new year, the pboc trims the rrr as chinese stocks hold near two-year highs. this comes amid reports that beijing has extended plans for the beijing-london stock connect. hong kong starts the new year as it ended the old one. protests, vandalism, and teargas in the streets. we are live in the city with the latest. ghosn's getaway. theories emerge about how the former head of renaud and nissan escapes japan.

lebanon had sought his release a week before he fled tokyo. welcome to "surveillance," i matt miller in berlin for francine lacqua. let's check in with what is going on in the markets for the first trading day of the year. the stoxx 600, the broader european stocks index, is gaining 0.8%. futures that are rising as well. we could see a positive start in the u.s. we have a ton of pmi's out this morning. i just had germany at the end of the hour. 46.7. 46.3.e looking pmi is still weak wherever you look. i thing we had italy or france and they were also pretty

disappointing numbers. coming up, a couple big interviews on the docket for friday. chicago fed president charles fed president -- the chicago fed president joins our colleagues at 4:00 p.m. london time tomorrow. set your dvr, because at 6:00 p.m., we have the cleveland fed president joining bloomberg television. another interview you don't want to miss. let's get the bloomberg first word news in new york. >> happy new year. iranaqi militia backed by has broken up its encampment outside the u.s. embassy in baghdad after fighters attacked earlier this week. the move could ease tensions between tehran and washington. israel's prime minister benjamin netanyahu said he will see community on corruption charges. there is no functioning government to consider his request. he is gambling that once the coalition is formed, he will be the one leading it.

north korea's leader has called for shocking action against the u.s. he declared he was no longer bound by his pledge to halt major missile tests and would soon debut a new strategic weapon. that adds to president donald trump's foreign policy concerns in a politically charged election year. theralia has drafted in navy to rescue tourists from wildfires. many struggled to escape rural towns. 8 people have been killed in the blazes this week. hundreds of properties have been destroyed. global news 24 hours per day, on air and on quick take. this is bloomberg. matt? matt: thanks very much for that. the pboc has slashed the retired -- required tax reserve ratio, --eashing about 115 billion

$115 billion of liquidity into the financial system. it aims to help it make -- help make it cheaper for companies to borrow. the manufacturing pmi stayed in expansionary territory for the fifth straight month, in-line with recent pickup and economic data. and over in the u.s., president donald trump says he will sign the first phase of a trade deal with china on january 15. he said he would even go there himself to help negotiate phase 2. joining us now is simon french. this good news out of china and the china-u.s. stocks, does that make you bullish for 2020? >> near-term, certainly. i think there is enough signs of use in those pmi's to get through the first half of the

year aligned to the stimulus the central banks put into the global economy during 2019. my concern is that we talked about phase one, we are already talking about phase 2, but this is going to remain a conflict between the economic superpowers that will run for many years and it will lack send wayne and the concern will be -- and it will wax and wane. the concern will be that there could be violent reversals. are your expectations in terms of rates? earlier whost on said he actually expects a resurgence of inflation in the u.s. and he expects the ecb to ratesm negative interest to zero interest rates. that is an outlier point of view. what do you think. simon: it is not a view i share.

you mentioned in your intro that presidentsr from fed this week. the fomc have guided markets to expect to be on hold. they really will tell the market to look closely at core inflationary pressures in the u.s. economy, i would think, and see whether an increasingly tight labor market with uncertainty over how much spare capacity is left, whether it will start to show the kind of inflationary picture that would justify a pick back up in u.s. interest rates. i think that is unlikely. i think it is even more unlikely that we would see inflationary dynamics in the euro zone that would permit the euro zone to move off negative interest rates. yes, that is an outlier view. i don't see the core inflationary pressures in europe or the u.s. to justify the change. 2019 is thet get in level of stimulus we saw in

2019, which was its most conservative for a decade. matt: right. you don't expect that to continue. is that a problem for supportive markets? that kind of stimulus, that kind of expansionary policy has been viewed as addictive in the past. simon: it has been very addictive and certainly if you trace the significant gains we saw in risk assets in 2019, it was all to do from the initial plateau in rate expectations. then the subsequent cuts in interest rates. are we addicted to it? we have to go back to core earnings growth when trying to assess appetite for equities. i think that is correct. a slight caution. monetary policy and fiscal policy comes with a lag. we saw the action in 2019, the

impact into the real economy in terms of earnings behavior, greater appetite for investment won't start to sort of pick up towards its peak during the middle of 2020. for me, the concern is what comes next because central banks time tocymakers' deliver what is relevant in the euro zone. they by time and the clock is ticking. my concerns are the back end of 2021, you can't play the getting stimulus gain from central banks again because we fired those shots already. matt: we will talk a little bit more about that through the program. simon french. panmure gordhan. coming, tales to tell and scores to settle as theories about carlos ghosn escaped from japan run rampant.

tokyo seeks talks with lebanon about the scandal. we will bring you the latest annex. this is bloomberg. ♪

matt: hong kong kicked off 2020 with renewed protests, vandalism , and tear gas in the streets. riot police and demonstrations, fighting running battles on new year's day. after tens of thousands of mostly peaceful protesters flooded the streets. what was the turnout and mood like last night? >> we saw hundreds of thousands of people come out on the streets. they marched through downtown

from victoria park straight through to the central financial and shopping district. for most of them, it was peaceful. there were a lot of young families out. people handing out flyers. a bit of the block party vibe we saw when the protests were largely still peaceful. at night, it turned a bit more tense. we saw police bring out a water cannon. protesters let a couple of fires. compared to a lot of violence we have seen in recent months, especially through parts of the fall, this did not escalate as badly as that. it still managed to maintain an air of peace. this signaled regarding the turnout that this is going to sustain well into 2020. protesters saying they will continue to fight into the new year. they still want their demands met. this showed that that does not show any sign of slowing down for the next little while at least. matt: clearly, the protests are going to continue. the question is how does the momentum feel? does it seem to be ramping up or

does it seem to be slowing down? it definitely feels like it is sustaining momentum. a lot of it depends on the week, a lot of it depends on what the government has done. have more people been arrested and that is going to bring more people out? at the same time, we saw this real peak of the violence in the fall and in recent weeks, things have calmed down a bit. we did see some flares over christmas eve and christmas and on new year's eve and new year's day, but it is not quite as violent as it had been. the people's worst fears have not been realized and a lot of people looking to rebuild in the coming year, looking for things to be stable. at the same time, protesters saying they will continue the fight. how this all shakes out and whether either side makes concessions will be seen, especially in the coming few weeks. matt: all right, thanks very much. let's get the bloomberg business

flash with karina mitchell in new york. karina: china is cutting reserve requirements for banks. the ratio will be lowered by 50 basis points for commercial lenders. releasing about 800 billion you want of liquidity into the financial system. the aim is to make it cheaper -- companies to endeavor is looking to expand, looking to acquire on location experiences. the deal is valued at about $660 million. india is shooting for the moon once again. they will probably attempt a landing this year as it seeks to restore credentials as an ambitious space power. that comes after a previous try last september failed minutes before a scheduled touch down. david stern, the man who transformed the nba into a global multibillion-dollar powerhouse, has died at 77.

he boosted revenue from $118 million to $5.5 billion. his 30 years of service make him the longest tenured commissioner of any professional sport. that is the bloomberg business flash. matt? matt: thanks very much for that. let's get back to our top story, which is carlos ghosn's dramatic escape from japan. it continues to pose more questions than answers. we may get some answers soon. in fact, we expect i believe a press conference from carlos ghosn. he previously had sought to give a press conference, but then was quickly rearrested. he did release a video, but the names in that video were censored. it will be interesting to see what we finally get. let's bring in our asia transport editor. talk first about the escape. i have heard a denial that he

escaped in a cello case. beenw that there had reports that lebanon was pushing for his release and maybe even talk that japan might have kind of look to the other way. what are you hearing? will: happy new year. there are many colorful and interesting theories as to how he did escape to lebanon. what we don't really know is the exact mechanisms of how he did it from start to finish. , there had been developments just recently. turkish investigators are launching a probe into how he got to lebanon, because reports suggest he went by private jet through turkey. also, prosecutors had gone into his home in tokyo to look around. we don't quite know what has

come from that. is that heelopment reportedly entered lebanon in a second french passport. he was allowed to hold two. what do we expect to hear from him? you were telling us earlier reminding us about the video that he released in which the names that he used were censored. people in companies or named ands set to be shamed here? i think that seems very likely. in his statement he issued when he arrived in lebanon, he said he could now finally speak freely. expect much more forthright comments from him when he has his press conference next week .n that, january 8

perhaps he will release more names. he said he feels more free to speak from lebanon. right, will. thank you for covering the story for us. coming up, we are going to talk about the year ahead for europe and the challenges facing the european central bank. more with simon french. this is bloomberg. ♪ mberg. ♪

economics, finance, politics, this is "bloomberg surveillance." i'm matt miller in for francine lacqua. one of the two new executive board members for the ecb joining the central bank this week signaled she wants a more precise inflation goal. she warned her native germany against unjustified criticism. makes --as ecb policy issued a strongly worded letter to leaders to prevent the region from preventing low economic growth. simon is still with us. let me ask you about what you think of the ecb inflation

target right now. it is close to, but below 2%. you could take a broad definition of that. they don't seem to have taken a very broad definition of that. 1.8%ly, what they mean is or 1.9%. should that change? simon: i don't think it should. if you are not hitting your existing target, let's be honest of the ecb has not been hitting its existing target -- if you choose to lower it, you are effectively capitulating. ,f you choose to increase it then how realistic is that given your inability to hit the previous one? week orhe backdrop of inflationary pressures. the danger is that the market looks at this and says, the ecb is playing around with technocratic measures, which might make economists such as

myself pick up and take interest but actually are losing sight of the bigger picture. how do you return the euro zone's growth inflation dynamics to the kind of levels where citizens are comfortable with? i think that is a really important part of the story that gets missed. christine lagarde has managed through her first couple of months to contain the unrest that was taking place in the ecb governing council following mario draghi's decision to stimulate policy. is she going to be able to reconnect with the agenda with politicians in the fiscal and structural reform side? that is where the success of her tenure will ultimately be determined. growth andkind of inflation do you think they need to achieve here? well, you can't immediately -- you certainly can't over any short-term

horizon -- change the underlying demographics of the euro zone area, which is consistent with growth across the zone of below 2% year on year. it is modest. what you need to assure is that given that it is relatively , yout, the downside risks have the policy arsenal and the structural reforms that limit the risks that it falls into a negative cycle. 2% growth range is not an unrealistic expectation for immature area, but in order to insulate it from downside risks, mario draghi's failure was to move his statement into action. christine lagarde has to do that

to provide the safety blanket for the euro zone. matt: all right, simon, you are going to stay with us. our guest cohost for the hour. is beginning already. the countdown to the 2020 election. if president trump wins again, he will be the first impeached president to win reelection. we will preview the key dates to andh this election year talk about how markets could react. that is next. this is bloomberg. ♪ whether you're out here on lte

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plus, unwrap $250 off our best phones. click, call or visit a store today. matt: the pboc plans the rrr as chinese stock falls near two

year highs. this comes amid reports beijing has suspended plans for the shanghai-london stock connect. hong kong starts the new year just as it ended the last one, with protests, vandalism, and teargas in the streets. we are live in the city with the latest. get away.os ghosn's theories emerge about how the former head of no escaped -- of .enault escapes japan you are watching "bloomberg millerlance," i'm matt in berlin for francine lacqua. we are getting pmi's throughout the morning and right now getting u.k. data. december manufacturing pmi's in at 47.5,d kingdom read and the preliminary number was 47.4. so a little better but silly contraction.

that has been the theme of the morning with all -- but still a contraction. that has been the theme of the morning with all the connections we have seen so far. let's check in on your european stock movers. for that we go back to annmarie hordern in london. on move: we have a risk at the start of a new year, the minors more than 1%. therekinds of financials this comes down to china, china moving to inject more capital into the economy. theses why we are seeing sectors pushed higher. airbus up 3.5%. they delivered a record number of aircraft for december and are expected to exceed their 2019 goals. performer forst the stoxx 600 for 2019, now starting 2020 on the back foot. they discovered oil in guyana, that they not enough

anticipated before they started drilling. matt: i believe earlier this morning, it was off almost 20. annmarie hordern, thanks very much for that. let's get to first word news with karina mitchell. an air recce -- that comes after the fighters attacked of the compound earlier in the week. the move could ease tensions between tehran and washington. says he willnyahu seek immunity from prosecution on corruption charges. that essentially blocks the start of his trial for months because there is no functioning government to consider his arrest. he is gambling that once the coalition is formed, he will be the one leading it. north korea's leader has called for shocking action against the u.s. kim jong-un says he is no longer bound by a pledge to halt missile tests and promised a new strategic weapon. that adds to donald trump's foreign policy concerns in a

politically charged election year. struggled toakers escape rural towns in australia as fire danger escalated. many went to south wales and the neighboring state of victoria. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in this isn 120 countries, bloomberg. matt? matt: thanks very much. it is officially the year 2020. that means it is a presidential election year, in america, and in just over a month's time, we will get the first real results in terms of who could face donald trump with the democratic caucus in iowa. here with more is our editor in singapore. derek, what are the key dates to watch this year beyond the bible caucus? theou are right that

cauci starts the process. in march you will see this democratic field thin if not come to a resolution on who they want. there are two ways it can go. it can go quickly. south carolina and nevada in the super tuesday and they are all done, or you can split the difference between a lot of those states and then you have a protracted fight because the democratic party's rules are not conducive to coalescing around one person. that could mean a late decision, to as late as july before you know who the democratic nominee is. do we have someone right now or is it going to be a while he? interspersed with that, you are looking one day after iowa, and donald trump ghost of congress to deliver his state of the union address -- and donald trump goes to congress to

deliver his state of the union address. there is going to be a lot of tension during the february to march window. the other one obviously, election day is november 3. what i like to watch, not just the election but that month afterwards. that is where if donald trump loses, there is going to be a transition process where the entirety of the u.s. federal government sort of prepares to change. if he wins, that means that donald trump has gone through impeachment and seen that often gotten reelected with a new mandate, and he is going to walk into the g20 in saudi arabia and beyond as somebody who is completely unfettered. matt: is there anyone questioning, derek, whether president trump would begin that transition process where -- where he to lose? derek: not in a serious way right now. i think everyone is a little bit too far to -- matt: i just heard joe biden

talk about that. derek: there is not a real indication about donald trump failing to concede. i would also note that at this point, a lot of people are bullish that the president's chances are maybe 50-50 or somewhere around there. i think there is a lot of market speculation. that he gets in. i saw one analyst report that basically said the expectation is that it would be donald trump democrat, maybe biden or buttigieg. even if you have elizabeth warren and bernie sanders pulling well, there is a lot going in that perhaps the centric mccright or president shrink -- centric democrat or president trump will move on.

matt: derek wallbank talking about the election. of course, michael bloomberg is the founder and majority owner of berg lp, the parent company of bloomberg news, and is also running for the 2020 democratic nomination. simon french is still with us. this inow important is terms of the u.s. economy. do presidents tend to ramp up, try and ramp up economic performance ahead of an election? simon: they do, and certainly if we look at the last 12 months and president trump attempts to get the federal reserve to be more stimulative, triggering qe4 and faster rate cuts, that has played to that traditional playbook of politicians trying to influence independent policymakers are you also have to look at things that are not

directly within the president's epic control. what are macro significant in the presidential election cycle, which is the amount of advertising spending that will go into the u.s. economy, starting in q1. indeed, it actually started in democratic primaries, caucuses starting during q1. those will ramp up throughout the year. they are macro significant for cyclical spending, so it is material and i think resident to campaign here against the backdrop of having been very hawkish with his international neighbors for years. but trying to take the media press -- the immediate pressure off and see the u.s. economy pick up during the 2020 season of a strong u.s. economy. what do you think about the advantages china had in the previous trade paradigm? was it necessary to wage some sort of trade war even given the

economic damage it will do? simon: it is a great question. i think whoever the occupant is the on november 2020 will an economicface cold war, as i call it, with china because there is a competition here between the two preeminent economic powers of the world to write the rules of nextrce, politics for the decades. with that comes a privilege, a privilege of writing them are closer toou the regulatory architecture that they can both influence and operate. i do think that this relationship, uneasy relationship with china will

continue. whoever is in the right -- in the white house come 2021. matt: we will get more from simon french. coming up, a couple of big interviews on the docket for friday that i want to tell you about. chicago fed president charles evans at 4:00 p.m. london time. then later, cleveland fed president loretta mester joins bloomberg television from 6:00 p.m., a couple of big fed president interviews. do not miss it. this is bloomberg. ♪

matt: economics, finance, politics. this is "bloomberg surveillance ," and i'm matt miller in berlin

for francine lacqua. that's go to karina mitchell. a: releasing about 800 billion yuan of liquidity to the financial system, the aim is to make it cheaper for companies to borrow money. lebanon had stopped the return of native giant carlos ghosn a week before he escaped from house arrest in tokyo, according to "the financial times. the newspaper says the lebanese justice ministry requested that he be tried in the country, but chinese officials did not -- japanese officials did not respond. india is shooting for the moon once again. the country will probably attempt a landing this year as restore credentials as an ambitious space power. that comes after less september's failure minutes before a scheduled touchdown. died at age 77.

he boosted revenue from $180 million the year before taking over, to $5.5 billion in 2014. that makes him the longest tenured commissioner of any professional sport. that is the bloomberg business flash. matt? matt: thanks very much for that, karina mitchell in new york european shares ushered out of a decade in style with their biggest annual advance since 2009. the green swept across sectors on they single industry stoxx 600, climbing in 2019. the bigl services where winners. construction technology -- construction, technology, retail, industrials all returned more than 30% last year. telecom is the biggest lacquer -- the biggest laggard. what needs to happen to sustain the momentum this year? joining us now is tim craighead,

senior european equity strategist for bloomberg intelligence. gordonrench of 10-year -- clearly no one expects in 2022 repeat the size of the moves we saw in 2019 but can we direction?t the can we still look for gains in 2020? tim: i think we can, matt, but i think it is going to be a very different story line if this does happen in 2020. we are essentially looking at a mirror image of what we faced at the beginning of 2019. at that point we had had the wind at our sales from the standpoint of earnings. valuation had been compressed because of trade fears that erupted in 2018. as we closed 2019, it is exactly the opposite. we have had negative estimate revision, but hopes have sprung because of brexit clarity,

u.s.-china trade clarity -- we hope -- etc. now what we need in 2020 is to see a return of earnings momentum because we do not see a lot of upside for european valuation. we have to have earnings. tot: simon, do you expect see a return of earnings momentum? do you expect to see earnings pick up enough to justify the 30% gains we saw in a lot of indexes last year? simon: we talked before the break about low structural growth rate in the euro zone, and that is relevant for corporate earnings trajectory, so i do not think earnings will necessarily come to the rescue. there are a couple of additional points to tim's analysis. european stocks are still cheap. long-termelow their average over the last 30 years. compared to the u.s., which is

above. the second thing to take into account is that in the middle of january we will hear from the u.s. as to whether france will come into the frame for specific retaliatory tariffs based -- based on the digital services tax. if that indicates to markets war, the eye of the trade war for the u.s. will shift from china to europe, that will be very bearish. the two things to look out for the near term political risks to where that might reflect in 2019. matt: 10, what are the biggest risks, headwinds we could face in 2020? risk-on bias,dest we need to see interest rates ticked up a little bit to help financial net interest margins. we need to see commodity prices

most notably -- commodity prices, most notably energy, stabilize and move ahead as they did toward the end of last year. i would agree with what simon said. the biggest risk is that you have got trade that turns on its head, maybe as part of the political cycle in the u.s. yes, there is improvement or a calm between the u.s. and china, but if indeed the sites turn economic a trumpian election push, that could be problematic for europe. notwithstanding that, europe is highly cyclical in orientation, given the nature of its sector structure between financials, industrials, consumer discretionary, and if we have a better tone to global economics, that will suit your quite well well it's of -- relative to the u.s. matt: tim craighead of the , senior- tim craighead

equity strategist for bloomberg. simon french will stay with us. coming up, we talk about the outlook for the pound and the u.k. in 2020. this is bloomberg. ♪

matt: economics, finance, politics. this is "bloomberg surveillance ." i'm matt miller, in berlin for francine lacqua. best quarter in a decade after prime minister johnson lifted the risk of an immediate no deal brexit. sterling gained as johnson reached an agreement with the e.u. and then won the election, setting the stage for parliament to approve britain's exit from the e.u. within the next few weeks. some strategists see the currency struggling in the coming months on concerns britain will not reach a trade pact with brussels before the brexit transition expires. simon french is still with us. what do you think about the possibility of reaching a trade pact this year, simon? typically trade agreements take

a long, long time. can boris johnson get one done in less than 12 months? simon: yes, he can, but not all trade pacts are made equally. it is an important responsibility for the journalists or all people in markets this year to understand a fairly thin trade deal that prioritizes zero quota zero tariff trade is possible. it would require making concessions, but it is possible. the kind of deep free-trade agreement that encompasses services, standard recognition qualification recognition sets in the rules of game for arbitration. i think that is highly unlikely , realistically by the end of june 2020, 6 month away. -- i think as

trillion -- a thin trade deal is possible, but will that be enough for market participants to move into u.k. assets. u.k. domestic companies on the prospects of this, the worst of brexit being behind us. matt: will the u.k. be able to negotiate trade relationships with the u.s., maybe with china, tradeutweigh the loss of that is inevitable with e.u.? simon: that is highly unlikely. the best analysis we have seen from the u.k. treasury suggests it will only really compensate for about a sixth of the loss. but of course a lot of that depends on the nature of the withgence or convergence e.u. regulatory standards long-term. there is still huge uncertainty as to whether, with its newfound

freedom -- and that is what the u.k. gets from being outside the e.u. -- whether it chooses to mark the european union and limit the frictions to trade. but of course by doing so, it will limit the ability to arbitrage its regulatory systems to align itself close to u.s., china, india, to other emerging markets. that thet is unlikely net effect will be positive based on compensation from other trade deals to do with the loss e.u.-u.k. trade. matt: we have seen the pound 2018.ack to the highs of how does that bode for the u.k.'s economy, and where do you see it near the end of the year? tim: -- simon: the near term of the struggle pound is that inflation will dip close to if not beyond 1% year on year, which will mean

the central bank of england is unlikely to move interest rates higher, and indeed could consider a cut. we already have two rate setters calling for an immediate cut of interest rates. the pound is still below, at least the u.s. dollar, against its purchasing price parity level of 1.5. the fact that 2020 will be difficult will mean it will matt: not retrace that level. simon -- will not retrace that level. matt: simon, thanks for joining us on "bloomberg surveillance." surveillance continues in the next hour with tom keene out of new york. this is bloomberg. ♪

year,his morning this new this new decade, how did

somebody get so wrong the great bull market? don't tell me about single-digit risk and/or adjusted return ratios. what do you do now? in this hour, our john authers. the u.s.-china relationship will be different this year. two, continued protests in hong kong. in the state of global wall street, it is a whole new world after all. good morning, everyone. this is "bloomberg surveillance ," the 2020 edition. i am tom keene new york. francine, it is quite -- it was quite a new year's eve nejra cehic is with us as well. what is your starting thought in the united kingdom on the state of 2020 brexit? nejra: happy new year and happy new decade, tom. view on brexit is very light today. we exit, and then the rest of the year, it is boris and that you. it is not going to be the famous

theresa may. i will spend a lot more -- a lot less time outside westminster. tom: one of the best photos this year was nejra cehic outside with a cat the day of the election. here is karina mitchell. karina: signaling-- cover continued action in 2020 to reduce borrowing costs for companies. in china, the country has temporarily halted a link between the shanghai and london stock exchanges. bloomberg learned the move was prompted by political considerations. the u.k. staff on the hong kong protests is one of the issues. the london shanghai link was designed to allow companies listed on one venue to issue shares on the other. in north korea, kim jong-un declared he is no longer bound by a switch to halt major missile test and is promising

what he called a new strategic weapon. according to the north korea state nguyen's agency, kim wants to ease the pain and suffering on the country because of economic sanctions. in australia, the navy is rushing to rescue thousands of tourists stringent -- stranded by raging wildfires. at least eight people have been killed in south wales and the neighboring state of victoria. the fire has destroyed hundreds in peak holiday season. 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, karina mitchell. this is bloomberg. tom: thank you so much. how about a data check? i was really out of touch. i did not realize how well we did last week, and we continue today. up 1.60 four. you have some nice curves

steepening, going on during the week. euro with a little one week elevation. brent crude 61.19. nymex crude -- i made that mistake there. that is american crude, well over $60 a barrel. you think the vix would be 11 or 12? on the vix. there is the friday close -- excuse me, the tuesday close. steepening in the three-month as well. we will talk about this through the morning of "bloomberg surveillance." and ran crude, 66.22 per barrel. nejra: we build on gains today, the stoxx 600 up 1%. even withly in china, japan closed, and risk on showing through assets as we see yields moving higher both in the u.s. and europe as well. cable-year trade yield --

falling from a two-week high with some of the recent gains that have perhaps been excessive. nejra cehic dazzling with the constant quote this morning, commodities. i have not looked at commodities in a while. let us look at the equity market, which gets us all through surveillance. this is the zoom in of the great chart. all you need to know off the 2009 bottom there is per year, six years, 12.2%, 15.6%. the last two years are the ugly december of 12 months ago. two years, 10% per year, and that is where we are above the 90 yearm, 70, 80, regression of the dow jones industrials. nejra: it was a great year for bonds, which means that the

60-40 portfolio has the best year, had the best year in two decades. the question becomes, how do you beat that in 2020? does it continue come and how do you continue to generate alpha? tom: it is important to see the bond market, the big double vision market in bonds going back to the beginning of this crisis. we begin the year strong with andmy stretch of crb to, even better, he had to go home to the queen, a meeting with the queen. john authers joins us this morning. acclaimed bloomberg opinion -- bloomberg opinion columnist. the author of many books. books, and wemany should point out as we are waiting for his new book "brexit: the solution," which is not out yet. let's rip it up right now.

jeremy, what does tom sterling tell us? : it is telling us this morning that it rallied a little too far, too quickly through the latter stages of december. i think there was too much optimism priced in, and we have seen that reflect in terms of holdings. i think there are some obvious headwinds ahead. i think two factors to consider, one is that the markets are almost completely ignored over the last 12 months or so, macro data in the u.k.. that will be more relevant as we go through the first quarter of this year. in particular, we are watching to see how retailers performed over the christmas period. we cannot avoid the brexit word because we may get it done, in the words of the prime minister. trade negotiations will be tough, troublesome, and i think there will be uncertainty as a consequence. valued, ats fully least at the start of the trading year. tom: let us get to these

extraordinary markets, with john authers of bloomberg opinion. he has written 4 billion pieces this year on the stunning bull market. give us a thought for february of 2020. what do i do today to stay in this market with confidence? is a very difficult question, which is presumably why you asked it. what worries me is that we look the way we did two years ago. stocks are moving up while bond yields are also rising. if you look at what has happened in the last month or so once we really did have the off to the races call with the trade situation improving, then unusually, you have had a weakening dollar and you have had strengthening emerging markets, most international markets have been beating the u.s.. which is very unusual. if you think this is for real,

that the risk appetite has got this kind of strength behind it, then there is an element of waiting about this, an element of lucy, charlie brown, and the football. but i would look at the non-us equities, particularly in the emerging markets. they are very much cheaper than they have been for a long time, but we do have what looks like a looming correction or a looming accident in the u.s. nejra: in terms of a correction, is it possible to see the same gains in stocks and bonds if we look at the outlook for central banks in 2020? people are saying there is no way we will get the record stimulus that we got in 2019. john: i might not totally agree with that one. china is very much more important than many others. china has already surprise people by announcing stimulation in terms of how much it will allow banks to lend.

that has already happened. the other critical point, perhaps the most terrifying piece -- i am also just back from my vacation and have been doing my best not to read up on this -- but the most terrifying piece i read on the break was from jim bianco, who drew a parallel between the repo markets of last year with what the fed did to bailout the repo markets during the y2k nervousness. a lot of money was made available to make sure there was no crash, that we were all worried that there would be one. very similar in terms of the amount of extra money made available, and obviously this is only one data point. the nasdaq data drops 25% in the week when the fed removed that repo stimulus, and that final

ludicrous turbocharged rise in tech stocks at the end of 1999, 2000, really starts when the end of the repo market starts. the similarities with what we are living at the moment are there. depending on how confident you are about the repo market, most the repo do not trade market are not worried about it at all because it is technical and difficult. but if the fed cannot find a way to leave the scene quietly, that will be interesting. nejra: interesting to draw a parallel with 2000. are there any parallels that your drawing could -- that could impact the dollar outlook in 2020, jeremy? been oneiquidity has of the major drives in markets over the course of the last decade or so, so if we roll back to december 18 when we saw the liquidity draining,

that is a real risk aversion mentality to play out. if we see liquidity being maintained in its essence through the course of 2020, we will not see any significant draining of liquidity, that probably does imply from an fx -- in may will be the case that the dollar has a fundamental as well as a technical reason. the technical factor suggesting that the dollar may be under a depression for the course of this year. coming up, lots of talk -- and we will do this on friday -- charles evan of chicago -- charles evans of chicago is fascinating. he is a different fed president to relook for that in the 4:00 p.m. hour. and then the cleveland fed president, loretta mester, will join us tomorrow. this is bloomberg. ♪

nejra: i am nejra cehic in london with tom keene in new york. happy new year, everyone. tom coming back to 2020 sick as a dog, is how you described it. let's get to china. the pboc has/the requirement for commercial leaders -- commercial lenders by 50 basis points. releasing money into the financial system. president trump says he will find the first phase of a trade deal. jeremy, with this cut today, you could argue it is business as usual with the seasonality, preempting more liquidity demand around the spring festival. in terms of the cut today, do you see it as usual, or does it

give us a signal as to the outlook for stimulus for the pboc in 2020? jeremy: it could be a little bit of both. we always know about the seasonal variance year end into the seasonal holiday, so innocence there is always liquidity demand. in the context of the broader perspective than the macro story in china because of the ongoing issues in relation to trade tensions and trade issues, there is that stimulus environment that is going to continue to be put in place to the course of the next few months to maintain the momentum in the macro story in china. it is a combination of probably both and it is a reflection that the authorities want to make sure there is no risk of a stall speed in terms of the macro outcome. nejra: how aggressively do you think the pboc will lean against slowing growth, especially for example if we expect a fed, the pboc, the bank of japan, to do nothing in 2020 ?

john: the case here is how they view the macro prudential risks. they are terrified of another lehman crisis. theless chairman revoked risk of a misty moment in his farewell address. when the credit market looks down. and with the amount of credit that has been extended in the shinese economy, it make sense to worry about that. realization that they were actually just allowing debt to be issued to cleanup balance sheets. if they really are now confident that they have done enough balance sheet repair, that they are not running major macro financial risks, they might stimulate quite a lot because the comet's party cannot afford to let growth to get below 6%. the critical question -- the

communist party cannot afford to let growth get below 6% per the critical question is how confident they are that they have sorted out the mess. that is the question. themes off the conversation late in 2019 is emerging markets linked at the chinese hip. do you agree with that? if so goes china, so goes em, or is there non-correlation between independency ech? ago much of the sector was really responded to commodity inputs in particular. but i think there is going to be some degree of a relationship between the two. if we see a degree of moderate stimulus into the chinese backward drop -- the chinese backdrop, i think that can and will see a reasonably

constructed backdrop over both of the em spectrum. i think you need to look at the idiosyncratic risk to say that it is not just a pure em trade, that it can be a positive one in 2020. nejra: stay with us, jeremy stretch of cibc, and john authers of bloomberg opinion. ghosn lands in lebanon with tales to tell and scores to settle. we will update you next. this is bloomberg. ♪

karina: this is bloomberg surveillance there is followed from carlos ghosn's escape from japan. turkey has detained seven people, including four pilots. pilots seem to have taken him from japan to istanbul and then to beirut. one official said he was transferred from one plane to another inside a box. investor david einhorn rebounded from his worst year ever. following a 34% -- following a value oriented investing strategy that is the bloomberg business flash. tom? nejra? tom: a delicate conversation i

was, bloomberg opinion columnist and expert on nissan-renault, an expert on the interesting path of carlos ghosn. i want to get away from the sensationalism. the last time i saw carlos ghosn, i was waltzing down madison avenue, and there he was with his wife, and we made light conversation. america? to is he stuck in lebanon now, or can he actually start moving around again and being a private citizen? chris: good morning, tom. i think the answer is he is not going anywhere for the time being unless he can be sure that he will not be in some way deported back to japan to face justice because whatever the narrative of the accusations against him in japan, he is now effectively a fugitive from the law. we are expecting in the coming days that he will hold a press conference. no doubt he will once again defend his name.

but there needs to be, i think, some kind of process because the accusations against him are quite serious and he needs to fully answer a lot of questions. the press conference -- and i think the bloomberg coverage has been remarkably responsible on all this -- great. what is his legal two-do list now?- is legal to-do list chris: i don't think he is going to return to japan he is being very clear that he thinks the japan justice system is unfair. a 99% conviction rate. at the end of the day coming he is a man that has fled justice, not an option that is open to most people. he is in lebanon, where he can ensure a more sympathetic reception. in order to carry on as before -- remember, carlos ghosn is a jet setting man -- he would know lap -- no doubt i to continue

his old life. but to do that, he needs to have some kind of process, and i would recommend that perhaps he go to france and answer questions there in order to set the record straight. there are some questions about his conduct as chairman and ceo of these companies that need to be answered. nejra: you make the point in one of your columns that carlos ghosn's very escape underscores how he operates by very different rules from the average person. in terms of facing a trial in france, how likely is that to happen and what kind of challenge as opposed to emmanuel macron? chris: i think there is no coincidence he has ended up in lebanon. a country that is very sympathetic to him. on the other hand, it is extraordinary that up until now they have been extremely reticent regarding carlos ghosn. in the last 48 hours, the french minister has declined to comment.

they imply that he should return to japan. i do not think he will be in a hurry to get on a plane to france. for mr. macron, carlos ghosn is an unwelcome customer. his weakness is that dish mr. isron -- this to macron criticized for being a president of the rich. after an extraordinary escape from japan, now in lebanon, mr. cohen now wants to continue his life. nejra: chris bryant, you have called it a drama better than netflix. coming up, hong kong starts the new year like the end of the last one, with protests. this is bloomberg. ♪

♪ i am near a jh in london with tom keene -- nara jh in -- ehic in london with tom

keene. of mostlyousands peaceful protesters flooded the streets of hong kong. leigh ins will be tara leigh in a- cara moment. rather than celebrating, we saw people protesting, and hsbc coming under criticism with relation to closing one account linked to protests so it has become a target as well as the authorities. tom: i have the clearest memory of being on a plane from hong kong to singapore and talking about the 24/7 job of moving people out of hong kong. for years and years, it has not worked. you really wonder into this year when the exhaustion of last year , is this the year when that

finally shift? i do not have a strong opinion. successeen hong kong's maintaining their place in the pacific rim. nejra: we have certainly heard from xi jinping, saying without a harmonious and stable environment, how can people live in peace and enjoy their work? let's get the bloomberg first word news. karina: and iran backed iraqi militia has withdrawn after staging an assault on the u.s. embassy in baghdad following airstrikes. there is concern this could lead to broader confrontation. additional american forces are being sent. prime minister benjamin netanyahu will ask parliament to grant him immunity from prosecution on corruption charges. israel is headed for another round of elections in march and

netanyahu is counting on being the next person. david stern is being remembered as the man who turned the nba into the global multimillion dollar powerhouse. he died after suffering a brain hemorrhage. he was 77. it was the longest tenure ever in the top of a pro sports league. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am karina mitchell. this is bloomberg. , and i wanteurope to emphasize my focus on negative rates. i will be doing a panel in davos at the world economic forum 100% on negative rates. let's dive into that, jeremy john hasith us, and written voluminous lyons that.

this was not in our textbooks, was it? john: no. prices willuch like go down on a national basis, nothing we need to be possible. it does appear to be a lower bound, even if it isn't zero. there is at some point a level at which there is no point bothering to keep your money in cash, where you have your presumably at the point where a safe becomes cheaper than a bank. there are limits to how far this can go. i suspect we are approaching those limits and that is part of the reason we now have this assumption that it is not going to go any further within europe. tom: we do this in honor of marvin goodfriend at carnegie mellon, writing at jackson hole

on the amplitude of negative interest rates. have we tested the theoretical amplitude of where they become efficacious, or are we miles away from that? jeremy: i am not sure we are miles away from it, but we are increasing the debate about the efficacy of negative rates. that is a theme that has been building in the last few weeks and months and that has been amplified by the transition of the leadership of the ecb. the structural and strategic review the ecb will be conducting in terms of monetary policy, because we have not seen a strategic review for two decades. we are discussing and realizing the efficacy of that negative rate scenario, and i think we are getting to that tipping point where there is the realization that taking rates negative further is counterproductive. that is something we have seen

in terms of the germanic countries who have been saving because of the fear of rates going more negative. nejra: is that cognizance and concern about the reversal rate what is driving your optimism on the euro, or is it the data? we had pmi data outcome of the factory gauge clocking below for theory for -- 50 friend 11th month. -- four and 11th month. jeremy: if you take the view that there is a moderate retreat, retrenchment and some of those global headwinds which were impacting markets through the bulk of 2019, because the german economy is disproportionately impacted by the export trajectory, we can see a moderate improvement, then that implies some of those investors who had been exporting

capital into the u.s. looking for high yields may rollback a little bit in terms of those flows. there is a flow argument, not necessarily one where you will see a significant and exponential growth that will drive the euro disproportionately higher, but we will see a gradual appreciation through the course of the next 12 months at the expense of the u.s. dollar. nejra: would you agree with that and would you say it is also to do with hopes about fiscal expansion which some would say are overdone? john: that is the point we need to make. tied up with the notion that we have finally reached rock bottom on rate, that that will not go further, that it has got to be a move from monetary policy to fiscal policy. that would be politically a good idea because austerity is unpopular everywhere else on the planet. even germans are now looking busily for excuses to start

expanding fiscal policy. they have constitutional bars against running too much of a deficit but they may be able to get around that. the critical question is whether we do see fiscal expansionism. things, thissitive may be in the price, is christine lagarde is a very political choice, exactly the kind of person who would coordinate with finance ministers to come up with the monetary policy that fits with an expansionary fiscal policy. there is also in the price a sense that the bottom is in. if you look at european manufacturing numbers, which today's numbers do not contradict but do not do a great deal to concern. we are bumping along the bottom in terms of that numbers. writing, maybers not daily. maybe he will write an essay

while we are on break. jeremy stretch with us. as we drive forward the conversation, that is easy today with michael mckee. michael mckee in conversation with two fed presidents, charles evans, the asymmetric evans of chicago, and a conversation with the mathematician from cleveland, loretta mester. this is beginning the year strong. we do that at bloomberg. good morning. ♪

♪ bloomberg "surveillance." a real effort to talk about our podcasts. jonathan ferro and i have been humbled by the success of

podcasts in 2019. a lot of those were about china, particularly the protests in hong kong. we need a 2020 brief from karen leigh. , what changes for carrie lam this january? aren: the protests sustaining momentum well past when we thought they would, past when she thought they would, and protesters sending her and the government a signal over the past couple of days, coming out hundreds of thousands yesterday downtown marching across the financial district and trying to send the message they will continue this fight into the new year, signaling that will sustain momentum. she will be looking at that and looking at that turned out and trying to figure out how long this will go on in 2020. nejra: what has been interesting

about the protests is yes, they were directed at the authorities, but there was some anger toward hsbc. inthere any kind of a shift terms of the protesters' targets as we enter the new year and decade? has been targeted since it closed an account linked to the protests in november, and people coming out and vandalizing these bronze statues outside hsbc that are memento from the colonial era. people are really upset from all walks of life to see that happen. the protesters taking out some anger, but really the government is the main focus of their demand, their anger, and continue to be so into the new year regardless of whether other

targets pop up. nejra: karen leigh in hong kong, thank you so much. in the u.s., the first democratic debate lands on january 14, weeks before the iowa caucus. the following day we will hear from the president and his state of the union. all building up to november 3, a date etched on our brains. tom: it is extraordinary. it is really upon us. there's something about the first business day of the january in an election year where things change. with us are jeremy stretch in john authers. i grew up in a house with a mother who thought everything in the markets was linked to the presidential campaign. she had nothing else to do. is any of this mumbo-jumbo linked to market performance?

john: some of it does but the links are not as direct as you would expect. one of the factors behind the surge in markets at the end of last year was the decline in the polling numbers for elizabeth warren. people were very scared and the markets were scared of elizabeth warren. she has a specifically anti-wall street agenda and she would not deny that. when the numbers were going well in the polls in november, that overlapped with quite a strong risk off move. people were nervous about that. you see elizabeth warren making a comeback, if she does well in one of those first two states and establishes herself as a clear, realistic candidate again, that would be a problem for risk appetite. actnd that, there is an odd

behind sentiment on the economy and sentiment on donald trump's chances of being reelected. if you think a recession is happening later rather than sooner, then you tend to think donald trump is being reelected. points, joeour high weisenthal in conversation with senator warren. , majorityoomberg owner of bloomberg lp is a candidate for the democratic nomination, and it is the parent company of bloomberg news, television, and radio. jeremy, what is the dollar call you have? you have such an interesting view out of toronto and london. what is your dollar call into that first tuesday of november? jeremy: we think the u.s. dollar will be under downward pressure in the calendar year 2020. political uncertainty is one of those and that will cause international investors to find

shy a little bit of putting money back into the u.s. over the course of this year. the risk of deceleration in growth and the recession story is overdone. nevertheless, deceleration is likely throughout the course of this year so it will be a case of slow growth, political risk. the fiscal backdrop will play negatively in terms of the dollar. it is a story where we will see a depreciation of the value of the dollar, not an exponential one, but something which perhaps will please the president because he is always keen to see a more competitive dollar to level up the playing field for the u.s. dots like we join the this? it is a presidential election year so president trump will want to make a deal with china beyond phase one and therefore the fed is on hold? jeremy: it is interesting

because the timing of the domestic political dynamics, and in that context, the impeachment last year may have been a factor which brought forward some of those discussions in terms of the phase one deal as sort of an alternative or pushback to negative publicity. you are right that in the context of an election year, it makes sense for the president to have an opportunity to have something to provide as a tradewinds and an impetus for the u.s. economy going forward. there is an assumption there will be some degree of movement or not that extension of negativity on the trade side through 2020 because of the physical headwinds and timetable. tom: anna edgers and set to join us. greg valliere this morning reaffirming his call the republicans will keep the senate next year. we continue with jeremy stretch and john authers.

we need to bring it back to the data. the first week of this year, up. upures up 20, dow futures 79. i have lost perspective on the numbers they have moved up so quickly. oile steepening and crude nicely through 60 a barrel, brent crude, 66.38. please stay with us. worldwide this 2020, it is bloomberg. ♪

♪ this is bloomberg "surveillance." shares of general electric had their best year since the beginning of jack welch's tenure almost four decades ago. ge soared 40%. over, the ceo has made changes to the portfolio and tackled concerns about that and cash flow. mediallywood talent and endeavor is looking to expand and acquire on location experiences. the deal is valued at about fixed the million dollars.

-- $60 million. that is the bloomberg business flash. i am karina mitchell. ,om: if you are out of oxford you have got to look at history. that is what john authers does for bloomberg opinion and with decades at "the financial times" as well. you had a killer year and putting into perspective where wall street is, where hedge funds are, where absolute and relative return are. let's begin with the gloom of last year. how many people missed up 28%? john: quite a lot in the hedge fund world because you have had continued drastic underperformance as a whole. earlier on in this broadcast we talked about david einhorn having a bounce back year. off the top of my head, he made

14% last year which he is seeing a lag to the s&p very badly. he is a brilliant man and poker player but could not beat the s&p 500. the problems for the hedge fund industry remain very acute. it was far too easy to make money without needing to spend on making that money. tom: your single best essay last year was when you tore apart shorting, a controversial paper by blitz and awe on shorting. what is the pushback to your essay? how did they respond when you say it does not add alpha? john: i have had very little response thus far. i was expecting to put on a hard hat and wait for incoming. , just to go quickly over it, discovered that almost

all of the benefits of factors such as value buying cheap stocks off momentum was on the long side betting on the stocks that looked good by that factor, not on the short side betting against the stocks that look bad. that has a lot to do with how equity hedge funds did absolutely terribly over the last decade. the number i had was that they failed to beat tilt, the etf treasurieslong dated and funds invested in nothing but treasuries -- equities in the bull market. i cannot believe there isn't going to be significant pushback. so far, i haven't received any and there isn't any and the academic literature, which surprises me. buta: hindsight is 20/20, if we look over the last decade is there anything investors can learn from the benefit of

hindsight? john: according to hindsight capital llc, a figment of my imagination, are now needed to say does not exist because i have a few people wanting to know the addressed, the imaginary hedge fund that investors have benefited. , all youdecade needed to grasp was that inflation was not coming back and if you grasp that and grasp that rates will stay very low, more or less everything you need to know is to make easy money fell into place. people time, i am sure will find plenty of things i wrote to back this up, in real time is difficult to see that and it is difficult to make that call with that kind of clarity. i find it extraordinary how many assets did fine. whether you are in bonds or

stocks, you had no problem over the last decade. that is unlikely to happen again. tom: this has been wonderful. hindsight llc has seven terminals, so watch what you say. john authers, thank you so much for helping us out this year. coming up next, we continue strong this first business day of 2020. we are thrilled to bring you robert albertson. you talk about decks. albertson has the deck on the street. we will find out what is in it. this is bloomberg. ♪

♪ tom: this morning, this new year, this new decade, how did

so many get so wrong the great home market? don't tell me about single-digit risk and/or adjusted ratios. what do i do now? the u.s.-china relationship will be different this year. can there be a phase two? ,iven protests in hong kong serious protests. the state of global wall street is a whole new world, after all. bloomberg "surveillance." tom keene, nejra cehic. there is so much to talk about. give us a boris update. i saw them continue to jockey to run labour. did boris have a good new year's eve? nejra: i am sure he did. the key thing for 20 for u.k. politics is that will be so different from theresa may. he does not need to bring the

deal back to parliament to get it approved. i will probably be spending less time outside westminster. january 31, we are scheduled to leave the e.u. and the pound coming off the boil. dust of the of the pound was overdone -- of the pound was overdone. tom: here is karina mitchell. karina: china's central bank will make credit cheaper. they have signaled continued action in 2020 to reduce borrowing costs for companies. there interbank repo rates fell the most in five years. china has halted a link between the shanghai and london stock exchanges, prompted by political considerations. the u.k. stance on hong kong protests is one issue.

in north korea, kim jong-un declared he is no longer bound by his pledge to hold major missile tests and is promising to debut a new strategic weapon. "pay for the u.s. to the pain suffered by the country because of economic sanctions." president trump's response was muted, tweeting cam was a man of his word. is rushingian navy to save people from wildfires. fires have destroyed hundreds of homes in rural towns with tourists during the peak holiday season. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am karina mitchell. this is bloomberg. tom: quick data. we will do one screen. upures up 19, dow futures

173. oil.61, american brent crude $66 a barrel. nejra: we saw the best year for global stocks since 2009 in 2019, a bullish start to the year. the stoxx 600 pushing up session highs. -- cabler handle dropping from a two-week high. it was the best quarter in a decade for the pound as reality starts to set in. it is a bullish start to the year, reflected in copper. tom: robert albertson has the best deck on the street. , theis the bits in chart regression from 1942 -- if it's chart and- ibbotson the regression from 1942.

it gives us a sense of where we are going back to the depth of 1942. nejra: you have done well in equities in 2019 but in bonds, the portfolio had its best year in two decades. cannot continue, and what do we do now to generate alpha? tom: thank you for the comments on my year-end show with abby joseph cohen when. -- abby joseph cohen. we do better now with robert albertson of sandler o'neill, their chief investment strategist, synthesizing in all of this noise into the market. thrilled you are here. can you stay fully invested? can you be invested with consonants? robert: i don't think so. investments ultimately follow

the economy to some extent, and they are also very connected to interest rates. i don't see rates going down anymore, or if they do, very little, and i think the economy is in trouble. i have a unique window into the economy. i talked to the regional bank. tom: what do they say? this is sandler o'neill and --irm desk in a firm, they in a firm, they own small banking. robert: what i hear in first quarter and second quarter was consistent. businesses were concerned but not reacting. third quarter was the watershed where they went from concerned -- it impacts the labor force, the job numbers. we cannot have 180,000 average

per month in 2019. the consumption on the retail side will go down, and i see nothing that can hold things together in 2020. i hate to start the new year with that kind of thinking. tom: jumped in. he is too gloomy. nejra: if is the one variable is the one- capex variable that will define if we go off a cliff, should we take money now or stay invested and tried to time the market? typically after a year of returns in equities like last year you see another year of gains even if they are muted. robert: at some point this year, things will get very sluggish. you can't time when to get in and out of the market. a view and take stick to it. , more globalsset

investments that are not as hindered by what is going on in the united states. it is a different environment now. i would be backing out. nejra: does that mean going to the bond markets or just reallocating equity exposure to other parts of the world? robert: i don't think the bond market is different. interest rates are extraordinarily low around the world. it is capped here because of other central banks that have maintained excess accommodation, silly things like negative nominal rates, and there's nothing else they can do. , we need fiscal stimulus, we can't do this. i think that is it and i don't think you will get a reaction out of the bond market in the positive direction because they do not think any move will continue down on rates. tom: this is almost my chart of the year. , thank you for

bringing this to us, the inflation-adjusted fed funds rate. vice-chairman stanley fischer and up we go, less restrictive, the rollover we saw last year. what is the difference between getting a more restrictive fed, or they sustain here at this accommodative level? what is the distinction if they choose to sustain? robert: it is hard to know. we all know about phillips curve not behaving the way it is, but we all forget the phillips curve varies depending on a lot of factors. if you look at the way our economy has evolved over several decades, organic growth slows. we are barely holding onto percent. the fed is unlikely to do anything restrictive at the moment. the only thing that will change them is if they see something

going on in inflation. i would argue inflation is doing what it always did, it just started later, and it is very slow increasing. you have to look at the wage numbers. they are 50% higher in terms of rate of growth than they were during the recession. there is inflation and at some point there will be a trigger. tom: within your great deck and 300 charts, service sector inflation, which every viewer and listener knows is up, their tuition and the rest of it, and down here is goods deflation. how do you synthesize this belief within the stock market of high service sector inflation and a lower goods inflation? robert: we have dramatically changed the economic mix of our country and most countries have as well. the service sector is stronger and i would be more focused on the service sector number rather than the durable goods number.

we are not a big manufacturer anymore. that has been slowing in most countries except for some of the developing. there is no way to synthesize it. i would pick the service sector as more reflective of what is going on. bera: it is now the time to -- if now is not the time to be in stocks or bonds, where would you put your money? bonds outside and the united states, carefully obviously, probably into fixed assets including real estate. that is a tricky market. i would have a fairly chunky position in cash until this blows over and the investment community adjusts. of opinionsset here. kotok 20% ink -- cash. starting the year strong, you do that with michael mckee.

michael mckee with the hemmetric charles evans and will do the math with the mathematician of cleveland, loretta mester. a strong start to this year. this is bloomberg. ♪

♪ this is bloomberg "surveillance." there is fallout from carlos ghosn's escape from japan. turkey detained seven people, including four pilots who took him from japan to assemble and then beirut. -- istanbul and then beirut. a new trade deal between the u.s. and japan is in effect that

cuts tariffs on agricultural products and industrial goods, but failed in its goal of getting tariffs on cars and auto parts reduced. there is little signs they will pledge to meet. rebounded from its worst year you have her -- his worst year ever. does follow a value oriented investment strategy. the firstthe u.s., democratic debate lands january 14, weeks before the iowa caucus. the following day, we will hear from president trump in his state of the union, and primaries for republicans and democrats will take ways across the u.s., building up to november 3. tom: michael bloomberg is the

founder of bloomberg lp and the owner of bloomberg tv and radio. we do this as we begin to look at iowa. edgerton, thena morning must read is straightforward, on iowa. really smart. it has come to resemble a reality tv show, the whole process. the process puts a higher priority on the appearance of democracy rather than the reality. it is past time to end the special treatment that iowa and new hampshire received by always voting first. they are two overwhelmingly white, disproportionately bb bloomberg states. how important is super tuesday? important because that is when you rack up the most delegates.

they have to, especially when you have this many candidates vying for the nomination, you have to accumulate delegates wherever you can. tom: the delegates are there, and put them up on the wall. the conventions are there like item three on the wall. great. do the conventions matter anymore? anna: i think they well this year more than in the past because we don't have a clear frontrunner. when we get into the summer, we will have to see who has pulled ahead and even if it will possibly be a contestant convention. nejra: talk to us about the political risks of the impeachment trial as it continues into january. isa: the main political risk for the democrats who are currently serving as senators and seeking a nomination for the campaign.

people like elizabeth warren, cory booker, bernie sanders will be stuck in washington as iowans begin to caucus. they will have to find a way to they wouldalls and much rather be in iowa talking to voters. tom: i have the exact same cost you do, so we will -- cough you do, so we will suffer together. that is nejra coughing. it is a new year, and this is really important. quietly for some, the central bank of china, the pboc trimmed one of their rates called the rrr. this is a big deal and it is a lot to do with up 19 and 164 in futures we have. this is accommodation the chinese way.

this is bloomberg. ♪

♪ nejra: i am nejra cehic in london with tom keene in new york. the pboc has slashed the cash reserve for foreign investors. in the u.s., donald trump said he will sign the first phase of a trade deal january 15. still with us is robert

albertson. you were saying you would want to take money out of u.s. stocks and bonds and put it elsewhere in the world. are the emerging markets in china one of those places, as we see the pboc with an easing bias and authorities say they are committed to fiscal stimulus? robert: in this case, monetary and fiscal stimulus will work. the monetary stimulus is shifting credit from state owned enterprises into small businesses and that will create jobs. china is one of the handful of countries taking fiscal action. we can argue they will have a debt problem, but that is something they can write off if they have to. china looks like it will do well and relies less on trade. global trade has shrunk dramatically from decades ago. i think china is in good shape.

what i invest in china? yes. what i invest in other emerging markets? yes. i think they are doing the right things. china would you invest in even if we see the u.s.-china trade talks take a turn for the worst? things are looking optimistic but can change quickly. robert: going back-and-forth on the negotiations around two will make a lot of noise and make people more nervous psychologically, but in reality this is a country living off its own domestic consumption. i don't think the global trade agreement can meaningfully move them off their 6% growth target this year. tom: this chart has to go to the creativity of the chinese central bank experiment, futures up 17%. long ago and far away, the assets of china, japan, and the in. -- here is the leg up

the recent accommodation of the united states. none of this was in your textbooks at carnegie mellon, i am certain of that. alan melzer would have fallen out of his chair. is china doing better because they are not doing a balance sheet expansion? robert: the balance sheet expansion can be a lot of different things. in this country it is happening because it is a necessity for the fed to control the short-term rates. they have got to bloat their balance sheet, but i would not call that accommodation. probably they mind most likely to surprise on the upside over the next several years. tom: on the upside what? robert: in terms of economics. tom: we get the doom and gloom, 4%, 5% gdp, but can you lift above a five handle? robert: maybe not this year but

certainly 2021. nejra: what does that mean for europe? if we look at europe, a lot of its recovery, whether we are bottoming out in pmi is dependent on china. are you more optimistic on europe in 2020? robert: when you look at trade globally, all imports around the world to figure out which markets are more powerful, europe is three times larger than china in terms of import market. they are more sensitive to trade, number one. number two, they are facing ongoing stress in the euro as we know. number three, we don't know how brexit works and we will not now even this year very much. it has to be damaging, not just to britain. everybody agrees it is europe, and europe is barely moving, just above the growth rate.

you can see a recession in europe. i am not calling for it, but they are in a delicate position, and the united states has not been helpful. tom: we have tons to talk about. cough.i love the you cannot be on the show today unless you are sick. nejra: how have i managed to catch it from you from across the atlantic? tea, lemon, honey, and potato vodka. robert albertson of sandler o'neill on the banks. that is a good, important conversation. ♪

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-- news. backed iraqian militia has retreated after staging an attack on the embassy . there is concern this could lead to a broader confrontation. additional american forces are being deployed. nancy pelosi and mitch mcconnell are locked in a standoff over president trump's impeachment trial. over the holiday break, there were no negotiations on how the senate trial would be handled. pelosi has delayed sending the senate the articles of impeachment. she wants to see a pair process -- fair process. benjamin netanyahu will ask to be granted immunity from charges . israel is headed for another round of elections in march and he is counting on being the person to form the next government and having his coalition can send you --

consider the immunity request. david stern turned the nba into a global multibillion-dollar powerhouse. he died of a brain hemorrhage. he was 77. he served years as commissioner of the nba, the longest 10 year of a sports league. tenure of a sports league. us on the banks, sonali bassett joins us. ak joins us.s also joins us.n there is a small start up shop on park avenue, jp morgan.

on and on, operating income. i thought banking was a challenging business. it was a boom year. robert: it was, and it was reflected in the stock prices. the banks are usually more abundant in a slowdown. banks have three things going for them. one is credit discipline. they have stuck with it despite huge aggressive competition. if we have a recession tomorrow morning, loan losses would be very small compared to past recessions. number two, there is more consolidation. they are figuring out if they can do deals without a big premium, they can become powerful. tom: consolidation, what is the update on the body count, not only in new york but

international banking? sonali: we have the most cuts worldwide in at least five years. in the u.s., we are not seeing that. morgan stanley is cutting 2% of its workforce which is little in terms of percentage. citigroup cutting hundreds off its trading desk but we have not heard from jp morgan or goldman sachs. robert: this discipline and body count, the u.s. banks have been doing it for a long time. they are kind of at the core. what will change them is technology. aspect,the technology you are asking where the opportunity is. if they can use more technology -- and jp morgan says they are at the beginning of what they can do. robert: it is amazing stuff. nejra: i just wanted to ask how much of a headwind it will be

for the banks, the low rate environment. in 2019hree rate cuts and the market is affecting the fed to be on hold in 2020, with a steepening yield curve. morgan and goldman sachs were some of the best performers in the dow jones at the end of the year. low interest rates, the reason they are not a big deal is because people are still borrowing so there is still money made despite projections downward at the end of last year. what people are excited about is the yield curve steepening a little bit more. low interest rates, as long as banks keep lending, investors believe they will be ok. nejra: when we were talking earlier, you said 2020 is not the year to be in u.s. equities. the bank is one place to put your money, and is that across the board or in certain lenders? maket: i do think you can

good money in regional and community banks. they have a heck of a lot of upside. people keep thinking technology will kill them because the big banks have so much to spend. the reality is it is a leveling of the playing field. if you get out of your 40-year-old core systems and go cloud-based, you can probably save 75% or 80% on your tech operating costs. can morgan and citi do that? it is tough because they are dealing with a more complex structure. technology will be a positive for regional and community banks. tom: where are the mergers? they all want to go to lunch at the rotary club. where is the catalyst for mergers? robert: constant pressure on earnings, that is not going away . historically, banks did mergers by being in the same market,

acquiring branches, and consolidating and saving money. that model is dead. the new model is to find a bank similar in culture and merged with no premium, and there is no damage to the customer base because you are in a new market, and you diversify your revenues and probably can enhance it. i am talking about mergers of equals, and when you think about who will do what, it is a whole different ballgame. tom: who is going to merge with deutsche bank? sonali: [laughter] tom: you have been following this. sonali: deutsche bank is in the middle of a messy restructuring. tom: "surveillance" breakthrough, messy restructuring. sonali: until they get through that, you cannot ask them to

merge with anything. they are cutting thousands of require a merger would thousands more being cut. nejra: what about the backdrop of the u.s. consumer? this was a positive for the banks in 2019. will it continue? robert: no, it won't. it has to slow. you have to get a kick up in your business c&i and commercial lending and that ties to capex. until february we will not know whether things will get better. i think interest-rate damage is done. i think the base is there and that will not play into this year, but they have got to get loan growth and that slows the economy. consumers probably slow their spending and their borrowing. nejra: are we likely to see investors show more love for thepean banks, particularly

sort of capital requirements ising a little bit, perhaps the prospect of return of capital to shareholders? a strong.s. banks are and steady story and european banks return to raid -- turnaround story. people are willing to wade into the european banks. the u.s. is about to hit a messy political cycle and people believe europe can be a haven. tom: this is good for the hedge funds. we had the mr. einhorn numbers. do betterdge funds than the standard & poor's last year? sonali: there are people that killed it. with netflix wavering in his call. tom: how did they do it? sonali: they have a lot of faangs and private stocks. you have a lot more room to

grow. tom: we will continue, sonali basak and robert albertson. much more to talk about. i have got to say it again, michael mckee leading our economic coverage with two important conversations, charles evans heated about the asymmetric need to get rates up and boost inflation. a really interesting conversation. and then loretta mester of the cleveland fed as well, always interesting. this is bloomberg. ♪

♪ bloomberg "surveillance."

it is a beautiful washington, the library of congress behind us. trillion dollar budgets, i am sure we will make a theme of that in january. to get your year started, we do basak,th sonali vasek -- and robert albertson joining us. day wember the first heard the math of hedge funds and we go, really? sonali: most people cannot get away with charging that much these days, but you occasionally see the 40% performance fee. tom: is it like billions? up on tv.put ferro sonali: i think the private equity world is more like billions and the hedge fund

world is the world where people are becoming billionaires consistently because people are pouring so much money into private equity but it is largely an outflow. nejra: you were saying before the break those that did well were putting money into private companies. if you look at public markets, where there any strategies that did better in 2019? equities, what did ok even as there was underperformance? hit the categories on the head. venture funds raised most capital. if you look last year, volatility had come back but not in a crazy way, which is pretty decent. not all the tides are rising. squared? is r

youid not exist because bought a mutual fund that was sort of like the index. ancient history. has it distorted the markets so much? the index fund, have they distorted the market as we know it? robert: it is hard for me to tell. what shocks me is to look at the ownership of regional and community banks, and you always find these index funds, and a huge amount. i am talking about a $2 billion bank has 25% of its investment from index funds. it is a machine, so it has to distort the market. tom: let's look at something charty. , thei has never seen this annual soliciting of all the stocks in the journal. in the old days, albertson had a pencil and would look at his ownership of amazon or apple

computer. it is charming. we use to look at this in the old days. as the market rigged in the old days -- because we are not looking at the stocks like we used to? robert: you have so much in index funds -- and i'm not knocking them overall. how do you a really invest in index funds as an individual? do you pick something based on your own premise without a lot of thought? it is very tricky. it is there. volatility in some of these stocks is much higher than it used to be. i get calls from some of these banks who say, why is my stock up or down? how do i know. when i look at those index funds and what they do, it adds to the volatility. ahead.sonali, go sonali: volatility is good for

these funds. in some ways, index funds are taking over the market but people who can find opportunity in the middle is the clients last year had a tougher time. the big question now is are we at peak want? -- quant? are they picking up signals and are they too crowded? nejra: how much of an interest are you taking in private markets? robert: i am not deeply involved in it. it is clear that area is probably the most rewarding for the simple reason that you come in with multiple investment, and you only need one or two to work, number one. number two, the opportunities of picking the right one are pretty good and they seem to perform better. they got one advantage, they have a long-term view and hold. whatever goes into that

portfolio is well thought and they live with it. you can see it in the performance. it is hard to get ian as an individual, but the pe funds are the answer. bridgewater, mr. dalio's shop, he is doing the whole help thing on linked in and lectures with bloomberg. how did bridgewater do last year? they are not macro, right? sonali: pure alpha has a lot of macro and his bet on interest .ates did not work out that is a fund where we have seen outflows on a smaller scale. i wonder how this will survive into this year based on how much muni -- money is being pulled out of it. tom: are we in alternative

investments -- i am using that phrase almost institutionally -- are we at a point where we misjudged the amplitudes that could come with any shock because we have gotten so complicated and cute? robert: the trigger point would have to be significant. it will be highly distorted and take a long time to settle. small things i don't think do that you get a big surprise and any kind of global event, then you will see an amplified reaction. week,an we do this once a the two of you? and spiritedmart discussion, thank you for joining us. tell and, tales to scores to settle with theories about how carlos ghosn escaped. tokyo seeks talks with lebanon about the scandal. this is bloomberg. ♪

♪ this is bloomberg

"surveillance." general election shares had their best year since the beginning of jack welch's 10 year almost four decades ago -- tenure almost four decades ago. it was larry cops first year taking over. he tackled concerns about debt and cash flow. singapore's economic growth slumped in the final months of 2019. gdp rose at an annual rate of 1/10 of run percent for the fourth quarter -- 1% for the fourth quarter. singapore was hurt by trade tensions. it is one of the most export reliant economies in the world. endeavor is looking to expand. to acquire a high events business for the wealthy, valued at about $660 million.

that is the bloomberg business flash. nejra: thank you so much. escapeghosn's dramatic continues to pose more questions than answers. beirut may have been pressing for his return more than a week before he slipped out of japan. joining us is chris bryant. you made the point that this is better than a netflix drama. so many theories abounding, have any escaped and stood up yet? chris: no, indeed. still more questions than answers. what is abundantly clear is this was an extremely professional job. could rely on his money and contacts to spirit him out of japan. it is extraordinary that he was allowed out on bail. clearly, the japanese authorities will be regretting that his escape relied on

private jets. he may have stopped in turkey before flying into lebanon, a country where he is sure to receive a warm welcome. one of the most extraordinary stories i have covered in my career. nejra: lebanon's justice minister has said they would reject his extradition. what happens now? does he stand trial, and where? chris: if lebanon said they would not extradite him, interestingly, so has france. they do not extradite french ministers so he has at least two options where a process could take place. i would imagine he would favor lebanon, which is a country that really fought in his corner ever since his arrest on these charges which he absolutely rejects. france has been more reticent up isil now because mr. ghosn accused of financial crimes,

something the french would probably not want to have too close to them. excepts an ghosn invitation to fly to paris remains to be seen. his first stop will be a press conference where we will learn how this escape happened, and also a more lengthy defense than he has been able to give up until now. nejra: as we wait to hear from him, what of nissan and renault in the meantime? chris: this is extremely awkward for both of these country has companies. -- companies. he was ousted as chairman of nissan, he says as part of a conspiracy to close the union of these automakers. since his departure, the share prices have tumbled. their sales and profitability are down, so both are in crisis.

it is extremely unhelpful that takehosn is at liberty to pot shots at his former employer should he want to. he will want to settle scores. last year he gave brief video of -- the conspiracy. now he has a chance to do that. nejra: chris bryant tracking the carlos ghosn story for us. sentiment in equities, green on the screen in europe. u.s. futures on the front foot as well. bonds were more mixed. copper in the green. this is bloomberg. ♪

>> lucky money.

china's central bank eases restrictions in advance of the lunar new year. asian markets like it. pmi coming in under in 54 the 11th month in a row, once again by germany. a risk on start to the new year, with stocks from asia to europe, u.s. futures climbing even he higher, hope apparently springing a terminal. welcome now to "bloomberg ." break you can see u.s. futures have been up all morning long. no hesitation whatsoever. that was led by europe, of broadly across the board, led originally by asia. in the meantime, the u.s. 10 year, the yield is going down a bit on again. it was the reverse for the day but it has come around again. oil has curved up as well. off for a bit, that is where we are in the