longere: iran says is no is bound by the 2015 nuclear deal the killing of a top general. president trump threatened disproportionate retaliation should were -- iran take military action. the ust debarment warns military attacks at basis. global stocks fly. gold surges of the highest level in more than six years. -- ♪; francine: good morning everyone. talking to "bloomberg surveillance."

markets trying to figure out the fallout from the u.s. strike meansilled the general for their portfolios. and what it means for the price of brent. is at theere bryant moment. gold at the highest in six years. data. also getting some euro area services pmi coming into 52.8 just a touch better than expected. we are at the eurasia summit talking 2020 risk. we will talk to the italian prime minister. in the international rescue committee chief executive david miliband. those are coming up on bloomberg surveillance. let's get to the first word news in new york city. >> we begin with australian authorities counting the cross -- of newowns on the south south wales in neighboring

victoria. blazes are the generated drive thunderstorms, thousands have been evacuated to recreation grounds, converted into makeshift camps. a new top man from china and hong kong, a communist party of thel who is now part anticorruption campaign. after nearly seven months of political unrest. shows beijing's intention to restore law and order. he says the way he is certain the situation in the city will stabilize. confidence that a constitution and basic law will be fully enacted in hong kong that will maintain the one country, two system policy ensure the long-term prosperity and stability thanks to the joint efforts of carrie lam, or government, and all parts of the community. escaper carlos ghosn from the country, japan is tightening its immigration

procedures. he skipped bail and fled for lebanon last week. in a first comment from japanese officials, the minister said authorities were -- will learn without how he left detection. at the golden globes, once again living up to its reputation. is a world war i epic at that won the prize for best drama. it also inserted itself into the oscar race ahead of its release. just two prizes for its -- off for the night. -- for the night. 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. trump is president threatening iran with major retaliation if it does anything to avenge the u.s. killing of

top general sublimating -- of a top general. all americanng for forces to be expelled from the country. we are joined by the chief executive at center for applied research in partnership. thank you so much for joining us. when you look at the biggest unknown it's what does it mean, how much will they rise from here? >> we have a lot of ongoing conflict and wars already, but the potential here is that all and the conflicts looming ones elsewhere in afghanistan, these can all get worse. they can get worse because iran which both are on the opposite , that's to the detriment of all these conflicts. >> one of the domestic

applications for ron? >> what you see today and yesterday already is a marginal millions in -- a marching of ourning for the general. people are unified after seeing the general be killed. been subject to criticism inside the country but people are now gathering and rallying around the flag and this is a unifying moment for the country of iran. francine: what does it mean for u.s. sentiment in the region? mindat we have to keep in is that not only an iranian general was killed, there was also an iraqi state official and so ianese interlocutor, guess it's not only iran that is now calculating how to retaliate but also state and nonstate

actors both in lebanon and iraq and that could lead to potentially very dangerous for american interest in american troops in the region. francine: give us a sense of what this means for u.s. foreign policy in the region? is there any -- do you have any insights into what president trump was trying to achieve? , to me this looks -- driven decision which doesn't follow any sort of strategy or actual policy so it's difficult to define what u.s. policy is. the one thing the president has been consistent on these he wants to pull out the troops from countries such as iraq. and by developments inside the iraqi parliament we may see them being expelled. we are not quite there yet. more internal things have to happen. maythe targeted killing actually bring closer the moment

ofthe u.s. being kicked out iraq. we are not quite there yet but it makes it urgent and necessary that the u.s. develops a coherent middle east policy. francine: should we worry about energy supply disruption? >> this is certainly something that is in the cards should iran decide to disrupt the routes and transfer in the persian gulf and the strait of hormuz, that could have political ramifications for energy supply and security. we will have to see whether they want to follow that path. if you were to look out for something in the next two to three weeks, is it -- the europeans who had the nuclear deal with iran and had stuck with that even if president was against it, do they react or is it something else? isthe european reaction important. today we are seeing a statement

which is in fact siding -- but it falls short of condemning for example the questionable active targeted killing, he criticizes iran for its shortcomings to fulfill the jcpoa so the european leverage in iran will decrease even more. iran will look at how its rivals in the regions, how they react to the killing to see whether any retaliation will also happen ,otentially in those countries a lot of things we need to look at before we can actually reassess. francine: thank you for the insight. coming up we are -- global downside,de to the

gold surges to the highest level in more than six years. this is bloomberg. ♪

francine: economics, finance, politics, this is bloomberg surveillance. let's get to the business flash in new york city. singapore, they are setting up an electronic currency trading in private -- pricing platform by jp morgan in citigroup. wille city -- facility support electronic trading at 50 currencies and would swap nondeliverable forwards and options according to a company statement. it will also allow trading of precious and base metals. pounds to00,000,000 british businesses. this is lloyd's renewed pledge in 2020.

the bank match the commit for loans that will make it available for companies are qualified. as brexit clouds the british economy and lloyd's reported a decline in quarterly commercial banking but the overall credit quality remains. would you give up facebook for a month in exchange for $50. that could help the question -- that could measure how much social media is shaping the economy and our lives. the social network alone could add as much as 0.11 percentage points annually to u.s. gdp. that's the bloomberg business flash. tensions between the u.s. and iran are looming through markets. oil at $70 a barrel at the state -- u.s. department of state warns about a at military bases and energy areas. offered threats

of retaliations and vowed heavy sanctions against iran. let's get straight to our reporter. >> the chart you need to look at is brent spread. you can see it is really spiking for march compared to december, the premium is about six dollars a barrel. so the physical market looks like it's going tighter in the near term as you see these prices around $70 a barrel. risk in goingore three to $10 a barrel and given the fact the u.s. state department saying its heightened risk at military bases and oil facilities, many people think of what happened in september. also we saw a boost their with these risks in the market. no supplies have been hit, but these risks pushing the price of oil and it's moving these spreads allow wider. francine: thank you so much.

joining us for the hour, head of fx strategy and deputy global chief officer of credit suisse. happy new year to you both. we started the new year with shocking news no one was expecting about the assassination. what does that mean for the markets in the next several quarters? >> what an interesting way to start the year and the decade indeed. this is one of those singular events which we would argue -- i have said to you before you cannot insure them, you much diversify them. fundamentally the world economy, consumers are happy and willing .nd able to consume monetary policy remains accommodative compared to where was last year. certainly this event will make sure monetary policy will remain supportive. center aslt up to the we've seen in markets last year

was making them prone to being prone to some sort of correction and arguably this could be at. this could be the correction which probably turns out to be a buying opportunity. recessions cause which we don't think this one will, they give way to buying opportunities but we are probably not there yet. the think we've seen reaction we would publicly expect. canada because it's in oil currency. it's difficult at this stage to estimate how far this will escalate or not. the other thing is the geopolitical events we had in the last two years hasn't had as much market impact as many what is expected or they would have had the news come out 10 or 20 years ago. the reason for that is liquidity in the market. central banks providing so much

liquidity. if we look at volatility levels, they are quite low in fx. 2019markets in 20 -- outperformed market expectations at the start of the year because the market was thinking we are going to get slowdown in global growth, that is going to hinder, but with so many central banks starting so much liquidity, stocks went up really very high and i think we will have the same sort of function this year when we have geopolitical events creating risk aversion, but on the others of the scale we've got central banks providing so much liquidity that it provides a buffer. thatine: is there a danger we say in this fictitious world of extra liquidity so that once again markets don't fully price in this assassination could mean worldwide. this all rests on where geopolitical crisis will go.

a dangerous and bold pattern cat and mouse game. where both parties, both antagonists have strategic constrained to declare out right war and with a hit-and-run operation, which markets are preparing to price in right here and right now. that may take some more time. an our main scenario is outright war in the middle east is unlikely, not only of the antagonists unwilling to do this, so are the most hardened -- they are constrained for other reasons. storms one of those many that tragic as they are, passes. once the dust settles, markets will have sensed what it does to the economy. and our sense is it will not derail the world economy. the u.s. is the next exporter of

energy. francine: one of the things that kept on changing my mind. i decided to show you gold and copper, what are the havens left in the world? have they changed from five or 10 years ago? >> that's a very good question. one of the traditional havens that hasn't changed at all is the swiss franc. it's much more reliable than gold, which is a good one now, but not every time there is a crisis. the yen is a good haven. a reflection of recovery in global growth much more than it being a risk haven. and other than that. is best haven for investors to diversify. the yen benefits and i think we got -- the central bank has as a tool

the ability to intervene. for investors is always a risk that if they buy too much swiss franc. and with the yen they have a negative interest rate. the bank of japan and the swiss national bank do not want these, they have an issue with two low inflation. they don't want to currencies being pushed up even further. -- float thesend elsewhere. it's a place where gold becomes quite interesting. gold became interesting last year. level since 2013. the reason why think it's become interesting is fixed income markets became interesting last year pushing it a negative interest rates. as we go back in the early 1990's, gold did not retain the safe haven gains it made, it went lower. in the markets tended to say back then why would you buy gold when it's effectively got a negative yield because you have to buy insurance, when you can

get perfectly good return in the fixed income markets. when they are not yielding what they used to. gold for investors become interesting again. in the next few months it's going to be interesting whether or not it holds those gains or not. francine: also another great chart. can get decade started strong. burkert van holt credit suisse joining us, stay with us. china plans tol, send a delegation to the u.s. for phase one, this is bloomberg. ♪

francine: this is bloomberg surveillance. i'm francine lacqua. chinese trade delegation plans to travel to washington on january 13 to sign phase one of the trade deal. bloomberg understands the plan is -- they are sending the prime negotiator. jane andh us is burkhard. we were just talking about the foreign policy of the u.s. in the middle east where it really took the market by surprise. deal, does the good feeling of the market gets canceled out by what's happening in the middle east? >> it's possible. hopefully that won't happen. a lot of the markets are rallying over the last couple of months. so the question is do the

markets carry on with that about phase one or as we fear, do fears come back again. issues to be sorted out for phase one. if you listen to some of the rhetoric from one of the u.s. security advisors, they are quite hawkish when it comes to china on both sides of the political divide in washington there is still a lot of hawkish rhetoric. that sort ofto undertones from washington, i think it's easy to suspect that we will again get some degree of tension surrounding the u.s. and china in the course of this year. >> what does it mean for the markets? are there sectors that will benefit or is it just the status quo? >> do you mean from the trade war? yes of course. some of those that are hardest

hit, the reality is calling this a trade war has always been a misnomer because it's not. it's deep geopolitical rivalry and the only term i agree with is talking about it phase one. this is going to carry on for the entire decade because it's not a trade war. it's a geopolitical rivalry between the number one challenged by an up-and-coming number two. business is remarkably flexible to adjust and we have seen businesses adjust value chains and vietnam as one of the biggest winners and will continue to be one of the big winners of this. francine: we will be back. this is bloomberg. ♪ ♪

the follow-up. iran says it no longer is bound by the 2015 nuclear deal after

the killing of its top general. president trump threatens disproportionate retaliation, should tehran take military action. oil surge. statebreaks $70 after the department warns of missile attacks near military bases. global stocks slide. gold surges to the highest level in more than six years. good morning, good afternoon, good evening, everyone, and happy new year if you are just back at work there it i am francine lacqua in london. we are getting some u.k. data. remember, january 31 is when the u.k. leaves the e.u., and then we start renegotiating to see what kind of trade we will eventually get. pmi coming in at 50. the preliminary figure, from 49 to 50, is neither expansionary nor contractionary. i guess it is just expansionary. jane foley will correct me. is it expansionary? jane: bear in mind that where

some of these numbers are, that it is a relief. here is annmarie hordern. annmarie: i want to start off with the oil and gas sector. all of big oil is on the big move higher. it is the only sector in the green. brented crude prices, hovering around $70 a barrel. premium,eing that risk the geopolitical risk premium over the price of oil, the state department saying there is heightened risk around u.s. military bases. boding welle is not for airlines. they are under pressure. air france, 4.5%. all these airlines are under pressure, we do not know when or how long this increase of oil price will stay. againstlines can hedge this, but for the most part it is out of their control. francine: we will have more on

those movers and what that means for airlines. annmarie hordern with the biggest european movers. let's get straight to the liver first word news in new york city with viviana hurtado. viviana: iran is no longer abiding by any limits on uranium enrichment. iran pulling out of the 2015 nuclear deal, marking a widening fallout from the u.s. killing of a top iranian general. also devotedment to expel troops from the iranian country. oil extending its germanic surge above $70 a barrel. this is the u.s. date department -- this as the u.s. state of higher warned risk of missile attacks against military bases. resident donald trump reiterated with threats of a retaliation should iran "do anything."

gold surging to the highest level in more than six years. moments access it offers a more effective hedge and oil. australian authorities are pounding the cost of -- are counting the cost of bushfires. blazes are growing so large, they generated dry thunderstorms. .housands have been evacuated recreation grounds have been converted into makeshift camps. he is known for anticorruption campaigns. after nearly seven months of political unrest, the appointment signals beijing's intentions to restore law and order. he is certain the situation in the city will stabilize. thee have confidence that constitution and the basic law will be fully enacted in hong kong. that will maintain the one country, two systems policy and

ensure long-term prosperity, thanks to the efforts of carrie lam, or government, and all part of the community. viviana: 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. francine? seecine: fed officials their monetary policy likely to remain appropriate for the time being, despite persistent downside risk. that is according to minutes from the fmc meeting released friday. the cleveland fed president says the underlying fundamentals are still strong in the u.s. economy. >> i think it is great that we can have an economy with three point 5% unemployment and inflation that is well contained. we do not have inflation following in the sense of inflation being too high. inflation has been running under the 2% goal. those fundamentals suggest that the economy -- the economy is

healthy. jane foley -- francine: jane, are you expecting any big surprises anytime soon? president trump -- there is a school of thought that president trump is doing everything he can. jane: looking at the relationship between the fed and trump over the last couple of years, you could say that by lowering interest rates may be last year, you could argue that it facilitated trump taking a hard stance on china. and if there are another bout of tensions between the u.s. and china, which i think is quite likely, the fed will ease again. to the consensus, which i think is fairly stable, we do think that there is -- that rates will more likely come lower than stay steady. francine: do you agree with

that, burkhard? what would it take for the fed to be more dovish? burkhard: a weakening in the economy. another geopolitical or other singular crisis. an the reality is this is election year, and usually the fed does not raise rates. francine: jane, let me bring you to a chart that looks at the haven test, dollar-yen holding below the 5100 day average. -- there is aip reasonable collation between the dollar index and the msci emerging market index, meaning that when flows are coming out of emerging markets, they are tending to go into the dollar. you can reason that that varies in different ways, that the dollar is the number one global payment currency, people in e.m. need dollars, e.m. has grown in

the last decade. people need dollars. there is dollar-denominated debt. and there is the whole demographic need for dollars. i would argue that if we do have more geopolitical risk, the dollar would hold relatively certain, but the yen would still outperform it. it is a favored safe haven. i reckon if we had had this sort of news just a few years ago, the yen would have seen even more gains. goht now, i think we will lower assuming that we get more political risk in dollar-yen. the dollar will remain relatively firm switched the chart, looking at inflation. burkhard, this is for you. u.s. versus the 10-year -- is that the big surprise that we could get in the u.s.? burkhard: i think inflation is

fundamentally dead. it was killed by the internet, and it remains dead in a ditch prices ino can raise an environment where your consumers can find out your next competitor's prices online immediately? this is an environment where there are very few drivers for inflation. demographics is also weighing on islation, and even if there wage prices rising, they cannot be passed on. --now that left anza has -- the reality is that lift anza ticket prices are determined by ryanair and easyjet. and therefore wage pressure is good for employees and consumers. and it still does not translate to inflation. therefore inflation is not

something that i think investors would lose a lot of sleep over. francine: thank you both. and janevarnholt foley. let's look at the week ahead. tuesday we get a look at inflation and u.s. factory orders. boeing announces its latest orders and delivery numbers. thursday there is industrial production for germany. friday, it is the u.s. jobs report. we have more on key events next. this is bloomberg. ♪

francine: you are looking at live pictures entire around -- morningn of iranian's

qassem soleimani. occasions --f here is viviana hurtado. --iana: we begin with the mp bnp paribas setting off an electronic currency trading and pricing platform like jp morgan and citigroup. it will support electronic trading of currencies in spots, forward spots, nondeliverable forward, and options. this is according to a company's statement. also allows trading of precious and base metals. up to 18 billion pounds loans to british businesses are this is lloyd's review in 2020. the banks matched last year's commitment for loans that will make the element available to all companies. -- make them available for all companies. overall credit quality remains strong. a question for you -- for 50 bucks, would you give up

facebook for a month? the answer could help economists at m.i.t. measure how much technology is reshaping the economy and our lives. it -- they estimate just the 0.7al network could add percentage point annually to u.s. gdp. that is your bloomberg business flash. francine: thank you, viviana. 50 bucks. i will ask my guests during the break. have -- there is a shutter in the middle east through risk assets through 2020. investors have guns or pricing in additional futures for currencies. us. burger is with dani: this is certainly a wake-up call that nobody and markets ask for, but we can see some of the biggest impacts of those rising tensions on m effects volatility. when we look at the past five-day move, it is the biggest jump since in august. this number in december was the lowest since -- in the jp morgan

gauge since 2014, so certainly coming from a low base. i talked to a bank of america analyst who told me the low volatility in fx is akin to -- it is difficult to get out. , soeed something big perhaps these rising tensions are just the thing to do it. francine: dani burger there with some of the charts that we will be looking at this week. still with us, jane foley from rabobank, and burkhard varnholt from credit suisse. burkhard, any value in emerging markets in 2020? burkhard: absolutely. they still have room to lower rates. if you pick some which are less exposed to these wars, take brazil, for example, which is neither exposed to the trade war nor to what is going on in the middle east, this is a country that is dodging effective reform of the labor market, the pension market, the tech system, which is very high rates still compared to the rest of the

world, but declining inflation. all of that creates an attractive opportunity set for investors who are waiting at the pour francine: money into them. -- that will pour money into them. francine: what does it all mean for currencies? jane: i think you've got to be clever. the first effect is the market thinks volatility affecting a.m.. but investors need to look at the markets and all e.m. has different fundamentals. one will be more vulnerable. the turkish lira is vulnerable right now because of many factors within turkey, too. so the initial impact -- yes, they will be sold off and there will be opportunity for some markets. for some investors. francine: how do you find out? if you look at policy, you could have a trade war with some of the -- we have seen president

trump do it with south africa, with mexico, and other emerging markets. jane: the example of brazil is very good. brazil does not export a huge number to china. if we do come back and look at the markets being more exposed to china, if you think there is going to a phase two with more tensions, you will be more concerned about the south africa , australia dollar as well. the very strong links with china. again, it is a matter of doing the homework and finding the ones that are less vulnerable to some of the concerns that we are expected to have this year. francine: burkhard, if you were to do your top three picks of 2020, where would you put your money? burkhard: where there is the most value in terms of sectors, i.t. will still lead the pack. regions, the u.s. is

still the place to be. francine: anything that you think is in a bubble? a bubble that is about to burst? you could argue that treasuries are in a bubble or bonds are within a bubble. is that a risk in 2020? burkhard: for now we have enough singular risks, middle east, to deal with. you know, many people wonder a bubble,-yield being treasuries being a bubble. i do not really see either of them as being a bubble. they would be too obvious to be a bubble really. this market is still characterized, surprisingly so, by more worry than euphoria, and that is what is giving me confidence for the outlook in 2020 because bull markets do not die from old age. euphorially die from or from a deep recession or

inflation. as long as we do not see either a deep recession or recovery in inflation, and certainly no euphoria among our clients, among institutional and public investors around the world, it would be premature to call major pillars of financial markets in a bubble. we may see the end of this year somewhere, but not now, not here? francine: thank you both. they both stay with us. coming up, iran says it is no longer bound by 2015's nuclear deal after the killing of its top general. president trump threatens disproportionate retaliation should tehran take military action. more on our top story throughout the program. this is bloomberg. ♪

assessmentlligence made clear that no action allowing soleimani to clear his planning. we reduced risk of a president trump is committed at every step to protect and defend american lives here in the homeland, and

we will continue to do that. the u.s. that was secretary of state, mike pompeo, speaking yesterday. much more on our top story throughout the program let's turn to the u.k. peer the opposition labor will formerly begin the contest to succeed jeremy corbyn today. us jane foley from rabobank, and burkhard varnholt from credit suisse. become -- does him becoming the leader of the labour party change much returning the pound? but itrobably not much, has significant implications to the 2024 election. there is an issue of the election with the leadership of the labour party. if we did get a leader who perhaps was a little bit more in the center rather than the far-left, clearly that could have issues for the election in 2024. the sterling think

will be the start of trade negotiations, the future relationship negotiations between the u.k. and the -- francine: what does this mean for u.k. assets? i mean, they have done well since the election, but our fear is that -- our concern is that boris johnson will be more when he with e.u. then ran for election, that will generally be learn -- be viewed as a positive by markets both for u.k. assets as well as for the pound. francine: where do you say -- do you see volatility in pound as we see negotiations? we already heard from prime minister johnson that he will use this take that will leave under double eto rules as a negotiating chip. jane: if you stay on that path,

there is the probability of volatility. if he carries on using the threat, that if we do not like the negotiators we will walk away, we will have a no deal brexit, i think that will effect incoming investors. do we believe that he will be more flex a bull? then we do believe a deal will be done. not, if the start of negotiations shows and in norma's -- an enormous gap, the market will start to get more nervous. francine: what happens to pound if we were to leave under -- jane: sterling plummets. the m 70 connected with that will create a huge deal of uncertainty for investors. election,s before the the markets very concerned about the prospect of a no-deal brexit. and we have negotiated a deal, but the deal that he was talking about was a withdrawal agreement, not the future

agreement. so i think now, many of us have got to understand that there is still a huge amount of risk connected with the future arrangement of negotiations, which could still result in a hard brexit if things do not go well. francine: burkhard, what is your take on the european economy? is there value in certain countries that you see e? is that: the good thing consumers are still doing well. they have the will to do what they do best let's also not forget that construction across europe is strong, especially in germany, which was hit hardest by the investment load on the -- the investment slowdown, manufacturing slowdown. germany has become the detroit of the world. anour view, that is idiosyncratic challenge for germany's industry, not an

reflection of a weak global economy. selling all the cars to chinese consumers, it is linked to the diesel scandal, which they have not fully overcome. it is linked to the german car industry not fully having anticipated immigration to the mobility and what uber and dd -- that the disruptive takes time to overcome, but do not count the german car industry out. they will recover, and in the meantime construction and consumers will do most of the heavy lifting. francine: thank you both for joining us, jane foley at rep. banks:, and burkhard varnholt from credit suisse. this is bloomberg. ♪

the fallout. iran says it will no longer be

bound by the 20 15 nuclear deal after the killing of its top general. president trump threatens this proportionate retaliation should tehran take military action. oil's surge. brent breaks above $70 after the state department warns of missile attacks new military bases. and risk off clearly rules as the global stocks fly, gold surging to the highest level in six years. good morning, good afternoon, good evening, everyone. this is "bloomberg surveillance and francine.om focus ono focus on -- foreign affairs since last week. tom: this is an annual visit to ian bremmer and eurasia group. this is the best place to be this morning for all of these questions, and the more questions and the more questions, and maybe a few answers on what is going on between tamron, baghdad deck

between tehran, baghdad, and the united states. francine: we are looking at the top risks for 2020. if you look at the top 10 risks, it goes through every part of the world. at number eight, you have she a crescendo, just what is happening in the -- the shieh crescendo, just what is happening in the middle east. well,ront and center as the elections in 2020 moving forward. we will have a huge focus on the news of the we can on iran. francine? francine: let's get straight to viviana hurtado in new york with the bloomberg first word news. viviana: we begin with china naming a party official described as a strong man as its new top official in hong kong, this after seven months of unrest in the city. restoreg it wants to order in hong kong. faithful of the

party. today in australia, firefighters are getting a break. cooler weather and some rain helping attempts to control raging bushfires. authorities are warning this week dangerous conditions will return. fires in southeastern australia are blamed for at least 24 deaths, more than 12 million acres burned, and thousands have been forced into makeshift camps. in venezuela, a day of political chaos. reporters -- supporters of the president are being allowed to choose their own president. they reelected him anyway off-site. europe opposed nicolas maduro. 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 am viviana hurtado. this is bloomberg. viviana, thanks so much per

equities, bonds, currencies, and oil. let's look at the equity markets. risk off -21, moving on the news flow of all we have seen since friday. euro stronger now, 1.12. on oil, want to focus which was out of 70. global, brent crude, 10-year coming in as well. dataine: i have a similar check to yours. stocks are building on some of these gains. investors are trying to figure out what the fallout from a u.s. air strike that killed the means, but we've ed above moreghten than six years. dr. bremmer would like us

to start stronger in this 5:00 a.m. our in new york. joining us now, meredith sumter out of eurasia group had all of their research strategy and profound expertise on the policy of domestic china. we are thrilled to bring in henry rome with eurasia group. they are an expert on iran and a terrificone budget analysis. one of the great telling points for me on friday was admiral stavridis. he made clear, joint naval exercises, russia, your china, and iran in the gulf of hormuz. the moves of u.s. policy in the malisse is strengthening russia, and frankly iran's hand in the region. seeing less policy in iran and iraq and syria driving

political risk across the region that will have political and economic detrimental effects for that region as well. there are three key risks here. first you have the risk of lethal conflict with iran. ofh a 55 percent chance escalation between the u.s. and iran. second, there is a risk of the iraq state being either in iran's orbit or being at risk for -- tom: we really have seen that in the last 24 hours. this has been the story overnight sunday into monday. meredith: the u.s. is becoming persona non grata in iraq. looking at tying into china as well, reaffirm for us the linkage of the silk road of china. of yes,the linkage

russia, but more china with a struggling iran? henry: it is an important issue to look at, frankly because the chinese have long seen iran as a key part of the belt and road initiative, but they have also been looking elsewhere in the gulf over the five to 10 years, and hedging their bets, i would not say they have switched sides to focus more on the sunni world, but china, if you were to look at the crisis today, you would see china having a more prominent role in trying to iran stepe and take aside. right now they are largely staying on the sidelines, content to skirt sanctions on the margins. letting iran for and for itself. francine: what does this all mean for the president -- for the present's media strategy? is it a calculation or a turning point on something they had predicted? henry: the killing of qasem

soleimani was a response to the killing of a u.s. contractor and the storming of the embassy, which i think was a miscalculation on iran's part. and the killing of qasem soleimani will come to be seen as a significant miscalculation from the american side. the way it was executed through the policy process in washington, such as it is, indicated there was not much thought toward these consequences looking at iran today. millions of people marking the funeral procession for general soleimani. on the iraqive parliament in expelling u.s. forces. it is our base case, that iran will respond militarily, and it will kill american soldiers. it is just a matter of time. francine: meredith, we're looking at live pictures of

thousands turning out to mourn the military chief. the you look at tehran and troubles that they had, does this give some support from the people and give them leverage in conflicts such as syria and yemen? meredith: certainly the u.s. attack provides a useful rallying point for the government in iran. u.s.ample of how the tactics is bullying iran. that certainly helps the government in tehran, but let's be honest here, regardless of the economic sanctions or the maximum pressure campaign washington has been enacting toward iran, there really has not been that much of a risk of domestic instability in iran that would cause the government there to choose a different path. folks, we are getting started on what is going to be five hours of diving into all of the nuances of this topic. some of the obvious statements

-- one of them to me is that , simply a major economy writes the check to iran as we step back from iran, and frankly from other parts of the middle east. is china capable of getting out a checkbook and insisting iran -- and assisting iran as they really struggle? meredith: china is more interested in assisting its own interest in the middle east. tom: i will go with that. meredith: what where witnessing is quite incredible, tom. administration's america-first approach to the region, the u.s. withdrawal from that region has allowed russia and china and iran to solidify their influence. but it is also going to make for a much more unstable withintical situation the middle east. we have already seen the price

of oil impacted. we think there will be a $10 to $15 risk premium in 2020. tom: is eurasia group this morning publishing $80 a barrel he echo meredith: not yet. tom: i want to go back to your mid-december analysis of the budget in iran. how broke is iran right now? as a general statement, how is the state of their government finances, and do they need china and russia more than ever he ? henry: i think the state of their finances are very poor, but they are not on the verge of collapse. i do not think we are at that stage at this point. they need china, at the very least, to continue buying 300,000, 300 50,000 barrels per day of crude oil. they would like to china -- they would like china to do more, certainly. it at this stage iran has become resigned that they will not get more support from russia and china, largely because of the

threat of u.s. sanctions against both those countries. so they are trying to make you with what they have -- to make do with what they have. over the next year, they can manage on the exporting a small amount of oil. they are taking significant steps to try to rearrange how they fund their budget. if president trump gets reelected and policy continues and we look at five years of this pressure, i think that becomes a lot more difficult to comprehend. over the next year, they can make this work, but looking out farther, it becomes more tricky. tom: henry rome, thank you so much. greatly appreciate you beginning our coverage here. eurasia group and with global macro in iran as well. we have this out on linkedin and twitter as well, the great graphic of meredith, who made with 72 crayola over the

weekend. top risk of 2020. we have been incredibly fortunate to pull together all the eurasia group talent to speak of this time of great, great tumult. coming up, along with meredith sumter, we will hear from dr. bremmer not only on iran but on the domestic politics of america. stay with us. worldwide, this is bloomberg. ♪

viviana: you are watching bloomberg surveillance. skip in large cases before they were loaded onto a private jet this is according to japanese forecaster in hk on carlos ghosn's escaped from japan. police reportedly believed he was hiding in one.

u.s. nild major producer to file for bankruptcy -- borden's debt load is unsustainable less than two months ago, it's rival filed for chapter 11. to flythey are allowed the boeing, u.s. pilots may have to undergo mandatory flight simulator training. months ago it was rejected as unnecessary, but recently it has gained momentum. it is still not certain when the plane will return to service. that is your bloomberg business flash. tom? francine? francine: in a report from beijing, the vice premier is planning to lead a deal to washington next week. the delegation will fly to the s on monday, january 15. there is not inspected to be a

unilateral announcement. meredith sumpter is still with us from new york. if you look at the u.s.-china trade deal, what does it actually change? meredith: not much. if you look at the number three top risk, u.s.-china this year, i actually like to call it, even with the trade deal there is no real truth. in 2020 we see u.s.-china tensions as leading to a much more explicit clash over national security, over global influence, and over values. and the trade deal not withstanding, with phase one, the two sides will use economic tools to coerce one another. but in 2020 there will be more political goals, and companies and governments will have an even more difficult time avoiding getting caught in the crosshairs. this is a great power rivalry much more than it is anything purely ideological. theensions escalate,

diversions is between the two sides come economic structures, and specifically how they managed their economies, will bring economic -- will bring in irreconcilable differences to the floor. at china'sf you look increasing or decreasing role in the world, we were just talking about the fact that they have not really weighed in on iran as the much as they may have in the past, what will that mean for chinese influence across the world? meredith: this gets to our number two risk, the great decoupling. you're going to see the world's second largest economy expedite its divergence from what had been converging globalization under western liberal leadership . china is going to be more so acting globally, uniquely in its own domestic interest. china will expand not just in international security, but also in terms of international technology and trade, and even

the financial architecture to better promote its interests. we think that this could lead to pressures that would see our world turning into a more bifurcated world where you have the u.s. and china. meredithcharm of the -- the charm of meredith sumpter is that you pay attention to the chinese press as well. how has that changed? what do you listen for? what do you see? meredith: it is remarkable. in the last three months, the communist party leadership talking points on the long march, on -- tom: excuse me, this is so important, folks, because dr. ter is focused on the long march. but this is not the long march we learned in school, right? meredith: it is, but what you see now is the state-backed

media is being pretty consistent in criticizing the u.s. and pointing its finger toward the ills,or a host of chinese including unrest in hong kong, trouble they might have in shin john and taiwan. you can see that the state is looking to control domestic opinion. tom: if it is a long march, does that mean they wait out president trump? meredith: absolutely. this decoupling is going to move beyond the technology sector, the heart of the u.s.-china trade confrontation. it is going to spill into a broader array of economic activity. it will affect not just the 5 trillion global tech market, but also other industries, a host of other industries and institutions, the media and entertainment to academic research. the key risk is this is going to divide inarsh reverse business and economy and in

culture and society that would be extremely difficult to reverse. francine: thank you so much, meredith sumpter of eurasia group. she stays with us. china sends a party strongman to oversee interest in hong kong, indicating beijing is determined to restore law and order. more on that next. this is bloomberg. ♪

>> we have confidence that the constitution and the basic law will be fully enacted in hong kong that will maintain the

one-country, two-systems policy and ensure long-term prosperity and thanks to carrie lam and her government and all parts of the community. news flow ofn the friday and saturday was that exceptionally important announcement -- barely touched on saturday and sunday -- and here we are monday morning, finally able to get perspective on a new director of the liaison office in hong kong. not a substitution of carrie lam, this is a more hong kong-beijing position. with your expertise in china, what is signal -- what signal is beijing sending to hong kong with some indifferent to run the liaison? meredith: it is a consistent signal, which is, hong kong, you are not going to get away from our grasp. the more that you push, the more we will smother you with what we've got it tried economic influence, we tried other ways andanage the legislative

regulatory sphere. you push back, we will push back even harder. tom: the chinese method seems to be to take someone from a province, move them to another province. going into hong kong to get things fixed or grooming him for other positions? meredith: a little bit of both. beijing is looking for someone with a strong arm that they can put into a difficult position to work with carrie lam. it is a pretty precarious position. beijing is focused on what it needs to get done in hong kong. if luo does a good job, it will have a positive tailwind for his career within the communist party as well. my sense is it is just a matter

of time. but the key question is, not will carrie lam be replaced, but will -- what impact will that have on the protests in hong kong? our view is not much of one. replacing carrie lam is unlikely in hongde those protest kong. that will add to more pressure over the medium-term. francine: meredith, thank you so much. meredith sumpter, the eurasia group head of research strategy. joins us to guest top 2020t malaysia's risk. plus, the developing situation in the middle east. this is bloomberg. ♪

tom: good morning. city.a group in new york francine lacqua in london, much

to talk about on this first working monday of 2020 and we do that with eurasia group and this is a different visit with eurasia group than we have ever seen before. francine: it is certainly different because if you look at the top 10 risks, and especially number three is the middle east, we could not be more on the news given what happened last week with the airstrike and now tensions flaring up in the middle east. in newt's continue now york city with our "first word news." viviana: we begin with a warning from president trump to iran not to retaliate for the u.s. killing of one of its top generals. he also has a warning for iraqi lawmakers voting to expel american troops and he said that that happens, he wants iraq to rebuild -- to repay billions in military base construction costs.

two former central bankers warning of the risk of a low interest rate world. mario draghi and janet yellen say central banks alone don't have the tools to cope. -- a new poll shows the first major test for democratic present candidates is a deadlock. the cbs news survey showing an audit -- in iowa, bernie sanders, joe biden and pete buttigieg each with 23%. mr. sanders is seeing his support jump. jerry selection begins today in the rape trial against harvey weinstein. too movemente #me worldwide. weinstein has pled not guilty,

saying any sex was consensual. global news, 24 hours a day, on air and on quicktake, powered by over 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: thank you so much. host -- at 10will downing street. a future trade deal is high on the agenda. about the now to talk 10 top risks that eurasia sees is the former prime minister of italy and the eurasia group managing director for europe. talk about the risks that europe is facing. it is the influence that europe tries to have with the rest of the world. >> what a time to be talking about such a risk. relevant argue however the eu is on the global stage

and precisely why i think emmanuel macron in 2020 once europe to redefine its place in the world. he doesn't want europe to get stuck in a conversation about exit or whether italy or the euro is sustainable. posture,, a huge number of risks. how does this new commission get back on its feet and reconnect with the citizens to find its place in the world? point was thein green deal. the commission with the idea of was the big project news of last year, of the last part of the year with the presentation of the commission. now we have to see what will be the true content, the true

substance of this new deal but it is clear that this green green new deal will have consequences in the relationship between the european union and the rest of the world. my point is that the green deal will be the top challenge for the 2020 year for the european .nion and the commission it is not easy for europe to keep united. , you are acutely aware of the history of the mediterranean. you mentioned libya and then over to iran and hydrocarbons. are the recent days enough to destabilize or lessen any sense europe?ery in

enrico: yes. the first consequence is on libya. what is happening at this very moment is really worrying us very much. risks thatome big europe can play a crucial role to avoid escalation in the region. of riskave explosions or instability in libya, you immediately have consequences in terms of migrations. i raise this point because last year's where not only for my country but the rest of europe, very complicated years because of the mismanagement of migration flows and the consequences of the mismanagement on the internal domestic political situation.

a big risk is to have a very unstable situation. tom: as i mentioned on social media, eurasia group absolutely nailed germany alone two years ago, maybe it was three years ago. entering is germany 2020? give us an update. >> horribly is the answer. angela merkel is stuck in a miserable coalition. her preferred successor is basically not up for the job and her team has come to that conclusion. the social democrats are very unhappy with the performance of the grand coalition and is seeking to renegotiate their -- their agreement with the cdu. all of this creating a massive vacuum in the middle of europe that macron is filling. that is precisely why i think

focusedmissioner is so on the geopolitical disposition of the eu. that is a macron agenda. he says it is time for europe to be relevant in the geopolitical theater. that creates a huge number of risks. europe isn't going to stand up its own army but it may use trade as a more one instrument -- a more blunt instrument. it creates a more challenging context for the european union to operate and because macron is less mature when it comes to geopolitical -- geopolitics than merkel. francine: the commission is now trying to do a lot on climate change. if you focus on climate change, is there a danger you displace workers in the fuel economy and you cannot find a new place -- cannot find your place in the new world order? >> macron has had the yellow

vests rebellion that is not going anywhere. background noise in the presidency. the pension reform strikes. that is less than 0.1% of public workers. about the street protests in a historical perspective, what you are seeing right now is not substantial by any means. ratings,t his approval the fact that he sits on absolute majority and is highly likely to win in 2022 suggests he is in a strong position domestically and is de facto europe's leader at least for the next six or seven years. the eu has missed the boat on digitized a shoe in and it is the first mover on climate , there are substantial potential economic gains. arguably 7new jobs, million in the eu.

letta, there is a first mover's advantage. how does the european union need to do something? how quickly did -- how quickly do they need to say this is where we are going into the next six months? enrico: is necessary to have the next -- it is necessary to have the next weeks and at the end of the first 100 days with some good signals. with the green deal, on trade -- the but the europe european commission has a very -- and myrole in andd point is about digital how the european union can take the lead of this sort of technological -- on how to deal , new dealsrotection

and new challenges and of course it is not easy. there is the topic of taxation on high tech giants. these topics are the top issues in the next weeks. i would like to add the fact unexpected geopolitical instability is challenging europe because if we have libya and iran in a situation in which the european union appears divided and ineffective, that will create a lot of risk and weakness at the european level. and libyafor the iran situation will play an important role the entire year. enrico letta letta,

thank you so much, the former prime minister of italy. up next, we are joined by the founder and chief executive of grow intelligence, a tech startup focused on the global agricultural sector. we will learn about climate change and agriculture. this is bloomberg. ♪

tom: good morning everyone. we welcome all of you worldwide. extraordinary images from iran. many different images from around the nation in the islamic republic. we will have continuing coverage through the day.

those bloomberg headlines as well. out, driving for the international conversation, the chancellor of germany and mr. pruden of russia saying they utin of prussia saying they are discussing the issue. we welcome eurasia group. to 59th i usually keep street to this is almost a foreign trip for me this morning with eurasia group. as wes in london as well talk of europe and all of these international ramifications. the name will -- the naval exercises of russia and china in the persian gulf, what does mr. pruden want to accomplish -- tin want tor. pu

hit -- want to accomplish? >> i think constraint is too tough a word. europe is not about to stand up its own army. foreign policy will remain the -- but i think the europeans will try with a view to putin and looking to manage him more effectively, try and break down cross-border barriers to things like military trade, technological development. why do we have to import our drones from israel? why can't we develop that technology ourselves? using the large internal market as a vehicle to give europe more weight in the geopolitical sphere and use that as a vehicle to try and manage putin a bit more effectively. europee: how should respond to what is happening in the middle east?

mij: it is tough given the situation in germany we talked about. the u.k. is stuck in the middle. this is real tension for global britain. they desire to remain in the continental european diplomatic orbit. one has to look at the initiative. macron's objectives are not being reflected internationally. that is not what the u.s. administration is saying and as a result, european calls for those objectives are falling on deaf ears. -- is under wto rules or because even if it is, it is more of a domestic problem? mij: there is a risk. of nois a 50% of ability

agreement on a free-trade deal by the end of the year. but that hits in 2021. for 2020, it builds up a lot of problems that ultimately 2022.st in 2021 or essentially status quo but i don't think you will see into -- i don't think you will see material impact this year. tom: very good. thank you so much. we greatly appreciate it with eurasia group. we are looking at the risk today and front and center is all we are learning about iran. overnight, the news on iraq and the response from washington. riskthat, our other eurasia group is seeking is climate change. intelligence -- with gro intelligence is with

us briefly this morning. i understand that 2020 is a shift for climate change. describe that shift for us. what will be the new of climate change this year? sarah: good morning. i think some of the big shifts that are occurring around climate change for 2020 are largely going to be driven by adopting and being under pressure to adopt climate friendly policies which are obviously going to be at odds economic short-term sacrifices that need to be made in exchange for that. at the same time, governments that are not as committed to climate change. conflict in the big

issues we have to get around is just that. tippinge we reached a point on what i am going to call the stereotype third world air pollution as i see the images of x numbers of city and in -- cities in india or the pollution in northern iran and tehran as well. have we reached a point where the air in the cities is totally acceptable? sara: i think so. and civilians are essentially making demands that the air be cleaned up. in certain countries, those policies are being taken quite seriously. a lot of air pollution we see is very much driven by coal fire power generation. mix in termsind of of what sort of tech is used in

power generation is probably the biggest contributor to that. , theparts of asia pollution you see, those are some pretty serious economic trade-offs to make in terms of changing the fuel stack and what types of fuels you use in power generation. francine: how does the calamity we are seeing in australia change the dynamics for business and how data is available to look at climate change? sara: it is quite a tragedy in australia. australia is one of the countries that has not been as to making changes around climate change. in australia for a long time it has been one of the regions of the country most impacted by climate change. if you look at the volatility, overall that volatility, you see it in terms of food production.

it has been one of the most volatile in the world. that aggressive policymaking is not occurred. what is happening there and this is where it is about civilians adding significant pressure to corporate's and saying cleanup , there are allin help peopleers to and consumers want to consume and that -- a lot of the pressure for this year will come from consumers. francine: thank you so much, sara with gro intelligence. this is bloomberg. ♪

francine: this is bloomberg surveillance. the eurasia group's headquarters in new york to get started for their 2020 top risks. we talked a little bit about how europe should react to iran. how should the deal with turkey? it is one of the top 10 risks

for 2020. mij: it is number 10. it is a big mess. erdogan has been in power for 17 years now. very effective at winning elections and a massive miscalculation in 2019 he lost istanbul and then engineered a rerun and lost the rerun by a bigger margin. if there were a nationwide poll, he would lose and that makes a much more defensive domestically, much more unorthodox when it comes to foreign policy. there is a chance he may do something similar in libya against opposition from the u.s. and of course managing the domestic economy where growth is coming close to 0%. on europe's doorstep this will be a fairly substantial challenge. thecine: with

million-dollar question being how do you deal with him? there is a refugee question, turkey has been buying certain weapons from russia. mij: the vehicle is always political economy in europe, by that i mean signaling a willingness to upgrade the eu-turkey customs union, enhance trade relations. there is a degree of finance available for turkey should it continue to work in a cooperative manner to constrain refugees and then there is the symbolic bolstering of political ties which is helpful to erdogan in a context where he is facing a challenging relationship with the u.s. but ultimately this guy is quite unhinged. francine: thank you so much. . this is bloomberg. ♪. ♪

tom: this morning, chairman

angle and a house foreign affairs committee say quote, president trump, you are not a dictator. the president threatens iraq with sanctions, he threatens iran with blowing up cultural antiquities. oil advances this morning and the yen is stronger, decidedly risk off. in this 2020, it is a tipping point. eurasiader the risks of group. this is bloomberg surveillance. we are at the headquarters of eurasia group in midtown. i am tom keene. in london, francine lacqua. the reaction of london to the news flow we have seen since friday. francine: what a day to have eurasia and its founder to talk about everything we have seen in iran. world.ly goes around the brexit doesn't show up as one of the top risks, but what does show up as the eu trying to around what the next year will

bring and how they will put themselves in a bigger and stronger foot when it comes to geopolitics. it will be an interesting conversation in the next hour. tom: dr. bremmer within your top and rewrote back sections of it because of the news flow from friday. dr. bremmer: of course. what we didn't do was suddenly put iran at the top of the list. starting up 2020, my new year's resolution has been to telling people that world war iii is not here. tom: i want to talk about that in a minute but the impressions you had two years ago and saying chancellor merkel will be very alone. tell us about europe and how alone germany is right now. dr. bremmer: germany is the staunch multilateral list. they are all about the rule of law and when you look at the

rise of populism inside individual european countries. when you look at the united , boris and brexit johnson and the conservatives taking an absolute majority. you see the italian government and the french cooking -- taking a much more assertive traditional french position of our way of developing europe, you have -- there aren't committed multilateral lists on the stage anymore. fading, not just because of her own history but because the world is just not with her anymore. francine: before we get started, why did you not redo everything to put iran at the top? dr. bremmer: to the extent that president trump is about unpredictability with american adversaries, he is much more likely to pet the dog then he is to smack it.

this is not somebody who is looking to engage in war with iran. he had every opportunity to do so over the last ticks months. in response to the hit of tankers in the region by iran. importantly, the decision to go after saudi oil, 50% taking -- taken off the market. he does not want war with iran and the iranians understand the power of symmetries. over the course of the past month, the iranians were not hit back as they escalated carefully and cautiously and they hit the americans directly. trump has now hit very -- has now hit back very sharply. deterrence has been established. tom: right now in new york city, our "first word news." trumpa: president donald is talking tough on iran and

iraq, telling reporters last night if tehran retaliates for the killing of a top general, he is willing to hit cultural sites. he also threatened heavy sanctions on iraq if u.s. troops are forced to leave the country. the president says iraq owes billions in military base construction cost. iran taking at least one step in response to the general skilling. tehran will no longer comply with the key provision of the 2015 nuclear deal. after months of unrest, china official to top resolve the situation in hong kong. he has no experience in hong kong but he is a communist party faithful. in his most recent job, he had a regional campaign to end corruption and discourage disloyal officials. in australia, firefighters are getting a break. cooler weather and some rain helping them. dangerous conditions will return.

fires in southeast australia are blamed for at least 24 deaths. thousands have been forced into makeshift camps. in venezuela, a day of political chaos. -- entering the national assembly. to chooses supporters their own assembly president but loyalists went off-site and elected him anyway. that drawing praise from the u.s., europe and some latin american countries. global news, 24 hours a day, on air and on quicktake, powered by over 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: we are getting news from boeing. later on this week that will, and say how many orders they have and according to del jones, boeing is considering plans to raise more debt to bolster finances that were strained by the grounding of its 737 max.

we know there was a new chief executive in charge. -- there is a new chief executive in charge. he faces a pretty daunting task which is basically rescuing the 737 max while mending the kind -- while mending the kind -- the company's fractured -- in the meantime, this is what your markets are telling us. very clear risk off. , goldooking at havens surging to the highest in six years. tom: as i said over the weekend, the panic really not evident in the contained market response. futures at -21. the second data screen, showing the relative calm out there. let's leave it at that.

this is a great joy to have with us ian bremmer of eurasia group. a collection of the smartest people on the block. we are thrilled that dr. bremmer joins us as he releases his top risks and we have decidedly ripped up the script. joining us now as well, a former national security advisor under president obama. all sorts of good things written, including but you. i want to go to dr. ferguson. something that is really important for you as you trying to contain the hysteria off of friday. let's look at ferguson in the times of london. 2020iddle east in january -- the downside of killing general soleimani is that iraq will now blow up. the unanswered question is what could be done to reverse the biggest trend of the past decade which has been russia, not iran

taking over the united states as the middle east powerbroker? what are so many analysts getting wrong? dr. bremmer: the media is suggesting that because they dislike trump and everything he does, that means that when he talks about the 52 sites he's about to hit in iran, that killing soleimani without asking anyone in advance about it, but that is the meltdown, the catastrophe in the region but we can clearly talk about how american alliances have gotten a lot weaker given trump's america first. he does all sorts of things they can't stand. we can also talk about the fact that the power a symmetry between the u.s. and its allies has been moving toward the united dates. the u.s. does not need the middle east as much. it is the largest energy producer in the world, the largest food producer in the world. the allies are nowhere on all of this. the allies mostly are not

spending on defense. even though trump as president is somebody that antagonizes these allies, unilaterally the u.s. does reflect the changes in power. risk, i and your top heard it from tom beckett early on friday morning. where is the strategy? you go right into this and that there needs to be a recapitulation, a reinvigoration of an american strategy on the broader middle east. dr. bremmer: there is more of a pivot from the middle east. i do believe that the -- tom: can we afford to leave the middle east? dr. bremmer: a lot more than our allies can afford us to leave the middle east, both in europe and the middle east. when the saudi's were hit by iran, they were so stunned that the united states did not did -- did not do anything to back them up that they started negotiating

with the iranians directly. that was the interesting take away. east is clearly going to be a more unstable place going forward. how much of that is going to affect the global marketplace is likely to be reduced because the u.s. is producing much more of energy. francine: if the u.s. can afford to leave the middle east, with russia -- would russia or china not take its place? dr. bremmer: let's be clear. the russians and the chinese do not have allies in the middle east. they have interests and they try to work with everyone. in the case of the chinese, these are not military interests and alignments, they are largely economic and commercial. chinese perspective in reaction to the america -- to has beencans on iran everybody calm down, we will work with you. the russians actually want

chaos. the chinese want stability. the russians are a more dangerous player. let's keep in mind that the media response to trump has been this guy is in putin's pocket. he ordered the assassination of the most important military figure in iran, something that clearly the russians would not have supported. where is the response? is's stipulate that trump not a good foreign policy president but we still need to recognize some common sense analysis on what is happening on the ground. tom: ian bremmer with us and some good guests from eurasia group. up, someone who has been at the white house and optionsed a wealth of with several worse choices. a former national security advisor under president obama. stay with us in london and the offices of eurasia group.

this is bloomberg. ♪

viviana: this is bloomberg surveillance. let's get to your bloomberg business flash. they were loaded onto a private jet according to japanese broadcaster nhk. -- to file for bankruptcy recently. challenges making their debt load unsustainable. less than two months ago, their larger rival filed for chapter 11. that is your bloomberg business flash. tom: thank you so much.

this is always a special first monday of the year. we are joining ian bremmer and eurasia group. tumult weal is the have been seeing the last few days. with dr. bremmer somebody important to speak to that is because of his public service to the nation. he is a former national security advisor under president obama but it has -- i am thrilled that you could join us now. i want to cut to the chase over the weekend of a secretary of state who looked very alone. you were in charge of the obama biden transition team at the state department. state secretary of anything like the previous 10 state departments back to truman in world war ii? tom d.: not only does the state department not like -- not only is the state department not like

the state department in world war ii but the president is a very sharp departure from the u.s. approach to foreign policy. tom: does not change the dialogue between congress and the president because there is not a state department to comanage the message? tom d.: the approach the president makes in taking these decisions and is another ducks committee case and approach really does cause a gulf between himself and congress. it begs the question, what is the strategy here? or has not been a full explanation of what the president's approach is in the middle east and what the approach is going forward with respect to iran. wherere question here is does this go? what is the purpose? deserveder soleimani his fate at the end of the day. we have a very different approach on foreign policy. a very different approach to relations with congress. tom: let me bring in my

colleague from london, francine. francine: what would you describe as president trump strategy in the middle east -- president trump's strategy in the middle east today? tom d.: that is a good question. the president articulated a strategy of trying to pull back from the middle east but the moves he makes here show us he is becoming more deeply meshed in the middle east. he ran in 2016 on a platform of ending the endless war in the middle east any he had made a variety of decisions over the course of his presidency that have him pushing and to the middle east -- pushing in to the middle east. the strategy of the united to pullormally had been back and engage more with the great power conflicts between russia and china.

with respect to the key interests in the middle east, how is this advancing our key interests in terms of fighting isis which is number one and protecting the united states and our allies against terrorism and number two, the nuclear deal which stands to be collapsing under the pressure of the action of last friday. dr. bremmer: it is clear that the nuclear deal was the original cause for the escalation that we have had over the course of the past few days. the u.s. pulled out and then the iranians tried to find a way back in with the europeans. and failed and escalated the americans didn't do much but it was causing a lot of hurt for the iranian economy. the question isn't escalation by trump but how much is it a blip and how much did a real change and orientation? in six months we will look back and see the americans pulling out of iraq, maybe with a lot of

egg on their face. do i really think trump is going to bomb the cultural sites? no. it is a seasay change. tom: the discussion will continue. please stay with us. this is bloomberg. ♪

francine: this is bloomberg surveillance. tom and francine from london and new york. tom is actually at eurasia group's headquarters in new york. formerhat this is a national security advisor to president obama and ian bremmer of eurasia group. you look at what is happening in iran. war orng on twitter, iran world war iii, president trump committing more soldiers to the region. what are the chances we are actually stepping into a war? dr. bremmer: it is not clear at this point. you always have a risk when you get into the cycles that things can get out of control. i don't think at this point, president trump nor the iranians are interested in any major conflict but that is the increased risk. i am more concerned about some of the unanticipated consequences that came out of

the process that led to this decision which include our relationship with iraq and disrupting the iraqi political system and society. i am concerned about the announcement that we were suspending operations against isis, one of the principal reasons we are in the middle east right now. i am deeply concerned about the iranian nuclear deal falling apart. this really does begin with the president taking the step of pulling out from the nuclear deal which was working to achieve its purpose. francine: what does this mean for isis? tom d.: i think for isis at this point it means there is pressure off of them. they netted states announced it is no longer engaging nor can it engage with the pressure on it, and the training of iraqi forces, anti-isis forces and we are suspending operations against isis which gives them more breathing room. if the united states is forced to pull out, i think a tremendous amount of pressure off isis because you cannot have a functionally coalition's

against isis absent u.s. leadership. tom: i think americans are confused. we need iran to go after isis. let's get back to fundamentals. dr. bremmer: certainly the talk we have seen from the iranian foreign minister is can you out ae the u.s. took principal combatant against isis that he was also engaged in atrocities on u.s. troops and american assets across the region. the fact is that trump does not see isis as as much of a priority. he said of some of those isis presidents are going to escape, they will escape to europe and not the united states. that is a horrible message to send to your allies in europe. when mike pompeo said he was surprised that the u.s. was not getting as much support from germany and france, all you have to do is go back to some of those statements.

were going to be times when you need allies and this is one of them. tom: this is extraordinary. i think we will have a six hour discussion here. francine, just absolutely extraordinary, what we see here. listening for the different american responses to the politics, we saw over the weekend, from minister johnson out with this statement on all of these events. we will catch up on the demographics of europe, immigration, but of course united kingdom politics. this is bloomberg. ♪

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every day, comcast business is helping businesses go beyond the expected. to do the extraordinary. take your business beyond. tom: good morning everyone. bloomberg surveillance from the offices of the eurasia group as we consider the top risks for 2020.

francine lacqua in london and i am tom keene at the office of eurasia group. and here with ian bremmer their chief executive officer. a great partner. we have been working with the big pieces looking at the future of the u.s.-china relationship. tom: we have been looking at china coming out of europe and the unique character of switzerland as well. what do you look for as a response of europe this year to not only the u.s.-china debate but now the news that we have of tehran, baghdad and washington? >> i would not be overoptimistic. i think europe will try to continue to find a way in keeping a balance between

economic and industrial interests in china and political interests toward the u.s. and do not forget about managing interests toward russia. francine: what does this mean for markets in 2020? zeno: i would fall in line with en on this is a blip and not a change. more fort -- the more important factors drawing -- driving markets in 2020 will be will the global economy bought amount but continue to grow, but sluggish growth and also very important, will central banks keep supporting stance which we firmly believe, so we remain cautiously optimistic for markets and we should see --

francine: on the day where we look at the top 10 risks for 2020, are the markets mispricing risk because of all the cheap money out there from central banks? say if money has -- that is something that we have witnessed for years. the tide has been lifting all we see yield compression selectivity and sources of income and sources of risk have become more important going forward. much, comingu so to us today from zurich, the chief executive officer with

their support of the eurasia group top risks of 2020. right now with our "first word news," here is viviana hurtado. viviana: president trump offering a warning to iran telling reporters if iran does strike back, he is willing to hit cultural sites. he also had a warning for iraqi lawmakers voting to expel u.s. troops. the president says if that happens he wants iraq to repay billions in europe again -- in u.s. military base constructions and if not he will impose sanctions. two more central bankers warning of the risk of a low interest rate world. former ecb president mario draghi and fed chair janet yellen say central banks alone do not have the tools to cope. they spoke to the american economic association annual meeting. ms. yellen saying structural forces holding down rates might be around for a while. a new poll sews the first major test presidential -- for

democratic president of candidates is deadlocked. in iowa, bernie sanders, joe biden and pete buttigieg have 23%. next month they hold caucuses. york, jury selection begins for the sexual assault trial of harvey weinstein. dozens of women making allegations against the hollywood mogul. it's part of the worldwide #metoo movement. has pleaded says -- not guilty saying any sex was consensual. global news, 24 hours a day, on air and on quicktake, powered by over 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. back to you. tom: thank you so much. so much of the risk that eurasia group has looked at over the aboutive years has been the moving of bodies around, the immigration, the emigration from nations of peace and

particularly those with troubled peace. toh us now is david miliband begin what should be a five hour conversation. the small matter of the labor results in the election and such but let us talk about the work you have done since you left parliament. i think henry kissinger would say this as well, you more than syria, crisisd and migration. david: there are 70 million people around the world, one in every 105 in the population who have been driven from their homes by conflict or persecution. 30 million of them have crossed borders and become refugees. 40 million of them are internally displaced within their own borders. syria is the poster child for that. of 18 million, 5

million have fled and 8 million of those, displaced within the country. that is part of a global trend on every continent, you are seeing more people on the move, not just for economic reasons but for political and conflict reasons. the 2010s were the decade of disorder. are dealing with the consequences. tom: how do you respond to people that say you're an elite and the fact is we have done our fair share? whether it is the united states, australia, any other nation where they say you are right, 2010 was a decade of chaos but we've done our fair share. david: countries like uganda have done their fair share, lebanon, bangladesh. turkey has more than done its fair share. those of the countries hosting refugees. the countries that haven't done that are like the european countries other than germany and sweden. countries like the u.s. which

has retreated from its historic position. fair share is the right principal, one that is not being followed through and the consequence is simple. political crises causes humanitarian need. unattended humanitarian need causes more political crises. one where that has not been turkey -- one word that has not been mentioned, turkey. they are a major player in the syrian debacle. last 72e events of the hours, the comments of president erdogan, his own take on what this means for the future of western engagement, essentially saying it is over, it is long-term consequences not just short-term. francine: turkey coming up as number 10 on the top 10 risks of eurasia. also getting breaking news from the spokesperson for prime minister johnson talking about the situation in the middle east

saying the u.k. is talking to the allies on the announcement of the nuclear deal and urging restraint on all sides. erdogane does president , who is seen as severely weakened at home given the istanbul election, what does that mean for the middle east given this increased uncertainty? is goingthink the u.k. to find itself and the world is going to find the u.k. increasingly a commentator rather than an actor in global affairs. it is going to have to be focused on the home front. it has a lot of work to do before the consequences of brexit are fully played out. it is going to be doing brexit for a lot of this decade. the turkish situation is one that has changed radically. ago, we were talking about turkey and the eu and potential membership and now no one is talking about that. the fact that there were turkish

russian, rainy and in chinese military exercises tells you where power is shifting. two your discussion in the last site -- to your discussion in the last segment, the soleimani killing, i see long-term consequences and shifts in the balance of power. tom d.: the united states is playing a much more marginal role on the ground. we have seen that in syria over the course of the obama administration and the trump administration. we are going to see it in iraq and as a consequence of this u.s. and iran confrontation. they will have to figure out ways to deal with the iranians. my final point is the big reason you are having this level of animosity between the americans in the europeans on this issue is because the americans by themselves decided that that nuclear deal was no good. every single ally opposed the

united states coming out. tom: we've got much more to talk about this morning from london and here at the offices of the eurasia group as we look at their top risks for 2020. continued to ceremony over the killing of general soleimani. this is bloomberg. ♪

francine: this is bloomberg surveillance.

tom and francine from new york and london except tom is at the eurasia group headquarters in new york looking at the 2020 risks. here is what we are watching the month of january. president donald trump said he will sign the first phase of a trade deal with china and then we are off to dabo's, switzerland where the economic forum begins. january 31 has the most focus as brexit day is quickly approaching. miliband and david still what this, ian bremmer of eurasia group. why is brexit not in your top 10 risks? dr. bremmer: we thought we should give them a break. three and half years of doing nothing but brexit, they are actually going to leave, they actually got a majority conservative parliament following the general election, so david is right that what the post-brexit world for the u.k. in terms of trade relations is going to take many years but this year, the

united kingdom gets a bit of a breather and that's why we decided to remove it. francine: what kind of leader does the labour party need? democracy needs an effective opposition as well as a strong government and the government and the u.k. with a majority of 80, it is pretty much boris johnson's conservative party and labor has to return to being an alternative party of government. becauset elections their policies weren't incredible and the leaders were undesirable. what happened to labor under jeremy corbyn. it was a tragedy for the country to not have a strong opposition but candidates are now coming forward and the laws of political gravity have to drag a political party back towards the ground on which elections are won.

the issue for the u.k. is that it's got four or five years of very difficult discussions about what hotel it is going to check into. we know it has checked out of the eu hotel. i think the issue is not just about trade and goods but also services, about the security relationships, research and educational relationships, the people, but the bare-bones deal that boris johnson says he is going to strike by the end of this year covers only a fragment of the economy. they say they want britain to remain a european nation but not in the eu. in: are you interested running for the leadership? notd: mp's only and i have come on this program to launch my campaign. i am in london, the

last couple of years, i really feel foreign, etiquette is a generational issue of your labour party. do some but he like you attach themselves to the youth of the labour party? range you go down the age , the passion about remaining within the european union grows. that generational issue does also play -- tom: how do you get those people back to a labour party to complete with the conservatives? david: you have to open up and address real issues and have a program that looks like it could be credibly delivered. youalso have to make sure are not literally repelling people. they reduced labor to its worst position since 1995. francine: how can you address real issues about the same time staying close to president trump given you are about to renegotiate a trade agreement?

david: there is a real challenge of the johnson administration. you have seen that over the weekend with some very pallid comments made by the foreign secretary, sympathetic to the american position. there are real warns of a dilemma. thoughtful people are concerned there is a degree of delusion in the government about doing a trade deal with the u.s. the u.s. is a much smaller part of u.k. trade but the offer seems to be on the table from the conservatives that they -- that they can somehow replace the european relationship with an american relationship. they're going to get put in a very difficult position, not just on the economic front because the british government is going to be told by the u.s., if you want to play ball with us, you have to be on our side when it comes to a horrible -- it comes to a whole mess of foreign policy issues. of the thingsne that johnson has going for him

is one of the most unprincipled people that could possibly be running the u.k. right now. his ability and willingness to shape himself to respond to trump if he has the public to pass it -- public capacity to do so. tom: my coverage friday morning with the lieutenant general of the united kingdom army with rounds of public service to your nation in the middle east. how should the united kingdom military with all that heritage in the region, how should they respond to the events of the last three days? david: first of all, every western nation needs to play some effective defense over the next weeks and months because there are assets all over the middle east including on the military side but not only that. matter, notliances just within the western alliances but with countries in the middle east and diplomacy matters. third, i think the eurasia group is right to say that there is a

much more dynamic leadership of the european union now. are going to provide what you call geopolitical engagement of a much more serious kind. china has something coming up. you will find europe recognizing the dangers, it will be the sandwich between china and america. it is not want to be there. francine: thank you both for joining us. staying with us is ian bremmer of eurasia group. live pictures of crowds into run. seems toe on soleimani be uniting a rainy and's -- be uniting iranians. giving to ron coverage -- giving tehran leverage. this is bloomberg. ♪

tom: good morning. we welcome all of you.

francine lacqua in london. i am tom keene in new york but at a different location. i am very downtown at the offices of eurasia group, celebrating important risks of 2020. this is wonderful. the quality of the guests we -- barely describes her ability to form discussion on america's energy and i would say the nascent moment for that was when james baker -- was with james baker at rice university a couple years ago. 101, asgin with 2010 america oil independent right now? >> we're typically a net exporter. that means we are sending more diesel thanline and we are bringing in.

i would like to remind people that we are still importing the same amount of oil we imported back in 1973. immune to completely international events. there will be some oil if there was a breakdown in the middle east. there would be some oil not coming to the united states that could cause some logistical difficulties. independent, people think it means no impact for us from the middle east. tom: dr. bremmer sat down with us this morning and said he was hysteriize.- you have a pie chart of a cartel right now. explain how we should treat iran , iraq, and also saudi arabia. the strength of opec after the

events of the last three days. some oily time we get supplier getting knocked out, venezuela, you have the every timen iran, you have a crisis, it makes the market a little less resilient and i think we are really to a point now where we start to see markets react and we start to understand that the operational flexibility of the producers that are left, think of it like a game of musical chairs. we are trying to get to the point where the flexibility in the system is getting smaller and smaller and i think that a , if you thinkraq of the unrest on the ground which has already blocked oil workers from getting to work on a couple different incidents, the possibility that iran has been doing some kind of complex -- to get its oil trickling out into the markets. rackng some benefit from a

-- from iraq when they sell their oil. the president putting active sanctions on iraqi oil, then we could wind up with a really tight market. tom: these are conversations we will have over the next days. we are out of time. amy with themuch, council on foreign relations and dr. bremmer, thank you so much for the top risks of 2020. certainly we could go on. we will do that on bloomberg radio today. there is much more to talk about including i will travel to washington tomorrow. a conversation with alan greenspan. this is bloomberg. ♪

♪ alix: middle east versus the

u.s. tensions erupt. president trump threatens against wage warns retaliation in the war of words. and oil surging, the yen rallies as investors opt for safety over risk. and janet yellen says monetary policy won't be sufficient in the years ahead. we speak to former new york fed president bill dudley. welcome to "bloomberg daybreak" on this monday, january 6. happy belated new year's, everybody. it is a risk off move developing in the market. equities down, oil surging, gold surging. that is your safety trade. on the flipside, the dollar is the biggest loser, despite being the biggest winner on friday. other currencies surging. that feels more of a risk on trade, and bonds go nowhere. it is time now for global exchange, where we bring you today's market moving news from all around the world.