francine: easing tensions. the u.s. and iran step back from a deeper conflict. markets breathed a sigh of relief. johnson says britain will not extend the transition period. the eu commission president says a full dear near years and is impossible. of itsuse criticism legal system absolutely criticisme -- calls of its legal system absolutely intolerable. we are live in beirut with the saga. , goodorning, everyone afternoon, and good evening depending on where you are in the world. welcome to "bbg surveillance." i'm francine lacqua in london.

the markets are clearly telling us that the markets are not pricing in the worst-case scenario when it comes to iran, or at least portfolio managers not. stoxx europe 600 gaining some 0.6%. on bloomberg surveillance, we will be speaking to the president of euler hermes, wilfried verstraete. that discussion is up very shortly. let's get straight to the blumberg first word news. in new york city, here's viviana hurtado. >> we begin with the first stage of the u.s.-china trade deal, set to be signed next week. china says its top negotiator is visiting washington, d.c. it is the latest move towards a détente. contradictory reports this morning are emerging about what caused the ukrainian boeing 737 to crash and iran. initially blaming a

technical issue, then an engine fire. ukrainian embassy running out terrorism, but then it amended its statement to offer no comment on the cause. all those aboard the plane were killed in the crash. hong kong preparing a bold plan to boost its economy, according to the city's financial secretary. he is pledging to maintain spending on infrastructure and public services. he says the government has the resources to offset the recession. ♪ violence,an stop the restore law and order, people will be more willing and feeling to spend to come out money, then things can bounce back very quickly. >> the u.k. and eu mapping out rival red for a post-brexit deal. it is the first clash in negotiations. it may be even harder than the divorce stocks. prime minister boris johnson stressing he will not extend the

u.k.'s transition period. the eu chief says a deal by the end of the year is impossible. global news 24 hours a day, on-air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. hurtado.ana this is bloomberg. francine? francine: thank you so much. let's get straight to our top story, holding fire. the u.s. and iran seem to be stepping back from a potential war. president trump has indicated he will not order a military response to the missile attacks on u.s. bases in iraq. he said no american or iraqi soldiers were killed in the strikes, but the president did announce new sanctions on iran. the unitedrump: states will immediately impose additional punishing economic sanctions on the iranian regime. these powerful sanctions will remain until iran changes its behavior. forcine: joining us now more is our executive editor for the middle east, riad.

bring us up to date to where we are now. markets seem to be a lot more lighthearted about what will happen next. are we looking at de-escalation? riad: definitely. things feel a lot less tense here as well. president trump sent a very clear message. iranians sense a very clear message. nobody wanted this to escalate into a full-blown war. the strikes on the american basis seem to be iran's way of saying, you did something in a very openly, so we are going to do something in a very openly, but that's it. we don't want to go further than the. francine: what happens next? you know, i mean, it probably depends what you ask. a couple of things could happen. one, there could be may be attempts by the u.s. and iranians and the governments in

the region to try and talks ande by having trying to figure out a way that there isn't these regular blowups. on the other hand, there is a sense among many observers that iran says public way, that it is done, but of course, iran has a lot of lovers it can pull in avers it can very indirect way with a lot of the militias it supports. there is a sense they might still encourage those proxies to take action against american bases or american interests in the region. they continue to say their aim is to end the american presence in the region. francine: thank you so much. our middle east executive editor there. joining us now is wilfried verstraete, president and chairman of the board of management at euler hermes and

toby gibb. when you look at the risk mood in the markets, it was terrible, then it got better, then it was terrible again, now a bit better. how do markets price in geopolitics? are they too optimistic because of central bank actions? wilfried: i think overall, the pricing of the political risk is probably too long. there is obviously a correlation with the overall interest rates in the market, which has globally speaking, pulled down the price of risk. talking about the geopolitical risk and we had perfect examples in the past few days, the issue, of course, is that most of those events, either totally unexpected or have a much higher impact or a much lower impact than anticipated. it is pretty difficult to have precise productions, but

overall, i would say the pricing of political risk today in the market is too low. francine: too low because of central-bank action or because they don't know how to price it? wilfried: i think the market knows how to price it because political risk is not new in the market. political risk has been around for decades in the oil market. the market knows how to price it. there is stillat some overcapacity in the market, and also with risk, it is a matter of supply and demand in terms of capacity how the price evolves. i am convinced of the price of political risk will rise in 2020. francine: toby, do you agree with that? do you think the market is mispricing geopolitical risk? toby: i think what we tend to see with these sort of events is that there tends to be a knee-jerk reaction in the short-term. potentially, you do see something of an overreaction very short-term to these events. you tend to only see that in

hindsight. i would totally agree that i think in general, the market is sort of underpricing risk. i think that is because of central-bank policy. i think with rates so low, we saw last year the sort of disconnect with political uncertainty indices and with the volatility measured by the vix. that is driven primarily by central-bank policy. francine: is it central-bank policy and the fact that some of the policies coming out of the u.s. administration are difficult to understand the kind of -- the unintended consequences or maybe the intended consequences? wilfried: i think there is definitely an element of that. to your earlier point, i think this was a very unexpected event. no one really saw this coming at all. it was somewhat extreme. i think that is why the reaction was so meaningful in such a short amount of time.

what we have seen over the course of the last 24 hours is that both sides seem to have stood down. the markets have reacted very positively. we have seen markets effectively back to where they were a few days ago. in fact, higher. francine: thank you both. toby gibb and wilfried verstraete both stay with us. i also want to get more thoughts on geopolitical risk rising in 2020. coming up, war of words. carlos ghosn strikes back at the chinese government -- strikes out at the japanese government and at nissan. that is coming up and this is bloomberg. ♪

♪ for 17 years, i was considered as a role model in

japan. more than 20 books of management were written about me. in a minute, all of a sudden, prosecutors and a bunch of executives said it you know what? this guy is a cold, cold, greedy dictator. there are many other people. toyota, and member of the board, was a link between the board of nissan, nissan, and authorities. it's not difficult to come to the conclusion you are going to die in japan or get out. i am not here to victimize myself. i am here to shed light on a system that violates the most basic principles of humanity. i am here to clear my name. francine: the press conference a was of 2.5 hours, that course carlos ghosn speaking in beirut yesterday going on the attack in his first news conference since fleeing tokyo.

yousef gamal el-din joins us. we heard from the japanese government today. it is fast becoming a war of words. does this escalate? at the moment, that is what it has the makings of. we had the cascade of reactions, not just from around the world, but specifically, from japan and the japanese government. the justice minister has pointed out that carlos ghosn may have reservations about how things work in japan, he would have needed to see things through over there. we have heard from the corporate sector in japan and the former nissan ceo go. here's what he had to say. the real reason he ran away is because he was afraid of being found guilty. if that's all he was going to say, he could have just said it in japan. the former independent director of nissan has shipped in, saying i don't have time to be dealing

with a one-man show who broke the law and escaped. locally, the prosecution will pick up the conversation of carlos ghosn in lebanon. most of that is procedural and not going to be televised. ? francine? francine: thank you so much. pretty amazing story that we will keep covering. let's get straight to the bloomberg business flash. >> apple shares hitting a new high after the company said customers spent a record amount in its app store during the final days of its holiday season. spending hitting 1.4 billion between christmas eve and new year's eve, up 60% from a year earlier. is retiringalsh after 15 years in charge. he has transformed the british airways owner into a global giant to take on the likes of air france, klm, and lufthansa.

some of the biggest u.k. retailers suffering this holiday season. spencers says it expects the lower end of guidance. it is closing its home unit. tesco revenue also dropping. a weaker performance in central europe offsetting growth in the u.k. that is your bloomberg business flash. francine: 2019 was a year that almost every asset did well. the u.s. s&p 500 index alone adding $6 trillion in value. less than 10 days into the new year, investors are already facing a sling tensions in the middle east, an unexplained a deadly plane crash and more uncertainty over the global economy. still with us, wilfried verstraete from euler hermes and toby gibb from fidelity international. you are talking about the fact that you think geopolitical risk will escalate in 2020. what does it mean for euler

hermes, given what you do? wilfried: our main goal as a business to -- as a business is to accompany clients, no matter the environment. theill be more selective in types of risks we take. -- there will definitely be pricing higher than in past years. francine: do you think you are a good benchmark of a downturn in the world economy? wilfried: yes. on our trade credit insurance peace, we are definitely an extremely valuable and extremely precise watchtower of what is happening in world trade. francine: right. so you track insolvencies almost, right? will insolvencies go up in 2020? wilfried: yes, correct. our prediction is that global insolvencies will rise again with 8% in 2020 compared to 2019

after already a substantial rise in 2019 versus 2018. francine: what do you see in equities? it is difficult not to make money in equities in 2019. what happens in 2020? toby: i think 2020 will be a lot harder for equity investors. clearly, we saw huge rises for equity markets over the course of 2019. 20% plus an hitting record highs in most areas. i think what was interesting was most of those returns from by rewriting. buyt of the returns was -- re-rating. i think 2020 be somewhat different. i think we need to see more fundamental earnings growth come through to support equity valuations and two-seat -- to see equities rise. i think we could see a change in leadership. we talked a bit about monetary policy. i think if we see a shift from

monetary policy towards fiscal policy, that could be something of a catalyst for different areas of the market to start to perform. francine: is there anything that is in a bubble right now? toby: i think -- i mean, when you look at areas like some of the u.s. tech stocks, you have the hyper growth stocks that are certainly on quite high valuations. in some instances, it is justified. i think one of the areas that i am somewhat concerned about is the quality growth momentum areas of the market, which have been bid up. even though we have been enable market, there has still been a focus on security and -- been in has stillket, there been a focus on security and safety from investors. froth.s an element of thecine: when you look at

insolvencies that you see increasing in 2020, is it by region or is it by sector? wilfried: both. talking about regions, we still predict an extremely high increase in insolvencies in china. china has been on the rise for the last 3-4 years and that will continue. there are number of reasons for that. the credit policy from the chinese government which has restricted credit in the chinese economy will continue to have its impact on the number of insolvencies in china. secondly, our prediction is that china and one can debate about the accuracy of the official brother numbers, but we think -- growth numbers, but we think they will be closer to 6%. many people can dream about 6% gdp growth. when you look at china over the last five years, year after year , it is slowing down and that definitely has an impact.

the policy from the chinese government to not support at all costs what we called zombie companies, the companies that are on the edge of failure but that will's -- that are still supported by the chinese government, that has changed. we see the number of insolvencies in china definitely continue to grow. francine: toby gibb and wilfried verstraete both stay with us. the world bank has trimmed the growth outlooks for china and the euronet area. will talk about the outlook for the global economy next. this is bluebird. -- bloomberg.

♪ francine: this is "bbg surveillance." i'm francine lacqua in london. let's go back to the conversation we are having. some of the defaults out there, some of the insolvencies from some of the companies. we are back with wilfried verstraete from euler hermes and toby gibb from fidelity international. we were talking about insolvencies growing overall, especially in china. what is that a symptom of? wilfried: it is a symptom of a clear policy by the chinese government. in china, nothing happens by coincidence or accident. the chinese government has decided already a few years ago credit ordize the lending market. they started by imposing lending restrictions on banks. they have also taken measures to

control or reduce shadow banking. secondly, they have decided to let go, default and number of even state owned companies that were considered to be no longer viable. that has been a change in policy from the past. francine: does that have -- cross into your world of equities around the world? toby: i think it is important. i think we need to remember as investors that insolvencies and defaults are a natural part of the business cycle and it is not something we should be afraid of. it is something we should embrace and we should, you know, accept as part of the business cycle. i mean, i think in china, we are still finding a lot of opportunity there. even in the industrial space at the moment, steel inventories are at the lowest in many years. particularly in china, areas related to the consumer. we are finding a lot of opportunities in consumer sectors, not necessarily autos,

but elsewhere. francine: very quickly, does the trade war impact anything between the u.s. and china? are we now at status quo? wilfried: it does have an impact. when you look at the latest u.s. figures, trade balance in the u.s. has improved. not so much because there has been an increase in exports but there has been quite a substantial reduction in imports in the u.s. and that is part of the trade measures or the protectionist measures that have been taken or announced by the u.s. government. francine: thank you so much. wilfried verstraete from euler hermes and toby gibb from fidelity international. we will bring you the stocks on the move so far. we will also talk about brexit. this is bloomberg. ♪

francine: easing tensions -- the u.s. and iran step back from the deeper conflict, markets breathe a sigh of relief. brexit red lines -- boris

johnson stresses britain won't extend the transition period in a meeting with ursula von der leyen. the e.u. commission president says a full deal before year end is impossible. and, fighting back, japan calls carlos ghosn's criticisms of its legal system absolutely intolerable. we're live in beirut with the latest on the saga. good morning, everyone. good afternoon and good evening, depending on where you are in the world. welcome to "bloomberg surveillance." just over an hour to have into the trading session, let's check on the european stock movers with annmarie hordern. doingie: air france is well today, 3.5% higher. passenger data was a rise of 3.5%. a bit of a reprieve today. they are expanding the partnership with bayer in terms of women's health. they will be focusing on policy stick over resend them. -- markets --

marks & spencer having a rough day, down more than 9%. that has to do with the margins, gross margins coming in at the lower end of their guidance for the year and on top that, the clothing at home unit is still struggling. francine: thank you so much, annmarie hordern. now let's get straight to the bloomberg first word news in new york city here is viviana hurtado. viviana: hi, francine. backing away from the u.s. -iranian conflict. tensions remain high. a pentagon report indicating the missile attack was aimed to avoid casualties. in a speech yesterday, president trump promising more sanctions on iran. carlos ghosn's criticism of the nation's legal system is "intolerable," according to the japan justice minister. she is also pushing back against carlos ghosn, accusing him of spreading lies, this after the former nissan chief also hit out at president emmanuel macron.

he blames the french leader for sitting in motion of the chain of events that led to his downfall. the world bank cutting outlook for global growth due to worsening prospects in china, and the your area. but it says gdp may pick up a little bit. -- and the your area. but it says gdp may pick up a little bit. youquestion for you -- if are looking especially for a pay raise in 2020, check out some of these jobs are to the recruitment website indeed, it released a report on the highest payrolls in the u.k. coming out on top at an average of over 100 12,000 pounds, chief financial officer, maybe consider a career in health care. it accounts for almost half the jobs in the top 20. 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. francine? francine: thank you so much.

boris johnson and early so vendor lorraine level playing -- without a field there cannot be access to the market. thethe prime minister says future will not involve any kind of alignment. maria, what are exactly the redline on either side? maria: good morning. there are a number of things here. -- urszula vonay-i der leyen is saying the trade deal that boris johnson once simply cannot be done in one year, that it is quote impossible. she is stressing this idea of alignment. if you want to do business with the european union, this is a huge trading block that you have to do business that still complies with e.u. regulation.

the europeans protecting the market is the crown jewel, the european union. it can get problematic because down in the street the same day, what we hear is that the one-year deadline still works and that the prime minister is still determined to get back to a free deal. when you get to the details of the trade deal, two years to negotiate, the canadians had to align some issues with the european union. at this point, the tension in the story has more to do with the timing than the content. they agree they want a trade deal, but they do not agree whether they can get this done. boris johnson is crystal clear that he does not want to ask more -- for more time when it comes to transition. tom: still with us to -- francine: still with us to talk about the u.k., assets and brexit. at u.k., dou look they need a trade deal? rules orve under wto

whether there is a threat of wt rules that persist, what does that do? toby: i think that u.k. companies, to perform, we need clarity over the free-trade agreement. i think what we had in december was a removal of some uncertainty. we removed the corbyn risk and we removed the hard brexit risk, which clearly was good for markets, but then quickly thereafter, the trade deal and the lack of extension of a trade deal risk was introduced. so i think for equities to perform and sterling to perform, i think we need some resolution. i think this is going to create some uncertainty over the next 12 months. francine: does that change the outlook for possible insolvencies? i am not saying the market is unsophisticated, but it feels like we are getting brexit done, but we have no idea of the future relationship with e.u. >> absolutely.

we have seen already over the last 24 or 18 months the number the u.k.encies in rising in some particular sector that are more exposed to the risk of a hard brexit. we do not yet see the concrete consequences of brexit. that still has to come. so my view is that one should be very careful and not underestimate the risks associated with a brexit that full-fledgedail a trade agreement on all sectors. i think what many people underestimate is just the sheer volume of agreements that need the next 6,with in 12 months, and i agree with what ursula or lay-in was saying --

ursula von der , it is really was saying impossible to have everything done by year end, and a similar took years to deal with canada. francine: we are getting breaking news out of the bank of england governor, mark carney p this is basically from the text of a speech he is giving in london. he says first of all the boe has an equivalent of around 250 basis point of policy space, and mark carney, do to leave on march 15, changing the u.k. monetary framework, the bar is quite high. toby, if you put this into context, how difficult is it for the bank of england to sills -- to still set monetary policy? it used to be almost impossible because we did not know what kind of brexit we were looking at. is it just as difficult now? toby: i think the uncertainty, as wilfried said, not knowing

what the future relationship is, we are going to have a lot of --dlines and rigid rhetoric and rhetoric on both sides that will create uncertainty. it is difficult to have that clarity and to set policy as a result. startthink if things moving in the right direction, you could see some more firm action from the boe. francine: given that you are an expert in equities, with tesco under pressure, what do you say -- what do you see for the u.k. high street? with declining consumer confidence over the last 18 months, but also because of internet shopping and the impact that has had on the high street, those have been double negatives for the sector. i don't think the weakness of christmas is totally unexpected. the reaction that we see in share prices today is quite extreme. what we have seen with shoppers

over recent years is that people have been bringing forward their spending, and into november, .aking advantage friday you have seen more discounts rather than pre-christmas, and that can be a reason why gross margins have come under pressure. francine: if you look at the u.k. and brexit concern issue, what side -- are you expecting better growth in europe? the figures from germany were a little haphazard, better than expected today. wilfried: we expect lower gdp growth in 2020 for the eurozone than it was in 19, and 2019 was not that great. we are more looking at something between 1.3% and 1.5% from the eurozone in 2020, so do not expect the eurozone to be the traction for growth in the u.k. francine: thank you both for

joining us. -- wilfriedse trott and toby gibb. we will have more on our top stories throughout the program. this is bloomberg.

francine: this is "bloomberg surveillance." in the last couple minutes, mark carney actually releasing text of a speech he is giving in london, where he says that qe forward guidance and rate cuts are part of the tools. he also says that the bar for changing u.k. monetary policy framework is quite high. he was saying that the boe, has 250- he thinks,

basis points policy space. mark carney will be in charge of the bank of england until march 15, and then andrew bailey will take over p let's get to the bloomberg business flash in new york city with viviana hurtado. hp says the deal with xerox significantly undervalues the computer maker. was -- willplan provide more value to shareholders. question for you -- is a startup that stops making it still in business? -- the company is also known for serving up robot made pizzas. the five-year-old start will focus on its food production and deliveries. bed, bath & beyond's new chief is setting expectations low. the u.s. retailer withdrawing financial guidance, following

declining sales. it says the performance underscores the imperative to change as a company. bed, bath & beyond says in the spring it will have a turnaround plan. that is the bloomberg business flash. francine? francine: thank you so much. the yuan is on track to strengthen the dollar -- strengthened against the dollar, but how much further can the currency go? we go to dani burger. dani: we are coming off the back of two strong volume dates for the yuan, and the opening we have seen so far from the currency seems positive. handle, stronger than where the pboc set its fixing rate. it has been popular, popular carry trade as investors cut their dollar long. looking at technicals, it has dropped below a 30, which means it is overbought. this technical picture might not be a death knell for the currency because we expect this year to see a lot of foreign money move into both bonds in

china as well as chinese shares. all of that should be a positive as we continue to see the on short currency strengthen. francine: thank you so much, dani burger. let's focus on emerging markets and wilfried verstraete toby gibb. with a short time we have left, tell us what you worry about most in 2020 it is it part of the region or emerging markets or elsewhere? number one the geopolitical risks, as we have seen in recent days. secondly, i think we are very anxious to see if there will be a change in monetary policy from the ecb, yes or no. for us, the money inflow in the economy, talking specifically about the eurozone, has not led to substantial improvement in growth. on the contrary, it has underpriced significantly the price of risk.

so we do believe that a change in monetary policy will happen. the question is of course the timeline. because any brutal change would of course have brutal consequences, so on the other hand, rising interest rates in a indicatedonomy growth 2020 growth -- 2029 growth will be -- francine: where do you see value in stocks? toby: you mentioned emerging markets. we are quite constructive on emerging markets. there were huge outflows that followed inflows last year, and a small amount of inflows in the latter part of 2019, still an aggregate, and that has left the regions essentially trading at the biggest discount they have to develop to markets in many years. 30% plus, discounts to developed markets.

when you think about the growth prospects at the macroeconomic level, but particularly the corporate level, i think there are compelling opportunities in emerging markets. francine: is there anything you worry about in emerging markets? clearly aolitics is risk. trade wars, the u.s.-china trade wars, it has an effect on china but other emerging markets more generally. and i think there is still quite a lot of political risk particularly in latin america, which we have to be conscious of. francine: thank you both for joining us today. , and tobyerstraete gibb. let's take a look at the pound. its lowest level since december 27 after the comments from the bank of england governor, mark carney. more on that next. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." the news flow, as tom keene would say, pretty terrific from the second of january this year. market checks are what we do

here on bloomberg tv. stocks rising today across europe and asia. equities futures also climbing there seems to be a relief rally after america and iran seem to step back from the military conflict. we have the bank of england governor, mark carney, saying the monetary framework is pretty high. monetaryr for the framework is pretty high. 250 basis point of space. it is the world's largest corporate sustainability initiative. nearly 10,000 companies in 161 companies have worked -- committed to working toward the united nations goals about sustainable development. my next guest has just taken over as chair of the u.k. network. she also -- welcome to bloomberg. when you look at all that you do

with your new role, how much of it is transparency and how much of it is coordinating the various companies that they just disclose more? cia: -- which relate to human rights, the environment, labor, and also anticorruption. so it is a combination of making sure that you have your own house in order, which is something that we try and do at relics. francine: is it going slower than you thought it would? arcia: there is a drive from a range of stakeholders to

push companies to perform even higher on environmental, social, and governance criteria. we have seen it rise up the ranks because there is a confluence of factors between the interests of government, of shareholders, of ngo's, government regulations, so it is really a combination of these the focust is putting for companies on doing good by doing daily business. francine: are they doing it enough? elx, we arehink at r quite focused on it. there is the need for companies to focus what is there unique contribution as a business? for us it is looking at advancing health and advancing science, protecting society, focusing on the rule of law and access to justice, and fostering community. we are's -- we are setting

goals, putting them in the public domain in each one of those areas, as well as the stuff all companies need to focus on related to governance, what they are doing on the environment, engaging in communities, the supply chain. francine: if you look at, in your new role, is the u.k. better than other countries in putting this agenda forward? u.k. has think the typically been a leader on corporate responsibility, and the network of the yuan global compact, u.k. network, has about 230 members -- of the u.k. globalnetwork -- the compact, u.k. network, has about 230 members. and they learn from their corporate peers on how they can advance the agenda, so for example, just before the end of last year, we had a session on transparency, and actually we invited our head of compliance

to come and talk about how we , because it is very helpful when you can hear from a range of views on issues that all companies face. marcia balisciano, thank you for joining us, chair of corporate responsibility at relx. tom keene joins me out of new york in the next hour. we will have extra check on your markets. there are a couple of things we need to watch out for. first, it is what is going on with pound, interesting given what mark carney was saying minutes ago. the text that mark carney was giving out as a speech in london. on brexitbound uncertainties is not 100% assured. that, mark saying

carney, saying that the npc debating merits in the near term stimulus. he also says there is an in equivalent of 250 basis points of policy space. cuts are all part of the tool. there was a little bit of a reaction when it came to cable. stocks definitely advancing. america and iran appear to step back from a military conflict. this is bloomberg. ♪

francine: easing tensions -- the u.s. and iran step back from

the deeper conflict, markets breathe a sigh of relief. brexit red lines -- boris johnson stresses britain won't extend the transition period in a meeting with ursula von der leyen. the e.u. commission president says a full deal before year end is impossible. and, fighting back, japan calls carlos ghosn's criticisms of its legal system absolutely intolerable. we're live in beirut with the latest on the saga. good morning, everyone. good afternoon and good evening, everyone. and, quite a lot of market movement. i am also looking at pound after the mark carney comments. had 250 basis points to go when it comes to monetary policy. tom: when do we get governor bailey echo francine: march 16. mark carney was set to step down, but they extended his contract for about six weeks. the what is so important is melt up continues, remarkable to

see where we are versus even three trading sessions ago. francine: first emma let's get to bloomberg first word news in new york city. thatna: the boeing 737 crashed in iran tried to turn back before plunging to the according to iranian regulators are the ukraine international airline said it disappeared from radar at 8000 feet. the witnesses saw it on fire in the air. all 176 people on board were killed. will has now confirmed it find the first deep phase of a trade deal next week. -- the top trade negotiator during the tariff conflict, the u.s. has agreed to suspend plans for a new tariff on chinese imports and it is also reducing existing levees. prince harry and his wife, meghan markle, may become stars on the public speaking circuit.

the two announcing they are stepping back from their roles as senior members of the british royal family. they say they will work to become financially independent. harry should be able to command as much as former president barack obama, about half $1 million per appearance. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, viviana hurtado. this is bloomberg. tom: let's get to data right now. equities, bonds, currencies, commodities. thunderstruck where we are versus when i did this 24 hours ago. futures up 11, but that does not edit to the level of on the 29,000 watch. curve steepening with a vengeance. you're a comes in, stronger dollar. oil with under $60 on a marrow -- your comes in, stronger dollar. 12.94 on the vix. again with a vengeance, 1.0

handle, goes to 1.0945. francine: i am looking at stocks. we are seeing pressure on some of these u.k. retail stocks that struggle over the holiday period, but overall the relief rally that we saw yesterday is extending into europe and also in asia, and this is after america and iran appeared to step back from possible military conflict. i'm looking at yen-gold declining, and oil steady. tom: this is a delegate chart, dollar-yen, and -- this is a delicate chart, dollar-yen. on the right side, here is before iran-iraq, with a weaker yen, stronger yen, safe haven dash, and this is how much we made back with a calmness versus where we were before friday of last week. francine? francine: what i am looking at yuan, something that

has been overbought, showing that the rally could lose momentum. what i have at the moment is the ratio. i will get that afterwards. i will get you an indication of what stocks have been doing since the beginning of the year. tom: we will do this here in a moment, but right now to continue our discussion on the international relations and the focus into the economy, we have sorana parvulescu with us. thank you so much for being with us today. what is the significance of american oil act under $60 a barrel? that is a surprise to oil experts, international relations experts, and i would even suggest politicians. what is the significance of oil back down under $60 a barrel in america? seen the oil be

thetively resilient to tensions we have seen in the middle east over the past few months, not just with the recent flareup, but in some ways we afterxpecting a dial down the tensions had subsided. in of course we have seen president trump, as he addressed the nation yesterday, he made it very specific that he views the u.s. as independent from energy from the middle east. tom: what is so important here is your study, with robert hormats yesterday, we had a good conversation on the persian gulf. tell us how these events change the western middle east, it and particularly how they change the dialogue of libya and tunisia? ways wei think in many

see the middle east will always be important for both the u.s. and europe and of course for and north africa is in the neighborhood. leave europe and the european union with more expectations that they will handle some of these issues, whether they are capable of it or not is another question, especially in light of brexit. francine: donald trump backed away from these threats to strike iran. instead, he seems to be focusing on a new nuclear deal. what are the chances that iran will come back to the table? sorana: for the time being, we are seeing the risk of conflict has subsided. after declarations yesterday and the fact that the iranian response was quite calibrated. but tensions will remain high.

president trump has spoken about a potential new deal, but actually there is nothing on the table from the u.s. in terms of off ramping further. so we do not have something that the u.s. is prepared to give to iran in exchange for something else. i ran, on its side, has started to ramp up its nuclear the viewt, probably in of having something to crawl back on if negotiations would happen. but with u.s. elections coming up, it is quite unlikely that such a deal could be possible right now. president trump has taken a very clear message on iran, and this would be domestically difficult to have those conversations. francine: what does it tell us about -- if these tensions are high, does it mean that they could escalate fairly quickly, or does this give us a template of what we will see in the next 12 months? for theour scenarios

next year, for 2020, is that flareups could come back. we still expect some tit-for-tat probably in iraq, maybe syria. ande could be attacks mobilization against military targets in iraq, and every one of these could lead to another round of escalation. as long as the u.s. is in there will be additional pressure on president trump. tom: what will you look for from riyadh and saudi arabia? sorana: the gulf countries have been -- governments from the gulf have been very clear in ,heir desire for de-escalation have traveled to washington, d.c., to make sure there is no further escalation, as they , chances of a conflict in

the region. question. a if the international community can rally to another round of talks, then definitely the region should be involved, and the government of saudi arabia requested it before. francine: thank you so much for joining us. sorana parvulescu. the events you should be looking at today, starting in europe, the spanish prime minister expected to name his cabinet. in the house of commons, a brexit deal law proceeds to its third reading. richard clarida and james bullard will be speaking ahead of tomorrow's's jobs report. this is bloomberg. ♪

tom: "bloomberg surveillance." good morning, everyone. francine lacqua in london, i am tom keene in new york. wall street week -- david westin started strong with a conversation of the former vice chairman of the federal reserve system. and the roger ferguson former secretary of treasury, lawrence summers, to kick off what we think will be a must-visit friday evenings. and into the weekend as well. itid westin will drive

forward. francine? francine: looking forward to that conversation. also looking forward to this conversation, because joining us now is neil dwane, elian's allianznvestors -- global investors. our markets mispricing geopolitical risk? i would think they have been simmering the last two or three years. then they have a flareup and they settle down to get your your earlier guest epic comments, we do not see iran wanting or wishing to take the u.s. on head2head, but where i disagree is that i think they will continue to agitate in the region. therefore one has to be nervous of the oil price and think what that may do to your folio. -- your portfolio. francine: are we not mispricing -- i don't know if it is political risk or insolvencies

-- because of cheap money? at one point do central bank actions make it worse rather than better? neil: this is going to be an interesting test case because we are beginning to see following the right bank in q4, negative interest rates are a bad policy and created a lot of unintended collars -- consequences. as a house, we are of the view that negative yields suggest capital is being destroyed. it affects the solvency of pension funds, of insurance companies, so we think the central bankers will have to find a way of maybe supporting the economy differently going forward because i think cheap hasy, as we see in china, been allocated badly around the world and probably will therefore not repay itself. tom: i get the idea we have had a tumultuous one week in the markets, but the melt up recovery has been absolutely extraordinary. points,res up now 96 running in on 29,000. there is a point here where

everybody has to climb on board. are you witnessing that both at lianz and that people are buying and that people are buying in because they have to? is ani do think there element of our favorite girlfriends, tina and trina, at work in the u.s. with brexit believe, we have seen a lot of money come into the u.k., but i would question if u.s. taken a certain risk with investments, why now is the time at the beginning of this year after such a fantastic run in all risk assets last year, why you would want to add to that portfolio. to be honest, i think we have had a big bounce, but what i am nervous of given the leadership from the u.s., it has been in the fangs. it is a safe, defensive way to put your money to work. your point.gly take

one idea percolating here away from all the analysis of tehran, baghdad, and washington, is the idea of share buybacks. are they a good thing, and are they holding up this market, including the banks? neil: i think the phenomenon of share buybacks has become a u.s. one p you are closer to the numbers than i am, but we are talking about $800 billion per annum being taken out of the s&p every year. there is no doubt that it has been very supportive. around the governess share buybacks needs to be revisited because obviously -- i think the governance around share buybacks needs to be revisited. and of course the largest seller of the u.s. equity market this year and last year was share management, and the largest buyer of shares was companies themselves, so how they rationalize that independence when they make those decisions i

find quite perplexing. francine: i guess the story of a lot of chief executives were just not investing enough. they were given back -- they were giving back. at what point does it become your number one concern that there is not enough reinvestment in the system? neil: i think we are already seeing a good across most of the developed world. with low levels of productivity and low levels of r&d. many governments are not doing the fundamental research we now need to improve climate change, decarbonization, maybe some of the new productivity and technologies of the future because as an industry we may have foreshortened many management horizons into what is my return on a three-year investment rather than on a 10-year investment. tom: coming up on radio today, my conversation with jane street particular so after

senator from utah michael leavitt left a meeting with the white house yesterday livid. there is no other word for -- from utah michael lee left a meeting with the white house yesterday livid. there is no other word for it. this is bloomberg. ♪

viviana: this is bloomberg

surveillance. i'm viviana hurtado. 2019 was the worst year ever for british retailers. brutal price pressure and a shift to e-commerce hitting holiday sales. tesco and john lewis all giving generally downbeat christmas sales update. plunging.encer shares growth margins will be around the lower end of its guidance. after 15 years in charge, the ceo of british airways is retiring. walsh facing down unions and cutting costs. he left the purchase of a betty. runs the spanish airline. american express is a step closer to entering china's $27 trillion payment market. the central bank is excepting the company application to start a bank card clearing business. the decision coming days before the u.s. and china are expected to find the first phase of the china agreement. that is the bloomberg business flash. tom: when the facts change and neil dwane will change, there

was the -- forget about all the international relations stuff. there was the adp report and revision yesterday, which looks like demographically morning in america. what does the fed do in january? does it reverse what they did last year? rates going up? no, rates going down. we are going to talk about rate increases that some point? neil: i don't think we are going to this year, tom. i think the fed has made it very clear that their tolerance for raising rates is probably much higher than their tolerance for cutting rates. they will only raise rates if they see some inflation, and i certainly think -- although the adp number was a good one, any people forget employment is a lagging indicator of the economy. we look into this year the political uncertainties and see the u.s. quite recessionary.

equity markets may have to price in a fed that is getting more dovish because the economy is slipping through their fingers. tom: let's go inside the halls of "bloomberg surveillance." let's look at the dirty linen of what we do at 8:30. this is what jon ferro and i look at at 8:30. i know it is hard to see on tv, i know that, but the answer is 160,000 is a survey off that bank up 266,000 the last time around. neil, these are huge numbers, and if we get a lift up like we did in adp, how do you tell me that is a bad economy? is a i am not saying it bad economy, i am saying it is growing at 1.5% to 2%. when you see a 10-year treasury at 1.8% or so, and the s&p at all-time highs with no earnings

growth at the market level, i would question, isn't everything pretty much priced in the u.s.? i think the issue we now face is individual corporate earnings. we are going to have real earnings growth coming across the market want to get stuck in here. francine: will we? neil: i don't think so. as we are seeing in the u.k. today, we will see more tough times in retail and more unemployment coming in u.s. retail, and that will feed through into maybe be a weakening consumer as we go through the year. francine: for the international audience, we had some pretty numbers from tesco and from john lewis. is directlyums across from the burberry at heathrow airport. it is unfair. francine: "it is unfair." if you look at the volume at how

much it fell, it is the margins. neil: particular clothing. if you go into a store, you would have a hard time finding anything you would want to purchase. imaginge a sourcing and problem still. change you at will little bit from burberry. stay with us. coming up, the world bank has trimmed to growth outlook for china in the your area. we will talk about the outlook for the global economy next. in the meantime, markets are up on the back of the relief rally we saw yesterday. europe up. this is bloomberg. ♪

♪ "surveillance," a lift tothe markets -- a the markets. here is viviana hurtado viviana:

house democrats are heading for a symbolic showdown on iran with donald trump. lawmakers will vote on resolution to limit his military option. the president could act in response to an imminent threat. nancy is being pressured by democrats to end the standoff over impeachment, several saying she should send the articles of each meant to the

it has become increasingly clear there is no chance of her winning concessions from mitch mcconnell. the u.k. and european union each setting out redlines for a post brexit trade deal. they had their first face-to-face meeting. mr. johnson said the u.k. will not extend the transition beyond the year and ursula von der leyen says it is impossible to get a deal done that weekly. wildfires in australia are likely to weigh down the economy. a drag on tourism will get worse. goldman projecting some of that will be offset by an increase in fiscal spending. the fire covered an area larger than ireland. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: thank you so much. outlookd bank cuts its for global growth due to worsening prospects in china, but is it being overly cautious? roomry data gives the pboc to move monetary policy. neil dwane is still with us.

talk about u.s. china, the trade deal. how does that help the china economy? >> it is already starting to show up in the december pmi. we have a confidence boost coming through if and i we did see a drop. -- even though we did see a drop. we see the confidence coming through and it makes a difference because even though monetary conditions are tight and that is amplified in this kind of a situation. the phase one deal, we do not know what it is and it is a week away before it is supposed to be signed. it looks like the chinese will attend and xi jinping will not be there, but liu he will be. $2 billion of goods over the next two years from the u.s.,

when i saw that number, my honest reaction was to scratch my head because if you look at the chinese import data, you see that actually before these trade 2018,ns started in june the imports were only $150 billion a year from the u.s., so even if you add on services you cannot really get to $200 billion. it is hard to see how you get from those types of figures to adding $200 billion and $40 billion of purchases from agricultural. that is a head scratcher as well . francine: over the last three to four months, default in china has increased. is that authorities letting out steam or something more sinister? lota: there definitely is a more sinister brewing under the surface.

the question is whether they will allow that to come forth. it looks like we will see a bit of a recovery from the economy and some green shoots coming through, but they are quite limited. broadly, it is more of a stabilization than an outright recovery. we think there are a large number of bad debts still to be realized, and still a great deal of pressure on a structural sense, but at least the bpi is in the right direction. that should help profit margins. authorities are trying to tide things over in terms of injecting liquidity in the banking sector. fighting fires as they arise rather than grabbing the bull by the horns and trying to deal with the underlying problem. tom: a gentle question, if i could. are these forecasts of any value?

if it is the world bank or international monetary fund or oecd, which has the best value? toya: it is quite difficult really say which one has the best value because they are all taking the official numbers and as institutions, that is what they do. they take the numbers and project forward. what i would do personally is work out what is going on and project that forward, so it is hard for me to compare my projections with these international organizations. thisink it will pick up year, but we are looking at full-yearow 6%, 5.4% up from 4.7% from last year. it is a bit of a pickup. at this stage, those green shoots are looking exposed in

the context of tight monetary conditions, and the green shoots on the import side of things are limited to text cycle and items -- tech cycle and items related to the phase one deal. the tech cycle is a bright spot in seems to be picking up. have we seen a full start as a result of demand related to bitcoin hardware and with profitability in bitcoin falling in the last half of last year, not is the caveat on that side. tom: even if we get a pantheon view of china stability and pop on some inflation, albeit taxtly affected by the food in china, that affects the nominal gdp. will they feel that sprightly nominal gdp? sprightly by historical

standards, what we have seen in terms of the household sector is what is being felt on the ground is much worse than what is being reported in the data, which is something that occurs quite a lot in china. if you look at the retail sales data in values terms, that slowed in terms of the up shoot and import prices you alluded to, we have seen a significant slowdown in retail sales and that does not show up in official numbers because volumes do not equal the values minus inflation, which is a china cork. there is a -- cork. -- quirk. there is a serious turnaround in the household sector. the economy overall is just stabilizing at the start of the year, so we probably will not

see the household sector from a labor market perspective seeing the benefit of that until well into this year. we are not seeing the recovery for the economy as a whole until the middle of this year. the household sector is facing headwinds, to -- put it mildly. neil: i would make different points about china. it is important to reflect on the fact that china will no longer be a major driver in the global economy. in the last 10 years we have seen it growing at an average of send -- 7% a year. when we think of europe and the next cycle that president xi will unleash, we see it growing at about 4%, and with strategic initiatives to internalize more of the dynamics of the chinese economy with the made in 2025 ,ampaign, the rest of the world

particularly the large exporters like south korea, germany, and japan, will not see the benefit of the ballooning growth from china we have seen in the last 30 years. francine: china growing at 4%, what would that mean for president xi? freya: i think the authorities are talking more about 5% and 4%. i think over a two to three-year horizon we might see something like 3%. the authorities at the moment are going through this ongoing campaign to deleverage the economy and they have stuck to their guns, which in a sense is laudable, but in another sense i am not sure they are aware, to be humble about it, the extent that will impact growth further down the line. if you think about the historical relationship between m2 growth and nominal gdp growth, if we got m2 growth and outpaces5.5 range, it

gdp growth by about three percentage points. over a two to three-year horizon , nominal gdp growth being 5% or below and real gdp growth being in the 3% range. i am not sure they really have come to terms with what that means for the economy. xi jinping has him thinking to do from that perspective and i think over the next few years or so, we will see some kind of a day of reckoning where they realize quite the extent of how debt dependent the economy has been, and they cannot change the financial system overnight to wean it off of debt, whereas at the moment there monetary policy puts the cart before the horse in the sense of imposing this target that m2 growth has to eat nominal gdp growth -- equal nominal gdp growth. -- m2 growth has been much

higher than the nominal gdp growth. neil: deleveraging is important and one has to understand how they are addressing it strategically. the chairman of the pboc disagrees with renting money to bail out economies and sustained -- printing money to bail out economies and sustain bust banks. in germany and europe, there are many bust banks so we have not solved anything. we should expect deleveraging to continue with china. it will be painful. people who have loaned or deposited money will have learned their lesson. he needs to change the culture of casino investing in china and to make them real investors and understand the risks they are running and the returns. that is one reason the economy is going slower. as long as president xi is offering wrote, his key chat --

is to, his key challenge offer to the other 600 million chinese -- shanghai looks like london to me. it will be a benefit to people who have not been in the first wave of economic buoyancy. conversation on china. coming up, jobs day. getting back to economics, finance, investment, and part of it is the mystery of yield. equities up, yen behaving according to script. jeffrey rosenberg of blackrock in the 8:00 hour. this is bloomberg. ♪

♪ bloomberg "surveillance,"

francine lacqua in london. i have been reading "the new york times" and "the times of london." "the new york post" taking a new tact. times" saying maybe they will settle in vancouver. i know you know the dirt. francine: i was going to say, i know that prince harry is your first thing on the show you are launching. twitter and the u.k. press are exploding with these hilarious memes about what the couple means. people talk about it. it ist know whether because people feel quite close to him, she receive less of a

warm welcome in the u.k. we have a business story saying he may command as much as 100,000 for speaking engagements just like barack obama. tom: maybe it is 100,000 sterling but i think the number would be much higher than that. we will have chief coverage on this event as we move forward. hanging in the balance of the united kingdom is brussels as we go to maria tadeo. we had a meeting with the european commission president and a newly minted prime minister. what is the body language we need to know about? maria: this was actually a good meeting, constructive. there were no fights if you look at the language, two things were obvious. bighas flat out said, the comprehensive trade deal that boris johnson wants cannot be done in one year and is

"impossible, will not happen because we like rules in europe -- like rules in europe." boris johnson is still hoping to get the canada style trade deal and get it done in one year. if you look at the fine print in every european trade deal we have had so far, they take many years and every country would wind up aligning with e.u. francine: can we go back to wto rules if prime minister johnson does not want to extend, if the ecb commission says, it will not be done by the end of the year, what happens? maria: she is saying it is not going to be done by the end of year in those terms. the europeans would tell you it is not just about trade.

there are many other issues, military, fishing rights, which the u.k. feels strongly about. wto, boris johnson he is not bothered by that. you could have a trade deal that decides which industry you want to cater to, but the europeans need to keep in mind that they like their rules and look at the single market as a bit fragile. they will do anything to protect the single market because it is the glue that binds everybody together and they all agree for the time being on that. bencine: the market seems to discounting the fact that now is the hard part. we find out what the trade relationship between the u.k. and you is and they are far -- e.u. is, and they are far apart. the e.u.take on what

president was saying was for the european audience rather than the u.k. audience. it took four months to approve the canada deal, so if boris wants a deal by the end of december, we will have to have a deal by august. some of her message was, we are going to have to really focus on this. that is where the negotiation strategy of boris johnson will be vindicated because we want to get the uncertainty through and europe needs to get its act together. it cannot play politics anymore. we still think it will happen. tom: thank you so much. coming up again, what an extraordinary moment yesterday, shifting from his one hour five-minute comments and the and a, tor to a q see this world-class ceo fighting for his reputation.

carlos ghosn on the great escape. this is bloomberg. ♪

♪ years, i was

considered a role model and japan. more than 20 books of management were written about me. in a minute, all of a sudden a few prosecutors and executives greedyis guy is a cold, data. that is part of the problem. there are many other people. toyota member of the board was a link between the board of nissan, nissan, and the purchase. it is not difficult to come to the conclusion you have to die in japan or get out i am here to shed light on a system that violates the most basic suppose of humanity. i am here to clear my name. in the string of value, great value, extraordinary value. we have never seen what we

witnessed for a good two to two and a half hours yesterday. hanging on every word was yousef gamal el-din. amazing. let me cut to the chief -- chase. who was mr. ghosn speaking to? yousef: the world, in general. he wants to recover his credibility and he can only do that by getting what he describes as a fair trial, which is why he decided to take the painful decision to escape the system in japan. he is a citizen of brazil, lebanon, and france, so he is open to doing the trial in those countries. investigators in beirut wrapped up their discussion on mr. ghosn on that will continue

potentially an illegal visit to israeli land, which is not allowed for lebanese citizens. there could be roadblocks ahead for mr. ghosn locally. francine: what happens next? does this escalate. japan took it badly. any chance lebanon extradite him? yousef: lebanon does not extradite its citizens and it is unlikely to change on that front. there might be a trial here because there is a red notice out on interpol for him, which is why investigators were interested in speaking with him. where that goes and where they decide to take this remains to be seen. the trial and the ultimate judgment remains fairly short, so maybe he gets a better deal and lebanon than he would in japan, but the japanese authorities have made it clear

they reject everything mr. ghosn has said about the legal system. the former ceo of nissan basically said the real reason he has run away is because he was afraid of being found guilty. for thenk you so much coverage yesterday, yousef gamal el-din with our middle east coverage with mr. ghosn. this is a joy. jim glassman usually joins us on a friday. we get out front with james glassman of j.p. morgan chase on the pulse of the nation and a very late january 10 jobs report. much more coming up. the markets rally, the yen 109.

♪ tom: this morning, markets signal a return to melt off the

dow neared 29,000. gold retreats. the president goes in search of these with all who seek it. -- peace with all who seek it. iran considers an air crash taking off from tehran. away. henry will walk "surveillanceerg ," from our world had orders in new york and -- headquarters in new york and francine lacqua in london. what was the body language you observed? francine: the body language was probably more friendly than with the previous president of the commission, jean claude juncker. that was much more in open book in the body language. when you look at the red lines, it is less clear whether each of

youleaders there national have two sides that want different things and may not be able to meet in the middle. tom: we developed a nice relationship with ursula von der leyen. explain who she is and how she fits into german politics. francine: she is the first president of the commission who is female. , anwas defense minister ally of angela merkel. a lot was said about the fact that the defense ministry was in great shape for she arrived just before she arrived and also when she left. she is making green issues a priority and i'm wondering how much brexit she has time for.

right now in new york city, here is viviana hurtado. viviana: we begin with president trump's gamble on killing at top iranian general. it appears to be paying off. iran's retaliation did not cause any casualties, giving the president and opening to claim victory, but it is not clear iran is done with retaliation. it is unlikely they will negotiate a new nuclear weapons treaty. the boeing flight tried to -- that crashed tried to turn around. the jet disappeared from radar. witnesses say they saw a fire in the air. ukraine is examining several scenarios, among them a missile strike and terrorism. china will sign the first phase

of a trade deal with u.s. to -- will traveled travel to washington. the u.s. has agreed to suspend tariffs on chinese imports and is reducing existing levees. china agreed to buy more farm products. fires in australia are likely to weigh down the economy. goldman sachs sees immediate hits and says the drag on tourism will only get worse. some of that will be offset by an increase in fiscal spending. have burned an area larger than ireland. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: equities, bonds, currencies, commodities, the melt up continues. a remarkable 48 hours, again up

nine points. that is the additional move this morning with dow futures 28,000 -- 28,855 they yen 107, 108, through a weaker yen at 109. francine: gold sliding, yen significant after a relief rally after america and iran appear to step back from a deeper conflict. that rally has gone on to europe and asia. i will bring pound up because of what mark connie was saying and the scope of -- mark carney was saying and the scope of monetary policy. tom: emily, an open question on a thursday. what will you look for today from capitol hill? emily: a lot of attention will

be in the house where they are expected to vote on the war powers resolution. we are expecting most democrats to support it and most republicans will vote against it. we will be looking for exactly who in either party does or does not break. tom: extraordinary for our worldwide audience, this is nuance, the body language of each person is extraordinary. gail collins with a liberal tilt writing for the new york times. it is really a provocative essay. president mcconnell is running everything. the majority leader is leaning towards giving trump a pass on the impeachment discussion. some of the republicans might think that mr. penn's, vice president pence would be a big improvement over the guy they have got now. for the country, may be, but not

for the senator from kentucky. that is some of the back-and-forth going on right now. did the president have a good day yesterday? emily: i saw numerous people praising the president yesterday. it sounds like they are entering a phase with iran where they are open to de-escalation. you did not see loss of american lives, so it looks like at this point we will have to wait and see what happens next. some colleagues have reported there is concern we could see future attacks, maybe cyberattacks, but at this point it looks like there will not be a continuous pattern of escalation right now. francine: where are we on impeachment? will john bolton testify? emily: that remains to be seen. mitch mcconnell has the votes to start the senate process.

the democrats were hoping to get an agreement from mcconnell that he would call witnesses, but the way it is shaping up, the process will start and after they get into the process and house managers present the case of impeachment they will see whether they can call witnesses. tom: emily wilkins, thank you so much. this is a joy, james glassman usually on a friday. because of his schedule jim glassman has darkened the door today, senior economist at jp morgan. he is actually out there practicing people economics, looking at what people do. we go to a chart with our equity market strategist jim glassman i want to get -- jim glassman. i want to get to you. thursday, down we go friday evening and we plunge with all the angst, and we come back.

chairman greenspan always believed in watching the market. how does a guy like you watch this melt up? jim: it has been going on for several years. if you look at the stock market and gdp, something amazing is going on. the value of the stock market is 1.5 times the gdp. we thought it would be roughly around parity. it is ironic that it is happening at the time there is all this angst about trade tensions in terror and brexit and recession. this is really more a relief. i think maybe there is a big relief, plus over the holiday season got trade issues off the table. beenmichael for rowley has out front on lower for longer gdp. at yale university, talking about gyrations leading to asset bubbles.

how does a guy like you out of northwestern, how do you synthesize the idea of bubbles in this melt up? jim: i am leery of the idea of bubbles. we set a trust in market process to figure out the right value. what is behind this optimism driving the equity market? the u.s. business cycle is set up differently than in the past. it is not as inflationary. financial balances are not obvious. innovation is remarkable, the way it is transforming the economy. the global economy is waking up and wanting to go to work. i can understand why the equity market right be where it is. nobody really knows. maybe people feel this is irrational exuberance, but every time i turn the corner, i see fundamental things that look remarkable. francine: that is a pretty

optimistic assessment of the equity market. the dividends going up, a record number of dividends being paid out to shareholders, and cheap money in central banks. when you have a similar rise in equities -- would you have a similar rise in equities of central banks were not there? jim: that is an open question. interest rates are low, but the fundamentals are slower so that drives the natural level of interest rate down. when i think about the fundamental set up of the u.s. economy, it is different than we normally see, and the innovation is driving all kinds dynamics. worldal story is that the , despite the worries about trade tensions and tariffs, there is a lot of underdeveloped economies that want to open up and grow in europe and the u.s. and japan, we are per dissipating in that as --

participating in that. as the market opens up, it makes it difficult to value equities. the multiples of the stock market are not crazy like 1990's, and yet the value of the market will attempt to the u.s. economy is much bigger, so it is not about bubble phenomenon. it is something transforming going on the and global economies. -- the u.s. and global economies. francine: are you worried we are cycle and if the central banks start normalizing ahead of time we will be back in recession? jim: we are much closer to full employment and developed economies then we talk about. unemployment is that the lowest levels -- at the lowest levels we have seen in europe and japan

and the u.s. inflation problems will start building and central banks will start stepping on the brakes what we are talking about now is getting your foot off the gas as long as inflation -- foot off the gas. engaged,s inflation is they are willing to sit on the sidelines it may take time for them to move back to something normal, and that may be the issue as we go through the year. this year and next year we will see central banks moving rates to something more normal. francine: jim glassman stays with us the events you should be looking out -- with us. the events you should be looking out for today, pedro sanchez will name a cabinet. brexit law has a third reading. and jamesarida

bullard will be speaking ahead of tomorrow's jobs report this is bloomberg. -- report. this is. >> we will return on the second of june. the summer recess will happen that the conclusion of business -- ♪ ♪

♪ francine: you have heard it there david westin himself. this friday, bloomberg tv and

radio will bring back one of the most iconic brands, lawrence summers and roger ferguson. street, every friday at 6:00 p.m. new york. tom: upon us, a very late jobs day. year. report for the new we are thrilled to have james glassman with us from j.p. morgan chase. you were way out front more than 10 years ago on the study of youth employment, teenage employment, that first job. how are we doing? jim: pretty good. participation by age, virtually everybody 25 to 35 is back to where we are -- were. tom: where are the kids? they took, much out of my paycheck? jim: the teenagers are not?

-- are not. labor force for teenagers has been going down years because there is not much space for two's. skills -- not much space for no skills. when you look at government surveys, there are 7.3 million jobs going unfilled. surveys like j.p. morgan chase survey, you chase's cannot find -- tom: i am going to rip up the script. if that is the case, why don't they test the landscape and raise wages? jim: the problem is they know if you jack up wages, they do not have the people. if: they will get trained they are making the wage.

they will get educated. jim: they feel like it is getting more difficult to find people, they are doing more training in companies. pay is doing better. pay increases are growing double the pace of inflation. it is slow but it is coming. when i hear the complaints about the labor market, it is music to my ears because it confirms what we economists generally know, the economy is in good shape, unemployment is very low. all those pockets of unemployment are gone. the surprise to me is we economists expect to see employment growth slowing down. i was thinking this would happen in 2019 and it did not slow down much. to 70,kforce, folks 16 that has slowed dramatically. we were growing 2000 -- 200,000 a month and now we are growing

50,000 a month. how much scope is there for that? we think we should have done motion. francine: why is it so difficult for economists to predict recessions? jim: obviously, there is always things you are worried about, but when we look at history -- and you go back all the cycles with the benefit of hindsight, it looks more and more like most of the problem is inflation problems build, central banks step on the brakes. once they start doing that process, it is not hard to figure out what is coming. if you told me, we are all sanguine about the outlook for inflation for the next several years, if you tell me inflation will be ramping up over the course of the next two years, i would be quite wrong. dotral banks would have to

something about it and that would make you worry about recession. when you think about the past, it is not that hard to know you are looking at trouble, and that is why everybody was so obsessed with the yield curve because when it inverts it is a sign the federal reserve has to slow things down. the last thing i think about now is recession. the big surprise today is inflation is so sanguine and we are struggling to figure out why it is benign. balances are reminiscent of what we saw last decade, there is not a lot of that. central banks are looking for trouble too, and you cannot find much that would you worry. -- that would make you worry. francine: jim glassman stays with us. the war of words. carlos ghosn spikes -- strikes out against the japanese government and nissan.

>> for 17 years, i was considered a role model in japan. more than 20 books were written about me. all of a sudden, a few prosecutors and executives say, you know what, this guy is a cold, greedy dictator. there are many other people. a member of the board was the link between the board of nissan and the authorities. it is not difficult to come to the conclusion, you are going to die in japan or have to get out i am here to shed light on a system that violates the most basic principles of humanity. i am here to clear my name. ♪

♪ you are watching bloomberg "surveillance." lebanon issuing a travel ban for carlos ghosn. according to the associated press, they are responding to a notice from interpol that does not require he be arrested. after being smuggled out of japan, he arrived in lebanon. 2019 was the worst year ever for british retailers. marks & spencer, tesco, and john christmasing downbeat

updates. after 50 years in charge, the parent of -- retiring. a led the purchase of a betty -- iberia. he now runs spanish airline. tom: what you need to know as the melt up continues. one day off the president's comments, futures up 10. coming up on the fixed income mystery, jeffrey rosenberg of blackrock. ♪

♪ bloomberg "surveillance," good morning. what you need to know as markets improve and watching the headlines.

we are getting back to a more normal news cycle. right now in new york city, here is viviana hurtado. viviana: the house democrats are heading for a symbolic showdown with the rock -- on a rock with -- on iraq with president trump that would require him to cease action against iraq unless congress gives approval. the president could act in response to an imminent threat. endy is being pressured to the standoff against impeachment. they say she should send the articles of impeachment to the senate. it is increasingly clear there is little chances of her winning concessions from mitch mcconnell. is the u.k. and the european union each setting out red for a post brexit trade deal?

and ursula von der leyen had their first face-to-face meeting. mr. johnson says the u.k. will not extend the brexit transition beyond a year and ms. underlying -- ursula von der leyen says it is not possible. prince harry and meghan markle may become stars on the speakers circuit as they step back from the royal family. one agent says harry should be able to command as much as former president barack obama, about half $1 million -- $500,000 per appearance. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. tom: the times of london, "the "the new york- times." for our international audience, what is so important is the force -- first couple,

pounding pabst blue ribbon beers. america, called pbr in a fine beverage. have you ever had one? i feel likehave not it is something we should do the next time you are in london. the evening standard revealed how harry defined -- defied the queen. the queen is probably not having the best start to 2020. through various reports in the u.k. media, we understand the queen had said, please do not go ahead with this until we manage the details, and they still put out that personal statement yesterday. tom: caught blind-sided is the town. this goes back to may 19 and francine lacqua's blanket coverage of the wedding at

windsor castle. we look at a quieter windsor this morning. there is a real divide here on the royal family within the british press. ourain that divide for morning in america audience. francine: i think the americans know more about the royal family than the brits do. i don't know that i will need to explain anything to you, but it is clear that i can was a divisive figure. -- meghan markle was a divisive figure. it feels like what kate middleton went through and was accepted. i am surprised at the number of attacks against meghan markle. tom: for our international audience, i suggested the move to america would be a geographic balance, is the language they use. they hint vancouver, canada. they are not moving back to

hollywood. francine: i need to translate reddish speak. -- british speak. when the british family says they are deeply disappointed, that means they are mad as hell. tom: that sounds like our dining room table last night. francine: let's get back to business. boris johnson ursula von der leyen has set out -- have set out rival redlines. insists prime minister the future partnership does not involve any kind of alignment. joining us from brussels is maria tadeo. how far apart are they in negotiating a trade deal? maria: good morning. they are very far apart and it is not a surprise. we did have ursula von der leyen in london and this meeting was

described as being destructive, the tone was polite. she had it in the u.k. and had nice words to say, but was also crystal clear on the thing that matters the most, the trade deal. she said in a way that is very explicit, the trade deal that boris johnson wants to be done by the end of the year will not happen there is no time to do this, and europeans are concerned about alignment, unfair competition, and taxes, and they want to protect the single market. that is perhaps the key going into the negotiation. for the europeans, the single market is the crown jewel. tom: this is not that hard. you can slam it into place. it will be ugly for x number of days or weeks. what is slowing them from doing

it and figuring it out in a rapid pace? maria: you make a good point. one argument i hear is the u.k. is not a country like canada. that is the most comprehensive trade deal the u.k. has done canada was not a former member -- has done. canada was not a former member of the e.u. boris johnson does not want to do a copy and paste of the european rules. he wants to rip up the script. the europeans really care about these rules. taddeo, thank you so much. jim glassman of jp morgan is with us. he does not want to talk prince harry and meghan. negative interest rates, rea

taddeo's year -- maria tadeo's gear up has negative interest rates. jim: it is not just europe, it is japan also. don't understand the full impact of asset purchases, qe, and you worry that all the central banks had told you there longer and goal is to percent inflation, so when you see inflation,es -- 2% so when you'd see nominal rates below zero that does not feel like equilibrium. oureels like we do not have full hands around asset purchases and qe. francine: can negative rates go further negative or do they realize it is untenable? jim: people are starting to question whether this is the right idea. you do not see the u.s.

embracing this idea. frankly, this is passing because when i look at the european region, i look at the labor market and europe is going through the same process the u.s. is. growth may be slow but labor markets are getting better which tells me the potential growth rate is slower than we think. the central banks will have to think about backing off. this is an issue we will be dealing with next time there is a recession and not now. francine: how difficult will this review be for the european central bank? christine lagarde asked for this review, very broad. is it too broad? jim: the important thing for everybody, including the fed, inflation is so well behaved everybody can do this in a deliberate way, thinking about all the issues and go carefully. there, the sooner we get

the sooner we start the process, the sooner we will be better off we don't know what discourse and's -- better off. we don't know what distortions this is causing. theory,general economic i am going to go out to the london school of economics, do we really know where the equilibrium is? and something like negative rates massively distorts any attempt toward general equilibrium. jim: we need to know where that is. it is important because central banks have influence on interest rate. i do not see any pure market interest rate because central banks are involved at both ends, long and short rates. tom: with james dimon and a small bank on park avenue, i know the view you have, but a

bank like jp morgan has to deal with something near normality in interest rate structure. you are sitting with mr. dimon right now and he says, how far away from normal rates are read? jim: i look at 10 year treasury yield, 1.80, that does not feel like equilibrium. come downl rate has because of demographics in the natural growth, but equilibrium cannot be zero. this is the thing that is puzzling me about the fed. if somebody went to sleep 10 today, thend woke up 1.75%,ds rate at 1.5% to they would wonder why is the fed flooring the gas pedal? maybe they didn't realize the natural level of rates has come down and the fed is trying to get their hands around it, but

zero federal funds rate is not equilibrium. tom: jim glassman, thank you so much. simply, it will be a theme in washington today. it is truly the morning after. the zeitgeist this morning, there is a real tangible mystery of what is next for the president of the united states and his pentagon. this is bloomberg. good morning. ♪

♪ tom: bloomberg "surveillance," good morning.

about, and we advance forward a theme for the riskseurasia group's top for 2020. heam kamel joins us now and has an interesting piece on these themes. thank you so much for joining us. if you were to write your top risks now versus five days ago, how would it have changed? ayham: i don't think it will be any different. we averted a disaster. president trump moved towards decisive military action against iran, we would have ended up with a massive confrontation in the middle east and a disruption in oil prices. the long-term picture is the same, the u.s. does not have a coherent policy in the middle east. tom: you are in the academic

trenches of this at lebanese university and a scholar as well. are we losing our linkages in the united states to the rest of the middle east? are we destroying relationships that have built up 50 to 100 years? ayham: to a certain extent, yes. the way this has been done. the way the president has been disengaging from the middle east, that is where you get some of the risks. the u.s. has less direct interest in the middle east today, partly because of energy transition and partly because of the appeal of putting troops in the middle east. there is much more of a focus on investing in the u.s. it is not why the u.s. is doing this, but how it does it. francine: if the u.s. re-trenches from the middle east, will some other big

powerful nation take its place? ayham: incrementally, that is happening. saudi arabia is engaging with russia and the crown prince is meeting with putin more often than trump. same with china. they get energy imports from the middle east. francine: is it a progression that the u.s. realizes and something they want to stop? ayham: the u.s. does know and president trump's attitude is they should pay for this, pay for middle east security. i think the mistake is for the u.s. to completely disengage. it is natural to reshuffle the position of forces to not be engaged in terms of having massive military interventions that cost a lot of money, but how you do it, that is the challenge. tom: if we are isolationist, what does that due to the tenor

of our economic growth? is: we lose -- the world waking up and wanting to go to work. living standards all over the world are extremely low and there is a lot of upside as we help people get back on their feet. if we shut the world out, we miss out on the opportunity. tom: what will you look for now? yesterdayert hormats looking at the persian gulf and another representative looking at africa what will you focus on? ayham: the persian gulf. the story is not over. the iranians will keep doing what they are doing in the persian gulf. 20/20 could be the year mr. trump withdraws from a rock could be the 2020 year mr. trump withdraws from

iraq altogether. they have to reform their systems. tom: this study goes back to oxford years and years ago, and the tanner -- tenor of all the books is that iran is the most developed, complex, stable capitalist economy in the middle east. do we have the potential to destroy that reality? are we at a point where we destroy the best chance of success in the middle east? ayham: i think the iranian trajectory is clear. iran and turkey have real influence today, military, economic, population, education. that is not going away because of tension between iran, saudi arabia, and the u.s. the challenge is we have most of the oil in countries that have

more challenging dynamics. the demographics in the golf, saudi arabia in particular, employment issues. it is at the heart of what can impact the economy, that is what is in trouble. tom: thank you so much. jim glassman, you are one day too early. coming up, we will drive forward this conversation on the nation's international relations 8:00james stavridis in the hour. this is bloomberg. ♪

♪ are watching bloomberg "surveillance." a new ceo of bed, bath & beyond is trying to get the bad news out of the way first, shares plunging after it withdrew its financial guidance. the ceo says it's underperformance underscores the

need for change and he will have turnaround plans. an unsolicited takeover offer from xerox. they say it significantly undervalues the company. ofox lined up $24 billion financing. chase sapphire reserve credit card is about to get more expensive. jp morgan will boost the fee from $450 to $550. the bank will add new works. -- perks. users will get a $125 credit on doordash. francine: we were talking about the middle east, talking about iran and the u.s. one other thing we are trying to figure out if there is a standoff between the u.s. and iran, can it get worse quickly?

ayham: absolutely, and part of the problem is it is difficult to anticipate what the iranians and americans want to do. president trump assassinated qasem soleimani and the iranians did something symbolic after a series of threats. the iranians have a structural problem with the u.s. presence in the region. this is not over. from agoing far away direct confrontation, realizing that would be too costly. francine: what does this mean for isis? ayham: the u.s. has been doing a great job at managing a coalition of forces in iraq that prevents the reemergence of isis. the pressure is real now the iranians -- real now. the iranians want the u.s. out of iraq and if the u.s.

withdraws, we will have a problem of the resurgence of isis. francine: what will happen to iraq in the next decade? this bouncing around of foreign -- u.s. foreign policy, what will happen to a rock? -- iraq? ayham: the u.s. wants to retrench and be in less places. -- the population is mostly pro-iranian so unless the u.s. feels they are welcome we are likely to see some readjustment. francine: you spend a lot of time analyzing libya and that region. how is the refugee situation going to get better or worse? ayham: part of the challenge is these countries that have structural and economic issues,

that is creating security vacuum interventions, and libya creates this huge problem. that security vacuum has not in resolved. -- has not been resolved. you have a lot of refugees in libya those problems -- in libya. those problems only get worse over time. francine: thank you so much, ayham kamel of eurasia group. these are your markets. yen declining and pound falling to the lowest in two weeks after comments from bank of england governor mark carney. ♪

♪ pres. trump: iran appears to be standing down, which is a good

thing for all parties concerned and a very good thing for the world. alix: talking away from war. investors have a big sigh of relief as the u.s. and the run step away from a deeper conflict. boeing's latest crisis. the jet that crashed in iran tried to turn back before killing 176 people. and save the date. china says vice career liu he will travel to washington to sign phase one of a trade deal with the u.s. next week. welcome to "bloomberg daybreak" on this thursday, january 9. i'm alix steel. it seems like the last 48 hours were just a dream for the markets. s&p futures up by about 0.3%. euro-dollar pretty much flat. about one basis point, but what's the 30 year. $6 billion of supply coming