♪ francine: duty-bound. washington and beijing are set to sign their phase one a trade deal, but u.s. tariffs will stay in place until the november election. banks and focus as goldman sachs, blackrock, and bank of america report earnings today. $3 trillion of deals after a bumper 2019. we will focus on the future of a.obal m& ♪ francine: welcome, everyone to "bbg surveillance." i'm francine lacqua in london. we are getting some german growth, 0.6 for the

largest economy in europe for 2019. there are more concerns about the global trade deals than there was yesterday. you can see european stocks pretty much flat. the dollar pretty much a steady. we are getting some data out of germany shortly. we also speak to the dallas fed president, robert kaplan at 3:30 p.m. london time. let's get straight to the bloomberg first word news. now, u.s. story for tariffs on china staying put. the trump administration is likely to keep them in place until after the presidential election. any relief is also contingent on compliance. steven mnuchin and says tariffs won't be removed until the next stage of a trade deal. >> these tariffs will stay in place until there is a phase two . if the president gets a phase two quickly, he will consider relieving tariffs as part of a

phase two. it has nothing to do with the election or anything else. >> today, the u.s. and china are scheduled to sign their phase one trade deal. $1 billion is the figure by which jp morgan's fixed income beat revenue expectations. citigroup debt traders posted a jump that was more than double expectations. the surge at both firms helps them notch up the best trading year since 2016. the trump administration plans to restrict the media's ability to pre-prepare economic stories. at the moment, the u.s. hosts a lockup, where journalists could receive data in real time in a secure room, that way they can publish the stories right on schedule. but now, the administration is looking at removing the computers from the room, making it more difficult to get the stories out on time. democratic presidential candidates squaring off for their final debate before the iowa caucuses.

there was a truce between senator warren and bernie sanders. sanders was asked about a report that he told misses warren he did not think a woman could win the presidency. as a matter of: fact, i did not say it. this is what donald trump and may be some of the media would want. thatdy that knows me knows it is incomprehensible that i would think that a woman cannot be president of the united states. >> senator warren pointing out the only people on stage who have won every election they have ever run in, all of them are women. 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. i am viviana hurtado. this is bloomberg. francine? francine: thank you so much. the russian president, vlad or promote putin -- vladimir putin's, annual state of the union speech is about to get underway in moscow. we should see the russian president arrive onto the stage

and the speech usually last two, 2.5 hours. let's get more with our executive editor for international government. joining us for the hour is james bevan, chief investment officer at ccla investment management. this is the much anticipated showcasing of may be russian might or russian domestic policies. what are we expecting from vladimir putin today? ,> it could be relatively short 60-90 minutes compared to the two, 2.5 hour odysseys we have seen in the past. he might be pretty careful about the idea of interference. interferenced no and there is no need for pressure to interfere. that is even as a conversation obviously picks up about the coming election in the u.s. and any role by russia in that. he might try and needle the states about weapons.

trump pulled the u.s. out of the inf missile treaty. it is only a year until the start -- until the nuclear treaty expires. he might try to push them on the missile front. francine: the president of russia has just started speaking. >> is one of the first events of the year. it is urgent that we tackle the sizable economic and technological tasks facing the >>country and that we lay down e main guidelines for international -- for our national products, whose implementation real required -- will require direct dialogue with our citizens. today, our society is demanding change. people want to development and they are trying to move forward

in their own professions, in their knowledge, in their achievements to achieve prosperity. --y want to see real they have a clear idea of what needs to be changed, be it in the cities, in the country, throughout the nation. change must continue to develop and people must be able to feel the effects, because we need to provide them with a decent standard of living throughout the country. ladies and gentlemen, russia's future depends partly on how many we are, so therefore, i would like to start with demography. who those children will turn out to meet, what they will do to

develop the country and what values they will base their lives upon. we have something like 147 million today, but we are facing , difficult period demographically speaking. thanks to the measures which we took soon after the turn of the millennium, that situation is improving in our demography. francine: vladimir putin, the russian president, just started his state of the union address 2020. this is a slightly shorter one than in the past, maybe 60-90 minutes. you can see the visuals are quite important and always quite impressive. when you look at the force that russia will be in 2020, to stabilizeabilize or de- world politics, what are the three things we are looking out for? u.s. elections, how they deal with china and the middle east. >> one thing very interesting is

seeing russia's behavior in the middle east and north africa in the past year. we have seen russia really advance its interests in both syria and libya. we saw that russia and turkey seem to have done a deal behind the scenes where they have agreed to carve up livia amongst themselves -- libya amongst themselves. that has pushed the u.s. further out from that region. what we are seeing is a renewed foreign policy effort by vladimir putin in areas where he feels like he can have an effect. russia's economy cannot compete with the u.s. they cannot compete in that sphere. what he can do is needle, needle, needle and have impacts in other parts of the world that remind us that russia is still there and still a power. one thing to watch is his behavior in the middle east. francine: james, do you have any assets linked to russia? they are very oil dependent. we have seen a little bit of fluctuation in the price of oil. given what we saw in the middle

east, it has been relatively stable. james: indeed. we have no direct connections to russian investments. mr. putin began his speech talking about demographics. demographics globally are a huge issue in terms of whether or not we can get sustained economic growth. u.s. has much better data for graphics -- much better demographics compared to germany. china is also in a tricky position. francine: thank you both. our executive editor for international government, james bevan from ccla stays with us. up next, president trump is expected to sign a beautiful monster of a trade deal today. details on phase one of what it means for markets next. this is bloomberg. ♪

♪ economics, finance, politics, this is "bbg surveillance." i'm francine lacqua in london. let's get you straight to the bloomberg business flash. here's viviana hurtado. >> we begin with a sweeping round of job cuts at ubs' wealth management business in europe and asia. it has cut up to 20% from several european teams at every level from assistance to managing director. this is to bring clients closer to decision-makers. seeking, jp morgan is full control of its fund management joint venture. the wall street lender is in talks to acquire the company from its chinese partner. it overseas $22 billion of assets. the move coming as global financial firms are rushing to capitalize on china's opening of its $45 trillion financial market.

morgan stanley promoting 130 executives to managing director. marks the, that smallest wave of annual promotions to the firm's top ranks. bank has years, their tightened entry into its highest echelon. rival goldman sachs has done the same. that is your bloomberg business flash. francine: thank you so much. president trump is set to sign what he cause a beautiful monster of a trade deal with china today. it is phase one of an agreement. for the first time, china could be punished for violations on currency, intellectual property, and the trade balance. of. tariffs on almost 2/3 chinese imports will stay put until the u.s. elections. still with us is james bevan. with tariffs staying in place until november, they are question exact what that means. what could it mean? james: i believe mr. trump simply wants to get through the next election able to say that he has stood tall and squared up

to the chinese. we all know that actually reaching a sustainable deal between these two powers -- superpowers is exceptionally difficult. it is all about whose technology rules the day, who is the politically most important player. what happens on the military front? these are all issues that will not get signed off. francine: i guess the million-dollar question is they have avoided to try and talk about the state of capitalism in china in 5-10 years. will that ever be addressed? james: not through this process, absolutely not. there will be some form of survivorship over the years. china has greater share of world trading partners and share of trade amongst those partners than the u.s. the u.s. is a much larger internal economy. francine: will we get a phase two deal? stephen mnuchin said they would

only think about getting rid of tariffs if they were at the negotiating table talking about phase two. james: it is very hard to see that we would get phase two anytime soon. if one thinks about what happened in terms of china joined the wto, it never really abided by the rules. very similar to the stories in japan in prior generations. their entire economy, in terms of subsidizing exports, still written in the frame. francine: what does it all mean for the markets? were the markets to quick and in?ing in -- in pricing james: i think we are going to have an up year in equity markets largely because the u.s. central bank is going to continue to -- an awful lot of cash. francine: despite the fact that the trade war is still looming and potentially could take a backward step? james: i think the amount of

credit and liquidity that floats around the market will cause people to look past the traded difficulties -- trade difficulties. this only becomes a real challenge with a credit crunch and recession. francine: if you look at the melt up, if the markets keep on being on a tear, in 2019, it was very difficult to lose money. what is it fundamentally based on? a stronger economy, strong fundamentals, or cheap money from banks? to pay ae preparedness rationally higher price in a climb of low inflation, low in terest rates, and low bond yields. we start with a higher yield on a like to like basis against credit debt. francine: are we creating bubbles? james: we have every chance that we are going to create a bubble, which is why i think we have to be very selective.

we have to think of quality of whether that growth is going to be sustained. francine: where do you see quality? james: in the very best quality banks. i think jp morgan's results this morning were an absolute indicator of the pure strength of that bank. back. the name i would in health care, i would certainly back some of the best names. if we are going to see a real justification of the long-term appreciation of equity back. prices from current levels, there has to be a pickup and productivity. that has to come from technology. francine: jp morgan beat on all levels. the share price gained 1%. how much more do they have to do for shares to go up more? james: i think people are missing the trick on jp m. it is not just about growth. it is about the reorganization, rationalization of earlier acquisitions and a reduced overall cost structure. we have seen the effort they have put into growing the revenue. i think the next big trick is

cutting costs. francine: james bevan therefrom ccla investment management. germany's slowest growth in six years. we will focus on the your area economy. towill also continue listen to president vladimir putin's speech. his foreign minister is in india. this is bloomberg. which will come into force again on the first of january, 2020. one a family has its first child, it will already get the capital,get maternal not from the second child, but from the first child, a full maternal capital payment. after indexation, it will be 466,000 rupees.

♪ this is "bbg surveillance." i'm francine lacqua in london. let's focus on the euronet area. we have had a gdp data out of germany confirming the extent of 2019's slowdown in the continents biggest economy. gdp growing at 6% -- 0.6% in the last year. the odds of recession in europe this year our solo, the risk can almost be ruled out. he was talking saying the french economy is still relatively resilient and he also says the impact of the strikes we have seen over the holiday season on french gdp will be at most -0.1% in the fourth quarter. there is the french bank

governor. on him.keep an eye still with us, james bevan from ccla investment management. what do you worry most about ecb policy? a lot of hope is that madame lagarde can try to move something on fiscal policy. what if she cannot? james: i am reasonably confident that she can. if she cannot, then we have a problem. in effect, giving the come on to the government to spend more money. the governments know they have to spend more money in order to get their economies moving. i think that we will get some traction. i am very pleased that you asked me to send in my german gdp forecast. i share the french optimism that we will not see a recession. i think we are bumping along the bottom and we will see better progress from here. the challenges, if there are

significant challenges, are very adverse demographics in germany. we have real issues in terms of variation of unit wage costs between germany and the peripheral european economies. that will require real expenditure. deflation we will see in those peripheral economies to regain competitiveness. francine: what do we do with the german two and 10 year yield? if it is no longer negative territory, what does it tell us about the state of the world? james: i think the german bond market is an absolute basketcase and investors should stay away. it violates all principles of capitalism to have negative yields. we grew up in an environment where a textbook staple yield, nominal yield on a 10 year government bond was 10 year nominal economic growth. unless you buy the idea that we will have outright deflation, protracted economies, these are wrong. francine: when they are no longer negative territory, doesn't mean the situation normalizes? james: well, it is not as if

bond yields are going to drive normalization. they will reflect underlying normalization. i subscribe to the view that we are likely to have a longperiod of -- long period of low inflation. it is the global component which 2/ depending3 and on3 which economy you're talking about. high levels of global indebtedness and of course, against that backdrop, we have real challenges of demographics. to me, we are not going to see an acceleration back to the high inflation days we saw in the 1970's and 1980's simply because we do not have enough push to get there. francine: what is the one thing you worry about with friends? is it reform mobile -- france? is it reformable? james: the thing that worries me

is the banks. if you were to join the links in the global banking system from the enormous amounts of credit that were created by the federal reserve, so where did it go and what was the transmission mechanism? french banks are absolutely center stage. i think if there is a draw in global credit and liquidity, french banks are in the firing line. francine: james bevan from ccla investment management. that $3 trillion year after a bumper 2019. we will focus on the longest m&a cycle in history. stocks struggling for traction in europe, as markets are trying to figure out with these trade tensions lingering with china. what does it actually mean for world trade? this is bloomberg. ♪

♪ hey. hey. you must be steven's phone.

now you can take control of your home wifi and get a notification the instant someone new joins your network... only with xfinity xfi. download the xfi app today. francine: washington and beijing are set to sign their phase one trade deal. the u.s. terrace could stay in

place until november seppi election. -- the u.s. terrace could stay in place until november's election. $3 trillion in deals. we will focus on the future of global m&a. good morning, good afternoon, good evening, depending on where you are in "bloomberg surveillance the world. "bloomberg surveillance ." the money markets have really moved toward pricing in rate cuts either in january or march. i think a rate cut from january is up 50% at the moment. the december inflation rates have fallen to 1.3%. was onecast we had .5%. core inflation has fallen to 1.4%. the pound moving a touch on the 2992 --that one point

1.2992. we get to european stock movers with dani burger. dani: the biggest decline or is christian hansen. on the stoxx 600. they cut their outlook for organic revenue, but bloomberg intelligence says even that new goal is still too ambitious. the ceo saying in the earnings that it was a mixed starch of the year and they see persistent problems. because the problems are sticking around, we are seeing shares fall by more than seven .5%. on the other side of the leaderboard, the biggest gainer on the stoxx 600 is asm international, the chipmakers having a good quarter. thereasm says fourth-quarter is going to come in stronger than they previously expected. order number 370 million euros, more than 20% then where they saw their midpoint.

we are seeing shares skyrocket to a record high. -- jly, jay martens martins. a lot of their look says it is the strength -- they said that food inflation picked up more than they expected, so we are seeing shares rise nearly 6%. bernstein says the one thing to look out for is the fact that their store openings have slowed. that highlights how difficult it is for the retailers to find space. francine: dani burger with your main stock movers. let's go to the first word news in new york city. here's viviana hurtado. viviana: boeing is no longer holding the title of the world's largest plane maker, the grounding of the 737 max leading --the company's biggest deliveries tumbling to just 380 jets.

that is less than half of airbus ' 863. europe turning up the heat on iran in a bid to save the nuclear deal. germany, france, and the u.k. triggering formal action against retaining strict -- routine restrictions on uranium enrichment. the e.u. has struggled to hold the deal together. today the u.s. house set to vote sending donald trump's articles of impeachment to the senate. the next step, the president's up a trial in the senate. the host city of melbourne endured some of the worst air quality in the world and it sparked by australia's raging bush fire spirit summer questioning playing tennis in such bad conditions.

global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in this isn 120 countries, bloomberg. i am viviana hurtado. -- i am viviana hurtado this is bloomberg. one of the main newspapers in iran, we understand that the british ambassador to iran has left the country, so we will have a very close eye on what is happening in the middle east with those tensions with iran. global mergers and acquisitions exceed $3 trillion. within that total, health care was the second most active sector with mega deals including the purchase of sochi by estimize squibb. squibb -- imyers bristol-myers squibb. i welcome our guest of the program. when you look at health care,

how much more money and how many more transactions will we see in 2020? 18 months ago, this was one of the only sectors left with that combined. >> we are in the middle of an environment where investors are looking for two things. one of them is underlying sustainable growth, and the second one is sectors which are resistant to technology innovation. it fits both of those factors well. that is the reason why we saw such an active health care m&a market last year, and those factors are still here. i think they will continue next year. francine: how much of it will be big acquisitions, and how much of it will be bolt on acquisition? will 2020 be different from 2019? antonio: we saw large innsactions in 201019 --

2019. 70% of volumes are represented by the deals. this year there will be a combination some of the companies have bid very large deals last year and are likely to stay on the sidelines, focusing on integration. some of the companies that did not participate last year will be active this year as well. francine: if you look at biotech, are they attractive enough for companies to sweep them up? antonio: i would say the answer is probably yes. at whatwhen you look companies are trying to do, there are a couple of things. the first one is trying to refocus the portfolios and the core area, but the second one is streamlining the r&d pipeline. some of the large pharma companies are facing -- some of their drugs are going to be -- they need to replenish those

with new technologies. francine: do you have anything you're looking at in health care, james? james: absolutely. these sorts of ongoing -- the piece that worries me about m&a space is that a lot of these people that are trying to get themselves out of trouble, and they think we can buy this, we can make sense of this, and they pay fancy premium for uncertainty with regards to -- whether it is really going to be there, i don't know, and i think this makes a lot of these acquisition combines quite risky, from my point of view as an investor. that.o: i can understand a lot of these deals have been using stock as the acquisition currency, and if a sector is highly valued but actually makes it easy for these companies to use their own shares to buy some of these assets, even if they

could be overvalued, they are still using a high-value currency to buy them. global volumes in health care have been using some kind of stock involvement. francine: if you look at regions and the world, where is a lot of the m&a coming from? is it from asia, europe, the u.s., or is it cross-border? : most of it has been focused in the u.s. and there have been domestic deals. cross-border m&a in the health care sector went down by 25% in the broader markets. one of the things we are hoping to see for 2020 is an increase in cross-border and cross regional m&a volumes. francine: the other thing we want to talk to you about is that you see so many of these companies in basic resources needing to give back to shareholders in terms of dividends to make them loyal.

does that mean investment is not going where it should be? antonio: i don't think so. the basic resources sector is ,riven by prices of commodities and there are some periods within the cycle where these companies will be investing a lot of money, and there will be other periods in the cycle where the market will return capital to shareholders. it is a normal trend within the sector. about thewhat transfer financing? antonio: one of the things fueling m&a in general is the fact that we are at a such -- in such a low interest rate environment. it is fully available. stock asse your own currency for acquisitions and that is fueling a lot of m&a. the other point i want to make is there is a lot of unvested -- unl -- -- unvested

invested capital in the market. i absolutely take privates point that equity is a disappointing asset class because a lot of the cash provided it sitting on the sidelines and has not been invested. that suppresses the internal rate of return that investors respect. will think about how i'm i going to play this? i am going to have to buy some targets and think about myself. francine: even in the financial sector? how long have we been talking ,bout european bank sector james? years. james: because of the political changes that are required for consolidation -- if you said to me, i will take a huge amount of that and there is lots more to come. francine: thank you for joining

us, james bevan and antonio alvarez-cano. coming up, an epic year per jp morgan posted the best year for this is bloomberg. this is bloomberg. in u.s. history. ♪

francine: this is "bloomberg surveillance." jp morgan test estimates by a whopping $1 billion this comes as citigroup's debt traders posted a jump, more than double what analysts were expecting. here with more is dani burger. jp morgan, it was the best

year for a u.s. bank ever on record. a huge earnings season propelled by vix trading. we saw the same thing as citi and sure. we thought there would be a big jump, but jp morgan beat it by $1 billion, citi more than doubling the estimates. you can see how big a jump for jp morgan this was from 2018. according to jamie dimon, a big reason this happened where the trade deals between the u.s. and china that helped improve sentiment and get traders into the market. at the same time we have the steepening yield curve between one and 10 year yields are that helped investors with up an appetite for fixed income products. this sets the bar high for the banks we have on debt. have bank of america and goldman sachs today before the u.s. open, and morgan stanley on thursday. for goldman, those numbers will continue to be important. goldman sees a much larger share of their revenue come from fixed income trading than a lot of the

other banks. whether they are able to hang on or even improve their competitive edge when it comes to fixed trading given the other numbers is going to be key for the bank. a couple of the things we may or may not hear about. jobs and cuts and costs are always important at banks. today we learned morgan stanley promoted the fewest number of employees to their elite levels since 2002. goldman is gearing up to go on a hiring spree in china. francine? francine: dani burger with the latest on u.s. banks. james, we were talking before about jp morgan. if the u.s. banks do well, does that mean they are taking market share from europe? james: i think they are taking market share from europe. i hear the french banks have taken a normal share of the high-risk part of the market, so this is not just about scale, it is about where is that scale being distributed. it is much clever about the recompense it seeps -- it seeks for taking this risk. let's get straight to

the bloomberg business flash in new york city with viviana hurtado. viviana: the u.k. agreed to back a plan to rescue fly be and it unusual rescue for a state that is long skeptical of state bailouts. the largest regional airline thed be reaching some of parts of the u.k. with fewer transport links. the u.s. has been putting pressure on westminster to block the chinese giant's access to its 5g network, but some supporters say huawei can be used in noncore areas. >> i want to make it very clear, while we will not be involved in the critical national infrastructure, the safety and security of that infrastructure is paramount. viviana: that is your bloomberg

business flash. francine? we talk: coming up, investing in tech and a business of wellness with the founder of felix capital. that is coming up next. this is bloomberg. ♪

francine: economics, politics, finance. this is bloomberg. britain has become the fastest growing u.s. -- the fastest growing tech hub. all european of tech investments. announce a fundraising round of $300 million, doubling the amount of asset management. it now has 3200 -- 3200 portfolio companies. we are -- joining us now is frederic court. congratulations on the fundraising. it is quite a big move and how difficult was it to fund raise so much? where investors actually keen to give you their money because they wanted something specific? frederic: we ended up raising more than we were planning

originally. it is a step further. for us it is continuation one and transformation, and it is a validation that that more -- that investment strategy is working. biggest: what is your concern? if you invest in a company where you think the business model is great but actually you do not have the support of the chief executive 100%, or they don't have your support, is that a noninvestment? business is to back people and to take them all the way. peloton,the example of it was led by the founders. companiese top tech are able to transform themselves. peloton is symbiotic with the ads that went bad over

the christmas period. does that change the view on companies? frederic: you can ask that question and you will get an interesting answer. that, it is very broad. -- it will bewer a key moment for company. francine: you have been good at taking companies from the start that will do very well. how will i consume my kind of tech retail things that you are involved in in the next 5, 10 years? is it going to change, or is the trend going to be exacerbated? frederic: i think there will be exacerbation of the trends. we see the transformation in the way people lead their lives, transformation of the brand that you relate to. i think we have a good eye for the brand combining logic elements with a good product with magic, something that makes

you feel that you need that product, you love it, you talk to your friend about it, and trading that magic is very difficult. gives an amazing method of connecting to people. francine: if the barrier to entry is not that big, are you concerned that a second disruptor will come along? frederic: we invest in different types of businesses, consumer brand that are unique to the proposition, and platforms as well. typicallye platforms require much more capital, and there is more execution than uniqueness of -- they get bigger bigger. is there a platform to understand how the consumer will behave or not? what place will people be more --

frederic: i can do that for my onne or my daughter's phone these platforms. i would say we have been surprised in the past five years how california, los angeles in particular, has been coming to us. this is where many of the big trends are being lost, and that is the we are interested in. francine: do you want to expand in an industry that you are not in yet, or do you want to go -- we are a brand with a unique point of view and we have caught up with france by word-of-mouth. it is an interesting industry that has done very well in that respect. with the emergence of consumer services, the likes of moonves oh, has done very well. do you not worry about

regulations? thinkic: we were -- i regulation will take care of itself eventually because this is something that people want. so it is a question of adjusting , obviously respecting regular but also affording a much better service. work and most l people of them. i think it is the leveling of the platforms. you can be anywhere in the world and not connect to people everywhere. so the likes in the u.s., the likes of spotify for transaction. all of these are available to people. to the market with something very unique and global. francine: how important is it to scale up very quickly? i think that is one area where europe still has to play catch up, but now we have

the benefit of 10, 15, 20 years of growth, the likes of spotify, the likes of many of those company's that have been bringing talent and grooming talent. significante now improvement of the quality of the management that entrepreneurs can access, especially when it comes to scaling fast. francine: thank you for joining us. frederic court of felix capital. tom keene joins me from new york, and in the bit later today, robert kaplan as tom and i prepared to head to the mountains in switzerland. davos starts next week. this is bloomberg. ♪

francine: duty-bound.

washington and beijing are set to sign their phase one trade deal, but u.s. tariffs could stay in place until the election. jp morgan reports it's best year ever for the u.s. bank. europe, less than stellar data out of germany with gdp growing at 0.6% last year. the weakest in six years. this is "bloomberg surveillance ." i'm francine lacqua and london. tom keene is in new york. the money markets pricing and more of a chance of a rate cut in january, and for a lot of folks this is on president putin, with his annual state of the drip -- state of the union address in moscow. tom: 1300 people gathered here to attend. it changes every year. i noticed some of the messaging is about demographics come about the need for russia to have an ever greater population. about howhe talked

many children couples should be having in russia. i think he will move into foreign affairs and the middle east maybe as the speech goes on. we will continue watching president putin delivering his annual address. let's go to viviana hurtado. viviana: we begin with a beautiful month for trade deals. that is how donald trump described the trade it with china. today he is set to sign it, phase one of an agreement. for the first time china could be punished for violations on currency, intellectual property, and trade balance. u.s. tariffs will stay in place until at least the election. china signs a more extensive deal, more tariff relief will be considered. senator elizabeth warren and senator bernie sanders -- mr. report was asked about a

that he does not think a woman could be fit for the presidency. >> as a matter of fact, i did not say it. i don't want to waste a whole lot of time on this because this is what donald trump and maybe some of the media want. anybody who knows me knows that is -- that it is incomprehensible that i do not think a woman could be president of the united states. viviana: senator warren points out that the only people on stage that have won every election they have run in our women. leading to a trial that is expected to start a sweet, the president has yet to settle on defense strategy and lawyers that will represent him. the majority republican senate is almost certain to acquit him. and the senate moving closer to a rebuke of president trump over iran. the jr. senator from virginia, democrat tim kaine, says he has enough republican votes to pass a war power bill limiting the president's options. several republicans changing --

concerned about the presence up at changing justifications for killing an iranian general. 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. tom: let's get right to the data check. one screen today, even though oil -- i almost did two screens, but i said let's move on to good conversation. futures negative five, dow futures -50. down to 60. francine: dollar study. there are concerns over the trade tensions lingering ahead of the signing of the trade deal between america and china. not it is time for a fun -- fun but interesting chart today, not something really directly into the zeitgeist of the moment. this is iranian oil production. i have no idea how it cratered. i knew it was bad, but back to

1985 -- this goes back to 1979, 1981. you have a linear bill over the years. down we go with a first set of sanctions. tok at this, francine, back 1985. part of the color of the domestic situation in iran. francine: i have a chart looking andaluations of u.s. japanese banks peered while the u.s. and china are set to find ash to sign the first phase of their trade deal, it looks like tensions will remain high. existing u.s. tariffs on almost two thirds of chinese imports will be in place until after the presidential election in november. our guest joining -- our guests join us. thank you both for joining us. miranda, we were expecting an easing of tensions or a truce. with the fact that tariffs remain in place until a phase two deal is negotiated, how are

the chinese taking that? >> this is the kind of deal that could have been signed months ago without all the ensuing tensions, with a more competitive relationship with the u.s. than we have now. whether we move to phase ii, this is probably after the election there is no priority for china, no priority for the usp the interesting thing is starting this comprehensive dialogue again, which is one of the things that is overlooked. that always used to be the key forum, where the u.s. and china could reset their relationship. that was -- if they reestablish that, it could change how the u.s. and china work going forward. francine: what does that actually mean? the bigger question is what form of capitalism will china adopt in the next 10 years. thatda: it is very clear xi jinping has his own idea of what that thought is going to be. for includes a key role

the state, a key will for government, both for companies and the economy. so the idea that that is going to be overthrown for a phase two deal is unlikely. i think the u.s. will have to adjust to that under the next administration. tom:. in the literature and the article of bloomberg this morning is a classified annex. aat is a classified annex in trade agreement? what will the american public not know about what china needs to buy from us? is abouta lot of it the details and how much we have conceded because a big issue is on the enforcement mechanism in terms of can the u.s. go in and check everything in china? does it give free reign to check the government or the company elements? that would potentially be very divisive in china.

so if that is classified, it removes that from the dialogue. and it means that both sides can present it as a corporation, not a competition. tom: does a classified annex mean this is a trade agreement? this abasic question, is trade agreement that will be signed today? miranda: you have the basic details of the trade agreement, but it is, in terms of a long-term relationship and how that is managed -- that is much more of an ongoing relationship and that is more of a political assessment rather than just how much soybeans or pork the u.s. is going to buy. it moves into a very different dialogue. francine: jeremy, what does this mean for the markets? two days ago we saw the u.s. remove the currency manipulator label of china. what does it mean for china? >> as you say, that could have been one of the late stage

concessions given by the u.s. prior to the deal being signed. clearly i think markets have been hoping there is this broad base in the escalation in terms of tensions. now having a slightly more sanguine response in the likes of the news over the course of the last 24 hours or so, to the extent i think we should not expect a complete de-escalation, they will be ongoing and we will see headwind to global trade. but i am not sure we will see some of the uncertainty we were seeing through the course of 2019. that should be more encouraging for some of those riskier assets. now that china is no longer a currency manipulator in the eyes of the u.s., the renminbi would depreciate by 10%. moment, actually at the it depreciated a lot during the in terms, and actually of if you look at the u.s.-china spread, you have quite a bit of room in the short-term to appreciate, so this is what we're seeing now.

there was basically a 10% overdraft, and now that is beginning to rivers. to be honest, -- to reverse. longer-term, you're probably still looking -- you have still got over the next 5, 10 years, you still have a fundamental mismatch to address. in the short-term, i do not think it will be 10% downside. tom: jeremy, what do you have on -- can you get back to 6% with good news, a good feeling over the last couple of days? jeremy: that comes into the traditional market bug in terms of what israel and what is the assumption of reality. what we can suspect is if we are going to see this slightly less bellicose trade relationship between the u.s. and china over the short to medium-term, they

entail the growth mechanism and will stay in line with the central committee targets. i think we are in a continued longer-term deceleration in terms of growth trajectory, but i think it is still a case of growth that should hold up reasonably well with measures of stimulus. tom: miranda carr, give us a more fuzzy view. can the consumer or business investment support the chinese economy? miranda: the interesting thing is there will be a lot of rebounding in the chinese economy that is not going to come from trade. it is nice to have but it is not essential, and it measures -- it already -- it is measures that the government put in place last year, infrastructure and monetary easing. the auto market is beginning to stabilize. factorsese domestic

which were a drag last year are now improving. conversely, the consumer is the one that is being hit because you have rising pork prices and rising food prices. as we come into the key new year festival and everyone should be going out and spending, it may be the time that the soon -- that the consumer starts to rain in and does not buy anymore and that is where we are seeing tension in the short-term. a lot of the more cyclical traditional sectors are going to benefit. view the how should we default that are happening in china? miranda: in some ways it is a good thing, but it is a bad thing as well. the interesting thing is the focus on financial risk at the cbrc are allthe focused on financial risk, a big issue for 2020. a trade negotiator has just been

upgraded in terms of looking at financial risk because once you have a few of these defaults coming in, it raises question of how muchhow much that spreads into the smaller banks. and the smaller companies. we will see more defaults and we will see spreads rising in the higher end of the market, but all in all, this is good pricing. we are finding a finding -- a proper pricing mission it is him -- a proper pricing mechanism in china. and mirandastretch carr with us this money. coming up later, robert kaplan, the president of the dallas fed, 10:30versation in the hour. michael mckee with mr. kaplan. ♪

tom: "bloomberg surveillance." good morning, everyone. we are talking about the signing of trade, but there is a broader reach on china. we do that with jeremy stretch and miranda carr. there is a volcano in the philippines, and i think the philippines move east to west and the ashes will blow over the south china sea. whose sea is it? --anda: obviously chanda obviously china has its lines and it says it is in ownership of that, but there is dispute written this is an ongoing issue, but the risk is with the u.s., with freedom of movement over there. this is one of the sort of challenges that you go into the ongoing u.s.-china relationship,

how they manage that strategic military and technical challenge. and hopefully, that is the thing where the dialogue comes in, rather than these tensions building up. view.eremy, give us an em are there opportunities within asian em currencies given the state of china? work withthink if you the basic principle that the underlying dynamics in china are still going to remain reasonably constructive, than i think in the context of a world where we are expecting slightly better growth trajectories in 2020 relative to 2019, if we assume fed policy is pretty much on hold throughout the year, i think it provides opportunity for those who are still linked intrinsically to the chinese growth models. there can and will still be opportunities in a number of those em markets which are linked to the china story.

i think it can and will be a good year for em investors, albeit you do need to look at currencies just to make sure you're not investing somewhere which still has one or two structural issues. tom: if you look -- francine: if you look at geopolitical tensions at the start of the year, our currency markets moving into havens that have almost been forgotten? jeremy: it is remarkable, this be that we have seen moving away from the geopolitical risk, which was evidently amplified. it was a little more than a week ago and people were talking about what are the ramifications for global peace going forward? now here we are recently seeing equity markets trading fresh highs, and risk appetite well supported. i think markets have an increasingly short memory. if you like seeing a presumption of worst-case scenario put behind us, i think you were always one tweet or one uncertain response from iran time ofm another

risk-based uncertainty. you have to be susceptible to those headline concerns. francine: the havens par thellence, the swiss franc, yen? jeremy: in a sense, the swiss franc does seem to be the case the swiss franc is continuing to be of interest. the yen is interesting because there seems to be some discussion in the market about whether it has quite the same safe haven tendencies that it has historically. but when you think about the significant net outflows in terms of the life insurers over the last few years looking at those high returns, you have to be mindful then -- that in an if stream risk-off move, the yen would be a good respondent to that. tom: i have to make money back in 90 days because the holidays killed me. where do i make money back and the next 90 days?

jeremy: if you are looking to make money in the next short period, it is looking for some of those em nations to continue to recover. been -- last week we were looking at the turkish lira making gains. i think the rand has been pretty big as well. in some of the high-yielding markets, i think they can ash there can and should be residual gains. but you have to be susceptible to those headline risk versions -- headline risk aversion uncertainties. thank you to miranda carr and jeremy stretch. up next, boeing lose the title of the world's largest plane 7 max is the 73 grounded. this is bloomberg. ♪

viviana: this is "bloomberg surveillance. i'm viviana. jp morgan wants to take full control of its joint fund venture in china. jp morgan wants to acquire its 40 night verse eight -- 49% stake in the venture. a push for so-called cultural sovereignty, france putting pressure on netflix. french lawmakers are finalizing a will that would force video on demand to put 25% of revenue into local productions or

netflix has already made several french original series. internal emails from boeing employees could prove very expensive and corporate the messages could strengthen the case for families suing boeing over the two deadly crashes of the 737 max. one plaintiff attorney says the email supports lawsuits. they claim boeing compromised safety to sell jets. all that to pressure the company into settling the lawsuits. that is your bloomberg business flash. tom, we have been covering the boeing story since the very beginning. boeing now reporting its worst airplane order in at least two decades over these -- the ground seven max one of the things people are still not sure about is when this plane, if this plane starts flying again after all the damaging emails. tom: the thing to me is to go

back months ago to where i believe it was american airlines employees, flight attendants, etc., that they really are not sure whether they get on -- they want to get on the 737 max. to me that is where it started. the denial in america with boeing's shocking. the other thing is a number of experts, including our wonderful george ferguson, are noting the move from seattle to a corporate headquarters in chicago, in the history books of boeing, how that will be interpreted. francine: boeing halted production of the commercial and learn -- airliner and the grounding of the 737 max means it is possible for firm to deliver the plane. we will continue watching boeing tom: let me do a data check right now. or -- downing south $.11. the trend on oil has been

remarkable given where we were 10 days ago. 64.43, down six dollars from the 70 level we saw in the heat of the crisis with tehran and baghdad. still a lot of information flowing out, particularly on europe's up a relationship and new stance with the islamic republic. we have much more ahead for you, and i want to bring to mind bank earnings all being compared to jp morgan. in that beautiful view, the building site on park avenue of jamie dimon's new palace. ♪

♪ tom: good morning, everyone. from london, from new york, right to us. let's get to our first word news. viviana: today, president donald

trump signs a trade deal with china but it leaves a lot of questions. will face penalties for not living up to currency and intellectual property. europe turning up the heat on iran to try to save that nuclear agreement. u.k.ny, france, and the triggering the deal to resolution mechanism. if the deal doesn't return to compliance, the court could eventually end. a delta airlines jet dumping fuel over 4 schools, causing breathing and skin problems for kids and adults. an engine problem prompting the delta jets to return to the airport. the faa investigating. formernt donald trump's national, michael flynn, now wants to withdraw his guilty plea just two weeks before he's

sentenced in the russia inquiry. he was charged with lying to investigators. he says prosecutors acted in bad faith. after pleading guilty more than two years ago, mr. flynn cooperated with the authorities. 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. i am viviana hurtado. this is bloomberg. tom, francine? francine: thank you so much. let's focus on the euronet area. within the last few minutes -- euros area. year, thet 0.6% last weakest in six years. despite the sluggish data, the governor of the autobahn says the risk of recession can almost be ruled out. let's get straight to our team on the ground here with me, roslyn matheson and jeremy french still with us. thank you for joining us. let me bring you over to my german two year and 10 year

yields. if they climb positive, what does it tell us about the state of the german economy? >> if we continue to see german yields grow back higher and we have seen a substantial low, but if they do continue to climb, i think that is the market suggesting that there is a sign of optimism regarding the growth cycle. i think the market is largely and already discounts that very week print we have seen categorized for 2019. i think it does come back to two factors. one is the german economy remains disproportionately influenced by exports. the china trade tensions have been one factor of that. the brexit process has been another. if we could see a de-escalation of some of those tendencies, i think that would be encouraging. i think you could see a modest degree of physical easing. i think we can and will see those german yields moving back towards positive territory. that is good news for inflation expectations in europe and ultimately the euros.

francine: germany rounded off the year with slight growth. what does that mean for angela merkel? >> at depends on this year. the forecast for 2020 remains pretty weak. has to navigate its own trade issues with the u.s. we have a new european commissioner for trade in washington at the moment starting to form those relationships. he is a very different personality from his predecessor. that is one thing. angela merkel is obviously facing continued pressure at home, question about where she goes in the twilight of her political predecessor. career, possible challenges starting to come up and push her. hasany under angela merkel been very reluctant to unlock the fiscal spending cuts. these sorts of numbers suggest they just are going to have to, particularly if her party wants to stay in power. tom: there has been talk of a consumer malaise in germany over the last number of years. is that a myth?

or is there some justification to that statement? >> certainly if you go to germany, you do not see it as much in the capital cities. outside of that, there is certainly a feeling that an economy that for many years was driven by manufacturing is struggling for new sources of growth. wants merkel saying she to position germany to be a leader of green technology and find those new sources of growth. but then you have to transfer people into those sectors and have them change their jobs and change training. that is where you get real issues around consumer sentiment and people feeling that their lives are not getting any better. if they do not feel like they are getting any better, they are not inclined to spend. that is something she has to navigate very carefully, that transition in the german government over the last 5-10 years. tom: the chancellor lives in east germany. what is the divide economically and socioeconomically right now between west germany and chancellor merkel's east

germany? >> well, you do still see that. angela merkel is very astute about that. keenly.s it very she knows where she came from and she understands those feelings. it seems she is really trying to show that she is interested about that, but again, transitioning workforce is structurally is difficult in any country, let alone a country that has a history like germany of divide economically, socially, and so on. she has to encourage people to embrace the idea of very different jobs. francine: jeremy, when you look at the concerns of europe and it is not german growth, but also inflation, how you read it. that goes back to the ecb review. is it to wide? is that going to be a problem for the your currency? >> it will be -- euros currency? >> it will be -- euro currency? >> i think there are a number of

questions about inflation not just in the context of europe, but in terms of many other global central banks. i think in the context of the broader perspective, i think there are some cultural issues in terms of german to german spending, which i do not think will be broken down quickly. i think the debate about the efficacy of negative rates in germany and/or europe is increasingly becoming relevant. german bank deposits increased something like 8%-eight .5%. %-8.5%.rlies -- 8 francine: would you change the way we look at inflation? there are two schools of thought. jeremy: i think just changing the goal post because you cannot reach the target i think is perhaps not the best way to try and adapt policy. it may well be the case that over time we will become adjusting to the fact that

because of demographic issues and technological changes, we are going to have to think about different parameters of inflation. i think purely changing the metric for that simplistic outcome is probably not going to be the beneficial way forward. tom: we talk about an optimum euro for italy or a given eastern nation. what is the deutschmark optimum euro for germany? jeremy: that is a very good question. we will have to go back to the to think about those different dynamics when you had the individual currencies. a country like italy, which had a history of depreciation of its currency, to try to maintain competitiveness. that has been lost by the advent of the euro. you can argue an equilibrium value of the euro is probably in the range of 1.25-1.30.

in a sense, there is still this push and pull relationship between the different component parts of the eurozone and this aggregate euro measure. as we stand now, i think it is still supportive of even some of those weaker members of the eurozone, whether it be eastern europe or the southern mediterranean. tom: when you talk to simon kennedy or one of our experts on economics, give us an update on the tension of this single currency. is it a topic discussed or old news? >> i think in some senses it is a perennial, and it comes up at times of political tension when countries are saying they want to take some of their control back, be it on fiscal policy, interest rates, and so on, and take that power back from brussels. you see these conversations come up again. when you travel around many parts of europe, you still get that very strong sense that

people enjoy the benefits of being in the eurozone. they want to be part of that and they also enjoy the money that comes out of brussels to support their economies, even in italy, where they grumble about it. it seems to be noise perhaps. the big question is after the u.k. leaves the eu, do we get any sort of inclination from other countries to do so? hank you so much.s been so roslyn madison there and jeremy stretch -- rosalind mathison there and jeremy stretch. wall street impresses on day one of earnings. will the momentum continue when bank of america and goldman sachs report later today? this is bloomberg. ♪

♪ viviana: you are watching "bbg surveillance." let's get your bloomberg business flash. investors once chaired the restructuring plan, now looking for results. the u.s.'s biggest aluminum producer has been cutting costs and selling core assets. alcoa reports earnings after the bell. and the u.k., amazon providing a lifeline to food delivery startup deliveroo. without a loan from amazon, the company ran a risk running low on capital. if british regulators ok a deal, it would be converted to equity. just 100 30 morgan stanley bankers were given the title managing director. that is the fewest elevated to its top ranks since 2002. a decade ago, incoming classes were more than 200, women

nabbing over 25% of the promotions. that is your bloomberg business flash. tom? tom: thanks so much. i was looking at ft lexus this morning, they did a great summary on jp morgan. i put that out on twitter and linkedin with a chart that shows jp morgan excellent. jpt is shocking about it is morgan, wells fargo with all of their challenges, and two banks at the bottom. our chief financial correspondent joins us. there is this immense divide ,etween jp morgan, wells fargo and citigroup and bank of america this morning. what is the moynahan-dimon divide? >> they are competing for the american consumer. both of them want to build the branches, they want to bank them digitally. you have all of these banks meanwhile partnering with tech firms left and right. yesterday, michael corbat talking about his partnership with google and may be seeing

more projects with google. tom: dimon came back and had to struggle to find his place in jp morgan. was handling. debris how debris field is bank of america still? >> jp morgan is very diversified, so they have their investment bank that has been in our mislead strong, one of the top -- enormously strong, one of the top three. given all the challenges they had last year and on the talent that they have seen turnover, they have been holding pretty strong. it is proving that they can hold onto middle america. francine: i was looking at the share price of jp morgan. i think it finished the day up 1.2% yesterday after that pretty impressive quarter. what do they need to do to get traction with shareholders? >> for jp morgan? francine: yes. tothe cfo made it clear

shareholders yesterday that they did not feel that this quarter was a one off and that they can keep this momentum going. every time she was asked about whether gains are coming from, we heard a lot of, it was broad-based, all over the place, around the world, in different business lines. that kind of strength across the board is something people were happy about, especially because the fixed income trading numbers, while they were through the roof, everybody knows trading is volatile, so you cannot depend on it every quarter. francine: do share prices actually have a plateau at this point for a lot of the banks? they are expensive. >> they are expensive and this is the one thing, we talked about yesterday. a lot of those net interest income fears were shrugged off last year. the stoxx blew through the roof regardless. capital returns stories was a big question, especially in light of eglin torrey and

accounting changes we might see and year -- regulatory accounting changes we might see this year. go unsteadily but that doesn't mean they will keep beating what they've done before. tom: thank you for your assistance yesterday. our she financial correspondent. withndon, jeremy stretch cbiz, the wonderful bank -- see cbic, the wonderful bank. the divide between the london banks, european banks, and american banks, is that overplayed by the media? jeremy: i am not sure it is necessarily overplayed by the continental european banks in north america. i think we have to go back more than 10 years to think about the legacy of the great financial crisis and the recapitalization

that has been evident in rebuilding the balance sheets in those north american banks, which has encountered them or in various economichem positions. i think some of those constinental european banks are still bedeviled by a number of those regulatory issues. we did see a disproportionate degree of economic activity function funded by the financial sector. the u.k. financial sector was hit hard by the crisis and it is still bouncing back slowly. tom:tom: i am going to sell the idea, jeremy stretch, that we still need strategy perspective -- strategy, perspective, and guidance across economics, finance, and investment. where is foreign platforms at big banks in 5-10 years? how do you perceive that? jeremy: that is an incredibly interesting question. we have seen an enormous degree of advancement in terms of

platforms and/or investment in trading platforms over the course of the ensuing period. the advanced algorithmic trading has certainly changed the dynamics of the fx space quite dramatically. are we going to see these platforms extent? is inevitable. are we going to see the degree of human interaction in markets diminished? i think that will also be the case. francine: what do you worry about when it comes to markets? liquidity, something else? jeremy: liquidity is always an issue. would do get those pockets of -- we do get those pockets of liquid -- illiquidity. it does amplify uncertainty. so when we do get these times of -- and a degree of underlying headline risk, it could cause those blowout moments.

we have seen the on occasions over the course of last four or five years. one suspects those issues will continue to be a function of the market architecture. tom: jeremy stretch with us of course looking at the demand out there to find a place for cash. if it is wednesday, it must be italy. yesterday, spain. let's look at a huge overbooking, the demand for italian paper. we talked with someone from ubs about this. the demand, the pickup in basis points is extraordinary, isn't it? jeremy: yes, that's right. we are seeing an obvious, significant expansion in supply and some fairly significant movements in yields. we were talking earlier about the influence of the germany curve and how that has changed. we are seeing those yields moving higher. i think it is going to be the case that if we are going to see a slightly better global backdrop, that i think investors will continue to be looking at the opportunity -- then i think

investors will continue to be looking at the opportunity and we will continue to see those yield levels gradually moving away from the lows we saw from last year. tom: folks, it is an inside baseball headline but such a huge deal for global wall street to see this demand. buts not to editorialize, 2006-ish. stays with of cbic us on the banks. this is bloomberg. ♪

♪ francine: this is "bbg surveillance." tom and francine from london and new york. this is for me the charge of the chartif not the charge -- of the week, if not the chart of the year. the boe cut probability has surged quite significant. the fact that inflation slowed it down it seems to be ramping up that boe rate cut view that it is imminent. is the market getting way ahead of itself? >> this to me looks exactly like an overreaction. it is the case that inflation came in below expectations this morning. in a sense, that is partly due

to lower levels of discretionary spending. retail is being forced to discount to try to maintain sales volumes. we have seen mr. saunders, the mpc member, advocate once again additional easing. i think what we have to remember is that most of the data we have been seeing up until now has been distorted by both electoral risk in terms of the december election and the brexit uncertainty. if you can start to strip some of that out. the deloitte cfo survey was taken after the election saw a big rebound in cfo expectations. if we see that reflected in terms of the flash pmi next week, then i think the degree of appreciation or rally we have seen in those rate cut expectations needs to be put into context. francine: what happened exactly? i reread it yesterday the speech that governor carney made last week, which is actually a lot more tempered than the markets took after we had a couple of mpc members -- >> absolutely. i think markets are putting two and two together.

it is carney's last opportunity to influence monetary policy. we have those comments over the weekend as well saying, well, if there is going to be a deterioration or if there is not a bounce back -- i think in a sense, that rate expectation for the january meeting is going to be absolutely pivotal in terms of those flash pmi readings. if there is going to be some rebound, if we are going to see some of those indices start to recover, albeit from a low base, but nevertheless showing si , to me suggests the market has got very much ahead of itself in terms of pricing in such a high probability of a january rate cut. tom: very quickly, what does sterling do given prime minister johnson's fiscal space? jeremy: of course, fiscal rules are being rewritten. what i mean by that is torn up in the context of the u.k.. i think that could be one of the

fundamental problems that we have and the u.k. going forward if we are going to see a rapid acceleration in terms of fiscal spending. i think in the context of fiscal dynamics, i think that will take away some of the necessity for the bank to had into-- rush headlong monetary policy ammunition. fiscal spending will come. causingmarkets will be a degree of correction into what's priced in. tom: we will see. jeremy stretch, thank you so much, with cibc. china out with headlines, looking for a prudent monetary policy. stay with us. this is bloomberg. ♪ sometimes your small screen is your big screen.

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bonus round that includes the on whatlassified annex" china will buy from the united states. at the photo op today, no huawei . oil, it receipts. des.t -- rece big,morgan commits beautiful, year-over-year organic revenue growth. this morning, we hear from bank of america. good morning, everyone. this is "bbg surveillance." francine, we have got to lead with germany, a bit of a challenge. was this expected? what do you think? francine: a lot of focus has been on the challenges in germany. if you look at gdp, it finishes that you're not as bad as it could have been -- it finishes the year not as bad as it could have been. it paints a bit of an uncertain picture for germany but maybe not as bad as it could have an. we need to look at trade --

been. we need to look at trade, whether or not president trump imposes tariffs. tom: interesting theme. i know chancellor merkel in a meeting that will be public at davos some time later next week. with our first word news is viviana hurtado. viviana: a beautiful, monster of a trade deal. that's how president donald trump has described the agreement with china. today, he is set to sign it. it is phase one of an agreement. for the first time, china could be punished on violations over currency, intellectual property, and the trade balance. u.s. tariffs will stay in place until at least the election. if the country's sign a more extensive deal, more tariff relief would be considered. before the iowa caucuses, democratic presidential candidates scaring off for their final debate. a faltering truce between elizabeth warren and bernie sanders falling apart.

mr. sanders was asked about a report he told mrs. warren he did not think a woman could win the presidency. senator sanders: as a matter of fact, i did not say it. and i don't want to waste a lot of time on this, because this is what donald trump and maybe some of the media want. anybody that knows me knows that it is incomprehensible that i would think that a woman could not be president of the united states. viviana: senator warren pointing out the only women on stage who have won every election they have ever run in are women. articles of impeachment are expected to be sent to the senate. the president has yet to settle on a defense strategy on the lawyers that will represent him. the majority republican senate is almost certain to acquit him. the senate moving closer to a rebuke of president trump over iran. --ugh republican votes

several republicans complaining about the administration changing specifications for killing a top iranian general. 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. i am viviana hurtado. this is bloomberg. francine, tom? tom: let's get to the data quickly. equities, bonds, currencies, commodities. one screen today. oil with a 57 handle earlier. 70-ish down tom a 64 handle in recent days. francine: i am looking at markets in europe. they are struggling for traction, a lot of concern over trade tensions still lingering over that u.s.-china trade deal signing. dollar actually edging higher. tom: very good. let me bring up the bloomberg here. anthony, there it is. this is iranian oil production. i did not know this. is back to 1985. it is real simple -- it is back

to 1985. it is real simple. down we go and we go down a second time on those sanctions really back to where we were in 1985. francine? francine: i love that chart. we will spend a lot more time looking at iran, the oil, and the middle east. within the u.s. and china set to sign the first phase of a trade deal in washington, looks like trade tensions between the two will remain high. existing u.s. tariffs on chinese imports will stay in place until after the american presidential election in november. a bloomberg senior trade reporter joins us from washington. what does this actually mean? we saw that the trade tensions would be called a truce. now, we have this lingering feeling that tariffs are still there. how will the chinese side be taking this? >> that is a great question. one of the big expectations for the signing today was that it would clear the way down the line for further reduction in

tariffs. that is something the chinese were counting on if you go back to december and their own announcement of the deal. they talked about tariffs being reduced in stages after the signing of this deal. what we have learned is there is this tacit understanding between the two sides as they go into the signing today that there will not be any further reductions until after the presidential election. that, of course, allowed donald trump to wield his tariffs. he's called himself tariff m an. he will take that into the campaign and try to keep looking tough on china, even as he is facing criticism from people like chuck schumer that really phase one tradehe chinese the deal is nothing huge. people saying this could have been signed 6-12 months ago. how can we be assured the deal holds? >> that is the big question facing this.

the chinese have a long track record of not living up to their commitments to american presidents. the administration says that there is an enforcement mechanism in here that allows them to restore tariffs, that allows them to take other trade sanctions if the chinese do not live up to their end of the bargain. at the same time, it is going to be hard for president trump to act politically and take that decision to say that the trade deal he has cut is not working. there is a lot of questions around this deal. it is also pretty short at it is six pages. coemis not a trade deal, on. it is a memorandum -- come on. it is a memorandum. what is a classified annex? did you learn that a boston university? annex that isied there is essentially the details

of the purchase commitments that the chinese are making as part of this deal. tom: buys that secret -- why is that secret? >> so folks out there in the market, listeners cannot gain the mark and front run purchases on certain commodities and so on. that is the worry from the administration side. that annex is one of the reasons this trade deal is so different from any other. you cannot imagine any other american president using the instrument of central planning to get some chinese purchases. tom: that is exactly where i wanted to go. is this central planning by the trump administration? let's cut to the chase. >> it absolutely looks like that. that is one of the main criticisms you hear from republicans, that this is a real managed trade. tom: this has been wonderful. thank you so much. it will be interesting today amid the pageantry.

crise visibly moved as we talked about taking -- moved as we talked. are is a big deal that we not letting out information that government parties no, but we don't know, is it? shawn --as said, kind ofawn the brave new world of the -- of thehould administration. it is sort of a usual practice languageational dual contracts where china is one of the parties that there are some games that are played. what you think you are signing in english is not necessarily with the chinese are signing mandarin. it will be -- signing in mandarin. it will be interesting to see if

that kind of discrepancy emerges. tom: will this actually have market impact? cameron: i think the market has kind of not necessarily lost interest but become tired of the issue. fortunately, after the announced agreement six weeks ago, whenever it was, we could kind of ignore it. there was a small reaction yesterday in the equity markets on the news emerged that the tariffs would not be rolled back. i suppose the real issue is, does trump then go on the offensive again vis-à-vis china? does the yuan suddenly start weakening again? if so, then it could come to top of mind for equities. i think the bigger risk is that trump reorient to europe. that could be the next front on the trade war, as it work. francine: i am look -- as it were. francine: germany needs a trade deal between the u.s. and china.

is phase one enough? enough? cameron: i would doubt it. the real, you know, visceral issue, i think, of cast-iron, intellectual property rights, which is really the crux of the administration's dispute with china, that is not being resolved. the issue of huawei his not being resolved. germany -- is not being resolved. germany, yes, they need a deal to smooth the international trade waters, but they could do with a lot more fiscal spending domestically as well. if they are not willing to help themselves, it's hard to have a whole lot of sympathy that they can't free ride on the rest of the world. tom: look at that, cameron crise with the morning shot. it is great to have cameron crise here on a quieter day, francine. usually he is here when it is frantic and frenzy and all that.

moments ago, a blistering note was published on the iowa debate. whoe different opinions, won, who lost. the final debate. we will do much more on this next. this is bloomberg. ♪

♪ >> he pulled out of the agreement, trump. we are now isolated, in a situation where allies in europe are making a comparison between the united states and iran, saying both ought to stand down, making a moral equivalence. we have lost our standing in the region, the support of our allies.

>> the war in iraq turned out to be the worst foreign policy blunder in the modern history of this country. as joe well knows, we lost 4500 brave troops, hundreds of thousands of iraqis died. we have spent trillions of dollars on that endless work. i did -- war. i did everything i could to prevent it. joe side differently. tom: there is -- joe saw it differently. tom: there it is. you have said in your reporting, many are calling this a junkball. junkball -- jump ball. ball?s the jump ofit a jump ball because genuine political enthusiasm? candidates inour the race and voters operating on

a lot of them came out in force on february 3. we have got some technical difficulties this morning. thank you so much. some technical difficulties as well so we will move forward here right now. cameron crise watching us. i grew up in a house where one of my beleaguered parents tried to link politics into market performance. do you buy it? cameron: historically, it is not related. tom: it is a parlor industry. cameron: there is a long history of people say, if such and such happens, everyone will flee the country and a kind of never ever works out the way. tom: let's take it to the banks. i was blown away today.

you and i have never seen a juggernaut of j.p. morgan. can other banks compete with them? are they on a five or 10 year path to true dominance of the industry? cameron: well, i think they are never going to have like a hegemon in the banking industry because the regulators will not allow it. it is fair to say that j.p. morgan occupies a place in the consciousness now that may be ago.an had 10-15 years they were the player, they were the paragon performer and industry. francine: do we underestimate -- in the industry. francine: do we underestimate the changes that the market are going through? this could be ai, passive investment, liquidity. how much does that shape what we are looking at? cameron: it is a totally different market to what it was five, 10 years ago. that is the regulatory burdens,

as you say, -- there is the regulatory burdens, as you say, the move into passive investments, feels like you are living in the matrix in some ways when it comes to financial markets. for me, the issue that i am looking at during this earnings season, not in some of the trading performance of the various banks, because those are always a little idiosyncratic. in terms of the backdrop, there are some environments that are very good for trading and some that are not. the banks cannot really control that. really on the commercial can side, are we going to start to see more charge-offs in terms of consumer loans on the weak credit portion of the spectrum in terms of credit cards and autos and stuff? the consumer is in great shape, the labor market isn't great shape -- is in great shape.

are we going to start to see any evidence of weakness from a bottom-up perspective? that will be worth looking at i think. francine: when you look at blackrock's landmark climate move yesterday, we spent time trying to figure out whether that actually changes the market. cameron: i do not have a whole lot of insight there. tom: we will come back on that. we are going to do a lawn blackrock in the coming days -- a lot on blackrock in the coming days. it is, without question, all the in davos at the meetings next week at the world economic forum. all the rage when michael mckee sits down with the fed president. 10:00 hour.plan in the again, bank of america later. this is bloomberg. ♪

♪ viviana: you are watching "bbg surveillance." let's get the bloomberg business flash. j.p. morgan now wants to take full control of its fund management joint venture in china. its morgan wants to acquire 49% stake in the venture. banks are rushing to capitalize on china's opening of its $45 trillion financial market. in a push for so-called cultural sovereignty, france putting pressure on netflix. french lawmakers are finalizing

a bill that would force video-on-demand services to put 25% of revenue into local productions. netflix has already made several french original series. and internal emails from boeing employees could strengthen the case for families suing boeing over the two deadly crashes of the 737 max. compromisedoeing safety to sell jets. all that could pressure the company into settling the lawsuit. and that is the bloomberg business flash. tom: opinions this morning on the debate in iowa are really substantial and varied. let's try it again with tyler pager with the bloomberg news in iowa. it is 244 miles due north to minneapolis. how did the senator from minnesota do last night? >> i think senator amy klobuchar had a pretty good debate, but i'm not sure she did enough to make up the gap in polling.

i think for the most part, the debate did not do too much to tie we the kind of 4-way see at the top. tom: who is running for vice president? assad cory booker out with some chit chat -- i saw cory booker out with some chit chat yesterday. these candidates that have dropped out, are they are running for vice president? >> i do not know. the only big name candidates that have dropped out that has already endorsed his julian castro, the former secretary of housing in the obama administration. he dropped out and quickly endorsed elizabeth warren and has been a surrogate for her in her. spinning for i think he is someone people have pegged as vice presidential material. other candidates like booker and

kamala harris have yet to endorse. i think it depends on who is the nominee. francine: i do not know how you measure success in these debates. is it because they move polls. we are so far off from a european perspective from november 8. do polls still matter? tyler: you make a good point. some of these candidates have been campaigning for more than a year. at this point, it is, how much do they move the needle in terms of bringing in new support, solidifying the support they already have. it is about trying to get your message to breakthrough from all the other candidates and showing why you are best positioned to leave the country. so i -- lead the country. so last night, we just did not see as much of the sharp

elbows. there was a lot of agreement on stage between the six candidates. i am just not sure the contrasts were highlighted enough for some of those other candidates. tom: very good. , thank you so much. bank earnings. i knew it would be interesting but it has been fascinating to stagger from jp morgan to wells fargo and citigroup, and now onto bank of america. bank of america with a really interesting story. a nice stock of recovery as well -- stockerrific recovery as well on that terrific 2019. this is bloomberg. ♪

♪ tom: "bbg surveillance." good morning, everyone. bank of america out here in 15-ish minutes or so.

blackrock out now with earnings and 9% seems to be the number. j.p. morgan with a revenue increase of 9% year-over-year. blackrock gets a huge fixed income pop. yields down with the herd following in following the market and a bull market for bonds last year. that t is for trillion. francine, making a big splash with the climate angle that mr. fink will no doubt take at davos as well. francine: i know when blackrock made that announcement through larry fink's letter to the chief executive yesterday, one of the big questions was how they -- that through their passive investments. that could be a real game changer. tom: a busy day. with our first word news, here's

viviana hurtado. viviana: today, president donald trump signs a trade deal with china but it leaves a lot of questions unanswered. the agreement calls for china to be punished for not living up to agreements on currency and intellectual property. critics say plenty of unresolved issues remain, including about what to do with government subsidies to chinese companies. europe turning up the heat on iran to try to save that nuclear agreement. the process could ultimately end if iran does not reach compliance. angeles, a delta airlines jet dumping fuel over 4 schools. authorities say no one was taken to the hospital. on engine problem prompting the delta jet to return to the airport. the airport. the faa is investigating. michael flynn it now wants to withdraw his guilty plea. this just two weeks before he is

sentenced in the russia inquiry. michael flynn was charged with lying to investigators. he says prosecutors acted in bad faith. mr. flynn cooperated with authorities. 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. i am viviana hurtado. this is bloomberg. tom, francine? francine: the world economic forum is sounding alarm bells on climate change with environmental risks occupying the group's top five long-term concerns for the first time on record. it has just been released today. joining us on set to discuss all of this, borge brende, the president of the world economic forum. a pretty busy week as we gear up to davos. with us as well is peter giger zürich insurance group. congratulations on a pretty

extensive report that also sets the agenda for davos 2020. i think it is the first time in 10 years that the top five risks are environmental. where does geopolitics fit in all this? >> the most pressing risk this year is in fact trade wars and geopolitical possible meltdowns. so in 10 years perspective, in the survey, people respond for the first time in 15 years that top-five likeliness of risk is related to climate. that is also extremely serious. francine: do any of these actually make a difference? if you put out a report saying, this is the biggest risk, what does this consciousness around the world that we need to do more on climate actually translate into? want to make people aware of the transition risk. the longer we wait, the more

expensive transition will be. we see the cost of climate -- we seeing to the cost of climate change today. tom: we have a great chart here. it is hard to see on tv but all you need to know is that this study is worth looking at because the graphical presentation by zürich is nothing short of outstanding. these are the migrations, the acceleration of change in all this debate. peter, from where you sit in zürich, how alone is the united states in not addressing these issues? mr. is going to go to davos. how alone is he when he stands up and criticizes climate change? peter: any structural change in an economy will have early movers and late movers. experience tells us that the longer you wait, the more tom: wait, the moren will

painful the adaption will be. [audio drop] mr. fink of blackrock talking about the big story. what do companies and sovereign wealth funds backing them, how do they act over the next years? >> we are increasingly seeing that oil and gas companies are also focused on renewables. they are integrated companies. i think natural gas will have to be a bridge. [audio drop] --i think natural gas will haveo inaction -- the cost of inaction. francine: if you look at domestic political polarization, which we talk about day in and day out on this program, how does that make it so much harder to deal with these long-term challenges? we are seeing with the

demonstrations and shin

tom: target has come in with a 1.4% statistic versus what was a really good number hope for from the premier big-box distributor. down below, you have got 19% with digital sales. cameron crise has seen this many, many times. the premarket as well, let's show that. thank you. 2.3%.rt down target, absolutely iconic and big-box retail and they just come out and say, it did not happen. cameron: it is hard to know how we should interpret this on a broader perspective. as you point out, online sales were quite robust. is it just a case of the oftinuing amazon-ification

the retail space. is there something idiosyncratic about target's brick and mortar space that is not reflective of walmart? tom: let's go back to securities 101. brian cornell, the head of target is basically james dimon of retail. everybody thinks he is phenomenal. do when you own a stock and you get a shock like this? it really depends on your timeframe, doesn't it? cameron: yes. i also think it depends on your investment process. the my perspective, appropriate methodology is to employ something like the scientific method, as you have a new input and have to assess in the context of your existing model. i think what you do not do is thisassume that, ok, is going on sale, i am just going to buy it.

you have to employ the scientific method. tom: this is walmart and target, real simple here. you can see the huge outperformance of target over a half, twor and years, even as walmart has advanced as well. it is a fascinating american story. francine: it is a half, two an n story. i don't know how you would explain to our international guardians target -- audience target. cameron: it is kind of like a , discount, discount, but they sell a broad range of goods. francine: i tried to buy something like three months ago, a t-shirt for a three-year-old. it was like $59 to send it to london. tom: i did that, too. shipping was enough to kill you. francine: does it go to the fact that the u.s. consumer is worried? is that what we could read into

it, cameron? cameron: again, it is hard to know without seeing confirmation from someone like walmart. typically, you think of stores like target and walmart as consumer staples. they actually perform well typically on a relative basis at least when things are going poorly. tom: i am going to go back to the original side of your study. one observation i make is that target stores are spotless. that is one of their great claims. we are going to take a break. a bank of america next. this is bloomberg. ♪

♪ francine: this is "bbg surveillance." tom and francine from london and new york. we were just talking about target.

they came out with some pretty disappointing comparable sales. those missed estimates. if you look at the guidance, they also missed average analyst estimates. the share price premarket was down more than 6%. tom: it is on 8% right now and walmart down 2%-3% as well. let us do this. we will migrate from this important retail story. amazon side digital sales up 19%. sawill squeeze in -- amazon digital sales up 19%. we will squeeze in a chat. we have got it out right now. beattment banking revenue 1.5 billion versus 1.4. does bank of america compete with the excellence we saw from j.p. morgan? or do you have the -- do they

have the interior confidence to say, this is our story. buildout,ail branch consumer loan growth, that is what we saw. both banks have been gaining share. the trading business is a little bit different. i am not sure if you have seen those numbers. tom: we go on ratios. j.p. morgan numbers are out of body. 17% on tangible equity. bank of america, i guess i got 11%. 15% to 11%. eight 10%-11% statistic from bank of america. >> it will depend on your mix of business. bank of america is a very strong

on some capitalized businesses. j.p. morgan i think also has been perhaps a stronger out-of-the-box coming out of the crisis in terms of improving returns. one thing we have seen at bank of america is really best in class cost ratio. i do not have the numbers in front of me. you do. perhaps you are looking at more improvement. that is something we are looking at this quarter. francine: let me bring in those numbers from bank of america because they are just crossing the bloomberg terminal. some of these big banks are quite let's say intense in terms of earnings. we need to really break it down. trading revenue better-than-expected. fixed trading better-than-expected, 1.8 billion. that is the fixed trading revenue. if you look at equities trading revenue, they are actually lagging estimates. overall, the earnings per share is coming in at 74 instead of $.70.

what is the weakest point for bank of america right now? >> i do not have the full numbers in front of me. .o your point, fixed beat that is a comfort. their business is more u.s. and credit focused so we will want to hear more about what drove the strength there. tuities trading, a miss here. tom: bring up the chart on the wall, please. this is from the presentation of bank of america. this is the moynahan ratio. is chart with the blue bars the expenses and efficiency ratio. they have just quietly managed expenses down 1% year-over-year. this efficiency ratio has come down to a moynahan level. is he the one cutting the costs

the most? ispart a visit -- part of it their efforts and part of it is business mix. they have made an effort in terms of reducing savings. one of the charts would love to look at is charts of their branch count and a chart of mobile usage. when you think about the fact that a deposit costs about three cents on the dollar, pennies on the dollar depending on the bank, as you are converting more and more branches to digital, you can sort a picture some of the savings. tom: what are we going to see on body count? this is a movable target that we have seen for years. 000.ve a count of 208, s that on its way to 1999 or 250.9 or >> while some of the tellers are

being replicated through digital use, they are hiring more salespeople. still hiring people in the branches, but a different mix. francine: i do not know what that means for the rest of the crop, right. we have had j.p. morgan, bank of america. how difficult is it at this point to rank some of these u.s. banks by weaknesses and strengths? cameron: i do not have the numbers here before me, but going to what i was alluding to irfore, it looks like the provision for credit losses was a little lower than expected. that is encouraging, assuming that they are accurate in their provisioning. essentially suggesting that underlying loan quoted is higher than thought. >> that is another trend we have been seeing across the banks. credit keeps getting better. francine: let's bring in ken

f equityra director o research. if you look at the initial price reaction, it is down was a little bit. your thoughts on the numbers? fourth quarter also brought and strong results from loans and the capital markets -- brought in strong results from loans and the capital markets. likenterest income, banks bank of america because they are growing their business are able to buffer a low rate environment. i think we are in a great position. its of america, most of revenues from the u.s., a strong economy is going to benefit in 2020. we see momentum for bank of america. tom: a question from me before i go to radio. i have got j.p. morgan 1.8, bank of america one poi -- 1.3 and

the others on a lower level. ken: i think if we have low inflation and we do not go to 2% higher, these are extraordinary values, historical and relative to the market. we think 20/20 is a good time to be looking at banks, particularly the ones we are bank of america and j.p. morgan chase. francine: tom keene off to radio. when you look at equities, trading came in a little lower than analyst estimates. what does that tell us? business, an uneven which does not give you a great equityined whether it is trading or fixed income trading. most of the banks, because this is a heavily regulated area, are moving away from trading.

they need investment banking. that may times is dependent on ceo confidence and where we are in the world. francine: what can you tell us about the investment banks? for all the folks watching from home and also from the trading floors, we have a great bank of america blog with all of our experts on. one of the things that michelle davies is writing about, total drivenents were a beat by stronger than expected performance in debt offerings and stock offerings. >> i think what we are seeing at the investment bank is about in line with our expectations after some of the reports yesterday. it looks like the interest income coming in line. interest margin come online. i think the cost side jumps out to us as may be looking a bit higher than expected. we are going to want to dig in a little bit there. basically, back to the investment bank, big trading across the board a beat now for

the big three u.s. banks. we will see what happens with goldman sachs shortly. equity trading a little bit mixed but are we seeing the big getting bigger with j.p. morgan and gaining share? debt and equity underwriting, we did see some strength, especially towards the end of the quarter. that's one of the benefits of strong asset prices are low volatility. and mandate, keep in mind -- and a, i have not seen the specific advisory number and the numbers yet but the hope would be that they are doing a little bit better. they have really made a focus on turning around that business and especially focusing on the middle-market area of the business. francine: what do you expect from goldman sachs and morgan stanley tomorrow? ken: goldman sachs is going to have a strong quarter. it is also a weak fourth-quarter 20 for the capital markets, especially for tech trading --

fourth quarter 2018 for the capital markets, especially for tech trading. investor day is january 29. they still cannot give it much financial contributions from their new expansion and to retail with markets. i think goldman sachs will follow along what we saw yesterday, particularly with j.p. morgan. their core business is not stable. they do not have a large franchise in loans as it relates to the u.s., particularly the growth of small business loans. goldman is still vulnerable, because the capital markets can always be cyclical to volatile. that is what they are trying to move away from. you think that is a problem for goldman and the stock has moved y. size we -- sizable it is priced for perfection. francine: ken leon there. thank you as well allison williams of bloomberg

intelligence and cameron crise. joining us now is our bloomberg opinion columnist who covers retail. moments ago, target really tumbling postholiday sales. is it just weakness at the retail because we saw disappointing figures from jcpenney and kohl's or is it something in particular for target? overually, the winners win christmas and the losers lose and this has been different because target has been a winner. and has suddenly become a loser. this doesn't seem quite target seem quitethis does target focused. it seems to be in toys and electronics. target has really been focusing on toys because of the demise of toys "r" us. target has actually been doing everything right, investing in stores, digital. we have a rare retailer investing in its products so them but want to buy

something has gone very wrong here. francine: i was assuming internet sales would go up almost every year and month. web sales rising them but something has gone very wrong 19%, slower than what they did last year. >> that's right. they have been doing click and collect, where you order online and pick up from stores. that seems to be still doing well. it is the regular web sales doing poorly. common fort seems to be these holidays. francine: coming up later today, i conversation with the dallas fed president, robert kaplan at 10:30 a.m. in new york, 3:30 p.m. in london. this is bloomberg. ♪

alix: the u.s. and china will

sign phase one of a trade deal. low bar for rate caught. the u.k. sees the weakest inflation in years. the bank of america comes in strong. the bank beats on fixed income and net interest margins. welcome to up and claude bloomberg: daybreak -- welcome to "bloomberg: daybreak." the day we are waiting for has arrived. we will send the trade deal. german eco-data coming into human gloom. none of that seems to be reflected in the market. you're a is up despite the weakest growth -- the euros is up despite the weakest growth in germany in years. in the bond market, little bit of safety, but everywhere else, steady as she goes. time for global exchange. we