manus: good morning from dubai, it's bloomberg "daybreak: europe." i manus cranny. today's topre stories. u.s. and china sign on the dotted line, efforts to close amid concern but over what comes next. over to the senate, house of representatives sends articles of impeachment against president trump to the upper chain her. these -- to the upper chamber. , beforek overhaul pairing losses as russian president vladimir putin

replaces his long serving prime minister. attention turns to the shape of constitutional changes to come. manus: a warm welcome to "daybreak: europe." it aresident because monster deal. -- the president calls it a monster deal. the meat and potatoes will come in phase two. china is the main loser in this major truce. the question we have to ask ourselves for markets is, this help globalally

growth? nejra: the question is, because the tariffs made on two thirds of imports from china, the fact that china seems like the loser here, you wonder how the enforcement is going to work in the big question for markets is, is it phase one and die? we -- phase one and done? we ever moved to phase two? manus: indeed, those are the key questions. profit, margins, and the sales number, all three coming through the top end of the estimates. what else do we have on the details? nejra: the first quarter guidance for sales beat estimates, net profit was above all analyst estimates and for quarter growthth as well, the inventory decline may bode well for the chip sector.

more for the chip sector, with $15 billion on tech and capacity in 20 to prepare for the advent of 5g smartphones in coming years. -- thats may think it's coming up in the run-up to 5g phones because basically it was he customers from apple to huawei adopting more smart semi can -- semiconductors in smartphones. manus: we've had a huge shifting of gears, over 83% analyst have recommendation. bank of america still very bullish on the stock. let me take you through some of the markets, at the end of the day you got a little bit of a dip in the dollar here.

the interest-rate differential is a critical issue. negative europe, negative japan, and calling for weaker dollar-yen. triple big on your face. do we need to debate what is next for the dollar? i would say the bloomberg dollar index was a doubting thomas yesterday. --y're going to strive to do the oil market of nearly 1%. china has agreed to buy 50 been dollars of additional energy products. inventory is to the downside. ar the moment there is palpable sense that were over the line with phase one. whatever the hurly-burly of phase two, we can debate. nejra: absolutely. if you look at the msci

asia-pacific index, it's trading pretty flat right now. it's a bit of a mixed picture below the surface. builds indicate we could on it somewhat today and the 10 year yield after dropping below 180 is edging up still holding below that level now. the phase i deal has been signed and president trump said the accord is righting the wrongs of the past. that beijing needs to do more to crackdown on theft of american intellectual property and avoid currency manipulation. makinghina has been substantial and enforceable commitments with regarding to the protection of american ideas, trade seton's -- trade secrets, patents and trademarks. in a letter, he said the chinese president said the deal was good for china, the u.s.,

and the whole world. some big issues on china's economy have been left off. the agreement does nothing to address the claim that chinese backpacking of american inpanies will require reform phase two. tom mackenzie joins us. he is our china open anchor. good to see you. said, but how has it been received in china? just on the surface, you look at this deal, you have to think that at this point, it looks like a win for the u.s. when you go to that link, the tariffs remain in place on most of the commitments in china, from energy to manufacturing to commitments you got on licensing from insurers to the banks. we got nothing in terms of

huawei or china's tech sector and you do have an enforcement mechanism, but, and here is the caffe out. when you start to tread -- stress test some of those commitments in china, it becomes apparent they were already part of the policy agenda here in beijing, in china. that was already part of the plan. in terms of some of the commitments around enforcement of some of these issues, some of the licensing, again, that dovetails with china's concerns. what it does is by china time. of course there is initial relief that they don't get initial terrorist put on some of these products and they can work through some of the issues but the global stigma has been trying to stress the fact that some of the targets around purchases of agricultural products will be market driven. either the state run companies -- it has to be market driven. potentially trying to have

concerns expressed by the europeans. the two sides are rewriting globalization to operate and sell their goods in the chinese market. you've got that concern from the european business conglomerates. the state run tabloid saying essentially the phase one deal, even before they get to phase two, the phase one deal is looking fragile. is strategic relations between the u.s. and china that still declining. executive chief officer of blackstone said the u.s.-china trade agreement shows nothing has changed from the world's economic superpowers. phase two will cover a number of other things, which are

important. things that have not been resolved. there are some issues regarding tradeand nontariff restrictions. us is the founder and ceo of ail. how long is it going to be enough risk assets to just have phase one without any clear signal that removing to phase two and enforcement of the issues defined in phase one? >> the structure of the deal has been driven very much with the u.s. 2020 elections in mind. the structure and the timing of it is in order to ensure that president trump does not have a u.s. recession in 2020, which reduces his chances of getting reelected. in that sense, i would not expect on in -- any volatility

coming into the rest of the year until november. any signs of phase two would probably be 2021 are beyond. this is just the first part of the truce. manus: good morning to you. the currency manipulator tag was removed. goldman-s says we don't see a lot of new things here. deutsche's says there's a lot to that remains to be seen on the enforcement side. howimportant or underexposed are we to this currency chapter? it hasn't really made it to the top of the headlines. does it irk you that there's not a better resolution function? >> not really, because to be

fair, they've kept their renminbi at fair levels when thang the crisis, rather the currency weakening with all the other emergency -- emerging-market currencies, they've kept it stable. i would say if anything the manipulation could've been on the others. , and's a lot of headlines that's an attractive headline to make. but i don't believe it is a structural issue. nejra: we have to remember that tariffs remain over two thirds of chinese imports. have enough negatives been removed for global growth to pick up for 2020? >> totally. we turn positive, in fact. ahead ofed some truce the 2020 elections for former -- forks president trump. with the worst case scenario, in

essence this has now been priced into the market, but it does remove that level of uncertainty that allows for medium to longer term investments to take place. i think there is a positive sentiment, but it will not shift things higher because of this now. there is a portfolio that is storming ahead and the china purchase commitment portfolio, to tag onto nara's point about the global growth, how do you play the additional? data? how do you add to the portfolio to take advantage of phase one and the momentum that might come from phase two? thanos: i think the way we look at it is looking to benefit from the countries that are more open to global growth.

countries whose gdp is reliant on trade and exports, such as germany, korea. our preference is for investing in those countries to benefit from the easing of tensions, less uncertainty, so germany, south korea, and china as well. i guess stays with us. let's get you up to's feed with -- up to speed with the first word news from hong kong. president vladimir putin has replaced his long serving prime minister. he's also call for sweeping changes to the country's constitution. he isled speculation that moving to extend his grip on power. tocould take on another post show continued influence. in the u.s., the house has sent two articles of impeachment to the senate. it's a first step to begin

president trump's trial, almost certain to end in acquittal. a super majority of senators would be needed to convict the president. chief judges -- chief justice john roberts will preside over the trial with the senate as jury. the trial begins next tuesday. in germany, angela merkel has begun a deal to begin phasing out coal. they've set a timeline for shutting down power generation by 2038. 40 government will provide million euros for regional infrastructure as part of the deal. 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. this is bloomberg. nejra: annabelle droulers in hong kong, thank you so much. later in the program we speak to the goldman sachs chief economist and we will ask him about his 2020 outlook. don't miss that interview at 6:30 london time.

coming up, the consumer is solid. that's the view of the fed robert kaplan. we'll bring you that exclusive, next. this is bloomberg. ♪

is "daybreak: europe." nejra: economic growth was modest in the final weeks of 2019, according to the beige book. the report supports the decision to leave interest rates unchanged in december. the san francisco fed president said the economy is in a good place following three rate cuts in 2019 and is positive about the fed's inflation target. goinflation will gradually back up to target and reach a sustainable 2% in 2021. outdone, the be dallas fed president robert

kaplan told bloomberg in an exclusive interview that the isacity of the u.s. consumer strong. >> there may be months when the consumer pulls back and saves mourn doesn't spend, the but -- but the capacity of the consumer to spin is solid. household balance sheets are in much better shape than they've been in 10 years. not perfect, but in better shape. the consumer has the ability to spend and over time, i think that will. can i just take a little further, he warned about risk asset valuations and expansion of the balance sheet are things we ought to be sensitive to. do you think this is a little bit of a rational warning about the potential for irrationality? i'm grabbing at any fed leader that i can think of. thanos: i think that is right.

the markets have rallied, unemployment is continuing and we got a census numbing in this year which is going to boost a little bit more of that. seeingiew, will be inflation a little higher than what the fed expects, with consumer confidence levels at an all-time high. all of that would lead to a little bit of precipitation to the other side, and there are risks. nejra: is it that you see companies actually raising prices in response to higher wage growth? what are the signs that is giving you because market is already pricing much higher inflation. ? very true, but in our view a couple of things. the continuing squeeze of the labor market and there will be some wage push going through,

especially as were coming for the middle of the year. we also have the continuing pickup and growth -- global growth on the back of the easing tensions. less a pickup in commodity prices. more broadly, we see some inflation come through, and what's more important, it's higher inflation than what the markets had inspected. in that sense, we could see the fed behind the curve and we expect u.s. yields to continue rising. manus: let's take that a little bit further forward, on the back of what kaplan said. say we need to start to communicate by the winding down of the balance , and that's one of the objectives, by tempering the balance sheet, can they really do that? saying they will never be able to reduce this balance sheet, they need to keep it fully

engaged. what do you make of the difference there between kaplan and macquarie? thanos: what kaplan did say is there is a debate that is taking place in that debate has not really concluded, that is his view. if there is the reduction of the balance sheet, it would have to be done very gradually and slowly. so it is a gradual reduction of the balance sheet, so i do believe that will continue but it will be gradually eased off within the fed. nejra: you said the deal will move higher because the fed will find itself behind the curve. if that's your view on inflation and on yields, how do you reflect that in the portfolio? thanos: in terms of the yields theg negative, in terms of dollar, and we went to the

university together, so i respect him a lot, we were positive on the dollar the last couple of years. it was only december for the first time in two years that i went negative the euros. that's because i agree with david that is the interest rate differentials that drive the currency but there's also economic differentials. i believe it will continue to favor the u.s. but it could shift toward more open economies. europe may see a slightly more positive sentiment in terms of economic growth. bloomberg's get the business flash from hong kong with annabelle droulers. parent is airways complaining about the u.k. rescue of the regional carrier taken on flights with its rival virgin atlantic. saying the u.k.'s tax plan for

the airline is unfair. government denying that saying the passenger duties will apply to all airlines. you're going to see a full-scale banking crisis in hong kong because you've got such a tightly wound economy in a stage of freefall from an economic perspective. the warning doesn't seem to be convincing markets. shown nos markets have sign of an impending banking collapse who would bloomberg business flash. manus: thank you very much. let's look at the vincent will be dominating the day's agenda. huge interest rates cuts over , andast four quarters continuing the u.s. bank earnings season, morgan stanley, stand up and be counted at noon.

nejra: and the south africa reserve bank is expected to hold interest rates despite the struggling economy and oil uncertainty. follow half an hour later by u.s. retail figures from the holiday season. ,n goldman's biggest quarter but profits fell short of analysts estimates. will bring you the latest, next. this is bloomberg. ♪

you're going to see a full-scale banking crisis in hong kong because you've got such a tightly wound economy in a stage of freefall from an economic perspective. speaking tobass bloomberg about the outlook for the banking sector in hong kong, not good. call is not

convincing the markets. the economy has risen us to three-year high by tightening liquidity. >> when he speaks, everyone listens. this is a man who made a fortune betting against subprime mortgages. part of that bet against hong kong financials is on the hong kong dollar but it has been trading on the upper end of its trading range against the u.s. dollar while many think the economy will suffer from months of protest. our guest is still with us. a final thought on earnings season as we keep getting bank earnings rolling in. think the slightly higher curve in consumer sentiment is a positive. nejra: great to have you with us.

continue the conversation with us on bloomberg radio at 6:45. later we speak to the goldman sachs chief economist. you do not want to miss that interview. this is bloomberg. ♪ sometimes your small screen is your big screen.

and with the xfinity stream app, which is free with your service, you can take a spin through on demand shows, or stream live tv. download your dvr'd shows and movies on the fly. even record from right where you are. whether you're travelling around the country or around the house, keep what you watch with you. download the xfinity stream app and watch all the shows you love.

nejra: good morning from bloomberg's european headquarters in the city of london. this is bloomberg "daybreak: europe." these are today's top stories. manus: phase one done. the u.s. and china signed on the dotted line to provisions and efforts to close the trade gap is seen as positive, but it's a mixed picture for stocks amid concern of what comes next. over to the senate, the house of representatives sent articles of impeachment against president trump to the upper chamber. the historic trial is set to it is alluesday, but but certain to end in his

acquittal. and a russian reshuffle, after paring losses, as president vladimir putin unexpectedly replaced his longest serving prime minister. turnsn changes to the -- to the constitutional changes to come. nejra: phase one and done. how quickly will the markets turn their attention to the prospect of phase two, if that comes at all? u.s. futures .2 u.s. equity markets that might build on record highs. we get all the action from around the world. manus: we do indeed. but aational exuberance, re-rating to global risk in markets, some perspective from across the globe.

things kicking off in asian stocks in india. indian markets are flat, so there's not too much activity, but it's a hot topic in india, primarily for two reasons. a beleaguered airline, the reason this is happening is when you look at inter-global buytion, they all want to as much of the stock is a company can give them, which brings people to believe that they be qatar is interested in what will take place, that got the stock excited. on the other hand, one airline that is grounded right now, the stock has seen a sharp up -- uptick, with two bids coming in

for its revival. all those people are hoping there will be some action. aviation is formally in focus in india. nejra: thank you so much. i saw headline today that junk bonds are pricing like treasuries back in 2000. what caught your eye? >> you read my mind, because that's zaki what caught my eye. if we travel back to 2000 and i would tell you that em jump once had the same yield as your treasuries, you have told me i was crazy, but that's exactly the bizarre world we are living in. the yield about 5.8% now which is what treasuries, 10 year yield yielded into thousand. it shows you the search for yield that's going on right now. deutsche bank asset management said they are shifting into corporate bonds in the developing world away from

sovereign bonds because their badly.rs want yield set nejra: thank you so much for all the market action. let's get the first word news with annabelle droulers in hong kong. >> in russia, president vladimir putin replaced his long serving prime minister. he's also mention sweeping change to the country's constitution. currentlyspeculation, his presidential term ends in 2024, but he could take on another post and show his continued influence. in the u.s., the house has sent two articles of impeachment to the senate. is the first step to begin president trump's trial. it is all but certain to end in acquittal. a super majority would be needed to impeach the president kirchner just is john roberts will preside over the trial with the senate as jury. the trial begins next tuesday. in germany, angela merkel reach

a deal to begin phasing out coal. they set out a timeline for shutting down coal-fired power generation by 2038. as part of the deal with germany's coproducing state, the government will provide 40 billion euros for regional infrastructure. havee philippines, police vacated towns and cities near the erupting volcano. the second highest level of alert -- alert is still in effect. died and tens of thousands forced to flee. the plan is warming faster than any time in human history, according to five major independent assessments of global temperature. 2019 was the second hottest year and 140 years of recorded data. the decade was also the hottest ever, setting a new record. goldman sachs has called off it's taken uber. the wall street lender owns

about 10 million shares of the ride-hailing giant at the time of the offering. .ber shares plunged goleman was restricted from selling shares until six months after the ipo. taiwan semiconductor posting a bigger than expected rise in profits. the robust results demonstrate how investing in new technology has safeguarded -- safeguarded the market lead. h -- xpo logistics considering a selloff of some units. which not determined businesses, considering an exit from the supply chain in europe. 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.

this is bloomberg. thank you very much for the roundup from hong kong. here's what you need to know for the trading day ahead. calling for sweeping constitutional changes. anne-marie is changing -- tracking the changing political landscape of russia. putting context for us. >> it's a big reshuffle, dramatic and unexpected move. a low profiled technocrat. a politicalen as power play. many are scratching their heads. he may take a new position as deputy chairman of the security council. that's a start of the personnel moves. we are waiting on other key ministries such as finance and we will focus on energy. ,art of the shakeup as well

also calling for sweeping constitutional changes. that has many speculating about a plan to potentially hold onto power beyond the end of his term in 2024. one saying the presidency will be downgraded and the state council might become more powerful. they seem to be potentially modeling the new russian model to potentially's keep a grip on power after he in's his term as president. tora: coming up, we speak the goldman sachs chief economist and we will talk about his 2020 outlook. and global growth led by the u.s.. don't miss that interview up next. this is bloomberg. ♪

nejra: this is bloomberg

"daybreak: europe." manus: i am manus cranny in dubai. if phase i is done, the deal is in the bag, it's been sign, president trump said the accord is righting the wrongs of the past. beijing has agreed to do more to cut down on the theft of intellectual property from america. steps inhas made will confront action with pirated goods which is a big problem for many people in the room. nejra: the chinese president said the deal was good for china , the u.s., and the whole world, but the big issues for china state run economy have been left for phase two. great to have you with us.

we now have the details of phase one and big question being raised over whether we will manage to move on to phase two. does phase i as it stands, is that enough to maintain relatively optimistic view of global growth in 2020? >> yes, that is our assumption that we will have phase one stay in place without renewed resulting in a substantial comprehensive agreement that goes much beyond phase one. so we think the two sides are probably still a little too far apart for a much more comprehensive deal, but the key for us is that the continued escalation of 2019 that progressively weighed on roles in the u.s. and china, probably to the tune of .5 percentage point in china by the end of the year, that's impact on

annualized, and assuming no renewed escalations, we think the number goes toward zero, effectively a subtraction of negative and it contributes to acceleration. manus: good morning to you. you say the outlook is more mixed than your sanguine view on central-bank policy and what it might suggest. from a global perspective, as phase i passes and we interface to, how do you think global ,entral-bank policy this year one analyst said qe around the world was a little bit like exactlyer united, not getting the bang for the buck. jan: phase one is what we have

built into our numbers, and on the back of that, other views on the economic outlook, we are basically inspecting very little from the defective -- developed market central banks, no moves from the ecb or the bank of japan or the federal reserve. ultimately, probably no moose from the bank of japan, given the weak dead and the dovish commentary. the most part we think 2020 is going to be pretty stable in terms of interest rates in central banks. nejra: when it comes to china, you say that in contrast to the eu and europe -- china is unlikely to see a meaningful acceleration in 2020. talk about the spill over to the rest of the region and the world. they are hugeure spillovers because they are not talking about large changes.

on an annual average basis, our expectation is that china goes from a little above 2019 to a little below 6% in 2020. sequentially, just look at the change from one quarter to the next, basically a sideways move. i don't think there are any major spillovers of this. what is notable is that many places in the emerging world think are getting somewhat weakr after a very 2018-2019. latin america is an example. india is an example of countries that should look a little better. china is an exception to that. i think that is noteworthy, but at the same time i would expect a negative result from it either. manus: from an inflation perspective, my last guest from macquarie said to me, the phase i one trade deal allows the nascent reflation we've seen on

the world to hold. the question to you is, 2020 be a year where we see more inflation around the world as we passed through some of these hurdles? i think relative to the latest numbers on core inflation , and the index at 1.6 at the moment, we will see some acceleration, partly because the index relative to some of the other indicators on core inflation or toward the bottom of the range. partly because the economy continues to make headway. the unemployment rate is at the lowest level in 50 years. it's probably going to come down a little more from 3.5% to 3.25%. some pick up an inflation, but that's it, the starting point is 40 basis points below the target

, so even if you were to move up to that target, it would itentially be desired so would not make them nervous and convince them they would have to tighten nejra: nejra: policy estimates. how much will the eurozone and germany and if it from? ? the signing of phase one we've had some data points in germany, factory points for example, that of because some concerns and cause people to question the manufacturing cycle. jan: it does seem that things are bottoming out in the german numbers and more broadly, the european numbers. some of the industrial indicators are looking a little bit better. some of the surveys have picked up quite a bit. not so much the current activity components of that but at least looking to some rebound. we would expect a pickup in sequential growth of maybe .5% or so if we look at all the

different indicators together in the your area. , if weegative in germany put some weight on the high-frequency indicator. we think it will probably rise to 1.25% in the your area. so things are getting better at it isrgins, but so far hapedinly not a v-s recovery, but certainly more u-shaped. it doesn't change our outlook, movet is a constructive that will help our outlook get stronger. manus: one of the things we touched on is momentum in the bond market back to zero. looking at inflation in europe,

where the highest level in more than eight months. this is perhaps one of the more underpriced risks in the inflation or the reflation story? we are not expecting a rapid increase in european inflation. i still think the economy is further away from full employment than other advanced economies, the u.s., u.k., japan. unemployment rates especially in the periphery are still relatively high. while wage growth has picked up, it continues to be softer than in the u.s. or the u.k.. over time, inflation will probably gradually move higher, but right now it's still close to 1%. i think that is probably going for inflationide as well. inflationhat breaking

still has room to rise in the west, we have been positive on that. there has been a rebound there and we think there is room to grow, for some of the reasons i outlined earlier talking about u.s. inflation. nejra: thank you so much for joining us this morning. coming up, tensions may soon rise again between the u.s. and the middle east. that's according to j.p. morgan in the morning call, next. this is bloomberg. ♪

manus: this is "daybreak: europe." i'm manus cranny in dubai. markets may be overly optimistic. here are the details in the

morning call. >> markets are over optimistic and under appreciating the possibility that tensions will bell up between the u.s. and iran. really nothing was resolved, if anything, with the potential for tensions to increase even further. you have iran stepping away from the nuclear commitment to the u.s., adding new sanctions. because of this, investors need to be hedging, and the crucial date they should be hedging into is the u.s. elections. the u.s. may step up its rhetoric against iran. he notes there's been a recent divergence between oil prices and energy stocks. he says it's all based on technicals and momentum, not due to fundamentals. bloomberg's dani burger, thanks so much. the u.s. and china have signed the face one -- phase one trade deal. great to have you with us.

we have the details of phase one and immediately we start to question how it's going to be enforced and whether we will actually be able to move on to phase two and there is still the risk of further escalation. is that the takeaway? enda: i think you are right. it does feel like the debate is already moving on. aredly speaking, people saying it is a positive in that it extends the trade truce and is going to be good for sentiment. of course if you're at the other , youf china's checkbook may not get a benefit in the near term. the questions are, how sustainable is the deal and how realistic are those shopping targets for u.s. goods? then again, the question is , do wethe enforcement see extra tariffs being imposed?

itve got the u.s. presidential election coming up, and beyond all that, you got phase two. the questions are about negotiations, even when they do begin, how realistic is that any progress will be made in the near term? economicget into the and economic and industrial ambitions. todaywatching and coming expect it will be time before progress is done. as one china watcher did say today, the best thing for investors to do now is sit back and enjoy the peace while it lasts. so thinking your glasses have full. -- your glass is half-full.

saying there's nothing middle --rency currency manipulation and enforceability. people -- there are those who say it's a sideshow. there are those who say the currency provision will at the least mean the yuan is broadly stable. plus or -2%, but broadly speaking, china will probably remain on best behavior , because it is in their interest now.

it's not as big a factor as some might think. nejra: great to have you with us. much positivity after a flat close in europe yesterday. this is bloomberg. ♪ here, it all starts with a simple...

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live from our european headquarters in the city of london. matt: today the market say nothing is going to stop us now. enthusiasm over trade one -- phase one of the trade deal. european futures point to a positive open. ♪ matt: