francine: sealing the deal. blackstone says the trade facts are chewed -- are a huge change. -- a major constitutional shakeup that allows the president -- the russian president to extend. the house of representatives sends articles of impeachment against trump to the upper chamber. the historic trial is set to begin on tuesday. welcome to "bloomberg surveillance." i am francine lacqua here. these are what your markets are

saying. we are getting headlines out of the iea. it depends on what is happening in the middle east given what has happened in iran and the last 15 days. the international energy agency saying the oil supply is a vulnerable as middle east tensions flare up. ieas always good to see the thinking. you can see the brent. stocks are gaining 0.4%. we are -- we have to see and i will show you later that we have a tight range when it comes to treasuries and dollar pound. significant one because there is more bets that the bank of england will cut rates in january -- i believe january 30. coming up, we hear from the chief executive of allianz. something you do not want to miss.

that is coming up a little bit later. let's get to first word news. viviana: we begin here in the u.s., the house of representatives sending two articles of impeachment. it is the first step to begin donald trump's trial almost certain to end in acquittal. chief justice john roberts of the u.s. supreme court will preside over the trial. the senate serves as the jury. the trial will begin next tuesday. over to russia, that is where vladimir putin replaced his long serving prime minister. he is calling for sweeping changes to the country's constitution. he is looking to extend his grip on power. francine: sealing the deal, the his presidential term ends in u.s. and china sign the phase i agreement. blackstone's steve schwarzman 2024 but he could take on says the trade pact is a huge another post to ensure his change. continued influence. shock overhaul -- vladimir putin convinced manager is

the city of hong kong is headed unexpectedly replaces his long for a crisis at >> you are going serving prime minister in a to see a full on banking crisis major constitutional shakeup that could allow the russian in hong kong. president to extend his 20-year rule. and now to the senate -- the house of representatives sends articles of impeachment against you have an economy in a stage president trump to the upper of freefall. chamber. the historic trial is set to begin on tuesday. viviana: his warning doesn't seem to be convincing markets. good morning, good afternoon, good evening, depending on where you are in the world. this is "bloomberg months of unrest as the city's market has shown little sign of surveillance." i'm francine lacqua in london. an impending banking collapse. let's check in on european stock the philippines, police are vacating -- the intensity weaker movers with annmarie hordern. today but the second highest annmarie: a lot of trading level is in effect. updates, a big move on individual names per hello fresh up 7%. eruption is possible within hours or days. beating highest analyst 10 people have died and tens of thousands have been forced to estimates, giving a boost to the german food service company. flee. the planet is warming faster outlookupdates, the than any time in human history according to five independent remains pretty much the same, but they did say there is better assessments of the global cash generation for the better temperature. -- for the second half of the decade also is the hottest year. pearson plunging, down 10%. it has everything to do about ever.

their u.s. higher education. the coursework, a dropping of global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in demand there. over 120 countries. we are seeing pretty big moves on them, francine. an viviana hurtado. this is bloomberg. francine: let's get to first word news in new york city with francine: the phase i deal has been signed. trump said he is writing the viviana hurtado. viviana: many of the big issues wrong of the past. in the relationship between the u.s. and china remain after the beijing is doing more to crackdown on theft and avoid per limiter stage of the parade -- of the trade deal was signed yesterday. currency many ablation. >> -- regarding the protection it outlines a 200 billion dollars spending spree to close of american ideas, trade the trade imbalance. secrets, patents and trademarks. blackstone's steve schwarzman says the deal is significant. china plans firm action to steve: what is important as a confront counterfeit goods which business person is to know that is a big problem for many people there is positive momentum. in the room. there are countries that realize even though they may be rivals francine: steve schwarzman said the u.s.-china trade agreement in certain areas, that in the commercial area, as much shows positive change. i think phase ii will cover a cooperation on as fair a basis number of other things. as you can do is better than which are important, you know, countries just sort of breaking

apart. viviana: now to hong kong. things that have not been resolved. hedge fund manager kyle bass is there are some issues regarding convinced the city is headed for a financial crisis. cyber and nontariff trade kyle: you are going to see a full-scale banking crisis in restrictions. hong kong because you have such francine: joining us now, enda a tightly wound economy in a stage of freefall from an curran. economic perspective. viviana: is thinking does not overall the million dollar question is time to figure out seem to be convincing the markets after unrest. what kind of capitalist country china will become in five to 10 years. markets are showing little signs it is the phase i deal give us of an impending banking -- does the phase i deal give us collapse. the planet warming faster than any insight into that? >> in many ways the at any time in human history, according to five major independent studies of global mark of deglobalization is a temperature. managed trade agreement. 2019 was the second hottest year in 20 or the decade was the that is one of the terms unionsed by the european hottest ever. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than -- european -- it is a good 2700 journalists and analysts in i amthan 120 countries, thing for sentiment and good to see a pause in the escalation of viviana hurtado. this is bloomberg. francine: thank you so much, two. hostility between the

viviana. from the eu point of view and earlier this week, asset managers say that they would brazil, those countries are now the blackrock chief watching to see how china ratchets up his huge shopping executive, larry fink, says it will make decisions with bill of agricultural goods. environmental sustainability as a core goal. how does this effect energy at the expense of other markets. companies and the push to goal in terms of the core, real top -- to go green? i guess joins us now. notormer, those are unigestion isom necessarily in this current batch. here as well. first of all come if you look at a net zero for target in francine: what do we see next? missions, how are they shaping what is a phase ii deal. the gas industry strategy? -- phase ii deal? >> the gas industry is part of the molecule piece of the pie. question. the big electricity will continue to increase penetration. first of all, people will want to see how this current targets are very high. agreement how he gets up and 50% of the energy mix in 2050 is running. molecules. the goal for the gas sector is how it is enforced.

does the u.s. make a judgment? to become greener. we can do that with bio methane, we can do that with ccs, blue hydrogen, so taking co2 out of in that case, there will be no methane and having it run in existing pipelines but without telling when it comes to phase ii agreement. co2 come and having green hydrogen, which is what we are be itf it goes smoothly, optimistic about, which is to produce molecules from sun or wind energy. this can really come down and after the election, i don't cost very significantly, and it think anyone expects a near-term has come down and costs very breakthrough there. significant. francine: you have given us three alternatives. how fast will the transition be? is it something that we will take on? marco: if we have gas prices further on national champions around six dollars, bloomberg and of course their own ambitions to develop china into a leading high-tech technology came out yesterday with a big study saying we could get hydrogen made from renewable driven economy at all those sources at a competitive cost by issues, all of those matters 2050. we think it will start replacing pose redlines. gas before that. it will be much more tougher for the u.s. and china to reach a we think co2 pricing will help accelerate that, and there is deal. really no need for new francine: thank you so much. technology. the cost of solar has come down

frick. us now, fiona significantly, so to make hydrogen with solar, you need to this is largely priced in. split the water and separate the deal. expecting a trade from thethe oxygen hydrogen. does it change trade dynamics? we are seeing costs of electrolyzers coming down. does it change what we are so we have a fuel that behaves seeing in the markets? exactly like gas but it is made from the sun or the wind. fiona: the market value in q4 francine: so what are you doing last year when we saw the with hydrogen? marco: we have been among the possibility of a trade one. first in the world to blend hydrogen with methane, up to in the market, everything has 10%, in the existing gas grid, been priced. the question is, there could be to prove it can be done. adding no extra cost to uncertainty around the steel. -- around this deal. the consumer, no change in behavior, no batteries, no markets are driven by backup, simply adding renewable energy to the existing gas mix. sentiment. francine: a lot of the focus, some could be priced quite negatively. asset managers were talking and not doing as much, they were what kind of bad news could bei don't know if the prie doing, the blackrock chief executive saying this is a to do with central banks. policy and we are unclear if it capacityeate

even if the trump administration goes back to colleagues, would investments. how is this changing markets that be taken badly by the overall? push is think the markets? fiona: we don't see a big curve. coming from everywhere. deceleration and we see climate change less dramatic, i think as an asset manager we have two things we stabilization -- we see can do. destabilization. we can be active and overweight energyes that are making we see a macro environment, we cleaner or making underweight or cutting completely companies are still positive. that are not. with see central banks -- we -- for the passive managers, think central banks will be neutral. blackrock is mainly a passive what we see is the markets a manager. very extensive. they have good engagement. dispersion between they own part of these companies and ensuring that they vote sectors, between countries, properly, they can ensure that these companies are making the between asset classes. transition, like we heard a few minutes ago, to go to more green energy. it will take time. francine: when you say markets partnergy sector should be are very extensive, are we creating bubbles? of the solution rather than take them out of the portfolio.

or at some point do we need a correction? fiona: i don't think we are in a bubble. francine: marco, how although the u.s. market is market -- the european quickly can -- can you buy shares in a gas company when you are looking at net zero is trading in a 78 percentile. transmissions. there is going to be the the growth is still there. next transition, to get out of there is no reason why they oil and into gas. should be a big correction. gas is right now almost half the price of diesel, so there will be a big switch to natural gas year andh we had last the equity markets was mainly ships, trucks, even cars. due to the extension and not we have more than one million because of earnings. cars running on natural gas. every time you switch from coal , marketske history to gas or diesel to gas, you are essentially cutting in half the co2 and essentially eliminating the smog, which is a completely separate issue. but very important mainly for markets grew 11%. cities. that is a phase one. as we do that phase, we can ramp up production of these electrolyzers, and then you will you can see the central bank have green gases that are grew 5%. competitive at a cost point. the transition will happen well

diminish bank will about the need for big next year and go back to average growth and equity. subsidies. francine: definitely a bit about m&a. so you have been active in connectors -- enter francine: fiona, thank you so much. she stays with us. what else you should be looking is one of the things that you're at for today. looking at. are they paying off? : the problem with m&a is turkey has delivered two interest rate cuts. another reduction is on the cards. we have that decision at 11:00 a.m. london time. there is so much liquidity out there in the market that you see even private equity groups 1:00 p.m. london lowering the return thresholds, time, the south africa reserve bank is expected to cut interest becoming more competitive. this is the first time it has happened in the last 20 or 30 rates. we have a pretty busy day when years. so you have already -- you have it comes to eco-news. always had passive money, pension fund money think cheap a full round up of what you need compared to corporate spirit -- to watch out for next. this is bloomberg. ♪ compared to corporate's. be competitive for existing assets. i do not believe in paying premiums in our sector at least. what i think is promising is the

energy transition and going into organic projects. we are building $7 billion project at the moment. they are sizable. francine: what is gas demand looking like? marco: gas demand has grown 12% in the last three years. why? there has been some industrial recovery, which is positive for the economy. more importantly, there has been a big coal-to-gas switch. if you added co2 already in 2018 and the second half and 2019 most of the year, gas was cheaper than coal, which is very important. seems the political situation is stabilized. we still worry about regulation and a second, but for general investors, is it a good time to fiona: in italy? fiona: it is a

good question. one of the biggest problems that makes the european become more , it is not the same -- i would say there are some very good companies. francine: what does regulation look like? marco: i think regular is investment geared. what is positive is, as a sector and a country, we need a lot more investments. i think the upside potential is very significant. there is more than 100 billion euros of investments that are necessary, that have essentially been approved politically that are waiting for the red tape to get moving along. $100 billion of investments orld generate $200 billion 300 billion dollars of gdp, so there is significant upside through investments on the economy, and investments are geared to facilitating those

investments, mainly the market structure. francine: marco alvera, thank >> we are expecting very little you very much. from the developed markets central banks, no moves from the coming up, we hear from the federal reserve. , one of hisive no moves from the ecb. no moves from moves from the first interviews of the year. do not miss that interview. bank of england, although there that is coming up shortly, and is more of a question around this is bloomberg. ♪ that in the near term given the weak data. we think 2020 is going to be pretty stable in terms of interest rates and central-bank policies. francine: that was the chief economist talking about develop markets. let's go to the bloomberg business flash. viviana: as -- the german government is paying are to be as angela merkel begins phasing out the fossil fuel. rwe is europe's biggest carbon dioxide emitter.

they want to be carbon neutral by 2040. iag.arking complaints from the carrier feeds on passengers. europeanth the competition regulators saying thetax is unfair if government says all airlines will see changes. expected bigger than rise in profits after customers from apple to huawei adopted more advanced chips in their smartphones. the results demonstrating how they are investing in new technology. they are ahead of the emergence of 5g. that is your bloomberg business flash. francine: u.s. bank earnings season is in full swing and while fixed income trading is a bright spot, goldman shares dropped.

trading that's where the star of wall street. they have posted a 56% increase in trading the best in eight years. investors want to trade in this environment. however, the big gains we saw in jp morgan set a high bar that didn't keep up with bank of america and goldman but they did post increases. equities was a bit weaker. even with those solid results, the little disappointment was enough to send the shares lower. francine: this is "bloomberg costs for the big -- posting a surveillance." let's bring in $1.1 billion litigation charge. our exclusive interview, the a lot of that has to do with the settlement of the scandal. chief executive -- the chief for bank of america, it was all about net interest. executive of allianz. they were under a lot of pressure showing how much bank actually, china, and i wish

of america is tied to the u.s. the u.s. was the same, has interest rate, something that executive said they do not committed to multilateralism, so perceive getting any better. most of the thing that the now we just wait for morgan chinese governments do, they say stanley later to see if they can it is not part of the wto rules, keep up with a big surge in fixed income trading. it applies to everybody. my assumption is that they stay francine: dani burger with the true to the promise that latest news on some of these whatever they do they do in a bank earnings. still with us, fiona frick. multilateral way. so i'm optimistic. how risky is it to be involved >> in terms of deals, you may 2 in some of these banks given last -- you made two deals that even if they have very good salts, it seems that the market takes a lot to impress year, one in brazil and one in the united states. shareholders? casho you think the excess fiona: banks are really linked -- with excess cash in the balance sheet, white has been so to the economy and the performance of the markets. difficult to find appropriate targets? first of all, if you're saying the markets -- there will be oliver: some people are saying less growth in the market than we have overvalued assets almost everywhere. perhaps banks are less positives when an investor comes to us and says we have this beautiful .- positive insurance companies, can you buy it, it is relatively cheap -- the result we saw from j.p. relatively cheap means relative morgan. two goldman sachs will show

to other lists of companies. that. they had to invest a lot of the that does not mean it is technology. there's a lot of business that inexpensive compared to its cash has to happen. flow power. it is a sector where you will we have looked at many have a strong -- opportunities, very few have really made it in terms of financial returns relative to francine: coming up, shakeup in the risk involved. we will remain very disciplined moscow. putin names a new prime minister. to deploy the capital of our we get all the way to russia investors even going forward. >> which regions are you looking next. this is bloomberg. ♪ at for dealmaking? presumably there are regions where it is more attractive. oliver: we look at partnership deals. what is coming to the sections that you have mentioned is that we have established relationships to these partners over many years, built trust, and we have participated in transactions where we can really balance the interest of the buyer and the seller in a good way that allows us not to overpay and actually fairly share the synergies out of these

transactions. that is very rare these days. >> are you still looking at bbva, the unit in spain? oliver: we never make any comments about specific transactions, i do apologize. >> no problem. should we expect a pickup in deals by allianz in 2020? active we have a very m&a department. it will depend on the specificity of the opportunity. it has to make sense for both sides, and again, given where asset valuations are, we would rather be cautious. buying high and selling low should not be part of my strategy program. francine: that was oliver baete, chief executive of allianz, speaking to bloomberg. fiona, you at 2020, hinted to the fact that valuations were a little bit

frothy so we will see corrections here and there. where do you think we will see corrections, and what would be the catalyst? is it idiosyncratic, something in emerging markets, china, or the central bank in action? fiona: we see the market environment, we do not see a risk of recession. see something that brings us to the level of recession. we see that central bank will remain calm in that environment, all the growth that happened last year, the fuel will be more about earnings price of companies and showing that the growth can translate in turning growth, which will be important this year. i think the catalyst for the equity market this year will be making sure we remain in -- not

going into a recession. earnings from companies to show that there is growth because last year the performance was mainly due to an extension. francine: what is the one thing you're worried about? i don't know if it is inflation in the u.s., a complete gang changer -- game changer. is it the dollar in the u.s.? fiona: we are still positive on the market, so we are not really worried. the development of the market in the last decade has been much to thehan -- asset class central bank, i think this will start to disappear because the central bank does not have so much that they can do anymore. the opportunity will come back, which is good news because that is how it should be. so therefore we could have some 5%, 10% correction in a few days because there is a supplement that is very bullish now, and there is no really price of bad

news. francine: this is bloomberg surveillance. francine: we are priced to could vladimir putin possible perfection at the moment. but what are the chances of this power continue past 2024? happening in the middle of a downturn? it calls for a sweeping when does the next recession come? constitutional change. nota: at the moment we do putin's do to step down in four see recession. we think the market will be more years but the shakeup could see driven by market sentiment, him take on another post to political threads, things that ensure his influence. will have an influence on let's go to our government behavioral investors rather than editor. the macroeconomy environment at how much of a political the moment. because valuations are high, because the environment is earthquake was that? >> it was completely unexpected. stabilizing, it will be a lot of sentiment of investors and how putin was given his annual address and there was no sign of they react to news when they these changes. come out. at the end of the speech he thought to outline the you see theere do constitutional changes she said best values? are you bullish on your, on were very important. europe engine -- on euros? it was only after that the bombshell news arrived. be more optimism the departure of the prime than we have had in a while. minister so it has been very fiona: the growth in the u.s. rapid and very swift.

they knew incoming prime was stronger than other markets. i think that could be a sort of minister has one support from .he ruling party reversal there. you could see european market starting to perform better, you could see emerging markets >> how are markets reacting? becoming better. are they concerned? the trade deal obviously will make things a bit easier for china. so i think in relative terms, reactedr they have the markets are less expensive remarkably calmly. than the u.s., which we believe the ruble dipped a little bit yesterday but now it is going to it is interesting. quickly recover. between equity and credit, we prefer equity. generally credit is more today's stock markets are very sensitive to downturns on the similar, largely unchanged. first wave than equity. we are not positive on yields. we are waiting to see with the -- he is quite well-regarded. he was a technocrat. given the -- given that mr. they would not necessarily play their role of protection if something happened to the macroeconomy, so we need to find diversification. medvedev was pretty unpopular with russia, people are waiting be -- carry to see which direction the government goes. strategies, where your long on yields and short on other ones francine: the prime minister had

your is an indication of a pretty low profile in federal tax service. how much power to the prime portfolio, and being more the risk in the minister's have? market materializes. -- do the prime minister's have? profiting from moments when >> a distant second to putin himself. there could be potential for him there is overpricing and underpricing. to make his mark if he manages to succeed in turning the russian economy around. francine: fiona frick, thank you so much. it has had a lackluster share price up 100% performance in recent years. the russians themselves are pretty unhappy with the in three months. government and they want to see analysts cannot keep up. signs that there quality of that story next. this is bloomberg. ♪ living is going to go up. putin hadn't been spending money set aside for big national projects. it should give a boost to the economy and as a result, -- improve. there's a lot for him to do.

i think putin wants to government to get on with the job of improving economic performance. francine: do we have any inside to president putin? he have to many differences? there is not really any sign that he fell out with putin. medvedev has been a loyal and long serving politician on his team. it seems it is much more geared toward his longer term play. putin always said he wouldn't change the constitution to allow him to stay on but then the question is, what happens then maintainsr putin control by other means. bodies tollow other have more power. it would rain in putin's successor as president.

it can carry on running the country effectively while somebody else's president. that certainly is the way it looks right now. francine: tony, thank you so much. the political earthquake over in moscow. coming up we speak to the chief alvera.e, marco we will talk about the currency and news ween should be focusing on. that is coming up shortly and this is bloomberg. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance." are street analysts struggling to keep price targets in line with the latest surge. here with the details, dani

burger. dani: a huge day for tesla in the past 10 days, gaining more than 23%. a lot of this is positively over andits, progress in china, these prices have taken off so quickly that it has been very difficult for analysts to keep up with those prices. , teslasee in the white price really surging. you look at the blue, the 12 ,onth price target for analysts only three of 30 firms that were waiting the company had any of $600ose to the level and beyond. there are still 13 firms that have a sell rating on tesla. another way to look at this is the short interest. the short interest percent of float is in the blue. it has declined, but it is still at about 18 percent shares

outstanding the average on the s&p 500 is 2%, so the decline, but still very high. the yellow is the nominal value, so about $14 million of tesla is currently being shorted. that has gained as prices have gained, but still a lot of money on the table shorting tesla. francine: dani burger with the latest on tesla. "bloomberg surveillance" continues in the next hour. tom keene joins me in new york. and then we will speak with jeff currie, on a day where we have headlines. this is bloomberg. ♪

francine: sealing the deal, the u.s. and china sign the phase i agreement.

blackstone's steve schwarzman says the trade pact is a huge change. shock overhaul -- vladimir putin unexpectedly places his long serving prime minister in a major constitutional shakeup that could allow the russian president to extend his 20-year rule. and now to the senate -- the house of representatives sends articles of impeachment against president trump to the upper chamber. the historic trial is set to begin on tuesday. goodmorning, afternoon, everyone. we look at the markets and i think we need to look at boe because of what the markets are pricing in terms of an interest rate cut. i know we talked about at the last couple of days and we look at the u.s. china trade deal and what that means for the market. tom: the news flow extraordinary, and underneath that, the equity market in america. what i am really watching is that grind out in yields. the interview yesterday of robert kaplan was really interesting on the regime ship -- the regime shift we are

seeing right now back down to lower rates. francine: i have a good spread between the two year. that's get to first word news in new york city with viviana hurtado. viviana: hours from now, u.s. house impeachment managers return to the senate floor, where they will read out loud the articles of impeachment against donald trump. afterwards, the u.s. supreme court justice, chief justice john roberts, will be sworn in to preside over the trial. the full trial begins next tuesday. the agreement between the u.s. and china bring in clarity. the markets rocked by the trade war. credit card stocks were among the big gainers paid company like visa and mastercard moving closer to gaining assets to the chinese payments market. commodity market got some numbers on china's commitment to buy foreign products. but some doubt remains. the leader of hong kong says the city's one country, two systems framework could last until the 24/7 -- until the 2047 deadline.

carrie lam said hong kong enjoys freedom that is unheard of in mainland china. sincevernment protests june have battered the city. many see beijing trying to tighten control. in russia, authorities are moving quickly to make vladimir putin's vision a reality. he made changes in the cabinet one day after he shook up the government and asked for a constitutional overhaul. that could allow him to stay in power after his term of office ends in 2024. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, viviana hurtado. this is bloomberg. datalet's look at the right now. with the market absolutely extraordinary, really fascinating here, moving on the edge of february. futures up eight, and they continue to drive higher. 64, 29,093.up

the vix coming in, getting back to a bull market tone area there is a close on the dow yesterday, and this is really important. handle,w i have a 1.55 on the two-year yield that is a grinding lower yield. francine? francine: i am looking at my data check. it is close to yours, so i wanted to look at treasury, which you just talked about. i will have a look at ruble in the next hour as wewhen you loon markets, they are trying to figure out what comes next. would look at pound as we have ratesore bets, from, that the t january 30. tom: let me go to the chart right now.

francine was talking about spreads earlier. the difference in yield between two important yields, many different spreads. yield. just the two-year the chart is beautiful and it shows the great higher yield move here, the presidential election right here, up we go with higher yields. here is the great rollover from a year ago and how consolidated we are here. you wonder, francine, which way this sector breaks. that is a great mystery for 2020, at least early 2020. francine: it certainly is a great mystery. a number of banks have said that there is an area of strength to look at with the 10 year yield. this is my chart. see thees, you can december peak, but you can see at the start of the year the curve has been tightening again. the u.s. and china signing a phase one deal, leering one hurdle, but it looks like that is the end of the beginning. president trump says he is

turning his attention to the next phase. and with all the issues that will have to be addressed. our guests join us. thank you both for joining us. in your world, so much has been going on over the last six days. --o not even know how we can sustaining this kind of momentum. what indication do you get from the trump administration that they will not go back on the phase one deal? >> that is the great uncertainty. and a lot of the really hard stuff has been left off this deal, and there is a lot that needs to come. there is no sense of when phase two talks will start, how much they will bleed into the u.s. election. it is even doubtful how they will execute the first deal. the $200 billion after that china is going to buy, half of that in commodities. that means u.s. exports of goods

and services need to go up 56% just to make that. noiseis so much political in all of this. xi jinping sent a letter to donald trump saying we need to have mutual trust and cooperation. do they really trust each other, or have they just reached a deal that suits them at this point in time? francine: do we know what kind of relationship president trump wants to have with china in an election year? >> it is a valid question. donald trump really needs to be able to go at his motives and say i have a win for you. i have things that will help american jobs, help american farmers and others, factoring other sectors and bring money into the states. we will get china to buy a lot of stocks including soybeans. if we can keep that to november, that is probably the most they want from this. if it suits him better to be taking a more antagonistic

stance againstand more broadly,e short-term, the long-term tensions are not going to dissipate. essay from aant gas that has been on the show many times, folks, an expert on china. he said there are benefits here for the president, and long-term china, win, win, win. 2022 orthe value in 2032 -- what are the legs of this thing? unknown: that is the question. for china, it does have some benefits, and those will continue in the longer term. xi jinping, as the leader of the communist party in china, is in tune with the state of his economy because the state of the economy is key to the durability of the communist party in china, and the extended rule of that party because the thing they fear the most is the protracted

social unrest that gets out of control, and suddenly you have challenges to their administration. so for him, having something that he feels will keep the economy on an even keel is important. but in the longer term, these idea ofomic giants, the coming at each other is sort of a false dawn because they are on a collision course in some ways about certain things. marketniel, is the trading off it signing? >> we have already anticipated this, the market has priced it in and it will be looking into what is next to push the market higher. what we will be doing now is pushing -- transitioning to the earnings season. earnings do matter for the equity market. it is something we have not had for a year. earnings growth in the last year was zero, and you cannot really

sustain 20%, 30 percent market appreciation with that profile. the market is looking for 10% earnings growth for next year, 2019, 2020. we are going to start seeing any indication of whether that is a realistic expectation. if it is disappointed, that is where you see the risk to the market. francine: i love that we talked about janet jackson eight minutes into the show. when you look at what the market expects the phase do deal, are they just ignoring it for now? -- a phase two deal, are they just ignoring it for now? is quite think it amorphous. do not forget, these are issues that are concerns that are shared by the europeans, by the japanese, by the australians. at the same time, not many people expect that china will fundamentally change the way it operates its economy. so it will be a grind, maybe marginal improvement, but no fundamental shift. francine: when you talk about

trust, what kind of trust does china want to see from president trump, that he doesn't turn around and suddenly call them a currency manipulator again. is it something on tariffs? rosalind: it is probably a little bit of both. if you see donald trump revert any of this, or change his rhetoric over the next year or so, you will see in china's eyes, that would be quite terrible. they want continuity through the end of this year, and they probably will want to see some type of secondary discussion start before too long. that said, those discussions bring risk because those things that were not contained in the first deal that china does not want touched, that includes the bar system -- it is really how far the u.s. wants to push it when the talks get underway. francine: i have to ask you about vladimir putin because we were talking about it yesterday right before his annual state of

the union. the change and prime ministers -- no one was expecting it. do we have insight into why this happened? rosalind: he tends to keep things very close to himself, but we should not see this as a sign of extreme discord or discontent in power in russia. everything vladimir putin does is part of a plan, and probably part of a plan through 2024. he does like to surprise people. even parliamentarians at the time had no idea this was coming. it does fit the idea that vladimir putin is thinking ahead about how he can chart a course where he will have some continued hold on power. that might be weakening the presidency, the premiership, putting power back in parliament. he could perhaps take on different roles. speaker of parliament could become a very influential role in the state council. it is about setting things up so he can continue to influence russia politics well after 20

24. rosalind: roslyn -- francine: rosalind mathieson turning us, and daniel morris stays with us. coming up later today, we will talk with the former australian prime minister, and the current asia policy institute president. you can catch that conversation with david westin at 12:30 p.m. in new york, 5:30 p.m. in london, and this is bloomberg. ♪

tom: "bloomberg surveillance." it is time to take a direct look at germany, and perjury are lead to behavioral and cultural foundation of german investments

particular, behavioral and cultural foundations of german investments are the ceo of decca investments -- back in 1918, they are one of the great houses of germany on bond investments. we are thrilled that he could join us from goldman sachs, global strategy conference. thank you so much for being with us. is there any indication that the german people, german institutions, that they are going to become more equity coupon still aa coupon and it will always be bonds, bonds, bonds? this is exactly the question since years with regard to germany. as you know, we have no terrific equity culture in play in germany. you cannot compare this with the anglo-saxon and the u.s., but we are working on that. i am quite positive that now visibleard to the

change, demonstrable change with regard to the expectations on returns, in particular with regard to government bond returns, will help us to come closer to the kind of satisfying equity culture. tom: i know francine has a whole different tack on this. we are thrilled to have you one. --h that is the role of the many in america knew west lb, they know decca as well. are we going to see a consolidation of financial institutions in germany? is it going to be faster into this year and into next year? yes, i think the pressure in the industry is quite high. ofre is clearly a necessity consolidation. not so much has already taken place, but i am pretty convinced that over the next three to five a closingill see

within the industry, but not all across europe. it will be globally. francine: great to have you on "bloomberg surveillance." is 2020 the year when equities finally out perform the u.s.? stefan: that is a good question. as we all know, there was a visible outperformance of equities in europe. it is a pretty right question. that inuite convinced 2020 that kind of situation could emerge. what is the reason for that? we are now in a cycle of hope, reason, having brought the equity markets higher in the fourth quarter of when he 19, looking back to the fourth -- the first quarter of 2019, it was pretty stellar

market situation, rather driven by rebound and commendation with a visible shift in central bank policy. at the end of 2019, we buy into a so-called cycle of hope, so the markets are pricing out the trade war fears, pricing out the recession fears, pricing in more stabilization on the macroeconomic ground, and the markets are pricing in the kind of transmission process that an improved economy could help. the moreind of world, cyclical regions and the more cyclical sectors are more underpinned. this now back to your question, could be indeed the scenario more cyclical regions, japanese markets, but also europe and the eurozone markets, could be underpinned and ending up with a relative outperformance against the u.s. markets. francine: stefan, thank you so much. eitel. k

later today we will hear from jeff currie, local head of commodities. this is on the back of the iea. coming up, we go back to the markets with daniel morris. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." let's get your business flash. car sales in europe jumping to a record with tough new penalties

at the end of the are causing a buying frenzy. vehicles, andlion apple's main chipmaker is projecting quarterly sales that are well above analyst estimates. tsmc also posting fourth-quarter earnings better than expected. investing ins technology this will ensure it maintains its market lead over samsung and intel. this year's rollout over 5g phones is expected to lead to faster growth. that is the bloomberg business flash. francine: thank you so much. let's look at the boe chart. this is really one of the most extraordinary charts of 2020. tom: love it, love it. francine: we have seen this changing over the last couple of days and it is clear that there is something in the markets because of disappointing data in the u.k., because of what we heard from governor carney and a couple of other members, there

is the idea that there will be a cut come january 30 on the bank of england. that is the last interest rate cut -- they last interest rate decision that mark carney will care. let's go back to daniel morris. the pound has moved quite significantly on this. what if the market is wrong? daniel: i don't know how comforted you would be by that, because that would suggest given the weakness we have had in growth, not getting the support from the boe, i think you will decisions. negative you think if you look at the economy, it is warranted? daniel: absolutely. i don't know what more justification you could possibly want for a central bank to try to cut interest rates. the market in this case a bit belatedly has come around to the right view given the outlook you

have for inflation in the u.k. versus other parts of the world. tom: are we at a tipping point on this? we have been in a tight range, daniel morris, whether it is the united kingdom or another -- on grinding yields. does this keep ebbing along, or are we at a point where we figure out which way we are going to go? daniel: i guess neither, if i could say. fairly we will stay stable. the two-year and the 10 year last year, the u.s. was the slowdown in growth, but not in the sense that the u.s. had any risk going into a recession. this was a slowdown of growth that was entirely forecast by economists. if you remember at the end of 2018, growth was at 3.5% because of the tax cuts in the fiscal stimulus. but already then, forecasts for growth were at 2.2 percent, which is more or less exactly what it has done, but along with that you would have fallen bond yields. here, we expect both more or

less to stabilize around 2%, so that argues for stability in yield, and then the marginal driver of 10-year treasuries is going to be with china and what is happening in the middle east as opposed to growth expectations. tom: it is going to be fascinating, and we will follow bank of england through the coming days with that abrupt shift in expectations. daniel morris with us from bnp pnb parabolic asset management. the chief justice of the united of america of our supreme court will impanel 100 senators as jurors. this is bloomberg. ♪ good morning!

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making today's xfinity customer service simple, easy, awesome. i'll pass. ♪ "surveillance." the news flow is extraordinary. we want to pause and not go to bank earnings -- morgan stanley coming up later -- but digressed

to a business week article with phenomenal photographs of leon black. article.is, a major k on this team effort to bring forward a gentleman from long ago and far away. soireeo mike milken's and many do not even know where he came from. bonds,lls me it is except apollo is this amorphous thing nobody knows what it is. there are things they took into drexel that helped them in apollo but apollo is one of the largest firms in the world. it is a misnomer. tom: they are opportunistic. sonali: leon black was known for

doing deals and apollo is one of the largest credit managers in the world. , after the crisis with banks -- tom: you said some heritage to ge capital and what they did. who is their closest competitor now? sonali: blackstone is close. their credit arm is about 150. there is a wonder on how long it sold take apollo to catch up blackstone is the biggest competitor but in credit, apollo is better -- bigger. the story of sanford bernstein getting up on the table and screaming and running up and down the table at morgan's. everybody has a style all wrapped around high-energy, but what is his thing?

what do we associate with mr. black? sonali: apollo is the black -- bad boys of wall street. existhogany wall does not anywhere else on wall street except apollo on nine west he is known to have a rough around the edges personality, but is also a philosophy major. tom: he is a good guy as well. sonali: he did not mean to go into finance. tom: give us the recent transaction he has been ruthless on. i don't like this word "ruthless" on the cover. sonali: can i not talk about ruthless and talk about the financial magic of apollo? tom: what is the latest transaction. sonali: their insurance company, they have a huge stake which

provided them permanent capital and this has become one of the biggest trends on wall street. the insurance company invests their assets with apollo -- tom: it is legal? sonali: absolutely legal. insurance to still grandma's in omaha? sonali: there are questions of whether this can get bigger than the ig one day. people do not realize how much of an arm apollo has they are growing -- has. they are growing in europe as well. there insurance companies and their ability to pick up distressed assets from european banks that have been failing. tom: does he have a fearsome reputation? sonali: he does. his clients like him because he walks back from it very ugly. he is known -- very quickly.

he is known to be esoteric, hard to relate to, not hanging out with other private equity guys he is a dealmaker but harder to get to. with thisi basak story on leon black viviana: we begin with the impeachment against president donald trump. several house democrats will read out loud the articles of impeachment. robertscourt justice will preside over the trial. it is certain to end in the president's acquittal. what is next in the effort to change the economic relationship with china? that is after the u.s. and china signed phase one of the trade deal. are chinesees

government subsidies for business. those have been put off for phase two. china willeal means open the door to global investment banks earlier than expected did. goldman sachs and other firms are expect did you have fully owned units there in april. the trump administration is talking about another tax cut, but there is one big hurdle. republicans will have to recapture the house in november. larry kudlow says later in the summer, the tax plan will be released. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: thank you so much. let's get more on the market in 2020, on banks, and some of the pitfall valuations that we could be seeing.

as a state street senior multi-asset strategist, and daniel morris is still with us. there are a lot of banks that came out with earnings. a lot of them beat estimates. what do you do with european banks? how much do you wear negative rates will cut -- rush them? are thoughtful to have a large capital market ranch that has done well for them. -- branch that has done well for them. europe,ok across capital market branches, businesses are quite a lot smaller proportionate to european banks and it is somewhat bad european

corporate's, but still not as strong as the u.s. consumer. it is not much in terms of positive sentiment. francine: it feels like 2020 will be the year for europe in general on valuation. do you agree? , i came ongeneral this program a year and a half and talked about value. we still believe that strong fundamentals are more than underlying valuations in the world with low interest rates, lack of growth, and the quality and growth will persist. ofing said that, it is kind a level of change game for us. the u.s. by far is the strongest market, strongest fundamentals, --hest buybacks, high highest everything. should there be a change in the

global environment, adults of for europe is massive -- the delta for europe is massive. tom: you have one of the most optimistic notes i have seen that this will continue. you look like a genius in the last two weeks. everyone has been caught flat-footed, even relative optimists. trees to the sky, how close are we? marija: we are in the sky, no question about it. i have constant debate with my fixed income colleagues who tell me stocks are more expensive. that is coming from fixed income specialists and stocks are expensive, and that comes back to the point i made, value is stretched. why is it stretched? central banks are ready pricing interest rates and pushing

investors to take more risk. changed.als have not we are optimistic last year and we remain optimistic this year. tom: we are going to stagger to a different view with daniel morris of bnp paribas. with grace rebuff. daniel: the first thing, when you think about relative opportunity between the europe -- the u.s. and europe, you need to think about tech knowledge he broadly -- technology broadly and the rest of the market. the relative performance of the u.s. versus europe, the outperformance came from the tech sector. the rest of the market was in line with europe. up about 27% last year. percent.he u.s. was up

-- up 60%. you have higher multiples in the u.s. than europe, higher earnings -- it comes down to reasonable earnings growth in europe in these core sectors and more attractive valuations which give a better expected total return over the medium term. we are going to continue. dallasup, mr. kaplan of making some news yesterday, driving up the risk. are the central banks behind this? a good interview with michael mckee yesterday. this is bloomberg. ♪

♪ months where the consumer pulls back, saves more, does not spend, but the capacity to spend is solid. household balance sheets are in better shape than they have been in 10 years and the market is tight, so the consumer has the ability to spend and i think they will. tom: there are 12 federal reserve residents in the united states of america. presidents in the united states of america. they spread them out. at kaplan is on the board dallas. divet to die to this -- into this. there is a broad difference of opinion of fed residents of

managing -- presidents of managing -- is there evidence they can reflate? daniel: i guess it is how far you want to go. venezuelana or getting tips on inflation, it is hard to do without destroying the economy and from that point of view it seems extremely challenging. we do not want to forget the role of tech knology, -- technology, the disinflationary aspect and it is only growing. one reason the trade war has not hurt the u.s. economy that much is because the economy is becoming more services oriented, digitalization, and that is disinflationary from our view. here thehe solution same solution is 2008 and 2009,

extend the x-axis? there is all the cliches that came down the road, but a solution for the central banker is to move it out in time and get more evidence, right? daniel: the fear that everyone seems to have with these persistently low rates and low inflation, is europe and the u.s. going to become like japan? if that is the case, what does it mean? japanification is not such a bad thing. if you look at gdp per capita in japan, it has been in line with the u.s., better than the eurozone. the unemployment rate in japan is lower than the u.s., so the purpose of the economy is to give incidences of a job. japan has accomplished that. --s morbid fear of jebavy

japanification is overdone because there could be positive aspects. francine: if you were to see a correction, where would it start? daniel: look at high yield spreads in the u.s., they are neo-the lowest -- near the lowest they have been in the last 10 years. minimumsustify near for high yield spreads? probably not. very little scope. francine: do you agree? marija: i have to take the other side. saidiew is, dan kind of u.s. economy is fine. the u.s. consumer is strong. but it is very cheap, which means the credit to extend the x-axis.

it is not now, it is somewhere in the future. bankng as you have central policy, you have to take risk. inflation --t if what could be upsetting for the central banks? what if inflation in the u.s. does not behave like they think it well? marija: we need sustainably and we thinkion that is sometime in the future. francine: coming up, a shakeup in moscow. president putin names a new prime minister. this is bloomberg. ♪

♪ you are watching bloomberg "surveillance." the ceo of smith & wesson leaving the company. american outdoor brands says he engaged in nonfinancial misconduct and did not elaborate. american outdoors will split into two publicly traded

companies, one focusing on firearms and the other on outdoor products. more fallout from the boeing 737 max crisis. a disjointed structure relating to communications. the move affects boeing aviators who train commercial pilots. that is your bloomberg business flash. hascine: vladimir putin replaced his long serving prime minister and called for constitutional changes. putin is set to step down and another four years but a shakeup could see him and another powerful post. and isthis unexpected, this a little bit of a political earthquake? what do we know about the new prime minister? shock,t was very much a

even to the political elite and russia when he announced at the thatf his annual address he wanted to carry out constitutional changes. that was followed by the resignation of prime minister the replacement is known as a technocrat, a well-known reformer, and he is today due to start addressing legislators in the state. essentially, the ruling party has said they will back him. russian news agencies were reporting that he told legislators that he wants to focus on putin's national project, and infrastructure which putinject, of was very critical of medvedev and his government because he thought they were not moving

quick enough. the focus is kickstarting the economy, making russians feel better because they have forined in living standards the past five years. francine: what kind of prime minister does russia need? anthony: the focus seems to be on getting the economy moving. growth and living standards have been stagnant and there is discontent. the shift will be on improving economic growth, getting spending going on national project, and raising the average growth levels. -- keyade a keep requirement for the rest of his term. remaining to be seen whether he stays for the rest of his term. tom: you have been doing this since "the daily mail" 10 years

ago. this is absolutely unique. i spoke to marshall goldman in moscow the day mr. putin took over power. is he running an autocracy? is he running a dictatorship? anthony: he is certainly very much the kingmaker here and the king of the moment is him. viewed as awidely prelude to a circumstance in --ch he can and is required leave the presidency but continue in some form to run the country. i don't think anybody sees on the horizon a successor that

would have the levers of power that putin has now. tom: what would be the character of protest, if all of those people assembled at the state of the union, if x percent chose to protest, how would they effect that? anthony: there were street protests last year, very must focus on this -- much focused on this question of democracy and civil rights. candidates were not allowed to run in the moscow city council. there are parliamentary elections later this year which are much more important, so this question of responsive government will return to russian politics, and putin has to respond. there is not much sign at the moment that he is. here.ne: let's get back

does it change for investors in the country? marija: i would say no. what investors like about russia is stability. inhink the change constitution that is proposed is going to make it very stable. we can see putin running the country for the foreseeable future. that is what investors like at the moment. francine: thank you so much. tom and i continue with stephen stanley. this is bloomberg. ♪

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yields grind lower with purpose. se house democrats must fournce for senate -- senate republicans they need evidence. the -- foraring to the happy track. fink, a very woeful davos debate. this is bloomberg "surveillance." to get to davos as you and i get into preparation, mr. fink has changed the debate early on in the 2020 davos. francine: i think he has changed the debate. we need to see how that permeates through passive investment. in the last couple of seconds, turkey's central bank cut its

repo rate to 11.25%. if you look at all of the things we should be watching out for, idiosyncratic concerns out of emerging markets should be one of them. tom: what we are hearing on em is a raging debate. right now, a news up date -- update. viviana: managers returning to the senate floor hours from now when the house impeachment begins, and they will read out loud the articles of impeachment. supreme court justice john roberts will be sworn in to preside over the trial which begins on tuesday. the agreement between the u.s. and china bringing clarity to market. credit card stocks were the big assess --aining access to the chinese credit

market. the later of hong kong says the last untilework of after the 2025 deadline. carrie lam speaking to lawmakers. hong kong enjoys freedoms that are unheard of in mainland china and protests have battled -- battered the city. in russia, moving quickly to make vladimir position -- appointment a's reality. he asked for constitutional overhaul that could allow him to stay in power after his term ends in 2024. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. whatlet's get to the data,

an extraordinary market. we will dovetail that into economics. we drive ever higher after the market yesterday. there is a mystery. oil churning. the vix beginning to show the great bull market. closed abovedow 29,000. yield, it is remarkable. stephen stanley will be with us on the signals of the market. francine: turkey has slowed the pace of easing and seems to be joining the negative real rate club, lowering its benchmark to 11.25% from 12%. this is in the context of president erdogan calling for monetary policy to rev up the

economy. 5.18632.sh lira at we have to look at what is going bunds and the dollar is steady. onnd, what to watch out for the expectations that the boe will cut in january. tom: the news flow in washington is extraordinary. i want to go to the realities on the floor of the senate. kentucky wasll's 63% for trump, the biggest plurality for republicans since nixon in 1972. that is an obvious call for mr. mcconnell to support the president. in maine, secretary clinton took 48%. state-by-state, what will the

body language be on the floor? kevin: such a great point. i would add senator joe manchin. he is a centrist democrat from west virginia who is under pressure from his constituents to go with republicans. i am most interested to see which way he goes. you mentioned senator susan collins who has been pushing for witnesses. she told reporters that she feels the rules package lawmakers will vote on later today will include language that allows for there to be an up and down vote on whether to be witnesses. tom: this video for bloomberg radio, remarkable video of the house members walking over to the senate. commonsnot the house of trotting over to lourdes for a speech.

what was the body language in the rotunda and this absolutely unique moment? kevin: i am watching this play audience,or our radio the pomp and circumstance, i have been covering washington for eight years, it was even more ceremonial than a state of the union address. .here was a seriousness of it of pens thatzens nancy pelosi signed the impeachment. they will be giving some of those two top members of the house and republicans will pounce on that and criticize. just a pause, you see that ceremony take place yesterday and you think, here we are. republicans do not see any threat for removal from office. tom: speaker pelosi signing the

document like francine writes her opening script every morning. francine: we have a similar pen. does every senator have to be there during the process? democratict mean for senators trying to get the presidency? kevin: it will be a headache. if you are senator bernie sanders, he has ascended to the top of the pack in iowa, which is february 3. he has got to be there in the senate. senator elizabeth warren, amy klobuchar, they have got to be there. if you are joe biden or tom steyer, that is good news because you are able to hit the ground when other candidates are not able to. haveheaven forbid we would people in government running for office. hope you get one of those pens. thank you so much.

watching all of this, the very pomp and circumstance is stephen stanley. he has been absolutely brilliant on a resilient american economy. do you reaffirm this morning your call for a more resilient american economy versus the sub 2.0 growth? stephen: in the first half of the year, with the trade deal behind as you could see a pickup in investment, and the consumer continues to roll along. they should be good in the first half of the year. thehe year goes along, election starts to be a cloud. cloudse we relieving with people walking over to the senate, or the trade deal yesterday? does it help? stephen: the big issue with regard to trade was not the

tariffs but the uncertainty around the policy, on again, off again with tariffs and where are we headed next. businesses have a lot more clarity than last year and that has got to be a positive. francine: what do you wish you had more clarity on as we get into the thick of 2020? stephen: the next shoe to drop might be what the fed is going to do, not so much on rates because they will likely be on hold for a while. the fed will have to adjust its balance sheet policy and an increasing theme in the markets in january has been the positive effect the balance sheet has had on asset prices. the stock market continues to rise. fixed income has benefited quite a bit i don't think -- a bit. i don't think we are in for another taper tantrum but there is a question of what happens if

and when the fed starts to wind down the balance sheet expansion. francine: if priced to perfection, how can equities rise? stephen: the economy needs to do better. equities are certainly priced for a lot of good stuff to happen a lot of that is the black cloud of trade being lifted. it was amazing to me how gloomy market disciplines were in 2019 in 2019 thents were market performed ok. us, heephen stanley with is going to switch hats. chairman greenspan big on what the stock market. what does it -- signals. what does it signal to you? stephen: optimism with regard to the economy, and it reflects the

fact that monetary policy is easy. if i were a fed official, i would be concerned about that. tom: are you calling for a rate increase? stephen: now i think it is more about the balance sheet and the fed has to make a decision of how quick they want to take a decision -- expansion of the balance sheet. tom: january 29? stephen: there is some discussion and sick of they will not do any -- signal of they will not do anything until the next monthly, but we might see them taper down the pace of expansion. tom: stephen stanley knows the script as we speak about the fed and the economy, one of the optimists on wall street. coming up, this is really important. former australian prime minister working with the asian society institute, he is

with david westin in the 12:00 hour and i think they will talk about the fires of australia. this is bloomberg. ♪

♪ >> i think we have done what we had to do, but i am sensitive from here that we need to be finding ways to limit and temper the growth in the fed balance sheet. i am conscious all three of those actions are contributing to elevated risk asset valuations. there may be months when the consumer pulls back, saves more, does not spend, but the capacity of the consumer to spend is solid. balance sheets are in better

shape and the job market is very tight, so the consumer has the ability to spend and over time, i think they will. tom: mr. kaplan with his economics that harvard and focused on the process at the fed, stephen stanley of pierpont to focus on his comments. i want to go to the charles evans-robert kaplan debate that we have to manage our way now back to normality. is that feasible? is there any evidence a fed can manage us away from the fear of , theive rate, zero rates grinding rates we have seen in the last two weeks? stephen: that is a good question. what is interesting as we have had an economy that has performed fine. there have been downside risks

the fed responded to last year yet it still feels like the fed is on crisis voting. can the fed get off that crisis voting? -- footing? here we are talking about negative rates again. tom: negative in europe and the united kingdom, but at the chart upncine's great chart -- put speed to get to this chart, ripping up the script. the fear of being unstable in the united states, can that chart come over to the united states? stephen: look how quickly monetary policy flip last year. 2019 -- began 2019 and a tightening cycle and by the middle of the year were moving

in a different direction. francine: i find this chart stunning. the boe cut probability has shot up from 8% in december two some 65%. -- to some 65%. what if the markets are wrong? stephen: we will snap right back typically, -- back. typically markets are more volatile than the central bank so sometimes you get false moves. cloud has been the big hanging over the u.k. economy for many years, and itlike we fe resolution on that front with the election, and yet here we are talking about the boe easing again. twists and turns that are not always expected. francine: is there an amount of -- the markets are almost

forcing central banks to do things. i don't know whether the dynamic between market and interest rate cuts has become perverse. stephen: i think that is 100% the case in the u.s. last year. the fed was pushed into a corner by the financial market and the president and his jawboning. i thought it was incumbent on the fed to grasp back control of the narrative. they have done that to some extent, but it is interesting, which three eases in 2019 were explicitly taken to counteract the downside risks coming from trade uncertainty. most of that is gone and yet nobody is talking about reversing those what were labeled insurance cuts. you can argue the fed to back the narrative, but i am not so sure about that. francine: coming up, more ahead

from the global stocks -- goldman sachs global strategy convention. we will hear from jeff currie about renewables. this is bloomberg. ♪

♪ you are watching bloomberg "surveillance." car sales in europe last month jumped to a record. new emissions penalties at the

end of last year caused buying frenzy. up 1.2%. the year makers main chip projecting estimates better than expected. taiwan's company is investing intact to maintain its market -- market lead above samsung and intel. isis convinced hong kong headed for financial disaster, and the city will suffer from a full-fledged banking crisis. one measure of the financial stock is near an all-time high despite months of antigovernment protest. that is the bloomberg business flash.

francine: let's go back to the ecb and the hero optimism going into 2020. optimism going into 2020. there is a school of thought saying christine lagarde can convince countries to do more fiscal stimulus and others say she will struggle and is running out of tools. where do you stand? stephen: i would put myself in the latter camp. the ecb has done about all they can and the issues in europe are more structural. draghi spend his term trying to browbeat the government's to do what needs to be done, with some success. she is well-placed to have influence in that situation, but it is difficult. you are staying across the continent. france is a great example where

the government tries to implement reforms in the government is not having it -- the people are not having it. than policyolitical oriented questions that will have to be answered over the next two years. francine: next week, we are expecting christine lagarde to unveil the scope of the strategic review. would you like to see a wide review or would that be too confusing? stephen: one thing i saw mentioned yesterday is the possibility of having the vote publicly disclosed, which is something the ecb does not do but most central banks do. that would provide more accountability and give a better sense of what the thought of the committee was. the ecb was sharply divided last year with some of the moves that were taken at the end of noghi's tenure, but there is

way to know because no vote was taken. as we are seeing with the fed, they can talk about tweaking the operating strategy, but i just don't see big changes taking place. tom: stephen stanley with amherst pierpont. c -- onarah bellows -- , goldmangoldman sachs sachs is torn apart. morgan stanley a little later. this is bloomberg. ♪

♪ bloomberg "surveillance," things becoming official on the road to davos. i guess we knew it. francine: it will be interesting. we do not know what day she will

be there. we know the vice president of china will be there and the foreign minister. we know boris johnson is not coming, so it is always interesting three days before understand out to who is coming and who isn't. tom: when these people attend, it is always different, the body language on the entourage. speeches, the major chancellor merkel, maybe they make an appearance, but would you agree they are mostly going for face-to-face private meeting? francine: i think you are right, but if you look at two years ago, in that same week we had president xi, and this was a new president xi and a new china at that time in the world. in the space of three days, said

they wanted to be more open to the world and then president trump showing up at davos focusing on the u.s. borders. tom: i would go back to an exceptional space by mr. sarkozy 10 years ago that was just an extraordinary moment. here is viviana hurtado. viviana: impeachment proceedings against donald trump resume today on the senate floor. -- housenagers managers will read aloud the chief justice john roberts will preside over the trial which is almost certain to end in his acquittal. sign phased china beijing trade deal, committing to buy american products. the biggest question is

subsidies for american businesses and chinese hacking of american companies. china will open the door to global investment banks earlier than expected. goldman sachs and others will own units in april. the trump administration talking about another tax cut. one big hurdle, republicans will have to recapture the house in november. larry kudlow says later in the summer, his back land will be released. released.n will be global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: we cannot keep track of all the schedules. we have a team that does that. on the pomp and circumstance at the capital, 12:00 noon, the house managers

will attend the senate chamber and readout the articles of impeachment in full. justice roberts will arrive born in, and will's -- sworn in, and will swear in the senators. under the rules, the president is summoned and given a time to respond. i am uncertain what that will mean. right now, stephen stanley with us and we are thrilled to bring you david earl, code -- david earl. -- pearl. how do you hold it up? let's go to a general statement, bull market and the first two weeks of this year. david: it has been pretty good, but last year was characterized by good earnings growth and multiple expansion.

earnings were good, high single digits, but you don't get double-digit returns without valuation going up. that is the real question going forward, how much more valuation can you put on? history thatthe you see of the multiple expansion sustaining or giving itself up suddenly? david: it is a tie to the economic growth, so as long as growth is good you got speculation. the last few years, speculative growth stocks with no earnings have outperformed the market. this will reverse itself once we go into a slow down. 2018, the market was down a lot and speculative stocks were down twice as much. it is a quality year to hold onto your money, hold onto companies that earn real money

that can hold onto mid single digits or higher, and you are looking at a high single digit return. the average on the stock market is eight percent to 9% and if you get dividends of 4%, you are halfway there. the story of the year, do not hope for valuation. we had owned apple for over 10 years and for over 10 years it was at a discount in the market. everyone thought the next iphone would be a bust. apple was up 80% last year. revenues were down, earnings were down, and the stock was up. it is a growth stock even though the numbers do not show it. francine: what do you do with margins this year? people focus on

more when it comes to earnings? david: we think so, because if you can increase costs and control margins, you can control demand for your product. the companies that can do this will win. when we talk about financials, that has been a big part of the story for bank of america and morgan stanley that margins are going up, and it may be more of a return of capital story than a growth lori, but that is ok. you can get -- story, but that is ok. you can get double-digit returns. there will be a lot of areas where companies control costs, increase profit, and outperform. francine: what is in a bubble? david: some of the growthy tech stocks, some of the big ones are not as bad as you would think. google and facebook are not that expansion -- expensive, and

microsoft is priced correctly. it is the smaller names like netflix, everyone talks about tesla. it is hard to imagine how they will sell enough cars and make enough money to justify valuation. pearl onyou brief mr. the american economy? will it support this expansion? stephen: we will be fine this year. we are looking at decent enough growth. tom: what is your synthesis for that statement? what does it mean for rebalancing and reallocating portfolios? stephen: you want to be in economically sensitive areas that are driven by growth so when consumers are spending, you want consumer stocks. we are talking single digit growth, not double-digit growth. then there is the companies that pay you back. tom: how do you put a revenue on

sales? what is the price of sales dynamic? david: when you have a company with no earnings, people seek to put a huge valuation on sales, hoping that somewhere 10 years in the future they will make a lot of money. amazon has been in business 30 years and large swaths of the business do not make money at amazon. francine: thank you both, david and stephenl stanley stay with us. hogan,rsation with phil the e.u. trade administrator in the u.s. a lot of the focus will be on u.s.-china trade and brexit. this is bloomberg. ♪

♪ viviana: you are watching bloomberg "surveillance." the ceo of smith & wesson leaving the company. american outdoor brands says he engaged in nonfinancial misconduct and did not elaborate. they will proceed with their plan to split into two publicly traded companies. -- is nottop a getting help from the alumina performing --tal reporting a quarterly loss. global aluminum supply will outpace demand. its staffreorganizing

while the 737 max was being developed. the move affects boeing aviators who trained commercial pilots. that is the bloomberg business flash. francine: we are getting live pictures of russia. this is an important conversation. this is the pick that vladimir putin surprised the markets yesterday. -- markets yesterday trying to make a prime minister --. -- prime minister. he has reformed the tax system and he considered a bureaucrat with not much political desire, but one of the smartest people in the party.

we will have more headlines from vladimir putin saying constitutional changes will boost the political party, according to the national agency of russia. tom: i would recommend "the new york times" a brilliant essay. back to the market, stephen stanley with amherst pierpont and david pearl. how is business investment? stephen: as we were talking about, with the trade deal behind us, there is more certainty. probably a lot of activity was put on the shelf in advance of that, and now with the deal consummated you would expect some revival in the first half of the year. tom: nominal gdp feeds into revenue which will drift to free cash flow, what is the capex

view? stephen: it was somewhat contained last year because of the fear of a trade war. data centers were not being upgraded as quickly. companies were trying to make do , so discretionary that you could delay -- capex that you could delay is delayed. the semiconductor industry is generally a growth industry but is sick will -- cyclical. it had a trough year last year and stocks are coming back. there is a lot of growth in data , and companies are willing to spend where they weren't last year, in data centers. francine: our companies reinvesting enough, or is -- are companies investing enough or is that the biggest concern, that they are hoarding cash?

david: the economy needs more business investment, particularly at a time when the labor market is tight. you would expect businesses to invest a lot because they are trying to save on labor expense. that was somewhat interrupted in 2019 because of the trade deal and other issues, so hopefully we will get back on track this year. francine: where do you see that going? david: we are moving to a more capital light economy. we are adding more tech knology and automation, so when you get -- technology and automation, so when you get to fast food, you will not need as many people, and labor costs are going up as employment goes down. we will see investment. tom: scale is the buzz word.

scale comes to me from a lack of revenue. will we get enough revenue pop where scale drifts away, the urge to merge drifts away? david: schwab buying te deum air to, it makes a difference when you're pricing -- tdma are to, ameritrade. david: i think those guys are too bid to merge -- big to merge. scale clearly managers -- matters in the money management arm. you need scale because fees have been going down. tom: epic investment is legendary for cash flow analysis and what to do down the income statement with the zillions that come in. give us an active-passive

update. how do you battle against the passive juggernaut? david: you have to stick to your guns. we have a philosophy about companies sticking to cash. thes based on actual data, single best factor that has been in the market has been free cash flow and free cash flow valuation so that is what we look for. hashe past three years, it been a growth speculative rally, and looking at the market is how to beat the market. francine: what if you can't beat the markets? what if there is a significant downturn that makes it difficult? do you still catch a falling knife? david: active managers will look better in a downturn because of passive. you have a one decision trade, you get in or out, and sell

everything proportionately. the good go down as much as the bad, if not more in some cases. ugly, but018 it was active managers did better in that environment and even coming out of that environment. tom: are you taking notes? stephen: i got it all right here. tom: stephen stanley and david thou -- duet to do at dow 29,000. morgan stanley fourth-quarter results, they are different from goldman sachs, but what it interesting day -- what an interesting day yesterday. we have morgan stanley coming out in about 52 minutes. this is bloomberg. good morning. ♪

francine: this is bloomberg last 24lance." in the hours, a lot of news to do with

emerging markets. bank opted onal its smallest interest rate cut since embarking on an easing cycle. firing --terday, the certainly the prime minister of russia decided to step down with president putin appointing a new one. let's get to justin carrigan from dubai your thoughts on where turkey goes from here, it was not as much is expected. justin: there has been a minor relief rally in the lira today because of expectations going into this decision were fairly wide-ranging. the cut was right in line with the median, but some expected a larger move that would have been more in character as far as the

central bank is concerned. a little bit of relief. the cut will accelerate in turkey and we have this credit driven expansion, which some economists worried about and ultimately predict might end up with a similar situation that we saw last year and the year but or enter with these current -- in turkey with these currency crises. tom: this is a difficult -- francine: this is a difficult balance. we have had unprecedented easing and he has managed not to freak out the markets and to keep president erdogan on side. how long can he continue this balance? justin: that is the question, how long can you sell continue to cut given that he has

president erdogan looking over his shoulder ahead of every meeting. the fact that inflation is accelerating makes this task difficult. the problem is where the economy is going, they have to keep the growth sustained, and the outlook is very cloudy in turkey. francine: what can you tell us about russia? there are a couple of notes saying there is a lack of clarity amongst the government that has an impact on what the central bank does. justin: the key figure is the finance minister, and whether he stays in the government and if he does, whether he will have the same clout. he has been a conservative, steady as you go figure within the government who has been fairly tight as far as fiscal

policy is concerned. the risk, the uncertainty you talk about is if his influence declines, russia would go down a fiscal lax path that could see more spending, borrowing, and a rise in yields, and that would be bad for the bond market. not so bad for the ruble, as one would expect the central bank would probably hold off from the recent cycle of rate cuts it has enacted. francine: thank you so much for the insight. , morgan stanley fourth-quarter results are due within the next 30 minutes. we had j.p. morgan and bank of america yesterday and now it is the turn of morgan stanley to tell us where they see the u.s. economy going. this is what i am looking out

for morgan stanley, analysts expecting banking revenue to be under pressure despite projected gains in equity and debt underwriting. we have to look at equities and ficc trading. one look at pound, we have seen a repricing from the money expect the bank of england to cut interest rates. all of the oil market, because of what we heard from the iea earlier on. bonds are fluctuating. this is bloomberg. ♪ sometimes your small screen is your big screen.

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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. ♪ alix: a small, positive step. china's flagship newspaper warns there are a lot of differences

between the u.s. and china the needs to be resolved, echoing the market's lukewarm enthusiasm. xpo logistics thing into strategic options like selling or spinning off its businesses. we will speak to ceo brad jacobs. and morgan stanley, it's your turn. big banks beat estimates. stocks go nowhere. morgan stanley now on deck. welcome to "bloomberg daybreak" on this thursday, january 16. i'm alix steel. in the markets, it doesn't feel like there will be a lot of conviction after that signing of the phase one trade deal. yesterday ended pre-much flat. -- ended pretty much flat. one thing that could be helping the market, the people's bank of china said that overall financing expanded almost 11% last year in china, so that liquidity always a good thing when it comes to investor sentiment. time for global exchange, where we bring you today