>> unrest returns to libya. leaders look for a path to peace. davos kicks off amid barriers to trade migration mount. will it be the peak of globalization. we discuss it here in davos where we have an all-star lineup -- get all --eted and of course the outlook for the global economy bring --

global economy. ♪ welcome to "bloomberg surveillance." it'sve a lot to get to, five days of a packed agenda. we have many world leaders at the forum. no matter where you are in the world, we need to check on the markets. the markets a little bit thin on compared to other days. i'm looking. in crude oil is one we need to watch out for. you see on the screen, really rising today. lower, ittocks edging will be appropriate earnings and gold climbing parade get to the first word news. libya's oil industry have been caught in the crossfire.

-- they havewn shot -- shut down and output 2011, peacesince talks are underway to work towards the p -- cease fire. oilfieldave halted an letting widespread -- a second oilfield is expected to closure. around 600 people have died and thousands wounded. in the u.k., prices increased for the most on any january on record. 307es increased to nearly south of the pound. before a new tax on foreign

investors. china at least three people have died and 200 diagnosed with a new virus. an independent report said i'm already at 1700 people. join us as the outbreak is still preventable and controllable. just over 2100 people have more money than 4.5 billion u.k. based charity. he says governments are massively overtaxing rich individuals and underfunding public services. global news 24 hours a day on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. we are hearing to have

those with the theme is stakeholders for a cohesive and sustainable world. cohesive was here in the community. largest -- planned to climate crisis. what a great way to actually kick off davos 2020. when you look at the announcement you made. of benevolence. ultimatelyize they've understood and they have been calling for this dissent to get ahead of these trends and recognize as a fiduciary we had to respond to the five client risk has despite -- become a

client britain -- we believe this is a fundamental reshaping of finance. we are at the beginning of a ,hift in finance and we hope it's a large firm we hope to make a difference. perhaps be a second -- an i'm being halfg of our clients. francine: how do you translate to -- citizen votes? >> we have a large index platform. the key there as we work very closely and increasingly closely with the providers of indices to make sure the index providers have been moving in that direction. are very much on board,

they recognize something has to change and i will allow this very significant shift in capital. we think you will entail a major reallocation of capital towards sustainable investment. what if you can hear from chief executives? are they worried their businesses will be affected. >> it's always an opportunity in the risk, but with few exceptions, it's also very clear that almost all ceos recognize that. the question is how do you adapt your business models of these changes. in some cases it will be a challenge. there will be very few people today who feel they can simply ignore this. >> have you had discussions in a something that is not talk.

>> how we engage with the company is frankly, early successful. based on -- --have information risk the pushhere toward sustainability if you go into a recession? >> over time in the very long a sort ofe may be watering down of this return, but i think this is a major .hift --s is the fundamental

francine: have you been frustrated by the fact it's difficult to define and you can't force companies, but to actually measure the impact climate change will have on them. >> that is been the principal challenge. -- we now standards have standards. this has been an evolving process to make sure we do have standards atcommon least with regard to disclosure of public sector. governor carney at the forefront of pushing this. i think we will see convergence in some of the standards. a lot of work remains to be done. don't have common standards it's very hard to judge. we are well on our way with the standards. francine: would we not be better

off forcing companies? >> there is can be regulation. ultimately climate change cannot be tackled by the private sector. it will require sustained coordinated government responses , then the private sector adapts. in the meantime we have standards that are beginning to lead to some of this regulation emerging, hopefully in this will be challenging, we cannot reach the paris goals in the absence of coordinated sustained government policy. francine: should there be another that looks at gdp long-term for incorporating these changes. >> there was a very famous

speech by bobby kennedy where he calls for this, i think we will see the evolution of how he mentions things. , they arerisk sinners manifesting themselves and flooding and fire and all kinds of natural events. i think this idea of a risk-adjusted -- to returns is .ritical , weink there's no question will have to be incorporated to the way they think and investing in the way we think and measuring output. >> philipp hildebrand, thank you so much. reached peak we globalization? we talk with chief executive of the largest support operator.

our interview is next. this is bloomberg.

>> let's get straight to the bloomberg business flash in london. >> the middle east biggest lender is looking to southeast asia to expand. oil prices are forcing them to look outside its market. they've also been hit by the standoff between qatar and saudi arabia since we 17.

-- 2017. went to southeast asia where we are now focused. spacex has passed a crucial safety test. it clears the last major hurdle before it starts crude missions missions first sent -- nasa. that's your bloomberg business flash. francine: thank you. let's discuss global trade according to america -- are going to bank of america strategist there are five times made physical barriers as they were 10 years ago. as government protectionism and wars and migration will the 2020 be the decade when globalization

goes backwards? joined byleased to be the chief executive officer -- officer of dp world. you for joining us here on bloomberg surveillance. are you optimistic or pessimistic? have we reached peak globalization? eventually felt that -- i think the fair step was done and it's a positive step. it's my belief of this one is done it would be easy to do that. visibility. when they agree to do business, it's a good signal for prosperity.

francine: what are you optimistic about? when you look at the world, i know you've spoken in the past about latin america and africa. is that were trade will be? >> definitely. africa shows good times for both. they have good policies and sound policies. in 2019, 2 .4 billion, a small country opened a dry port that would allow people to come out for cargo. youcine: how worried are the geopolitics in the middle east was at the forefront since january 2 of this year that the geopolitical concerns could affect trade wars. >> it is not something permanent , it is something that happens, but people move on. francine: do you think we

reached peak globalization? >> it looks that way at the moment. on the other hand, if you look historically we've never really seen in recent decades any kind of sustained retraction of globalization. the price would be very high, not least for some of the emerging countries and continents -- on the can -- on the continent of africa. such is the biggest economies of the world, it's been lifting those out of poverty. the challenge there in the short term this is good news, there is the question of fragmentation with these trade talks per their deeper issues between the u.s. and china. francine: you put your plans on hold, given brexit was looming. are you restarting those plans are they on hold? we want to expand the port.

nobody wanted to take a chance that was going to cost them. positive.ks very francine: they look very positive even though we don't have -- don't know what kind of trade relationship the u.k. will have with the eu? people in our business need narrativeefinitive and once that's decided, the government would divide it. now they decide it. situation.ith any this indecisiveness creates a lot of insecurity and disturb the market. francine: how much work are you doing with china as part the belt and road as well as -- how much does china want. >> we have three terminals in

china. >> that means there is cargo coming. believe that it's not free trade that the issue, it's fair trade. and trade is important that's why the united states is negotiating. they have to be a fair trade. a trade that gives a fair treatment to each other. that's very important. francine: if you look at the supply chains that have moved because of the trade war, do you expect them to go back or are

they stuck where they are? >> in the longer-term term that's the biggest question. if we are moving towards a more fragmented world chess competition not just on trade, but ideology and technology. to what extent does that change the way global supply chain is set up in the world. that's the thing to watch, it's very hard to model and translate that into growth. i think that the market will be focused to see how these supply chains can be reestablished or how they might be altered by longer-term strategic competition between the two biggest training partners -- trading partners. francine: what are you seeing in terms of trade volume? in the general picture are things getting better? announcedi we something, supply chain is an andcient, very inefficient

how do we optimize a place like dubai airport to link cargo exporters to africa and latin america. why do they have to go all the way to europe. the threely one of just a start. so we are -- when you look at blockchain. it gives you encryption and today, people are still paying for paperwork. need 1000nt could pieces. us to unlocklow

amazing opportunity and today the biggest course is time. because it saves a lot of money. look for if you example at optimization on the fact you don't need these thousands of paperwork, how much money does it save you? example you get cargo from frankfurt to chicago. hours and you say you do a digital , transaction, if you go out to all she need to work with. people talk about -- when you cut the supply chain --

alibaba, they are giving people time. francine: how many jobs does that make the economy lose? job loss.u talk about maybe jobs lost in lower paying, but in higher-paying. today is the age of -- automation. but in the past if you are strong in support. work.chine would do the people, theye are are.

i need the brain. francine: when you look at the world economy, would you say the regions that are doing better and what regions were you? >> i think globally the big story is banks in 2019. this, they can see are very easy judging by looking at that we should see growth inching up. what's been holding this back have been the trade risks we talked about, the geopolitical risks so we can pull back on those, we should see global growth inching up in 2020 simply as a result of the extraordinary pivot back to monetary policy. this should lift almost all tides, it's really a global phenomenon.

i know we touched on the africa and latin america, is there anywhere else you see a poignancy in the economy? media is a big market. trade is only 10 million containers. there is a chance for growth in india. ourselves.pted because of the pressure, we did the work outside the gate. railroads --ave a lot of our work to get -- work today -- gate get things from the -- to the gate.

we have huge investment in logistics around the world. francine: thank you for the conversation. coming up this week from dabo's, we have a host of interviews including the hong kong chief executive carrie lam and credit suisse chief. day one is kicking off and we have four more days. this is bloomberg. ♪

francine: risk returns, oil

jumps as unrest returns to libya. global leaders look for a path to peace. davos kicks off, but as barriers to trade and migration mount, will the 2020's be the decade of peak globalization? we discuss all of that this week at the world economic forum in davos. we have an all-star panel today. we will continue our conversation about political risk and the outlook for the rogue central banks. good morning, good afternoon, good evening. you're watching "bloomberg surveillance." the over 1.5 hours into trading day, let's check in on your european stock universe -- stock movers with dani burger. dani: the biggest mover on the stoxx 600 is qiagen, the bio company. they have had a buyer interested in the company, according from's espn. cspn.m

they are seeing shares rise more than three point 5%. now trading at a december hike. to the downside, huge losses from beaver tree, the company that makes a lot of tonics. apparently u.k. customers were not drinking enough gin and tonic over the holiday season there they said there you take -- they're u.k. holiday sales were weak. we are seeing shares now drop the most on record. that is about a 21 and some change percent loss. finally, gains from bae systems. they are buying $2 billion worth of defense assets after a merger between raytheon and utc. because of that merger, they need to spin off some assets in order to get regulatory approval. bae gobbling up about 2 billion of those, saying this will help their technology systems, the ceo talking favorably of those acquisitions, the market taking it well also.

now trading at a record high. let's get to -- francine: let's get to the bloomberg first word news with laura wright. laura: as the global elite gather for the world economic forum, boris johnson is staying in britain to remind -- to stay focus on the people's government and to reinforce that, he is working to move the house of lords out of london. house --k., the according to -- and increased to an average of nearly 300-7000 pounds. a separate report shows london's luxury market is seeing a surge homes.s, snapping up in china, at least three people have died and 200 diagnosed with a new sars like virus. it is due in part to increased

testing. an independent report says as many as 1700 people in wuhan may have been affected by the virus. showing us that the outbreak is still preventable and controllable. deutsche bank is cutting the bonus pool of its investment bank by about 30% area that is after a tumultuous year that saw the lender embarq on huge restructuring. it is a fine line to walk. cut costs butd to also needs to retain top talent. 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, laura wright. this is bloomberg. francine: geopolitical concerns flaring up again in the oil markets as libya's oil industry has been caught in the crossfire of the country's civil war. an oil pipeline has been shut down. exports have been blocked.

--n outlook says how are geopolitical risks affecting markets and investments? still with me is the vice chair of blackrock, philipp hildebrand mr. hildebrand, when you look at the geopolitical tensions that we've had since the beginning of the year, how telling wasn't that markets spiked her there were concerns that died down again. is this the concern of central bank policies? are two forces. this tremendous easing of monetary policy and the flaring up of geopolitical risks and trade engines. we have seen some of this moving into the background. some certainly, the trade deal between the u.s. and china is positive news. brexit is a big weight on markets. these are positive developments, but is early days. the underlying longer-term question is how this strategic competition between the u.s. and china, beyond trade -- trade is

one part of it but he goes beyond trade -- how that will evolve. francine: so still trying to figure out what kind of capitalist society china will become. how does the market trade that? philipp: what has become pretty clear is that unlike what is the hypothesis in 2000 when china entered wto, that this would be a big convergence trade in every way. that has not happened. today we have alternative systems. china has been successful in terms of economic rose, in terms of advancing -- economic growth, in terms of advancing prosperity, really in terms of an alternative system, we have to recognize the fact that we will be in this competing system parent on. the big story on geopolitics -- in this competing system paradigm. the big story on geopolitics is that there is very little policy space left if we were to go into a deep recession. francine: do you mean a big problem would be -- people were

concerned that we were on the brink of war when there was that strike on the iranian general, and with a markets functioning properly, if we were looking at a war in the middle east? philipp: markets have a very hard time discounting military conflict. it does not happen very often on a large scale. this tree tells you it is hard for markets to discount that -- history tells you it is hard for markets to discount that. so we have hope that nothing severe occurs, and the reason for an economic perspective that there is so little space to respond to an economic contraction -- this is the secular stagnation story, the limited policy phase story. there are many reasons to worry about geopolitical risks, but from an economic perspective, the main reason would be because we would find it hard to respond to any kind of severe shock in the economy. francine: how can europe respond?

watchlistng put on a -- for example, for the swiss franc by the u.s. administration -- or possible to france and germany? philipp: i think this will be a big question. what happens if president trump gets reelected? do we see a never the united states to start -- do we see an effort with the united states to start the same kind of conflict with europe? i was little policy space left, so we cannot afford any major setbacks. formulaic setup that puts you on a watchlist or not. it is not the most comfortable thing for the authorities to be on that list. at the same time, switzerland is a sovereign nation and has a constitutional mandate for the central bank to do its job, and i think the central bank will continue to do its job. it will engage. i'm sure my successes will engage with u.s. officials wherever they can to explain the monetary -- the difficult monetary situation they are in. francine: it would not change

policy at the margins, would it? philipp: no. the policy is set by the mandate, and the mandate is clear. the central bank has to navigate a difficult external situation. it is a global problem. the consequence is difficult, but it is not something that the -- wherene: is there a level monetary policy loosening is a concern? thispp: no, they feel that is the appropriate level, the monetary -- the monetary policy stance. if you look at the performance of the swiss economy both during and after the crisis, not least due to a very active central frankly very positive. switzerland has gone through the prices and the decade after the prices -- this -- switzerland has gone through the crisis and the decade after the crisis very well.

they are part of the instrument to drive down generally, it strength. the entire arsenal of the central bank today really tries to affect interest rates across the curve. the problem we have, it is very hard to imagine we can drive interest rates much lower in most countries. the u.s. has some policy space again. europe does not have very much, which is why it is so critical that none of these geopolitical risks really come to pass, because we would find our results in a very uncomfortable position if that were to happen. francine: philipp hildebrand is from blackrock. he will stay with us. we will talk with the fed at will. it may be devils week, but it is not where all the action is happening. we will talk about the european central the bank of japan, amongst others. we will cross all of that as well. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." i'm francine lacqua. day one in davos. let's get to the bloomberg in this flash with laura wright. offering airlines a new way to guard against foreign affairs. it is delivering a trading platform, the aim to -- clients will be able to trade futures and options across the industry. invest 500 plans to million dollars in france over the next five years the u.k. pharma company says it could lead to the creation of their

own 150 jobs. the money will go to research and development, assembly lines, and an innovation hub in paris. south africa has failed to pay nearly $140 million to bail out its national airline, but says it is working on a solution. lenders agreed to keep south african airways afloat and the government has agreed to match the funds. but the airline has been in a local form of bankruptcy protection for months. that is your bloomberg business flash. francine: it is not all about davos -- it is, but there are keybank decisions waiting. in europe, christine lagarde will begin a once in a generation review of monetary strategy policy. in tokyo, boj officials are poised to keep their monetary stance unchanged. i was joking about davos, because both central bank president will be joining us in

davos after their policy conference. still with us is the vice chair of blackrock, philipp hildebrand. i know you have done a lot of work. you released a statement a couple months ago, with stanley fischer, saying where monetary policy could go next. if you look at ecb, is the review too why? think it is high time to do that. the world has changed. at the time when the ecb started, i don't think anyone could have imagined that rates could be where they are, where we could be stuck at zero or lower at such an extreme fashion. it is appropriate to put everything on the table, and they will be very diligent about studying this and we will draw some conclusions from it. i suspect we will see some change. francine: but inflation? philipp: if i had to take one area where i would expect some change, it is probably a

definitionss precise of stability. we fool ourselves as analysts if we pretend that we can really pinpoint inflation or the definition of price stability to a decimal point, so i think some more flexibility, both in terms of how you define the definition of stability, and more importantly perhaps the timeframe over which you have to meet it. i would put sort of -- i would put that sort of high up on my list of priorities. how much can the ecb due on fiscal policy? philipp: the ecb can do nothing on fiscal policy. it is a physical measure. at the moment you could say this could be put as a global rule. central banks globally -- i think the are for changing monetary policy either toward tighter policy or loser policy, the bar for changes very high, so we are seeing, barring some

major accident, geopolitically or otherwise, i think we are likely to see central banks essentially on hold -- which, by the way, is also a good time for the ecb to do its review because the vases quite unlikely in the short term that this gets injected with policy changes in the short term. francine: so you expect gdp to ?lowly rise the echo philipp yes, given where financial conditions are today, i think there is a big gap, almost a puzzle. growth should be higher given where financial conditions are, so i would expect that given this easing throughout 2019, that we will see growth slowly edging up there is nothing phenomenal, nothing that will call into question whether central banks had raised rates, that there should be an edging up of growth in 2020. francine: what would ucl -- what

would you call what we saw last year, a recession scare? philipp: i would say a pivot by central banks. 2015 was meant to beginning -- meant to be the beginning of globalization. -- of normalization. the net result was 2019. we had this extraordinary pivot by central banks toward globally much easier monetary policy stance. francine: do you think europe and germany will deliver the goods on fiscal? philipp: i don't think we should have any illusions about a major fiscal stimulus coming out of europe. we will see at the margin some easing. we have seen that in france, some discussion in germany. but when you run through the numbers, and you look at the multiplier that this easing will entail in terms of gdp growth, you will find that unfortunately in many ways the easing that will come through will have very limited effect on gdp. at the margin it is positive, but it will be small. philipp: philip --

francine: philipp hildebrand, thank you so much. here are some of the big names that you should be watching out for. we will discuss the climate crisis and the green economy global chieff executives and global leaders. this is bloomberg. ♪

politics,economics, politics. let's talk about what elsewhere watching for this week. president trump headed back to -- we will hear his opening remarks for the world economic forum. we will hear them at 10:00 local time. trial willment be getting underway. throughout the week we have angela merkel and many more heads of state. let's get the view from philipp hildebrand. you have been coming for davos for -- philipp: 30 years, almost. i was a graduate student in the late 1980's. francine: how has it changed?

philipp: bigger, much bigger. it is still cold, by the way. danger, we am in have decided. philipp: the spirit, in some ways, they are trying to preserve the spirit. but the biggest change is davo'' health. it used to be that the restaurants were open, and the cafes were open, but now it has all been taken over by corporate sponsors. francine: is this the year where something changes because it seems much more focused on trying to live or something on sustainability and climate change? in the past it was big globalization and a lot of people came here for business meetings rather than to try and do something different when they get back home. philipp: i think the reality is still in a lot of business meetings take place, but the pressure on the private sector to react, to deliver on sustainability, israel.

you could -- is real. you could say all they do is talk and then they leave, but physicalty is that the events -- the fires, the floods -- but also the data, the science, and the social pressure coming from young people in particular, is now at a point where as a corporation, you can simply not ignore this. it is too risky. that would be a responsible from a governance perspective if you do not think about what this means for your corporation. i do think these pressure points are significant, and they are real, and they will lead to change. we will not reinvent the world up here. that is clear. is this meetings are still a big part of what davos is, but it accelerates the debate and discussion. francine: what are you expecting from president trump? the first time he was here -- in four days, you had president xi of china, that the world would be opened up, and you had the u.s. president saying just the

opposite. francine: first of all, i'm glad it is not snowing. it is difficult enough when he shows up. last year it was complete gridlock. hopefully, we talked about this earlier, there will be some messaging that this is not a complete sort of breaking down of globalization, the global supply chains. as we mentioned earlier, we have -- we are skating on thin ice. the economy right now is fine. it will edge up a bit. the u.s. is in pretty good shape, but the reality is if you look at our ability to respond to major downturns, there are significant? 's. if you -- there are significant? marks there and he does not want to add unnecessary volatility and risk into the system. francine: is there a point where the american president will no longer be the leader of the free world? in 10 or 15 years? does that go back to a dollar or

reserve currency? philipp: the real question is to what extent you really have a fundamental, unquestioned alliance between europe and the united states. does europe find itself in a position, for instance, in a second term, if the president were to be reelected, where he has to think about where europe belongs? youe you look at -- whether look at financial market infrastructure, technology -- security is the most important issue -- these are all systems based entirely on basically being part of a u.s.-guaranteed system. these question marks are out there. the questions are being asked. europe faces a particular challenge in responding and essentially rebuilding its own sovereignty, its own ability to act in a sovereign way in these three areas in particular. think chief you executives have seen a turning point where they are ready to

invest back in the economy? are you optimistic? philipp: i would expect we would see an uptick in manufacturing as a result of easing, but there are many uncertainties in the world. the risks are high. an unusual number of risks that are out there -- they are not all going to come to pass, but i think some holding back of the message will continue to be a theme. but given the amount of easing we have seen in 2019, i would expect we are going to see a pickup in manufacturing and business spending in 2020. francine: philipp hildebrand, thank you for joining us. forgetting us started with davos, 2020. more to come. ♪

francine: risk returns, oil jumps as unrest returns to libya. global leaders look for a path to peace. davos kicks off, but as barriers to trade and migration mount, will the 2020's be the decade of peak globalization? we discuss all of that this week at the world economic forum in davos. we have an all-star lineup. we will be speaking about geopolitical -- including social mobility. good morning, good afternoon, good evening. this is "bloomberg surveillance ." i'm francine lacqua, live at the world economic forum -- vos. it is day one and we have a packed show for you, discussing diversity, sustainability, but also social. let's get to bloomberg first word news in london. of oil hasthe price jumped because of supply disruptions in libya and iraq. brent crude rose above $65 a barrel. libyan oil production almost

ground to a halt after armed forces shut down the pipeline. iraq temporarily stopped output at an oil field sunday because of unrest. the two sides of president trump's impeachment trial have previewed the arguments. a formal -- formal briefs were filed over the weekend. say the president's conduct posed a threat to the nation and a rule of law. the trial begins tomorrow. an outbreak of pneumonia in central china has gotten even bigger. more than 200 people are being diagnosed with the virus. three people have died. there isperts say evidence that the infection is st spreading from people to people. rocket launched from the kennedy space center.

spacex demonstrated dragon's ability to eject from the rocket during an emergency. 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, leigh-ann gerrans. this is bloomberg. francine: let's take a look at what is going on in the market here is dani burger in london. ni: it is low-volume today because of mlk day, so no trading in america. after friday, we saw the stocks hit records. a little bit of consolidation here at the top after a pretty weak asian session as well. we are seeing crude gain after disruptions in both libya and iraq. in libya, there was a pipeline and opec, the second-biggest oil producer.

we had weak data on friday for u.k. retail. keep an eye out for job numbers. cut, are supporting a boe catching up with the rest of central banks throughout the globe. a stronger dollar is helping to sink the euros amid davos, a macro conversation going on. when it comes to individual movers, we have a big want to begin with, and that is beaver tree, the maker of tonic. it would seem not enough were drinking gin and tonic's over the holidays. the company is expecting a decline over the fiscal year. francine: dani burger there with main movers. according to the world economic global inequality will worsen unless governments do not cast aside global economic

change. great to have you on the program. to get us started on this monday, the first day of davos. when you look at all the reports that you put out, our governments taking on board the fact that social mobility -- is it retraining? what did you learn? >> we tried to look at, clearly there is not just income inequality globally, but there is possibly the threat of rising income inequality. that is being perceived around the world. we did a chief economist outlook a couple of weeks ago and one of the biggest threats to global growth over the coming year is economicallythe motivated social protests we are seeing. we try to find out what are the pathways to social mobility? how do we get the economy going economicthat close the equality gap? some of the factors are standard stuff -- health we need to ensure that people have better health care. we need to be sure that people have better education. what has become critical in

today's economy is one that we need fairer wages. we need social protection systems, given that there will be all of the technological destruction and also disruption due to climate change in industry transitions. we also need lifelong learning mechanisms that has become a nonnegotiable in the current economy. we need that to change because if not, it does not matter if we do the investments in primary and secondary university education. they need lifelong learning's. and finally, working conditions need to change, too. francine: who is getting it right? what government regions are working to make a difference? saadia: we covered about 82 countries, the ones for which we had good data. denmark is number one. the united states is the 27th country that has a fairly high level of income inequality. not surprisingly at the bottom when it comes to factors of social mobility. everyone will have to make a difference.

it is not just developing economies that have this issue, it is a lot of large developed markets like the u.k., like france to some extent, like the united states, they will also have to put a lot of changes in place. main risk to their economies, the world economic forum has focused on climate change this year. together with the gdp, are they looking at these indices to make an impact to ensure that governments do not do that? will be the decade where governments have to take this seriously. we have to make sure that the ' dynamic elevator keeps moving. if not, we cannot lift votes for everyone. the second is the industry transition the needs to occur if we need a greener economy and that if we want a greener economy. none of this will really be possible if people do not have a

sense of optimism, the sense that they will be able to give to their future generations a better life and better earning opportunities than they have themselves. so this agenda around social mobility will be critical. without it, we cannot achieve the objectives that we have. francine: is it up to government or private entity to do that? saadia: clearly there is a lot of role for the government. but is not -- but it is not just about increasing spending. it is about a mix of spending. if you look at france, it does fairly high levels of social spending. but when you look at the results, it has become clear that it is not the right type of spending that needs to be done. so there is probably a different mix of spending, a different type of quality that is required, more dynamic mechanisms for of social safety and lifelong learning's. the second aspect is businesses. we are making a big call for stakeholder capitalism here at davos.

take into have to account social mobility because they have a big role to play, one because of the services that supply -- whether that is training, health care, safety nets and security, social security. a larger role, for example, for insurance companies to play. but also what they can do with their employees, with their value chains, and with their communities. that will be the game changer for social mobility if businesses trying to take -- if does this is start to take control seriously. francine: where do emerging markets stand on all of this? saadia: brazil is at number 60, india is at 77 -- 76. china is up 45. for most of these economies, if they want their growth to remain positive, they will have to tackle inequality. ,rancine: thank you so much

saadia zahidi. coming up this week from davos, we have a host of interviews with top newsmakers, including hong kong chief executive carrie lam, david solomon from goldman sachs. all of that and much more coming up this week at the world economic forum for 2020. this is bloomberg. ♪

leigh-ann: this is "bloomberg surveillance." let's get to your bloomberg business flash. bae systems has agreed to buy u.s. defense technological

assets worth close to do billion dollars. those assets were made available by the merger of united technologies andreessen. -- and grayson. -- raytheon. u.k., there is a sign that the conservative winners of december's election has boosted homebuyer confidence. home sales increased by any january on record. the protests in hong kong are keeping people away from the city. the airport's passenger number felt last year for the first time in a decade, a decline of almost 4% from 2018. at one point in august, demonstrators paralyzed the airport. they staged a sit in and kept people from traveling. that is your bloomberg business flash. francine? francine: thank you so much.

zahidi.th us, saadia of andthere are a number how to make the world a better place. when you look at the u.k., how are they doing on social mobility? is there anything we can learn from the u.k.? atdia: the united kingdom is 21 of the 82 economies. what becomes clear is that some spending, onks on social aspects, whether that is social security, whether that is education, health, that is really starting to have a negative effect in terms of equality and social mobility. but as i mentioned earlier, it is also about the mix of spending. it is not necessarily about insuring there is greater spending, because there are economies that do that and still end up with poor outcomes. what you're seeing is that the

equality is not great. with a focus on upscaling for workers being displaced by technology, that is an area where the u.k. has been slipping downward in some of the other studies we have been doing. a government that does not address the right thing for 12 months, do you lose ranks quickly? saadia: one of the reasons we are doing this now in 2020 is because this is going to be one of the urgent issues that is going to need to be taken on in the next 10 years. in some cases, when we are looking at better wages, some of this may take a little bit of time to be directed. but if we do not start now, there is little possibility we will get the results we are looking for, and little possibility that we will get back economic dynamism. it is not just about social dynamism, it is about the returns that we generate. we found that china and the united states have some of the largest gains to make in terms

of gop growth -- gdp growth. francine: the concern is that gdp on a quarterly basis, that you have to look at it so fast. is there another index that governments are trying to look at. we talk about new capitalism. what does it look like? saadia: for businesses it means looking at different -- looking differently at environmental and government and social measures. there is an equivalent to that when it comes to gdp. we do have to look at things like what is your medium-term growth prospects, what does that look like? the competitive index, and thanks for having me on for that. ont is where we try to focus the medium to long-term growth. the second thing is things like social mobility. is it possible for an economy to start directing that growth into better quality growth and into growth that is improving living standards for everyone? that is another aspect that has to be looked at. think of it as the equivalent of

the -- there are the environmental related standards. we have integrated measures into our competitiveness framework. francine: these indices are important. if you are a world leader or a finance minister, you should not just be looking at gdp, or the old school way of measuring the economy. saadia: some of it is about outcome. for most economies it will be critical to look at their a highest andre lowest earners. economies 40% of most -- the top 10% are earning three times what the bottom 40% are earning. that is the g20 average. that is another aspect that they will have to look at. what we try to do with the social mobility look is try to understand what is happening in terms of the factors that lead

to inequality. it is almost a measure of the input rather than the measure of what the outcomes are. francine: how much work have you done on redistribution of wealth? is that the right way to do it? saadia: this is where it becomes an party requip -- a question of redistribution. plus it is the quality that matters, so it is not simply about taxation on its own is not going to solve the problem. it is going to have to be a combination of improving taxation. it is going to have to be new sources of taxation that have to be -- it does not fall purely on the middle class. at the same time, that taxation will have to be reinvested into the right stuff. that has not been happening in most economies. muchine: i don't know how work you have done or will do on central banks, and the fact that central blanks -- central banks play with all that cheap money. will they get wealthier? saadia: one of the findings of our report has been that we will start to run out of room when it comes to monetary policy, and

many economies will have to rethink fiscal policy. which is a tool that has been underutilized perhaps in the last 10 years. as we do that, one of the things to think about is not just tax related measures but also measures that look at where public spending actually goes. francine: are you expecting more public spending? this would be the dream of so many central banks. saadia: i think there needs to be a better agenda around public spending, and again, the quality aspect comes in. there are plenty of economies that are covered in this index that do a fairly large amount of public spending on social aspects and are not necessarily getting the returns, neither in terms of -- francine: we will talk about gender diversity next. all of this week, we just started out coverage. we will discuss more with newsmakers from around the world, including the imf managing director.

u.s. secretary of transportation, elaine chao. all of this is coming up this week, right here on bloomberg. ♪

francine: this is "bloomberg surveillance," from the world economic forum in davos.

zahidiith us is saadia come on the world economic the world economic forum coming out with extremely important indices and also research papers. we talked about in the last couple of weeks, diversity as well. world economic forum has big goals on diversity, on gender. how is the rest of the world doing on diversity? are we thinking about a possible level playing field? saadia: it essential to restoring any sort of social mobility in advanced economies and creating a lot of it in the emerging markets. we in particular look at gender equality. a couple of weeks ago we launched our global gender gap report 2020 and found that it is still going to take about 100 years for gender equality as a whole, and 250-plus years for economic gender equality. that is completely not

acceptable, and a lot of what we will be doing in davos is working on the mechanisms that will change that. an aspect is trying to focus on countries and what they need to do, and the other is looking at businesses. they have a huge role to play. i think they can get this dynamism within the gender equality space if they take into account the highest growth roles of the future and getting more equality into them. francine: the numbers are crazy. why are we still so slow? every single report shows that it wasd be better off if done fairly. saadia: we just don't have the social infrastructure in place that allows for working parents essentially to combine work and family, and that tends to fall disproportionately on the shoulders of women. the second aspect is technological change. a lot of the roles that are being displaced have been the ones that have given women good earnings potential over the last couple of decades as they have

entered the workforce in larger numbers than before. those roles are getting displaced, and in general there is not a rescaling and upscaling agenda in the form that should exist second, there is segregation within that that takes into account that women are going to be impacted differently than men. francine: so the report on rescaling -- what does that show us? saadia: rescaling is not a report, it is an initiative that we will be introducing on wednesday in davos, and essentially we are laying out the goal for the next 10 years. we are trying to get through the world economic forum's own initiative and the initiative of our partners, better skills, better jobs for one billion people by 2020. so far the commitments that come in, 200 50 million people will be impacted. -- 250 million people will be impacted. so we are a quarter of the way there. francine: what can people ?atching do

can have a focus on gender equality and diversity within that as well. the second element is joining some of the activities that we have set up that try to take the agenda forward very quickly. we have created these country accelerators and industry accelerators, and industries -- businesses can join that right away. the third aspect is joining some of the initiatives that exist already. there is a lot out there in the world that is joining the industry revolution platform, and we need coordination. francine: thank you so much. "bloomberg surveillance" continues. ♪

francine: this is bloomberg surveillance. i am francine lacqua from the world economic forum in davos.

trump is heading back to davos. he will deliver opening remarks at the world economic forum tomorrow. the president will celebrate his trade deal with china while warning against socialism about the same time his impeachment trial beginning underway in the senate. sight to thend in unrest in the government push on one of the protesters key demand saying hong kong residents should understand any chief executive elected by citizens will also be accountable to beijing. a judge will hear arguments on whether to extradite the cfo of china's huawei to the u.s.. they were arrested in vancouver more than a year ago. the u.s. was seeking her on four charges. out on bail but cannot leave vancouver. authorities brace for protest.

they will demonstrate against democrat plans to pass conewago creek -- gun control gestation. virginia's governor has declared a state of emergency. white supremacists are expected to join the pro-gun activists. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by over 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. a beautiful day here in davos. it is quite cold, a little bit less cold. a lot of the focus will be on decisions chief executive's and world leaders will make for 2020. let's focus on the outlook for the world's second-largest economy. in 2019, thew 6.1% slowest rate in a lost 30 years.

can the global economy adapt? my next guest is also the former deputy managing director of the international monetary fund. welcome to bloomberg surveillance. see the chinese of aering on their promise trade deal with the u.s.? >> a trade deal is good for china. china needs those things. in particular on the stretch reform side, protecting ip, improving the business environment. these are all things china needs. -- in thisving from particular moment bringing international competition is a

key issue for china. it is very much in china's own interest. francine: those the western kind ofderstand what form chinese capitalism will take in 15 years? being the central bank percent -- for five sovereign years. collectivity is a big issue. it is more centralized. china may have a different form to bring the people a better life. francine: we have seen a number of defaults in china. can it be something more sinister? zhu: what evils do you mention? francine: the smart brokerage companies. zhu: those are good things. let the market play the role.

over leverage is still a concern. some small companies would go .nto default you will continue to see those things happen. , thenk that is a good market should play a role and should not protect them. francine: if you look at the opening of the financial sector to foreigners in china, do you think that will be quicker than we think or slower? zhu: a little bit quicker. jp morgan is there, blackrock, s&p is there, everyone is there. foreign capital accounts for more than 10% of the chinese equity market trading volume. justis incredible from 2% 12 months ago.

it will take some time for them -- to thed to the new more volatile market. see more of my friends come to see me and try to see how the market will be. francine: what do they ask you? what about the rail a tory framework, what is the cost, all very interesting strategic issues but most of the people feel the chinese financial , thet is such a big market ball is not in china, it is in your ballroom. big, yount to play have to get approved.

francine: what happens when you look at the u.s.-china phase i deal? are we going to see a phase two this year or could both countries live without it? good,he phase one deal is focusing on trade and reducing tensions. i think it is good for both sides and they will continue the dialogue. i would prefer it to have a more broad economic dialogue. being the number one and number two biggest economies in the world means they have to talk in a broadway. i expect to see an economic dialogue. francine: a number of questions about trade which we will get to in a second but how would you describe the world economy right

now? we had a recession scare last year. has that going away? zhu: with the trade deal, people are much more relaxed. it will bring global growth. other growth will remain low. still in the low boundary. in the last year, more than 40 central banks cut interest rates. we are all at the end of cycle but the appetite is still there. 2020 should be ok economically. francine: have central banks done too much? much onelying too central banks? zhu: we are relying very much on central banks, that is for sure.

particularery situations, we have low interest rates, low growth rate and you .ave limited fiscal space think central i banks are doing their best. we figured out how we can get out. i very much hope this davos meeting -- francine: talk to me about pboc. zhu: pboc has changed a lot. we liberalized it further with interest rates. it is market-based which is important. another thing on p2p and the

deleveraging process but now we move to stabilize leverage because if you go too fast it can create a problem. stabilizing leverage, i think the financial sector risk is coming down and things are getting better. francine: should we worry about shadow banking in china? zhu: shadow banking is gone. p2p is really everywhere. i think that today, shadow banking is not the key issue. the key issue is to make sure that liquidity is more --

francine: zhu min, thank you for joining us. zhu min will stay with us. don't forget to meet -- don't forget to see some of our conversations with top asian business leaders. you can catch those all week long right here on bloomberg tv as we kick off our coverage for davos 2020. ♪

>> two momentous trade deals we completed last week are just the beginning of a really incredible story because nobody thought we would ever get here. they said the deal with china

would be impossible to make and getting rid of nafta would be impossible. one of the reasons it was impossible was it was such a bad deal for us. francine: that was president donald trump speaking to the american farm bureau federation meeting in austin, texas. we are back with zhu min, former deputy director of the imf. a phasehing we reached one deal with china. great to have you on surveillance. i can we be so sure the u.s. a does not go back on this trade deal -- the u.s. does not go back on this trade deal? the chinese are sticking to the deal, and lamenting a quick pace and sort of matching but the u.s. is doing in the u.s. is continuing for its own pledges, i don't paper should be in expectations of a brain edging of those promises. francine: what kind of

relationship does president trump need with china to talk to his base and get those vote? saleha: the campaign president is running on is based on the economy. make america great again, america first, he needed a trade deal with china to kind of show that during this impeachment trial, he is continuing to govern so it is and ends -- it is in his interest to keep this intact and we will see him really pushing and touting when they signed the deal -- when they signed the deal, he spoke for one whole hour even though it was a short 10 minute speech, sort of boasting and thanking everyone. francine: zhu min, what are you expecting from president trump? he will speak tomorrow morning. are we expecting him to talk about capitalism and socialism? will he talk about china? is it in his interest to talk about this agreement?

it is supposed to be 10 minutes but he can talk for an hour on trade. it is a good deal and both for the u.s. and for china. hoping he will come back to paris for a deal on climate change. that would make everyone so happy. francine: what does china really want from this phase one deal? zhu: a few things are very important. the trade relationship is very important. the u.s. is a big market for china in terms of trade. to stabilize that relationship is to stabilize the chinese domestic supply side.

currency manipulations are also important because this deal shows that both sides have to respect each other independent of monetary policy. particularly, china will -- but also the deal in the u.s. should give china the same treatment. we will see the chinese company will do more with the u.s. financial market. they will be able to work together. saleha, could we have had this deal before? saleha: it was the first time we were seeing a president who was following through on threats, it was no longer this strategic patience we had seen under the obama administration. those tariffs really shook up the whole way the u.s. and china

talked to each other. dialogueght economic and we are going back to that. was --. china dialogue but restarted as the two signs learned about each other. the president needed pressure domestically. we cannot forget that he has been impeached and there is a trial going on and it is election year and he is trying to win voters for office again. he wants to show the key strategies, pushing as we are still governing. usmca, the u.s.-china trade deal. francine: talk to me about supply chains. because of the trade war, a lot of the supply chains have shifted. will they go back to what we had three years ago or have they shifted forever? i think this is the big

suffering party for the whole trade deal. it dropped 20%. people don't know where to invest. flows slowedal down and it is a big issue for the global economy. after them, i think people are still careful because the tariffs are changed. is that permanent? many people will still assess the situation. francine: who has benefited from this trade war? zhu: it doesn't make any sense. the u.s. has more tariff revenue

than china. a 19.3 percent tariff on chinese exports is not good for both sides, particularly for the u.s. consumer. 16% of the u.s. market share on middle priced goods. francine: what are we expecting from the u.s. delegation? presidenthin is here, trump is giving a speech tomorrow, on impeachment day. saleha: the house managers are marching back to the senate to be getting that truck -- to begin that trial as president tomp will will be speaking millionaires and billionaires here. from the u.s. treasury secretary, there are a few items on his agenda. on friday he will be speaking

but there are other side issues, meetings with the french finance minister to talk about the withal tax being agreed with the oecd. there is always the threat of more tariffs from the u.s. onto french wine and other products. we also have money laundering issues they want to talk about. francine: thank you both for joining us. saleha moshin from bloomberg and zhu min, former deputy director of the imf. coming up, a conversation with the imf chief economist. you can catch that interview at 9:00 a.m. in new york. this is bloomberg. ♪

francine: this is bloomberg surveillance. joining us now is bloomberg's saleha moshin and with the still is zhu min, former deputy director of the imf. you have the best job this week.

looking out for, who is here, who are the meeting with? saleha: i sit at the espresso bar and you talk to people and you ask them to define inequality and then they talk about what kind, immediately they turn to gender inequality but income inequality, i am waiting for that to come to the forefront. we have been talking about stakeholder theory, that is the number one thing people are talking about, and i'm wondering if it is because that is what they know how to focus on. these have measurable things you can change about what is going on here, so 1700 business leaders, capitalism is under fire for them and the way they can change the course of how the rest of the world sees them is an interesting question to ask at davos this year. francine: a question about met -- measuring sustainability is a good one because we don't really have a platform. how disturbing is that?

zhu: when we are looking for the next 10 years, i think a big holder of capitalism and the global order for more sustainable development is in everybody's mind, not for this year before the next 10 years. i think that is important, so i'm very much looking forward to a heated debate this year. francine: are executives coming here to do business or focus on sustainability? saleha: the parties are mapped to what bigesforce deals -- big deals get done in davos. there are these big thoughts amount where the future of capitalism stands. this idea of stakeholder capitalism is and that goes against the basic tenants of -- who most people have grown up to believe. ,rancine: very quickly, zhu min

when you look at visa and mastercard, will they ever go back? i don't think they will be able to go back because it will take a long time but it is really on the regulatory side. libra is still struggling but i think this is inequality issue. francine: thank you so much, zhu min for managing director of the imf and saleha moshin. plenty more right here from davos. this is bloomberg. ♪

francine: risk returns.

global leaders look for a path to peace. devils kicks off. barriers to trade and migration mount. we will discuss all of that right here this week from davos. we have an all-star lineup of guests speaking about geopolitical risks and the outlook for the world's central banks. good morning, afternoon and evening. this is bloomberg surveillance. i am francine lacqua live at davos. look at that sunny cold day. our team is braving the cold to brief us and what they will be watching out for coming up. let's get straight to the "first word news in london -- "first word news" in london. here is leigh-ann gerrans. leigh-ann: brent crude rose about $65 a barrel.

almost brought to a halt after armed forces shut down the pipeline. iraq temporarily stopped output and oilfield sunday because of unrest. integrateg to push to to thegrate with the -- 2015 nuclear deal. meanwhile foreign minister pulled out of this week's world economic forum in davos. 's supreme leader accused europe of joining a u.s. campaign to quote, bring iran to its knees. the two sides and president trump's impeachment trial have previewed their arguments. house democrats in the residence legal team filed their first formal brief over the weekend. democrats say the president misconduct made him a threat to the nation. the president's lawyers called the impeachment and intent -- an attempt to overturn the 2016 election all stop the trail begins tomorrow. rocket company has

passed a crucial safety test. spacex clear there last major hurdle for nasa. the falcon nine rocket launch from the kennedy space center. spacex then demo started dragon ability to eject from the rocket during an emergency. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by over 2700 journalists and analysts in more than 120 countries. i am leigh-ann gerrans, this is bloomberg. with your markets, here is dani burger. later volumes as the u.s. markets closed early for martin luther king jr. day. crude move higher, -- $655 dollars a barrel

a barrel after disruptions in libya oil fields and iraq. that is after disappointing data making it seem like the boe is going to cut rates, catching up with their global peers. we are seeing the your decline, it's weakest in weeks and most of it is driven by a stronger dollar. in terms of some of the big nearlyual movers, losing a quarter of its value, after the company said it would -- other losers but overall the market is looking week today. francine: thank you so much, dani burger with the main stocks. -- fromre joined by bloomberg -- from bloomberg economics. how are the stress levels? >> all hair. -- all here. francine: there have been

various situations in davos. last year they were kind of on the money. >> they were pretty good last year. a year ago they were a bit optimistic, if you for growth of see globalw they growth was about 2.9% will stop a lot of people here were putting those recession risks aside. the consensus last year was that growth would be all right in 2019 but the central banks needed to cut interest rates and .e saw those cuts thanks to those cuts, the world economy entered this year on a bit more stable footing. francine: so much of the focus this year is on sustainability and inclusive capitalism.

simon: deutsche bank pointing out that how do you pay for the things that you want? a lot of people will talk about the need to improve their global record on climate change, stakeholder capitalism, but how do you do that and still deliver economic growth and profits to your shareholders who will want a return on their investment? that is one of the key debates of this week, how do you meet those eager aims and actually pay for them as well. francine: how can you be sure that chief executives here really want those aims? stories youhree top want -- what are the three top stories you want to focus on this week? simon: the world economy is one and then it is those things, climate change, greta thunberg , her message,rrow

and youhere last year, do see things, like the business roundtable last year, talking about the need to spread the meaning of capitalism, blackrock , just last week talking about the importance of taking other things into account, so they are certainly paying lip service but it is all in the action. francine: breaking news from the chinese foreign minister, saying that china will work in cooperation with the u.s. is this a game changer? simon: it provides some level of support. last year, every support -- every story was about the u.s. trade war. obviously you saw the phase one deal signed last week and certainly that will bring some stability but the question is whether they will be able to get

a phase two. some uncertainty has been cleared up and you can see that in how the markets have started this year. whether that optimism turns we will have to see. francine: simon kennedy foresees all of our davos coverage. coming up, we have a host of entries with top newsmakers including the hong kong chief ofcutive, david solomon, all that and much more coming up right here on bloomberg. ♪

>> we are going to put a little fuel in your bus. this is a challenge to you, alumni, this is my class, 2019. my family is making a grant to eliminate their student loans. francine: that was chairman robert smith, making headlines when he pledged to clear student loans of the entire college class of 2019. he joins us now. what an extraordinary thing to do. exciting to be a part of, for sure.

is the outreach that i know that comes from various philanthropist, what can we do, what are effective ways to actually help? how do we create a more inclusive economy which is part of the whole theme here, inclusive capitalism which is a great system in which to operate and we are working on a really interesting project now. a former commissioner of the irs and i are working on a program where we can create completely free education for stem students for hbcs. the urgency is here and it is now that the efficiency of it is one of the key elements of how we are going to get this done. francine: how do governments also deal with this? what are the recommendations you make to the presidential candidates? robert: think about this holistically.

it is redistribution of opportunity, our global economy is one that has been enabled by technology and we have to skill our people to be able to participate. we have can -- we have disturbed a computing power globally and as a result, we now have centers of excellence in different parts of the world that are leveraging people and training them to participate in the next generation. part of each of our governments, how do we skill our people best and create opportunities for them? education is a fundamental basis for ensuring that happens. francine: why have we not fix this in 2020? robert: one of the advantages of being here is i have a chance to spend time with and become friends, we are focusing on how to reskill the workforce, how do we get people to -- get young people engaged in the process of leveraging technology and also

thinking about it holistic he. how do we do it in a way that we are not impacting the environment negatively but creating impacts that are positive. francine: the way of looking at it holistically is very difficult. how do you measure these? robert: it is difficult but the good news is, when you get smart people who are motivated to make a change, you can actually make some things happen. if you don't meet, it won't happen. if you don't convene or talk about it, it surely won't happen and people than kind of retreat into their own world and i think that leads to a lot of what we are seeing, this whole nationalism which is a bad thing for all of us globally. francine: do you think there is real concrete change? people don't just talk about inclusive capitalism but do something about it? robert: we see it every day. --increase increased andhas

we are now at 40% not only in our senior ranks that throughout the rank and file. our whole dynamic of what we are doing is saying let's be holistic about the approach and do it by example but if you do it by example, -- like all things, as you have the conversations, you have people out there saying i will start the initiatives. eight years ago is when we started our first esg initiatives called the compass conference. how do we get corporate leaders to think about esg as a forefront of what they do and actually create sustainable returns, not just one time returns. francine: is there anyway to make this better, forcing companies to actually disclose some of these things? robert: of course you have to disclose. the big part is actually

educating, understanding, look at the impact, one of the things we are doing, what is our carbon footprint? what we figured out is within our companies, air travel, we are in a relatively clean industry, software, air travel and power, so we have figured out with our own firm, we are making more advances over the next week or so, we are buying about 650,000 tons of carbon credit. the way to do it is do the math, find projects, a project we are doing in kenya which is actually preservation of land. francine: you are doing it but so many other people aren't. robert: like all things, i will leave that to the politicians. all the things we can do is control the things we can and lead by example and talk about the benefits. one of the greatest benefits is because we take the stand and we lead by example and make off a double companies take that

profit and turn it into holistic approaches to addressing community issues. we are able to attract more talented people. this next-- generation is thinking about wanting a place -- 20 to work at a place that has a heart and the soul. i think leading by example is the better way to do it. i hope the politicians listen but part of what we do is lead by example and show the result. francine: why do you think there is a shift? is it because it just makes business sense, because they are worried about populism or is it something else? robert: i think there is a necessity that has come from the fact that our climate is changing. it truly is. you talk about transparency and the revelation the data actually shows that. that sort of activity, you would be a fool not to do some thing about it. it.thing -- something about

he have to do it in a way that is sustainable, otherwise unsustainable products and companies will not last. all of that, the information you provide, because we have this global media world, we've got people aware and we talk about it and say we will do something about it in little groups. part of what we have to do as industry leaders in places like davos is actually talk about what our sustainable solutions at scale and that is what i have come here to do. talk about how we can inspire and connect and put action in place and get contracts in place and move things forward so that works profitably for us. francine: thank you so much, robert smith. he will stay with us. plenty more from davos this week. that still to come right here on bloomberg. ♪ ♪

francine: this -- leigh-ann: this is bloomberg surveillance. let's get your bloomberg business flash. europe's biggest a defense firm has agreed to by defense worthlogy assets close -- close to $2 billion.

a military gps raytheon'slso airborne tactical radios operation. here in the u.k. there was a sign that the conservatives win in december has boosted homebuyer confidence. asking prices for british homes increased the most for any january on record. 2.3% to an by average of $400,000. the protestant hong kong are keeping people away from the city. the airport passenger number fell for the first time in a decade. it declined more than 4% from 2018. at one point in august, demonstrators paralyzed the airport. they staged a sit in and kept people from traveling. that is your bloomberg business flash. francine: thank you so much. we sorted a great conversation with robert smith, under, chairman and executive of vista

equity partners. we were talking about education, reskilling and training. we want to talk about part of the same conversation, robert smith, technology. do we fully understand how much technology -- the pace of technology and the change of technology we will see in the last -- in the next 10 years compared to the last 10 years and how may people will lose their job as a result? change ise pace of actually accelerating and it is exciting to be on the forefront. francine: is it a bit scary? robert: not to me. as long as we are responsible about what we do, i feel confident we will arrive at the right conclusion. sometimes you end up with pickups in the road but i look at our companies in particular and on average we increase our employee base by about 20% when we buy a company and sell the company. you have to go through reskilling and retooling of the

employee base and their skill set. that is a part of our process and i think it is an interesting dynamic. the most important thing i look do a -- look at is we survey of our portfolios and they develop a payback in less than five months. still a massive consumption of software because it is beneficial to its customers. that is very important our customers because that creates productivity in the broader economy. francine: how do you retrain people? the skills we need to 20 years ago are going to be different. robert: there is a whole series that we think about, and ecosystem. 6-9ire people and go to boot camps -- 6-9 boot camps and train them on how we run software companies. reskilling our ceos to the about technology and artificial intelligence, block

chain, all of those are continuing to not only accelerate but now actualizing in the economy and in businesses. you have to create training systems, you have to step back and say how do we train people who have not been to school? there are coding hague cash coding academies -- there are coding academies. we started a new partnership with scratch.org. part of what we want to do is continue and skewed -- continue to scale and educate to meet this huge gap of skill sets versus what we need for our businesses. francine: should students learn algorithms and math or philosophy and social values? robert: the short answer is both. we need to be more comprehensive in the way we do our education. not everyone is going to be a programmer but everyone is going to have to engage with some sort of computer interface. you may be a truck driver today. ultimately you are going to be managing a truck that has

systems that may be automated and you have to ensure are running properly see you get more productivity out of it. those of the dynamics we have to ensure that our people as citizens get re-skilled and retooled but you have to build the infrastructure or just doesn't happen -- or it just doesn't happen. you don't want people to tap out of the economy because they are not skilled. francine: robert smith, founder of vista equity partners. he stays with me to talk about the global economy and the possibility of a recession. all this week we are discussing those and many more things with newsmakers around the world including the imf managing director, and the u.s. secretary of transportation. this is bloomberg. ♪

francine: this is bloomberg surveillance. imf the world economic forum in davos. a beautiful cold day. we do a weather report every 10

minutes just to make sure our team is not freezing up here. it gets better from here apparently. still with us is robert smith, chief executive officer and founder and chairman of vista equity partners. when you look at recession risks, you are one of the most optimistic leaders at the start of 2019. you are warning everyone not to talk themselves into a recession and we didn't. there was a recession risk. what does 2020 look like? robert: the dynamic is still productivity being introduced in the global economy. the issue is the trade agreement between the u.s. and china. that is the biggest risk in that context. if there is a decoupling, we have a problem. slowdowns, it is clear to me both sides really don't want

that to happen. we just have to figure out what is the right ground and we are making strides. i am optimistic about the economy. record low unemployment rates, people having challenges of the last few years are actually employed and gainfully. we still need to rescale and upscale our people to make sure they are participating in the up -- in the u.s. economy. francine: the concern was if you don't reinvest, getting a plant up, then that could lead to a downturn. robert: i surveyed all of my ceos, about 55 or so over the last month or so and said what is -- what does fundamental demand look like for our products? arele are investing, people investing in productivity tools. capex expenditures, we have to look at that from different lenses. we are seeing productivity measures are increasing. from our perspective, it

actually is creating outputs and we have to re-envision our business models and create new products and the innovation cycles are increasing as well and accelerating and all of our companies aren't -- blockchain technology, it is accelerating the dynamic of products in the market where we can show tangible results to our customers. we are optimistic from that perspective. francine: you look at recession risks, are they 18 months away or have they been put to rest? robert: i honestly think the biggest issue is the u.s.-china trade agreement. if there is a decoupling they are, there is a decoupling of different parts of the planet and you will end up with one part being on the china standard and one part being on the u.s. standard and that will create a slowdown. francine: we are in an election year in the u.s., a huge deal. everything could change. wealth distribution but also the

relationship with china. robert: the key is that people need to get here, sit at the table and communicate and negotiate and figure out what the issues are. one of the big things, i was in china a few weeks ago talking about how they have an open financial services for foreign ownership. they need to open the technical markets. i think that is a way to build more of those fibers that will keep the global economy -- the chinese don't want a recession and they don't want to slow down there markets. they had their slowest growth in the last 10 or 12 years. from our perspective, they have incentive in terms of the u.s. coming together and that is one of the best ways to open up ownership of these technical fields. francine: i guess you have to make sure that intellectual property is respected. robert: absolutely.

one of the beauties and joys of capitalism is the protection of property rights. to bring forward the best ideas in the form of competition. that is what creates the ability to move things forward. phaseeve there will be a two and it is important that we come to a conclusion and have more open markets. china markets are more open and the u.s. markets are open. it is good we made a first step. francine: given that we are trying to reach peak globalization because everything from now will become smaller. robert: i don't think so. there is a massive economy in china, india, that are really just now moving into a middle-class type status and they will create more consumption. thathallenge is to ensure that consumption is done in a way that is sustainable and you are utilizing resources on the planet. you need to be more thoughtful

about that and we are actually seeing it in action, in thought and in practice. francine: are you optimistic about 2020? robert: i am optimistic. when people get together in places like davos, everyone criticizes but i do see real action. i see people reskilling, upscaling, improving their station in life. that hope and optimism is what continues to fuel growth in underlying businesses and economies. we have to continue to meet and convene to make that happen. francine: what happens with blockchain to make that happen? what is the future? robert: i have been telling my group as you become informed, we are involved in 15 different blockchain initiatives. it will be two or three or four that actually

emerges, those will redefine industries. it is probably going to be one of the more disruptive, and a positive way, and effective way to fuel economic growth and activity. it is going to take time and we will have to continue to put more resources in it. francine: thank you so much as always. robert smith of vista equity partners. let's take a look at what else you should be watching out for. u.s. equity and bond markets closed for martin luther king jr. day. several world leaders have decided to skip this year's event including the u.k. prime minister. instead he is hosting the u.k. africa investment summit. also today is the beginning of huawei extradition in vancouver. the first tennis grand slam of the year, the australian takes place in melbourne. we really have everything covered. let's get to the bloomberg "first word news."

in london it is leigh-ann gerrans. leigh-ann: an outbreak of pneumonia and central china has gotten even bigger. for the 200 people have been diagnosed with the virus. health experts say there is evidence that the illness is spreading from people to people. in hong kong, another sign there is no end in sight to the unrest. a downtown rally turned violent and the government pushed back on one of the protester key demands. they say any cheap fix it developed it by citizens shall also be accountable to beijing. in canada, a judge will hear arguments today on whether to extradite the cfo of huawei to the chat -- the u.s.. the u.s. was seeking her own four charges. she has been out on bail but cannot leave vancouver. she has denied any wrongdoing. president trump is heading to davos. he will deliver opening remarks at the world economic forum tomorrow. the president will celebrate his

trade deal with china while warning against socialism at about the same time his impeachment trial will be getting underway in the senate. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by over 2700 journalists and analysts in more than 120 countries. i am leigh-ann gerrans. this is bloomberg. francine: thank you so much. first day at the world economic forum in davos. a number of voices talking about business but also sustainability. i am delighted to jeep -- to be joined by -- and the brand is so well-known because everybody knows what it is and what it stands for. talk to me about business. you have led the change and becoming more higher-end, more luxury, what are you doing well and what can you do better? >> thank you for having me here. it is the fourth year that we have participated in this forum

and it is so important to be here and to hear from the changemakers and the heads of state, what is going on in the world which certainly has influenced our strategy. we have to create a product that is relevant to the consumers and what we have focused on is sustainability and creating a project -- a product that is sustainable, making sure that we have processes in place that support people and the planet so in terms of our manufacturing, we have a limited -- we have eliminated harmful substances like led and we are very excited to have been recertified by the responsible council for manufacturing. in terms of our product, we have focused the last year on more cause related marketing and cause related part -- products.

we are teaming up with a nature conservancy and proceeds go to that nature conservancy. we have also teamed up with the what -- with the movie wonder woman. a humongous topic for swarovski. francine: how difficult is it to be sure that everything is sustainable? how much extra work having needed to do to ensure that is the case? extra works a lot of and as a family owned company, that has been a tremendous value for us. time, effort and money has been worthwhile for us to invest. we want to make sure our consumers can rely and trust in us and make sure that our processes are correct. francine: have you had competitors or business partners

-- even if it is more expensive to do, this is the right thing? nadja: absolutely. we certainly tried to lead with a good example. we are one of the biggest fast really manufacturers. because the family business, it is important for us to have those correct ways of producing although it might be more expensive to us, it is the right way forward. that right way forward is inevitable for the future of other countries and companies. francine: why are you doing this? does it make a difference with the end consumer? this is what they want. nadja: it certainly makes a difference. we come from the alps, they look just like this. it is an environment we wanted to preserve. manufacturing while still not polluting the environment and protecting the people that live there. francine: if you look at your clients and your customers, there is also a direct -- is

there also a generational sip -- a generational shift? nadja: absolutely. they really ensure that companies and brands are adhering to the right message -- right method of producing things. the right way forward does exist. ,t is often not a requirement so it is really its own initiative and i think it is great that the younger generation puts that pressure on companies and brands. francine: nadja swarovski, thank you so much. a member of the swarovski executive board, she will be staying with us. we've got some headlines from the u.k. prime minister. says the u.k. has made extensive preparations for the u.s. trade talks. he also says the u.k. will not -- no alignment with the eu.

this could be quite significant. january 31 the u.k. leaves the eu and the future trade relationship is something we don't know. we don't know what boris johnson wants. we don't know what the red lines are that the new commission president will give to make it easier or harder. plenty more on this. cap ande my bloomberg we are seeing a little bit -- bloomberg app and we are seeing a little bit of a jump. don't miss our conversations with top business leaders throughout the week in davos. this is bloomberg. ♪

> this is a major shift that

is just about to happen. this is no different than the shifts we have seen related to the baby boom. we really believe this is a fundamental reshaping of finance that will entail significant reallocation of capital and relative price changes. francine: that was the blackrock vice chair speaking to me earlier at the world economic forum in davos, saying it is a game changer if companies like blackrock focusing much more on sustainability and looking at where they are investing in the companies they are invested in. i am delighted to be joined by nadja swarovski. aboute talking nadja sustainability and the fact that this came from family values but also the customers want a lot more of this. is there report of the world where customers want to know where their jewelry comes from, how it is made? nadja: absolutely. we have felt tremendous curiosity with european and

american customers although we are feeling that now with in the chinese younger generation. -- within the chinese younger generation. francine: what does that mean for swarovski. how do you sell to chinese consumers? nadja: it is all about storytelling and about during the cut -- adorning the customer with a beautiful decorative item that stands for something, the symbolism of jewelry is so important. this year in china we are launching a collection all about bamboo and panda bears. penelope cruz, the face of swarovski, is creating a flower design. proceeds of that will go to the station in brazil and china.

we have a collection focusing on the caribbean. al customers are really identifying with the topics we are touching upon while at the same time able to adorn themselves and also knowing that what they are investing in goes to organizations supporting certain causes. you wereu -- francine: the driving force in selling these two other countries. is there another branding segment you want to focus on? nadja: since we are talking about storytelling and sustainability and luxury, our next step is the creation of diamonds using fair trade gold. it is really demonstrating that by creating a luxury is product, you are not ever compromising on the planet.

it does require tremendous research in the supply chain but it is out there and the choice is out there. francine: when you look at the hong kong protests, have you lost business in china or does not go elsewhere? nadja: we have definitely felt the loss in business and i think there was a tremendous amount of -- of insecurity and we really appreciate our chinese markets,, our chinese in the early 90's and we really saw that jewelry is a strong means of self-expression, when the beck -- women were allowed to wear what they want to wear that this is aw very strong vehicle of human empowerment and that is why we are here, to create a product that is relevant to the consumer that empowers our customers.

francine: that was nadja swarovski on the importance of the jewelry and some businesses around the world. for more headlines from the u.k. prime minister spokesperson, briefing reporters. i do believe it is in london. the u.k. has made extensive preparations for trade talks. the u.k. will not be rule taking from brussels after brexit. it is moving the pound. i don't know if that means they don't want the alliance for regulation. of borissperson johnson saying the u.k. speaks -- seeks a free rate -- seeks a free-trade deal. plenty more on that next. this is bloomberg. ♪

leigh-ann: this is bloomberg surveillance. let's get to your bloomberg business flash. apple ceo tim cook says ever but he knows the corporate tax system needs to be overhauled and he is hoping the debate can

take place at the global level. he spoke in dublin today. apple is appealing a $14.4 billion bill for back taxes from the european commission. the u.s. is awash with natural gas and it is about to get worse. despite the glut and depressed prices, sale -- shale output continues grew to -- shale output keeps growing. prices fell below two dollars for the first time since 2016 and at that level, u.s. producers don't make any money. airbus is offering airlines a way to guard against falling ticket prices. clients of the airbus -- will trade futures and options on index that capture fair fluctuations and that is your bloomberg business flash. francine: thank you so much. minutes,st couple of

-- look if there is any fallout from that rating cut later today. the interview of the week without a doubt is carrie lam, chief executive of hong kong. we will ask her about the future of hong kong and her place in it. we are delighted to be joined by -- joining us from davos diary. looking forward to this first time. >> is my first time here, i am trying to meet as many people who are outside new york as humanly possible. francine: if you look at the devil's diary, a lot of the focus is on inequality and sustainability. >> there is so much of a focus on sustainability that my goal is to understand what has been under covered. inequality is being under covered because so many executives are focused on what they can fix. just downstairs i was talking to somebody about inequality and he goes yeah, yeah, 24% women this

year and i said i meant income inequality. inequality seems to be hard to define for a lot of people. a great report said it would take about 100 years for female workers to be paid as much as male workers. our chief executives aware of that? sonali: the numbers in front of them like that. the richest 22 men in the world have more wealth than all the women in africa. can you imagine? what are they doing to redistribute that wealth whether it is through taxation, raising minimum wages, those are not conversations we have had yet. francine: thank you so much. we continue our davos coverage. ♪

♪ >> 12:00 p.m. in london, 7:00

a.m. in new york. i'm anna edwards. welcome to "bloomberg markets." let's have a look at what we are dealing with here on european equity markets. we are without the united states today. sois martin luther king day, a market holiday. stocks in europe have come down on the early part of trading, but are fairly flat now. a number of sectors in positive territory, including oil and gas. the brent crude price up 0.8%. we saw it jump early on because of geopolitical tensions in libya and a rock -- and iraq. we've had weak data coming through on the u.k. a lot of speculation on when we will see cuts on interest rates from the bank of england. the 10 year bund yield unchanged