from the coronavirus as countries even quit their citizens and china shuts travel with hong kong. fed confronts a new set of risks. new issues from confrontation with iran to the spread of a deadly virus. and 3m announces 1500 job cuts after missing estimates, the bs week for reporting -- the busiest week for reporting. welcome to "bloomberg daybreak" on this tuesday, january 28. i'm alix steel. how do you mitigate any kind of risk in the market? it feels like what we are going towards is the dollar. the dxy is dominating all currency moves. yields take a break here. equity markets are rebounding off of their lows from yesterday. we had the worst selloff in global equities since last august. we seem to be stabilizing. time now for global exchange,

where we bring you today's market moving news from all around the world. are bloomberg voices are on the ground with this morning's top stories. we begin with the latest on the coronavirus outbreak. germany now confirming its first case, a 33-year-old who had a visit from a chinese colleague. hong kong chief executive carrie lam announced travel restrictions. given the gravity of the epidemic to further reduce the ,low of people between places we are installing the following measures. number one, we will have to tackle the problem at source, and with the endorsement of the central government, the mainland will stop issuing individual traveler endorsements. alix: joining me on the phone from beijing is bloomberg 's beijing reporter.

reporter: 106 people have now died in china. euros seeing increasing numbers of infections as well, and seeing secondary effects in countries like germany and japan where people who haven't traveled to china are getting the disease. a tour bus driver in japan was confirmed as having the virus. he drove a tourist who went to wuhan. justhe problem is not stopping people from other countries, people from china, but trying to contain the virus that is already spreading in other countries. you are also seeing international companies are pulling out of places in china, setting their operations. many major banks and other companies have told their in hongto work at home

kong and across china. the effects of that are going to be very large for china's first quarter, and that is going to spill over to the global economy as well. alix: thank you very much. we want to head to the market reaction now as investors try to price in the fallout from the outbreak. bloomberg's dani burger has more from our markets desk in london. walk me through what traders are talking about. dani: it is definitely hard to hedge risk, so there's been a andof creative etf buying derivatives. what we have seen is really an attempt to stabilize. there's an underlying fomo in the markets, but it is a typical pattern we keep seeing where any sort of optimism has been really fragile. it was clear in the european trading day today, when stocks started higher. but as soon as we had carrie lam's press conference saying there would be more restricted travel, european stocks gave up those gains. the u.s. certainly doing better, but that may be has more to do with the expectation for tech

earnings. we see the nasdaq, for example, leading gains. investors are trying to reprice what may be dampening demand and growth in consumption. one place that is abundantly clear is in oil markets. have oil following the most in about three months. jet fuel might be a factor with the curtailed traveling. things like palm oil at their lowest since 2008. agricultural products heard as well. china is a big consumer of wheat, corn, all of those things that feed livestock. you are seeing investors question what consumption is going to look like. some analysts are a little. more skeptical. . ubs said it is really unclear whether this will have an impact on the oil market for 2020, but then you have people from evercore saying to expect chaos in the next few weeks. alix: thank you so much. thewe stay in london, where u.k. government has made a decision on 5g, deciding high

risk vendors will be excluded, and there will be a 35% cap on high-risk vendor access to nonsensitive parts. going us for more is bloomberg's alix webb. walk us through what we just learned. alex: we knew the government was onng to make a decision bothi and cte, -- and zte, chinese companies, and the extent to which telecom operators in the u.k. are able to use these companies. when was think about networks, it's really about 5g, the next generation of ball telephone -- of mobile telephony. there's been a constant push and pull. on the one hand, the u.s. saying the u.k. shouldn't use this because it exposes them to threats from china, but on the other hand, threats from china itself, and the carriers saying they want to be able to build the best network and do it

cheaply, and taking huawei out of that process would mean ,here's just nokia and ericsson increasing the cost and the time it takes for the rollout of those 5g networks. we now have a decision they won't be able to use the most core part of the network, but they will be able to use the antenna and radio access network, which is less vulnerable to attack. alix: thank you so much for breaking that news. so the wrap up here, huawei is given partial access to build the u.k.'s 5g network. ,ow i want to turn to earnings from industrials like 3m, united technologies. 3m is falling. it missed estimates and is going to restructure and cut jobs. united technologies is up slightly on an earnings beat. joining me is bloomberg opinion's brooke sutherland. what are your takeaways? brooke: i want to start with 3m. the company is taking a significant charge related to

litigation involving those prefabs. for it is a very lowered bar for the company after a string of disappointments in 2019. its outlook for 2020 is not impressive, falling significantly short of what shareholders had been looking for. that reflects organic growth in 2019.r a down year weakness looks pretty broad-based. it will be interesting to see whether or not 3m can dig itself out of a hole, especially given its reliance on china and concerns about the impact of the coronavirus on the economy. 3m is also announcing another restructuring effort, an effort to reorganize its business rather than having teams report by geography. they are going to report by business unit. that is going to result in job cuts of 1500 people.

whether this is the end of restructuring for 3m, we will have to see. united technologies is seeing an impact from the 737 max production shut down, a hit of tout 550 million dollars $600 million in their aerospace division. alix: thank you very much. stay with bloomberg for more on 3m earnings. the chairman and ceo will be joining "bloomberg: balance of power" at 12:30 eastern time. finally, we end with the impeachment trial. president trump's defense turned to president clinton prosecutor ken starr to complain that impeachment's are becoming too,. -- becoming too common. >> we are living and what can aptly be described as the age of impeachment. in the house, resolution after resolution, month after month, has called for the president's impeachment. alix: the president's lawyers

begin their final day of arguments following yesterday's bombshell revelations from former national security advisor john bolton. joining me from washington is kevin cirilli. it feels like the question everyone wants to know, is any momentum building with senate republicans to call witnesses now? kevin: it would appear that the same republicans who have for a while now said they would be open to having witnesses are still the same republicans who are calling for there to be witnesses, but no new additional republicans saying they would join the likes of senators romney, lisa murkowski, and susan collins. the president's defense team will wrap up, and tomorrow, lawmakers will begin submitting questions to chief justice john roberts. we should know by friday whether or not there will be witnesses. i talked to several republicans over the last 24 hours who are saying to democrats, be careful what you wish for. should they hear from john bolton, it would only increase the likelihood that they hear

also from hunter biden. you saw this from the president's legal defense team. they made a passing reference to john bolton, and they are largely shrugging it off. democrats are making a transparency argument. but again, in terms of whether wide number is this of republicans voting to convict president trump, it hasn't changed the trajectory of the outcome. what it has done is raise the question as to how long the trial will be, and that has policy and locations should this drag out for several weeks in an already crowded calendar of an election year. alix: thank you so much. one other story we are watching today, the fallout from the deadly virus in china. starbucks shutting its locations they are, and wework shutting offices all across china, also

encouraging employees to work from home. s meanwhile, apple -- meanwhile, pute's supply chain to be -- supply chain could be bracing impact. diceyrts to get really for the company, and they just may not have enough phones. coming up, much more on your trade and analysis of the markets in today's first take. this is bloomberg. ♪

♪ alix: time now for bloomberg first take. joining me from our in-house

team of wall street veterans and insiders, gina martin adams, vincent cignarella, and evan brown, ubs asset management head of multi-asset strategy. as a traitor, what -- as a trader, what price action are you looking at? or how do you hedge the risk? vincent: you really can't hedge the risk. how do you hedge a virus? the reports, talking to some traders in hong kong last night, were amazing. hong kong researchers think 100,000 people have been affected, and university of lancaster suggests that i february 4, 100 90,000 people affected. what we are getting from china is confirmed cases that have been confirmed physically. you have to know it is obviously a multiple of that. hopefully not as bad as the researchers think, but at the

cuts, the day, the rate things like this from a short-term trader perspective you can look at. from a long-term portfolio manager perspective, you kind of have to let things go and hope it doesn't become a pen to make -- become a pandemic. if this becomes something outrageous, it really doesn't matter what you are in. alix: if you just take a look at what the fed cut is being priced income you can see how more are november andin for december as this goes on. vincent that with it is difficult from an asset allocated's point of view. what this shows is treasuries still have value. everyone hates buying 10 year treasuries below 2%, but they continuously show that they will

help protect you against these kind of shocks. vence's -- in vince's case that in general, all we can do is watch the data and be patient, and hope that it is an acute shock, short-lived, and it doesn't turn into something more concerning broadly for humanity and the global economy. gina: i think in equities specifically, the primary hedge over the course of the last decade has been u.s. stocks relative to the rest of the world because the u.s. is somewhat isolated. even in this instance, u.s. exposure to china is less than 5% of revenue on the index. u.s. exposure to nondomestic sources of revenue, less than 30% of the revenue stream. i do think you will continue to see some slight quality in the equity universe as well. that said, the dollar is already overbought.

the 10 year treasury is already overbought. the rotation among the asset class environment has already happened. i think what you are going to see among equity investors is finding opportunities to pick at some of this risk off over the course of the next week. if earnings comply. that is a big if. you've got to get central bank and earnings to comply, but if you get those things happen, you probably see people pick at opportunities that emerge as a result of this extreme move in a very short time. vincent: i have to wonder how investors are going to match up when it comes time to mark towards the s&p. coming into this year, everyone is buy emerging markets, sell the dollar. i thought asia was going to be a brilliant bet because of the chinese trade relationships, that they've developed that 15 nation deal. then the virus comes in and asia looks terrible. europe isn't looking very brilliant. latam, because of exports.

andy dollar, which everybody hated, looks brilliant. how long does that go? how long are you squeezed out of that trade? alix: you mean until you have to dump and run? vincent: yeah. we haven't seen that yet, but you do get to a point. you just hope, fingers crossed, it does come back. alix: if it goes to april or longer, you have to report quarterly stuff to your clients, and that is not going to look very good. vincent: and you have to fess up. at some point, you have to get out. evan: we are focused less on the amount of time this takes than focused on the data. we know this is affecting the china consumer. the big question for us from the broad global growth story is does manufacturing hold up. do these supply chains come together?

we will be listening to the earnings reports to suggest are we seeing some kind of breakup in production. it is looking a little more concerning. i think we can survive a short-lived hit to the china consumer and emerging consumer, but if this lift in manufacturing we are seeing gets short-circuited, that is a they concern. gina: i think you have to think about the response, too. everyone is modeling this environment on what happened with sars and how slow china was to respond. the criticism was always that china wasn't fast enough, so the reaction function now is we are going to be incredibly fast because of what happened. so i think that is what you are seeing happen. oh my god, the numbers are crazy. we are shutting down everything. we are going to attack this. that's created a level of panic that didn't exist at the start of sars, so it is a little bit different. i think that is why you are seeing the asset prices react so

quickly at the early stages. the first cases were in late 2002. we didn't really see the market react until 2003. wetead, today it is, ok, understand a case occurred two weeks ago. we had a reaction over a period of months for sars. so you have to consider this is not a repeat of last time. the reactions are very different. vincent: gina makes a really good point. i was talking to a trader in hong kong that said all of the banks are basically telling everyone to work from home. . some people are coming in. if two or three people get picked it -- get affected in a building, they basically shrink wrap it, sanitize it, and don't let anybody in. of,lso does the signal among god -- of, oh my god. ask, when yout to

talk about it putting pressure on some managers who went bullish em, what about things smb, when you have euros swissie hitting key levels? vincent: swiss national bank is probably in the worst position of any central bank out there. they do have to get involved. they will have to make some sort of intervention. floor, iteen with the doesn't hold. they are just going to keep mitigating the damage until the markets turn, but they are just not in a pretty place. alix: it is brutal. evan: and they are now on the u.s. treasury's watch list for intervention. not an enviable position for the snb. alix: is there a safe haven asset in equities? yesterday, the majority of the money lost was in those five big

tech names. is it still sell the winners, or is there something more intricate? gina: you are seeing a little bit of sell the winners and buy the laggards. and out of, in particular, commodity sensitive names. tech has been somewhere in between, and i think this week will tell us where tech is going to go. there is a certain expectation that tech earnings are going to be a key part of stabilizing the market response, and certainly helping stocks going forward. we will see. you've got apple and xerox kicking off hardware, microsoft coming. there's a lot of earnings to absorb, but there is anticipation that tech goes from weak man in the s&p 500 to strongman over the next couple of quarters. alix: good conversation, guys.

gina martin adams and vincent cignarella, things a lot. evan brown of ubs will be sticking with me. any charts we use throughout the next two hours, go to gtv on your terminal. browse the features, check it out. gtv . this is bloomberg. ♪

viviana: this is "bloomberg daybreak." there's a takeover in the auto supply industry. warner agreeing to buy delphi technologies in an all stock deal for $3.3 billion, including debt. that represents a 77% premium to delphi's post price yesterday. they are positioning for the industry shift to hybrid and electric cars. bloomberg has learned boeing is receiving more than $12 billion

in order for a loan to boost finances, seen as a vote of confidence despite the ongoing 737 max crisis. the loan was first marketed at $10 billion. citigroup leading the financing. that is your bloomberg business flash. alix: thanks so much. here's a chart that caught my eye, potentially a good sign for the bulls. monday, we saw a rare inversion in volatility markets. you have the spot price on the vix, the white line, sparking above march futures prices in blue. that indicates more risk today than in the longer term. this kind of inversion usually doesn't last long, and when it does, you can have reversal in the markets. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i'm alix steel. yesterday we saw a cheap selloff in global equities. now we are seeing a bit of a reprieve here, off the highs of

the session. european stocks also trading in neutral. and other asset classes, still a stronger dollar story and a teeny bit of buying when it comes to the bond market as well. still with me, evan brown of ubs asset management. we are waiting for earnings, which is why i'm pausing. we are supposed to get lockheed martin. it is out right now. we have earnings coming in at $5.29. . that is definitely a beat. you are also looking at a backlog of $144 billion. obviously, these stocks have been the real winners last year. it looks like sales are coming in at almost $16 billion. they also raised their guidance for net sales for this year. a beat and a raise. that is pretty much all you can ask for in this earnings season. when you look at earnings season , what is good enough?

when you have a beat and a raise and the stock is at 1%, for example. evan: that's good enough, but more important for us than the actual numbers is the guidance. fourth quarter was the cyclical bottom for the global economy, the most difficult time for corporates. now we want to see, as they move forward, are they see and demand conditions improve? how much is the phase one deal going to lead them to be more optimistic, and will they actually start investing, buying and the like? that guidance is really what we are looking for. alix: what kind of earnings do you have to see to justify the valuations we are at? where is the biggest disconnect? evan: i think in general, right now we still have 9% earnings expectations over the course of the year, and we know that those expectations tend to go down over the course of the year, but as long as we are seeing an inflection higher from basically coming from near zero, then that

gives us some nice momentum, and that justifies some of the multiple expansion we've seen today. just to recap these numbers for you, lockheed beat on earnings and also raised guidance in terms of sales for 2020. 2020 earnings coming in a little lighter than previously estimated, but they do see a very healthy backlog of $144 billion. let's get to the macro front. i want to bring in jason thomas, carlyle head of global research and managing director. he's out with a recent report that has five questions to watch for 2020. some of them include whether a trade deal will foster more engagement for the u.s. and china when it comes to earnings, and if u.s. will embrace fiscal expansion, and how the fed feels about spansion. thank you for -- about expansion. thank you for joining us. feel aboute fed expansion?

i think the fed, actually, there is a very clear bias towards rate cuts. i think the priced in cuts is related to the fear of the virus and hedging, and the same dynamics that have put downward pressure on risk asset prices. but in general, even taking that aside, even if in three to four months, everyone feels more comfortable about the viral outbreak, there's still going to be this downward bias in favor of rate cuts. i think that is something related to this inflation undershooting, the way it has been persistent. the only way for the fed to prove that it is truly symmetric when it comes to its inflation target is to not only be cautious in terms of raising rates, but actually to proactively cut rates if inflation continues to undershooting. alix: what is your base case? evan: i think that's right. we don't see the fed moving this year, and it is interesting that

the market is starting to price in a cut. alix: is that a put? evan: i think it is a few things. one, what jason is talking about. they are doing this inflation review and want to show the market they are serious about getting higher. two, it is downside risk protection against the virus outbreak or other trade issues. we are still seeing a u.s. economy, u.s. economic data, where the consumer is in good shape, but the rest of it is kind of mixed. all of these things combined lead you to a fed that is more likely to cut then hike. hikes are a long way away, that's for sure. alix: even at the meeting in the next few days, there are risks now that weren't in the december meeting. you had i virus, you have iran -- you have a virus, you have iran versus u.s.. on wonder if that will see some downside risk capacity. jason: i think what you see is a

recovery that is yet to be evident from the data. as we get deeper into the first quarter, it looks as though there's going to be some pretty significant downward pressure on china gdp. this could spill over more broadly, and i think the hoped-for rebound because of a phase i deal may be pushed further into the year. i think that is going to change perspective, and i think the downside risk or a reassessment of the strength of the rebound is something we can be talking about through the end of the first quarter. alix: go ahead, evan. evan: we were excited coming into this year that we thought we had the potential for a much more vigorous economic recovery. everyone said we ask that they recovery, but it is going to be very modest, muted. we were positioned much more aggressively international than the u.s. because of that. now you have the coronavirus complicating things, and as much as he saw some really nice many factoring pmi's, especially out of europe, you have this

overhang here. we still think the power of the global easing you saw last year is providing a really nice support, but i like the way that jason put it. i think it is more delayed as opposed to derailed, this economic recovery. alix: fair, because if you think about the virus, at some point it will be solved, and then you have to rejigger everything. to this point, the shift into value felt like a blip, and you had a great chart in this piece you did that talked about just how expensive growth is over value. that ties into europe and the eem story. walk us through it. jason: one of the clearest empirical facts in finance over the last 83 years is the notion of a value premium. buy what is cheap, hold onto it for a long time, and your portfolio will tend to outperform. the opposite has been the case for the last decade, where growth has significantly outperformed. the reason is because people

have been willing to pay for aggressively higher multiples for growth. at the end of last year, we had reached a point where the trailing multiples for the top quintile of growth stocks was now at all-time highs, about 80 times trailing earnings. so we live in a world where investors are starved for growth. they see the downward pressure on returns and realize the only way to hit those targets is to invest in the fastest-growing companies whose earnings growth can ultimately validate today's very high valuations. but one has to wonder if we've reached a point where there is so much froth and so few companies can actually hit those embedded growth expectations that it makes for a market where there is really no margin for error. evan: i don't disagree. alix: reluctantly. i really need the value story. [laughter] evan: it would certainly help with tilts toward europe and japan. i think what we need in the end is a more vigorous economic

recovery, full stop. we need people to be feeling better about the world. right now, they don't. i think we will still get there. i think we are kind of trapped in this late cycle mentality, but ultimately, i think we will end up seeing that good bounce inactivity, and that is going to underpin the value story. godot atst waiting for ghett this point. alix: is it possible to get this recovery, and still have growth outperform because you are in a new low neutral environment? jason: that is my expectation. right now we have this cyclical downward pressure related to virus scares and the change in the fed policy framework. also the ecb rethinking its framework. but from a secular perspective, what we used to think of as a neutral 10 year yield of 4.5% to 5% is now really in that 2% range.

you're going to have yields cycle around 2%, almost irrespective of where we are in growth in the cycle. alix: to your point, how do you get that shift into value if the neutral rate is going to come down, or is lower than we may think, and you have 2% or 2.5% yield? evan: i think value from growth is going to have to be really aggressive fiscal policy, which we are also still waiting for. you see it in a few places. maybe to get a secular shift, we may have to wait until after the next recession. monetary policy won't have enough room to cut. fiscal policy, elected officials will panic and let it rip on fiscal. then you could see value really start to outperform growth. alix: which is another one of your themes, will germany embrace fiscal. i haven't heard that one before. jason: it's important to note

that it is not simply debt or debt to gdp, it is what you pay to service your debt. fiscal arithmetic has changed so dramatically from 1992 when they signed the treaty. once this gets incorporated into thinking, there has to be some fiscal expansion in europe, and not just in germany, but the eurozone as a whole. of course, u.k. now outside the eu. i think there's 1% to 1.5% fiscal expansion this year, and that could set the stage for the eurozone. alix: if that scenario plays out in addition to years, does your trade and portfolio allocation still work, or are you sibley not as aggressive? -- are you simply not as aggressive? evan: i think that's what it is.

we think value overgrowth is a trade that will work, but it is more trade than investment. for it to become a big investment, that probably takes much more aggressive fiscal, and that might be after the next recession. alix: great conversation, guys. really appreciate it. evan brown of ubs asset management and jason thomas of carlyle investment management, thank you. viviana hurtado is here with first word news. viviana: we begin with the deadly coronavirus. governments and health organizations around the world stepping up their efforts. at least 106 people have died. hong kong limiting flights from china and shutting down high-speed rail service. germany is the latest country to confirm the virus in one man. pressure building in the u.s. on senate republicans to agree to call witnesses in the impeachment trial. it is coming from the level he should's in john bolton's forthcoming book about president -- thend ukraine

revelations in john bolton's forthcoming book about president trump and ukraine. bolton was concerned that the president granted favors to autocratic leaders of china and turkey. president trump is set to reveal his middle east peace plan. it is expect to be very favorable to israel. that should be favorable to benjamin netanyahu, who faces another election february 2. there are fears today's announcement could spark violence. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i'm viviana hurtado. this is bloomberg. alix: thanks so much. boosts itsub investment management business. if you have a bloomberg terminal, check out tv .

you can watch us online, click on charts and graphics, interact with us directly. check it out. this is bloomberg. ♪

♪ viviana: you're watching "bloomberg daybreak." airbus agreeing to settle long-running bribery investigations in the u.s., u.k., and france. no details have been disclosed, but the settlement could cost airbus about $3 billion. the corruption allegations reaching high into the company's executive ranks. they were partly responsible for an exodus of top management. philips reviewing options for its domestic appliance business. the dutch company saying it could take up to 18 months to carve out the unit.

it makes coffee makers, air purifiers, and other products. a sale would allow philips to become a more focused hardware maker. -- will reach zero greenhouse gas emissions by 2040. sainsbury planning to reduce water use and plastic packs are getting -- and plastic packaging, and also use more electric vehicles and alternative fuels. alix: we turn now to wall street beat. first up, ubs overhauls its investment bank. the bank plans to hire 20 managing directors as part of a broad restructuring push. jp morgan keeps bonuses flat. the u.s. bank is said to be keeping annual payouts roughly flat for bankers and traders. and venture fund investing eases with the vulture revamp -- with the volcker revamp. joining us now for more, bloomberg's sonali vasek.

let's talk about the scoop -- sonali basak. let's talk about the scoop from ubs. sonali: they are ready to start hiring more to turn around that banking division, stay competitive in the u.s., grow in certain sectors, technology, consumer, and see how it pays out. alix: where do they get the talent? sonali: this is a really interesting story because wall street is not forgiving lately. ubs is not the only bank to be cutting hundreds of jobs and then say and come away to minute, we really want to stay competitive. they want fewer bankers to be doing more with that. there's a lot of movement on wall street. let's see how this works out for them. we saw mizuho cut some jobs, ard cut some jobs. do those people have a place to go at the end of the day? alix: and if you are at jp morgan, you're not getting a bonus raise necessarily.

walk me through this story. it has been on the high list of reads for two days. sonali: how is it that you can be breaking through records in terms of profitability and then keeping peso stagnant? -- keeping pay so stagnant? it is because banks are trying things flat to stay competitive. there's disparity in the number here. high performers are going to have to stay competitive forward. if you want to bring in the rainmakers, you have to keep paying those rainmakers. but that doesn't mean the overall bonus pool will be protected from that. alix: fair enough. i also have to wonder -- i'm going to make a leap here -- feeds into tomorrow and goldman's investor day, and that they want to become this consumer bank, and that has a different set of talent and pricing with that. sonali: exactly. how do you bring on this big consumer bank alongside this big

investment bank, where investment bankers are used to getting paid a lot under this bonus culture? that does create a disparity in terms of how people are paid at the end of the day, but remember , everybody is tightening the belt and trying to invest on future growth. james gorman had a pay cut this year and a cut for the workforce. so how does goldman growth? we want to hear about that in the face of 70 people preparing for a tougher time ahead -- of so many people preparing for a tougher time ahead. alix: let's hear about this next come of the volcker rule and people being able to invest in venture capital funds. investor in were an million turned into $600 million gain. they have seen major strides here. the question is whether other banks will really catch up. jp morgan, morgan stanley have

been doing this through funds as well, but right now, there's a very specific set of banks that gain from this. alix: do you make it a stinks in between goldman sachs' own money in investment versus money from clients in venture capital funds? sonali: yes. remember, prop trading and putting your own money and this was a big risk before. we are waiting for the volcker rule revamp to come out later this week. let's see how much they really rain this in. are they going to let banks take massive bets on their own balance sheets, or say this needs to still mostly be client money? alix: fair enough. thank you very much. in today's off the beaten street, we are looking at the bombshell goldman sachs ceo david solomon dropped last week in davos. it is not just a pr stunt. if the policy had been in place last year, goldman could have

lost up to $101 million in fees. the firm is the biggest underwriter of ipo's in the u.s. it is a great article that gives you a big list of how much they would've lost. coming up on the program, now that the usmca is signed, is all good news done for the mexican peso? and if you are heading out, tune into bloomberg radio heard across the u.s. on sirius xm china 119 and the bloomberg business app -- xm channel 119 and the bloomberg business app. this is bloomberg. ♪

alix: time now for trader's take. 20 may, vincent cignarella, voice of the bloomberg audio squawk. you can listen to vincent on the bloomberg by typing in squa . vincent: at the beginning of december, we were looking at this where reese adjusted the

peso had a lot of room to run ash where we suggested the peso had a lot of room to run against -- where we suggested the peso had a lot of room to run against the dollar. think the usmca still needs signatures, but it is basically done. it is all the good news out for the peso. traders telling me you have $1.32, which is exactly where you are at the canadian dollar right now, and upwards of the 200 day. a lot of real money. these are the kind of corporate buy theat come in to canadian dollar, but don't resell it. it could stop the fall of the canadian dollar, and in the next coming days and weeks, we could see the canadian dollar taking advantage over the mexican peso.

chase, so theyly sit at levels where they hedge, and somewhere in the last range, we have been one dollar 29 -- we have been $1.2905. what usually happens after that is the hedge funds follow suit, so i think we could see the canadian dollar do a bit better in the short term. alix: so i'm assuming that cad- mex would be best cross for that? vincent: i think that what is going on in latam right now is not good. it is probably going to lean on the mexican peso as well. real money behind you, you know when you are wrong. so downside could be to big, it is not a shabby play either. alix: in the dollar,

overextended? vincent: short-term, i don't think so. i think we will still have some virus hits that will come out and. . spooked people it is -- come out and spook people. it is the 21st century, so people can't get their hands around the idea of a pandemic where a lot of people could be impacted. but a lot of people could be impacted, especially in the short term. calling tops and bottoms is just a little too tricky. alix: awesome stuff. thank you very much. coming up, colin moore, columbia cio, anddle investment seema shah comfortable global investors chief strategist -- seema shah, principal global investors chief strategist. this is bloomberg. ♪ oomberg. ♪ by the strolle♪s

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january 28. i'm alix steel. let's take it from the top. mainland will stop issuing individual traveler endorsements. alix: hong kong and china shut their border at the death toll rises from the coronavirus. >> we are seeing increasing deaths overnight in china, no one had six people -- now 106 people. you are also seeing secondary effects in germany and japan, were people who haven't traveled to china are getting the disease. than 50 million people remained effectively locked down by travel restrictions. china securities regulators say investors should be rational and and pushe, for long-term investing guidance. >> one thing we have seen today is really an attempt to stabilize. it is the underlying fomo in the

garket and all of the dip buyin that ensues. any sort of optimism has been really fragile. alix: the dollar reigns supreme as a safe haven of choice. >> nothing in the bolton revelations, even if true, would rise to the level of an abuse of power or an impeachable offense. alix: present trump's lawyers begin their final day of arguments in the impeachment trial, setting the stage for the debate over whether to call witnesses, something they got more explicit after a revelation from former national security advisor john bolton. kevin: i talked to several republicans who are essentially saying behind the scenes to democrats, be careful what you wish for. should they hear from john bolton, it would only increase the likelihood that they here also from hunter biden. alix: majority leader mitch mcconnell is trying to get the senate to a vote as soon as friday. the u.k. granting huawei partial

access to build the country's country'sworks -- the networks. in the markets, just in the last hour, it has been a buy the dip mentality. triple digits in the dow futures. the dollar still raining supreme over the 200 day moving average, but a little but of respite yuan. for the in the treasury, selling a little bit on the margin. you have some seven-year supply coming on. joining me for the hour, colin moore, columbia threadneedle cio. welcome. what are you most interested in looking at today? colin: it's hard to avoid the coronavirus, but the theme we had in the office last night was what the market has begin to discount, and what we think is the likely scenario. has it been oversold or perhaps

underestimated? perhaps thinking energy is a little underestimated, some of the impact on it. but some other areas around retail, tourism, gambling might in fact be over exaggerated right now. alix: are using thing about taking inventive that -- taking advantage of that? colin: yes. we related out into or three scenarios of this being a reasonably mild scenario to what truly becomes a pandemic. if it is, i think all bets are off. but anymore mild scenarios, we want to have that list ready. there's a few securities even now we think are probably worth taking a look at. , principal shah global investors chief strategist, also joins us. seema: we thought that risk assets would do reasonably well, but at these valuations,

markets are vulnerable to be had by any kind of shock or shift in sentiment. u.s.-irany had the and australia bushfires, and now this, which means coming into this year, it was important to have defense exposure and some cyclicals. we have been in u.s. treasuries even at those levels. alix: would you want to buy them here? seema: it's a tough one, especially given the coronavirus. it is impossible to predict. i think we have to maintain some exposure. i am not sure if it is necessarily a buying opportunity. colin: if we look at other mrsa, ins like sars, think it is better to think about risk assets. i would not be going off to defensive now. alix: you have to on them before it happens. colin: really early, or wait.

alix: exactly. seema: coming into 2020, we had defensive exposure which we had maintained. we just may be reduced a little bit and allocated more to cyclicals coming into 2020. colin: i think at the beginning of the year, you were quite keen on emerging markets. seema: and it is still on a long-term perspective. i think the fundamentals are still very positive. obviously, the coronavirus, it depends on how it pans out. but i wouldn't be pulling back on em. colin: we like it as well. that was one of my recommendations, and our em team is quite keen, particularly on asian equities within em. that is obviously at the epicenter of some of the things we are talking about here. seema: we haven't changed our view. withing asia was our key debt and equities as well. it is something to watch. if this is something which

persists beyond q1 and into the second half of the year, as a long-term strategic perspective, we still like asia. colin: i think it creates more of an opportunity. the only example i've really got example.rs the bounce back was really significant. it is a terrible situation, but the economic opportunity i think is to use it as a buy. alix: does that mean we also need to expect stimulus and central-bank cuts over in emerging markets? i think every i had to deal with that in one of its outbreaks. -- i think korea had to deal with that in one of its outbreaks. seema: for china, if this is exacerbated, we would expect them to bump up their stimulus. that all comes into play. a number of those countries also have room for fiscal policy to come in. there's a lot to be positive about. i think maybe the sectors are the one to watch. colin: i agree.

the general state of the economies are much stronger than it was. alix: credit growth was better in china before this happened. colin: right. -- thenomies on economies are now more diversified. i think we are in a better position to have the stimulus you were talking about. seema: asia is more than just china. a number of those countries have done a lot of structural reforms to try to take advantage of the supply chain diversion from the trade war, so there are changes already in play from a structural perspective. alix: i feel like a couple weeks ago, we were talking about green shoots, and now we are talking about a derail of the global recovery. in terms of the benefit we may have got from trade, there is still u.s.-europe hanging over our head, still u.k.-e.u. does this add more negative fuel to the fire? colin: i think ultimately, it simply defers demand.

it is, in the early stage, deflationary. ultimately, going back to the previous examples, you deferred demand until later in the year. i don't think if we look back at the full 2020 or 22 anyone -- or 2021 period it would have made much of a difference. seema: but i think it will have an impact on production because of supply chain. when you look at the global growth outlook, we saw stabilization with slight optimism. although the view was never predicated on a chinese boom like when he or 2016, the east asia forecast was also based on the idea that china would stabilize and have a slight pickup. i think that is where the concern comes from, that that base starts to unravel if you have this lead free to the second half of the year. colin: how much of a resourcing of the supply chain has actually taken place? you were right to point out that it started because of the trade

tensions. do you think it is being significant in such a short time? seema: no, i think the intention was at least capex would pick up, and that would lead through to stabilization. -- stabilization messieurs stabilization measures which have been introduced in china start taking effect. colin: so the big impact is how much supply is in the inventory list. alix: right. bloomberg intelligence had a report about apple, saying they have about six months of inventory in china for the phones. once they run out, they can't make their phones. they can't operate. i want to get back to what is underpriced or overpriced. you said casino stocks or consumer stocks, we just got a headline that said china suspends issuing travel permits to macau, for example. do you expect all of a sudden, everything is ok and people will rush to gamble? for is it just a value call? colin: i think if they took the

travel ban back off, you wouldn't get a surge of people. that normal traffic would resume quite quickly. it is not that you would get the lost traffic back. you do have a significant dent to revenue in earnings, but from an overall valuation perspective, that doesn't really change things because it picks back up again in late 2020 or 2021. seema: and it creates a divergent between china, which was not as overvalued as markets, so we have potential to bounce back than you would see if the u.s. and europe are impacted by this fear trade. alix: that is a good point. are we going to recoup all the losses over the last three days? seema: it seems like it is still early days. you will continue to see headlines. we know that for sure. twitter is a bigger impact than it was in 2003. you've got the kind of echo chamber now. colin: but also, the response

has been faster and larger, and i think that's good. we all criticize what happened last time because the response was so slow and muted, but if the response is louder and faster, it is not just twitter and playing it. it is actually louder and faster, and therefore the impact will probably be more true medic. alix: the health care sector -- more dramatic. alix: the health care sector has been open for investment in a while, and they are still having infrastructure problems, cloud and tech problems. is this going to force china to open up their economy a lot faster in different ways so they can fix things like this? colin: we think so. we certainly hope that, not just on drugs, but medical devices, that they would have to make that investment in the medical infrastructure that is there. just one little caveat, there's not a lot of profit in this for the vaccine manufacturers. newstends to be great while the event is occurring, and then it dissipates again.

the longer term investment elements you are talking about i think are quite important. alix: we are going to leave it there, come right back, and talk more earnings. colin moore of columbia threadneedle and seema shah of principal global investors are staying with me. we'll discuss more. this is bloomberg. ♪

♪ alix: a mixed bag of corporate earnings out this morning. 3m falling after missing estimates and announcing job cuts. united technologies beat its highest estimates, but still

down by about 0.7%. joining me is brooke sutherland of bloomberg intelligence. still with me are colin moore of columbia threadneedle and seema shah of parts of the global investors. what is the macro, and what is 3m? brooke: there's a lot that is just 3m. they are taking a lot of charges here. they are going to cut 1500 jobs, and they are reorganizing the way their business is structured. they are going to have teams report into their business segments rather than by geography. whether or not this is just shuffling the cards around or actually going to provide meaningful change i think is a matter for debate, but they are also taking a charge for litigations related to those chemicals we have seen. interesting that they are taking a charge related to litigation because i believe that's the first time they've actually done that. of course, there is the broader macro return. it is weak growth.

that is below what a lot of investors have been hoping for. question is whether or not they are finally guiding conservatively, if they figure this out after having to repeatedly cut their guidance over 2019, or if this is just the reality for the global economy. colin: it's been a few years since i visited, but one of the big themes i had was the amount of innovation they had. something like 30% of sales e from products invented in the last few years. this adjusts the efficacy of that pipeline isn't as high as it used to be. brooke: they have historically been a heavy r&d company, and they have not and acquisitions come about last year they bought someone, so that suggests the pipeline isn't working as well as it once was. you feel the need to shell out billions on a massive deal with questionable returns. there's a lot of questions about

whether they were actually get what they expect to get out of that deal, considering that company was private. it was rather well-managed. the margins are already pretty high. colin: very hard to see the synergies out of that. alix: you guys were talking about this on break. boeing, what is the exposure? brooke: for united technologies, they also reported today, and they do have exposure for the max. alix: the stock is down even though they beat? brooke: yes. united technologies makes a lot of parts for the max, especially because of an acquisition, so it is going to break up in the spring and separate its elevator, carrier and hvac divisions. i wonder if that is playing into the stock performance today. it is getting rid of those. for collins, the concern is the max. you will see a hit to operating margins from that grounding in the production halt that

beginning january. colin: is it just the max, or do you think there are other issues? brooke: i don't know. i think this is the first time we've gotten numbers on it for 2020. the other thing is we seen a lot of industrial companies break up and get stuck in this sort of purgatory where you are waiting for the breakups to actually happen, and it is hard to really price in that advantage until it does take place. they are also buying raytheon, a more defense oriented company. defense has been great. it is a really great place to be right now. you have seen investors flocking to that sector. lockheed this morning is really strong. i asked to similar strength there. colin: i do think this breaking down of the conglomerate and focusing on some key businesses is a really important theme. are delphi andu borgwarner in dealing with a structural shift in ev's.

depends on the industry. brooke: it did make me think when 3m is reorganizing and putting employees in specific business segments, that has always been about because they ever be forced to break up. they have been the one conglomerate that has avoided this push. colin: do you think it is may be a pre-move to that actually occurring? brooke: i think it is interesting anytime you have a reshuffling and refocusing of businesses. that does make it easier to break off some of these segments. alix: seema, what do you do with industrials? the last year, they have been up 10%. do you want to buy them? what do you do now? seema: i think you need some exposure, but it is like everything else. you need a balanced portfolio. industrials is not necessarily at the top of our list. we like other sectors a lot more. -- but evenh within the industrial sector, there's a lot of individuals that can do well.

but you could do well to maybe pull back a bit and focus yourself on some of those defenses. we still like stuff like real estate as a longer term this current macroenvironment. colin: i think there's this concept now of the noncyclical cyclical, the secular cyclical. as they are restructuring, if you are going to focus on hvac and you are generally focused on the structure of world temperature, that is not a bad place to be. thanless dependent on little surges in gdp growth, for example. i would be very nervous just by an industrial, but there are some very well-managed companies within that. seema: i think that is the theme this year. if got to look at the balance sheets that can deal with anything from corporate profit margin concerns, geopolitical things. alix: very interesting conversation.

brooke sutherland, thank you very much. colin moore of columbia threadneedle and seema shah of principal global investors will stay with me. joineo of 3m will "bloomberg: balance of power" at 12:30 eastern time. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." u.k. is breaking with the u.s. over huawei. the british will give the chinese company a partial role in building its next-generation mobile network. it will keep huawei out of the most sensitive, core parts. the trump administration argues it is a security risk. it says it is disappointed in the u.k. decision. more fallout from the deadly coronavirus in china. public buses have been ordered

off the road to prevent the spread of the virus, but it is also mucking it hard for workers to get to steel mills. the full impact may not be known for about a week. many factories are now on go slow mode for the lunar new year holiday. that is your bloomberg business flash. alix: thanks so much. still with me, colin moore of columbia threadneedle and seema shah of principal global investors. think that china consumes about 15%, 16% of the world oil, 50% to six to percent of that is internal transport, and think of all of the travel restrictions at the moment, you could come up with the scenario where maybe 3% of world demand is being cut off temporarily. that is another one where it doesn't just come back. you don't take more trips in the

future because you didn't travel this weekend. i think that will create a pall in world demand, and there are not really the supply adjustments taking place, and my opinion, because it is too quick. they couldn't possibly have come forward and made the adjustments to supply this early. i think we've got this short-term mismatch. alix: how do you look at materials, commodities? seema: off the back of the u.s.-iran tensions, a lot of people were saying the best raise your is expectations. either you have a return of those tensions, which means that oil prices rise, or you have a global growth scenario, which also means oil prices rise. now oil prices have been really badly hit, so it is kind of a taking back the exposure for energy. it is so vulnerable to geopolitical hits that maybe raising your expect tatian too much isn't the wisest -- raising

your expectation too much isn't the wisest. colin: this is a time to really make sure you've got the lowest priced producers. that is where you get the market initially reacts, downgrades the commodity, downgrades stocks, but there are those that are much more able to cope with it. we tend to think that, like,," has a significantly lower ash like, --tend to think that, like, conoco has a significantly lower profit margin. alix: coming up, we get durable goods out in a few minutes. dean maki will be joining us. this is bloomberg. ♪ and they lived happily ever after. the end.

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panic we have seen over the last few days. s&p futures up .6%. earnings confirming upside like lockheed martin. the dollar winning out when it comes to all currencies. i want to take a look at the ftse, because there's a lot of talk about the s&p having to stabilize the market. durable goods coming out for december. it looks like a disappointment. if you back out non-defense looking at -.4%. transportation, -.1%. the headline is pretty good, coming into .4%, although the previous month -- coming in 2.4%, although the previous month is revised lower. boeing will make this messier. these are orders for durable goods that are supposed to last three years. transportation equipment orders was up 7.6%. part to defense

aircraft. orders for non-defense aircraft, that is a boeing story, continue to fall. let's break it down a little bit more. dean maki is still with me -- he is not, he is new. colin moore and seema shah are still with me. dean, it is getting messy. what is your overall take. : it continues the environment of sluggish business growth. the trade war has been a big drag on business spending. the trade war, all of that has combined to make business hesitant to invest. i did not think these numbers change that. comes frome strength defense, how long does that hold up? dean: the aircraft orders tend

to be volatile. it is the actual shipments that matter more than month-to-month orders. alix: went away see the change from the trade war in a positive way. now we will buy goods and invest? dean: we will see some stabilization where we had been seeing deceleration. global growth, apart from the coronavirus, seems to have bottomed and start to have picked up. we will see what happens with the virus, but if that continues and global manufacturing picks up, that will spur additional investment spending. do you think central banks can influence that or is it all driven by the confidence issue? dean: it can help on the margin but it is not the most powerful impact on business investment spending. colin: the big drivers the confidence about the future. dean: exactly. if they confident about the

future, then they will invest. they will not invest just because rates are a quarter-point lower. seema: how much is the u.s. trying to trade with tensions having eased off going to have an impact? we still have uncertainty hanging over us with the presidential election, you do not know what the policy will be next. is this still the environment where businesses are willing to pick up their investment plans? there is still a shroud hanging over us. dean: the deceleration probably ends. you start to have replaced things. you do the marginal thing you are thinking about doing. in terms of the push and a investment spending increases, that seems unlikely anytime soon. colin: at an economic level to individual corporate, what type of investment are you looking for that would have the higher multiplier effect on the economy. not all investment is that useful. in terms of multipliers,

construction always has additional things that go into it. all of it does have some positive influence, but that is the one that draws in most other sectors. colin: i was thinking about infrastructure and housing. dean: also commercial construction. alix: which leads us to what the fed can do. the rate cuts helped with the housing market. the bets are increasing because of the coronavirus. what would another cut do? can the fed do anything to help any of this? dean: if they did end up cutting, it helps on the margins. i do not think that is what is needed. what is needed is more policy stability, solid environment to make decision. the fed cuts have helped the housing market. consumers and the housing market doing well. business investment spending exports are probably week. that is where we at in terms of getting 2% growth. colin: housing is a largest

single investment in individual can make. it is confidence that drives it as much as the cost of living. the cost of money helps in the margin, but i believe it is confidence. if there issues about employment or coronavirus, people tend not to make big investors. alix: do you feel it has been a liquidity driven rally because the fed has had to expand their balance sheet, even though it is finally bewill it supported by something fundamental? seema: if you look back at last year, we had weakening growth, we had geopolitical risk and we continue to do well. he saw the sharp cup once the fed started to expand the balance sheet again. hopefully this year you will have the economic stabilization as well. on the margin, how much more to they do? we saw a rate cut.

we were unlikely to see much more. you need a solid growth to come through in order to see risk asset doing well. aren: i think rate cuts negative. they tell you there is a crisis. the marginal cost of capital change dean referred to is so small i believe it is confidence. if the fed is saying we are worried, that does not help confidence. alix: doesn't the market need the fed put? seema: in a way. i think the fed is held hostage by markets. in places like europe, interest rate cuts can only get down to this stage. dean: market participants see the fed as their friend right now and did not see the fed as threatening rate hikes anytime soon. as long as that is the case, the market sees the fed as friendly, the market tends to do relatively well in those circumstances.

alix: when jay powell talks tomorrow, how you think he will tackle things like iran and the coronavirus? last meeting, i thought the downside to risk started tapering off. how do they address that without freaking everybody out? acknowledge, especially the coronavirus, is a source of uncertainty. the fed will be monitoring it like anybody else. they are prepared to act if necessary but right now they are in a watching mode. it will be interesting. the fed may raise the interest on excess reserve rates, which is more of a technical. alix: i've been waiting for that to come up. it has been seven minutes and no one has talked about ioer. dean: there is the fear some of the market might take that is the fed tightening. the fed does not think about it that way. they think it is just a technical issue, but especially

if markets are in a fragile state, it may not hurt the fed to do for them for a while. would be aink that negative message wrapped capital investment. if you're encouraging the banks to increase reserves, then what happens to see and i loans. there's a lot of capital. i do not think it is a great signal. it only signaling and technical, but signaling -- it may not be the time to put a negative signal on. colin: signaling it technical to the fed. i am talking about what it means to the marketplace. seema: i think it is more of a technical. i am not convinced it would have a significant impact. the bigger conversation is what are they doing in april, what are they doing in balance sheet? colin: do you think that if they send that signal today, isn't that a precursor to saying we

may be taking more action further down the line? they rarely do everything is a one-off. that is where i am concerned. it is ado not think signal of policy rate hikes. i do think some of the market may take it as a signal the fed will not expand the balance sheet as much as we thought even though the fit thinks balance sheet expansion is not qe and should not be a big deal for markets. many in the markets think it actually is. that is where the fed should tread carefully. from thee conversation fed about what they are doing is fraught with uncertainty. nobody understands it. getting that messaging will be key. there is a massive segment, including myself, that believe it has been a liquidity driven rally. alix: if they wind up changing what is available in the repo market and tapering them back like we saw, does that mean you should sell stocks?

know if younot necessarily have to sell, but in terms of the positive outlook we still believe central banks are putting forth, anything that looks like the central bank is withdrawing is a slight negative. we have to get beyond that. the market treats the fed like a drunk now. alix: the question is how do you get beyond that? colin: we've been going on for 10 years. there has been solid earnings growth, but we have to get back to focusing on the fundamentals of the economy and less about what the fed is beating us with. alix: we have to leave it there. thanks so much. dean maki, seema shah, great to have you. colin moore will be sticking with me. we want to give you an update on it was making headlines outside the business world. viviana hurtado is here with first word news. viviana: we begin with the coronavirus.

governments and health organizations stepping up the fight. the number of cases has soared past 4500 people. at least 106 people have died. hong kong limiting flights from china and shutting down high-speed rail service. germany is latest country to confirm the virus in one man. and on capitol hill, pressure building on senate republicans to read to call witnesses in the impeachment trial. it is coming from the revelations in john bolton's forthcoming book about president donald trump and ukraine. the president's supporters are bracing for the possibility of more damaging disclosures. according to the new york times, the former national security thesor was concerned president granted personal favors to the autocratic leaders of china and turkey. today president trump will unveil his mideast peace plan. he will be joined by benjamin netanyahu. the proposal expected to be very favorable to israel, and that should be helpful to mr. netanyahu who faces another election on march 2.

the palestinians are not speaking to the president because they do not fear their side will be equally hard. there are fears today's announcement could spark violence. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. alix: thanks a much. coming up, apples rally will be tested when it releases its quarterly results after the bow. we will speak to an apple bull, krish sankar are. on gtv .arts this is bloomberg. ♪

viviana: this is "bloomberg daybreak." i'm viviana hurtado with your bloomberg business flash. airbus. with

the company agreeing to settle long-running bribery investigations in the u.s., u.k., and france. no details have been disclosed but bloomberg has learned the settlement could cause airbus $3 billion the corruption allegations reaching into the company's executive ranks. they were partially responsible for and exits's of top management. couldsk company says it take up to 18 months to carveout the unit. it makes coffee makers, air purifiers, and other products. it would help it become a more focused health care equipment maker. a british grocery chain says it will spend $1.2 trillion to reach net zero. reduce water usage and plaque just -- and plastic packaging and use more electric vehicles. that is your bloomberg business flash. alix: time for bottom line. we take a look at companies need

to watch. apple heads into earnings with a $1.4 trillion market cap. taylor riggs looked into the numbers. what a difference a year makes. just one year ago, tim cook sent a letter to investors saying the company was cutting its revenue guidance due to an unforeseen slowdown in china. tim cook highlighted a major slovak -- a major shortfall in iphone revenue. one year later, wall street has done an about-face. theysts have 27 buys on company and only seven cells. what are they expecting to fuel the bullish sentiment? iphone revenue. despite the company saying it wants to transition to services, 52% of revenue still comes from the mobile device. morgan stanley is the latest analyst to raise her price target into earnings. apple customers

seem prepared to replace their smartphone sooner. replacement cycles cannot increase much further. air pods are another reason for bullish sentiment. bernstein said air pods outpaced unit growth trajectory of the original iphone and watch. bernstein predicts air pods generate $15 billion of revenue in 2020. finally, apple tv plus. apple was one of the latest to enter the crowded streaming wars in late 2019 with a service at $4.99 a month. at that low price, analysts think apple tv price -- apple tv plus is priced for subscriber gains, not margins. but heading into earnings, anticipation is high. the apple revenue can meet expectations across the iphone, wearables, and services.

alix: for more on apple, krish sankar joins us from san francisco. $350tperform rating and a price target for apple. it is hard to find a bear on the street. what kind of earnings will justify where we are trading for apple? krish: it is interesting because for apple it comes down to the guidance. expectations are for a slightly better than consensus for the march quarter. forr things to watch out will be any kind of color they could give on services in terms of how the tv plus will impact the cost structures. they just completed the purchased of internal modem assets in december. keep in mind, apple is notoriously secretive. you do not get anything about the 5g phone. potentially the se to, which is supposed to come out in march.

what you need to be happy with his a beat in the march quarter and how to think about services and the cost structure. colin: if we think longer term than just the quarter, i assume a key driver is the transition to 5g and what the impact will be. i think it has been exciting to higher than the 11 there were expectations a year ago. do you think there has been a pull forward and there'll be less of a surprise with the switch to 5g or are you still excited? excited.am still i am not in the camp that has a super cycle for 5g, and i am in the camp where 5g will drive incremental iphone sales. a year ago people were very negative on iphone, and then that sentiment changed. the general view was no one was going to buy an iphone 11, they

would rather wait one year and by the 5g phone, and then they saw the camera and iphone levels -- the iphone 11 is a big hit. i feel like 5g will be an incremental driver for iphone units. the real question is how sustainable is it going to be. i think into this september and october, you will see positive revision for iphone. colin: taking that point about how sustainable it will be, think about new technologies like 5g that at&t and verizon are testing out. does that leave people thinking i will wait for the next big thing as opposed to getting overly excited about 5g, or you think that is far enough out to avoid any excitement about 5g? krish: the numbers are all over the map. supply chain information seems like there is supposed to come out with a sub gigahertz. the 5g wait and see how phone is.

as it is, there is no killer app. the experience of 5g, the faster download time might force consumers to move to 5g. we are shooting in the dark trying to figure out what the phone will be cured it comes down to what the phone and features are. if the features are attractive, the consumers will buy it. you saw with the iphone 11, all they needed was a better camera and a leap in battery life. alix: how do you think of the coronavirus? bloomberg intelligence says we have six months of inventory left of the iphone in china. what you look at to see whether we may be running out of production or inventory? krish: it is a tough question to answer. -- last the information week and this week the supply chain has been on holiday for those chinese new year, so it

has been tough to quantify. riskirus is a manageable -- the question is whether the virus is a manageable risk and there could be a solution found, i do not think there would be a big issue. it is more of a wait-and-see and see approach at this point. alix: thank you to krish sankar of talent. colin moore, thank you for joining me for the hour. it was great having you. coming up, more on apple and how the stock is looking overextended in today's technically speaking. if you're jumping into your car, tune into bloomberg radio heard across the u.s. on sirius xm channel 119 on the bloomberg news app. this is bloomberg. ♪

alix: time for technically speaking. we will set you up for some traits of the day. bill maloney, voice of bloomberg's equity squad, joins me now. listen to bill all day.

s&p, where you look. 3240 we talk yesterday how was the key support level. potential resistance around the morningside of 3264, yesterday's high of 3270. so far 3240 is holding. alix: let's get to the 10 year. we did see more buying overnight. what do you see? bill: we talked about the 10 year yield yesterday. currently around 1.62%. support was 1.59 to 1.60. it looks like it wants to hold that level again today. resistance 1.64 to 1.67. alix: let's round it out with apple. we just talked about how expectations were so high. bill: the stock is trading higher by 1%. looking at a five-year chart, historically the stock does trade around the 200 day moving average. it has had a massive run since

the january 2019 lows. maybe sellers around the all-time highs of 323, but the stock has had such a massive move, maybe a little cautious going into earnings. bloombergs- alix: bill maloney setting up with apple and the s&p today. that does it for me, coming up on the open, julian emanuel will be joining jonathan ferro. we are looking at s&p futures hanging on to that rally. up .6%. the virus fears are dissipating. this is bloomberg. ♪

jonathan: from new york city for our audience worldwide. i'm jonathan ferro. "the countdown to the open" starts right now. ♪

jonathan: coming up, into the unknown. global stock markets looking for stability as china expands travel curbs and companies continue to shut down offices just ahead of the biggest earnings report this season. apple results on deck. good morning. here's your tuesday morning price action. equity futures recover. we are positive 20 points on the s&p, up .6%. yields lower earlier for a six straight session. they are higher by one basis point. the euros a little bit weaker, euro-dollar 1.1005. let's begin with the big issue. the coronavirus sending investors into the unknown. >> what we know? >> we do not know much. >> we do not know all of the details about the virus. >> how it will pan out. >> we need more information about the real spread of this virus. >> if the virus