sent in their stores -- santander soars. >> the model is working, the , execution.on it allows us to keep growth. and keep an attractive dividend policy. >> coronavirus cases climb.

three more cases confirmed in germany. holiday quarter results top estimates on strong demand for apple. tim cook says the company is monitoring the coronavirus closely. welcome to "surveillance," i'm nejra cehic in london. green on the screen for a second day for european equities. u.s. equities bounced 1% after the worst losses in four months. the 10-year yield three basis points after gaining five yesterday. investors also digesting earnings season. the hang seng came back online and closed lower, down more than 2%. oil bouncing back after stockpile data. let's get back to santander. francine lacqua has been speaking to the chairman. >> $8.3 billion on the line profit, that shows the strength and resilience of our model. delivering against all of our strategic goals.

topline growth of 49 billion euros. it is doing it in the right way. profitability at 11.8%. atally, in strength, we are 11.65, which is a level where we are very comfortable. it is a really strong set of results. capital willnk placate the critics? >> it is a level where we are very confident. year will generate the capital growth. it means we have ended up at 11.55.

we have always spoken about the transformation. increase.nounced an we have doubled the cash dividend per share. the model is working, the transformation. it allows us to keep growth because we have also grown. and also keep an attractive dividend policy. we have concerns on the market. can we continue growing at this rate? or will you have to look at acquisitions? >> go back to our basics. what this means is that across our three regions, if you look at latin america, 20%, 20 1%

return on equity. 37% earnings. 15% of our loans. you look at europe, negative rates. underlying for europe as a whole. above the cost of equities. europe building a one europe platform. north america has done incredibly well. keeping the momentum. is one of our best performing regions. , it is working and it is working across all of our regions and businesses. >> you say you have a very resilient model, but can you take more negative rates if it were to do that? what does it mean for santander? with rates being at plus 05.

if you do the math, that is a huge change. scale, thek to the management, the strategy. 10% underlying return. 53%. we have committed to do better. it is going to increase next year. it is all about the customer experience. , a country, the u.k. that is doing more than others. that is why the model is more sustainable and predictable. banks cane anything do to protect themselves from negative rates except for cost

cutting? >> i have said this publicly that i thought the ecb did an amazing job, they basically saved the europe. i think it is important to work from here onward. look at the positives and negatives in a really productive way. none of us actually see it. the negatives outweigh the positives. social problems. how can i touch people for the savings? what if it means for inequality? ?hat does it mean the most important one is transition of monetary policy. take what you are trying , loans are coming down.

let's get the bloomberg first word news. >> we begin with the deadly coronavirus. more than one hundred 30 people have died from china's coronavirus. the number of cases jumping above 6000. in an effort to stop the spread of the disease, governments are tightening international travel. the u.s. and u.k. telling residents to avoid all nonessential travel to china. here in the united states, president donald trump says his plan for the middle -- peace plan for the middle east is a win-win solution and he believes it will make the region safer. the palestinians say it is a nonstarter. the two state solution would leave an undivided jerusalem as israel's capital and would give a green light israel to annex existing west bank settlements. >> over the last couple years, we have studied the issue, we have studied the region, we have

consulted with the parties and the biggest thing we were able to do today was bring the israeli government together to agree on different parameters to put a two state solution option on the table for the palestinians. , presidentol hill donald trump's lawyers concluding their defense, but they likely did not completely quash a drive to get additional testimony from former national security advisor john bolton. senate majority leader mitch mcconnell said he does not get -- yet have the 51 votes necessary to prevent the senate from calling witnesses. global news 24 hours per day on powered by more than 2700 journalists and analysts. this is bloomberg. nejra: thank you so much. coming up, as the coronavirus spreads, we will take a closer look at the human and economic impact across the world. this is bloomberg. ♪

economics, finance, and politics, this is "bloomberg surveillance." china's coronavirus is spreading further. the death toll has risen to 132 and the number of cases have passed the total for sars. there are restrictions on travel from mainland china. germany has identified a cluster of local patients. corporations have been taking measures to mitigate the impact. united airlines will suspend most flights to china starting on saturday. starbucks has shut around 2000 coffee shops. apple says it is assessing the disruption to its supply chain. toyota will stop all china production until november 9.

we also have our guesthouse in set from rathbone. let's pick up on the reaction by companies because it is wide-ranging across a number of industries. how does it compare to the way that corporations dealt with sars? >> this is a lot quicker, a lot more wide-ranging. you are seeing a lot of coffee shops, retailers closing down, british airways shutting down flights to china. kind of unprecedented actions. nejra: run us through some of the big actions. we mentioned starbucks. apple has even guided differently in its forecast, a wider range because of uncertainty. what are the other companies you would highlight on the global scale stood mark >> another interesting one was lvmh. they said yesterday that while they are seeing some impact in these aggressive steps by the chinese authorities hitting them in the short term because you are seeing a reduction in travelers and chinese consumers getting out to the shops, at the same time, that kind of action

could have a beneficial impact in the long term if it does come to grips with this virus. nejra: how quickly could these companies recover from the steps they have taken to mitigate the uncertainty of the virus. >> it depends on the company. apple is so deeply interwoven with the economy and it has a longer effect if they had to shut down. carmakers are pretty good at nimbly responding to this kind of thing and closing factories, reopening when they've got the right conditions in place. nejra: thank you so much. for the hour, we have our guest host, the chief investment officer at rathbone. great to have you with us. how concerned are you about the actions corporations are taking this early on before we have an actual true understanding of the scale of the virus? >> good morning. i think it is very prudent that they should be guiding investors to the actions they are taking.

it is interesting. you mentioned apple. was anphasized that it advantage they have over some of their investors. that is a point. obviously if you are giving guidance for 2020, people looking into q1, you are going to be cautious about your sales into asia and china because of the virus and i would expect we are going to have a number of people talking about this. 2003u reference back to and sars, people were worried obviously and the good news this time around is that the authorities have been very swift to bring into the world's attention and react by locking down a number of the major cities. i think that is positive in the medium-term and companies do re- turned quite quickly in q2 and 23 and 23 in terms of 2003 and the sars epidemic. we will have to see how it turns out. nejra: would you be making any changes to your equity strategy

in the portfolio based on concerns around earnings, but also the potential impact? >> obviously, no is the answer to that. global growth again, the only reference point in the recent past we got. it recovered very quick and the second half of the year. in terms of what we would be looking to do in terms of portfolio, we are fairly defensively positioned going into this. we have not altered that particularly going into q4. but if there was a large selloff in certain areas of the market, the leisure luxury goods area, that may be a fine opportunity. that is something we will be monitoring closely. nejra: i'm hearing a lot of people saying they are looking for buying opportunities, whether it be travel and leisure or emerging-market or elsewhere. what about bonds in the portfolio? would you be preferring treasuries as a sort of

portfolio hedge? julian: yes. we are a sterling based investor with the majority of our clients in sterling assets means that we obviously favor u.k. government bonds, particularly we would look more to protect ourselves. maintainbe looking to a government waiting, but not a large weighting. we have been running down our government waiting. i don't often talk about gold. youa: hell recently have been more positive about gold? was it pre-coronavirus? upped our gold weighting a couple months ago. our -- my colleagues turned out to be right. reasonablen running levels of cash, as well. nejra: you said some of the

travel and leisure stocks might look like a buying opportunity. one other aspects of the equity market would you be looking to enter? would be parts of asia, china, or other emerging markets? julian: i suppose if we had a sizable setback across asia, we would visit areas and waiting. looking athen we are the developing, emerging world, we tend to concentrate months more in asia than we do in europe. so, we keep that there. that may well be an opportunity down the line we have to see. obviously, you need a weaker dollar with that. currently, our forecast is for the dollar to remain reasonably firm. it will be through a crisis like this that people will go into it and that will support the currency to a degree. there is a balancing act to be had. if we look at currencies

more broadly, are you doing any of the hedging by currencies? julian: not at the moment. having a large, we've got over 60,000, so it is quite hard to do that with a large number of clients across the board. nejra: staying with us, our guest from rathbone. tracking the human cost of the coronavirus. we will bring you up-to-date with the impact on the markets. this is bloomberg. ♪

company, especially as a

bank, we need to do more. we have been working on this, so to -- but thetted key issue for all of us is to have it done responsibly. we don't want to leave people behind. a lot of people, billions of citizens, billions that are not middle class that want to live better. i'm francine lacqua in madrid. that was the santander chair speaking to me earlier in. we were talking about sustainability and that she wants to strike a balance. not encouraging new fossil fuels without displacing a lot of workers also affected. topping the leaderboard, the biggest gain or. let's get straight to the bloomberg business flash in new york city. >> we begin with novartis, the company forecasting rising annual sales and profits after

the swiss drugmaker sharpened its focus. sales in 2020 are expected to grow. this is helped by new key drugs. the company says the coronavirus is not expected to disrupt medical supply chains. >> in terms of our supply chain, what we see right now is a stable situation. suppliers arey far away from the center of this particular outbreak, so we feel very good where we are in the supply chain. the key is to closely monitor the situation. it is obviously very fast evolving. >> ryanair's warning of job cuts after the ongoing grounding of the boeing 73 seven max. the airline is reconsidering its summer schedule, which includes possible base closures. they also expect the first mass jets to fly in september or october. starbucks closing more than 2000 locations due to the ongoing viral outbreak that has killed

more than 130 people. the news casting gloom over solid results for the giant in the first quarter. same-store sales rising 5%. the company maintained its 2020 forecast, but that does not yet include the impact of the closures. that is your bloomberg business flash. thank you so much, i'm francine and i will pick it up from here. how long will the coronavirus continue to impact markets? the worst may be over in a few months. here with the details is dani burger. there crystalt ball and they say the coronavirus outbreak is likely to peak in march after the spring festival travel season. if that holds true, that means the market impact of the price trough will occur around april 25. impact will not be as bad as

ours, they say. the fatalities have not looked as severe as sars. they point these countries as the ones to be hardest hit. it is a very nerve-racking time to be trading this, considering you cannot trade directly on the chinese exchanges. we are seeing etf's and derivatives pick up the flatness. volume has absolutely skyrocketed as investors rush to hedge. that is the highest since the yuan was devalued in the summer of 2015. as we look at the contours of and calls,d -- puts there have been a lot of protective puts, but actually

more calls, which would suggest traders are hedging on the fact that china might see gains in the stocks when it reopens. francine? francine: thank you so much. dani burger with some of the charts we need to continue looking at. coming up, what will brussels decide on huawei? we will discuss that next. in the meantime, this is what your markets are doing. that may shift the focus away from the coronavirus that has been putting so much angst in the markets. this is bloomberg. ♪

francine: santander soars. the spanish lender topped estimates on strength in its

latin america business. ana: 97 basis points of capital shows the model is working -- the transformation, the execution -- and, again, it allows us to keep growth, because we have also grown. not just revenues, we have grown the balance sheet and keep an attractive dividend policy. francine: coronavirus cases climb. the death toll from the illness rises to 132 as the uae reports its first cases and three more are confirmed in germany. and apple shines. holiday quarter results top estimates on strong demand. tim cook says the company is monitoring the coronavirus closely. good morning, good afternoon, good evening, depending on where you are in the world. this is "bloomberg surveillance." i am in bedridden finish ceo of santander in madrid. we spoke about alex and brexit.

over an hour and a half into the trading day, let's check with european stock movers with dani burger. dani: big decline today from software -- they had to cut their midterm operating margins are that is sending shares lower by more than 10%. the ceo said they had enough cash for m&a but were big analysts say this is really going to put an intense focus on the company's future earnings. future growth might be hampered by the latest numbers. latest moversthe on the stoxx 600. the software company, satellite company, rather, has been that theor a payout u.s. wanted to give to mobile companies. ses says they would be worth as much as $77 billion. late yesterday the u.s. senate introduced a bill that would create a pot of only $6 billion, so a disappointment for the satellite company. santander -- i know you are all

over the story in madrid -- they are one of the biggest gainers, up nearly 4%. there fourth-quarter beat estimates, and they really helped alleviate concerns about their cash levels, their capital levels. they say they will end up in the buffer range of an important cet target. francine? much,ne: thank you so dani burger with your latest stock movers. that's get to first word news with viviana hurtado. viviana: the death toll from the coronavirus has topped 130. the number of cases also topping 6000. governments are tightening international travel in an effort to stop the spread of the disease of the disease the u.k. and u.k. -- the u.k. and u.s. allurging the stopping of nonessential travel to china. an earthquakes and office workers in miami financial districts fleeing. region areoss the

urging residents to move away from coastal areas. also in the u.s., president trump's lawyers concluding their defense, but they did not completely quash a drive to get additional testimony from former national john bolton. bloomberg learned in a closed-door meeting, senate majority leader mcconnell said he does not get how the 51 votes needed to prevent the senate from calling witnesses. whose bogusman trades contributed to the $1 trillion selloff avoided prison. that is because he provided "extraordinary cooperation" to the government in identifying other market chiefs. he was initially charged with 22 criminal counts. he faced a combined maximum sentence of 380 years, but he is not going to go to prison. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i'm than 120 countries, viviana hurtado. this is bloomberg. francine? francine: thank you so much.

let's focus on why way. the e.u. is publishing plans on -- on huawei. de was publishing plans. set to exclude equipment suppliers from critical parts of 5g networks deemed to be a security threat. let's get more from a reporter, maria tadeo. this was a huge story in the u.k. yesterday, where boris johnson said he would allow parts of the 5g network to be billed by huawei. what are we expecting the e.u. to say today? maria: that's right, francine, and it is a big decision for the european union because we are talking about 27 countries. the european commission will tell member states that they should be in a position to restrict access if they feel they are too risky for national security, and perhaps in some cases consider banning them. what is key here, we understand there will be no specific

mention or reference to either china or huawei, so that leaves the door open for huawei to participate in a 5g roll out here in europe. this is not just a technology story for the european union, it is also about trade and geopolitics. they feel they are caught in a cold war between china and the u.s. we know that officials have wrapped up pressure on -- ramped up pressure to say that europeans are naive, but they don't understand the company is a proxy for the chinese government. the chinese deny this, and they say that if europeans do not give chinese companies access, there could be retaliation. that is problematic for the germans in particular because they have a strong trade relationship with the chinese. in terms of today, the e.u. does vague enoughuage to keep everyone happy. we will speak to the commissioner later today about interview on a

day like today. francine: elsewhere in the tech space, apple had solid results from the holiday season, amid a rebound in iphone demand, but also surging sales on mobile devices. the tech giants reports $92 billion for the first quarter, but for the second quarter it issued a wider range than usual. for more on apple, let's go to tech opinionberg colonist. also julian chillingworth. apple was better than expected. anything that investors should worry about? always a little bit of uncertainty in china, but that is over more than just the coronavirus. the quarter was good but it was coming off the back of relatively easy comparison compared to previous years.

thanue was a lot lower everyone had anticipated two years ago. now with 9% growth, it is good and positive, but it is not something to be overblown. the share reaction jumped 2.5%. not much when you're talking about a trillion dollar company, but it was not a blockbuster increase in the share price. francine: alex, what will they focus on? i know we have talked a lot about -- is there another space where apple could dominate? alix: they have been going 100 miles an hour into services, apple tv plus, news plus, the subscription gaming service. it is unclear how successful those have been, what sort of penetration they are getting. they are still in that window where they are getting a year free subscription if they bought

an iphone, for instance. the margin for those businesses is also unclear. netflix does not actually have a terribly profitable business right now. apple charging less for its service, or is it a way of gluing people more firmly to the ios devices and ensuring that they keep buying iphones? people are buying iphones again, in the way that they were. the company business, there are question marks as to whether they are doing that. francine: let's get in julian chillingworth into the conversation. do you still see value in tech companies, or do you see them being broken up? are they too expensive at the moment? undoubtedly, apple demonstrates that tech companies at valuations somewhat higher than 12, 18

months ago. payout of growth has been driving tech generally. in a low growth world, i don't see that changing anytime soon. we are getting that from a number of tech names. we will see how the rest pans out this week. in terms of breakup, there will be pressure and continued pressure. i would reference you back to the beginning of the 20th century. it took 25 years to break up standard oil. came atof the parts more than the whole. francine: julian, do you like semi conductor components? is there a space -- i don't know whether this is all cars and tech companies in the race to go to cars, but is there something you are looking at to basically find the next big thing where you can be an early investor? arean: i think semis

cyclical. we are slightly nervous of getting too enthusiastic about cyclical names, and semis with deep cyclicals on occasions. in terms of the next big thing, we would love to find the next big thing. people talked a lot about ai, and it has not come to fruition as yet. we continue to search that holy grail of finding the next thing that is connected to 10 times our money. i have not achieved it yet. francine: all right, julian, thank you so much. julian chillingworth staying with us. as always, thanks to alex webb. now more of our interview with the santander chair in madrid. the spanish lender says it says ash it expects to reach the higher end of its target for capital this year as it reports earnings that beat estimates. i spoke with ana botin about the

takeoff of sustainability. important that we are all conscious that this is an emergency for the world. we are not going to fix it alone. the first thing i might say is, governments can get together -- second, it is private sector and you and i can -- meeting once a day, it helps. as a company, and especially as a bank, we need to do more. we have been working on this for 15 years. what we committed a few months ago is carbon neutrality for us. but the key issue for all of us is that it is done responsibly. we do not want to leave people behind. there are a lot of people, billions of middle-class citizens, billions that are not middle-class, so we need to ensure that -- for example, poland, 80% of the energy in poland is coal.

bank ina big poland. we are not financing new customers that already have coal-fired plants. but we need to keep financing the existing ones because otherwise there would be no energy in poland. my big concern is that we do not forget this. emerging markets, markets that are different, and second, we need to help companies transform. that is what we are working on. was santander chair ana botin speaking to me earlier on from madrid. we will have more from that interview throughout the money. coming up, our interview with the chief executive officer of novartis p he says it is about maintaining innovation between epidemics. that is coming up next and this is bloomberg. ♪

>> we absolutely support any kind of -- also more transparenc francine: this is "bloomberg surveillance." i'm francine lacqua in madrid, where we have been speaking with santander's ana botin. will mark carney make a final cut? we will share his last ever rates meeting tomorrow. economic data has been a mixed day. traders currently see a 45% chance of a rate cut. let's go back to julian chillingworth. we have great charts that hilary clark did for us, where it was a percent chance of a rate cut in december, then it soared to 80%, now we are at 49%. do you think they should cut, and do you think they will cut?

julian: know, i don't think they will cut, and, no, i don't think they should cut. in the economic data we have had more recently, post general election, we have seen an improvement in business sentiment and a gradual .mprovement in the economy i would suggest it is better to wait and see and hold the rate cut in reserve as we go into the end of q1 and into q2. so, no on both counts. francine: what happens if they cut? let's play devils advocate because there is a 49% probability in the market that they will cut. we saw some pmi's a bit more depressed than they should have been this time around, and i guess it would help for the incoming bank of england governor if this cut was priced in or not. julian: he may take the opposite

view, that he needs something in his back pocket to come in with a cut if the economy softens again. the other thing, the bank of england may wish to wait for the chancellor's budget on march 11 to see what stimulative action he is going to take. and they are going to be -- there are going to be some long term plans for infrastructure. to help more economies locally as well. in that respect, i think holding off is not a disaster. if they do cut, i suspect the market will sort of shrugged their shoulders and move on. shrugrt -- will sort of their shoulders and move on. 45% seems a fair estimate of where we are and where market

sentiment is. i think the market is much more going to focus on improving consumer sentiment, and obviously also talking to businesses, seeing what their reaction is to how they see 2020 panning out in what was a very difficult 2019. chillingworth,n chief investor at rathbone. novartis is keeping some offices closed in china and is asking associates not to travel. the chief executive officer, vas stability inees china due to safety stocks. term, testingar antiviral drugs, providing them to the chinese government to test whether these drugs would work to contain such a virus. over the next six months to a year, i would expect vaccine candidates to be developed and

then put into testing and be broadly available. year we could potentially see a vaccine for this. could take longer because of underlying biology and the science. conversationsyour in the past week with your employees and your distribution whatrs in china -- preemptive measures are you taking? concern ismber one our associates in china. we are aligned with that all government -- with what our government has advised -- not to travel and engage at the moment with all the various stakeholders, in order to protect themselves from the current situation. in terms of our supply chain, what we see right now is a stable situation. we have safety stocks for all of our key medicines. most of our key suppliers are far from the center of this particular outbreak, so we feel good from where we are.

i think the key is to closely monitor the situation. it is obviously very fast evolving. vas: i want you to put your white coat on your you are a medical doctor by training. the world health organization decided not to declare this a health emergency. do you think that will have to change? vas: it is very hard to predict. when you look at the cases right now, they are predominantly in china. you do not see sustained spread outside china from person in other geographies, so i think that is what the w.h.o. is looking at -- is it contained to a single geography within china, or is this a situation where we see person-to-person spread outside china? i think the data is what is going to drive the decision. -- can the farm industry -- can the pharma industry make this lucrative? vas: this goes back decades.

sars, h5n1, then we had the viruses keep popping up. the challenge is when they pop up, we have a big response. you see firms crowding into try to develop new technologies are when the viruses start to go down and the cases go down, everybody loses interest. so the real challenge for public policy is, how do you maintain capacity, innovation power in between the outbreaks? we still have not solved that as a society. interesting and important conversation with the novartis chief executive officer, vas narasimhan, speaking with emily horton. -- speaking with annmarie hordern. this is bloomberg. ♪

francine: this is "bloomberg surveillance," a live from madrid, where we just spoke with the ceo of santander. talking about the history behind us -- let's talk about luxury,

slowing in the fourth quarter with the protest in hong kong. the outlook is further crowded by the spreading of the coronavirus. let's talk about luxury and the sectors impacted by the deadly virus. let's get back to julian chillingworth of rathbone, in our london studios. you have the protest at hong kong and they are likely to be impacted by the coronavirus. is it one of the sectors that will hit the most, as chinese citizens stopped traveling to the rest of the world? julian: undoubtedly i think we have to factor in some of the earnings pressure across the whole sector. some of the luxury companies are more exposed than others to the asian markets, and one has to take that on board as well. but i do think that having seen in certain cases valuations getting quite stretched in the last six to nine months, you

could well see opportunities arising as the stoxx are knocked back some way. we are monitoring the situation quite closely, and seeing whether there are going to be opportunities down the line. julian, thank you so much julian chillingworth from rathbone. plenty more coming up throughout the day. we will focus on the coronavirus. also coming up, tom keene, as always, joins me out of new york. we will spend a lot of time talking about the impact the virus will have on some of these playmakers. fed, european banks, and negative rates. this is bloomberg. ♪

francine: santander soars. the spanish lender topped

estimates on strength in its latin america business. the executive chair, ana botin, says her model is working. coronavirus cases climb. the death toll from the illness rises to 132 as the uae reports its first cases and three more are confirmed in germany. and apple shines. holiday quarter results top estimates on strong demand. tim cook says the company is monitoring the coronavirus closely. good morning, good afternoon, good evening, everyone. depending on where you are in the world. this is "bloomberg surveillance," and i am francine lacqua come in madrid. tom keene is in new york. this is the stock exchange with its history and heritage. it is a replica of a place of worship in istanbul, and a clock that is a barometer it is the , give youhat you have a flavor of what we are looking at behind me.

tom: looking at european banking, we will spend some time on negative interest rates and what we look like for europe viviana will give us an update in a moment. made toazing, the calls asia, the impact of this. through "surveillance," we will stretch out the new timeline we are seeing from aviation and people on the ground in asia. with first word news in new york city, here is viviana hurtado. viviana: let's get to the coronavirus. in china, a grim milestone in the outbreak of the deadly virus. there are almost 6000 cases confirmed, more than the official number of infections in china during the sars epidemic 17 years ago. at least 132 people have died. to stop the spread of virus, governments have ramped up efforts, tightening international travel and border crossings with china. president donald trump several lawyers wrapping up their defense at his impeachment trial. now republicans are scrambling for votes. bloomberg has learned senate majority leader it's mcconnell

does not have the 51 votes needed to block a call for more witnesses. emma kratz are pushing to hear from former national security pushing-- democrats are to hear from former national security advisor john bolton. benjamin netanyahu moving quickly to capitalize on president trump's mideast peace plan. -- thes israel it cabinet will meet soon to authorize the annexation. that could help him in the upcoming election in march. the plan giving the palestinians the possibility of a fragmented state years in the future, but palestinian officials denounced the plan. federal reserve policymakers are expected to keep interest rates unchanged. today they wrap up a two-debt anding -- two-day meeting jerome powell is likely to talk about asset purchases. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries, i am viviana hurtado. this is bloomberg. tom: thanks so much.

this is the data, a stable market, improving markets. ever so slightly. recoveryp 5 after a day yesterday. curves do not do much. it is an interesting thing -- 1.1003. 19 was the fear for the vix, and we come into 15.72, with a euros half-asleep. offshore renminbi, because of the holiday. u.s. -- on usd-cnh. strongerittle bit renminbi this morning. francine? important,enminbi is but because chinese stocks remain closed, futures on the ftse china is what we are

looking at, rebounding after two days of losses. we are focused on trade decisions, and a lot of the focus is on corporate earnings are looking at treasuries gaining with most european -- tom: i want to show a chart. steve engle will join us in the next hour. chart that isisis ancient. you take gold and you set it in the currency under tension. gold set inog chinese renminbi. you can see the overall weakening back 30 years, and then somewhat of a constructive leveling of prosperity of china over the last 10 years, and we have ebbed that away, ready to break out over the recent highs we saw in 2011, 2012. that is one indicator of -- that is one indicator, a base indicator about a nation under

crisis. to consider china, truly ran, bloomberg opinion columnist, on the asia markets. what do you observe in asia? what is your thought this morning? .> it is pretty interesting the a 50 futures indexes rebounding a little bit. as you said, the offshore u.s.. ever, compared to 2003, china was coming out of a boosting situation. at that time investors wanted to look past whatever pickups and say as long as economic growth is good, it is all good. but now more than ever, investors are looking at whether the chinese bureaucracy still works. we all know china is slowing, but somehow the communist party mobilizing society

resources. then perhaps china is not such a bad market. and i think perhaps investors are being a little more optimistic. china is going to update the virus cases twice a day, and also if you look at the incremental number of new cases, it seems to be leveling off a little bit. is perhaps aere little bit of a positive consensus there. francine: so is there a sense that they overestimated or underestimated this breakout? shuli: i think that they probably at the very beginning overestimated, which is why -- underestimated, which is why it happened in the first place. areof the population university students, and the college kids, their rates

started at the very beginning of january. chinese new year is already done, so at the early stage it was a little bit underestimated. right now i think they are starting to feel cautiously optimistic. a doctor was coming out and saying that this virus, the number of infections will be peaking in the next 10 days. shorter thano be the sars epidemic. tom: we have signposts of the duration of this crisis, and they are very tentative. it is share cutting off major flights through march at least. what are the signposts you are looking for in the coming days in china? what are the things you will hear from the government or from the city states of china? shuli: i think it is important that the government starts to release money.

the ministry of finance already said that they have released about 8 billion yuan into the local economy to crack down this virus. i think the people from china need to come out with something. other china markets will be reopening next monday, and there will be a lot of volatility. they were hesitant to cut rates last year. one very tersee just one short statement, and they need to come out and say something to stabilize the market. francine: thank you so much, shuli ren of bloomberg opinion. hsbc,y is in london is an like advisor. -- hsbc economic advisor.

is not postan borders because of a deadly virus. >> is never a good time to have a deadly virus, frank lee. the economy is relatively weak. hsbc's forecast this year is less than 6%, pretty soggy by chinese standards. but i think the problem with this kind of situation is that even if you lose monetary policy , you're basically having to build barriers, and block the kind of economic engagement that you would normally take for granted. so when you start enclosing a city, having it in lockdown, when you have british airways canceling flights, you are basically preventing the connection in normal circumstances. there is not much you can do about that in terms of policy because it is precisely the need to break those connections, that is what you need to do to control the spread of the virus. one thing worth mentioning, will hand as a city is incredibly

connective with the rest of china but also with the rest of the world. there are flights in normal circumstances that you can take taipei,an to sydney, to hong kong, london, moscow, istanbul. city in theminor chinese inland area, it is a major city with major connections all over the world. what does it mean for gdp? is it too close to model it out and have estimates on how it hurts growth? stephen: i think at this stage it is too early because we do not know the full extent to which the virus might spread and how many people might be affected. what we do know as we get back to the sars epidemic in 2003, in the first half of that year, retail sales in china were going to be weak, hotel bookings collapsed, restaurants were mostly empty, hong kong itself was also very soggy, contracting and the first half of 2003.

they could use that as a vague benchmark to give you some sense come through.to but at this stage it is too early to estimate what could happen. tom: i hate to do this, but we "the brave new world." you opened it up, looking at 7-eleven andg at the distant past. break downhey can remarkably quickly." we are so wired up with our logistics, our airlines, our communication. what is the rift in the coming -- what is the risk in the coming weeks of breaking down, or can the modern architecture sustained through this crisis? shuli: medical science -- stephen: medical science has advanced incredibly over the last 100 years or so, so we can cope with these situations

better than in the past. having said that, there are international connections that exist that make it much more journeyt to break the of these kinds of diseases. having said that, the biggest damage we have seen so far in terms of the global economy is self-inflicted by us as human beings, not caused by a virus. that is associated with the protectionist rhetoric that has come through over the past two or three years. what is striking is that world trade fell in the second half of last year, which is pretty much an unusual circumstance in recent decades. are we are thrilled you with us today, stephen king with hsbc, someone who has really thought about these trends peered we thank our guests coming on abruptly, from johnson & johnson yesterday, and also from ucl in london, on this virus. and the optimism we have heard, the science is way out front of where they were 15 years, 17 years ago with the sars virus as well.

coming up, we will drive forward the conversation. airlines are front and center. wizz air, all of the airlines adapting and adjusting. this from the madrid deck from madrid and new york. this is bloomberg. ♪

viviana: this is "bloomberg surveillance." we begin the bloomberg business with shares of apple rising in the holiday quarter. the world's most valuable tech company reporting better than expected revenue. there was more demand for iphones and devices. more on apple after your business flash. now to ebay, issuing a lackluster revenue and earnings

forecast. this by last year's management shakeup. years of stagnant sales roof has diminished ebay's position in e-commerce. cutay pacific says it will capacity. dailyh airways halting flights to beijing and shanghai p united airlines says it will reduce flights to china from the u.s. that is your bloomberg business flash. tom: thank you so much. i am going to break a rule. usually when any company comes on, particularly apple, we dive into finances. 207 good jillion dollars in cash. alex, i have my phone here, the fancy phone. i did my fair share of all that finance. where is this made? the components are from switzerland, south korea, the

from the united states. how does china fit into the making of this toy? alex: assembly. most if not all of the assembly happens in china. isre are few -- mostly it foxconn or on hide, depending on where you want to call it. china is trying to do more of the clever technology behind it, the high end, the chipmaking, but at the moment, and a lot of the stuff gets put together in china. francine: i think what tom is trying to get at is how has the in changed because of the trade and trade war he echo and has it changed depending on the virus and what it morphs into? alex: it is one of the reasons

apple gave a particularly wide outlook, revenue outlook for the coming quarter. y to attribute in that partl the coronavirus and the uncertainties created by the supply chain. , think they do have ultimately this coming quarter is not generally a blockbuster quarter for sales, so capacities they have elsewhere, which are not as heavily affected by the virus outbreak, i think they will have the ability to do easing manufacturing into those places. manufacturing capacity in india -- it is not affected by this yet. tom: this is really important. we have manufacturing by foxconn and at shanghai as well. to mr. cook's comments yesterday, is it movable now to other locations, or are they looking at weeks and days if not months he echo alex: it is hard to tell.

the bigger issue is not necessarily going to be manufacturing itself, but the ability to get components and move the supply into those factories. high tech some of the stuff comes from abroad, there are deep networks of supplies within china itself, perhaps more of the rudimentary components. -- that is nothe necessarily so high tech and might be coming from a supplier in the chinese hinterland. tom: much more on the path forward in the coming chinese weeks. coming up, david solomon this afternoon at 3:30 pm we will do our fed coverage with david solomon. this is bloomberg. ♪

>> how tough is it being in banking today? >> i think it is exciting times. i think it is a great challenge. "bloomberg surveillance this is," -- this tom:loomberg surveillance tom and francine from london and new york today. london is hsbc senior executive advisor stephen king. what if we are wrong on inflation? that would change everything. stephen: if inflation did pick up, people would look at what the fed did and say that was some kind of error. but to be fair, i think there is little evidence of inflation

picking up. have been warned about it for quite some time. it never really materializes. then there is the impact of technology in suppressing wage growth, which is more difficult up in theg old-fashioned way. the other challenges, they may have achieved price stability. it is not quite so clear they have achieved financial stability, with the qe or interest rates and balance sheet expansion has contributed to rapid increases and in prices, and in parts of the work, substantial increases in debt. it may be that we have price stability, but at the cost of greater financial instability. point is allwhat of this lower for longer -- does this have negative consequences, that central banks will start being uneasy about their policy? stephen: central banks do not

want to admit to the fact that they may be contributing to these big increases in debt. where the pressures may come is not so much in terms of what central banks do, but rather what happens politically. one of the big issues at the moment is, to the extent to which qe is lifting financial asset prices is rewarding those people who are already financially well-off, even though the economies themselves are not really picking up at all. you're looking at hsbc's outlook for this year as an example. growth rates in china, the u.s., and europe and so on, all very low by their own standards in a cyclic sense. all quite disappointing but when it comes to gains and asset prices, very substantial. there is the story of winners and losers, and inadvertently central banks have contributed to it, through very easy monetary policy in recent times. tom: stephen king, yesterday, phyllis weigle at -- reaffirms trillion dollar deficit. does anybody of the press

conference yesterday care about trillion dollar deficits? stephen: the answer is probably not. we have an example really in japan of a very slow growing economy, which has partly reacted to the slow growth by having bigger and bigger budget deficits and higher and higher levels of government debt, and yet they are still at rock bottom. so there is no clear evidence that the weakness of growth, or whatever, these problems -- tom: we have to run. stephen king, thank you so much, from hsbc. this is bloomberg. ♪

♪ tom: bloomberg "surveillance," francine lacqua in madrid, tom keene in new york. we will go to stephen engle at

the top of the hour. right now, your first word news. takena: a plan to americans out of the epicenter of the deadly virus to return to , the travelers will be screened and monitored. to 132th tall has risen and almost 600 -- 6000 people have been infected in china. on capitol hill in the united states, the impeachment trial is a matter of getting the votes. mitch majority leader mcconnell does not have the votes he needs to block witnesses from testifying. democrats could cut test of phony -- could get testimony from john bolton and others. the pentagon raising the number of u.s. holders injured in the

iranian missile attack in iraq. 50 suffered concussions or traumatic brain injuries. 32 have returned to duty. has developed a promising vaccine for african wine fever, a disease -- swine fever, a disease that has devastated -- in china. the vaccine is 100% effective. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: it is the success story of ,ungary and eastern europe their leader and chief executive officer joins us now. we are thrilled that you are with us. i want to get your earnings, but r,th your years with wizzai

what do you believe will be the knock on effects to aviation worldwide? cathay pacific centered in china. what will be the knock on effects of this virus? >> good morning. thank you for the opportunity to be here. far, as far as we are concerned we are not exposed the asian market, but it is expressed across the globe. that is what happened with the swine virus. it may affect aviation, but based on previous experience it beforeke a few months things resume to normal.

things will get normalized. tom: congratulations on your earnings. -- as you load factor build out your capacity forward after these great earnings, what is the strategy? what is the city to city game zair?iz jozsef: we have reported strong earnings. the previous quarter report areings -- reporting's, we growing the business. we are not trying to steer passengers -- steel passengers from other airlines.

[indiscernible] ofhave a lot in terms dealing in this industry and this will continue to be the source of -- in the future. we look forward to all of the challenges. francine: you have an airbus fleet. some of your arrivals have young or half and half have been able to take advantage because you are solely airbus given the 737 is grounded? think we have to be somewhat fair from an industry standpoint. boeing is struggling to get the 737 max in the air but there are problems with airbus they have not -- airbus.

they have not been able to deliver and companies have been affected. we made a strategic choice for airbus years before this thing. it is the best suiting vehicle we can have. it will remain effective for the consumers and stimulate the market. justine: we also saw yesterday airbus putting to bed concerns over bribery allegations. does it help in your negotiating or does it make no difference? jozsef: i don't think we are steps on aake short-term basis. we are trying to see the industry perform well. we are going to see competition going on in the industry.

we will have a strong boeing and airbus and that should be the basis of moving this industry forward in the future. francine: thank you very much for joining us morning. -- joining us this morning. santander expected to reach the higher end of it capital. we speak to its chair after this. ♪

♪ 97 basis points of capital shows the model is working, the transformation, the execution.

it allows us to keep growth because it is also growth, not just revenues. we have ground the balance sheet and attractive dividend policy. as a company and a bank, we need to do more. we have been working for this for 15 years. the key issue for all of us is that it is done responsibly. we do not leave people behind. there is billions of middle-class citizens but billions that are not middle class want to live better. francine: that was ana botin, santander chair. she did not mince her words when talking about negative rates. she said it just hinders the itks to the point where could hurt the monetary transmission mechanism. is the ecb aware it could be counterproductive at some point

which is why there is talk of extra tiering, which the ecb refused last week? stephen: there is a growing understanding of the ecb and it is obvious why. theirnks typically for retail depositors, they are finding it difficult to impose negative interest rate. if it turns out official rates are negative or increasingly negative, profit margins are squeezed and that puts downward pressure on the ability of banks to lend. the credit system is not working in the usual way. it is a bit like turning up the temperature in your thermostat and discovering the central heating system is broken and nothing happens. point wheree monetary policy is not offering much room for maneuver. mark carney said the same thing earlier this month. if there were another recession

or down wing, there would be -- downswing, there would be emphasis on nonconventional monetary policy and fiscal policy, because there is nothing else left. francine: will germany spend enough to be sure that the ecb will not go further into negative territory? stephen: that is another issue. if i were the ecb, i would be demanding or calling for some kind of euros on wide fiscal policy -- your ozone wide fiscal wide fiscalrozone policy. whole -- as af a whole has moved into bigger accounts. it is because of the austerity adopted in southern europe. globally, you would probably say europe has room to offer

stimulus and its monetary policy would have to be fiscal stimulus. the only saving grace is the german economy is very soft and has weakened over the last 12 months it may be because germany itself is so weak, that would put pressure on the german authorities. tom: within this wonderful analysis, there is an assumption in the textbook that currencies adjust and the minimums provide market signals to participants. is what this is really about that we do not have european market signals because we have -- 7,rrency and not 1, 7 8, 9 currencies? stephen: it is probably the as ancy situation and part consequence of mario draghi doing whatever it takes. back in the day, if you are

worried about fundamental weakness in the eurozone, you could not express them through the currency but you could express them through spreads. you could arguably say central banks around the world have nationalized the financial system and the signals in capital market have left valuables where they were in the past. tom: what is the signal that is going to allow for fiscal action in europe? where does that signal come from? stephen: from the point of the markets, there is plenty of room. yields are very low. the separate issue is whether there is political enthusiasm to do this. mario draghi gave speeches where he suggested there should be a call to arms and europe should get its fiscal act together. emmanuel macron argued the same thing, but it is the germans that have the money and the rest

of europe needs the spending. that is a political impasse. if germany itself is weak, it might give room for maneuver that might be lacking. has fundamentally changed? has anything changed? mario draghi has had the fiscal policy for so long. may that convince governments to do otherwise? stephen: nothing fundamentally has changed, but white -- what might be changing is the fiscal weakness of germany. if germany had a sensible conservative fiscal policy, it would help them do well relative to their peers. othery has outperformed countries in europe, but more recently germany has revealed its achilles heel. it is dependent on world trade

being healthy and as that has slowed, the economy was hit hard. there was a moment when germany moment- if there was a when germany could choose to loosen fiscal policy, now would be that moment. francine: if they are building autobahns and better infrastructure in germany, does it help with jobs? stephen: it could help that you have migrant workers coming to germany, but that would not be the most obvious answer. the key thing is if you had a european wide series of spending programs linking systems together more than they are currently, that could be helpful. as with the u.s. where you have transfer payments from massachusetts to mississippi, what europe needs is an

arrangement whereby money goes from north to south. that is politically more contentious in recent times. tom: stephen king with hsbc. mr. wiesenthal with that interview with senator warren, he drives forward that discussion. a conversation with andrew yang. look for that conversation today in the noon hour. david westin, "balance of power." ♪

♪ viviana: you are watching bloomberg "surveillance." the deadly virus is having a severe impact on companies that do business in china. starbucks is closing more than half of its locations. toyota is putting chinese production on hold until february 9 and the country is also restricting travel. prices fell in 2019 the most in

four years. nucor reporting earnings that beat estimates. the improving economic outlook gives confidence 2020 will be a positive year. next month, mark zuckerberg heads to brussels to meet with e.u. officials, trying to head off scrutiny over how they handle future data. he will discuss the framework or new internet rules and regulations. that is the bloomberg business flash. tom: we are going to go to our stephen -- senior reporter, stephen engle, but we are thrilled to bring you stephen definitive essay is on the wuhan virus. get it from hsbc. stephen king, it is a grave new china. they have been here before, but this time is decidedly

different. what is the nuance now versus sars of 2003? stephen: the simple answer is the chinese economy is much weaker than 2003. it is possibly more vulnerable to these shocks. at the same time, our knowledge of viruses and its spread has improved. france has a smaller impact than people feared as a consequence of the extraordinary controls put in place as far as aircraft controls. we are seeing a repetition of many things we saw, but quicker than was the case back then you hope this will contain things. tom: i look at your work on this and i look at your competitor jonathan anderson with ubs in asia. it is about the movement of people. you emphasize in your essay the

restricting of people, how does that then restrict growth? stephen: the simple answer is globalization is all about taking down borders and barriers, allowing the movement of goods, capital, services, and people, and within countries. people going from rural areas to urban areas and finding work, throughoutgoing countries you want to stop -- countries. if you stop that movement, the economic connections you take for granted begin to be eroded away. this kind economists of thing will do economic damage. it is not the biggest priority, the biggest priority is saving lives, but in terms of economic damage, there will be some.

what geography will be affected, that is more difficult. francine: if we focus on the chinese economy, how much does fluctuations in the market or a selloff hurt the real market? would you see it in consumption first because of the virus? stephen: consumer spending got hedged in 2003 through spark -- sars. people stopped going to the shops and staying in hotels, and that clearly has a significant impact. ,n terms of financial markets the relationship between hasncial markets in china never been as strong as europe or the u.s. it may be that the pboc has to do something to shore up confidence, but the financial markets are not as strong as sometimes people think it might be. francine: what is the one thing

that we are either too worried something inthere the world economy that makes you much more optimistic that the coronavirus will have an impact but will not tip us to the edge of a recession or slowdown? stephen: my concern, the focus on the coronavirus is relevant, but there are a whole lot of other things we should be worrying about. trade connections in countries are breaking down anyway as a consequence of the u.s.-china trade spat, rising protectionism, populist politicians blaming other countries for their own difficulties. these things have been going on for quite some time and they are independent of the coronavirus. coronavirushe saying, isn't it bad, but other things around us are already bad

but they are mostly human made. the abilityina have to accommodate and provide so-called cash to their citizens beleaguered? stephen: anyone that has a tax system can probably do that so that is not so difficult. the issue is the logistics of getting goods across orders. -- borders. we learned from the fukushima disaster that once things break down, they can break down quickly and no amount of money can solve that problem. tom: stephen king with hsbc, wonderful to have you on. really cannot say enough about the historic reach of his books, "bright new world" and "grave new world." alan ruskin will join us from deutsche bank. stephen engle will join us at the top, and more on the ana

botin conversation in madrid. the markets, not bad today with apple elevation. 69, not back to 29,000 on the dow but getting there. we will do a data check at the top of the hour. please stay with us through the day, much going on including fed day at 2:00 p.m. we will be looking at that as well. stay with us. this is bloomberg. ♪

everyone uses their phone differently. that's why xfinity mobile lets you design your own data. you can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. all with millions of secure wifi hotspots and the best lte everywhere else. it's a different kind of wireless network, designed to save you money.

switch and save up to $400 a year on your wireless bill. and save even more when you say "bring my own phone" into your voice remote. that's simple, easy, awesome. click, call or visit a store today. which is why xfinity mobile data,is a different kindent. of wireless network that lets you design your own data. choose unlimited, shared data, or mix lines of each and switch any line, anytime. giving you more choice and control compared to top wireless carriers. save up to $400 a year when you switch. plus, save even more with $150 off galaxy a70. click, call or visit a store today. ♪ tom: this morning, the wuhan virus spreads the number

infected surpasses the sars epidemic. deathsncreased 25% -- increase 25% overnight. screening incal anchorage, alaska. markets recovered. chairman powell must address the economic impact this afternoon. apples jobs kills it, $207 billion of cash. increases 8% from a year ago. they are going out of business. this is bloomberg at aeillance." from madrid historic stock exchange, francine lacqua. what did ana botin say about banish banking? -- spanish banking? francine: she was at pains to

explain that negative rates are hurting banks and was hoping that the ecb would realize that despite these extreme pressures, geopolitics and the coronavirus, santander has showed they have a good model. she would say that, but if you look at capital which investors have been asking them to do more on, she said they will reach 12% and investors seemed to like what they heard. tom: it has been a very different path compared to other european banks. right now, our first word news. viviana: in china, a grim milestone. the outbreak of the deadly coronavirus, almost 6000 cases confirmed, more than the amount of infections of the sars virus. virus, the spread of the

governments around the world are ramping up effort and tightening international travel and borders with china. donald trump defense wrapping up and republicans are scrambling for vote. mitch mcconnell does not have the 51 votes needed to block a call for more witnesses. to hears are pushing from national security advisor john bolton. israel's prime minister benjamin netanyahu is moving quick weight to cap -- quickly to capitalize on president trump's middle east peace plan. meetys his cabinet well soon to authorize the annexation which could help him in the upcoming election. palestiniansng the the possibility of a fragmented state years in the future, but they say it is one-sided in favor of israel. policymakers expected to

keep interest rates unchanged. jerome powell will likely face questions about the plans to slow asset purchases. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: let's look at the data. futures up nine. dow futures up 76. euros breaks.10 -- 1.10. the vix at 14. i put apple computer to remind me i am in the tiller -- triple leverage all cash fund. francine: stocks are on the upside. investors will focus on concerns lingering over the deadly coronavirus, and the fed, but they seem to be focusing on

yuan steadyshore after the white house denied a report that the suspension of s was underflight consideration. up -- liftingting up. this is a foundational crisis. intoake gold and put it whatever the crisis currency is. this is gold logarithmic in yuan. you can see the weakening over the years of the yuan and the decadews over the recent , and then the weakening in the last number of quarters. there is news, and he will give it to us as our lead correspondent, but it is also

the anecdotal of getting your bok choy and white radishes for the day. that is difficult in shanghai and hong kong. stephen engle's joins us. it is difficult to get vegetables. measure the level of panic in hong kong and across china. stephen: hong kong was that the epidemic of sars 17 years ago. i remember it quite vividly. it does not seem like 17 years ago. publicas nobody on transport, nobody in hotels. there were nearly 300 deaths. china,ere 132 deaths in none outside of china tied to this coronavirus that we know, but the fears are there, and there are more concerns and china that we have not seen the peak of this theory length

cycle. the incubation period could be from eight to 14 days, so there is a lot of fear and people are staying home from work, working from home, and mental well-being is suffering. tom: how does beijing apply eight on a federal basis many miles to the central south china? how do they affect aid? stephen: that is part of the criticism coming toward the communist policy -- party. ,hen supplies are not there guess who gets the criticism? the same thing goes with the information. the central powers maintain a tight rep on information -- grip on information and a senior health official has been sacked for dereliction of duty and misinformation. --or nm propria be hit

inappropriate behavior. we assume that may have been covering up news flows. people are frustrated. they have not gotten their supplies of masks and they cannot get out they are quarantined -- cannot get out they are -- out. they are quarantined in their own cities. francine: how long could this last? stephen: we don't know, because the numbers keep adding up. 25%,ight, an increase of and it is also spreading. governments from other countries are sending in relief flights to take people out. you are seeing the latest, because extend is stopping --

all visan is stopping issuances to china. we are in the preparation for a worst disaster stage right now rather than saying it might be over in a week. tom: stephen engle, thank you so much for reporting from hong kong. we had stephen king in the last hour from hsbc, and we continue this our with a gentleman with decades of experience. his name is alan ruskin of deutsche bank. he is quite expert in a number of things, including foreign-exchange. let me start with the wheelhouse of currency as the litmus paper of a system. what does it mean we are seeing stronger dollar, you're a through 1.10 -- euros through 1.10, and offshore renminbi weakening out, does that

indicate a financial system acting normally within this financial crisis? alan: there is no obvious normal in this situation. what you are seeing is revealing in that the dollar is outperforming the euros. that says that investors prefer the yield and liquidity you can get out of u.s. bond markets, and at this point in time they could look to japan and the yen, but looking close to china. the u.s. dollar is the natural beneficiary.

francine: does it mean that supply chains have shifted? does it mean that some of these companies will be more global than a year ago? troy: that is probably wishful thinking. shifts in supply chains are modest and we are about to see those vulnerabilities tested. i would be cautious in saying effects to spillover the major economies, not least the united states. ruskin will talk to alan , and the fed meeting today.

after that,des, and david solomon will decide how to spin his investors day. basak in the 3:00 our. this is bloomberg. ♪

♪ this is bloomberg "surveillance," tom and francine from madrid and new york. there is a line on the catalano election.- catalan this is not the first time independent forces will hurt the spanish election.

this is after the regional budget is approved. about 10 annis -- and about -- and about 10 -- ana the government in her country. they are asking for some taxes on the banks, so we will have to see how this plays out in spain. tom: international relations and the impeachment, it is time to speak to our chief washington correspondent, kevin cirilli. yesterday,versation important news of the middle east buried beneath the headlines, kevin cirilli's conversation with jared kushner. kevin: when i spoke with jared kushner, he made the case that this was an opening bid for u.s.-bed police policy.

-- u.s.-middle east policy. they felt this could potentially be the last chance for the palestinians to have negotiating clout as it relates to negotiating this deal. they point to economic numbers and an economic trend downward economics for the palestinians. i am told we have a bite from that interview. couple ofe last years, we studied the issue, studied the region, consulted with parties, and the biggest thing we were able to do is bring the israeli government together to agree on parameters to put a two state solution on the table for the palestinians. perceptionuch of the of the administration's foreign , but iis unpredictable would note that i traveled on

the president's first international trip to saudi arabia and israel, and even then they were trying to rebuild and re-shift some of the strategic alliance lines in the middle east. that has been the crux of their middle eastern foreign policy. tom: let's look at some of the issues -- images of protest, 6, 7 miles south of jerusalem, bethlehem. it is protest in bethlehem. , myresponse to this response is i looked at the map and it seems like the president and mr. kushner are driving forward a map of enclaves, a map of chopping up the bank. is that what they are doing? the carvingved as up of 50 years of history? inin: no, especially not

pro-israeli conservative circles and being applauded by supporters of the president. in terms of looking where the alliances will be drawn, i will be keeping a close eye on what the jordanians say, and whether or not the palestinians -- they privately,blicly but the administration is offering $50 billion worth of investment in the region. and nearing the end of his term. yesterdayis to jared about the u.s. making relations with his successor, and it is clear that the u.s. is, and i can also port -- .2 other sources -- point to other sources about the next generation.

that is being talked about on both sides of the aisle. francine: give us an impeachment update. kevin: senate majority leader mitch mcconnell saying in a private meeting to republicans -- and i have confirmed this with my sources -- that they don't have the votes to block witnesses. what does that mean if you are outside washington? friday is when that vote will likely be as it relates to whether or not there will be witnesses, and secondly, if there are witnesses, that would dramatically extend the timeline for the trial, meaning less time to talk about policy issues. tom: an important conversation with mr. kushner yesterday, and you will see that out. kevin cirilli, our chief washington correspondent. we drive forward the political conversation.

mr. wiesenthal in conversation with andrew yang, the 12:00 our, power.", "balance of this is bloomberg. ♪

♪ bloomberg "surveillance," terrific news flow today. we will digress on industry for

the research business -- do presidents matter, do elections matter? alan ruskin weighs in. what did you and your team some up? alan: not as much as the electorate thanks. -- thinks. gdpfocus on this quarter's and attributing it to this president is always a factor. it is not just the trump presidency, it is all around the world. the gdp this year comes from policies which might have been accrued a few years back, especially when it relates to tax policies. tom: risky assets, like a republican-controlled house or senate, you have got that right now. you also have wrist the

asset, -- risky assets, seemingly resilient compared to what you have going on in the world. havear pattern is if you republican administrations, on three occasions you have had a serious deterioration in the fiscal deficit. you have had growth similar to democratic governments, but the budget deficit, you have had a deterioration. that is one to look at now because it is as important today as anything. tom: francine? francine: when you look at the u.s. deficit, is it ever a problem as long as dollar remains the world currency? alan: it can be a problem. you have had a large expansion in the fiscal deficit, yet the external deficit has gone nowhere. something we don't look at is the private sector position and

something implicit in that, what you have on the public-sector side, on the current account side, it is saying the private sector balance is improving. if you have a private sector balance improving as an offset and your external balance is going nowhere, your currency will be fine. if you see a fiscal deficit deficits,o further the dollar will exceed. tom: earnings out. apple yesterday, deep to left field over the turnpike. ebay, not so much. soon, generous electric. ♪

tom: breaking news, and it is not apple. finishingoubled ge strong for 2019. centsvious beat by four

for earnings, but the stability of the financial ratios, it is a usual ge terse presser out of washington. growth in the mid-single digits. the market clearly likes it with a left. the company delivers organic revenue growth which was iconic from years ago as he writes the ship. of thes about priorities leverage of the balance sheet as they move forward into 2020. viviana: we begin with the coronavirus. it is prompting airlines to cancel flights to china. cathay pacific will cut flights to the mainland by 50% or more.

dailyh airways halting flights to beijing and shanghai. united airlines will reduce flights. the pentagon raising the number of u.s. soldiers injured in a missile attack on an iranian base in -- on a base in iraq. concussion or brain injury. the most valuable tech company reported that her than expected -- better than expected revenue. apples forecast also beat estimates. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. hurtado.ana this is bloomberg. tom: i want to bring up a chart as we go to william power. bring up the chart. it is very simple, back 40

years. there have been periods when stumbles, and the 1980's and 1990's. william power, there has been a moonshot for a stunning duration, rounding out to 20 years. what is the risk of a stumble? everything is lit up optimistic. how do you frame the potential of a stumble? william: that is a great question and invariably, there is likely to be a stumble at some point. right now, they have got some ecosystem benefits that are generating traction on a lot of friends, which is -- fronts, which is providing significant dallas for the -- ballast for the ship. chinave some risk in which is a big market for them.

it will always be one of those things that we will expect one at some point. tom: i see a 24% reduction in shares over five years, dividend over five years with $207 billion in cash. can they up the share buyback and advance the dividend to a better double growth rate? william: the free cash flow is a good problem to have. if you look at the calendar year 2019, something like 66 billion dollars of free cash flow. they cannot spend it fast enough. they brought back shares this quarter -- bought back shares this quarter. activists to get to a net zero cash position, i think you

will see them push the dividends higher more moderately with a focus on the dividend buyback. francine: how will they make money in the future? william: right now, you have got a situation where the iphone growth is accelerating, which is a significant inflection from the decline last year. you have the potential for a 5g cycle, and i am not expecting a so-called super cycle. there is no question, it will generate a lot of buzz, and these are multi-year cycles. think you have got a nice tailwind. in addition to that, they are benefiting from these new capabilities. the services business grew 17%. isrables grew 37% and there

still questions on what they might do on the car front. francine: what do you think they will do with wearables? william: they will continue to expand beyond watch, beyond the air pods. they have a lot of interest in the health care space and invariably there will be more applications and capabilities. it is a play from the iphone. you have this great platform and what can you do to add to it over time? budget,ook at the r&d they are continuing to look at other avenues for growth, probably within wearables as well. you solliam power, thank much, on apple computer. general electric out with a little bit of a pop, highs intermarket, a good 3% to 4%.

doom 82% off the gloom and of months ago, mr. culp doing the magic he has been known to do. an update from mr. johnson of starbucks on their huge reach in china and the person for graham, , thatnter--- pacific rim interview at 10:00 this morning. ♪

♪ chain,erms of our supply we see a stable situation. we have safety stocks for all of our team medicines. >> it is better controlled this time.

experience,vious this will take a few months before the situation is fully controlled and the situation resumes to normal. sowe have people in asia they need to understand the do's and don'ts. >> most of our key suppliers are far away from this outbreak so we feel good about our supply chain. we have to closely monitor the situation. globalill affect the situation. over time, things will get normalized. >> we have made recommendations on travel, and taken people out of china and asia. francine: those were some of the chief executives we heard from this morning responding to the virus outbreak in china. a lot of banks have put quarantines in place to safeguard their employees. i know an important conversation

will be with the starbucks chief and negative -- chief executive. tom: bloomberg is committed to messaging this, not only the actions of corporations, but also the duration. the single headline over the last 24 hours is british airways ,aying, enough with the flights and putting a timeline on its february, the first headline that extended out the timeline of where this crisis is going. we will have much more in a conversation with kevin johnson of starbucks. alan ruskin has been more than patient. we will dive into some of the core themes of mr. powell. is there evidence a central bank can reflate an economy? alan: they can left asset inflation and have been doing it well since the mid-1980's.

goods inflation is harder to lift. if that is what you are alluding to, they will have a hard time. ,om: service sector inflation you say there has been a global disinflation. this china crisis as we look at copper as a proxy further puts the pressure on goods, doesn't it? alan: it does. it is disinflationary. depending on how bond markets respond, it will be moderately disinflationary or extremely disinflationary. as long as the markets think the bond markets are working and easing for central banks, it could provide a buffer for asset prices. if bond markets are not responding appropriately, asset prices will drop and be vulnerable.

our bond markets working? given the price levels we are seeing. alan: i think they are. we are seeing the remnants of the 10-year gilts going from 3.5% to 1.5%. that was the key element that lifted and is lifting the u.s. economy's expectations for 2020. we need to see that filter through. it is facing headwinds, but for me, that is the thing that is working, and one thing the market misunderstood when we saw the flattening of the yield curve. that had a net stimulus come through because of the back and d of theurve -- back en curve. francine: is there a fixed income space in europe or

elsewhere where you see a clear bubble? words likeld not use bubble as far as the fixed income market. cycleields in the bigger in the next few years could go down to zero at the front end of the curve and close to zero at the backend of the curve, and that would prop up asset prices. what it has done so far, a lot of people would say from an equity standpoint, it is stretched. the nasdaq ee ratio is above 30 and looks stretched, but not as stretched as the context of what other assets are yielding. institutions overshooting or undershooting the call? gete where oecd is, do you

the feeling institutions are behind a slow down or they will have to adjust up, given the spirit of business and economies? alan: most people are thinking in terms of revising up their forecast. it is less about the forecasting going up and more about the downside risk being reduced. we have knocked out oil in iran, u.s.-china trade. tom: are we going to knock out the virus? alan: i hope so, but it is looming. tom: that is why we love to have alan ruskin on, he is massively type one, type two. it is not what will happen but about what will not happen. we will see this with the virus as well. alan ruskin with deutsche bank, greatly appreciated. he has been more than patient, huge news flow, particularly

from stephen engle from hong kong. kevin cirilli and all of our washington team focused on what is to be an extraordinary and indeed historic day in washington with this trial of the president of the united states. decides at 2:00 p.m. it is expected to be a quiet meeting for the fed but a much more noisy press conference. chairman powell, his press conference later today. ♪

francine: this is bloomberg "surveillance." the u.k. not banning huawei but said it will be used in about 35% of its components, the e.u. ruling on something similar. they agreed to avoid a reliance on a single 5g supplier and they are restricting some suppliers, but have not actually banned huawei from playing a role. while way dodging the blanket e.u. band from their networks.

us back to the trade relationship between the u.k. and e.u. still with us is alan ruskin of deutsche bank. u.k.-e.u.ay about the future trade relationship and what kind of deal boris johnson will get. the boe has a choice for mark not.y, whether to cut or how do you see this play out? alan: a close call. odds are tilting slightly in favor of a cut. thisnk the way to look at is the bank of england is probably going to be the only g10 central bank cutting rates within the next three to six months. place it in that context that there will be overall ongoing pressure from the economy and

the uncertainty as it relates to trade, for the bank of england to ease. hiscine: does that make successor's job easier if he cuts tomorrow, or does it tie him in too much? alan: one of the arguments in favor of a cut is absolutely get this done and then the new governor can come in and set his , not have totone deal with anything related to the past whether it be pressure to cut at the first meeting. there will be pressure from the internal politics side of things to get it over with. francine: 30 six months, two prime ministers and finally the u.k. is leaving the e.u. what kind of relationship will

they get? alan: anyone's guess. the problem is that 11 months. trade deals do not get negotiated easily in 11 months. what you are going to see is there will be an enormous amount of time pressure, and to that extent, the real risk is you march along toward the end of this year and you are ending up with what amounts to way hard brexit, the markets under appreciating the risk of a hard brexit as it relates to the e.u. as this previous story was alluding to, the u.s. is not easily persuaded either. francine: alan ruskin joining us today. ,et's talk about santander topping estimates on strength

and their latin american business. the chairman says her model is working. 8 billion underlying profit shows the strength and resilience of our models. we are delivering against all goals. topline growth of 49 billion euros, we are up 3% again. we are growing customers6 so it is doing it in the right way, and with profitability of 8%. levelth, we are at a where we are very comfortable buffers level and the against the requirement so proud of the results in the team. francine: investors keep asking about capital. will that placate critics? >> we are in a good place, not

just the level but the buffers. this year, we generated 97 basis points of capital growth. because we had more than 60 basis of revenue requirements, if you look at what this allows us, the profitability in the model, i always spoke about the transformation of the model. we are announcing an increase in the cash dividend per share. in the last five years, we more than doubled the cash dividend per share and this is important. 97 basis points of capital shows it is working and it allows us to keep growth, because we have also grown, not just revenues, but the balance sheet, and keep an attractive dividend policy. francine: can you take more negative rates? even if negative rates were to stay where they are, what does it mean for santander? >> five years ago if you told me

where we are, if you do the math, it is a huge change. , thees back to santander scale, management, strategy that we can run europe as a whole. it is 10% on the line on , andgible, 53% cost income we have committed to do better. the cost savings we have achieved will increase this year. we have committed 1.2 billion of cost savings, and it is all about the customer experience. for example, the u.k. -- maybe i should ask you about the u.k.. there is always a model of a country that is doing more than others, and that is why it is the model that is unpredictable for the cycle. francine: regardless of what happens with regulation, you

feel like you are in a strong position in the u.k.? >> we are the third-largest mortgage lender in the u.k. and had our strongest year ever. we got a huge amount of work on current accounts. people forget we multiplied by five our current accounts, and that is a huge priority. that is the definition of a loyal customer. almost 25% of the total for the group, so it is a huge value for us having this strong franchise in the u.k. we are excited about the work we have done and the opportunities ahead. francine: that was ana botin, the santander executive chair. begin with the deadly virus having a severe impact on companies that do business in china.

starbucks closing half of its locations and toyota putting china production on hold until february 9, and restricting travel to the epicenter of wuhan. next month, mark zuckerberg heading to brussels to meet with e.u. officials, trying to head off scrutiny over how they handle user data. the company says he will discuss the framework for new internet rules and regulations. that is your bloomberg business flash. francine: it is fed day. coming up, bill dudley, former president will be speaking to us. this is bloomberg. ♪

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

download the xfinity stream app and watch all the shows you love. beyond the routine checkups. beyond the not-so-routine cases. comcast business is helping doctors provide care in whole new ways. all working with a new generation of technologies powered by our gig-speed network. because beyond technology... there is human ingenuity. every day, comcast business is helping businesses go beyond the expected. to do the extraordinary. take your business beyond. ♪

alix: supply chain disruptions. toyota suspends operations in china. apple worries about losses. the market prices and a full rate cut by the end of october. ge's turnaround takes effect. earnings beat and cash flow surprises to the upside. microsoft reports after the closing bell. welcome to "bloomberg daybreak" on this wednesday, january 29. the latest is from mcdonald's, that stuck up 1% in premarket. u.s. comp sales went up, beating estimates, over 5%. overall comp sales up almost 6%. earnings just shy of two dollars a share. some strong numbers coming out there. that follows more narrative of what is going to take hold, the macro virus fears or the micro fundamentals. you