francine: the death toll rises. the world health organization calls an emergency. india reports its first case. cutting market prices. a 50% chance of a rate cut from the bank of england. earnings come in weaker than anticipated. francine: welcome to "bloomberg surveillance," everyone. this is francine lacqua in london. these are your markets. a lot of focus is on the coronavirus, what kind of impact

it has on manufacturing hubs in china. european stocks down 0.7%. the fed yesterday on hold of course with what happens to the bank of england. we had movement on the yuan. you can see the u.s. 10-year yield at 1.57. we have some great maps looking at the coronavirus and trying to assess the impact it has on manufacturing. you'll see global figures from the cdc and the bloomberg news room. this is our map. i think you go to mapvirus go and then zoom in and overlay it with some of the manufacturing hubs in wuhan. news.t's get to bloomberg >> jerome powell is paving a way to a possible shift to more

dovish policy. he signals the bank will pull out all of the stops to combat inflation. they have a greater resolve to hit inflation target. >> we expect inflation to move closer to 2% over the next few months. unusually low readings from 2019 dropped out of the calculation. the sector taking bigger wrouns than anticipated and units at the heart of the california's turnaround plan. they saw declines in revenue. the european apartment approved boris johnson's brexit deal. it was all but a formality and clears the ok for the u.k. to leave the e.u. tomorrow. over the next 11 months the e.u. and u.k. will argue over the

terms of their relationship. and then mark carney's final rate decision. whether they will get the first cuts in 2016. carney said the b.o.e. has the place to ease if necessary. this is coming out at midday london time. powered by more than 2700 journalists and analysts in more than 120 countries. francine? francine: thank you so much. let's get the latest on the coronavirus outbreak. the death toll at 170 with more than 1,000 new cases. the virus has also now reached india. s. authorities will keep the first americans at a military base. >> there is likely to be some

distrouppings china and globally based on the spread of the virus today and travel decisions and business closures. >> this really is a temporary issue. we're going to focus on this in a way that is true to our mission and values. >> our focus is meeting the demand for recess operators. in terms of our supply chan most of our key suppliers are far away from the center of this particular outbreak. we feel very good with where we are in the supply chain. globals about 15% of our revenue. >> as we think about the long-term growth opportunity in china, we remain optimistic. >> we are very carefully monitoring the situation. francine: joining us now from hong kong, our anchor rish awed

sal met. >> this is coming particularly from hong kong at possibly the worst time it could. on top of that, slowdown with some green shoots and recovery. perhaps they could be nipped in the bud if it were. n top of that, we have maccau. we're talking about here the possibility we can have more than two percentage points shaved off growth in china. this is what an economist has come up with suggest this could go beyond what we saw in sars which was a 2% decline in g.d.p. this is an economy that has evolved so much in that time frame since 2003. it is dampte beast. it is six or seven times the size it was then and it is based on ssts and there is a lot more interaction between people as a

result and that could mean the virus spreads quicker here as well. to give you an example of what is going on in maccau, this is the busiest time of the year, he chinese new year. twhak government do? they can institute triple r cuts shes lessen the amount the banks have to set aside in reserves. they can perform more open market operations. the thinking is that won't be enough. it is not just going to affect things on the margin here as well. francine: at least one chinese lunar new tended the year holiday beyond february 2. do we have any idea the containment efforts are working,

the they are working or not working? >> well, the death toll keeps going up. we have the number of people being infected. it does not reflect the true picture on the ground. we have something like 60,000 people also under observation. that gives you the scale of it. so we have had as you just mentioned several provinces in china extend their holiday. st have extended it in the epicenter where wuhan is. it is in lockdown with 15 million people restricted from travel here. they have extended their holiday to february 14. this comes as other containment efforts are being undertaken. they will cancel all bookings to china from united airlines and british air ways and we have ome carriers, cathya pacific

reducing capacity on certain routes into the mainland into march. that gives you to idea of the kind of hits this region could take. francine: thank you so much. .oining us from hong kong the markets really panic. a lot of companies trying do their bit so that the virus doesn't spread but concretely, what are the markets worried about? is it supply chains? airlines? all to have above and that it could skjei off so much growth and really slow down the economy? >> i think what the market is focusing on at the moment is china has evolved into a onsumption-driven economy. when you have the chinese new year, during the year, it is the busiest period from the spending

points of view. having something like this that puts consumers on a standstill is going to have an impact on the consumer, on consumption, on growth. this is something we're going to be looking at carefully. francine: this is for china. is there a concern this spreads to the rest of the world. >> there are some concerns. ultimately our view, this is going to be a temporary phenomenal. -- phenomenon. yes, we have seen -- if you have a selloff in asian markets that will likely impact the sent number in other marks as well. the yields are down about 35 basis points from where they were in december. our view is -- also there is the fact that it is acting at a time when we entered the year with valuations there were quite a few markets that were stretched.

francine: repricing. what exactly is priced into markets now? it is not risk scenario. the high in cred in yield space. at one point we reached 350 basis points which is very much the best possible case as far as you can get. now we're at about 400. we have seen some widening but we're not in panic mode as far as the markets are concerned and what we can see. francine: thank you very much. up next, will we see carney's final cut? he will chair his last ever policy meeting with the traders split on the prospect of a cut. and then carney's final press conscious at 12:30 p.m. here on bloomberg tv.

this is bloomberg. ♪

francine: economic finance policy. this is "bloomberg surveillance." i'm francine lacqua in london. >> the same prudent forecast this year for a small gain in profit and sales. the same strategy for 2019 allowing it to boost its outlook three times. they expect to keep fueling growth. and microsoft's quarterly sales are beating estimates by more than $1 billion. fueled by persistent demand for

customers seeking it to shift computing tasks to cloud-based systems. it rose 14%. it was 10th straight quarter of double digit sales growth. blowout earnings for tesla. the record revenue carrying the electric car maker to its fourth profit in the last six quarters. chief executive elon musk celebrating the new model of the crossover. that's your bloomberg business flash. francine: thank you so much. let's focus on the u.k. it is mark carney's final policy meeting as governor. they are split town the middle as to whether the bank will cut for the first time since 2016. they are more divided than they have ever been this close to a decision under mark carney. joining us is nejra.

does carney cover or does he not? >> that is the million dollar question. the market is divided. what a wild ride it has been in those money markets. we saw the bets about a 70% probability. debts have pulled back after we had some soft data. mainly a confident pim and optimism survey and survie overnight on sentiment as well. money markets are divided. in terms of economists, they seem to expect we're going to get a hold with a 6-3 vote. if we get a hold, what kind of dovish signals might get from mark carney and are the dissenting voices going build up rom 17 to 6-3?

those are the big questions that we're looking at as to how mark carney will message soft versus hard data. we're waiting to hear from the b.o.e. agents moving across the country gathering data from consume rs and companies. francine: thank you very much. we expect that decision at 12:30. mark carney's final press conference. i would like to point out, we almost made a bet whether they will cut or not. i will not take a split. this is what the market is pricing in. this is an extraordinary chart. 8% cut in december. then soars to 70%. then it is 50-50. is it the carney speech? is it the data? it is his last. >> there is an element of is

carney doing to do a draghi and leave with a cut or a meaningful end. what the market is looking at is the data. the u.k. data has been slowing, particularly on the inflation side. we are seeing inflation falling quite sharply in recent times. now obviously we are at 50-50 as far as today's meeting is concerned. if they don't go now, they should go based on data alone. if they don't go now, the market is going to continue pricing in the chance of a cut in the spring. which is what we have at the moment. as far as u.k. assets are concerned, we haven't really recovered all of the brexit premium that was built into u.k.

assets. there is room to go there. francine: there is talk about fiscal spending and money to the north. how does that change? >> it is something that should be in focus and easing focus for us. as far as the u.k. capital bond market is concerned, our view is a mildly cautious one. jurned under .5 of a percent. they have come a long way. if you do start sozz in r fiscal stimulus, that will lead to high yields on the back end of the curve. francine: when you look at the idea that it is good to cut now so it gives the successor of mark carney a bit more time. is there a danger that we're front running and basically using too many monetary policy tools? >> there is something that the market is looking at.

unlike for example, the fed, the bank of england doesn't that the luxury of having that much room to maneuver on the rates. will they want to use that now or wait longer until it is evident that they have to? it is up for grabs. it is something that we're looking at and the market is toing on. at's why we have a 50-50 outlook. francine: so you bet they will cut? >> what are we betting? coffee? let's go with they will cut. francine: what will it take for negative rates to be in the u.k.? >> negative rates are no longer something that is possible. you have them in europe for a long time. we would need a protractive period of very, very low inflation and stagnant growth. the inflation the u.k. has been

uite high because of sterling. we have seen a drop in inflation. would -- we shouldn't avoid thinking that may be. in the u.k. the threshold for negative rates is much higher than elsewhere. francine: thank you so much. our guest stays with us. on wall the close street that sent shares soaring. we'll discuss that next. this is bloomberg. ♪

♪ francine: coming from the doc: bank press conference. just speaking to the crowd. we did hear from the earnings and doc: bank's trading surge which was quite good. it has been overshadowed by the big writedowns. minutes ago he was saying he cease higher adjusted pretax profits for the investment bank but trading revenue would be up 31%. it still trails its peers. tesla's record revenue carried it to its fourth profit in the last six quarters. alex webb joins us now to

discuss this. first of all, tesla blowout. are we concerned about the valuation? >> yeah, it is really hitting the upper extremities of what people had expected. 12-month target price significantly below where it urrently is. my colleague in new york, looking at some of the discounted capital mods, the analysis, in order to justify the current share price, it would need an increase in earnings per share over the next nine years. people are not looking at those type of returns. as we have seen the shorts have improved time and again over the

past year and 18 months. francine: on facebook quickly. again, there is a lot of -- is 2020 the year where we're going to start questioning how any of these companies make money, how you value them? >> if you look at these two companies that are dependent on ads for their income, google about 85%. facebook 98% on ads. if you look at the regulatory overhang coming into play with them. ou see earnings fall from what they were two or three years ago down to below 25 now. apple is going above. ♪

francine: the death toll rises. the world health organization calls an emergency meeting as the number of deaths from coronavirus reaches 170. india reports its first case.

carney's final cut -- the market prices a 50% chance of a rate cut today from the bank of england. and signs of a turnaround. deutsche bank shares fall as lenders' earnings come in weaker than anticipated. >> we -- then anyone had previously thought. morning, good afternoon, and a good evening. this is "bloomberg surveillance ." just over 1.5 hours into the trading day, let's check on the european stock movers with annmarie hordern. annmarie: it is an earnings bonanza today. than 9%, beating estimates on cost control. the story is the management changes. the chairman is stepping down, the billionaire patriarch giving the reins to his son. and we have a new ceo, the first

female ceo to run h&m in its seven-decade history. i look forward to the conversation you will have with her, francine, in the next hour. volvo boosted their dividend. they seem to be wait -- able to weather the storm with the demand drop we are seeing, cap -- theyith ring will be pushing for changes. we do not know how big the stake is yet, but the market likes it. we have some big followers today as well. royal dutch shell down more than 3%. slowing the pace of share buybacks as they missed expectations. ceo said that the buybacks will slip beyond this year if the macro environment stays weak, setting a gloomy tone to all of these big oil majors we

will hear from. bt group down five point 8%. hitei is expected to get with charges based off the fact that u.k. to his step to not include huawei technology as part of the rollout. an swatch group down 3.5%. everything here has to do with the hong kong protests, really denting the sales. they are seeing competition from smart watches like apple, and we have to think luxury at watchmakers -- what is next for them with coronavirus? potentially more damage to come in the luxury space. francine: thank you so much. we will have a full round of what it means for luxury let's get first -- to first word news in new york city with viviana hurtado. what anne-marie was talking about, royal show -- royal dutch shell falling after the share buyback. they say they will miss their target of the repurchase and

shares by 2020. it underscores pressure on big oil due to slumping natural gas prices. the result setting a gloomy tone for the industry. company posted its slowest quarterly growth in a decade, the unit includes the litan brand. last year it had close to 3 billion euros in sales. it decision is expected by midyear. black teae have a big business, including -- >> we have a big like tea business, which has for a long time been a drag on unilever growth. the number one priority in the business is accelerating growth sick cordially -- sequentially. might beeel like tea better managed in a better structure than it is today. viviana: adding pressure on the social network as it faces more restrictive privacy regulations of the world.

revenue increasing 25%. but expenses also rising 44%. the number of global internet users is women in growth for facebook because most have an account on facebook, whatsapp, or instagram. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in and than 120 countries, viviana hurtado. this is bloomberg. francine? francine: chinese spending on luxury goods has entered another period of uncertainty as fears around the spread of coronavirus escalate. that is according to analysis from bloomberg intelligence. any extended travel lockdown will increase spending disruptions and lower consumer confidence. we are delighted to be joined by chiefrmer ferragamo executive officer. our guestwith us, from fidelity international. we are talking about the impact the coronavirus could have on this consumption around the world. welcome to "bloomberg

surveillance." thank you for coming in. ferragamo charge of during the sars outbreak. how much of a nightmare is it for luxury companies? a lot of the demand cut comes from chinese consumers. >> i remember very well. it was 2003 and i was just talking with the person who was with me and we were walking into ifc more completely empty. the mostgned interesting contract of our lives. bigi think there is a very sense that even then it was limited to the south of china, where business was not very big, and of course hong kong. of chinese consumers around the world was very limited. on one side i hope we may have a

to get down tome 34 -- 3, 4 months. but definitely the size of the impact is going to be maximized -- thecollective chinese coincidence, with the new year, which is normally the booster, and in this case is not doing so. complicatede situation in china because everything has been stopped now. there is no -- francine: the fact that we are note online does necessarily make a difference because you need to pack things up and deliver. the first days we thought it could be a positive effect, but shipments are not

allowed in different regions and provinces, so it will create a further element of disruption in the near future. we also have to consider people not getting their salary because vacation, at home, on and i would say for the luxury business it is probably going to be impacting the first quarter of this year. remember that the market picks up very fast in the second quarter. it was going up in 2003 like 25, 20 6 -- ran cinco i do have a map that i would love to -- francine: i do have a map that shows where some of the factories -- how does the chinese shopper buy differently now than they did in 2003 at the height of sars? michele: i think they were still narrowin the very environment, limited number of

people had access. where now they are going all down the pipeline, and in fact probably the most experienced buyer in the luxury. and we try -- we tend to forget that 70% of the shopping in europe is related to tourism. and inside the tourists, chinese are number one. so you can see in florence, -- the this is impacting one thing positive is that most of the chinese will stay out for another couple of weeks. so we have people in australia, in europe, so i hope they keep spending. and i think probably this has been much better than in the past. it might be even shorter, hopefully. francine: we heard jay powell of the fed talking about this. do we have any models to look at

at how consumption changes? i want to get nicholas' thoughts on the fact that the luxury sector is pretty immune, dampening overall. but if you are in italy, what makes you stop going into the u.s. if you are buying toothpaste or a washing machine? dr. local consumption, the impact will be more from the >> local consumption, the impact will be more from shifting from one part to the other. the second-order impact comes from how are we going to get things that i want to sell from a to b, particularly when china which is a big money effect -- manufacturing hub anyway. short term, the impact will be felt in the data. we will look at q1 data in particular. it will be that short-lived, and we have seen in the sars case, there is actually

scope for a potential rebound. the authorities are there standing by, but other central banks. powell mentioned that. we will see with the boe does. supportl continue to demand globally. francine: is there anything chief executive can do to mitigate this in the luxury sector? i imagine with the u.s.-china trade war, some of the supply chains would have moved. luxury, china is not the manufacturing place, so this will not create any problem. what i think is important is now is to be able to focus on our markets, on other cities. ,hina has been such a old mine everybody -- such a gold mine everybody has been investing in china. i think this is an opportunity for singapore, from moscow, so

it will be important. and also in china china -- also --ide china, away from yo the cities away from wuhan. the cities on the west side, thegdu, those areas of world developing. so probably the companies that moved, you can open pop-up shops in the area in china, which are not impacted or less impacted. and i think the reaction will be extremely important. also managing inventory, managing people. the best companies have an emergency meeting every day to find a reaction. francine: thank you so much. we also have these great maps that help us figure out where the supply chains are and where it changes. we have these interactive maps.

i am clicking on factories there, and you can see it shows some of the factories. this is not necessarily the luxury sector. theou click on the right, apple stores, drug stores, to give you an idea of how this will impact the supply chain. and michelleli nourse a stay with us. up next, we hear from which a bag. after the german lender's earnings come in weaker than expected despite a surge in trading. we will have the next, and this is bloomberg. ♪

--we are obviously very

compensation overall is one of the most important processes we run every year. that is for the whole company and also for the management board. we gave deep consideration to our own decisions personally and as a group and feel we arrived at the right compromise, if you like, between recognizing the cost oath for shareholders and employees of the significant -- both for shareholders and employees of the sick giving restructuring, -- of the significant restructuring, but also with a long-term interest of shareholders. we think we struck the right balance both within the social environment and also as responsible stewards of the company. >> walk me through how you get to this loss. $5.3 billion was the net number. pretax you lost 3.6 billion euros. it is restructuring cost. james: our restructuring cost is that the loss after tax and pretax is driven by restructuring costs, transformation effects, we call them. that is across a range of areas.

line, goodwillax impairments, softer impairments, restructuring charges. that is more or less in line with where we got in the market back in july when we announced the restructuring. we announced we wanted to refinance it from our own resources and demonstrated in the first two orders that we were able to do that. we increased our capital ratio to 13.6%. i see all of this as very much on track against the goals and targets that we sent out and we have hit every single target, every milestone of this restructuring. what i think is important is the message that the underlying business performance -- once you strip out all of that noise that is created by the restructuring, it is actually quite positive, showing stability in revenues, growth in pretax profit in the core bank. we are pleased with that result in the second half. >> are you on track or are you ahead of schedule?

i noted as ratio, you are getting a lot of the headcount reduction out-of-the-way sooner than you may have planned. does that provide a lot of upside for 2020? james: we are on track with every single metric or ahead. where i would say we are ahead is on the capital side, also deleveraging in the capital release unit there it as you say, personnel reductions have been a heavy moving pace. with this step off into 2020, that underscores the confidence that we have been communicating to the market in the progress we are making, in restructuring, in the decisions that we made strategically to realign, reappoint the business. but also in the confidence that we think we have brought back to the company with our employees come with clients, in the capital markets. we sat insecurities and markets but in our everyday business. and in our engagement with frontline client officers. francine: that was the deutsche bank ceo speaking with matt in

frankfurt. let's go back to michele norsa and andrea iannelli. you are focusing also on basically trying to buy assets for the italian foreign wealth fund. andrea: we have the mission to help midsize or small size companies -- to grow and become or international. we are normally taking minority stakes, up to 49%. that of course along with opportunities in italy, and italian entrepreneurs are a little slow if you compare them is a key i think now time to start boosting some of the top industries. francine: and the chief

executive in italy, you help chaperone. they look at this chart -- what does this tell us about the spread in italy? andrea: it tells us that the market has a sigh of relief after the regional elections, which entered a possibility of further instability again for another year coming up. the perception is that things will carry on in a more or less stable way from a government point of view. clearly the market always has a bit of a sense of deja vu of what happened in the last couple of years. there is something interesting going on involved. what we have seen in terms of italian assets over the last few months is that they have underperformed the rest of the market. particularly in fixed income. expect our recovery to be in

the cards for the next few quarters. francine: thank you both for joining us today. michele norsa and andrea iannelli. coming up, gsp takes center stage as new reports with the bank's head of sustainability. this is bloomberg. ♪

>> we absolutely support any kind of regulation that continues to support innovation, but also more transparently, and particularly parsing on the discount. discount.

francine: economics, finance, politics. this is bloomberg surveillance paired as investors seek to identify which sustainable issues are impacting their business, releasing a special esg research report. the road to esg integration that explain problems that are material to business performance and valuations are joining us now from paris is the head of sustainability research. thank you for joining us on "bloomberg surveillance." the more questions you ask on esg, the more i guess it unveils complexity. what are you most worried about in terms of how we measure esg and how we understand the supply chain of how these things work?

>> good morning. here atare trying to do societe generale's to access the community in terms of signaling out for each sector what we believe are the key things and challenges and try to integrate specifico recommendations made by our research team. for each sector, we are listing a number of key issues, and we into a combined conclusion. francine: will shareholders really hold companies accountable for esg performance, or is it just this for now? >> two things. definitely companies are more and more facing investor questions about sustainability

approach, and it is becoming compliance to look at the effects. it is becoming more and more known among the investment community that we need to make things even appear for investors to exactly identify and to put together all the information in a pragmatic way. we are doing the business report today. francine: what is the one thing that will make a big difference to esg investment? do we need a common language to know what we are talking about? yannick: common language is the first step, to make sure that we all online. but there are some differences depending on geographic perception, availability of information, and the key that could be made available. what we are trying to do is to across all market caps,

all regions, to make it easy to understand and to compile by investors, and both by progress, we need some transparency. investments are integrating those new assets. and i believe the sustainability is the ability to demonstrate the impact on performance, so it is becoming the norm. and if i can say, we don't really have any more question about why should i do esg, but rather how come and how to integrate? at this is why -- francine: thank you. we are going to leave it there. thank you for coming on bloomberg. ♪

francine: the death toll rises. the world health organization calls an emergency meeting as

the number of deaths from coronavirus reaches 170. india reports its first case. carney's final cut -- the market prices a 50% chance of a rate cut today from the bank of england. and signs of a turnaround area deutsche bank shares turn positive as traders focused on the fixed income success. it ismes von moltke says trying to adapt to its environment. good morning, good afternoon, good evening. this is "bloomberg surveillance. tom, a lot is going on because we continue looking at the health organization and what it says about the coronavirus out. we have a new map trying to track the factories in china, and linking that to the supply chain for all sectors. then of course we have the bank of england, extremely important because it is mark carney's last decision, and there is a 50% chance the markets think he will cut. picture pretty yesterday was chairman powell dealing with all this. we see maps of market moves

since the fed decision yesterday, and, francine, i would suggest governor carney is constrained by the move we have seen in yields in the last 18 hours. and also what we are seeing in emerging markets. this is the first day were e.m. really cracked. turkish lira outcome of brazilian real, and the chinese offshore went through seven, which is extraordinary. francine: i have a great math, what i wanted to show, basically a bloomberg function, and you click on factory retail banking, and it shows you who is exposed to what. we will have more on the impact of coronavirus. let's get to first word news in new york city with viviana hurtado. we begin with the coronavirus and the death toll shooting up. china says at least 170 people have died. the number of cases on the mainland rising to more than 7700. the world health organization is calling a meeting of its emergency committee. it may issue a global alarm.

the group is looking at evidence the disease can be transmitted. before a person shows any signs of illness or on capitol hill in the united states, senate democrats making a final run at persuading a few republicans to call witnesses in the impeachment trial. a showdown vote could take place tomorrow. democrats need at least four republican votes. they want to subpoena former national security advisor john bolton to testify. senate majority leader mitch mcconnell is leaning on republicans to stay united. federal reserve chairman jerome powell paving the way for a possible shift in inflation strategy. he signaled the central bank would pull out the stops despite a global disinflationary downdraft. that could result in a more dovish fed. policymakers would try to pump up prices and the economy. 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 member. francine? tom? tom: we can do a lot of data

checks. they are very nuanced and global. we have some charts to describe what we are seeing. futures are -- ugh. dow futures down, a nice reversal over the last two days. curve flattening big time. crude oil really not part of it. it is where it was. next screen, please. out -- you think it would have to be higher at some point. index, the number we had on offshore yuan -- now 6.90 nine. and the u.s. 10-year yield makes the choice for governor carney a little more difficult, decisively under 1.60. francine: that was my data check, too, tom.

and he feels significant. if you look at what markets in europe are doing, they are down because they are worried about evidence that the coronavirus epidemic is disrupting china economics. tom: we are resetting, particularly at e.m. and commodities. that will be one of our themes today. very simply to look at -- i was going to go to a chart on commodities. let's go to steve engle right now in hong kong. he was extremely helpful yesterday. what has changed in 24 hours? steve: the number of cases, obviously, and the number of 29% since thep by last time i talked to you 24 hours ago. up to 170 deaths in china. cases and that might just be the tip of the iceberg. 29% a day right now. i don't mean to be alarmist, but there is concern as we just got

the first cases in the philippines as well as in india, those confirmed in the last couple of hours. it is a virus that is spreading. tom: this is an unfair question. yieldxtrapolate the market, global e.m. and commodities, i am looking at china gdp, short, medium, whatever term, well under 6%. there i say under 5%. -- dare i say under 5%. is that where we are heading? steve: let me look at the numbers. an economist at jp morgan has lowered his first quarter, full-year, and 2020 forecast to 5.6%, 5.8% respectively, so below 6%. the government has that target of 6%, 6.5%. this could be a huge blow to the economy they just got the phase one trade deal, but if demand in china is waning, that could put a lot of the commencement's -- the commitments to the trade

deal in jeopardy. that is a whole other ballgame we could talk about. keep in mind, back with sars in the first and second quarter of 2003, gdp went from 11.1% growth down to 9.1% growth in the second quarter. it is two full percentage points off growth. and an economist at la mora 5, 6 monthsis goes like sars did, we could be looking at that kind of drop off or deceleration in chinese growth. francine: what are authorities doing to try and cushion this fallout because of the coronavirus on the economy? steve: obviously they need to contain the virus first and foremost, and that is what they are doing by quarantining tens of millions of people in other parts of china. but going beyond that, as far as cushioning the economic low, most economists we have spoken to hearsay there will probably be more -- we have spoken to

here say there will probably be more quantitative easing. stephen engle, thank you so much, particularly for the adjustments we see from global wall street to all occurring in china. mr. engel, from hong kong today. we have a wonderful set of guests right now. patrick armstrong is with us he has to adjust to what he sees within the markets. we are thrilled on short notice to have with us today, randall kroszner, former governor of the federal reserve system and at the blue school of chicago. a chart, pull out china gdp. we have a lot of charts today. south, from 10% down to 6%. we have just seen jp morgan go sub 6% as well. how do major central bankers adjust to the elephant in the

room becoming ever weaker rapidly? and are is a long run short run. the gdp has been going down gradually and china mainly because the population growth has been slowing. they have a one-child policy. the number of working age population is going down. relativelye aging rapidly. when you have fewer workers coming into the labor force, you will have less output and less productive -- unless productivity explodes. they have not really done reform to make that happen. then there is the short run piece related to the coronavirus, and that will take chinese gdp -- chinese gdp will take a hit in the short run. seeing the weakness in the brazilian real, and commodities, is that opportunistic for you, or do you just stand aside? patrick: in commodities we put on a position where we are not betting for oil to move higher.

we are betting it is not going to fall very much anymore. we think opec has the floor at 60 where they like it. you have seen oil prices fall, probably justified given that you have greater supply and demand and middle east tensions are not looking as high as they were a month ago. but those tensions always pop up. and selling the downside on oil is a very good play right now. western bonds -- u.s., u.k. bonds right now probably overbought. i think the economic slowdown in china is real. definitely you will see a big hit to retail sales. the knock on impact to the u.s. and european economy, i don't think it is as large as the bond market is placing in. francine: i know we are not virologists but we are all trying to be. 10 days -- what does this mean for world growth in the markets? patrick: i don't think it is going to mean much. for the asian markets, you will see a big hit to retail sales.

it may be beneficiary that people stay at home, play video games, shop online, and stay away from malls. you might not see a big hit to consumption because people have the opportunity to buy online. some point guess at it actually hurts the delivery services, but we are trying to find out exactly the impact. what does that mean for central banks? jay powell had to come out and explain how this impacts his models. how muchthe key is impact this will have on the u.s. economy. right now i think the impact will be muted, but if it spreads significantly, it will have some impact. particularly on the profitability of major firms. there is often a disconnect between how the u.s. economy is doing and how the s&p 500 is doing. if china gets hit, i a lot of major u.s. firms, and a lot of exposure in china. the u.s. economy can do fine,

but the stock market could go down because china is getting into trouble. tom: i want to dive into inflation dynamics, some of the tone from chairman powell yesterday. , on chairmantion powell -- when you darkened the door, do you feel like the governor to the world? of the worldweight did seem to be on our shoulders when i was there. people were waiting to see what we were going to do. we also tried to gordhan a policy globally. it was unusual to have coordinated rate cuts globally, but we were able to orchestrate that. francine: thank you so much. kroszner and patrick armstrong. h&m announces a reshuffle at the very top. later this hour, we speak to the chief executive, helena helmer's and. this is bloomberg. ♪

viviana: this is open bloomberg surveillance." that get murdered/. deutsche bank and the fourth quarter struggled to boost revenue, reporting a larger than expected loss that overshadowed trading gains at the investment bank. the unit at the heart of deutsche's turnaround plan saw their revenue decline. last year the ceo, christian sewing, focused on lending to companies and retail clients. premarket trading, shares with tesla soaring deal and must's electric carmaker delivering a second straight quarter of blowout earnings, revenue beating estimates. newthe introduction of the crossover. he says deliveries will be beginning in march, months earlier than planned shares of

facebook falling. fourth-quarter results showing growth at the social network is slowing down. that is adding to pressure the company is facing governments around the world are weighing more restrictive privacy regulations, and officials are taking a closer look at how facebook does business. that is your bloomberg business flash. tom: thanks so much. markets are on the move this morning. where watching the yield and commodities particularly, and the global litmus paper, foreign-exchange, giving us signals now. let's look at something chairman powell alluded to, the separation of service sector inflation from good sector inflation. in the united states of america. patrick armstrong with us, and youre thrilled to bring randall kroszner. randy, the reality here is the homerun for powell and company has been this re-inflation of goods, products, through the last three years. are we at risk of seeing that rollover so we get two discrete

installations, one service sector inflation -- two discrete sectorons, one service and one outright good inflation? randall: the chart makes a really clear that they are taking two separate paths. we have seen the separation over the last few years as they go in different directions and i think they will continue to go in different directions. that is one of the reasons why chairman chat -- chairman powell brought that out because they are trying to study that. that may explain why we are having unusual inflation dynamics because of the separation. tom: we are having unusual inflation dynamics, but i have to set china virus and commodities down. that could all go away on a dime. are you seeing perdition goods pernicious goods inflation because of oversupply and because of a technological impulse? randall: i'm not sure i would say pernicious. tom: i am saying pernicious. randall: i understand.

it is following a different path and there are different factors affecting goods inflation. we are seeing a lot of competition internationally on that. for domestic labor. with domestic labor we are seeing less competition because that is internal rather than external. the unemployment rate is so low, you will see increases in costs versus increases in wages. there is more of an impact on services than on goods because labor is a much higher fraction of the cost of producing services. francine: patrick, where do you see the u.s. economy, inflation? patrick: i think the u.s. economy is driven by the u.s. consumer. growth, 1.8%rcent is coming from u.s. consumption. that is the line you want to look at if you are worried about recession. consumer confidence is high, so you need an genesis shock -- you need an exogenous shock.

access to money is essentially free right now, so something has to push up one of those factors for the u.s. economy to go over. francine: one of the chances that inflation is higher than we think? patrick: inflation always feels hires to consumers -- feels higher to consumers than statistics say. even though your commuter goes up in price that your computer goes up in price, it actually goes down, so it is deflationary. inflation is low, but it feels higher to the average man on the street. randall: i think that is right. if you ask people about price changes, they will tell you what prices have changed recently, so they do not think of it in terms of sort of like a carefully structured basket of all the goods and services that you are buying. they focus on things like gasoline prices went up. almost always you see consumers reporting higher inflation than the central banks report. it is important for central banks to take into account.

they speak about things in a different way than the average person speaks about them. rather than trying to change the way the average person thinks about them, the central banks should talk about things that should change the way they look at things francine: personally. here's a look at what you should be watching out today. the bank of england announces a rate decision at 12:00. mark carney casting his last vote as governor. then later, german inflation looks like it surges. we will get cpi data at 1:00 p.m. as secretary of state mike pompeo is in key avenue, his first visit to ukraine since congress opened impeachment proceedings. we will have more on all those stories next. this is bloomberg. ♪

>> of course we in the industry are adjusting to a sense that this rate environment will persist for much longer than anyone previously thought. >> if you look at this -- tom: it is a managing of a message. i spoke to mr. saving -- mr. sewing in davos. recovering deutsche bank, certainly the share price doing better on the year basis, out to just over eight euros for deutschmark -- for deutsche bank shares. this is pretty good, a little bit of a smile perhaps by mr.

sewing. always philosophical from berlin, our matthew miller, star of the european open as well. matt, what is different today from mr. sewing from 90 days ago? the mosthought interesting thing from christian sewing today was in a letter or emailed to employees this morning, he said they are now going to shift to growth. he has been pushing this huge restructuring, which forced 5.3 billion euros lost last year -- their fifth year in a row of losses -- but now he says they are ready to transition to growth, and i think that is a big sign. tom: it is great lang which but they have to do it on the interim statement as well. is there any visibility or profitability from this bank? matt: i asked a lot of questions this morning. i was over at the twin towers there, and a lot of people said, you know, we are looking to make a pretax profit, but nobody

would commit to a net profit in 2020, so it doesn't look like it is necessarily going to happen this year. that is going to be difficult for the bank because the populist concern here in germany about this lossmaking bank, especially as it pays millions of euros in bonuses to its executive board is getting worse and worse. matt, how much will they cut and do they risk losing good talent? how many job cuts are weak spec and from deutsche bank overall? overall, they are cutting a bit of their staff from 90,000. they announced that in july. they are ahead of schedule on that. plus, they managed to frontload the cost that is the good news for deutsche bank. the bad news is for employees they are cutting bonuses by about 20% across-the-board. of course, it is going to be different for you depending on how you personally performed. they are going to wait for the

annual raises that they give until april 1. typically they would have come out now, and then the executive board is going to give up its personal bonus performances. they are still going to take away half of their bonuses. they are talking about millions of euros if you divide it through each number of the executive board. francine: matt, thank you so much. a few miller, our bloomberg european anchor, joining us from frankfurt, where he just spoke to the deutsche bank chief financial officer. coming up on the virus impact, we will be talking with the eye chief executive officer on containing the virus. this is bloomberg. ♪

tom: good morning, everyone, bloomberg "surveillance." mark

barney with the really interesting meeting coming up. i want to bring up a chart for patrick armstrong. i will steal from anyone. this is from a viewer and this is a superb chart. julian, thank you so much for bringing this to my attention. this is the titanic resistance the two year yield faces, back 40 years and on a log basis, the two year yield is a wall of a diss inflationary trend. what is a central banker to -- diss inflationary trend. -- dis inflationary trend. what is a central banker to do? patrick: they have indicated they will be on hold, so there will be nothing to d anchor that until we see persistent inflation. there is no inflation. the u.k. is a little trickier for carney because there is some

inflation and you have confidence after the election but some weak trailing figures. tom: i have zoomed in on the chart and up we go to higher yields, everything is great, everyone is happy. we roll over for two years. why do we come to this point and roll over? you need to see higher prices because the central banks are what drives to year yields and the central banks, in order to hike, will need to see inflation and some persistence of that inflation. unemployment, wage growth has not spiked higher. we would expect significantly higher wage growth. without wage growth, you don't get inflation and with technological improvements, that is a constant disinflationary

backdrop. it is hard to see that changing. francine: what are you expecting from the boe today? patrick: i expect a hold and i will be slightly surprised if there is a cut. you can make an equally compelling case for a cut or a hold. there is some momentum that looks like after the election and getting through brexit. sitting on your hands may be best because at the end of the year if we get a trade deal, we may see a hike. francine: what it make andrew bailey's life easier if mark barney cuts today? patrick: yes, so maybe he is thinking like that or maybe he is thinking let's leave the tough decision to andrew bailey. francine: what happens to pound? patrick: if it goes down, we will be buying pound. you get a boost and weaker

starling is important for the u.k. economy as well. sterling is important for the u.k. economy as well. a week pound will be the catalyst -- weak pound will be the catalyst for growth. tom: it is great to talk bonds, fx, all of this off the tragedy in china. what do i do with my stocks? futures -21, dow futures -76. jp morgan adjusted china gdp under 6%. are you adjusting equities? patrick: we have not changed our equity positioning this year. have been adding equity exposure is in japan, so the u.s. as rocket -- is record highs. expensive with some growth.

nine timesading at enterprise value ebit the -- ebitda. that is where we are seeing some value. 10 years ago, revenue growth was different for the u.s. and china. tom: what will be the catalyst for a relative japan lift? patrick: i don't know what it will be. you have the olympics coming up this summer. tom: this is not in the curriculum of the cfa. -- cfa institute. patrick: you have big diversions of multiples and small diversions on revenue growth and at some point, gravity has to lead to a weakening of the u.s. stock market versus japan. a specific catalyst, you cannot say this will trigger it. financial gravity will have its effect. tom: patrick armstrong, thank

you. we heard from stephen engel earlier. in an important central bank motion, mark barney in his final print -- mark carney in his final press conference. look for this important bank of england meeting today. with our first word news, here's viviana hurtado. viviana: a crucial decision for the lord health organization. it is just world health organization. -- world health organization. cane is evidence a disease be transmitted before showing signs of illness. china has raised the death toll to 170 and more than 7700 people on the mainland have been infected. time running out on capitol hill for senate democrats in the

impeachment trial, trying to persuade republicans who agreed to call witnesses. democrats want to question former national security advisor john bolton whose new book has bombshell revelations. now to a scoop from our d.c. national security team, more problems for the most expensive u.s. weapons system in history. the f-35 fighter has a gun that cannot shoot straight. authorities have a long list of issues that need to be fixed, 13 described as must fix items. for the first time in three decades, fatal drug -- drug overdoses have decreased in the u.s. according to the cdc. a decade-long opioid epidemic has devastated communities. 2017, drugo

overdoses killing more than 700,000 americans. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: thank you so much. next week, we will bring you special coverage of the iowa oncus starting at 10:00 a.m. monday, february 3. tuesday, we will carry president trump's state of the union address. a lot going on, a lot of focus on politics and how it interferes or changes market perspective. this is bloomberg. ♪

♪ francine: this is bloomberg

"surveillance," tom and francine from london and new york. we have a map that tries to track chinese factories and how they will be impacted by the virus. the death toll has risen to 170 with more than 100 new cases. is carmine to cbo, -- carmine to cbo -- di sibio. this is a logistical nightmare. people: we have 22,000 in hong kong but fortunately only 100 in wuhan who have been sequestered. we have band travel to china. you can only go if you get approval at very senior levels. it is impacting our business for sure. mean for what does it

the advice you give chief executives in general? the contagion is so high. carmine: i think we should have moved maybe a bit earlier in terms of some of the travel bands. s. ban fortunately, the lunar new year was a positive year because it did keep people going -- not going into china from the west. we think this will impact our business for sure and it will impact overall gdp, and certainly gdp in china. tom: thank you for joining us. you pulled a chemistry degree at colgate, one of the most difficult degrees, and then you went to the ultimate belt and as theirs firm, now ey ceo.

you are the audit kings. how do you audit china growth and what it will do for international revenue? is it a single day -- single-digit 90 day drop or could it be a double digit for multinationals? carmine: we are hoping it is more of a single-digit drop. thanks for the plug on colgate university and chemistry. it is great. i joined arthur young at the time. we are hopefully optimistic on this. we have audits going on right now where our teams have to -- typically in some jurisdictions, our teams are supposed to be in china at some of the closing meetings and so forth. we are in the process of getting regulatory approval to not do that and to be able to do things via video and phone. we do think it will be an impact, certainly on companies that are more exposed to china.

we are hoping it is more single-digit. tom: on an audit basis, you are going to get a delay. i get that. how do you perceive as an audit guy this virus will filter through income statements? is it just a revenue hit and avenue -- everyone adjusts or does it go to operating income and free cash flow? carmine: we are hoping it is minimal in terms of going down the income statement. supply chains in china will be impacted. we are hoping that will not be the case but there is a likelihood it will go down to the income statement. francine: do you see it going down to the income statement? hit,ck: revenues 100% copper prices falling dramatically. anecdotal much

evidence about manufacturing processes being slowed yet, so the middle part of the income statement might be at risk but nothing specific is driving it. francine: in terms of timeline, we have never seen anything like it because the spread is different and we go back to sars and the bird flew, it is just , it isnt -- bird flu different. patrick: the numbers we are comparing it to his sars and those numbers probably cannot be trusted. the internet is spreading news more quickly as well. carmine: the real worry is the gestation period because we do not know what can happen. that is the real worry. francine: brexit is tomorrow. nothing really changes in the immediate term. we were talking about if you are going to get blue passports if you are a u.k. citizen. how does it change the process

of auditing? carmine: it does not mean a lot. we have advised our customers in terms of brexit and a lot are well prepared. this is a great opportunity for the u.k.. it is on a path where it can establish itself. if it cuts a good deal with the eu and the u.s., becomes business friendly and lowers its tax rate, something could happen. tom: what do you see across the broad ey landscape of people leaving london? do you see an exit from london, or will it be the complete opposite where london sees a boom? carmine: we have seen some people and some organizations move people out of london because they have to. people have gone to dublin, paris, franklin -- frankfurt. it is an opportunity for london

to surpass where it has been from a global markets perspective. tom: you were going to release all sorts of issues on sustainability. dollhousend i saw at ajump condition -- davos jump condition and environmental study. will we see action from corporations, budgeted action on climate change? carmine: the short answer is yes. we just announced we will be carbon neutral by the end of 2020, the first big four firm to announce that, the first of our competitors to announce that. steve marley, our head of the u.k., he is global vice-chairman in charge of sustainability, so we are very excited and our clients are excited. something changed six to eight months ago in terms of real change around climate.

which ist of the ibc part of 100 ceos run by brian moynihan. francine: you met by -- with donald trump. carmine: we took a straw poll how many would sign up and 75 said they would sign up to these new metrics to show what each company is doing from a common perspective. there is 22 metrics. we worked on these metrics. this is real and investors and companies are serious. francine: what did president trump tell you in the meeting? carmine: it was a very short meeting. we actually talked more about keeping talent in the u.s. and not having top talent go to top schools and leave the country, but keeping that talent in the country, which obviously is a good thing. ceo at ey.he sea --

another blow out quarter, tesla reports record revenue that vent shares soaring -- sent shares soaring. this is bloomberg. ♪

♪ watchingyou are bloomberg "surveillance." shares of swedish retailer h&m rising. the billionaire chairman stepping down, handing over the reins to his current ceo, his son. helena helmer send will become the new chief executive, the first ceo -- female ceo in h&m history. challenginggain samsung for the world's biggest smartphone seller. industry trackers releasing fourth quarter experts showing the iphone maker surpassed or came close to matching the korean company. apple asking buyers to increase their production. that is the bloomberg business/. francine: tesla has delivered its second straight quarter of blowout earnings.

it's forth profit in the last six quarters sent stocks shoring. joining us is anne-marie bates did -- based in dutch anne-marie nne-marie baisden. talk to me about valuations. expensive or doesn't have some ways to go? : if anything, it is in their best interest to make further evenng though it will be difficult. this will be quite a challenging year so it will be difficult to maintain the valuation. this is a heavily shorted stock.

do they double down and smash it, or do we go back to the angst we saw? anne-marie: there are some concerns because even though it has been going for years, and a still largely an unknown quantity as to how they will deal with challenges. the last few quarters may have put some fears at ease by meeting delivery targets, getting new models out. there are some positives. tom: i want to show to a chart that goes to the fitch wheelhouse, the bond of tesla. this is a recovery like i have never seen. equity gets all the play. the bond is extraordinary. we are up 23% from the bottom in 1982, back up to par, back to yielding a 5% coupon on the five-year paper. it is almost a once in a lifetime move. how does fitch perceive this

value now? can you believe in a par tesla bond? be amarie: that would question mark for the ratings site. certainly it is like nothing we have seen before. i think it will be a challenging year. tom: this is really important to hear this from a firm as esteemed as fitch -- this is not something we have seen before. how this recovery change rating agencies perceive mr. mosk and tesla? anne-marie: possibly, but one thing to bear in mind when looking at the equity price and bonds, it has not performed the same as traditional auto stocks. it seems to be more like a tech company. are broad respect, people still getting used to the way tesla is behaving. francine: do you own any tesla?

not the car. patrick: about six months ago it was negative free cash flow. they got to the point where they are cash flow neutral so that is good news for the bonds. in terms of the equity, you mentioned the short interest. it is down to 2% and that is pretty normal so it is not overly shorted anymore. that is probably a biggest driver, people having to close shorts. francine: do you compare it to facebook or renault? patrick: you have to compare it to the technology companies. times the traditional car company on all valuation measures. in anecdotal evidence, my wife asked me about tesla last night and two years ago she asked me about bitcoin.

when it gets to the point where my wife is asking about it, it may be a peak interest. francine: tom keene will do a misses armstrong chart. -- mrs. armstrong chart. merengue, chris summer -- christopher marangi. it is boe day and we will keep an eye on the coronavirus. ♪

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desires to create inflation. instead, they must adjust to china virus global slowdown. governor carney has difficult choices to make. markets speak this morning. yields lower and continue lower. realsh lira 26, brazilian to rack toured -- record weakness. it is a thought, sell in january and go away. has the sellarangi tickets out. what is governor carney's biggest headache? francine: governor carney's biggest headache is what to do with rates and when you look at money markets, it is 50/50 and you could make an argument for either side. it is the last chance that governor carney has to set rates so it would give his successor a helping hand, but data is mixed

so his headache is trying not to get it wrong. it is his last chance to make a difference, and if you look at the data, they could go or stay. tom: beautifully described, the ambivalence we might see in the last mark barney press conference. -- mark carney press conference. your first word news. viviana: we begin with the death toll from the deadly coronavirus. at least 170 people have died, the number of cases on the mainland rising to 7700. the world health organization calling a meeting of its emergency committee and may issue a global alarm. thes looking at evidence disease can be transmitted before a person shows signs of illness. democrats are making a final run at persuading republicans to

call witnesses in the impeachment showdown. they need at least four republican votes. they want to subpoena john bolton. mitch mcconnell is leaning on republicans to stay united. the final interest rate decision for bank of england governor split over, analysts whether they will get the first cut since 2016. policymakers have ample space to ease. we will find out at 7:00 a.m. new york time. 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: data right now, and a movable feast with my focus on feast with my focus oil in the last 20 minutes has trouble finding a bid.

the vicks, i thought it would be -- vix, i thought it would be higher. commodities, the bloomberg commodity index, offshore you on had a seven handle -- you on -- yuan how to seven handle. the u.s. 10 year two basis points lower in the last few minutes. companies aret of suspending china operations in an attempt to contain the virus and economists are cutting the growth forecast for china. the 10 year yield in the u.s. the lowest in -- tom: we will start with chris marangi. we must go to one of our jewels

in bloomberg opinion, david for claim. ng, and tim culp enjoins us. there was some media talk and data talk and the reality of your taipei and china. everyone has to go back to work at the holiday and -- end. when will that be? >> they will have to go back to work. a lot of people can work from home. people and factories do not have a choice. tim cook at apple pointed out they will delay the reopening of their factories by a week or two. that is a big deal. a lot of humans will not be lining up at factory doors. how do they go back to work

in this crisis under a totalitarian regime? are they ordered? tim: they will not be ordered. they will try and help their workers come back lunar new year, many of the workers may be buting elsewhere in china live somewhere else. many of them will go home after lunar new year and quit their job, and decide, do i want to go back to work? many of them may be looking at the situation and going, maybe i will stay home, and that will be andsk for foxconn and apple other supply chains. francine: we have a great story on the bloomberg talking about lockdown in the who may -- hubay province. are we estimating that if there

are no supplies, the impact that this complete lockdown has on the people and some of the related factories? tim: we have not been able to see the impact because it happened at lunar new year which is a shutdown period. we do not have an early enough picture of what is going on, so once things go back on monday and the following monday and businesses start operating again , we will see more clearly. investors and managers and executives in china and the united states, everyone is lost and groping in the dark, trying to figure out how it will play. will people go back to work? will people go back and shop? all these unknowns we will have to wait and see. tom: we go to china and i end up thehe deck in shanghai on

peace hotel. the yangtze river begins. what is it like right now, including that abrupt turn at wuhan? >> i will be guessing it is quiet. i have some friends in other parts of china walking in the street with a mask on and finding it is empty. people are usually out and about during the holidays and people are thinking, let's just stay home and not go out. people are a little bit afraid and do not know how this will play out. tom: thrilled to have you with us in new york. toasked for chris marangi come in, an adult in the equity markets. it will be nice if ice -- nice to know if i sell in january and go away.

hope thathad some value would come back. those hopes were premature as they had been for the last 10 years. tom: if you take apple as a are you raising your value parameter up? is it a 12 multiple 15? chris: we have never been strictly statistical. apple is getting up there and facebook with its move down is cheaper than apple. we will look at the multiple we are willing to pay for it, and the reliability of projections going forward. francine: what does that mean for valuations? if you look at tesla, is it a tech company or something else? chris: tesla is a unique animal. valuations broadly in the market are on the high side of fair.

we were expecting 5% earnings growth of the s&p in 2020 and would not expect a lot of multiple expansion so you will have a pedestrian return if any in the market this year. we are looking to add to that. measures,ll valuation absurd. it is bigger than gm on an enterprise value basis. anancine: if you look at yu tumbling, how much disruption will that mean for the markets? chris: we are in the middle of a earnings season and hearing data points from companies. sandsgeles -- las vegas saying visitation in macau is down 80%. that will be a drag on earnings. chainked about the supply , that is a big unknown. we do not know the impact on the

animal spirits of the consumer. does this make people less inclined to go out and spend money? flattening, the 30 year bind -- bond is 2.02. if you have cash and want to deploy it, is it in hydrocarbons and commodities? chris: that is not an area i would deploy capital. we have avoided energy. we are not in commoditized industries. there is incremental pressure on the industry with esg, which comes up in the conversation with almost every client so you will see a capital flight against that industry. maybe that creates an extreme valuation opportunity but i do not see it now. tom: it has been an extraordinary 30 days for institutional retail equity accounts. up next, i am thrilled to bring

you a congressman from little rock and he has an extraordinary perspective on the middle part of this nation, and also on his washington. we will do that next. this is bloomberg. ♪

♪ "surveillance," and exceptional morning, francine the claw in london waiting for golf -- fred sandler claw --francine the lacqua waiting for governor carney. bond, lower yield over the last hour. globalemphasize to our

audience, a complete fixation inside the beltway in washington on a trial of the united states senate. across the rotunda in congress is french hill of little rock, arkansas, and he always gives us his perspective from washington and what he is hearing from his constituents. the money question is are your constituents, republicans and a few democrats, are they interested in these impeachment and trial proceedings? rep. hill: great to be with you. as this has drug on since september, they have disconnected from it. i don't hear about it in the grocery store or in the constituency. they are focused on jobs and the economy, what the outlook is. they just view this as a political battle between democrats and president trump. tom: it has a important outcome.

permanent damage to the traditional republican party, as you represented george bush senior, how damaged are they from this impeachment process? rep. hill: it is definitely controversial, but when i talked to republicans around the state of arkansas, they are for economic growth, regulatory successfulanging trade agreements and getting new trade agreements. they appreciate the president's engagement on foreign policy in terms of getting nato to pay more and trying new things in terms of middle east peace or a new approach in asia. , the viewn positive of this administration, so we will have to see how the election cycle goes. tom: what messaging do you need from republicans to help them

forward in this election cycle? down the ballot, what messaging does the administration need to assist republicans nationwide? rep. hill: tax reform, regulatory reforms and redirection, and getting successful trade deals renegotiated is good for the health of the u.s. economy, and the u.s. is leaving around the world despite a barrage of people who suggest it is not. asia, leading in nato, in in trying to get the world together to confront the biggest challenges like iran, like rebalancing china in the south china sea. those things are resonating with constituents, but number one without a doubt is the economy in the united states and how they are seeing their own job perspectives. the gallup poll seemed to indicate that americans are feeling good about their personal economic situation.

francine: what are americans not feeling good about right now? rep. hill: i think they are frustrated we can't get some of the big issues off the table through bipartisan consensus, like immigration reform, consensus on border security which used to be a major bipartisan consensus in the 1990's that we needed immigration reform, border security, significant physical border security, and a positive program for admitting new americans to our country. it has been the best demographic story. out, wey america stands have population growth that is aiding us now and in the future. some of these nagging issues like immigration reform frustrate a lot of voters. francine: what would you do with the volker rule for banking institutions? rep. hill: the volker rule which

was part of dodd frank which attempted to say if you are a depository institution with insured deposits, you should not trade from the house account. when it got implemented in law and regulation, even jay powell said many traders need a ouija board to figure it out. we auto have harmonization. i have a bill that would have the fed be the first among equals to interpret regulatory guidance as it relates to the trading aspects of volcker. the trading authorities are proposing changes on funds and how they are impacted by volker. the statute is written in such a way that i don't believe by regulation we can correct some of the problems jay powell and others have pointed out. i think it will have to have a statutory change. tom: arkansas means springdale

which means tyson which means chicken. you dominate the poultry business. how will arkansas adapt to the china virus, the trust in poultry and the food process? rep. hill: it is a super question, something tyson foods has confronted. the ceo was at the signing ceremony yesterday, and china had just opened up poultry back to america in exports just before this terrible virus broke out. tyson has weathered these storms before. the chinese and american ag officials have come to agreements on american poultry going to china. china is confronted with animal practices as perhaps a source for these viral impacts. andn will weather the storm because of usmca and the china phase one deal, after the virus

subsides they will be in a good position. tom: congressman hello, thank you so much. -- hill, thank you so much. begins.us kevin surreally and -- kevin will bey -- cirilli couch side. this is bloomberg. ♪

viviana: you are watching

bloomberg "surveillance." tesla in premarket trading, shares soaring. delivering a second straight quarter of blowout earnings and speedy execution. up theeeding introduction of the new model y crossover and production will begin a month earlier than planned. shares of facebook falling. growth is slowing down, adding to pressure the company is facing. governments are weighing more rules.tive privacy that is your bloomberg business/. -- flash. francine: facebook shares slumping amid concerns about more restrictive policy.

here to talk facebook and other companies is chris marangi. what do you do with facebook and others? they are not growing as quickly as they used to. chris: google and facebook together, $230 billion, they are 30% of the market. if they continue growing, they will be half the market in a few years. secularrder to use growth to escape the forces of cyclical pressures. when we have a recession it will impact facebook and google, and i'm not sure investors are ready for that. tom: are they trick ponies? nobody is using facebook anymore. everyone is using instagram. it seems egos are in the way. can you buy a company that is so egocentric versus a two based --

toothpaste company? chris: they talked about shopping and payments being an attractive area, along with evolving the internet with vr. there are opportunities beyond advertising and it is very egocentric, but a lot of great companies are. it is not unusual for this market. tom: quite the statement. francine: chris stays with us. h&m announces a reshuffle at the very top. we speak to the new chief executive, helena helmerson. this is bloomberg. ♪

♪ francine: this is bloomberg "surveillance." deutsche bank shares up despite opening sharply down.

we had some bigger write-downs than expected. they posted a surge in trading and a higher profit for the investment bank. matt miller spoke to the chief investment officer. alive to they considerations in our home market on these topics. compensation overall is one of the most important management , forsses we run all year the company and also for the management board. we gave deep consideration to our considerations and feel we arrived at the right compromise between recognizing the cost for shareholders and employees under the restructuring we are undertaking, but also attempting to align our interests with the long-term interests of shareholders. we think we struck the right balance. matt: walk me through how you got to this loss, 5.3 billion

was the net number. and ityou lost 2.6 euros includes 3 billion in restructuring cost. after tax and pretax was driven by restructuring costs. that is across a range of areas, deferred acts -- tax asset valuations, and goodwill impairment, software impairment, restructuring charges. that is what we guided the market in july when we announced this restructuring and announced we wanted to finance it from our own resources. we have demonstrated we were able to do that and increase our capital ratio to 13.6%. i see this as very much on track against the goals and targets we set out. single we hit every milestone of this restructuring. what is important is the message

that the underlying business performance, once you strip out the noise created by the restructuring, is positive, showing stability in revenues, growth in pretax profit in the core bank, so we are pleased with that result. matt: are you on track or ahead of schedule? is the et one ratio and you are getting the headcount reduction out of the way. does that provide upside for 2020? james: we are on track in every single metric or ahead on the capital side and the deleveraging in the capital release unit. into 2020,tep off that underscores the confidence we have been communicating to the market. in the progress we are making, there has been restructuring, in the decisions we made to realign the business, but also the

confidence we think we brought back to the company with our employees, our clients in the capital markets, we see that in the securities markets and our everyday business and engagement with frontline clients. tom: mr. miller, an important conversation with the cfo, more relaxed from deutsche bank then we have seen him in the recent months, the stock doing better today. in new york city with our first word news, here is viviana first sought -- viviana hurtado. viviana: the world health organization is likely to decide to call the corona -- coronavirus a public outbreak. raised the death toll to 170 from 132 and says more than 7700 people on the mainland have been infected. the virus may lead opec to hold

an emergency meeting. oil prices have been falling on concerns the disease may hit demand. they will move the scheduled meeting to next month. brent crude dropped more than 10% in january. time is running out for senate democrats on capitol hill trying to convince republicans to call witnesses. bolton's new book has revelations about president trump and the ukraine. for the first time in three decades, fatal drug overdoses have declined in the u.s., according to the cdc, marking a respite from a decade-long opioid epidemic. drug overdoses killing more than 700,000 americans. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.

i am viviana hurtado. this is bloomberg. tom: we are going to do a little bit of retail, an important conversation coming up on dominant box retail and all the rental stuff going on. we have those dynamics going on and we need a brief from chris marangi. his retail a value trap or is there opportunistic valley? chris: there are places to make alpha. we have not historically owned a lot of retail, but the auto supplies stores. there are specific attributes to those companies. when you need parts, you need them now and they have a distribution network that is unrivaled by people even like amazon. they can get parts to your mechanic.

that is one side of retailers that can compete with amazon long-term. tom: whether it is luxury retail, gucci, lvmh, or traditional big box retail flat on its back, or even the discounters as we are going to talk about in the moment, i am fascinated that value guys like you see value in clothing and retail. chris: we like subscription businesses, recurring revenue, and the broadband business. i have had a front seat to secular change for the last 20 years. there was a change in the way consumers are behaving in retail and i don't know where that ends up, but more is going online. francine: are we just going to buy everything from amazon? chris: there are traditional retailers including walmart who have attractive online

businesses that are growing. i was in the mall this weekend returning some things i bought online. there were not a lot of other people in the mall. it will be difficult and you will see that reflected in the prices of general retailers and property rates like simon. francine: if you look at all the things that have been instructed, tech companies, we were asking if tesla is a tech or car company. car sectorminate the when it comes to driverless cars? chris: we are focused on electrification and autonomy, and those go hand in hand with technology. traditional car companies will probably be the leaders. bmw withrsche and their electric vehicles, test not -- tesla is not the only

game in town. it is a good product but there is nothing proprietary, campy, imitated, or improved upon by existing car companies. tom: i made a joke, sell in january and go away. what is the mood now in terms of what you are doing day by day? say wetand pat or do you are opportunistic? chris: let's be picky. market values are stretched and there is a lot of market -- not a lot of market safety. coronavirus having an impact on the market. we also have the election coming up and i'm surprised the market has not discounted an outcome more than it has. i think it will as the year goes on and is the possible democratic nominee gets more real. francine: is that the biggest, i don't know if it is a risk to the markets, but the one thing

you would like to know ahead to make sure your trade is right? chris: we are always doing expected value type calculations, what is the outcome of a certain person getting elected and the probability of that election. ,e see through who is in office because we are in a system where overall moves and policy are muted. we have a stark difference in the warren/sanders camp and a change from where the economy has operated. as we look at the polls through the next nine months, the market will pay attention and we are paying attention as well. francine: thank you so much, chris m stays with us -- chris marangi stays with us. the bank of england announces its rate decision in 20 minutes and mark carney has his last vote as governor. in germany, inflation looks like it will surge.

secretary of state mike pompeo is in key have, his first -- kiev, his first visit to ukraine since congress opened the impeachment. this is bloomberg. ♪

♪ this is bloomberg "surveillance," tom and francine from london and new york. 10%advancing as much as after reporting a tighter grip on costs. they announced a reshuffle at the top. it's long-standing chief executive officer is set to become chairman. we are delighted that helena helmerson, the newly appointed

chief executive of h&m is joining us on the phone. thank you for giving us a little bit of time on this day that is busy for you. in the first 100 days in the job, what are you hoping to achieve? helena: thank you so much. i am hoping together with my great team to continue on the change and transformation plans we already have, and really try to work on the customer focus and the digitalization and the sustainability work that is ongoing. excited tohappy and kind of be part of the journey in this new role. h&m has: do you think an environmentally stable business model given its focus on fast fashion? helena: i have been part of the work when it comes to

sustainability for many years, and we have developed our business model. the tests we have to do going forward, so i see a great opportunity for us delivering on our targets when it comes to climate, because of course we need to secure that we can go without using the natural resources we are doing right now. i am super proud of where we are when it comes to the sustainability work. i really look forward to continue that kind of investment. tom: i remember the day that lagerfeld walked into h&m. the lines were out the door for a long way. you just shut down your store at 59th street and lexington avenue, some of it because of the rental surge.

can you explain how h&m will do rental clothes at that low price point versus what someone can get at rent the runway? helena: i think it is so exciting in how we explore the business model to do tests and see how we can give access to fashion and design to customers in a new way. a very interesting way forward where rental is one thing we are testing. there is so many opportunities going forward in how you can garment, ore of otherwise moving forward. explorations an where we have to find our way going forward. tom: within that journey, have you discovered profitability, or

is it just unit sales? you can run a 340 nine dollar wedding dress out the door and make a sale but is there profit? meena: it is too early for on the first state to go into the profitability numbers. it is only through testing new ways and your business models that we can learn more from it and see how we can go in different ways. moving forward with our existing , and alsods we have new models in how we can reach customer demand going forward. francine: there is a huge shift in retail in general and physical stores versus online. how do you see that shaping your strategy, and how well that look in 10 years? helena: that is another exciting

journey where we have a fantastic advantage when we look at our physical network. of course, we have been looking at how to develop that because we can read so many markets and customers through that, and have the online clothes to that. we have to look at the holistic growth picture and look at what channels to grow. francine: looking at some of the numbers, we are looking at 1000 leases i believe of your stores are up for renegotiation in 2020. how well renegade creations -- , andill renegotiations go are you willing to close stores? helena: when it comes to those refer to theer to

report and press conference. this is my first day in the new job, so i hope to get back to you with clarity in the near future. rsson, hera helme first day in the job, promoted in the family dynamics. it is tough to transition a family firm to a real company. it doesn't matter what the industry is, to go from that family dynamic to a management dynamic. we mentioned facebook. it is not much different. chris: we have seen this in the media industry and will see it in the tech industry. tom: why is it so clumsy to do this? they are family, they are hemorrhaging money and losses are cleaning their clock. you have to make decisions and

yet it is taking forever. chris: it is hard to let go because founders come with a certain zeal that is hard to replicate. francine: you look at a lot of u.s. companies -- h&m is not a u.s. company -- but they are very big. how does scale matter, or is it a hindrance? walmart 20 years ago, there was a clear expansion. chris: across many industries as we have become more technological, scale matters. it matters and how much you are able to invest in your online capabilities and shipping capabilities. scale matters but you have to be nimble. --: i will ask you right now give me an update on media, particularly on disney and their streaming experiment. chris: disney plus looks like it is a big success. tom: what did they do right? chris: they put great content

and it is a bargain. the question is can they make money long-term. tom: how many times have you seen "frozen"? chris: i have lost count. there is something for everybody. francine: that is breaking news. sorry, finish. chris: disney will be affected by the coronavirus. shanghai disney is closed. this is a short-term dynamic, but we expect to hear more on that. 5, 10 years, you want to own disney. disney will be one of the winners from the video revolution. francine: we will get away from tom before he starts into song and dance of "let it go." will we see mark barney cut cut? -- mark carney we will bring you live coverage of the rate decision, and mark

carney's final press conference. this is bloomberg. ♪

♪ this is bloomberg

"surveillance," and mark carney's final meeting as bank of england governor. we will hear whether the bank will cut for the first time since 2016. joining us is near a jh. cehic. 50% think he will cut and 50% think he won't. sense in thet a have -- you get a sense in the fx market that all sorts of -- are hedged. money market pulls back on expectations for a rate cut following soft survey data. do we get a cut, and is it a one and done, is it a cut with more and economists

are expecting dovish policy ahead. how will they react off the back? gilt heading to the highest since 2016. francine: does the u.k. economy need a cut or would it be an insurance cut? nejra: this is the interesting it and what has pushed the money market bets around so much, it looks like a roller coaster. some of the hard data, numeral pointed to this -- nomura pointed to this, if you look at retail and the underlying growth , that would justify a cut now and maybe one later, certainly an insurance cut. what made the money markets pull back even odds now is the fact that we have had composite emi,

andi manufacturing survey another survey of sentiment from lloyd that maybe there has been a bounce back the u.k. election. that is what mark carney will have to grapple with, and we are waiting for the results from the boe. francine: thank you so much. probablycarney will field a couple of questions on the coronavirus. next, we bring you live coverage of the bank of england rate decision, followed by mark carney's final press conference. right here on bloomberg. ♪

♪ alix: virus fears spread.

markets go risk off, even as earnings deliver. the fed stays neutral, with the bank of england now on deck. and tesla short-circuits the shorts. stocks fly higher after its second blow out quarter. welcome to "bloomberg daybreak" on this thursday, january 30. i'm alix steel. the boe out with their latest decision. no real surprise here, except the comments around brexit are what is interesting. they say if recovery stalls, policy support may the needed. they wound up cutting their economic growth forecast. they see inflation below target until the end of 2021. they did not cut. interest2 to keep rates at 75 basis points. the majority see an improved global outlook and less uncertainty, but it is