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 all about the u.k. economy.

reactionooking at a here with the ftse down one percentage point. coming in atrate, about one dollar 30 cents, spiking higher on the fact that they didn't actually cut. the with the action has been crazy -- the whippy action has been crazy. going me are stephanie flanders with bloomberg intelligence, and christopher wolfe, first republic private wealth management cio. what should they have done? stephanie: this is a really tough decision. don't know what is in the first boris johnson government. we don't actually know whether this boris bounce people are talking about, the layout of uncertainty, we don't know whether that is going to last or

give a lasting boost to the economy. everything points in the direction of wait and see except this is an economy that, what are two years down the track, really is going to be leaving the eu, not just formally. tougher trade agreements, more uncertainty about what that is with the u.s. and europe. so this is not a strong economy, not one that you necessarily would say would hurt to give it a rate cut, but they would leave it for the new governor to come in and march -- to come in in march. alix: what is your call? largely,er: i think central banks around the world are trapped in a low growth, low inflation world. i think they also have to wrestle with the question, just because we can, should we? i think they need a little bit of policy insurance. in many economies around the world, there's not a lot of shock absorbers left. typically it is fiscal policy.

tough here, tough in other places. we just talked about the u.k. spending more potentially the next couple of quarters. if you don't have that, you have to rely on monetary policy and savior bullets. -- and save your bullets. i think that's the real debate among central bankers. it would have been the reason may be for them to cut now as the preemptive insurance cut. alix: they did wind up saying that monetary policy may be needed to reinforce growth. a promptgement favors response. especially when you have global growth, the question being are we stagnating here, in part because of the virus, that you need to get ahead of that. stephanie: traditionally, we would have said save your ammo, but there has been a change of feeling. christopher: the feeling is that policy is a slow-moving tool. it takes a long time to filter

into the economy. it would take a couple more quarters to filter through the british economy. giving themselves room i think keeps confidence in the independent view about central banks hi, rather than are they getting political. alix: so you think the fact that they didn't do it leaves the more optionality later, and doesn't put in more fear into the market? christopher: not in the near term. everything is so low and slow right now, they have room. alix: what happens to cable rate? stephanie: it's on two different cycles. it has traditionally reacted a lot to the rates cycle. we have seen the last few months it is very much related to bank of a limb moves. there's also been a structural -- to bank of england moves. there's also been a structural shift or you need a structurally lower pound. that big step change in the pound and the long-term view of the u.k. have been operating on a parallel track with the rates

cycle. it makes it quite hard to judge. , talking rhetoric was to many portfolio managers who like the u.k. what do you think? christopher: value is put to for around the world. there's a lot of cheap stuff, but not a lot of things that are growing strongly. those things that are tend to be rewarded. the british economy is not growing that strongly. there may be a value play, but it is going to create challenges around cost structures and around how banks and ajit. it.only -- how banks manage the only thing is maybe these cost pressures drive innovation. alix: what does this do for boris johnson tomorrow on the leaving moment? stephanie: at 11:00 because we have to leave on the continental time.

excitementbe sort of in the party and westminster. most people living in westminster and london voted remain, so that is an interesting dynamic. most people in the markets expected this decision, so i don't think it is a big change. he's looking ahead to his budget. he's looking to see in march, what he can do on extra spending , particularly on infrastructure. spending on some of those places that voted conservative for the first time in many generations. can he actually deliver for them, or will they go back to labour? alix: i guess my question is, does this give him more or less leverage? it seemed like he was going to be taking a playbook out of president trump's book when it came to negotiating with the eu. i'm wondering whether a cut hurts or helps. christopher: if that is the case, i think they will focus on what they want rather than monetary policy, and address monetary policy after rather than try to do something preempt of late. it makes sense to wait for the

budget. stephanie: the u.k. is in a lot worse position vis-a-vis 26, 27 eu countries, than the u.s. is with regards to any country in the world. i wonder how that is going to play out. alix: which brings us back to growth. when you have financial conditions so easy across the world, particularly here -- 10 year yields just went negative again -- if we can't get growth in that environment, what are we going to do when we are actually in a pickle? christopher: that remains to be seen. on the bright side, we have lived through an era and are likely to live through a generation of rule changes. governments, policymakers change rules all the time to adapt to the situations. whether it is the japanese central bank changing their guidance, what can be invested in the postal system, whether it is a rule change here, repeal of the regulatory issues, whether

it is britain leaving the european union, rule change all the time. i think we are set for an era of that coming down the road. that is how we will deal with it. stephanie: there's reason for optimism when you look at the next 12 months. the risk of recession is probably lower than it was months ago. it could continue for several years. we see a certain amount of dynamism and innovation in tech. once think we do know that the next recession comes, it is going to be harder to get out. it might be shallow, but we might be stuck in that for a while this does we have been stuck in this low growth environment because there's not very much ammunition to throw at it. alix: when you need the cuts, which brings us back to the debate. stephanie flanders, always great to have you on set. christopher wolfe of first republic private wealth management will be sticking with me. it was 7-2. you also had the boe cutting its growth outlook and they see

inflation below target until 2021. risk management favored a prompt response, so it seems like a potential rate cut is still in the cards for the future. our check on the market is risk off. the tenure goes negative. 10 year yield still bid, down to basis points. crude down a whopping 2%. if it hits levels where producers have hedged, you will see a lot more followthrough to the downside. some stocks that are moving this morning off of earnings, ups up in premarket. fourth quarter earnings topped estimates. eli lilly and coca-cola also gaining on earnings beats. altra you lower. it recorded a 4.1 billion dollar charge related to its investment in juul. top on those and all of our stories from around the world. this is bloomberg. ♪

alix: time now for global exchange. we bring you today's market moving news from all around the world. thebloomberg voices are on ground with this morning's top stories. we want to get the latest on the coronavirus outbreak. the death toll rose to 170, and more than 7700 cases are confirmed in china. it has spread to india and the philippines for the first time. joining me is rishaad salamat. give us the latest. also have a carnival cruise ship in italy because of one person who contracted this virus as well. we have an economy at the moment which could not have happened at the worst time.

a whole load of them at the moment cutting growth projections for this year, suggesting in nomura's case that we could see about 2% knocked off of gdp growth in 2020, down to this particular passage here as well. -- it givesly to be it more room to spread here as well. cuttingt airlines also services. british airways the latest to say they will not fly to mainland china until the end of february. we've also got united curtailing its flights to the mainland. russia is going to decide friday nn whether it is going to ba

flights into china as well. we've got this region really suffering. for hong kong, it couldn't have happened at a worse time given the protests in the streets. we've got macau, the biggest gaming hub in the world, seeing mainland traffic at the busiest of the year down a whopping 79%. alix: thank you for that. now we go to europe, where deutsche bank shares are up this morning despite opening sharply to the downside. the german lender posting a surge in trading. they see higher profit for its investment bank in 2020. bloomberg's matt miller spoke to the ceo. >> we in the industry are adjusting to a sense that this rate environment will persist for much longer than anyone previously thought. alix: joining me from frankfurt is matt miller, "bloomberg markets: european open" anchor. what were some of your takeaways from that interview?

matt: the big headline was the full year net loss, $5.71 billion. . the fifth consecutive year of losses for deutsche bank after they restated last year's profit to a loss, and a grand total of 15 billion euros in losses over that time. ,he difference this time investors hope, judging by the gain in shares right now, that christian sewing really is on track or ahead of schedule in his turnaround. they got the gain in fixed income trading. that just supports the turnaround. they have achieved the cost cuts they wanted to get them down to $21.5 billion, aiming for $19.5 billion. a ratio that is much more cushiony than was expected. that is another thing they can draw on when they are continuing this restructuring work throughout 2020. christian sewing wrote an email

to his employees today, saying he is very optimistic for 2020, and now it can be time to shift into growth mode. that could be a signal to investors that it is time to get back in the stock. it was down sharply this morning , but maybe because it is the best gainer of all of the european banks your to date. some profit taking there, and now investors getting back in. alix: thank you very much. tesla delivered its second straight quarter of blowout earnings. the reckitt revenue -- the record revenue carried the electric carmaker to its strongest numbers in four quarters. was there anything that stood out on the negative side? reporter: shares up 11% in aftermarket trading last night. this was a big number. shareholders love the results. the big thing is not actually the numbers. it is the fact that the model y

is going to be out by the end of the quarter instead of later this year, so that could be a big revenue boost because elon musk expects that vehicle to sell all of -- to outsell all of the others on the lot combined. year-over-year, they did make money in the fourth quarter of 2018, so revenue was just up 1%. gross profitability was down and margins were down because consumers are starting to buy smaller, cheaper teslas instead of the bigger, more expensive cars. they are going to have to grow profits to justify this lofty valuation. the stock really is priced like a growth stock, and growth appears to be slowing down. at least, that's what the bears will say. new plants coming online in berlin and china. bulls are definitely winning that argument. alix: thanks so much for joining us on that. now we turn to the fed. the central bank left rates

unchanged. chairman jerome powell saying the coronavirus was an underlying theme, carefully monitoring the situation. chair powell: there are some signs that global growth may be stabilizing after declining since 2018. nonetheless, uncertainties about the outlook remain, including those posed by the coronavirus. alix: your biggest take away from the fed meeting? was really that jerome powell hinted the federal reserve was going to remain on hold almost forever. so we should not be talking about hikes at all, probably in the next year, and may longer than that. the federal reserve is going to play on the side of caution, particularly with all of these uncertainties and global growth that might be harmed by the coronavirus. what that means for the market, it means for the treasury market

that you can expect interest significantlyo up , and the easing of these fears from the coronavirus. alix: thank you. finally, we end on u.s. politics. senate democrats make a final plea to at least a few gop senators to call witnesses in president trump's impeachment trial. senators began two days of questioning his defense team and house prosecutors. joining me is kevin cirilli. . what is the latest? kevin: senator cory gardner is the latest. that havingsted additional witnesses is not something he would be on board for. that is striking for two reasons. democrats would need one additional republican in order for there to be able to be witnesses during the trial.

the second point is that that is increasingly unlikely, and that the vote could come tomorrow for whether or not there's going to be witnesses. that potential he has political ramifications for a lot of the democratic president of candidates eager to get back on the campaign trail. alix: thank you very much. we will bring you special coverage of the iowa caucus beginning at 10 a talk p.m. eastern time, live from des moines -- at 10:00 p.m. eastern time come alive from des moines come on monday, february 3 -- eastern time, live from des moines, monday, february 3. this is bloomberg. ♪

fed chair jay powell speaking yesterday after policy makers kept rates on hold. still with me, christopher wolfe of first republic private wealth management. so help investors make money on this. if you have the fed forever not going to hike, what do you do? christopher: i think there's a

plus and a minus, or may be a challenge. the signal that most folks look at in terms of recession indicators, they have a lot less power. that has been the case because if the fed anchors the short-term of the curve in the long-term moves around, it is going to give us a lot of false positives. i think the positive here is that you are going to live through an era of very cheap money, and that is going to create an environment as we seen in the past where there still aren't a lot of good alternatives. that you end up pushed out on the risk curve. as long as there's other policy alignment like reduction in regulation, tax cuts, and other things that keep margins high, you end up building a case a little self-fulfilling about the equity risk because the cost of money is low, and after inflation, real rates are low and in some case negative. end up getting pushed out on

the risk curve. that's not all bad. it may create a lot of , but it may contribute to other things. one of the more interesting things about the era of low .ates there's concern in many of the private markets that there's too much money. valuations are too high. the pace of innovation is accelerating a lot of places. it's possible that there are interesting things that come out of all of this. now, the regime we are in, cheap money and put a good profit margins stay in place, so it is good for equities. alix: in terms of the balance , you arecifically laughing, but it is what everyone talks about, so do you buy the story that it is central bank liquidity driving the

rally? or is it somehow controlled and offset, and you buy fundamentals? christopher: if you make the rules that constrain the liquidity in the system, which is basically with the fed has done, now you have to go back and say, if the fed changes the rules, we have to put liquidity in, it is kind of one of the other. sometimes there may not be the best change. i think seeing the indication --t there was going to be more importantly, it is likely we are going to live with this environment. the fed is going to keep injecting liquidity. take ant to say let's breath around all of that. at the end of the day, what tends to happen with excess capital, it ends up in fixed income markets. there's a lot of pressure around story may push a little but of the risk on equities. alix: top trade? christopher: right now it is

u.s. versus the rest of the world. everyone else is in a tough spot. a lot of the policy dynamics for me financials perspective look -- policy dynamics from a financial perspective look pretty good. the second half of the year is likely to be a lot more bumpy, primarily because the policy discussion between the republicans and democrats is going to evolve in a diametric way, and the market has got to figure out what to discount. we will see the market tracking poll numbers in the second half. alix: thank you very much. great to see you. coming up, the boe keeps rates steady. we will hear from mark carney in his final press conference as the head of the bank of england. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i'm alix steel. we are picking up a little steam to the downside here. s&p futures and dow futures are down by about 0.7%.

there is selloff overseas in individual countries, picking up to 1% as well. in asset classes, you have the curve in birding on a three-month month-10 year basis yet again yesterday -- the curve /10birding on a three-month year basis yet again yesterday. overnight, dollar-yuan over that seven level. will we be able to handle that within the market? expect the selloff to continue if you see crude continuing to roll over, down by about 2%. now we will go to mark carney, the head of the bank of england, for his last and final news conference after they did not cut rates, but did downgrade their forecast and sound pessimistic on inflation. the minority said that the risk should lead to some kind of policy action. gov. carney: good afternoon, everyone.

the last decade ended with a whimper. and you factoring slipped into recession. overall growth fell to its weakest pace since 2009. , brexit.k. uncertainties added to the global drag on domestic activity. last year, the u.k. economy grew at its weakest pace since 2010 as business investment remain subdued despite having grown barely at all in the prior few years, and households begin to rebuild savings and cut back on durable spending despite the resilient labor market. overall u.k. activity likely stagnated in the final quarter of 2019, leaving the economy operating with a margin of excess supply. cpi inflation fell below the 2% target, reaching below 1.4% in the fourth quarter. this week this largely reflects energy prices. core inflation has also slowed,

and domestically generated inflation pressures outside the market remain contained. the question facing the npc at this meeting was whether the new decade would start with a bang. certainly, political developments have been uk'sficant, leading to the historic withdrawal from the european union tomorrow evening. on the economic front, the bar is more modest. npcts december meeting, the projected that u.k. growth would pick up from below potential rates, supported by a reduction of domestic uncertainties and a modest recovery in global growth. on balance, early indications are that both conditions underpinning the projected u.k. recovery are on track. the most recent signs are that global growth has stabilized, reflecting the partial easing of trade tensions and the impact of a significant loosening of monetary policy a central banks over the last year. the global manufacturing pmi has

returned to expansionary territory, helping push composite pmi to a six-month high in december. be hard data seems to following suit, with global industrial production swinging from contraction to expansion in november. recent growth out turns in the u.s., you are area, and emerging-market economies are coming out slightly stronger-than-expected. domestically, indicators of uncertainty have fallen broadly as the npc expected in its november directions -- november projections. frexit fell below 45% in january from 55% in november, and sterling implied volatilities have fallen substantially since the election. january, released in but related to activity prior to the election, was generally

soft. --e timely sir they data more timely survey data related to output growth following the election have increased sharply. markede are particularly in the most recent releases. the latest surveys suggest growth will pick up in the first quarter two around 1.2%, in line with the npc projections three months ago. businesses reported a short movement and a sharp rise in .nvestment and tensions there are signs that lower uncertainty is boosting housing activity. the area of consumer spending was a drag had been most evident. the latest data showed that the labor market remains resilient, with employment growing strongly towards the end of last year, and unemployment at its lowest levels in over 40 years. december,odestly in

reversing the pattern of near continuous falls since the start of 2019 and tempering earlier signs of a slowing in labor demand. households remain confident about their own financial situation, and a confidence about the general economic outlook has improved to its highest level in a year and a half. reflecting these positive elements, the npc judged it was appropriate to maintain policy. to be clear, these are still early days, and it is less of a case of so far, so good than so far, so good enough. it will be hard to follow through on the recent pickup in surveys and for domestic price inflation to strengthen. economy looks to be recovering, but caution is warranted. evidence of a pickup and growth is not yet widespread, and any

one the known risks, such as a renewal of trade tensions, could reverse recent progress. the emerging threat from a new strain of coronavirus is a reminder of the need to be vigilant. in the u.k., although early signs are encouraging, recoveries in growth and inflation are also not yet assured. uncertainty is still elevated by historical standards, strong investment intentions need to be translated into action, domestic price inflation remain muted even as growth in labor costs have risen. core inflation has slowed over the past year, and core services inflation has generally been somewhere below the rate estimated to be consistent with the inflation target. reassessment of the supply side of the economy, the npc judged that the weakness in domestic price inflation

indicated that the margin of slack has been slightly greater over the past few years than it had been previously estimated. at present, excess supply is estimated to be around 0.5% of potential gdp. that spare capacity lies within companies with little slack apparent in the labor market. unclear whether the wider margin of slack can fully explain the weakness in domestic prices relative to the strength in labor costs, and for how long that weakness might persist. the committee will explore these issues further overcoming months , considering u.k. developments in the wider context of relatively subdued inflationary pressures, but strong labor markets globally. thenpc also reviewed outlook for supply over the forecast, judging that productivity growth would pick up only a little from current rates.

reflects some continuation of the experience since the financial crisis of persistently weak productivity growth in the u.k. secondly, a period a very weak business investment over the past few years. from thean adjustment uk's trading relationship with the eu. the rate of potential growth also reflects a more modern rate of expansion in labor supply as the two factors that have boosted labor supply in recent years, namely rising trend participation and falling equilibrium unemployment, are not expected to continue given their historically strong levels at present. in the npc's latest projections, the tentative signs of a global recovery are borne out, with growth rising back to potential rates. domestically, uncertainty fades

gradually as more details about the new trading relationships emerge and companies assess how those affect businesses. overall, conditions on the market path of rates announced in last year's spending review, u.k. growth is forecast to rise above the weekend rate -- above and excessiveate demand is expected to build thereafter. cpi inflation is appointed to remain notably below the npc 2% target throughout this year and much of 2021, partly reflecting the impact of lower utility bills. thereafter, the drag from lower utility prep prices fades and domestic price pressures strengthen, in response to the erosion of capacity. inflation reaches the 2% target by the end of next year and rises slightly above it by the end of the forecast.

turning to policy, monetary policy may need to reinforce the expected recovery in u.k. gdp growth should the more positive signals from recent indicators of global and domestic activity not be sustained, or should indicators of prices remain relatively weak. recoveryhead, if the -- if the economy recovers broadly in line with the npc's latest projections, some modest tightening of policy may be needed to maintain inflation sustainably at the 2% target. , the u.k. is entering a decade of potentially profound structural change. new trade arrangements will be struck, a new immigration policy introduced, major initiatives likely on infrastructure, regional development, and the transition to a lower carbon economy. the npc will need to assess the applications of all of these develop its with a balance of supply and demand and set

monetary policy to deliver price stability and a way that helps smooth adjustments and support jobs and growth for the good of all of the people of the united kingdom. with that, we would be pleased to answer your questions. >> please wait for the mic to circulate. one question at a time, please. we will start here with edmund. >> sky news. one of the things you mentioned was that in your annual assessment of the supply side of the economy, you've cut your ,ssessment of that long-term not inflationary growth potential for the u.k. in short, does that mean the u.k. is a weaker economy now than it was before the referendum? if so, how much of that is down to brexit? part of the reason

we do once a year assessment of the supply side of the economy, labor supply and productivity, is to bring together all of the evidence, all of the analysis in one spot and make some of these judgments, and they are judgments. in terms of the rate of growth of productivity, i think it is fair to say that we end others have been persistently disappointed since the financial crisis about the rate of productivity growth. initially more understandable because of the distress, if you can put it that way, in the financial system, and the overhang of excesses in the precrisis, but that is very much in the rearview mirror now, and certainly in the time that i have been here the last six and a half years, there has not been a recovery in productivity. part of this is just bringing forward a continuation, and that is the first thing. the second we do have to

sinceize, in the period the referendum was called, business investment has been very weak. it has gone from the strongest to the weakest in the g7. that accumulates over time. it is not just capital investment, but process investment. on top of that, and there is evidence of this in the report, businesses over the course of the past year, because of a series of cliff edges in certain sectors, have had to devote a lot of time to contingency planning. there's only 24 hours in a day, is time they spend on that time not spent expanding. there's some payback from that activity over the forecast horizon. the third thing is that we are moving more rapidly to the new relationship with the european union then we had originally modeled. people didn't know what the

horizon was going to be for the adjustment. now it is very clear, the intention of the government is byt we will move immediately this time next year to a deep free-trade arrangement with the european union. there is some adjustment cost with that. if i can make one more point, and you would have caught this come about a want to make sure everyone does, it is that the rate of potential growth isn't about just productivity. it is also about the labor supply side. there have been two very positive trends in the labor market over the post crisis. a lot more people have stayed in the labor force, not always for the most positive reasons. initially it was because they had to re-peg that. pitches a patient in the labor force is very high, and most of

them are in work. 3 million jobs have been created since the recovery started in 2013. 3 million more people are at work since then. low, weployment is so think it can go a bit lower, but the number of the population working is so high, there's just not that much more of that to happen. so the growth in the labor force tends to come more from natural population growth. the culmination of those two things mean that the speed limit of the economy is much lower than it was a few years ago. >> just one very quick thing. [indiscernible] we forecast out three years, so we don't think it is that medium-term. on specifically whatever the are, we haveexit

generally understood those to be at the level of output, not the permanent effect on the growth wee, which at any rate, don't predict. so i would not use that word to describe what we've done. the governor says, it is a mixture of these effects, what has happened since the referendum, what might yet happen because of it, and just from a sequence of disappointment in productivity growth. >> bbc. the monetary policy report says it is predicated on the achievement of the fta this time next year. the government has said they will not extend any negotiation beyond the year, and also seem to be aiming for less than friction us trade without alignment. how would not reaching a trade deal impact these growth and as -- andnumbers, and

how has the less ambitious ?lignment also impacted things gov. carney: the assumption in the forecast, we take government policy as given, and as he would describe it. importantly, it is for an immediate move on december 31 to a new free-trade arrangement with the eu, so i will emphasize the point about immediate so there is not a transition between where the economy is today and where the economic relationships are. we are assuming that that is an orderly transition. we are assuming that all of the necessary border infrastructure, customs arrangements, all of the types of things we have been thinking about and companies have been singing about that is necessary to move from being

part of the european union to a free-trade arrangement, that those are in place. that is an assumption people work very hard to make sure is validated, but it is an assumption. the second thing is that what is different about this forecast from the november forecast is that immediacy, and there is not a smoothing of the adjustment and the bringing in of some of the customs and other regulatory frictions that would happen with a move to a free-trade agreement. i will give you one example, which is noted in the report, which is that a number of financial services firms will lose the right to passport, even if equivalents is granted. that is an open question, what i just said. .hat would be an assumption it is part of the discussion. over the course of the next year , subsequent in pc's are going

to have to adjust these very important assumptions with potential implications for the forecast. but we will see what happens with the evolution of the negotiations. , onlast point i would make alignment, obviously we start from a position where we are totally aligned in all sectors. divergence,, or would emerge over time in those sectors. in the forecast, even though there's not an assumption of alignment, we start with alignment and expect that it we'd emerge over time. it doesn't have a material impact on the two years in the forecast governed by the free-trade agreement, if you follow. phil nextand then

to him. andovernor, in your first in 2013,flation report you thought the supply potential of the economy, you could grow at that level without any rising inflation. now we are right an average of 1.1% over the next three years. do you think has gone wrong in the u.k. economy, and is the bank of england in a way to blame? gov. carney: i can enter the second part of that question quite readily, no. [laughter] gov. carney: but it is a very good question, and one thing which you would appreciate is here, we wereme in a position where a recovery was just beginning to some extent, at least on the measured data. barely missed a

28 -- and the the debate was about how much spare capacity was in the economy. at the time, we thought there was considerable spare capacity. as you can appreciate, there is a distinction between cyclical supply, a starting point with a lot of spare capacity, and you are going to make some of that up, which is what we look to do at the time, which was to , butde not just stimulus to provide signal guidance that we were expecting to provide a fair bit of stimulus for a fair bit of time so that that supply capacity could be used up. what is true, and i don't have the figure to hand you -- you might -- although i don't have the figure at hand because we didn't used to release it.

i think you helped push for this. you know what our supply some sins are for the forecast. so i don't have the figure at hand of what we thought the speed limit was of the economy, this point at which supply growth was going to proceed. but i suspect it was probably in the range of about 2%. >> as the governor says, starting from that position -- gov. carney: this will be a brief interlude. [laughter] >> starting from that position, unemployment rates were a long way above the natural rate, so the economy can grow quite a lot on top of the underlying trend. i'm not sure it should be taken as a guide, but it was probably in the region of 2% or so, now in the region of 1% or so, and all of that one percentage point supplyalf is in labor and half is in productivity.

some of that labor supply and some of those hard point drops may have been just because of arerience, and some of them probably because of developments in the economy, including consequences of the referendum. gov. carney: just to try and bring it together, and terms of the bank of england contribution, as you know, in terms of monetary policy, it is principally about the model side -- about the nominal side as opposed to the real side. on the margin, we can affect labor supply, certainly in the short term. to the big call we have had make on monetary policym which we made very early on, -- monetary policy, which we made very early on, was that interest

rates were likely to stay low for a very long time. that was codified in the 2014 monetary policy report. we set out why we thought that was the case. phrases come in around that to try to get that point across and help companies and households form expectations about where future interest rates might go and then act accordingly. view, both onour a cyclical basis, to use up that spare capacity, but for structural supply, if i can put it that way, or potential growth , our principal contribution as an institution is around the financial sector, so a different ensuring that the market-based finance was robust as possible.

i think there's been considerable progress, but as we thatere today, we do think small and medium-sized underservedremain by the financial system, so there are supply opportunities that can be unlocked there, and that part of the future of finance work that dave and others are leading. markets have been convinced that this was going to be a rate cutting meeting. as it turned out -- i mean, that was driven by speeches given by yourself and others at the start of the year. it turned out relatively hawkish. you seemed to have dropped the limited and gradual language, and arts adjusting that we will have to have some tightening ahead. in the context of forward guidance, which obviously you introduced, does this is just it hasn't worked, and would you

recommend that your successor maintain forward guidance? gov. carney: a big question. let me go from the general to the specific in terms of forward guidance, it is part of the armory of every major central bank the world over. it is not the only, it is one of the key tools that we as central banks have, and it is particularly relevant in the following situations. one, when equilibrium interest rates are low. secondly, when you are at turning points either in tightening policy or loosening policy, to provide some dimensions around that. , at think the jury is in least on forward guidance and the utility in general. secondly, i will refer back to commentsts, part of my

to chris giles, which is where it is relevant here is a couple ,f big calls the npc has made initially in terms of trying to secure the nascent recovery, providing guidance about rates, and moving the market off what was a demand driven reaction , and about the low level of rates for a time. then, when moving into tightening modes, the degree with which rates might move, which is when limited and gradual is particularly relevant, this is guidance that also is predominantly and first aimed at households and businesses so that they have an understanding of this. i think there is considerable evidence that it was effective

and continues to be effective in terms of their rate expectations around that. move to the current situation, i think it is pretty clear that the speech i gave at the start of this month underscored a debate within the committee which was flagged in the minutes of the december which related to whether or not we were going to get a ,ounce following the election and potentially greater clarity on whether the global economy was going to turn. what i did was pete what was in there ises to say that a debate at the mpc, and there was a debate then and over the course of this month. you will have to wait eight years for it, but in the course

of the actual meetings deliberations. a majority of the committee came of holding side policy because, as i said, so far, good enough. but making it clear that the data needed to fill in, or else some additional stimulus would be required -- would likely be required, i should say -- to reinforce the recoveries in gdp and inflation. the last thing i will say is that the progress of your question, as you probably know, is wrong. you had a 45% to 50% probability in the market of what we would do at this meeting. i am sure people who were priced on one side you have spoken to say x, but two people on the other side, that is what a market is. the market can read the data, and different people in the

market had different views on what the right decision would be, or what our decision would be. so the judgment is laid out, and we will see how the economy evolves. alix: that was bank of england governor mark carney. you can continue following his news conference by typing in . ♪ alix: welcome to "bloomberg daybreak" on this thursday, january 30. here's everything you need to know at this hour. >> we are sending our best experts from cdc to help them. the chinese invited us to do so. alix: a task force coordinates the u.s. response to coronavirus as the outbreak spreads to india. the virus is also impacting

businesses. >> we had a big food-service business, and in hesitate that that will be impacted because people are eating out in restaurants much less. more storescloses and tesla is expected to delay in the ramp-up of model threes. gov. carney:gov. carney: there are some signs that growth may be stabilizing after declining in 2019. nonetheless, uncertainties about the outlook remain, including those posed by the coronavirus. alix: the fed changes three words in its statement while setting the floor for reserves. we will produce approximately 1000 times more cars in 2020 then we did in 2010. added $2.3musk billion to his fortune in an hour after better-than-expected fourth-quarter earnings and a production ram up -- production ramp-up. >> it is a religious stock by,

and there are a lot of religious believers, and they have generally been right. elon musk basically makes things happen that nobody believes. . to be possible alix: alix: it is the second straight -- believes to be possible. alix: it is the second straight quarter of blowout earnings. the bank of england has its first meeting of the year, a day before brexit. >> this is not a strong economy, not one you would necessarily say it wouldn't hurt to give it a rate cut, but they thought they would leave it for the new governor to come in in march. alix: u.k. business optimism jumps to a 14 month high. calling witnesses in president trump's impeachment trial continues to be an uphill battle . gardner, ator cory republican up for reelection, has suggested that having additional witnesses is not something he would be on board

for. first and foremost, democrats would need one additional republican era drew breakthrough -- republican in order to breakthrough for there to be able to be witnesses. alix: take a look at the markets. we are picking up some steam to the downside when it comes to equity futures. s&p and dow off by about 0.7%. mixed bag for earnings, yet the macro taking center stage. just a little bit of selling in the u.k. because of that boe decision. you have a stronger dollar overall, with the exception of the arrow and the cable rate -- the euro in the cable rate. joining me for the hour is romaine bostick. i have to wonder read we will get selling at this point. romaine: nobody knows why we rallied on tuesday. you had the 10 year up there. you talked about the inversion

we saw. have seenn mind, we that flat much across the curve. think about where the 10 year yield was going earlier this year. most of that decline was being led by the declining real yields, and now you are seeing a real change in inflation expectations. you are seeing breakevens come down. you had carney talk about margin and slack. this is a huge about-face we are starting to see among central bankers, and presumably that about-face is coming about because of changing expectations in the market. alix: i am blaming oil. let's continue with the blb decision to keep rates on hold, and what we learned from -- the boe decision to keep rates on hold, and what we learned from mark carney's last press conference. nejra cehic joins us from outside the boe headquarters.

nejra: the one comment i would highlight from mark carney is that he said the decision in the outlook is less of an indicator so far so could t -- indicator so far, so good than so far, good enough. judging by that and some of the reaction in the markets in terms of gilt yields moving up and the pound strengthening, perhaps the market is interpreting it as a bit of a hawkish hold. some of the speculation going into this was if we did get a hold, there would be dovish signals from mark carney. the bank dropped its guidance for limited gradual tightening. the growth outlook was cut. cpi still seen below target until the end of 2021. what has really pushed those aggressive market bears towards speechesbability was from a number of mpc members, including carney himself. he said that the market had over interpreted his january speech. romaine: can you expand on that?

i found his defensiveness in the press conference when he was asked about this rather revealing. the market seems to have take away from carney's speeches, as well as the other governors' speeches, what the board was going to do. his explanation wasn't that things had changed. it was some lead up the market misinterpreted. was that the message? nejra: that is what he said. i then stepped out. but it wasn't just mark carney that gave those signals interpreted as dovish by the market. you had others adding voices that could have been interpreted as possible dissenters, in addition to the two we got today. is thing that i would say that what has changed since those comments from the mpc is the soft data. the market started pulling back bets on a rate cut after we had pmi bouncing back. we also had manufacturing

optimism data, and even overnight, a lloyd survey on business sentiment. what is interesting is that previously, mark carney had said pmi's could be misleading indicators in times of extreme uncertainty. what i would have asked if i was still in the newscast was, are you putting more weight on those now because you see less extreme uncertainty, since we've got the withdrawal agreement through the u.k. is now exiting the eu? alix: thank you very much. should point out that money markets are no longer pricing in any rate cut in 2020. it had been priced in in august. joining us for more is amy wu rbc capital markets equity derivatives strategist, and sebastien page, t. rowe price head of global multi-asset. we have central banks with

nothing else to do. the possible contagion of the coronavirus. think what's been happening is it has all kind of been glob together in the options market in terms of that fear being expressed. when we look at all of the different relative etf's, the international ones, the domestic ones, they are all showing very high fear. it is very hard to parse that out. is it brexit popping, central-bank fears? at least what that is telling me is people are waking up a little because the 1.i have been making since the beginning of the year is not that people weren't bearish. it was simply that they were under hedged, and that is starting to change. romaine: when we talk about what we are hearing out of the central banks, is this really about underpinning economic growth, or about financial stability and inflation? sebastien: it is a complicated mandate to be a central banker.

central banking is kind of the opposite of the news business. you want it to be boring. if you look at the fed yesterday, the fed clearly wants to be on hold, and the bar to raise rates is probably higher than the bar to lower rates. if you look at futures markets at the end of the year, the expectation that is priced in is that we end up with rates that are 30, 35 basis points lower. the interesting thing is to think about the probabilities around those expectations. do we have a big probability of a small cut, or do we have a small probability of a big cut, or anything in between? i would argue we are closer to a small probability of a big cut. i think markets for 2020 and for the economy, we are facing a barbell scenario, so it is likely the fed stays on hold and wants to stay on hold, with a small probability that it needs to act meaningfully. romaine: but how much more dependent is the market this time around on better communication, or

clearer communication, with regards to direction? thing,e expecting one but not necessarily sure that powell is on the same page. amy: i think that, especially in the options market, whether it was the powell put or bernanke put, the market has been counting on that. what is interesting to me, if you have a small probability of a big cut or vice versa, ultimately it comes down to what that expected value is. that number is what the options market is going after, and i do think, amongst everything else we know in terms of the known unknowns, that is going to be one of the bigger ones. it always seems like the fed wants to be the most boring, and yet, it is the one that people count on the most in terms of the downside being there. alix: and it is the one where inflation may never get to 2%.

we heard that powell is definitely not going to be hiking if it is below 2%. here's what he had to say about the inflation outlook. chair powell: we expect inflation to move closer to 2% over the next few months as unusually low readings from early 2019 drop out of the calculation. alix: i feel like the market took that as they are never going to hike, so you do -- so do you need to start hedging for inflation, at the same time hedging other risk? amy: we have seen people start to do that, and that is less in the equity option space, but that isn't the main trade right now. it is still more about whether we will see a cut in terms of what is priced in and people playing those tales then the other way around. romaine: how do we read those recent inversions? you are seeing this flattening across the curve. we should talk about not just oil, but the industrial metals as a whole. we have seen those prices come

down, so the expectations in the market are much more tilted towards a decrease in inflation, right? sebastien: i think so. we have had so much stimulus, so much liquidity in the system, and surprisingly low inflation. the inversion itself is a signal that investors should look at amongst many different signals. it now, those signals are distorted by qed, by a flight to safety today, by global rates being lower than they have ever been. we shouldn't reach too much into inversions. commodities and metals and mining, those reflect expectations for growth, as well as expectations for supply. as though shift in investors ' minds, you see those materializing. coronavirus up, the death toll rises to 170 cases.

markets are very worried about the potential ripple effects on the global economy. how do you hedge it? how do you view it? this is bloomberg. ♪

>> i think the 10-year note will probably get somewhere down to 1.3%. alix: scott minard of guggenheim with a not so optimistic view. you were mentioning that overall, investors with a risk off you are hedging. what is the options strategy? amy: it is interesting because

the coronavirus kind of threw a wrench into every thing that was going to happen anyway. the problem is that is an ongoing bid for volatility that will just continue to be ongoing. datesre still picking based on the known unknowns. the fact that friday, we are going to get witnesses or not. the fact that the iowa caucuses are monday. the fact that we have a potential rollup in the opec meeting. people are still using those dates to put on downside protection, either through put spread's or through collars. i think we will see a continued bid to volatility because i just learned a few days ago, there's a two-week incubation timeline for this virus even showing signals. that means we have no idea, in terms of more drip drop of news coming out, and that is what keeps volatility bid. romaine: short-term volatility is certainly understandable, but long-term, do we have any sense of how this will affect economic

growth to the point that investors should be worried? toastien: you will see a hit china gdp, and the market scenario right now is probably it gets worse before it gets better, and that is based on previous outbreaks. there's no reason to be alarmist , but there is a tail risk here. the market is reacting to the increase in the tail risk. amy is talking about hedging. the tail risk is an event where you have a very small probability, but it is very consequential. date,y 23, before that 1.8 million people got out of wuhan and the province. then you mentioned the two-week incubation period. we will hit that pretty soon. two weeks after that, we will get more data on the jen -- the gen two contagion, those that might have been exposed -- [no audio]

-- can be potentially contagious for you get symptoms. romaine: when you talk about those tail risks come over some of those already existing? some people say that the selloff in some of the hedging related to the coronavirus was really related to other issues already present, and that the coronavirus has just become a convenient catalyst to move things around. amy: that is a good point. in the beginning, the tales were very cheap to own and people outright own some of them. now what people are doing because they have become more expensive, we can imagine more of what these tail scenarios are. what we are seeing is people actually selling a near the money put, buying multiple times of a very far out of money put.

they are saying i guess i am ok with a down 7% scenario. i am not ok with a down 20% scenario. so i am going to own that small probability if there is a huge consequence attached to it. alix: we've had the worst two things for black swans, a potential world war iii outbreak with iran and the actual outbreak of a disease. this is a question for both of you. if you come inside to bloomberg, it is the world value versus growth relative price performance, and it shows you how undervalued growth is. for the options market, where is there still value in options, and where are we too expensive? amy: unsurprisingly, you are seeing utilities have very cheap options relative to other etf's because of historically, a flight to safety. it historically trades more with bond correlation then with equity. but i am actually seeing a lot

of activity with people buying puts. a lot of their thesis is at some point, if it starts to trade more equity like or if we do get that recovery, that is a good time to own volatility in that segment. romaine: we are talking about growth and value on a day where pretty much everything is at a record high. is, doesy question gross value even matter anymore? that is that debate. i know you have those out there who will say it definitely matters, but we've got to a point where growth is what drives this market. sebastien: it absolutely matters, and it will matter in 2020 because, as your previous chart showed, we are starting from extremes. global value stocks are as cheap as they have ever been relative to growth stocks. this is one of our themes for 2020. will we see a rotation? when we start from such extreme

levels, those rotations can be pretty traffic -- pretty drastic. if we have bottoming pmi's and global central bank liquidity picking up, you could see that. on the margin in our portfolios, we have started adding a little bit overweight positions to value stocks relative to growth. from a long-term secular perspective, we like growth companies. alix: guys, things a lot. really appreciate the conversation. capitalilverman of rbc markets and sebastien page of t. rowe price. willommodities edge," we discuss the coronavirus from a copper and oil vantage. this is bloomberg. ♪

♪ viviana: this is "bloomberg daybreak." tesla shares in the premarket soaring. the electric car maker delivering a second straight quarter of blowout earnings and beating execution.

tesla's record revenue beating estimates. deliveries of the model y will begin in march, much earlier than expected. facebook is slowing down, adding pressure to the company. countries around the world are weighing new privacy regulations and ticking a look at how facebook does business. deutsche bank reporting a large and that expected loss, overshadowing gains at the investment bank. bank's cfo.h the >> the loss this year after tax and pretax was entirely driven by restructuring costs, transformation effects, and that is across a range of areas. on the pretax line, goodwill impairment, software repairman,

structuring -- software structuring. viviana: that is your bloomberg business flash. alix: thanks so much. it is sort of like, if it is not terrible, it is good. i don't want to discount the fic. that was great. romaine: but obviously you saw a lot of the other units are struggling. the transaction bank or whatever you want to call it, that is struggling. sewing has said that the transaction bank is going to be the key driver of the company going forward, so you want to see a little more, but this is kind of a bottom story. , so a gotten decimated 3.9%, 4% up today probably warranted given what you see in fic. alix: what were the bonuses

about? i also wonder, yet was holding up, it was about the short-term story, long-term. alix: and to its -- romaine: into its credit, deutsche bank is sort of ground zero for all of the derivatives that could blow up on us. they are trying to make the perception at least a little bit safer. coming up, u.s. growth in the fourth quarter. we will get those numbers. plus, we will speak to stephanie kelton of stony brook university. this is bloomberg. ♪

alix: this is "bloomberg daybreak." i am alix steel. where a few seconds away from the fourth read on gdp on this risk off day. .6%.utures down

still outperforming europe. in other asset classes the three-month 10 year was inverted. that is what i'm looking at, also how the market handles volatility. handle -- trading around the seven handle. the data drops right now. it looks like it came in stronger than estimated. annualized gdp 2.1%. personal consumption was weaker, 1.8%. personal consumption was supposed to be holding everything up. that is an interesting point. core pce on a quarter on quarter basis coming in at 1.3%. not seeing any filter through from the tariffs. , 216,000obless claims as the job market continues to hold steady. the personal consumption what i find interesting. romaine: we were expecting that

slow down. worse than estimated. the deceleration is an improvement from what was on the previous quarter, but a lot of folks were expecting a rebound. the final sales to private domestic purchasers up 1.4%, the estimate was 2.3%. alix: and you could see bigger cutbacks in business investment going forward, especially if you have the boeing 37 max weighing on the production line. romaine: an interesting report. this is not a great report but it does not show any significant weakness in the economy, or any weakness beyond what some folks have started to parse in. alix: joining us is ira jersery. what you make of the numbers? ira: a little bit weaker than expectations. ,he worry is not these numbers these are backward looking and

there are other risks that have creeped into the market. if you are a bear and you think the economy was going to flip, you got confirmation today. those personal consumption numbers have to be the most worrying because the consumer has been propping up the economy while the manufacturing sector slipped over the last 18 months or so. if the consumer is going to start trending lower and you will not have the same amount of consumption, you have to start to worry about the economy. romaine: how much distortion is there in these numbers? there is concerns with the trade war and imports being pulled forward the number might not reveal as much as people thought. ira: i think that is true. the problem with the gdp report is there are a lot of numbers in their -- in there. at the same time, it is the broadest reading of the economy we have. market, it treasury

is the january numbers that will wind up driving things more than we have seen over the recent past. today's bull flattening aside. is 1.5%.ury market if the economy slows down further we could retest those lows, down another 10 or 12 basis points. alix: are you worried about the consumer considering this was a holiday shopping season and consumer spending moderated? business investment we knew. ira: we do not have the final reads on the holiday shopping season. we got advanced retail, we need to get the final report. you could see a modest revision upwards toward what the market was expecting. revision upward would not be surprising. the consumer is the single most important part of the economy that you have to be focused on. the jobs report next friday

winds being very important, particularly the wage component. you could wind out having over 80,000 or 100,000 jobs, but you need wages to be growing. alix: thank you so much. ira jersery with bloomberg intelligence. we want to dig deeper and turn to the context summit where erik schatzker is on the ground with stephanie kelton. erik: here in miami with stephanie kelton. we just heard the fourth quarter gdp number. i want to ask you about something we heard earlier in the week. the congressional budget office told us we should expect a trillion dollar deficit for the foreseeable future and a debt to gdp ratio of almost 100% by the end of this decade. it has caused a lot of handwringing. to those figures say anything meaningful to you? they do, but probably

not with the same interpretation a lot of people are having. what is interesting is we have trillion dollar deficits in an economic environment in which none of the things that traditional macro economic models tell us are supposed to accompany a big increase in deficits of the kind we are now witnessing and the kind we are looking at for the coming years, none of those things are happening. no inflation, no spike in interest rates, the clouding out, the slower growth. all of those things that are supposed to accompany in increase in deficit spending of this magnitude is bearing out. the cbo isu think measuring the wrong thing? valuenie: there is little in painting half a picture. what the cbo tends to do is to tell us the deficit is $1 trillion. what is the context for that?

how do you put that in the context of other balance sheets in the rest of the economy? when i see a headline that says government deficits hit record highs, trillion dollars, in my brain i hear nongovernment surplus hit a record high of $1 trillion. the government's deficit is nothing more than a financial contribution to some other part of the economy. if we hear the government is running trillion dollar deficits , what we should here is the government is making trillion dollar deposits into some part of the nongovernment sector. i'm interested to know where the deposits are being made, who they are benefiting, and are they likely to lead to a boost in spending that supports jobs and economic growth. erik: we have a trillion dollar deficit that has not triggered any acceleration in inflation. does that mean there is more room to run larger deficits? probably.

it also depends on the kind of deficit you are running. much of the increase is due to the fact that the republicans past these big tax cuts. the tax cuts were structured in a way that 83% of the benefits went to people in 1% of the income distribution. if you agree people in the top 1% have a lower propensity to spend, that is when they receive a financial windfall they do not spend a lot of that back in the economy. that is where the strain comes from. if you increase the deficit to a big number, and that does not translate into an increase in strain on your economy's real resources, if you're not training your capacity, you can leave behind lots of physical space because the predict -- lots of fiscal space because the way in which the deficit was run did not put a strain on resources. erik: do you have an estimate of how much more the government

could spend or give back in a tax cut? stephanie: we have some good estimates. some of the best work i've seen done was done out of gmo. an analyst did some research on this. his estimate is that right now there is something like $500 billion to $600 billion in available fiscal space in the u.s. economy today. even with labor markets appearing tight, we could safely increase the deficit by another 500 billion dollars or so before we see inflation accelerating to something we would see problematic. erik: that is not a one time thing. we could run a $1.5 trillion deficit this year and again the following year? stephanie: it depends on the ways the deficit is being applied. if you're investing in infrastructure, r&d, education, you're creating additional headwind. that kind of spending leads to increases in future potential

gdp which lifts the ceiling and gives you more space to grow. erik: people associate modern martin -- modern monetary theory with reckless fiscal spending because you advise the bernie sanders campaign. do believe there is a limit to how much the government can spend? stephanie: there is a limit to how much the economy can handle, not just government spending. when an economy begins to reach its full employment, potential, whatever you want to call it, once you begin to get your full capacity, any additional spending carries inflation risks. suddenly it has a bigger appetite for the u.s. goods and services and they start demanding more, that can put additional pressure on inflation the same way additional government spending or additional private-sector spending. there are limits. that is the centerpiece of modern monetary theory.

instead of saying the way we should think about federal budget are in the deficit, mmt says the limits are in our productive capacity and it is an inflation constraint we should be concerned with. erik: the trump administration has passed a $1 trillion tax cut with very little uptick in inflation. is that consistent with mmt thinking? stephanie: it could be. mmt is a language. what we are trying to do is say we've gotten so many of the big things wrong because we have been looking at the world through the wrong set of lenses. what that means is we still tend to have narratives bound up in fixed exchange rates, the gold standard monetary system. we have a floating exchange rate. mmt says we should recognize that, change the lens, look at the world through a more modern set of lenses, but i could give

that pair of lenses to a republican, to a democrat, they could both see more clearly what the policy space looks like and then use that policy space to do infrastructure, education. it is meant to be a way to decision-making, not guide any particular policy agenda. degree do you think bernie sanders himself or his campaign has embraced your thinking, or perhaps other democratic candidates? if they have, how do you think that depreciation will be reflected in who they might choose to run the federal reserve? stephanie: i do not think a lot of people are looking at policymaking through the mmt lens. i think we are trapped in we have trapped ourselves in a framework where every policymaker is expected to lay out a clear blueprint for every

policy item on their agenda. how will you pay for it? show me where the revenue will come from. we force them to provide an answer to that question. we put them in a corner where there is not an alternative for them in many ways but to say i want to spend this much money and here's where the revenue is going to come from. nobody has adopted and mmt lens to try to help explain to people some of fiscal space, this can be done the way republicans did the tax cut. some of what we want to do, there is low hanging fruit, and we can accomplish many of the things we want simply by authorizing these programs and sending money into the economy. romaine: it does not -- erik: it does not matter to you whether republican or democrat? stephanie: we need a better policy debate, let's start asking the right questions, and that is what i'm after.

erik: stephanie, thank you so much. great to see you in miami beach. that is professor stephanie kelton of stony brook university at the summit in miami beach. alix: thanks a much to bloombergs erik schatzker. coming up, we want to get an update on what is making headlines outside the business world. carney'sgovernor mark final policy meeting at the bank of england you heard right here at the top of daybreak americas. the central bank voting to keep interest rates on hold. it is waiting for more evidence of economic rebound. mark carney indicating talks on post-brexit ties of europe are going well. >> we are moving more rapidly to the new relationship with the european union then we had originally modeled. boe lowering forecasts for the u.k. gdp 2.75%. now to the coronavirus. says 170 people have died.

the number of cases on the mainland rising to more than 7700. the world health organization calling a meeting of its emergency committee. in may issue of global alert. showing evidence the disease could be transmitted. on capitol hill, 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. democrat seeking at least four republican votes. they want to subpoena john bolton to testify. mitch mcconnell is leaning on republicans to stay united. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. alix: thanks so much. coming up tesla is soaring and facebook moves. one of the biggest tech names and how they are performing in

today's bottom line. bloomberg users, throughout the day, gtv has all the charts we use route the television programming. this is bloomberg. ♪

alix: time for bottom line. we look at companies need to watch. today we will focus on tesla and facebook. tesla delivering its second straight quarter of blah earnings. joining us on the phone is a baird senior research analyst. is how much of the rally has been because of tesla at the numbers? ben: there is a combination of things. i defined it as a narrative change. 18 months ago tesla was feared to be going bankrupt.

they could not hit their targets. questions around demand. over the last 18 months, all of those things changed. there is demand for the cars, the competition is not there. they had $6 billion on the balance sheet last night. the liquidity concerns are gone. they brought up shanghai in record time. there new crossover vehicle are producing head of schedule starting in march. that shifted. investorsad long only that are looking at the name that has moved to profitability. there are some catch up going there from buyers of mutual funds. romaine: when we look at the fundamentals, which are quite for this company, there is some enthusiasm about the move up of the date for the model y. will we see production if satellite where that 500,000 number they put out could be

beaten by large amount? ben: what we have seen with their guidance as they have tried to temper some of the big aspirational calls. growing to 500,000 is not an aspirational goal. that is a comfortable number for them and still represents over 30% of volume growth from 2019. we have to step back and there may be a new factory in shanghai and there is a new mall. there's a lot of crossover, which should make the ramp easier. still big areas they have to execute on during this year. alix: thank you very much. romaine, you are watching facebook. romaine: shares moving lower in the premarket trading. the company beating on a lot of metrics investors want more. joining us is oppenheimer head of internet research. he has an outperforming rating on facebook and raised his price target to $265 per share. what is the reason for raising

the price target? jason: the reason is with the start of the year we moved our valuation framework from valuing the stock on 2020 to 2021. modest changes. we did raise the cash flow a little bit for next year, but i would not expect most estimates to change this year. the expects guide -- the expense guidance was in line. while they did beat marginally, they talked down first quarter. i cannot believe most people are raising the revenue estimates. alix: how much is facebook still growth stock and should be valued as such? jason: if you look at the quarter, they grew revenue 26%. that being said, it was a slow down from 31% in the third quarter. that is something people focused on. as far as the beat, they beat the street revenue by 1%. some of the key metrics will be

give and take by a percent. with the recent rally in the stock, people were looking for more. romaine: what is facebook going to give us? 25%, 26% growth? will that be sustainable? they talked about a slowdown in the first quarter so you will probably see street numbers around 20%. we are looking for 20% growth this year. that number should be sustainable. i think they can beat that. they talk a lot on the call about the opportunity to focus on targeted advertising which benefits small and medium-sized businesses. that being said, anybody who has watched advertising for a long time knows it is harder to do that. at where this , there is still plenty to go.

metrics --k the user they never give you two metrics, one is usage across all of their a -- all of their apps, but that even core facebook still grew 9% daily active users in the quarter. we have not gotten to a point where the usage has slowed, and they also told you add volume was up strongly. i think this was more of a function of the stock strong earnings and then in-line print on a top line. alix: jason helfstein, thank you very much, and romaine, thank you for working with me. trades in we get your today's technically speaking. if you're jumping in your car, tune into bloomberg radio channel 119 on the bloomberg business app. ♪

alix: time for technically

speaking. we will set you up with trades. bill maloney, voice of equity squad joins me now. listen to bill by typing in squa . bill: tesla, stocks up 9% in the premarket. near 649- should trade and the premarket. taking a look the 2017 highs in brings you to223% $652. $652, i am out of levels. says when a technician you're out of levels, you have to take a moment. let's get to microsoft. bill: microsoft also reported after the bell. around 174.50. it is tough to get a level on this one. going back to 2015, the stock

was basically dead money, traded sideways, did nothing for 15 years. once we had the breakout, the bigger the space, now we have this long-term uptrend. the stock is still positive. alix: very much like the tale of two upsides. .e will leave it there that wraps it up for me on bloomberg daybreak: americas. coming up on the open with jonathan ferro, oksana aronoff. he wind up having a risk off day. the market seems to interpret a more hawkish hold for the bank of england. this is bloomberg. ♪

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

jonathan: coming up, china anxiety weighing on markets. globo -- global equities heading south. chair powell setting the stage for rates to remain lower. results from microsoft and tesla deliver. here is your thursday morning price action. equity futures negative .7%. the bid slowly coming out of the bond market. yields down to 1.58 on the u.s. 10 year. the euros slightly firmer. euro-dollar 1.1026. coronavirus rattling markets amid mounting evidence it is impacting the chinese economy. the outbreak disrupting major corporations including mcdonald's, starbucks, apple, and tesla with airlines at the epicenter. there stocks leading the charge. larry kudlow telling reporters how the u.s. is planning to respond.