francine: china lowers tariffs on farm imports as stocks rally. central banks running out of ammo. risk-on is the only game in time and european stocks it all-time highs. iowa, buttigieg and sanders remained at ken. neck.ain net and welcome to bloomberg surveillance. i am francine lacqua in london. these are your markets. a lot more hope. yesterday was our rally. today the rally continues.

european stocks gaining. the markets a lot cooler about the coronavirus. importe focusing on this seen by china for u.s. products. 1.67.s. 10-year yield we will have more throughout the show. that's get to the bloomberg first word news. in the: we begin here u.s., president donald trump has been acquitted and is impeachment trial -- in his impeachment trial. mitt romney was the only republican to break ranks. he cleared the president of the obstruction charge but voted to find trump guilty of abusing power. than 560. more than 28,000 people are infected. some figures grappling with the

largest ever lockdown. hong kong now says it will quarantine all arrivals from mainland china. talks between asked -- experts -- that is as and russia remain split over the threat of ages coronavirus. -- over asia's coronavirus. while russia is willing to resend the current cut it doesn't want additional measures. the uk's economic growth targets are being called into question. national institute of economic unrealistic."uite they want to lift economic butth to almost 3% a year the proposed policies are likely to offset the impact of brexit. hollywood legend kirk douglas has died at the age of 103.

starting in over 80 moment -- 80 movies perhaps he is best known for his role as spartacus. -- ending the blacklist during mccarthyism. mr. douglas said that decision was one of the proudest of his life. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i am viviana hurtado. this is bloomberg. withine: let's start bloomberg look at trade. china says it will have tariffs on $75 billion on u.s. imports starting february 14. the action applies to two sets of tariffs and it is time to put aside moves by washington. global death toll reached 565.

we are joined by tom mackenzie in beijing. brendan murray is joining us for the hour. all. you we have full team coverage. tom, let me kick off with you. how many deaths have there been and how many people affected? numbers in the next few weeks are going to continue to rise on the death count. the official number of 565 globally and the number of cases which is above 28,000. it is worth reiterating 98% of those deaths are and have been reported in the province in this -- in the city of wuhan. on the testing front there has been progress.

the center for disease control in the u.s. sends out -- sent out testing kits. officials trying to speed up their assessment of people who are showing the symptoms that relate to this virus. testing is crucial. gilead sciences say they are going to start testing their antiviral drug and china. state media says there's been some progress from medical officials here using a , antiviral of drugs and anti-hiv drugs. there world health organization says we are a long way from a vaccine given the need for trials and regulatory -- that any vaccine would be required to cross. anderms of testing of this progress on potentially getting

somewhere towards curing some of these patients as it gets rolled out. of course, it is over the next few weeks given the incubation. -- incubation period. the numbers are expected to continue to pick up. francine: tom mackenzie in beijing. let's get to brendan murray and andrew wilson. brendan, this is a bloomberg scoop saying that china will have tariffs on $75 billion goods coming from the u.s. this is an implementation. brendan: we are seeing the market breathing a sigh of relief that all the this deal was signed weeks ago, there has been -- there hasn't been a lot

of comment from china about the follow-through they were expected to do. they are fighting this health crisis and markets have been anticipating china's followthrough and things like purchases of commodities. what we are seeing today is china following through. this would be a good sign to the administration. they will look at china as holding the pledges they made. overall, the market is really just breathing a sigh of relief. francine: brendan, talk me through this. there something called force majeure. if there's a natural disaster than they do not have to comply. the chinese hope because of the coronavirus that the u.s. will go easier on them. >> it was signed january 15. the fact that china is making moves to follow up our really good once.

what the chinese and the signals we are getting from the chinese is they are going to be looking at flexibility. there is an escape clause for unexpected events. we will see if that happens. francine: andrew, how bad is this? it is early days and i know the situation is fluid. andrew: the interesting piece is how much will impact q1. everyone is looking at swine for commissars and ebola. is it just one quarter and then we bounce back? it seems like markets are like, this is going to be contained. they are looking beyond this. the moves by the chinese authorities are positive. it does seem that they are taking steps, not only to contain the virus but to provide some liquidity and stimulus.

francine: is the market wrong to react like that? andrew:. andrew: it is too early to tell. we really do not know. markets certainly seem to be discounting a pretty mild situation here. not a huge increase from here. on a day-to-day, the risks are more skewed to the downside. it is speculation. francine: if the u.s. or to be more flexible with china, do we know what they would do in terms of trade? andrew: they would cut them a little slack, the size of the purchases they have pledged. after looking at those estimates and saying they are not feasible, there could be some scaling down of soybean

purchases and other agricultural commodities. the wildcard is, is donna trump feeling sympathetic? is donald trump feeling sympathetic? he ran in 2016 against the impact of china. francine: does the virus not changing -- change everything? >> you would think it would. it becomes a global economic drag, then sure, you would think there would be some consideration. francine: andrew, what this this mean for trade? we have someone yesterday who said it just gets worse. andrew: we saw a big rally. we came off the lows of yields by 10 basis points. if it does deteriorate, things you would expect to see treasury yields -- the fed may even come

back into play. stage, two cuts were priced in. slow down is already factored in but if we have much more of a slowdown, beyond china, it becomes a global issue, then treasuries are the beneficiaries. could we see 1.5 on the tenure? francine: we will talk about treasuries. thank you both. wilson murray and andrew . we also have a talk later on the bloomberg terminal. that is basically what we will be focusing on when we look at the coronavirus and the impact on the economy. assetan etf's have now management of almost one trillion euros. bloomberg's news show

etf iq europe tomorrow at 9:30 a.m. london time. coming up, christine lagarde wants central banks firepower. -- warns on central banks firepower. this is next. ♪

francine: economics, finance, politics, this is bloomberg surveillance. let's get to bloomberg business flash. viviana: we begin with -- pledging to boost shareholders return as it shifts the cash dividend policy. --s coming after the french

also signals it is set to miss a key target. in a credit may accelerate its plan to share a bigger portion of profit with investors. spokes the italian bank to reward shareholders. they payout from 2020 earnings may rise to 15% of underlying profit. it will be delivered through a combination of buybacks and dividends. in fourth-quarter earnings, ing suffering a bigger than expected drop as higher compliance costs income.he increase in the lender is investing in clients and improving anti-money laundering efforts. it is also facing pressure from negative rates. that is your bloomberg business flash, francine. francine: european central bank resident christine lagarde says of crisis fighting has left central banks with few options.

speaking to the european parliament she says the domestic economy remains resilient. earlier, former ecb chief economist warned about the side effects of negative rates. >> you also have to consider the economy as a whole. little employment gains, the unemployment rate in germany is 3.5%. if you have a job that is more important, notice it is true, i don't deny that in the future you have to think carefully about the persistence of these policies in the future to continue qe, continue with negative rates. i see it more as a cultural problem that the negative rates are persistent for five years, six years, seven years?

in ave been educated civilization where we say time is money. years, withhan 10 negative rates, is really a cultural problem. the question of inequality, as you mentioned. francine: that was the former ecb chief economist. still with us, andrew olson. we heard christine lagarde say the ecb has run out of options. does it mean she will not do anything and focus on fiscal? andrew: they are going through a review. i think some of this is softening up a little bit. unlikely toit is take rates further negative as peter was talking about. there are negative consequences. he talked about the cultural side. we look at it from the financial perspective.

there'sare conscious not a lot of ammunition and regard to interest rates -- in regard to interest rates. she is trying to broaden out and getive and try activity going again. -- fed central banks now is going to review. what other tools can they use? francine: this is something that mario draghi needs to do at every single press conference. if you look at the euros, figures yesterday were not too bad, but you also have concerns. do you see value in european bonds? u.s.-china phase one deal.

andrew: we are going to ghosn -- going to go in. we got the election coming up in november but the idea of increased trade tensions, it is not going to be good for the economy. i think the u.s. is going to be weary about ramping up that rhetoric but it is still there in the background. what will these tariffs do? most economies are running around trade. even aside from the coronavirus issue which has been a dampening lagarde, but christine is resilient. see somely want to increase in activity in order to try and enable getting rates back to more normal or at least zero.

francine: thank you so much. later today, we will be taking on the a live blog impact of the coronavirus. terminal subscribers can send their questions i going to tliv. it. looking forward to coming up, trump has been acquitted in his impeachment trial. we will talk the politics and prospects for the world's biggest economy. we will go back to that treasury call. this is bloomberg. ♪

francine: this is bloomberg surveillance. i am francine lacqua. president trump has been acquitted in his impeachment trial, cleared. mitt romney was the only republican to break ranks. he cleared the president of the obstruction charge and found him guilty for abusing power. on the economic front, we will get -- still with us, andrew wilson. andrew, without talking politics, the election will be one on the strength of the economy. andrew: it is resilient. -- it isnning at about about trade growth. and wepayrolls tomorrow

have seen a pretty solid run of jobs numbers. not spectacular but enough to numbers employment lower. wage rates have not gone up as much as you would think given how low unemployment is. growth overall is going to run somewhere around 2%, maybe even a shade below 2% but good enough to keep markets on edge a little bit. can the fed cut that much more? the fed will be on hold throughout this year. it is resilient. there are things that could be relit. -- that could derail it. trade tensions, look like we have taken those down quite a few notches in the last month or so.

taken off the agenda. francine: what happens to inflation? andrew: it is suddenly low. the u.s. is relatively high. far away here in europe, far away in terms of japan. inflation looks to be due. and a seen pricing in slow inflation world. francine: we will get charts next with andrew wilson. we have a chart looking at real yields. how do you take advantage of investment opportunities? we will talk about that next. this is bloomberg. ♪

francine: china lowers tariffs on $75 billion of farm imports as stocks rally across the world.

central bank's madame lagarde is running out of ammo as she warns global worries advance, but risk-on is the only game in town, and european stocks hit all-time highs. and, acquitted, donald trump is cleared in the senate impeachment drama. in iowa, buttigieg and sanders remain neck and neck. good morning, good afternoon, good evening, depending on where you are in the world. this is "bloomberg surveillance ." just over 1.5 hours into the trading day, let's check in on european stock movers with annmarie hordern. annmarie: a big day for earnings in europe. optimistic for 2020 and they are seeing a limited impact on coronavirus into the industry. that is helping shares this morning. unicredit up 5.5%. they may accelerate the plan to get back cash to investors,

whether it is dividends or buybacks. as their capital balance sheet in strengthening. and dassault to the downside, 3.13%.ree point -- down the first quarter is one that we have to be skeptical of, given the virus and impact on china. let's check the boy. i want to see what is going on premarket in the united states -- let's check the board. i want to see what is going on premarket in the united states. an epic roller coaster right after the past six afterwhere it hit 100% the rally. you can see it tumble in this five day chart. many analysts are pouring cold water on their outlook. a lot of them are saying now just hold tesla or potentially sell tesla. there are two things -- there is the factory in shanghai, worry thet vulnerability to

coronavirus. we had some a short positions, we are seeing bearish trades. hordern withmarie your bigot stocks to watch let's get to first word news in new york city with viviana hurtado. viviana: we begin with a decade of firefighting leaving policymakers with few options, this coming from ecb president christine lagarde. she warns global threats could hit europe's economy. central banks might not have the ammo to help. this low interest rate, low inflation environment has significantly reduced the scope for ecb and other central banks worldwide to ease monetary policy in the face of an economic downturn. viviana: at least three people died after a boeing 737 800 split open after landing in turkey. 179 people were injured. the jet veered off the runway in

what weather. the rear of the plane catching fire. it came to rest upside down. bernie made off asking for early --ease for his 150 year bernie madoff asking for early release for his 150 year prison sentence due to kidney failure. he has one year to live. he's served 10 years of his sentence. the company says the coronavirus outbreak will materially affect this year's profit and sales. in total, 30% of its restaurants across china are now closed. it does not know when they will reopen. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i'm than 120 countries, viviana hurtado. this is bloomberg. francine? francine: thank you so much.

let's bring in exclusive conversations. pledging to boost shareholder returns and bring in a new cashiering policy. executive spoke exclusively to our correspondent in paris. concerned that we have an good business model. generate revenue is there, and we will get the benefit of this restructuring, the full benefit in 2020 on the plus side. that is why we are confident to prove effectively the profitability on the capital. dark of what could be, in your opinion, the biggest headwind for the biggest franchise in 2020? >> when we look at the shares, it is probably out of than

people anticipated. six months ago, you have to say there is this virus issue in china. it is not at all the exposure that we have in china. that is small. like any company, what it could mean for the global economy -- that would be a solution for that. but beyond this, we are pretty -- as we have a slowdown in the economy, again, we can have a better performance thanks to all of the hard work. >> the growth forecast for china could be cast as just two points for the first quarter. with that have a big lasting effect the echo >> i think the question is how long it will last, the last two or three months, there might be an impact, but it is not such a big deal. beit lacked more, that could

a significant for many companies. >> socgen was among the banks studying the conditions for the security in china given the new regulations there. do you think the situation is delaying this? >> we talk about a long perspective, the development of the capital market, and we talk about the shorter impact. there is no direct impact on this project that we want to pursue. francine: that was societe generale's chief executive. tice,g us now, jonathan european bank's senior analyst, and andrew wilson from goldman sachs. i have a million questions on a million banks, but first, if you look at a bank like societe generale, like a lot of the

other banks doing well in some places but a lot of cost cuts to come in others. andrew: absolutely. we talked about revenue struggling and the need for more costs. on the plus side, the revenue out but -- i think the best thing for unicredit and socgen, if you said -- , you are getting cash dividends. francine: does that mean the share prices will go up? we still ask so many questions about what these banking models are in europe. jonathan: look at the best-performing banks in europe, there was the french and unicredit. what is the underlying run rate? mostly flat revenues are done on costs. any credit, it is not that much

of a surprise because all they have done is taken targets that we knew were quite global and messed it up a little bit. get andrew want to in the conversation on negative rates in a second. a lot of executive say it is a nightmare doing this -- doing business in this kind of environment. excuse? true, but they have to do more on costs. francine: but at some point if you do too much on cost, you cannot really operate. andrew? torew: i thick it is hard believe we will get to a situation where the ecb will be able to get rates back to zero. francine: two years, even more he echo andrew: i think the prospect of seeing rate hikes in 2021, 2022 is possible. it is obviously predicated on

the global economy doing better than the european economy. we are seeing reasonable growth but not enough to suggest inflation goes up and therefore rates need to increase. francine: is there such a thing as too much cost cutting a ?uropean banks he ech jonathan: no, it is a long painful process. networkl have a legacy of buildings that people don't go in anymore to put money in savings account. aredmp's of the world talking about 30%. give it 10 years, that is where francine: francine: it will be. -- francine: in 10 years, how many european banks will be left? not many. germany really has to have a lot of --

francine: what would you do with deutsche bank? jonathan: i suspect nothing. worldicredits of this going to the next phase are looking at cross-border reasonably material assets. francine: andrew, you look at the economy, you look at central banks, they also have to fulfill the function of transferring -- transmitting the monetary mechanism. is it being fulfilled? andrew: that transmission mechanism of negative rates really happen by the banking system, and as long as banks are not charging consumers, to some extent the policy is not as effective as it could be. can we see a situation where banks pass on the negative rates to consumers? it is happening in pockets with certain balances over large amounts, it is starting to happen. but the feel that the transmission mechanism is working, you need consumers being charged. that is obviously a difficult decision to make commercially,

so we will have to see if that happens. francine: thank you both. jonathan tyce and andrew wilson. part inalso take looking at the impact of the coronavirus on the market. bloomberg terminal subscribers can send questions to tliv . this is bloomberg. ♪

francine: this is "bloomberg surveillance." has failed to reach a

consensus on the coronavirus out but. let's go to emory horton. -- annmarie hordern. annmarie: you can see the brent curve is moving into contango, and this is something that many ok -- opec delegates are nervous about this means they will probably have more of a surplus of oil in the market and really is bearish to the price. technocrats meeting in vienna, and the talks dragging into a third day, which is really unprecedented. there seems to be a standoff and what action to take, and that comes between russia and saudi arabia, the two biggest producers. the deal they struck in december, expiring in march, saudi arabia wants an urgent and deeper cut, an urgent reaction to what we are seeing in the oil market. we have the top extending. whether or not they make a move is the question, and if they were they would have to call another emergency meeting and

ministers would have to do the meeting face-to-face. it all comes down to the price. it is obvious where we are to the price right now. saudi arabia needs $80 a barrel, while moscow can deal with $40 on brent. there is a story where talking about in germany, which is that the leader of the german christian democrats are battling to recover control after a state leader lined up against the far right in the key regional vote. europe, for people in but also especially in germany. so just to explain to get everything clear, angela merkel's center-right cdu yesterday voted with mp immigrant alternative for germany to put a candidate on the pro-business ftp into power in the eastern region of -- of thuringia. we are throughout the morning going to talk a lot more about this. angela merkel saying the cdu

state decision was "unforgivable." unforgivable is the word of the chancellor. we will have a full round up out of berlin shortly, but let's get straight to the bloomberg business flash in new york city with viviana hurtado. fecesa: in 2020 so no nofi is seen profit, now sit they -- spending in areas such as cancer. any credible six day winning streak, the drop partly on concerns that they struggle. they were to contain the coronavirus from last friday's close. tesla is still up about 13%. that is the bloomberg business flash. francine? let's focus on emerging markets.

central bank unchanged. the r.b.i. is taking steps to spur credit costs in an economy on course for its weakest 9.pansion since 20009 andrew, we talked about europe and the u.s. and china. where do emerging markets fitted to this? coronavirus has taken out a lot of commodities. this is definitely a pause in terms of the recovery that was taking place in most developed and emerging economies in the last couple of months of last year and into january. so we are on pause here. lasts for aavirus period of a couple of months and takes q1 but we get more back into a resilient growth story beyond q1, then the market is in reasonable shape. it will come back to the same thing we have been talking about for a long time, the surge for yield.

with the low yield environment, we talk about low inflation everywhere but with lack of ammunition from central banks, investors are looking for places where they can generate a return , get a yield, and that remains emerging markets. absent a more serious downturn driven by coronavirus, and for us emerging markets look a reasonably attractive place. not super bullish everywhere, but reasonably attractive because you are getting growth in those economies and you're getting paid to invest there. francine: if coronavirus spreads, would they be hit more than others? andrew: if you get into a risk off scenario, those are the markets that investors flee from. i would say that as we look at investor surveys, people are not overweight on these markets. in a flight to quality, as theys, going to treasuries, japanese yen, those are the assets that tend to do well. the markets look like a reasonable place to bid, sort of

on a six to 12 month basis. francine: do you choose individual companies or do you choose emerging markets? andrew: we are a little more cautious in asia in part because -- the things that are happening around the chinese economy, more importantly, again, that is slowing even before this outbreak. so latin america, some of the eastern european countries, that is where we are invested. andrew wilson from goldman sachs asset management. after record inflows in 2019, european etf's have almost a trillion euros. how can you take advantage of this opportunity? joining us on the new bloomberg etv europe show, catch us every friday. this is bloomberg. ♪

francine: economics, finance, and politics, this is "bloomberg surveillance." i'm francine lacqua in london. we will get to our bureau chief in london in a second. angela merkel says it is an

unforgivable decision. far-right --'s waves domestically but also across europe with chad thomas p let's talk about the u.k. peer the u.k. has exited the european union. that was january 30. -- january 1. what kind of trade relationship will be get? what does it mean for bank of england, and what does it mean for -- if you look at the u.k., we have no idea what the e.u. relationship will look like. there is this suggestion that negotiation will be trickier than the markets might have assumed. there is no doubt that there is quite a relief of having some certainty, having the january 31 date pass, so businesses know how to react.

there will be a bounce of activity. i think that is why the bank decided not to move rates, so i think that seems likely. the big question is, probably the second half of this year, as we approach that at the end of the transition period, what exactly is that relationship going to look like? the tariffs, and what does it mean for the different industries. francine: in the meantime, is investment going to come back in the u.k., or will it still be on hold? andrew: some activities will hold, -- not totally on not what we were going to get in the latter part of last year. if you thing of the auto industry, crucial, the nature of the trade relationship between the u.k. and europe. until we have uncertainty around there, i think it is unlikely to be a big investment. but i think there will be relief maybety that leads q1 and q2 to look better here. francine: andrew, thank you. chad, when you look at what

angela merkel has been saying and doing, she says basically the cdu state party decision was unforgivable. does it mean they will have to break that? hi, francine. it was quite interesting what the chancellor had to say this morning. she is on a trip to south africa and normally does not break with script. she obviously felt she had to weigh in here. she said the chapter of her own party should rescind this deal with the far-right. so now there is a standoff with the chancellor and the leader of the chancellor's party, calling on them to rescind the deal. we will see how that plays out over the next hours and days. there was also an emergency meeting of the coalition this saturday to discuss this. her jr. partner, the social democrats, are very irate about this decision that was made locally in thuringia. we will be watching to see how that plays out as well. francine: chad, what does it mean for the heir apparent,

akaka? how: it clearly shows weaker position he is eerie she said on the record yesterday that she told the local chapter in thuringia not to do this, and they went ahead with it anyway. at the height of merkel's power when she was leading the party, this would have been unheard of for something like this to happen. so it will be really interesting to see how she asserts herself now and tries to take control. we are hearing from some people that she may even go to thuringia yesterday. francine: thank you so much. bloomberg western europe vanishing editor, chad thomas. we went through a lot in an hour. "bloomberg surveillance" continues. john king -- tom keene joins me out of new york. ♪

francine: china lowers tariffs on $75 billion of farm imports as stocks rally across the world.

central bank's madame lagarde is running out of ammo as she warns global worries advance, but risk-on is the only game in town, and european stocks hit all-time highs. and, acquitted, donald trump is cleared in the senate impeachment drama. in iowa, buttigieg and sanders remain neck and neck. well, good morning, good afternoon, good evening. this is "bloomberg surveillance." tom, we continue following the impact between what is happening in china with coronavirus in the world economy. i am really looking at the markets because they seem to be ignoring the coronavirus now, risks to growth, and focusing on the positive. we have an important story on trade, the fact that china is ,etting rid of a lot of imports u.s. imports. tom: it is a next ordinary day. we have the fallout from sen. romney: in utah -- from senator

romney in utah. through all the news flow this morning, this story out of germany is absolutely profound. here is a direct quote. i want to be very careful, folks, on quoting this correctly this is a right-hand man to the merkel assistant. "cdu lawmakers in thuringia willingly accepted they could both elect a state premier supported by nazis." francine, can you help translate that? francine: it is something that happened basically yesterday. you have the partner of a coalition of angela merkel and her heir apparent, having said in the past that in no way she was ever going to coalition with the afd, which is very far-right, anti-immigration, german extreme right party. and yesterday they kind of did this packed.

.- this pact angela merkel usually does not deviate from scripps, -- from trips wasd on foreign talking about this moments ago saying this was unacceptable. we will follow that and other stories. in the meantime, let's get to the bloomberg first word news in new york city with viviana hurtado. viviana: china is cutting tariffs in half, on about $75 billion of american imports. that will take place next friday. the u.s. taking similar action on chinese goods. tariffs are in effect in large parts of the trade between the two countries. these are first steps in the interim trade deal between the u.s. and china. now to the coronavirus. countries around the world are taking more steps to contain the outbreak. india is the latest to impose restrictions on travelers from china. the death toll in china is now within 28,000 and

cases are confirmed. president donald trump declaring victory, this after he was acquitted in his impeachment trial. the vote was almost entirely along party lines in the u.s. senate. mitt romney breaking with his republican colleagues. he voted guilty on one of the two charges. president trump says he will speak at noontime to discuss "our country's victory over the impeachment hoax." and kirk douglas has died. crick's always mentioned his rugged good looks, and some can stash critics always mentioned his rugged good looks, and some consider him to be the first action hero. in 1996 he was awarded an honorary oscar presented by his actor son michael. kirk douglas was 103 years old. tom: thank you so much.

he is truly the last of a generation in hollywood that captured not only american but world culture as well. let me do a data check now. equities, bonds, currencies, commodities. this is actually extraordinary. dow futures up 94 now. we are of more than even an hour ago. the next screen showing the vic's coming in, nowhere near you thought the vic's was going to be. x was going to be. iron ore, what does the number mean? .o recovery in iron ore west texas, $51 a barrel. francine? francine: my data check is very similar to yours. we are trying to figure out what the market is latching onto. stocks are climbing. i think they are focusing on tariff cuts. treasuries steady, dollars steady, oil climbing toward two dollars a barrel -- $52 in new

york. let's start on trade. china, tom says, will have tariffs. --annot pronounce that word cut tariffs by half, starting fairbury 14. the move adds optimism that that starting february 14. is -- it has been far too long that we have been speaking to -- since we have been speaking to you, david. this is a bloomberg scoop. what have we learned? even if there is a coronavirus, china is sticking to its agreement. it took them a little bit longer than expected to put them in place. >> exactly. as the health crisis widened over the past couple of weeks, there was growing doubt in the minds of some people in the markets and other observers that would china be able to follow through on the pledges, with his

health crisis, overwhelming its ability to follow through on the phase one deal. what we saw today was largely an administrative announcement, very much in line with what they agreed to do. but it provided a bit of a relief to folks who were expecting that the phase one deal would come sooner. francine: i have a million questions on where you see the economy going, and the real impact that this coronavirus could have. it is impossible to know at the moment but supply chains are being disrupted. what do you view as the first round effects and the secondary effects if this stays on? david: there are several things coming together here. tariffsade is cutting in half. then you have in the past 24 hours the dynamics of the coronavirus leveling off. it looks a lot better now. you can see if you talk to virologists that the death rate

is coming down. over the next four to six weeks this will peter out. there will be some disruption to china. we expect chinese growth for the year to be nearly 20 basis points lower. believemately what we gives real muscle to the optimism and the mood here is the u.s. election and trump's -- the vote on trump and the fiasco of the democrats. there isirst time, 60%, 70% that trump will be elected in the industry. and the chance of that happening a blogns you will have government. so we expect the underlying stories to be narratives to be very positive.

we have just revised our equity, s&p forecast, up to 3600, and we feel very confident. so this in some ways, is all the good stuff coming together. tom: it is nice to hear, david. let's help brendan murray out, david, with the next idea from our berg trade team. avett folkerts-landau, take us but -- david folkerts-landau, let's focus on capital flows. will the wall of money flow into the united states, or is it time for a more international market? flowinghe wall of money into the united states from europe, european rates are 2% below that in the u.s., and there is no reason to think that will change anytime soon. then you look at the overall relative performance, the u.s.,ental view of the the u.s. is pulling ahead. there is no reason to worry about softening of the dollar.

this is the perfect territory. we see outflows every day from europe into the u.s. so we are very comfortable with the view that the dollar will .08, 1.07, 1.06 thereabouts over the course of this year. tom: brendan murray, if we look at david folkerts-landau's optimism, do we look for a continuation of trump trade policy? what is the after right now, after the new nafta, after the china deal, now amended with our news story. what is the next step for trump trade? brendan: before we predict who will win an election in november, it is important to keep an eye on something else that we have not talked about, the e.u. trade commissioner, who is in washington today, to try to make sure the european union and the u.s. do not escalate their trade disagreements.

there is a deadline next week for the ustr to put different tariffs on european products. things could escalate rather quickly if we do not pay attention to what is going on, especially with these talks between hogan and lighthizer. with they do it in the middle of something like the coronavirus? the markets are feeling much better about it, but we don't know the extent to which it continues to affect the world economy. the chinese were hoping to get a bit more understanding from the u.s. because of it, so why would they go after europe at this fragile time? brendan: the timing would be bad, but if you listened to the state of the union the other night, the president is dealing with a record high approval rating, is feeling very good about how the tariffs worked with china. it did not do too much damage to the economy from the administration's perspective, and it is unlikely they will go

full-fledged into a trade war with europe, but it is certainly something to watch. you brendan murray, thank so much. congratulations to our team for driving the tariff story. with dr.ontinue folkerts-landau. also anticipated, the next hour, jeffrey currie joins us from goldman sachs, the goldman sachs view as they adjust to the china slowdown. stay with us. from london, from new york. this is bloomberg. ♪

andhis low interest rate low inflation environment has significantly reduced the scope for the ecb and other central banks worldwide to ease monetary

policy in the face of an economic downturn. tom: madame lagarde there on reduced scope it a terrific news flow this morning. we are touching on many stories with futures up 8 right now, down from where they were an hour ago. with us from london is david folkerts-landau of deutsche bank, not only reading -- leading the research team at deutsche bank with important research over the decade on flows of capital. david, you have been clear and straightforward on negative interest rates. we just heard christine lagarde speak of the lower bound that we are at. give us an update on where -- on what negative interest rates are doing to continental europe. david: first, lagarde has been dealt a bad hand, in a sense, as she is stuck with the situation she inherited, and the question is how to get out of it. i believe there is a strong consensus at the lid -- at the political level that negative interest rates are responsible

to a large extent for the discontent within the broader population for a feeling that we are no longer -- that the central banks are no longer in control of what is going on with monetary policy. anybody looking saying that i put money in my savings account and i lose, something is fundamentally wrong here. when i talk to my german relatives, they say what are you guys doing, you can't even get this right, we cannot even trust you. then back up to the political, creating pressure. i believe that this negative interest rate from here on out is not the policy tool of choice. the question is how to get out of it now. you cannot all of a sudden flip the switch and go back to zero. but our forecast, what we hear from various angles and segments is that the search is for a way out rather than thinking of it as a positive tool. same when you look at the fed's

,eview of its monetary policy tools, and instruments, going on for a year. there is a strong dislike for negative interest rates because of the secondary impacts on the financial sector, on the general feeling of the population that something is wrong. tom: if we have today on the bloomberg an official of ms. merkel's party, the far-right being associated with nazis -- language, dr. ,olkerts-landau -- over to as you just said, people having lost confidence in institutions, has the -- has been a broken relationship with the people? david: it is tempting to say, but that would not be quite right. many factors are involved. there is a general breakdown in the sense of the right and left

dominance in european politics you have seen it in spain with fox, and italy with the league, and you see it in germany with the afa. we have a real problem with an economy performing reasonably well, nowhere near large unemployment numbers, in fact almost full employment yet there is this discontent that pushes people away from the center into the fringes. this is probably with the most -- probably the most serious political problem of our generation. it affects policy both macro, both monetary and fiscal. it should indeed. francine: this is too important to ignore. thela merkel called decision for the government to align with the far right party as "unforgivable." can this be reversed? david: it is difficult to reverse it by fiat, but it can be reversed by lots of pressure. to put this in perspective, you

have to recall, this is the radicalme since the far-right party helped forming a government. they are not in the government, they just elected the state premier. that means you are going to have not much control over it, but a little bit of control. probably underestimated in the international press as to how important this is for the german psyche. there is definitely an earthquake political event inside germany, one that has to be taken seriously. francine: will it change policies? without going into whether this changes the head of the cdu, which it could, does it change how you speak your citizens on economic policy in place? david: there is no doubt that it will lead to a soul-searching of why haven't we brought the rest of the country with us into these -- into this economic

boom? why do we have this discontent? this will have an impact on fiscal policy within germany. no question there will be more inclination to spend on infrastructure, and it also may come on the european side, be more difficult to implement that. and the same with negative interest rates. that is why negative interest rates are thing of the past, we try to get out of it, fiscal policy with be expansionary. this is going to impact policy. more than that, what it has done, it has legitimized the partyf a really far right in german politics, and it is going to have international repercussions in terms of reputation. so i think the quicker we can reverse this, the better. but you cannot just say that if it does not happen you would reverse it. this is something that has to get done by lots of pressure. and i presume that the three

parties coordinated this before and they thought about all the consequences. that is not going to be so easy to reverse. tom: i want to bring us up-to-date. our patrick donahue reporting chancellor merkel's party lines up with german far-right in shock vote. he has been extraordinary to see the language. david, what is the two-do list for institutions yet what is the for institutions, the institutional mandate to turn germany toward a more moderate task? david: i think it is important that institutions stick to their primary business. in our case that is inter-meeting that intermediated between investors -- intermediated between investors. no question this is bad for everybody, a concern. we are prepared. there are political issues where we can actually do something. this is less so, but we can do a

instance, about sustainability, and we have done that. but on this issue, all we can do is add our voices to those that are critical. our ceo has done that already. we speak strongly and we view strongly about this. tom: david folkerts-landau will continue with us. he is with deutsche bank. much more to speak of here, including the drama, the history in washington. also the drama in the markets. it is important that we catch up with mike wilson, from morgan stanley. are than timely after four-day surge in the markets. this is bloomberg. good morning. ♪

viviana: this is "bloomberg surveillance." let's get your bloomberg business flash. toyota raised its forecast for the full year after the automaker reported quarterly profits that beat estimates. toyota focused on cost control and it is helping the come any buckeye trend in recent auto earnings in europe. there is also increased demand. for a second day, the price of oil higher. there is growing optimism opec and its allies will agree on deeper production cuts because the coronavirus outbreak has prompted a drop in demand. that is your bloomberg business flash. francine? tom? three days up in a row,

futures up 9. francine? francine: treasuries pretty much steady, dollar also steady. i am also looking at oil climbing near $52 a barrel. tom: very good. coming up later today, the chief financial officer of twitter. this will be at the market close here as they look at their earnings. will join us from twitter. the battle -- linkedin announcing a new chief executive officer. that was announced yesterday. dow futures up 1.05. good morning. more with david's folkerts-landau. ♪

♪ another accident from a low-cost airline in turkey, pegasus air.

they are speaking about their international standards. there are three dead of the 180 on board. this is a boeing 737 of an older vintage, not the 737 max. they skidded off the runway and dropped 70 to 100 feet into a ditch, fracturing the fuselage. he has been more than kind to be with us. he is quarantined in his home, stephen engle. importantn by an legal definition on lng. as china about to do a group force majeure? stephen: that is on the gas imports and a rare move, but they are asking for flexibility from the united states on the

phase one trade deal. , maybe some term companies will not be buying as many soybeans or other commodities as they work through this virus, but they will make it up on the backend. now we are hearing from the chinese state 80 a they agreed to have -- media they agreed to have some of the tariffs they imposed in retaliation to trump tariffs, some billions of dollars worth of goods. .hey are keeping the pledge to confrontgreed each other if there is any unforeseen natural disaster or circumstances, and this novel coronavirus is an unforeseen event. francine: have we now gotten over the worst? i know the situation is fluid but markets seem to be

suggesting the world can weather this. stephen: you have seen some moves from the central bank, whether it is thailand or philippines making comments. you had the world health organization coming out and saying it is not a pandemic, but at the same time the world health organization said yesterday there are no proven effective therapeutics. that puts cold water on the speculation that a vaccine -- which i caution it takes a long time to come out with -- there is still no vaccine for sars, or some sort of viral therapeutic. please take months or years. contact,ll of your what has been the response of people you run into in china over the time line extending from the original two weeks now

weeks, weeks -- to months, or june, what is the response? stephen: frustration, and frustration in the epicenter in wuhan. my wife has a friend who is quarantined in her apartment and she is frustrated. if she goes out to the grocery store, there are not adequate supplies in hong kong -- supplies. in hong kong, it is more ordeal,on, ordeal after seven months of protests to adjust our daily lives. i would not say we are quarantined, but cabin fever definitely said in. -- sets in. francine: stephen engle from bloomberg in hong kong. let's get to viviana hurtado. viviana: we are starting to see

the impact of the interim trade deal between china and the u.s., beijing saying it will cut tariffs on -- in half on $75 billion of tariffs. this is only a pause in the trade war. asterix next to president donald trump's acquittal, from chuck schumer, on how history will judge this president and the u.s. congress. he was foundsays not guilty without facts or a fair trial. the president is declaring victory and will make a statement at noon. almost all the results are in from monday's iowa caucuses that show pete buttigieg and bernie sanders in a virtual tie. bideneth warren, joe fourth.

next stop, new hampshire where the nation's first primary will be held. the worst may not be over for german manufacturing, factory orders falling at their fastest pace in more than a decade. is working its way out of a slump. 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. i can't tell you how tom and i feel that this is an important story, the populists on germany's far-right have helped -- let's gette back to david folkerts-landau. i don't know if politicians understand the root of what is happening in germany, the election of president trump, populists around the world, brexit.

are we putting the tools in place so that the ones who feel forgotten no longer feel so? david: yes. this story has enfolded over the last 10 years. -- unfolded over the last 10 years. the equity markets have been the main beneficiary and austerity people who work in factories and everyday life. -- caused aibuted massive redistribution of income. there is no doubt as you move around the world, starting in the u.s., then you have brexit and the league in spain and then germany, policymakers and economists need to take responsibility and say the policies we have pursued have

produced the situation that is now extremely detrimental to peace and harmony and continued further growth. francine: given where we are now, how do you fix it? do you cut taxes, redistribute? david: yes and no. we have been clear and consistent that europe needs to return to zero interest rates, positive. is on thing is, germany extremely solid and firm fiscal ground, yet it has infrastructure that is not where it should be, so the obvious thing would be to borrow negative rates and tech infrastructure, 5g and things of that sort. that is not being done and that will cost. the same with the e.u..

-- 13 trillion issues, yeteen austria is about to block the budget not to increase more than 1%. we are not acting as fast and in some ways this thing in germany now should be a wake-up call. it should make us rethink what we can do with fiscal to redistribute and what we can do with monetary policy to get as a secondary impact on negative rates. tom: thank you so much for these comments, and we would like to continue them. i could go eight ways here. i want to go to reunification. as we look at the far rate -- far-right, 25,000 right wing 20%emists, and only about or 22% of them are neo-nazis.

an east of this is germany/west germany dialect? how much do we carry forward from 1989 to a polarity of far-rightism in germany? david: despite almost a trillion expenditure on infrastructure in east germany, it remains behind west germany and development. strong migration into west germany, so you have hollowed out a region. that is fertile ground for radical ideas and that is what has happened. something can be done about that and has to be done quickly. tom: david folkerts-landau, for his germany, truly an extraordinary day in the politics moving forward in the time after chancellor merkel. hampshire, itew

will be tuesday. we have the iowa results ready much at 97%. -- pretty much at 97%. david westin and kevin cirilli will do better at 7:00 p.m. tuesday. futures up nine. ♪

♪ that in the see ne, and our -- eurozo friends retail, we have a negative impact -- french retail, we have a negative impact. , they aree eurozone

not suffering in the same way. >> negative rates and potentially deeper negative rates has less and less effect. you can see from ing result during 2019 that more customers are saving with us then you would expect the policy would do to encourage more spending, which is not happening. >> the impact is the lowering of the rates that happened in september, so there was a positive impact but also a negative impact. the other negative impact in the summer, they don't have a compensating impact. tom: comments on commercial banking across europe, david folkerts-landau is with us and he will step aside as we speak banks.uropean this soap opera known as credit suisse, let us focus in on this

chairman ceo battle. you have a separate chairman, separate ceo. how is this bank doing given the battle? elisa: this is quite an unprecedented situation and that i don't think we have seen investors speaking publicly in favor of one or the other, and this is adding within -- adding to the tension within the board. the chairman was fine -- trying ,o find a successor to the ceo and investors are giving their , andrt to tidjane thiam putting pressure on the chairman to go. it is unprecedented. what has led to this is a drumbeat of embarrassing news from credit suisse, ranging from a spying scandal to more worryingly for shareholders,

what appeared to be weakness within governance related to that fine. tom: let me cut to the chase, and i feel this way on the fancy street in zurich when i go to mcdonald's and get a value meal for $19. is this cultural? when everything is said and done, is this the culture of tidjane thiam from a separate germanicrman and -- culture? elisa: i would go past but i was saying earlier about the governance week says that have transpired -- weaknesses that have transpired at the firm seem to have been systematic to employees, and management at the board did not seem to be aware of these procedures. questions about controls within the firm. francine: how are swiss supervisory boards different to

american and u.k. ones? if the chairman were to oust the chief executive, could he do it? elisa: we are in the position where we will be hearing about this potentially as soon as this week or in the coming days, and that is a possibility. one way or the other, we are at the point where either the ceo will see support from the board or chairman publicly which he hasn't had for several months. i don't think it is a situation of continuing like this much longer. francine: i have to talk to you about consolidation. will we see banks consolidate in 2020 in europe? elisa: i don't think we have the crystal ball, but more importantly, the regulatory conditions to be doing that. banking is not complete and will not be complete this year. francine: thank you so much as

always, lisa martin uzi from -- elisa martinuzzi. we are getting breaking news, opec plus recommended an output cut of 600,000 barrels a day, according to a delegate. we saw some in pretty -- incredible figures this week. 20% of chinese oil demand has been hit. crude, 55.63. nymex, 51.40. jeff currie at 6:30 a.m. in new york. up, more from david folkerts-landau about the u.s. economy and forecast. ♪

♪ this is bloomberg is set tonce." hsbc rollout its third overhaul in a decade. mark tucker is looking at job cuts, mergers, and disposals.

pick as ceost flopping. madoffmade off says -- says he is dying and wants out of prison after serving just 10 years of his sentence. he suffers from terminal kidney failure and other ailments. he defrauded investors in history's biggest ponzi scheme. tom: we have been honored to have david folkerts-landau to speak on his germany today, head of research at deutsche bank and voice of academic economics. i have to turn to the issues of the moment as madame lagarde was speaking about. is there evidence the central almost andflate emergency conditions post war?

can they succeed in a reflation? david: it depends on how bad the economy is doing. you can pump in additional money, lower rates, and you will have a little bit of an impact, to by and large, you need have the support from the fiscal authorities. you need to have fiscal policy looser and monetary policy to kick in. bps andsit rate is -50 you have a massive qe program. there is little you can do besides targeted lending to pacific -- specific institutions. it would go to the european periphery and it would lead to questions about unfairness of who you benefited and who you tax. the central bank room for being really stimulative is very limited of.

does limited. -- limited. normally, during a recession the fed will lower rates on average by five percentage points. it does not have the room to play now. the same with qe. if you do more of that, you will end up be a major distorting force in markets and it is a real problem. that is why central banks are undertaking a systematic review. i don't expect much fundamental to come out of that, but the fed might change the inflation targets to be more symmetric around 2%. we have yet to see what the ecb does. francine: should it be in europe more symmetric? david: definitely, yes, but europe has other problems. it has the lack of harmony within the governing council. that is what i meant when i say

mrs. lagarde has been dealt a difficult hand, and negative rate with 50 bps. you have to find the narrative to talk your way out of that and it is not easy. talking to investors around the world, some of these nuances of monetary policy, whether it is symmetric or not, forward guidance, the farther you go, people do not care much about it. rates are negative, would rather be positive. francine: the governing council -- splayed and we have been hearing about them not getting along. does that hurt their credibility? why do we care? everybody has different views. david: uncertainty about future policy because different views,

you never quite know how it will come out. this is the negative legacy of draghi. dogmatic, m.i.t. educated view of monetary policy, and did not do well with criticism at all levels. was no real cultural coming together of the governing council. that has to be built and reconstituted under lagarde, and she is eminently good at that. we have seen it at the imf and she is superb. the other thing that will happen at the ecb, draghi was almost immune to political pressure whereas christine lagarde is much more of a politician which you have to be, so she listens more to the german concerns about negative rates. it makes monetary policy more responsive, which you have to be if you want to have people

support you and accept it, just like the fed is generally an accepting institution, they trusted and believe it. the inclusiveness the ecb has not been able to do yet. tom: -- francine: david folkerts-landau. coming up in the next hour, thomas lee. we will look at the impact the coronavirus may have on the economy. highs. near record treasuries and oils moving -- oil moving on the back of the headline that opec is cutting oil production to deal with the loss of china. this is bloomberg. ♪

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days in a row stocks surge to record highs. on why theber bowl glam crew is wrong? in this hour, thomas lee. iron ore does not rebound. will henan province infections provincend -- wuhan infections increased 18%. the gentleman tells the republican party, enough. from our world headquarters in london and new york, we have to look back to the last hour on germany. that was truly a historic conversation with david folkerts-landau. francine: it was. we have great bloomberg opinion pieces, one coming up that i would urge everyone to read on the website or terminal. for the first time, the

populists on germany's far right have elected a state premier but theygued lies -- argues can mobilize mainstream germany in resistance. we are trying to understand the fallout. tom: the language coming out of chancellor merkel's party absolutely extraordinary, including a look back to 1945. viviana: we begin with china cutting tariffs and half on about deveney five billion dollars of american -- $75 billion of american imports. america taking similar actions on chinese goods. thee are first steps under interim trade deal between the u.s. and china. now to the coronavirus and the steps countries are taking around the world to contain the out rake. -- outbreak. india the latest to impose travel restrictions and says no

visas are valid coming from the mainland. 563death toll is more than and more than 20,000 cases are confirmed. donald trump declaring victory after he was acquitted in his impeachment trial, the vote almost entirely along party lines. mitt romney breaking with his party lines, voting guilty for one charge. president trump will "discuss our country's victory on the impeachment hoax." kirk douglas has died. some considered him the first action hero, starring in movies such as "spartacus." he stood up against the anti-communist mccarthyism and helped and the hollywood blacklist. he never won an oscar but his

son, michael, presented him with an honorary one. he was 103. up as 90et is not as minutes ago, but we will take it. interesting dynamics in the market. your ohio and dollar weaker -- euro-dollar weaker. we get volatility was so much going on, including china. iron ore, 79.7. francine: treasuries are heading up. 51.07 in the at u.s.. something we will need to continue monitoring in terms of

getting barrels out of the market because the coronavirus a return in china. along theore shuffled pacific rim, and this puts into perspective the pullback. we have not seen a recovery yet. francine: i am looking at something that actually is a good way of looking how we measure the coronavirus in terms of stocks. it has fallen. this is the msci asia pacific 100x, falling in the 50, day moving averages. this shows the resilience, i would say, of growth, to the coronavirus. halve tariffswill on u.s. imports starting

february 14. joining us is tom mackenzie. these are tariffs from the phase one trade deal that have come into place and were delayed because of the coronavirus. tom m.: they say they will dovetail with expected u.s. actions to lower tariffs, duties on chinese products, so the chinese emulating what they expect to see from the u.s. with their own tariff reduction. goods,lion worth of u.s. that has been reduced from 10% 5% to 2.5% in other countries, things like oil and soybeans from the u.s. it is less about an economic boost from china and more about signaling to the u.s. that despite the coronavirus, they

are still on board with the trade deal. tom: i am thrilled to editorialize that your plants behind you are far superior to stephen engle's plants in hong kong. tell me about beijing. we have been focusing on the pacific rim and wuhan. tell us about the virus effect. tom m.: in terms of infections, the numbers in beijing are fewer province. or hubei are happening in the province of hubei, so beijing is relatively sheltered. in terms of the anxiety and concern, you only need to step out of the front door. the roads remain very quiet even though it is the end of the lunar new year. most people are still working

from home, so it is eerily quiet in the capital. people are stocking up on food and water, even though there has not been a rush. in terms of traffic and activity, things are very dead, arehe number of cases relatively limited in the city. hospitals remain well-placed to deal with infections should they spike. francine: do you think we are over the worst, or is the situation still very fluid? tom m.: very fluid indeed, and it comes down to what impact the quarantine and lockdown, how effective that has proven to be. we have this incubation period of 14 days. the numbers of infections continue to rise globally.

there has been progress in terms of testing, the u.s. sending out testing kits around the world. they are setting up a facility to do 10,000 test a-day. says we are a long way tom --ing a vaccine tom: vaccine. tom: tom mackenzie, thank you so much. in conversation with one of america's great immunologists, he file it -- followed the virus into some form of pneumonia, is an important identifier. an important identifier in the market is people laugh at thomas lee. he has been able and the gloom crew has been around after and after. these are all of the times

thomas lee has been laughed at since the lehman low's. they beat up on him. the piñata joins us with the market beckoning 30,000. if you look back at the gloom crew going after you, what was the determinant they most got wrong. -- wrong? thomas: i think the gloom crew was so fixated that 2008 would happen again, we saw in the derivative markets where tailed events were still priced as if we could have another financial crisis. the difference in our work was the trust in demographics. bullishness comes from the fact that the millennials will be an important cohort. ofsaw in 2009 the type drawdown you only see generationally. tom: geoffrey yu at ubs, the

wall of money that is out there, how do you respond to smart people saying the determinant is there is simply so much money, it has got to find a warm place whether it is tesla or apple. global credit suisse's is $100hows there trillion of wealth in the u.s. today. the best market is the s&p 500. it is only a $25 trillion argument -- market. is there another country that has a better index? francine: if you look at what is going on worldwide at the moment , is there anything in a bubble? there is many bubbles. stilld say that there is a bubble of pessimism. i think every year starts with most of our ins the duchenne all

clients thinking this is the last year of an expansion. clearly, that pessimism is reflected in ultra low rates. we could be seeing a bubble of belief there is no inflation. it could be a year where inflation picks up in the world still thinks there is no inflation and we have more negative rates, and that would create a bubble in stocks. francine: why are we creating these bobbles, because of a wrong belief in economics -- bubbles, because of a wrong belief in economics, or because of negative rates people would rather go to risky assets in the search for yield? thomas: there is a somewhat logical basis for the pessimism, especially about rates low forever and no inflation, because the global economy did stagnate for the last 12 years.

growth undershot expectations and with the central bank liquidity, there has not been a of that ismuch explained by the fact that generation x, following the boomers, was such a small cohort that aggregate in the u.s. was overshooting. now it is turning out because of millennials so the stagnation will turn into dynamism. tom: i have to ask him about it going. -- bitcoin. headline out, an important headline. japan will deny entry to foreigners on cruise ship, just out from nhk. 7000 people on two cruise ship's, one in japan. coming up in commodities, jeffrey currie goldman sachs. this is bloomberg.

♪

♪ great question the constitution asks senators to answer is whether the president committed an act so extreme and egregious that it rises to the level of a high crime and misdemeanor. yes, he did. tom: an extraordinary moment in american history and indeed in republican history. the president no doubt will comment on this today as he celebrates an acquittal. this is mitt romney of massachusetts and then utah voting against his president.

nailed this in the washington post, a history of where mitt romney came from. i grew up with this long ago and far away. his father rescued a failing car company and wanted to become governor of a state, michigan that had not elected a republican in 14 years. thatood for the commission voted for mr. goldwater and decried the party's turn toward extremism. that was george romney. the republican party must respectthe interest and of the majority of americans. he represented a hinge point, a hard right turn. one of the foremost voices on consultantmerica and

to a fractionated -- fractured department of state, what did you hear in mitt romney's voice? john: i heard a lonesome voice read i don't know that -- on some voice. i don't know that mitt romney will be accountable to the republican party and i don't know that they will give him serious attention. he is in a difficult position with the senate and trying to get legislation he would like to see support get past, and in the white house where president trump put him in the crosshairs. one thing president trump will do if he is reelected by 2024 is to mark mitt romney for removal from the senate. tom: he has to mark votes in suburban districts. measuresilli says he

suburban voters at 70,000 will be critical. how did romney play to those voters? john: i don't think there will be much endurance from his remarks. it will be a footnote for voters. they are looking at more important issues, and if you look at the rest mucin report polling -- rest mucin -- rasmussen report polling, they are concerned with the economy. impeachment has dropped to 10% on the list of issues important to democrats. care, and climate change. i don't think the republicans will give mitch -- mitt romney much attention. francine: come november, as long as the economy stays strong, is president trump a second term president? john: most people, republicans

and democrats today in honest conversation thank trump is a fake -- think trump is a favorite to win. it is nine months away. anything can happen, but president trump is in a pretty good place if you look historically at where incumbents stand. the economy is extraordinarily strong. we are in relative peace around the world, and people feel confident in the future in a way they have not had in decades. trump win back independence who did not vote for him -- independents who did not vote for him in 2016? he is making a larger play for black voters in the republican party then has historically been the case. francine: is there anything in

the immediate future that could cost president trump the election? john: we have no idea what might be happening over the next nine months. look at china with the black swan of the coronavirus. no one anticipated this. we were looking for far greater global growth in 2020. the national people's congress will be delayed in march, the first time in over 20 years. very serious problems in china if there are headwinds in the united states and we have a setback, that could have a dilatory effect. if we have a major terrorist event, we are looking for very bad things do happen to the united states for president trump to lose. that means he is in a good place going into november. sitilides you, john

with us. forward tove tuesday, onto new hampshire. you got to believe there is a full-court press in new hampshire with each and every candidate showing up. this is bloomberg. ♪

♪ tom: got to squeeze this in. thomas lee with us. bitcoining up a chart,

has been in a trading range for two years at 9000. why will there be a need to bitcoin -- bid to bitcoin? thomas: it is the third largest transaction network in the world behind mastercard and visa. only 500,000 people actively use it coin -- bitcoin. tom: will it be held back by criminal threats, criminal allegations? thomas: that used to be the dominant transaction activity. now it is mostly businesses. criminal activity is one third of transactions. it is a negatively correlated asset but it was the best asset in 2019. got criminal, what do you

to get that down to? i am looking at u.s. greenbacks. one third is large. bills: over 50% of $100 are used in criminal activity so it is in line with other currencies. this year, it is up 35%. first teslabuy my share at 900 with my bitcoin. , we wille with us continue on tech. the chief financial officer of twitter, ned siegel -- ned segal. hour, this is bloomberg. ♪

♪ bloomberg "surveillance," francine lacqua in london, tom keene in new york. jeff currie with us, but first

thomas lee, linking this to economics, is the fed your friend? don't fight the fed. uber bowlu be an given the powell language? thomas: you do not want to fight the fed. dovish for to tell the markets to have confidence. 2018 was the biggest policy error in almost 20 years. keeping the fed on a dovish tilt, we could run on negative real rate and that would be bullish. companiese toothpaste with 25 and 26 multiples, the price divided by earnings. you can look at the ratios anyway you want. is it a bubble?

thomas: valuations are definitely extended. we are paying almost 40 times to buy a 10 year bond and 33 times to buy an investment grade bind -- bond and 18 times for equities, but stocks have the potential for a lot of earnings growth in the next decade. in a strange way, i think equity returns could surprise us in a positive way in the next 10 years. francine: what does vix do from here? thomas: the vix is telling us there is near-term event risk because when you compare spot vix to vix performance out, current vix is higher. outbreak seems regionally limited but the markets are still worried. francine: what else should they

be worrying about? you gave us a couple of calls. is there anything people should be wary about? thomas: one thing that is important to keep an eye on's china powered global growth the last 10 years. china is reaching stall speed soon and the coronavirus has weakened the economy. the u.s. is probably the primary driver of global growth. tom: apple. thomas: it is one of the most important companies, a reflection of how good u.s. tech companies are. there are no other good apple or facebook companies. apple toou have to buy save face? thomas: there is a strange anomaly where apple is in the s&p 500 so if you want to get value and performance you have

to own apple. tom: i said yesterday i bought on hundred shares of tesla. i checked with my broker. it was only 10 shares. thomas: the only way you get parabolic moves like that is when buyers are priced indiscriminate. disaster in 2019 and now it is ok and that is why buyers are coming in. a lot of the buyers the last couple of days were russell managers. tom: it is a scandal. i want to buy and sell tesla this morning. thomas: tesla is not facing another near-term competitor. it is truly disruptive. so many companies are going it

lectured five and i would rule out -- electric and i would not the russell 500 had to own tesla because it is the best stock on that index. love busting his chops on tesla. i said buy and sell and i got nothing from thomas lee. francine: tom keene, just for our global audience, i know you are a funny man but we are not allowed to trade stocks. tom: you are right. i bought the car. francine: thomas lee stays with us. let's get an update on the coronavirus, the chinese death toll has risen to 563 mainland .ases joining us now from hong kong is

stephen engle. there are about six angles to this, but what i most recently atd is beijing voiced anger countries who have placed restrictions on china. is it anger because they are speaking to their domestic audience and they need to retaliate? stephen: you are seeing japan and thailand and other places put in restrictions. hong kong is a huge social divide, and closing, you cannot call it a border, it is checked points. it is a highly sensitive subject. xi jinping is trying to rally support for the central party's attack of this virus. he feels and the state media

feels that to block chinese from coming into other countries is discriminatory. francine: are the blockades, the quarantines, the isolations working? stephen: that is difficult to answer, because the people in -- wu nd -- will hand han, you put a barricade around them to keep them from going out but it prevents much-needed needed supplies and rem is see -- remedies to come in. much neededkept supplies out because of the quarantine, so frustration is boiling over, people who cannot get into hospital because there are not enough hospital bed and cannot even get the test because there are not enough testing kit.

-- kits. hallmark"surveillance" -- we have thele geopolitics of edward morris, and now we go microeconomics with jeffrey currie of goldman sachs. he has taught the hidden art at the university of chicago for many years. fascinating. give me an update on the microeconomics of oil, the supply and demand dynamics, partial differentials. jeff: i would argue the shutdown in china, the magnitude of the withd shock is on par 2008, 2009. what is distinct with coronavirus from other pandemics is the magnitude of the quarantine.

we estimate demand is down from 2 million to 3 million barrels a day. the question is can opec respond to that? the reason the quarantine is big is because they do not want this to spread. tom: i want to link this into the names we know from goldman sachs, the idea of david kostin and abby joseph cohen looking at the equity markets. what you said is a profound statement. china gdp, i got a six model. where are you modeling china gdp? jeffrey: the drop is down to 4% growth. if you think about the impact that has on the first quarter, almost all of that will be concentrated over the next six to eight weeks. 0.4%, how do you extrapolate that to the oil market? therey: historically,

impact on the oil market is 2x what you see on gdp. you are not only shutting down activity, you are shutting down travel. tom: give me a single point. jeffrey: we are at 63 on the year. francine: what would happen for that estimate to go down? are opec reacting quick enough? jeffrey: they cannot do anything about it because it they start to cut production they are impacting supplies for april delivery. the dilemma why it has taken so long to come out with the recommendation of 600,000 barrels a day last night's because they know -- last night is because they know there is nothing they can do about china. it is a contango in the front end and moves into a backwardation. they have to realize all they can do is clean up any type of surplus that ends up being generated.

francine: what are we doing -- there has been so many factory shutdowns. extra barrels get sent to china. what happens to them? do they get turned back? jeffrey: they have taken force majeure on some of those. the way we are thinking about it as they are likely to build inventory inside china. we do not know the exact magnitude of the demand shutdown because they are likely feeding this into storage facilities. tom: you mentioned force majeure, do you just assume -- and i'm talking about goldman sachs as a shop -- that there will be application of force rimure do -- on the pacific and it will be a cram down against the industrial west and mideast? jeffrey: i don't know how that doesn't happen. it is the other way too.

the copper supply, china is short copper and they are cutting the output of copper because there smelters cannot operate. stuff that is supposed to go out is not going out and stuff that is supposed to go in is not going in. tom: explain the instabilities that are wrought it is really -- wrought. it is really important taking broader economics into the pacific gdp rim. jeffrey: one of the big issues that will have an impact on global growth and the supply chains. once we start cutting the ability to deliver one item, and up with a chain reaction that is much larger. the ones that are most vulnerable will be germany, japan, korea, older economies that create capital goods going in and out of china. francine: can you explain to

people who would not have thought about this, the chain reaction you are seeing? is this a snowball effect? jeffrey: we have seen this at other times with events like this, and it takes a while to understand what component we will be short that will end up shutting up -- shutting down activity. the one we are watching in the commodity markets is palladium, when it gets so tight that you start to shut down auto manufacturing. you don't know that you have hit one of these physical shortages until you hit them. tom: how do you get to a sustained 63 on oil, given this gdp outlook? me --urria would say give angel gurria would say give me .4% gdp. .effrey: .4% inch -- in china

you are living it here today. given three months, you will pop back up. that is the dilemma, you are living through it today and any type of policy stimulus will be further down the road. on: what is your account saudi arabia, russia, and opec? does america manage the shock of microeconomics for now or are they supposed to jump out three months? getrey: i would argue you an idea of your inventory builds out by china. tom: will this be the "business week" cover in china? jeffrey: i think the issue with how much backs up out of china, going back to francine's question of how much will go into inventory, we do not have a clear picture. at this point, we don't have a

clear idea of what the backlog will be. that will be the magnitude of -- so let's say the hit is in the 2 million to 3 million barrel range. about you want to fix a mess over the next three to six months, 600,000 barrels per day does not look that bad. tom: crude oil china does not matter. iron ore on a 4% gdp china, what does that do to australia? jeffrey: you pull back into the mid-70's on iron ore. you are feeling the impact right here right now. the ability to rebound, let's say we go back into march and right now, my best guess is mars second -- arch second when they would -- march 2 when they would

restart. about, we are creating shortages in steel in the outside of the world where you do not have china exporting steel. francine: we have not really talked about rare earth's. is there anything else apart from iron ore and steel? is there any other commodity we should look at as being largely impacted because of china? jeffrey: copper would be the one i am focused on right now just because not only have you had the demand losses, you have had supply losses. we estimate around 15%. x china fundamentals are still tight so the fundamental picture has not deteriorated that much. -- potential in copper is

tom: we will continue with mr. currie from goldman sachs, china with 0.4% gdp growth. later today, cautious on stanley and the 9:00 hour. this is bloomberg. ♪

tom: emails in and says, we need a gold chart. gold back to the time of george romney. up we go in the 1980's, down we -- down we goate

in the 1990's, and there is inflation-adjusted gold in the vicinity of $1500 an ounce. francine: it is a great chart. jeffrey currie of goldman sachs wrote a note saying gold is a better hedge than oil. is it that are now that we have the coronavirus to contend with? jeffrey: the chinese are not buying jewelry so it has a tinge of bearishness. gold seems to be performing well. we are just shy of 1570. our target is 1600. you have issues around the coronavirus and the middle east is still quite tense. gold has to do with dedollar ization. buying of gold is highest since the nixon era. we think it is much more of a

strategic allocation than a trade. francine: where does it end up? jeffrey: $1600 an ounce. francine: that is given the kind of economy we see now, nothing too ugly happening? , ifrey: there is enough think it really bad in the developed markets, that is bullish for gold. the developed markets are coming out of the coronavirus and phase one of the trade deal should but a lot of tailwind behind the emerging-market. that becomes a positive for gold. negative for the dollar, positive for gold. 4% chinae get to way gdp and we are optimistic about virology, immunology, and we move on from it, what do you see is the path of chinese recovery?

is it day one because it is a totalitarian system, they dive back into five point 5% gb -- 5.5% gdp? jeffrey: they will improve consumer confidence. another reason we like copper as if you think about the stimulus, it will be toward the end use and trying to make the population happy. francine: jeff currie of goldman sachs joining us. 2019,record inflows in etf's have asset management of almost one trillion euros. how can you take advantage of the investment opportunities offered by exchange traded funds? "etfme for a new show, europe." this is bloomberg. ♪

viviana: you are watching bloomberg "surveillance."

hsbc set to roll out its third overhaul in a decade. the chairman is looking at job cuts, mergers, and closures. investors are getting frustrated. now to a clarification. banner that ran the could suggest the ceo of societe generale could have a negative impact. the ceo did not mean that. bloomberg tv wants to set the record straight. francine: it is good that we correct ourselves. , europeanes climbing stocks also gaining, treasuries aiming up. if you look at what traders across the world are looking at, they take heart that china's plans for tariff cuts have started, and that adds to the

optimism that the global economy can weather the hit from the coronavirus. , aftering a touch jeffrey currie told us about the dynamics, some of the barrels not being delivered to china but elsewhere. german gdp fell at the fastest pace in more than a decade. toistine lagarde was saying the ecb that there are many things they could focus on. we look at your markets, treasuries, and job numbers out later this week. this is bloomberg. ♪

♪ alix: central-bank fight the

virus. growth from the coronavirus taking some real yields negative. ecb president christine lagarde s ability central bank' to ease policy in the next downturn. "elcome to "bloomberg daybreak on this thursday, february 6. summer earnings -- some earnings coming out this morning. fiat chrysler ebit coming bang in line with estimates, 2.1 2 billion euros. they see 2020 adjusted earnings above the range they had been looking for. they do see an increased ability uppede earnings, so they their guidance on that end. different story when it comes to gm and ford.