francine: coronavirus engages in imf warnsb street the it could damage the global economy. japan's economy strengths. the nation has its worst contraction in five years as a high content sales tax dampens. the coronavirus outbreak could tip the country into a recession. hsbc prepares major restructuring. shows a stephen bird rolls himself out of the top job. ♪ francine: good morning, good afternoon, good evening.

this is bloomberg surveillance. these are what the markets are doing. u.s. stocks and bonds closed today too -- today due to president's day. we are edging up a bit with buoyancy on the market on the backs of investors taking encouragement from china. they will do more to support their economy which is why we in gold down and yen down. that is a good litmus that we are on a risk on. spoke the yousef managing director of the imf about the outlook on the global economy and the active the coronavirus. all hear from the interview early. first, let leanne erin. leanne: japan is it possible for sex after taking another battery the sales tax hike in the last and that economy at the low end as the coronavirus it activity

drunk 6.3% in the final three months of the year. that would be the biggest slide since the previous tax increase in 2014. tensions between the u.s. and europe over huawei ramped up another notch this weekend. the u.s. ambassador to germany tweeted a warning to countries that use the chinese telecom giant's technology. he said it would risk intelligence sharing with the u.s. hopes for an emergency opec plus meeting are now fading. saudi arabia has given up on its push for a gathering this month, but russia is not keen. the alliance is likely to stick with the scheduled meeting in march as the outbreak continues. goldman sachs has cut its crew demand by almost half. the eu is set to launch a grand plan for technology and a challenge to the u.s. and china on the many new rules for

artificial intelligence. and plans to make data centers carbon neutral as a part of the eu digital strategy. it will serve to rein in u.s. and chinese companies, potentially to the benefit of european businesses. and, the u.k. is setting up its goals for post-brexit trade talks. brexit negotiator speaking in brussels today. that is as the two sides of work to flesh out an agreement by the end of the year. the u.k. says it is not seeking special treatment, but wants a deal similar to those agreed by the eu with other countries. global news 24 hours a day on air and on quick take, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you. let's bring you an update on the coronavirus situation. china says the number of situations climbed above 70000 and considering delaying its most high-profile political

meeting for the first time in decades. selina wang joins us from beijing. if you look at what we heard overnight, have the number of cases gone down or the number of deaths actually can gone down? selina: wuhan hospital is expecting a turning point. over the weekend, we saw the number of new cases starting to fall but today the virus has not reached its peak. hubei reporting 1993 new infections today which is slightly more than yesterday. i want to point out that has been more than 10,000 people that have been discharged. you can still see the effects of the coronavirus across china. in beijing, the streets are very quiet. many stores and restaurants are still closed, but this little more activity more recently as people slowly start to come back into the city and resume work. travel restrictions do remain. local officials are under a lot of pressure to try to prevent the spread of the outbreak in their area, while also trying to

get the local economy up and running again. bloomberg economics estimates china has only been running at 40% to 50% capacity in the past week in beijing. the government has ordered anyone returning to the city to go into a 14 day self quarantine. you are starting to see the effects on the government in beijing, with china considering delaying its most high profile of annual political meeting for the first time in decades. it has been planned for march 5 with 3000 members gathering for two weeks. they discussed some of the most important issues around annual economic targets, defense spending and other key policy decisions. even though this is not a complete surprise, it shows an acknowledgment the virus is disrupting basic government activities. francine: thank you so much, selina wang. joining us for the hour, chief strategist at ubs investment bank. great to have you on the program because i have a million

questions about the coronavirus, the impact on the economy, and how you see the strategy going forward. first, we come from the premise that pboc can do a lot more than needed? >> no. the pboc did not want to do a lot last year. it is not just the pboc, it is also the state council. three global cycles. thethree of them have been checkbook of the chinese state. last year when they were going through the shots on tariffs, they did not increase their stimulus in a big way. there will be more stimulus, fiscal stimulus this time. there will be a massive easing of property regulations. there will not be massive stimulus. growth is how you quantify, you will probably move up by 1% to 2%. that's comparable to six percentage points. francine: this is much worse than trade, is it not? or is it worse because of the timing, right after the trade war? bhanu: the second shock makes it

much worse. they don't have that much room to give you more stimulus without pushing the property market into a bubble. that is something they don't want to do. they will give you stimulus, but i don't think we should expect the same kind of stimulus as 2016. that spreads in some parts of the market. francine: is there anything -- a lot of the analysis i see brings it back to 2003. pboc also has a very different tools to deal with it. bhanu: at least three differences. at first, the acute impact is much higher than sars. wean in november of 2002 and began talking about it in march of 2003. this has been cut relatively early, but it effectively shut the place down. the impact of the economy is going to be much stronger. number two and perhaps most important, china stature in the global economy -- trade, liquidity, credit, tourism --

has increased a significant. third, china does not have the same policy room available as a 2002. the impact is much higher and the policies available are much lower. we can only hope the fatality the same lower and cases outside of china and that gives you room for hope. if this persists, the shock to the global economy would be much higher than sars. francine: what are the data points you look at? the number of cases, number of deaths? when it starts affecting the economy? bhanu: the flow of cases on a daily basis is what you look at. so far, 65% of the cases are in one province in china. 98% of the cases are just in china and that gives you reason for hope. francine: what happens if it impacts the emerging economy? outside ofhis goes china -- you can still think of them as a developed

emerging-market. heaven forbid, if it goes to other countries which have poorer health venture structure -- health infrastructure, that could be a major catastrophe. i don't think we are there and i hope we don't get there. francine: we keep on thinking about the tragedy and the huge loss-of-life, but away from that, could this tilt the world economy into a recession at this point? bhanu: not that far from a recession. --en that china is basically we will see negative growth in q1. on the year-end term, it will be 300. it is possible global growth is close to 2.9%. 2.6%.reshold is around make no mistake, you could be close to a global recession. you were coming off a shop of traders. francine: we will talk next

about the tool central banks have at their disposal to try to counter that possible shift. bhanu stays with us. we spoke to the managing director of the imf on the outlook of the global economy and the impact of the coronavirus. we will hear from that interview next. this is bloomberg. ♪

francine: economics, finance, politics -- this is bloomberg surveillance. the managing director of the imf kristalina georgieva says the lack of deeper reforms in the global economy is hindering the outlook for growth, especially now that the coronavirus is digging prospects of a pickup. askedoke in dubai and was of the virus could cause a downward spike in economic activity.

>> we expected to be notable, yes, because today, china's share in the world economy is quite significant. gdp, 19% of the world. china's tourists are an important part of the tourist industry. on every dollar spent on tourist, $.80 comes from china. 28% offacturing terms, manufacturing. a month of reduction in activities negatively would have an impact on china. some of this would be translated to the rest of the world. again, we need to give it a bit of time. on the more positive side, we have seen china taking very aggressive measures in terms of containment of the virus domestically, but also in

pouring liquidity into the economy. billionvalent of $115 from people's bank of china. cutting interest rates. driving stimulus already in the direction of affected regions. herest important message is actually a broader message. ofdo live in an era uncertainties. we just saw a reduction of trade tensions and the coronavirus hits. yousef: i was going to follow up on that. if i may, flesh out more detail. you came off the backs of these trade tensions and then you have the coronavirus to deal with. on the imf level, what kind of tools are you looking at for a potential synchronized response to mitigate the downside? fact very much valley the that when 2019 shaped up to be

the worst year since the financial crisis, central banks synchronizedh a rate cut and more monetary easing, what they had done is the equivalent of half a percentage point boost. we also saw some fiscal measures, around 2.3%. boost coming from countries that have fiscal space and used it. what is missing however is the ine aggressive swing structural reforms. expect moree we attention. obviously, monetary policy space is shrinking. and, the reliance of fiscal

measures as well as structural reforms to boost growth ought to be stronger. bhanu: that was the imf managing director kristalina georgieva. francine: still with us is bhanu from ubs. we are hearing the imf managing director talk about the world economy. wes not like you are saying be on the cusp of a recession. if you look at the markets, are they behaving the way they should be? bhanu: we are 2.9% global growth. we have a little bit of buffer. q2, we will is in see a decent rebound in global growth. we are not forecasting recession. if this persists, we will go into recession. across asset classes, bond markets are telling you we are heading there. the equity markets are not. the base metal arena has been hit the most. that is telling us copper is struggling to rebound. commodities and rebound, oil is

struggling to rebound. equities are telling you this is a shock. the very dissident messages. francine: is this because equities are much more difficult to price? if china collapses or significantly slows down, it impacts the demand for oil straightaway or is it because they are looking at fed? bhanu: i think they are looking at liquidity more than anything else. if you look within equities and the stocks more sensitive to liquidity, have done much better than the valleyue stocks. the value stocks are energy prices rising, auto sales going up? those stocks have been going down. the growth stocks, tech and liquidity driven, have been better. i think the market is looking for much more liquidity. you have seen fed pricing change quite a lot. francine: ok, are they right in doing it or is the market mispricing? bhanu: i think the market is impressed -- mispricing. if it continues into q2,

equities would be very wrong. francine: let me bring in this chart. thanks to hilary clark that brought me this morning. correlation between gold and the dollar. a negative correlation that annette year low. what does that tell us? bhanu: the correlation is not as negative as it used to be. it tells you that gold and dollar are moving roughly the same direction which does not typically happen. if this is a strong dollar environment, gold selling off the the fact gold is rallying shows you this is not a strong dollar environment. we should be thinking this is a slightly weak euro environment. it is trying to because all this worry about growth and the rest of the world. this is not dollar strength, it is weakness in other currencies. the subject is not the dollar. we will see the dollar weakened. francine: this changes everything. bhanu: i do think so.

if growth in the rest of the world -- because of the coronavirus, but because you are not getting support from the rest of the world, if that is correct, over the long-term that must impact the dollar. the dollar is going to react. it is not where the story begins. it is going to react to weakness in the rest of the world and it will be stronger over the medium term. francine: what does that mean for fed policy? bhanu: i think the fed will have to be more dovish. the market is already saying -- it is very interesting that after the coronavirus, the rba, the pricing did not change as much as it did for the fed. the fed is pricing close in two cuts which is quite a lot. we wouldn't be receiving. within canada, switzerland and australia gives us better opportunities. francine: we had an important interview with laura metzger on friday. bhanu stays with us.

coming up, zuckerberg in brussels. the facebook chief executive will be facing eu officials. what you need to know about that is coming up next. this is bloomberg. ♪

francine: this is bloomberg surveillance. i'm francine lacqua. facebook chief executive officer mark zuckerberg is in brussels

meeting with senior european union officials. the social media giant is on a charm offensive to ease tensions with regulators after coming under scrutiny over user data, privacy and taxation. joining us now is maria tadeo. expect, are will we we expecting from zuckerberg today? know is this is the first time mark zuckerberg comes to brussels in almost two years. we know into years, the company has come under huge scrutiny from european regulators when it comes to privacy issues. data, hate speech, freedom of speech on the web. last time he was here, it was a rough trip for mark zuckerberg in 2018 when he ended up apologizing to european lawmakers for not doing enough. operation ora pr you can read it as a charm offensive, but you can look at the trip as the weight mark zuckerberg is trying to preempt regulation in the european union. what is clear is for european

authorities, they want to go ahead with tax reform when it comes to digital services and they also want to go ahead with reform when it comes to data, data protection and industrial data and industrial data in the european union. it is interesting that today he is writing an op-ed in the financial times where he is saying, actually, facebook is in favor of more regulation if it means a better service for the web. when you look at freedom of speech on the web and tackling hate speech that should be done in both cooperation with european government and authorities. these are decisions that companies alone should not be taking. it is a shift in tone from facebook. francine: why is europe so much more aggressive when it comes to regulation and regulating big tech and anywhere else in the world? maria: there's two reasons for that. when you speak to gary been a bit of -- european officials, they will say they are concerned that the u.s. has total dominance in the market. when we look at china, we are

concerned that some of the practices. they are bad when it comes to freedom of speech and access to information on the web. of course, there is the issue of the digital tax. the third pillar is facebook's plan for its cryptocurrency which europeans find very concerning when it comes to the sovereignty of eu states. secondly, the eu feels for a very long time, they had a very laissez-faire attitude towards legislation. in two days' time, the eu will unveil more regulation proposals for artificial intelligence. francine: thank you so much. maria in brussels. this is bloomberg. ♪ hi! we're glad you came in, what's on your mind?

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that we can't do, but come in and see what we can do. we're here to make life simple. easy. awesome. ask. shop. discover. at your local xfinity store today. francine: coronavirus cases in china climb above 70,000. beijing considers delaying its march congress.

the imf warns it could damage the global economy. japan's economy shrinks. the nation has its worst contraction in five years as a hike in the sales tax dampens spending. the coronavirus outbreak could tip the economy into recession. and, awaiting the overhaul -- as hsbc prepares a major restructuring, reports suggest leading external candidate stephen byrd has ruled himself out of the top job. good morning, good afternoon, good evening, depending on where you are in the world. this is "bloomberg surveillance ." we are getting breaking news out of macau, saying casinos can reopen on thursday, three days after a virus closure. casinos have been closed for two weeks, maybe three weeks -- we will check that. i imagine it is because they see the situation is under control, or whether the loss of revenue

is too big. in terms of markets and some of the shares we are watching, look out for mgm and wynn resorts to see when they start trading, what impact that will have on them. just over one point five hours into the trading day, let's check on european stock movies with annmarie hordern. annmarie: i want to start out with the auto sector, up more than one .5% as president xi is encouraging purchases of autos. trying to cushion the economy as it deals with the blow from the coronavirus. up morefund management than eight point sent -- more than 8%. within 65 billion dollars of assets under management. you are seeing consolidation under the space. and then bayer down more than awardeda u.s. court has a herbicide from monsanto -- more monsanto problems -- killed

a peach orchard, and now imf could face more than 100 of these cases. to thee: just going back news about macau saying that one casinos can reopen thursday. the reopening will be conditional, but we don't know the criteria for that. this is according to the secretary for the economy and finance. we do not know exactly what the criteria is, but it is based on criteria. europe's biggest bank is set for its third major overhaul in a decade. trading desks and back offices at hsbc are bracing for changes that could see a surprise chief executive withdrawal from businesses, and job reductions across the globe. let's get more from our finance reporter, harry wilson. first of all, this could not come at a worse time because we also don't know who the new

chief executive is or whether the current one will stay on. the things you have around the ceo is so many different aspects to what the person will need to deal with. at the moment, the speculation has been they internal candidate is the issue and for the job, but that looks less certain. francine: i know hsbc did not konga great time, in hong where you had the protests, and now the coronavirus. why can the bank not sort itself out? harry: you're talking about and operation of over 60 countries, 230,000 employees, it is simply a very large bank. trying to change or an organization of that scale is a difficult job. when you are operating in that many countries with so many different moving parts, you have a difficult political backdrop as well. i think they find it difficult to find where they should -- to

decide where they should focus attention because you only have a certain amount of time in one area. is mr. quinn doing? is he doing an ok job? harry: it is yet to be seen. he has only been in the job since august. it could be that what they are looking at is a try before they buy. to demonstrate strategy tomorrow, maybe the market likes it, maybe it doesn't, but they get to test him out in the full glare of the spotlight tomorrow, and we will see. but generally at the job he looks to be doing some of the right things, but the proof will be tomorrow. francine: harry wilson, our finance reporter looking at hsbc. let's get to bloomberg first word news with sebastian salek. sebastian: the number of cases of coronavirus has topped 70,000. a turning point has been reached. that is as the number of new cases fell over the weekend.

was lessok on china positive. a u.s. health official says containment is showing fewer signs of success and that we could be on the verge of a global pandemic. of the imf says she hopes it could the contained. >> we are still hoping that the most likely scenario would be relatively rapid containment of d shaped dropping in china and a fast recovery. sebastian: china, hong kong, and singapore are pledging fiscal stimulus. to counter the economic hit, beijing is cutting the one-year the in core banks and phasing sets to help businesses. we are paying for bayer.

the first u.s. trial over a herbicide has landed the company with a potential multibillion-dollar problem. toer a missouri farmer blame the herbicide for destroying his peach orchard. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries, i'm sebastian salek, and this is bloomberg. lurching japan is toward a possible recession after taking another battering from a sales tax hike in the last quarter. preliminary estimate is that gdp shrank 6.3% in the final three months of the year, and that would be the biggest slide from the previous tax -- since the previous tax increase in 2014. as a release of minutes from the fed's january meeting. policymakers were in broad agreement to hold rates amid

moderate growth with a labor economy they describe as strong. weakness is expected. business data will pick up later this year. isi think the consumer side holding up. the business side has been weak. we have had to define the stabilization on the manufacturing side, so that is a good thing. notwithstanding today's numbers. that is the way the u.s. economy has been. the consumer side has been driving things. the business side for a number of reasons has been weaker. but that looks like it is stabilizing, too, and i expected to pick up later in -- i expect it to pick up later in the year. francine: we were talking about dollar, dollar dynamics, and the fact that it is maybe not about dollar strength, looking at a chart comparing it to gold. overall, what is the strength of the u.s. economy right now? business and equipment spending, shale has been quite weak.

shale has been quite strong. even with the consumer strength, this is not unsustainable consumer strength. you could see a hit because of the tariffs. you can see unemployment rising for a while, on the back of the tariff. but then you should see a strong rebound. i agree and the second half of this year, the u.s. economy would be looking pretty strong. the question is, will rest of the economy -- will the rest of the world? u.s. equities and the dollar will react to the difference between u.s. growth and the rest of the world. francine: if the fed cuts twice, has the -- have they become the central bank to the world? bhanu: there are other central bankers and policymakers -- ecb and boj have not been able to raise inflation expectations. those that have been able -- china and german fiscal -- are not willing. the fed is the only game in town. that is why the market keeps expecting them to move more. this is not a fed that is very

keen to cut in the near term, so you would need to see retail on a plumbing going up, jobless claims rising aggressively. i think even the strike of this -- thetting the strike strike of put, could be a danger. i don't think it is a probability. because of leverage in technology, because of potential weakening and the rest of the world, there is a disinflationary force in the global economy than inflationary forces. u.s. inflation is holding up, core inflation is holding up reasonably well. q1 will peak and then it will come down modestly. francine: how difficult is it for the markets to figure out the world we live in? we will talk about europe in a second, but it feels like we are in a funny position where equities keep on rallying, but you also come to the end of how much real effective tools a lot of essential -- and a lot of central banks have. bhanu: the fact that we are running out of cyclical buffers

from the global economy is the main point. looking through the shocks of tariffs, through the shocks of coronavirus, then i think the biggest point that we need to think about is the fact that the father of global growth, which is given us three cycles, which is china, is not willing to write another check. the equity earnings and the bond markets are telling you that. liquidity is cheap, and i think that is we are late in the game because credit spreads have come in very aggressively, and credit spreads are a better definition of liquidity than the 10-year rate. there is not much more you can squeeze out of this in terms of higher valuations. and therefore earnings need to do the job. that is where the weaknesses. francine: looking at the moment, what are earnings? is there a danger that companies -- we see good earnings and a lot of dividends and share buybacks, and therefore in five years we will have a problem of

underinvestment bhanu:. and perhaps -- of underinvestment. bhanu: and perhaps low-end yields. what is going to happen, right now, why are equities going up? is less than the bond yield. falls, ividend yields think that would be more likely. could see dividend yields fallen, and that is not something the market is thinking about right now. much,ne: thank you so hanu bawena. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get to the bloomberg business flash with sebastian salek. sebastian: nintendo is likely to suffer from shortages of its which console in europe. the issue will likely take hold in april. shipments for february and march have already left asia. even now, a switch is hired to find in his home market of japan. stephen byrd has been ruled out of the race for the hsbc ceo. abc chief quinn had been looking to be named this week, but the board is undecided. tesla's plan to build a car plant in germany has run into legal trouble.

there is a challenge my environmentalists. that will injunction threaten its plans to have the plant up and running by 2021. chiefne: david frost, brexit negotiator, will set out britain's's goals with talks. thrash outprepare to an agreement before the end of the year. while it is not looking for special treatment, it once a deal similar to those agreed to in the e.u. by other countries. the french foreign minister warned of a fierce clash. i guess joins us. when you look at brexit, the million-dollar question is, can we even get any sort of trade agreement between here and december 31? >> it is unlikely. boris johnson wants to push ahead despite that.

see sentiment which is quite positive right now, and therefore the boe did not move recently. you could see sentiment coming down again toward the second quarter of this year, definitely in the second half, so the boe still isn't there. francine: what happens with the boe, given the fact that we are back to square one? we have no clue what the future relationship will look like. under wto rules, what kind of economy is this? bhanu: it is an economy where you will get some pent-up demand domestically. -- whichequities have is why equities have more downside risk than upside risk. it has not been able to rebound aggressively because eight of the global context is very different. i think that is ash this is a smaller economy. this relationship is not going to be -- there will be tremendous uncertainty. i think the boe will use the rules that has to cut a base

cases. there is deterioration in the hard data as well. francine: it cuts but not to the point of negative rates. how dangerous would negative rates be for the u.k.? question -- that is a question for europe and the u.k. itself. i don't think they will go toward negative rates. we think they will cut once and hope for a rebound in europe by that time as well and hope that u.k. gets lifted as a result of that. francine: what happens in germany? we are looking at possible extra tariffs on german carmakers. they are possibly dealing with the virus and it is not an economy that is growing. bhanu: germany is at the intersection of serious structural problems. last --an was for the ratios will go up in the next 20 years. there are structural issues with germany and also in the car

industry. given how weak cyclically germany has been, it should not surprise us if germany gives us better data cyclically from here on. look at factory autos. there have been three standard deviations, negative, weak. once the coronavirus hit is through, we should expect better data from germany cyclically. structurally, i think the downturn and potential output growth is probably the most negative for germany and all of europe. francine: will we get a suspending like -- will we get fiscal spending like they are asking for? markets,think the inflation break-evens get that. think growth is likely to be slightly better, so there is a little bit of dissonance out there. i don't think they are likely to get that fiscal spending anytime soon. to have you on "bloomberg surveillance.

i know bu london fashion week is underway with the majority of chinese buyers and press not in attendance due to the coronavirus impact. we will discuss that next with the head of the british fashion council. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." let's discuss the coronavirus. the challenge facing one of the most globalized industries. fashion week is underway and london, as well as challenge to sustainability. it faces disruption to supply chains as asian consumers to stay away from stores. we discuss with the chair of the -- you talked about the new decade for fashion. i guess it is dealing with all of the globalization and the impact this could have. how has london fashion week changed because of the virus? >> we have definitely been affected by coronavirus. the entire luxury industry beyond, but we follow government

advice and have gone forward with fashion week, and we have created contingency plans around it, so we had definitely seen a drop in that partners from china. we have had a very strong partnership with china there is one of the first fashion weeks to livestream from china. further withd into digital and we are streaming content. where partnering with media, and actually you would see a lot more correspondence, local based correspondence from china. streaming information back so muchour businesses rely so on chinese exports can still showcase their goods to chinese audience. francine: if i am a chinese buyer, looking at some of the great shows, can i now buy directly from looking at a livestream, or do i call the brand up? how does it work? stephanie: there are technologies to do that, but there are multiple times throughout the year where brands can sell to their buyers.

travel restrictions are not completely capped. there are still travelers and buyers that are going to be there at fashion week. fashion week is a global showcase. it is about the media and the press that comes out of it. we will have to rely on technology. but we, despite all this, have seen a very dynamic fashion week . attendance is very good, and we have had chinese brands -- yesterday there was a real outpouring of support for chinese partners and we hope that we can go back to some sort of normality next season. it comes toen sustainability, it seems this year fashion week, and a lot of youbrands are showcasing -- have been outspoken, saying there is a fashion rule change over the next 10 years. stephanie: yes, in my opening remarks, the new cake -- i said the new decade in the 2020's,

the largest conversation will be on sustainability. it is undeniable that it is one of the most polluting industries. but we are seeing change from within and we believe we need to work with the system, and the british fashion council has been pushing sustainability back since 2006. for the last few seasons, has hosted exhibitions around designers not just doing different fabrics were thinking about supply chains, but thinking entirely different business models. the concept of consumption and fashion, which really we should be at the center of the conversation, and we are. francine: so that will change in five years, 10 years? where is the change coming from? is it from consumers or from the fashion brand? stephanie: it should come from both. the industries making huge strides. there are fashion commissions on climate change. luxury brands and smaller brands

as well, but the consumer. a lot of change comes from the consumer. we have opened fashion week to the public, and over saturday and sunday's showcase, it shows stalks, exhibitions, so the public can come in and be part of the conversation, be more inclusive, and sustainability is at the top of the agenda. it is something that millennials come at least 60%, say is a reason they would buy something over something else. bloomberg surveillance continues in the next hour. we will be speaking with the chief of -- with a chief economist. this is bloomberg. ♪

francine: coronavirus cases in china climb above 70,000. beijing considers delaying its march congress.

the imf warns the outbreak could damage global growth. japan's economy shrinks. the nation has its worst contraction in five years as a hike in the sales tax dampens spending. the coronavirus outbreak could tip the economy into recession. and, awaiting the overhaul -- as hsbc prepares a major restructuring, reports suggest leading external candidate stephen byrd has ruled himself out of the top job. well, good morning. is "bloomberg surveillance ." i'm francine lacqua in london. tom keene is off for president'' day. -- let's get to the bloomberg first word news with sebastian salek. sebastian: the death toll in china from coronavirus is now

1770. in countries from the u.s. to australia, have moved to evacuate passengers from a cruise ship in japan. more than 300 people on board have the virus. hopes for an emergency meeting of opec and its allies on the virus are fading. already arabia has not given up on a summit, but russia -- additional cutbacks have been recommended. in japan, the economy be may be heading toward a recession. gdp frank at 6.3% at an annual rate, the most in five years. economists predicted a decline because of the impact of a new sales tax hike. now the concern of the virus outbreak could make things worse. shinzo abe may have to consider a new round of extra spending. negotiator mayf -- primeles with the

minister boris johnson's office is the u.k. does not want special treatment and is looking for a deal similar to what the e.u. has with other countries. 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, sebastian salek, and this is bloomberg. your datathis is what is doing today. gold is slipping, a bit of a risk-on mood. when you look at what european stocks are doing, they are rising after we saw an up eight from tiny shares. investors are taking courage from the -- encouragement from the second biggest economy in the face of the coronavirus outbreak. i am also looking at a couple other things. treasuries not trading today because of president's day. higher aftert closing -- the euros a bit higher. what else i am looking at, this is one of my favorite charts, looking at the g7 fx volatility.

on record.g a low we will look at what is happening with coronavirus and equities. about thewill talk volatility and the lack of volatility. let's bring you an update on the coronavirus situation. china says the number of cases climbed above 70000 and it is considering delaying its highest profile annual meeting for the first time in decades. stephen engle joins us from hong kong. what do we know? has the number of cases or infections or deaths gone down? stephen: the number of deaths did increase, but the death number is a lagging indicator about three weeks after contracting the virus if somebody is going to pass away. it is usually that timeframe. we have to look at new infections. they did go up slightly, just over 2000 and china from the last numbers yesterday however,

the trendline has been slowly decreasing, so that is giving encouragement to people like this noted wuhan doctor who says we might have hit a turning point. i might caution, it is still too early. the news out there is quite dire. is why you just mentioned, the national people's congress in parliament in beijing, coinciding with the top advisory body to the national congress, the legislature in china, thousands dissent on beijing in march. they will have to delay that. they will have to make a decision this week on february 24. local officials need to be in their local municipalities to deal with this virus. not going to beijing at a time when the government is trying to scramble to figure out how to contain this. stephen, how much more can pboc actually do? they have done quite a lot. is the stimulus actually

endless? stephen: they have indicated they will do targeted and phased stimulus. there will be monetary stimulus from the pboc. there are a number of tools to employ, but i guess in lockstep with getting the economy shored up is as well containing this virus. what we are seeing is what some might call draconian measures to contain the virus first, and then, as we get into recovery phase, making sure that the factories are back up and the smaller enterprises that do not thatsarily have the means, they have the ample liquidity to get up and going. the big problem right now is getting those migrant workers back into the factories. and a lot of them cannot get to their factories. two, and a lot of them do not want to get to their factories. three, they cannot get to a factory because the factories are not open yet. it is a big struggle. much,ne: thank you so

stephen engle, for the update from hong kong. joining me now is jordan rochester, effect -- fx strategist. if you look at my currency, you look at currencies swings, and there just doesn't seem to be much volatility in g7 fx, what is that? >> euros-dollar is the most boring currency pair out there. when the ecb within the qe4 this year, said they are not going to raise rates for the whole of this year, that drives foreign exchange, which is speculation about what central banks will do, where interest rates will go, were growth differentials will go. all of that is contained substantially. we see that at most ecb meetings. timeframe, you see volatility in euros -- in europe make record lows each time around. this could change and we are already start to see -- francine: is there a danger?

if there is not enough volatility, are we prices and risk correctly? jordan: i don't think we are pricing risk correctly. we are doing it by the canadian dollar, the new zealand dollar. your a-dollar, i think we are in the 1.05 to 1.08 range. markets are expecting a v-shaped recovery, so it makes it really hard to trade. the news is really bad right now, but everyone is optimistic for the second half of this year. we have big stimulus, and therefore you're a will go higher this year. so how long do you hold the shorts is the biggest question for everybody. you see that in the australian dollar as well. what are you expecting dollar to do? the macro you look at markets, fixed income, rallied substantially. gilt markets have rallied.

fx is -- i think that is going to be a main focus for the next couple of weeks. the risks to these trades is that we have a headline saying china goes back to work. at the moment, 23% at work to basically 3% to four people -- to 4% of people are not going back to work. this shows negative correlation between the dollar and the low. if you look at this, is it dollar strength, or is it weakness with everything else? jordan: it is the weakness of everything else. the gold markets have been acting as a hedge during this time. this will be an inflationary supply shock. one of the more anecdotal pieces of evidence. if this goes on much longer, you will see supply chains hit, a

lack of supply. we saw a report this morning about how iphones will be delayed, how you cannot buy air pods. francine: what happens to gold longer-term? we were talking about volatility, that there was a lack of volatility. when does volatility come back up? jordan: when credit risk premium comes back in. if you look at what drives volatility in foreign exchange, it it interest rates, different asset classes, and a divergence of economies. if the u.s. outperforms europe, which is easier to predict now depending on what goes on with china, it affects more. intois lockdown continues june, this is a global pandemic, that is most severe scenario. then you have a big impact to gdp and you see default risk premium, and that kicks volatility up. francine: jordan rochester stays with us. despite the risks to the global economy, the cleveland fed

president says she will stick that-- we will have interview that michael mckee did with loretta mester on friday. that is coming up next, and this is bloomberg. ♪

francine: this is "bloomberg surveillance." i'm francine lacqua in london. tom keene's offer president's day. wednesday sees the release of minutes from the fed's january meeting. holdymakers agree to rates. interviewed linda master -- interviewed loretta mester. loretta: we have had stabilization on the

manufacturing side. that is a good thing, notwithstanding today's numbers. the consumer side has been driving things. this is the side for a number of reasons that has been weaker. that looks like it is stabilizing, too, and i expect it to pick up later in the year. francine: still with us to talk about the economy is jordan rochester. jordan, what is the possibility of inflation being bigger than expected in the u.s.? jordan: the long-term story is about low inflation for longer. i'm not worried about inflation shocking the u.s. francine: what is the biggest concern for the u.s.? jordan: the americans are on fire. the retail sector, you have 5% year on year growth in retail sales, so it is really healthy, the consumer. manufacturing is a risk. the problem with that is that you can rely on the consumer for a time, but if manufacturers suffer from the slowdown, u.s.

data shows signs of stabilizing. but it was lacking what i call the green shoots. that is when you have optimistic noton, in the u.s. has experienced that. they have experiencing a slowdown in manufacturing, hoping for the best. -- thee: the consumer consumer is strong and saving is also in the u.s.? jordan: absolutely. continue, --oesn't the bounce doesn't continue, it does count on manufacturing being strong. we need to see china going back to work, europe benefiting. for the time being, u.s. assets are the safe haven because the fed has room to cut rates. so the backstop is quite sizable. where in europe the backstop of the ecb, there is not much left it can do. francine: if we go back to the strength of the u.s. consumer, what are you expecting the fed to do this year?

jordan: it is quite a boring outlook. we expect it to be on hold. francine: that seems to be the consensus. jordan: it is. but that changes if we get to june and nothing has changed in asia and we still have a lockdown. then the fed can cut rates by 50 basis points. back to work, the fed is on hold for this year, -- and then is it bernie sanders, donald trump sort of question francine: mark. so that will change -- changee: so that will depending on who the president is? hard to say, x, y, z. you see theere do biggest concern about central banks having to deal with the downturn? jordan: the biggest concerns are in europe. if you have a severe shock, there is not so much that the ecb can do. in thatould like to see

scenario is fiscal stimulus that is coordinated. it has been a long time since we have seen coordinated policy action. going back to the global financial crisis. if we get to that stage, at is a headline that would move markets in a much better way. francine: jordan rochester, thank you so much. were in rochester of no mira, as i get my voice back. mark zuckerberg is in brussels this week. a height of the proposal to regulate data and artificial intelligence. summitsday, an emergency over the bloc's budget over the next seven years. all of that coming up. this is bloomberg. ♪

sebastian: this is "bloomberg surveillance." let's get the bloomberg business flash. plans to leave australia, new zealand, and poland by the end of next year the restructure would allow gm to focus on new technologies such as self driving cars and electric vehicles. ceo mary barra is shrinking gm to the point where it gets almost all profits from the america's and china. the french train maker has been in talks about him barnier her -- on barnier's rail business. h -- last year, a merger was blocked for antitrust regions -- reasons. the coronavirus may make it

harder to find switch consoles in the u.s. and europe because of a production bubble. chinawas a shutdown in because of coronavirus where the switch components are made. that is affecting a factory in vietnam where they are assembled. awardedn missouri has 260 $5 million to a farmer who 's --s that bayer and basf destroyed a peach orchard of his. that is the bloomberg business flash. francine: thank you so much. europe's biggest bank is set for its third major overhaul in a decade. trading desks and back offices are bracing for changes that can see a surprise with the chief executive. withdrawals from businesses and job reductions across the globe. ourlet's get more with finance reporter, harry wilson.

uncertainty about who will be chief executive? harry: it appears on the hsbc board there is some kind of dispute about what kind of ceo that they want the last one that was ousted in august was an internal candidate. and the guy they probably think will be, no quinn, is internal. there is a certain feeling that maybe they want to go look externally, have someone come from outside, have a view independent of a longtime executive coming in. so i think what we have at the moment is a bit of a sense of what we want to do, and no one really knows where this is going. francine: this is highly unusual, right? there are a couple of candidates we were talking about. one is no quinn, the current internal -- noel quinn, the current chief executive internally. is it difficult to feel the

position because it is a hard position? what is the concern about the interim chief executive? harry: it is a very difficult job. there is a lot of restructuring to do, there are job losses, and a lot of decisions about where to focus resources. whoever you are bringing in has to have different skills to do the job. someone coming from outside may look at all of that and say this is such a mess, i don't want to be involved in this. equally, having someone internally coming in, they are so much of part of the current they have difficulty doing what needs to be done. francine: why is it such a mess? extremelyrge bank, reliant on hong kong where we saw protests and now coronavirus. harry: they are extremely reliant on hong kong. and for many decades they were trying to diversify away from hong kong. what seems to have happened is that they are even more reliant on hong kong in recent years and

the diversification strategy has not worked, and now they face a strategic cross suit -- crossroads about where they go. francine: what is the report card for noel quinn so far? fairly mixed. he has not really had a chance to put his stamp on the bank. tomorrow is his chance to do that. and i think probably we will have a better sense at this time tomorrow about exactly where hsbc will be under noel quinn. francine: is this a bank that needs to down size? we have seen a number of european banks -- and for five years, we will have many more conversations before then, does it have to be focused on another part? harry: they have a problem with costs. i have over 230,000 staff and they need to operate the business with far fewer. they are heading in that direction. the cfo of the bank is very much focused on those costs, but they

have a long way to go to get to where they need to. do they need to be a smaller bank? i think shrinking is a very difficult thing to do. but certainly may be doing what they do but with fewer people is ultimately where they want to head two. you cannot really compare hsbc to barclays. what about to standard charter? harry: standard charter is a much smaller business. hsbc is double their size. i think they are sort of a unique proposition. it is often set about hsbc, you would not create them today in the current form they are in. they have their unique set of problems, and that is why choosing a ceo is such a difficult job for them. onncine: harry wilson there -- our finance reporter. coming up, the u.s. energy its outlook on oil. we had a great conversation

telling us that he was concerned about pricing things wrongly. the way the oil price has been going the last three weeks or so. i am looking at yen. it is slipping. i'm looking at gold. it is slipping. european stocks are rising. taking what the u.s. pc is saying. are not trading today. the dollar pretty much flat. this is bloomberg. ♪ everyone uses their phone differently.

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and save even more when you say "bring my own phone" into your voice remote. that's simple, easy, awesome. click, call or visit a store today. [ fast-paced drumming ] good morning, good afternoon, good evening, this is "bloomberg surveillance." tom keene is offer president's day. let's get a bloomberg first word news. sebastian: in china, the annual

meeting of parliament may be delayed because of the coronavirus outright. that does not happen in decades. toinos in macau will be able resume on thursday. authorities closed them four and a president 50 days to prevent the virus from spreading. 15 days toented prevent the virus from spreading. energy secretary said russia will be unable to circumvent u.s. entrance of the project. president trump has a germany for buying russian grant -- gas. the fight between u.s. and europe over chinese technology is threatening to split up nato. u.s. ambassador said anyone who uses the 5g vendor risks jeopardizing intelligence and sharing with the u.s.. he said the message come directly from president trump. at china's directed

huawei. democratic presidential candidates ramped up their attacks on michael bloomberg. bernie sanders has bloomberg will not create the kind of excitement needed to defeat president trump. policingd issues with and rape. 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. this is bloomberg. francine: u.s. energy secretary says he is confident russia's gazprom does not have the technology to complete the pipeline in the baltic sea. speaking to matt miller in germany, he also shared his outlook for oil and the impact of the coronavirus on the market. >> i think opec is in a fundamentally different position than the last four or five decades. with regard to their upcoming meeting, i would expect them to

consider cuts. it will be interesting to see if all of the members of opec all of the cuts, but that would be the expectation. i think that is partially the markets expectation as well. i was looking at the oil prices and it looks like we are up 2% in brent. i think as we move forward, we will continue to see opec manage its position in the marketplace somewhat aggressively, but we will have to wait and see what they decided the next few weeks. >> the demand side of the equation looks to have been weakened substantially by the coronavirus. what is your reaction to the coronavirus on the market? >> people are still trying to figure out what is the virus and do we have a complete picture of the actual virus itself? how fast will it spread? who does it infect or what types of populations are most affected? the scientists and the doctors generally are trying to learn more about the virus itself. then we have to evaluate the response to the virus, and that is what we are looking at

closely with regard to demand. if the chinese government, the world health organization, others, can put together an effective plan to contain the virus, i think we will see a smaller effect on demand, ultimate demand, then what some people are anticipating. if that is true, i think you'll see the economies bounce back really fast. >> in terms of the supply side, there are issues as well. libya has been taken off-line by the civil war. how do you expect that to affect the market? >> i think we are seeing it in the pricing today. as i mentioned, we are up 2% today. pricing has been stable the last 18 months, with large external impacts to the marketplace. i think back to the others coming off plan like libya, yet we have seen no real jump. as we would have expected to see 40 years ago. >> in terms of the situation in libya, do you expect it to

deteriorate for a long time like there is a possibility of detente and now it has evaporated? >> i hope not. i hope we can resolve these issues in the relatively near future. libya has a remarkable ability to produce oil and gas. we think having them come back online provides additional stability in the world. i think -- i hope these things get resolved relatively quickly. francine: that was the u.s. and are due secretary speaking to matt miller. joining us now is jordan rochester. i million questions on the coronavirus. the impact this has on the leadership on china. have they done an ok job or are people realizing they could have done better and so does it put president xi and a tricky spot?

>> there has been angry for many weeks about the handling of this. now what we're seeing is perhaps to redraw the narrative in reverse. going back and saying xi jinping about this in january and was giving instructions earlier in january, trying to take charge earlier in january, and putting the narrative under the local government and saying they were not doing enough. xi jinping was trying to get in there for the local government was not taking his instructions on board. that is also risky because at the same time, xi jinping's narrative is he is all-knowing and this good have him coming off as being seen as weak instead and ineffective. francine: does it mean he will be challenged? it is very unlikely he will face any kind of immediate challenge. you still very much in control. he recently replaced local government officials with his own people, particularly the guy from shanghai who is seen as the right-hand man. you certainly would not think there is any immediate threat to

his leadership, but longer-term, the communist parties hold on the power in the idea to have total control and that is getting eroded bit by bit. no longer term you can see some risk. francine: there is congress that could be postponed. does that matter to the leadership in china? stampis a bit of a rubber parliament event. people come from all across china for the meeting. they don't actually make decisions there. they are given instructions to go back to the robinsons -- their provinces and not. but if you have a crisis in china and all your officials are coming into beijing to talk shop for a week that a particularly good look? it makes sense to delay it. francine: what about ruben be? stop is difficult to trade dollar-china just below seven. for the time being, what is

going on in china, it is essentially a market that is expecting everybody to go back to work into weeks time. if we don't see that happen, if this gets extended, that i think currency weakness can come back and. francine: the u.s. and china may be for a long time seem to be on the same page of what they want remember you did do, we just be stable. >> if you have the shutdown go beyond the end of this month, if we go through march and into april, you need a release valve for the economy. it would be acceptable for the renbimi to weaken. i don't think that we are looking for a massive selloff in it. this is all small stuff in the grand scheme. the direction should be toward the weaker currency if the shutdown continues. francine: ros, how does this affect trade? are we expecting the u.s. at the margins to be a little bit more lenient with china or last week we had messages from the trump administration to be quite tough

on china. could that lead to differences in trade? >> this comes at an awkward time because we just got a trade deal but we still have those bumbling trade deals that go up -- bubbling trade just like a be on that. it is bound up in all of that. that said, the u.s. realizes this not only affects the chinese economy, it affects a bunch of economies near china and also the u.s. american companies are being affected. it make sense for the u.s. administration to go a bit easy right now and give xi jinping a bit of leeway. you can see that in the way donald trump is responding publicly on twitter of the way xi jinping is handling this. he is trying to give him a bit of leeway here. francine: thank you so much for joining us. coming up, the democrats are campaigning and raising money in advance of the nevada caucuses on saturday. we will discuss which candidates

have momentum and which don't. this is "bloomberg." ♪

francine: this is "bloomberg surveillance." tom keene is off. the next battle for the presidential is five days away. vermont senator bernie sanders holds a comfortable lead in the latest polls. we are back with roslyn matheson and jordan rochester. there are caucuses and primaries

confidence or national viewer, wind we know who the democratic candidate is? it has been fuzzy this time, different. >> the fact the number of delegates being decided is very small including what we have coming up later this week to next week, the one to really watch it super tuesday when you get that much bigger states like california and texas in play. right now it is a small pool and that is also making it quite murky. and all of the peeps is just pieces shifting around -- pieces are shifting around. the fight to the center, who would be the most successful centrist candidate to take on donald trump. that is where you see the fighting really taken place. peoplee: is it because what a centrist because i like a centrist are the only think or democratic voters only think a centrist can take on president trump at the national level? >> there are two schools of thought. one is you have to go far to the left to be complete counter to the administration of donald trump, the other is you need

someone on the center who can pull those republican voters back over the line toward being voting for democrats instead. you have similar policies on some things in terms of the economy and whatnot come and you get those voters back step joe biden so far as underperformed and that is really opening the field up and that is where we are seeing some extremes all in those early caucuses so far. super tuesday, we have the intro trade of another candidate, michael bloomberg. francine: how do you model the democratic candidates and the impact they can have on the economy? is it too soon a model? do we have actual policies that are written and stuff? >> in terms of who is more likely to will and you can rely on fivethirtyeight.com and others. currently it says none of the above. conventionsested most likely outcome at which is frustrating. that means bernie won't get the majority of delegates. no one else will, either.

that convention in july will be really important and we will see who wins that. when it comes to modeling its markets, i think it is safe to assume that bernie sanders approach will be health, stocks, under pressure. if you had elizabeth warren, she was going to be focused more on facebook, amazon, the technology companies. all of the others, it is a lot less extreme in terms of the impact on market, but overall commitment democratic president get in, the markets will be assigning higher chances, more spending, but higher taxes. if it is bernie, health care and former consumptive pressure. -- pharma comes under pressure. does the market assume that economy so strong the stock market is so strong that president trump is a two-term president? "bloomberg surveillance." at >> versus the reelection hopes, they are very correlated. more likely bernie is to win,

the more likely donald trump is to win. it is weird for us to model. your head around that. in terms of the market impact, it does mean dollar uncertainty i think. but too early at this stage. francine: when you look at the polls, which do you trust? last week we spent a lot of time talking about president trump pardoning some of his friends and going after some of his enemies. two people vote on the back of that or is it just inside washington politics? >> it is part of the narrative donald trump is created which there is this vast conspiracy, democrat conspiracy against him. and all of these things that have been taking place against people around him and his inner circle are part of that conspiracy a part of blocking them from doing real work. he is saying, i'm trying to create jobs for americans, i'm try to countries like china and mexico and others and i'm

bringing jobs back, bringing manufacturing back, i'm focusing on the economy and you. meanwhile, the democrats are trying to take down everyone around me and create this conspiracy. it will probably harden the opposition of people who already oppose them. it won't shift necessarily anybody's thinkings in the poll. francine: thank you. will bep, zuckerberg facing eu officials today as he sends off privacy concerns and antitrust scrutiny. that is coming up next. this is "bloomberg." ♪

this is "bloomberg surveillance." facebook chief executive mark zuckerberg meets with senior officials in brescia today just russia today to discuss rules and regulation for the internet. this comes two days before the block unveils its legislation plan for artificial intelligence. maria, mark zuckerberg in the past has not performed well in these kind of questionings. do we know what he will want to

focus on? you're exactly right, this is the first time he comes to brussels in on most two years. the last time he was here in 2018, it was a very tough trip for mark zuckerberg who had to really apologize to european lawmakers for not doing enough to prevent election meddling. in terms of today, it is interesting that he has published an op-ed in the financial times were he is saying facebook as a company would welcome more regulation. you could read this in two ways. he is trying to preempt regulators in europe which have made it clear that one to crack down on hate speech and want to stop election meddling, and we know there will be more regulation into the digital space. or you could read this in a way that mark zuckerberg is conceding that facebook should not have the final answer on this, that facebook is not really able to change hate speech on the web, and if there any issues he could say, look, it is not up to us, it is the

regulators telling us to do this. is europemaria, why so much more aggressive when it comes to regulating big tech giants than anywhere else in the world? >> there are two reasons for this which were often told by european officials. one is the fact that you has woken up to the fact that data they produce and they make money and profit from comes from europe, their operations in europe and the europeans should have a bigger say on that and why not also make money on that? that is what we're hearing also from the commission. data that gets done in europe which should be able to profit from that they concede the personal data the eu came not too late, but they do look at industrial data, business-to-business, as the next frontier. they also know there is deregulation when it comes to artificial intelligence that will be key and really the next frontier, so they don't want to miss the train on that. secondly, could argue this is cultural. for the europeans, the idea of privacy on the web is much more

relevant perhaps that in the u.s. and the europeans do tend to take on more stance on that providing a safe space on the web. francine: maria, thank you so much there in brussels. itsling is on course for biggest rally this month. this comes after chancellor to resign was in fiscal stimulus speculations. joining us to discuss this is rosalind mathieson and jordan rochester are still with us. the market is betting some kind of stimulus. the bar -- the market is now betting we're going to get a trump-style massive stimulus. are we? >> in terms of trump-style, i don't think will be all the way. they have got these three rules. the first one is the one i think they could play around with, which is backing the current data expanded within two years. they can relax that and make it five years.

that means more fiscal transfers. you can spend more than or. the second rule is the infrastructure, capital spending. that is a limit of 3% gdp. they could increase that, but financial ready projects are difficult to do. we are already expecting 20 billion sterling at least from that loan being spent before the resignation. it is all very generous to begin with. the second point i would make is the person -- the manifest or had these rules in, boris johnson signed up for them, and id was numberf jav two in the treasury. he had already been drawing up this budget coming up soon. terms of how much i expect change, some but not a massive overhaul. francine: but this is number 10 in charge. we have seen in the past something like it, but this is basically number 10 -- in the

past, the relationship between the chancellor and the prime minister's new k -- in the u.k. was at once had tension and this one, number 10 is expected it not to be like that anymore. >> basically boris johnson is saying he wants to run a different kind of government than those who came before him. like treasury and downing street were like church and state but it was seen as useful and productive and we need to have that by politicians geez been more in places where they think it will help them. -- need to be able to spend in places where they think it could help them. it could roll on without much restraint on it. his administration has moved on special advisors. what he wants is those advisors really under his house. the ministers are more enacting what he says and let's drawing at their own policies and having more free reign to do that. not just with treasury, but across the board. you'll see a different kind of government as a result. francine: what does this mean

for the bank of england? >> it is good news. -- it is good news for the bank of england. they have held off cutting rates for the last meeting. we now expect them to essentially be on hold, especially if you have the fiscal stimulus. it makes it less likely they will have to cut rates. if it is second year the global slowdown becomes a bit more of a opens up at can of worms. slowdown intorope recession, it is hard for the bank of england to ignore that. at the moment it is on hold, but the risks are probably more to the downsides a rate cut possibly the future if what happens in china spreads more broadly. francine: thank you for joining us, rosalind mathieson and jordan rochester. coming up in the next hour, holger schmieding. we will talk about the fed, the

bank of england with holder. this is what i'm looking at in the markets. there is a belief in the market that this gets a little bit worse and then becomes better. what if it doesn't? yen and gold both dipping. china pledging to support the economy in the face of this coronavirus threat. i'm also looking at dollar pretty much flat. treasuries are closed because of presidents' day. this is "bloomberg." ♪

francine: coronavirus cases in 70,000 dishbout

climb above 70,000. japan's economy shrinks. the nation has its worst contraction in five years. the coronavirus outbreak could tip the economy into recession. awaiting the overhaul as hsbc prepares a major restructuring. reports suggest leading external candidate stephen byrd rolled himself out of the top job. good morning, good afternoon, good evening depending on where you are in the world. this is "bloomberg surveillance." i am francine lacqua. tom keene is off today. treasuries are closed. a lot going on with china with the extra stimulus coming from impacting european stocks that are now up. let's get to the bloomberg first word news. here is sebastian. sebastian: a number of developments in the coronavirus outbreak, the number of cases in china has risen about 70,000.

the death toll is now more than 1770. china, hong kong, singapore pledging extra stimulus. from the u.s. and australia have moved to evacuate . the price of oil is steady after the weekly gain since september. hopes for an emergency meeting of opec and allies fading. saudi arabia is not given up on a summit but russia has balked at the idea. opec plus committee has recommended additional production cutbacks. economy may be headed to a recession. the gdp shrank in the fourth quarter, the most in five years. economist predict the decline because of a new sales tax hike. the concern is the virus outbreak could make things worse. prime minister abe may have to consider another round of extra spending. you cheap brexit negotiator will lay out the country's goals for the future relationship with the european union today. the two sides are trying to work

out a trade to by the end of the year. prime minister johnson's office has the u.k. does not want special treatment, but says the eu is offering more stringent terms then deals with south korea, japan, and canada. 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. francine: this is what your markets are doing. a lot of the focus will be on markets, although treasuries are not trading today because of presidents' day. for all of our american viewers i'm happy president day. this is what your markets are doing. the markets are focusing on some of the stimulus coming from china. european stocks rising. this after chinese shares were also up. renmibi up. gold earlier on i was looking at volatility in the g7

effects. this is the trade that hillary clark brought to my attention. smart, smart, smart. a way of looking at gold and the dollar. you can see that gold were focused on central banks and coronavirus. this is one of the macro views we have had today. if you look at my chart, it basically looks at the negative correlation between them. you can see the negative correlation at an eight year low. according to ubs, this means this is not a dollar strength story but more of a weakness across the world story. let's bring in update on the coronavirus situation. china says the number of cases climbed above 70,000, also considering delaying its most high-profile annual political meeting for the first time in decades. is selena from aging -- from beijing to salina. how problematic is it for the leaders from china that this foreign were local authority's come together to talk would be postponed or canceled? most high-profile

annual political meeting and would be the first delay in decades. he had been planned for march 5 in beijing, some 3000 members come together to convene for about two weeks. it is not really a surprise this is being delayed given the travel restrictions around the country, transporting thousands of officials from across the country to beijing and putting them into the same area would pose a significant transmission risk. a lot of the ski officials need to focus on controlling the epidemic by staying in their local areas, so attending the conference would be delaying progress they need to make. this is an opportunity for when china unveils its economic targets, other key policy decisions, so it remains to be seen when those will be unveiled if this large gathering is going to be delayed. across china, you still have trouble restrictions remaining in place,'s requirement meeting the movement of people --

requirements of movement of people. bloombergto economics, china's economy last week was only running at about 40% to 50% of capacity. francine: what can you tell us about what else to do to support this economy? >> you've seen a variety of monetary stimulus measures. try and cushion the economic blow. we saw the chinese central bank offering some $29 billion of one your medium-term loans and lowering the rate by 10 basis points, but that was largely expected by analysts. over the weekend, china unveiled plans for reducing corporate taxes and fees, part of the broader set of efforts to calm financial markets and companies, but so far there has not been any massive increase in stimulus. some of the big challenges can't be solved by the central bank. one of the big problems is

getting migrant workers back to the factories amid the travel restrictions. a lot of important workers are stuck in her hometown so a lot of these factories are not able to get up to full capacity. francine: thank you so much, selina wang from bloomberg beijing. now joining us now is schmieding and marija veitmane. look at the coronavirus, there seems to be a a belief in the markets that this could get a little bit worse and then suddenly better. what if we were wrong? what kind of data points do you look at to make an informed decision? >> a great question and i think the market expects recovery, probably a majority of people in the market of nuclear about the virus. francine: -- >> the do not give you a definitive answer. i think what the market is if policythat even

cannot cure virus, it can definitely help financial markets. i think that is what market is looking at. how policymakers can help markets, lower interest rates come extra stimulus. those are all the things that market likes. i speculate hopefully virus will take its toll and containment efforts will help to get out of what market is looking at is helped to financial markets, not consumers. , it ise: holger impossible to model. >> we don't know as economist what happened with the virus but we do know that china has a lot of monetary and fiscal space. whatever disruption in turn is and will be over the next few months, china is almost certainly not going to allow a lasting increase in

unemployment. disruptions of the will be permanent for china, yes, it will hit us in the west a little, but china will not probably face the problem say beyond three to six months of the magnitude that would really have a lasting impact on the western economies. francine: but how do we know if this spreads were not? if you look at the economics, i keep being told if this touches the emerging markets, it will be difficult to deal with. >> as to the virus, of course, if it were to spiral out of control, for instance in emerging markets outside asia were government structures are weaker than in china, then of course it may in medical terms turn into a greater emergency, yes. but china from the economic point of view is one key country . no other emerging-market comes close to the global importance of china. remainwe hope this will largely a chinese issue and, b,

china has the capacity to deal with the economic fallout afterwards and hence whatever hits us in the west will likely be more temporary, even if say for the first quarter it would be quite noticeable in the data. francine: what can the cdc do at this point? do they have an infinite toolbox? >> first of all, pboc has more tools than any other central bank. secondly, china being economy,ed planned fiscal and monetary policy is almost given. 's point, we know 20/20 is the end of five-year plan in china. we know 2020 is the end of gdp and for- double that, turning needs to grow 5.9% this year and that does not seem realistic which to me means only one thing, we're going to have a

lot of spending, going to have a lot of stimulus hitting us this year. that is for us if -- francine: but on china, in the middle of the trade war, they held back putting stimulus. why is a different? i think they worried at the time about financial stability. does the virus take precedence? >> i would say exactly that. last year and there before, chinese authorities were trying to reshape the economy and make it more westernized, try to work through the monetary channels. i think right now it looks like we're getting very close to the deadline and it is not materializing, and that means we're going to have a kitchen sink a policy. francine: thank you both. holger schmieding and marija veitmane. despite the rest of the global economy, she says she's sticking with their u.s. growth forecast for this year.

those comments coming up next. this is "bloomberg." ♪

lacqua.: i am francine tom keene is offer president's day. welcome to "bloomberg surveillance." policymakers were in broad agreement to hold rates. expects business dated to pick up later this year. >> i think the consumers that is holding up. the business side has been weak. we have had signs of stabilization on the manufacturing side, so that is a good thing. not was standing today's numbers. that is kind of the way the u.s.

economy has been, the consumers that has been driving things. the business side, for a number of reasons, has been weaker. at that looks like it is stabilizing, too, and i expected to pick up later in the year. francine: we are back with holger schmieding and marija veitmane. holger, give me your prognosis of the world economy as seen through the u.s. is it in good shape? are we creating quality jobs in the u.s. or not so much? >> i was at the world economy is -- enormousous shape, especially the western world. private consumers are spending, governments are spending. if anything, little too much as residential construction is solid. business investment is still hurting from the damage of trump's trade last year. if trump this year's restrains himself in terms of trade war, then business investment trade will come up and over the course of the are calm the situation, global economy will get slightly better. francine: what about the u.s.?

>> the u.s. is right in there. let's trade and manufacturing-dependent and europe. as a result, the u.s. has not slowed down as much as europe in the context of the trade war. what we will likely see is the u.s. consumer hangs in there but the business investment and inventor he said will come back to normal, rated u.s. growth from rates probably currently a bit below 2% in the first instance of the year to bit above 2% in the second half of this year. francine: how would you describe the state of the u.s. economy? >> i would not disagree too much with what has already been set. the u.s. or global economy is ok, not great. it is ok. what is interesting is central banks reaction sanction. asymmetric, be this bad news, read going on. good news, rate going up but not

too much. that is a great set up for risky assets. that is where we are. francine: at the moment, markets are expected the fed to cut twice. is there a danger that suddenly inflation picks up and is much higher than we expect it to be? >> if inflation picks up, that is very dangerous. i would probably take the chances of that are fairly low. it could be very dangerous for financial markets. see -- francine: i feel like a broken record. is this the year we see higher-than-expected inflation in the u.s.? >> this may be the year but it edges up somewhat. we see some signs of that happening. we see some signs of the stronger labor market feeding through into cost for companies. but with likely some gaining protective committee growth we would keep that contain and on top of that come the central banks tolerant for higher

inflation is high. it is not the question of whether inflation will pick up a little bit but whether inflation will skyrocket so much the central banks would worry a lot and that seems highly unlikely for this year. francine: thank you very much, holger schmieding and marija veitmane. here is what you should be looking after for this week. mark zuckerberg is in brussels this week. his trip comes out of a commission's proposal to regulate the data and artificial intelligence. hsbc also unveils its new strategic plan. that is tomorrow. on thursday, eu nations hold an emergency summit over the bloc's budget for the next seven years. all of that coming up this week and all of that being covered on bloomberg. this is "bloomberg." ♪

is "bloombergs surveillance." general motors plans to leave australia and new zealand and thailand by the end of next year. by the end of the year, rather. they will take a $1.1 billion charge. restructuring would allow jim to focus on new technology -- gm to focus on new technology. of its profitsl from the americans and china. fridge train maker has confirmed buy -- $7alks to billion deal.

last year the eu blocked merger for antitrust reasons. the coronavirus may make it harder to find intended switch consults. bloomberg said it has led to bottleneck. it is affecting a factory in vietnam where they are assembled. that is the bloomberg business flash. francine: tomorrow come hsbc is set to announce changes to its top management and business priorities. it will mark lender third major overhaul in a decade. hsbc's biggest market in hong kong has been suffering from protest and now the coronavirus. we are joined by an opinion columnist covering finance. back in november she published a piece entitled "hsbc last man standing is on its way out." why's is it so difficult to find a person that wants to be in charge, that was to be chief executive at hsbc? >> that is very good question.

that is the awkward situation going into tomorrow, they are about to announce the biggest strategic overhaul potentially in decades and not clear whether the interim ceo is going to be the gentleman or lady is going to run the company longer-term. an awkward situation going into tomorrow. ifwill get to hear tomorrow noel keeps his job or if there is a potential successor. francine: if he doesn't keep his job, what did he not do? >> their mind the job has always has gone toders, people from inside hsbc. the last position had gone to john flint. maybe the board is thinking about a bit deeper pool or broader pool of candidates and once to look outside. that is a possibility. francine: how difficult -- what does hsbc need now? they suffer because of the protest in hong kong and because

of the coronavirus. it is one of the largest banks. >> these are short-term and medium concerns. want them to be a little more radical, either expand or shrink quickly. yet the situation in which the majority of the populace coming from asia, but they still have an equities business, advisory business in europe and the u.s. in particular, which is not generating the returns that are needed. francine: who do they need? there was talk about stephen burke, comes from citigroup, he has ruledy -- himself out? that is a bizarre situation. >> they need a strategy that convinces investors they can shrink the businesses that are less profitable, can do more to capture that wealth situation in asia -- which is really for them to own -- and i think in terms

of who they need, clearly up to the board, but i think the sooner the better, really, because whatever is announced tomorrow, somebody needs to own it and executed. francine: who do you compare hsbc with? >> you probably should look at j.p. morgan and the comparison is not too favorable because the andrns both to shareholders both in terms of the profitability and share price have really gone in different directions. francine: if someone had to advertise, would be aggressive strategist? is that which -- what hsbc needs? >> i think they need a bolder vision than plodding along as they may have done more recently. francine: thank you so much. you should check out her columns. her columns. they are really great. coming up, we are from the

managing director of the imf about the outlook of the global economy and the impact of the coronavirus. we sat down with the managing director over in dubai. an interesting conversation because they talk about world growth and central banks and some of the tools they have at their disposal or not. in the meantime, this is what markets are doing. gold is slipping a touch. we started the day off on a higher note. when you look at the market and in hand, the u.s. is closed for presidents' day so it is not as exciting as it could have been last week. and investors really taking encouragement of pboc measures. this is "bloomberg." ♪

francine: this is "bloomberg surveillance." francine lacqua here in london, tom keene off for presidents' day. a lack of weaker reforms in a

bubble economy is hindering global growth. >> we expect it to be notable, yes, because to date, china is sharing the world economy is quite significant, measured by 19% of the world. china's tourists are very important part of the tourist industry. every dollar from tourists comes from china. month of reduction in activities, inevitably would have an impact on china, and some of it would be translated to the rest of the world. again, we need to give it a bit of time.

on the more positive side, we see china taking very aggressive measures both in terms of containment of the virus, domestically, but also in pouring liquidity into the of $15, the equivalent billion from people's bank of china, cutting interest rates, driving stimulus already in the direction of affected regions. herest important message is actually a broader message. we do live in an era of uncertainties. tensionsaw of trade and the coronavirus hits. yousef: i was going to follow up on that. you're just coming off the back of these trade tensions, now you have the coronavirus to deal with.

what kind of tools are you looking out for a potential synchronized response to navigate the downside of this? >> we very much value the fact that when 2019 shaped up to be the worst year due to the ,inancial crisis, central banks true, synchronized rates cut and more monetary easing, what they had done is the equivalent of half a percentage point boost. we also saw some fiscal measures , boosted coming from countries that have fiscal space, and used it. way it is missing is a more upswing in structural reforms. that ifwhere we expect

there was to be more attention, it should go. monetary policy space is shrinking. the reliance on fiscal measures as well as on structural reforms to boost growth ought to be stronger. francine: that was the imf managing director. in china, the annual meeting of parliament may be delayed because of the coronavirus outbreak. that hasn't happened in decades. congress is set to convene on march 5. macau willcasinos in be able to resume operations on thursday. the u.s. says it is confident russia will be able to complete stream pipeline to germany. has a sale top

germany for buying russian gas while it benefits from u.s. military protection. the u.s. ambassador to germany 5g vendor risks aligns with the u.s.. european leaders have pushed back at u.s. demands that they ban huawei from their networks. the man who is chairman of securities and exchange commission during the 1987 crash has died. his off-the-cuff remarks may have fans panic. he ran the sec from 1987 until 1989. last sectionn the of the insider trading. back to you. money managers are out with their latest holdings from

the third quarter -- fourth quarter. global equities it rapped out there best year in a decade. here to wrap up the filings is dani burger. restraint for these hedge fund managers was the overriding theme. mostly, these big managers just me -- need small tweaks to their portfolios. the two most added shares was just plain vanilla. already gained 20% heading into the fourth quarter. warren buffett's berkshire hathaway really no exceptions here. a few trends to its banking stock. it took a relatively small position in biogen, but a bigger stake in kroger supermarket. 2% of its market cap. we can see it made the shares gain.

kroger gained nearly 6%. the tech darlings. when it comes to alibaba, here is the total aggregated amount added. they boosted their stake, but tiger global/there's. some also drew interest. interesting and popular bets of the quarter was uber, really one of the only stocks to be at the top. the hedge funds added the equivalent of 6% of its market cap. more cash was piled into a uber than facebook, tesla or apple. francine: thank you so much. when you look at some of the earnings outlook and this goes back to the filings, but just in general, are you worried about some of the valuations we are

seeing out there? maria: in one word, no. francine: into words? maria: liquidation has definitely gone up. tech is one of very few areas in the market where fundamentals are actually decent. it is very hard to find and other sector where fundamentals are quite good. the trade-off investors have to make, do they want fundamentals or cheaper price? that growth is stocks trump. we think it will continue as long as interest rates stay low. interestcussed so far, rates are probably not going higher substantially in the rush. might have a little bit of reprising, but not much. to go back to the tech question, fundamentals are great. we believe that fundamentals,

better fundamentals will dominate and tech stocks will continue to outperform. francine: there used to be correlation. now, it seems all bets are off. when do we go back to some kind of normalcy in terms of correlation? marija: i think interest rates talk is that when we get enough inflammation -- inflation to worry central-bankers and they start raising rates, others carrying about financial stability, then we will go back to normal correlation. right now, market is addicted to this. it is dangerous, it is vulnerable. it is hard to see if liquidity will be withdrawn and the rush. it looks like we have to participate. francine: i don't know when we will ever normalize interest rates. is this just creating secondary effects? all, normalized

interest rates means back to interest rates where we used to be some 10, 15, 20 years ago. that will take time. of course, we have a bull market in equities, which is probably the least enthusiastic bull market we have had and the long, long time. markets and people are always questioning, can this last, can this last? as a result, outside some pockets of tech, we just don't have this excessive euphoria, which is the hallmark of a market close to a peak. as we lacked the euphoria, and to have an economy growing normally at interest rates that are staying reasonably low, we probably have balanced a little more upside. francine: is this not euphoria? hitting chinas

where we don't know the second third effects of what hits. >> i don't think euphoria is the right word. markets are placing the bet that the chinese politicians will eventually throw enough stimulus that it to dampen the impact this will have on the global economy. there will be losses in china, which are permanent, significant, to possibly devastating. the impact on the global economy, which runs through industrial supply chains is unlikely to be lasting. you can sort of bet that from now on, we will not have anything in global industry that is still disrupted by corona. the economic outlook is ok, recession is my get coming, markets are not euphoric, hence, more is unbalanced

downside than upside. francine: do you agree with that? see a downturn, unclear how they will deal with it. marija: i think what central banks have shown during those 10 years, increasingly ingenious are finding new ways to deal. worried, veryry uncertain, it will create inflation. in europe, when we talk about suspect there's probably a lot more imagination that central banks can put into it. what is very interesting to me is that one talk declines, lots of people agree to the slightly more positive outlook, but very few people put large positions back to work. dani burger was talking about restraint is probably true. that probably explains a lot of

this kind of why we can continue going higher, because markets are not overly invested in interest rates quite yet. people are somewhat positive, but i would doubt there are a lot of investors with very extended submissions. that probably speaks to why we didn't have a big fellow. francine: thank you so much. coming up, we are going to rip each other apart. those are the words of the french foreign minister. we will discuss the you k's brexit talks, next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." over to the u.k. where the chief

brexit negotiator were set out britain's goals over its future relationship with the eu in the speech later today. boris johnson says the u.k. isn't seeking special treatment, but once a deal similar to those eu's otheruy the countries. hogart and with marija:. what are the chances of actually getting any deal at all by the deadline, the end of the year 2020? veryt: it will be difficult. boris johnson saying the u.k. doesn't want special treatment. that is probably the first time in four decades. the problem is that they will get special treatment from the e.u.. andanada, you're far away

care about subsidies who might have an advantage over europe. the e.u. cares a lot about the level playing field relative to a country that is very close, next door, and hence, the eu will not offer generalist terms that it would offer too far away countries to u.k., which has said from the very beginning under johnson that it wants to deviate from eu rules, where the risk of a singapore upon thames is there. the other question we need to ask ourselves is, does boris johnson want to leave under dp uto agreement -- under wto agreement/ -- agreement? holger: i don't think he does. the canada minus will probably not be ready by the end of the year. few negotiations afterward.

marija: i don't disagree, substantially. i probably say that i expect we will have -- it will be a bit like u.s.-china phase one. we will definitely have a deal for publishing newspapers. it will be a very skinny deal with a few interesting points. wtoralia trade founded also. there is no austral you deal. francine: what do we understand? whatever these deals are, what do we know? we could talk in theory, but by what he said, is he willing to go wto? marija: really looking forward to your the u.k. negotiating stance because so far, we have heard, we want frictionless trade and we want to deviate and

great freedoms to mutually exclusive objectives. to hear the negotiating position would be very enlightening for the market. i think so far, market has very little clue. before the actual passing of brexit and withdrawal, we were looking forward to some clarity. francine: what does this all mean for the bank of england? holger: it should mean it will stay on hold for the time being and see how the balance of two things, brexit uncertainty and this massive fiscal stimulus workout, given what johnson has done recently, it is highly likely that whatever the uncertainty, the fiscal stimulus could cause the bank of england to hike rates sometime later this year. francine: that is a pretty interesting conversation we have to continue. coming up, the democrats are

campaigning and raising money in advance of being in the nevada caucuses on saturday. we will discuss which candidates have -- that is coming up next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i'm francine lacqua here in london, tom keene off for presidents' day. the next battle in the democratic primary is just days away. bernie sanders holds a comfortable lead in the latest polls. for more, we are joined by our bloomberg international executive manager. questions,llion first, why's it so unclear who gets the democratic nomination? >> because these don't always tell us a lot. these are not very many delegates up for grabs. when we get super tuesday and much bigger stakes up to for

grabs, we could see it go to a contested congress. in july, you could have the democratic meeting and then only decide the candidate at that point in time. workemocrats are trying to out what kind of candidate can be trump. who can they put up and who has the best prospect of beating donald trump. is that someone complete polar opposite, or someone in the middle who can drag some republican voters over. francine: do we trust the polls? if you are a democratic voter and you just think -- i want president trump out of the white house, is it tactical voting? how do you choose? in this era, it is difficult to say that you with full confidence trust polls because they have been wrong. there are many voters outside in -- the polls they would say the way to be donald trump's to come out him head on in terms of the economy because that is where you really need to weaken his support is on the question

about his running of the economy. francine: when do we actually find out who the democratic nomination is? rosalind: it may not be into the democratic congress in the middle of the year. the field will narrow. you could go in with two candidates at least at that point, which could be perhaps bernie sanders as the candidate center,eft and the where we have a lot of people jostling at the moment. the entrance of michael burns berg -- bloomberg into the equation. you can see they are starting to attack each other. francine: you all already know, but michael bloomberg is a founding member of the parent company bloomberg lp. marija: i think the market has taken of you. let's pretend it is not happening it. let's wait until super tuesday,

see what is happening on the naked decision. so far, -- and then make a decision. francine: what does it mean for the economy? if the economy is strong. as president trump just a two-term president? holger: the economy in the u.s. is doing ok. i don't think this election will be decided on the economy. we have to wait until march third for super tuesday. inm the market perspective, a way, the most important thing is whether or not congress will divide because whoever is in the white house, as long as congress is divided, we know that in terms of domestic legislation, not much would happen anyway. in that sense, as long as congress days divided, the election may not be such a big issue for market i sometimes

people suggest. has president trump just been campaigning from day one through twitter feed? rosalind: pretty much so. we can see if he has been casting himself as the guy to get stuff done on the u.s. economy, jobs. things like standing up to china and making america great again. that is a pretty powerful message for many voters in america. francine: thank you very much for joining us. european stocks are rising. yen and gold both dipping. we are looking at the coronavirus impact. this is bloomberg. ♪

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♪ >> from our european

headquarters in london, i'm there vucevic. happy president -- i'm nejra cehic. happy president's day to those of you in the u.s. futures in the u.s. point to a higher open, although the stock markets are closed today. that means there's no cash treasuries treasuring -- no cash treasuries trading, either. cable on the back foot ahead of an address by the chief brexit negotiator in the u.k. later today. a little bit of a retreat in the yen, and the aussie has moved higher following the cut to the mlf rate in china. promise of fiscal stimulus giving a bit of a backstop. onto coronavirus. it continues to spread in china, with a number of confirmed cases in the country climbing above 70,000. now china says it is considering delaying its most high-profile annual polit