to the thriving market and exchange rated funds. -- next 30 minutes will be your guide to the thriving market and exchange rated funds. francine:francine: as germany extends virus restrictions and the u.k. enters another lockdown, what will europe's economic -- we will discuss what it means for investors. the trillion euro market. as euro etf's cross a milestone, we will keep growing in 2021. a strong start to gold, and unwinding of etf holdings because a major headwind. let's get to our top story. democrats have taken one of two georgia senate seats with raphael warnock ousting kelly loeffler. democrat jon ossoff is leading the other crucial race.

a runoff will determine control of the u.s. senate and the fate of joe biden's presidential agenda. what does this mean in terms of how much stimulus we could see if the senate goes democrat and how quickly we could see it? i think that the number one thing if democrats are actually able to take control of the senate -- add right now -- and right now it would rather be democrats and republicans -- they run the agenda. mitch mcconnell has resisted putting $2000 stimulus checks on . democrats have wanted to thousand dollars stimulus checks. i would expect that democrats would put on the senate floor exactly what they want if they get the majority. you could be seeing some bigger relief packages coming down the way. what does itrall, mean for joe biden's presidency?

extra stimulus? how much more can this president get on with what he wanted to do? welle biden those really the bad things that happen if you don't have a senate majority because he was vice president when barack obama tried to get a supreme court justice nominated the final year of his term at republicans did not even give him a vote on it. when you hold that agenda, the nominees is huge. senator mcconnell did with a narrow republican margin. budget reconciliation, democrats actually have a lot of things they could get done even without republican help on financial issues, maybe some tax issues and things. that is another thing that i would watch out for. you watchingt were out for for the first 100 days? will president-elect joe biden

make a big deal that he is to act quickly? derek: the first thing that i'm looking for is, again, if democrats have that majority in the house and senate, i'm looking to see what of the trump agenda they want to get rid of. the majority in both sides opens the ability to overturn regulations that were made in the last little bit of trump's presidency, so watch for something like that. i'm going to watch what biden does in terms of positioning with foreign powers, specifically china but also saudi arabia, and, candidly, britain and the e.u. keep in mind ireland has not has a good of a friend that will in ainto that spot generation, multiple generations, and so that is going to be a delicate thing in as that goesit

forward. so i think in terms of where biden positions different than trump come on the world stage that is going to be really big. policy wise, look at infrastructure. biden wants to get something done on infrastructure. it has for years been stuck on how do you pay for it. that is i think the one big thing policy wise that people are really looking out for. francine: thank you so much, derek wallbank with the latest on the georgia senate race. let's get to andrew jamieson, global head of etf product at citigroup. thank you for joining us for the first edition of the show in 2021. if we have a democrat senate, what does it mean overall for markets and therefore for etf's? clarity wehink any could get at this stage would be welcome. there is a lot going on in the world and when that happens there is a lot of volatility. bad etf'slked that are often a barometer, often

with persistent exposure and flexibility. hopefully one would anticipate when we get some clarity after this long, drawnout u.s. election. hopefully we will start to see some normality come back into the markets and some sense of a sigh of relief, perhaps. francine: what does normality look like, and what does it mean for fixed income etf's if we have a lot more stimulus from the democratic president of the united states? it in: normality, i put context. clearly with covid there cannot be any real normality until that gets resolved as well. and obviously here in the u.k. and europe we are just coming through this last gasp brexit deal, albeit with limited impact from financial services. there is a huge of for everybody to absorb, try and make sense of everything.

in terms of what we have seen karen leigh over the last couple of years is a growing adoption for the professional fixed-income investor community and using etf's and continuing to use them on a number of growing basis, and i expect that to continue and for us to see etf's at the forefront of how people are deploying whatever their risk sentiment is as we start to get some clarity, and hopefully that sense of normality. francine: what do you expect the etf space in europe to grow, by how much? again, is it fixed income etf's? is it affects etf's? is it something else that you think will make a large part of what we see in 2021? in 2021 fixedk income will certainly be a strong component. equity etf's took more market share and flow last year, so they certainly had a very strong part to play.

i think in terms of the big themes we will see, there will be continuations of what we have seen in the past year in 2020. i think those big themes are esg . i think we will see that continue to be increasingly investors, andl i think certainly more on the , that hasype of etf's certainly been a big growth over the peace and something i think that will continue. francine: andrew jamieson will stay with us. now dani burger has details. dani: this tracks european tracking funds where the flows are going, and yet again over the past five days we have seen another week where all of the drama, all of the flows are really concentrated in the u.k.

if you look at the net flow value, it is $446 million, but the u.k. focused funds, 534 million dollars worth of inflows. when it comes to the u.k., the brexit deal was reached at the end of the year. we saw the top flows in europe coming from two u.k. funds. one was the ishares ftse 100 etf. the second biggest one was a vanguard mid-cap index. will those flows last now that there is increased lockdown through the entirety of the u.k.? that is the question we are going to be asking over the next few weeks. when it comes to the rest of continental europe, not a lot of action there. pretty thin outflows, out to 56 million dollars coming out of german tracking etf's. we get another week where it is all about u.k. really. u.k. etf's in december got more than $2 billion worth of inflows . the question again -- does

economic change in the u.k. -- does a threat of a double edition change -- of a double digit threatened that? holdings inming up, etf's are nearly 3.5 times equal to the year's mine supply. could that drive the gold price lower in 2021? more on that next. this is bloomberg. ♪

francine: this is bloomberg etf iq europe, everything you need to know about the funds and the flows. i'm francine lacqua. a strong start to the year for gold. u.s. inflation has added to demand, boosting its appeal over things like treasuries. golduld be enlarging

holdings as etf's prove a had wended 2021. eddie get to our editor van der walt. etf's have become increasingly important for the gold market. as you said before the break, they hold about 3300 tons at the moment, which is about 1000 $10 we have seen in the etf come every year holdings fell, gold prices fell as well. it is a bigger swing factor than the futures market at the moment. francine: does that mean it could trigger a selloff like we saw in oil last april, or is it a wildly different market? eddie: the oil selloff was spectacular in the gold etf's are important, but they are

very, very different beasts. the oil etf's contract are mostly backed by futures, whereas the gold etf's are backed by physical bullion. there is more of a connect between the actual physical gold is also much easier to store. if gold looks anything like it is trading negative, people will be queuing up outside the warehouses to take delivery. it is not as hard to store as theis, and therefore opportunity for gold to actually go negative is almost zero. francine: i cannot let you go without torturing you with a couple of questions on bitcoin. it was down, now it's up. what's the latest? and it iscoin is wild probably going to be wild one way or another this year. a big swing factor could be if we actually see the etf launch there. i also spoke to a market source

this week who said he is etfking about launching an so blockchain companies, there is a lot of interesting movement in the space. it is definitely something that could develop this year. us, andrewtill with jamieson of citigroup. what is the role of gold etf's right now? andrew: i think gold is an important asset class in its own right. it is always seen a -- it is always seen as an safe haven. it has been an easy vehicle to use to accumulate gold. as eddie mentioned, they are physically backed. it is much easier to trade a stock rather than to hold physical gold. so it plays an important part for people who feel they need

that safe haven. there has been a lot of influence with gold recently. i think reflection of the covid van and the -- the covid pandemic, it is not surprising that there is a lot of activity going on in gold etf's. francine: is there too much activity, is there such a thing as too much activity? would gold etf's completely change the price of somebody gets out of it? andrew: i don't think it represents a meaningful portion of the overall told market. there is a very well-functioning redemption process that surrounds it, so etf's, there has not been an issue with regard to that. i don't foresee any in the future. francine: thank you so much, andrew jamieson from citigroup stays with us. investors spent big on smart beta. the biggest inflows on record -- we discuss that next. this is bloomberg.

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francine: this is bloomberg etf iq europe, everything you need to know about the funds and the flows. let's take a look at these smart beta winners and losers over the past month with dani burger. dani: it was a really big month for smart beta etf's. at nearly 11 billion euros in the month of december, they saw record inflows. it has really driven all by esg. let's look at what they look like over the past week. this is to end the year and a little bit of 2021, size and value both doing very well. the first and third biggest inflows over the past week. despitepening trend more and extended lockdowns in europe. looking at small-cap values, looking more economically sensitive funds. but a little bit different from that is low volatility. low volatility had a really bad 2020. it swung more than the overall market and it is not supposed to

do that in a volatile environment. asideof investors cast lowball, but in the final week of the year it got more attention, seeing $75 million for is up inflows for the european listed market. in terms of outflows, it was really quiet over the past week, all about buying funds positioning year end for 2021. we did not see a lot of selling. the only strategy we saw sold there was quality, using $17 million with the flows over the week to january 4. esg and growth are both flat on the week. esg has had a banner 2020. it is hard to overestimate how well esg did in terms of garnering interest for the entirety of the year, so maybe that is why it was flat. perhaps people have allocated so much, there wasn't anything additional they needed to add. that is a record year for esg in 2020 despite the fact that it didn't see any net inflows for the past week, francine.

francine: let's get back to another of our top stories as we start 2021, and it is of course virus vaccines at the outlook for the global economy. solomon, goldman sachs' chair and chief executive spoke about getting people vaccinated in the hopes of emerging from the pandemic on the other. >> the toughest task of the new administration is continuing to march forward to make progress to get the vaccines distributed to so we can get to the other side of the virus. there will be a lot of discussion about what additional stimulus is needed. we have raised a bunch of issues here this morning, trying to get people focused on what we think needs to be included in any additional stimulus that is brought forward. the big focus is we have got to get people vaccinated and we have got to get to the other side of the virus. francine: still with us, andrew jamieson of citigroup. when you look at vaccinations, the pace of the recovery, how are you expecting etf's to

actually deal with that into the next 6, 7 months? andrew: i think we are already seeing it. you are just mentioning about the second generation of passive investing, trying to filter out certain attributes. and be very factor focused. we have seen that in terms of when the initial euphoria of these vaccines coming out, we saw that great rotation and growth stocks that have been doing so well inside of the e-commerce economy, versus more traditional value stocks that you mentioned are more economically sensitive. we are certainly seeing the use of smart beta, we are certainly seeing the etf's being deployed for people to take advantage of this evolving situation. smart beta is often viewed as that halfway house between passive and more traditional active investing, and it is possibly more cost effective. it is risky.

you will certainly continue to into 2021.ogressing the other thing that we are seeing significant interest in is that concept of thematic ofesting, filling the void possible dissatisfaction with more traditional asset funds, optimizing the entrepreneurial spirit. this is something that my colleagues got for quite a while now, the natural evolution in trying to get more effective alternatives. so i think we really expect a range of products to broaden in that thematic -- in that schematic universe, and certainly overly with this esg trend that we are continuing to see. so an exposure that prospers, if you can use that term, such as e-commerce, computing, robotics, or as we have seen in the u.s., in particular health care innovation. i think that will be a big trend in 2021. francine: when you look at some

of the things that were big in 2020 -- esg, digitization, maybe some medical related etf's, is that what will grow the most this year? willw: yeah, i think it certainly take a lot of inflows. you've got to look at it at in a comparative basis. do the negative funds take a lot of inflows, and proportionally they may be the dominant part of the flow? but i think the growth of the market in terms of new launches and what is coming in 2021, i think thematic and esg will definitely be to the four. i think the adoption of esg has taken things by storm in the last year. but in europe and the you just -- and the u.s., it has doubled. and also the european phenomena, the fact that the u.s. has caught up so rapidly, has really taken a lot of the industry by surprise and is opening up a new frontier in the sort of traditional etf battleground. i think that is really the front that all the issuers will be

fighting in 2021. you can see that as the evolution of the fee wars, or the arguments that have ranged over synthetic versus physical in the past. it is certainly going to be an exciting and interesting time to see how different firms tackle this challenge in different ways. francine: how much more transparency will we actually see in investing? andrew: that is a great question. i think today it is still very much a relatively dated process. we are still looking at first generational product, they are looking very much on an .xclusionary basis i think we need to move on to governance and impact investing. these innovations are coming, but it is how the industry can find and pace to embrace these changes and make sure they stay in tune with investor demand. soncine: andrew, thank you

much for joining us, andrew jamieson, global head of etf product at citigroup. that is it for this week public berg etf -- bloomberg etf iq europe. we would be back wednesday at time..m. london we will have dani burger looking at the funds and the flows. plenty more on etf's, right here on bloomberg. ♪

francine: the senate in the

balance. in georgia, democrat raphael warnock defeats republican kelly loeffler, and jon ossoff currently leads republican david purdue. the gop could lose control of the senate. beijing tightens its grip. hong kong police arrest around 50 people, including a prominent american lawyer. it's the biggest crackdown yet under china's controversial national security law. and boris johnson says one person in every 50 in england has covid-19. it comes as chancellor angela merkel tightens germany's lockdown to contain the outbreak. good morning and welcome to "bloomberg surveillance." i'm francine lacqua in london. tom keene is in new york. tom, i know you have the ins and outs of politics of the georgia senate race. i would point to what is happening with treasury. we have some interesting calls not only from columbia threadneedle about the 30 year longer-term but also what could happen to the 10 year treasury in the short term if we do see a blue wave.