labor market. european markets trend lower, while asian trade is curtailed by the lunar new year holiday. well, president biden says the united states has clinched deals for 200 million more vaccine doses and enough supply for all americans. the majority of adults could be vaccinated by the end of july. and the british economy shrinks nearly 10% in 2020. that's the worst yearly performance since 1709. rishi sunak says the u.k. shows signs of resilience. good morning, everyone, and welcome to "bloomberg surveillance." i'm francine lacqua in london, tom keene in new york. tom, first of all, happy year of the ox. i know it starts today. we look at the stock market, the number of volumes out there. we are not seeing a lot of volatility, but if you look at the volumes it could be symptomatic of frothiness in equities. we have breaking news. this is bloomberg, a story

originated back to 2010 when the u.s. department of defense and thousands of its computer servers sending military network data to china. the story crossing the terminal, called the long hack, how u.s. investigators found tampering. joining us now on this breaking story is our bloomberg editor-at-large, marty schenker. exactly what did we find out, and will this make u.s.-china relations even more difficult? marty: mike riley and george robinson, our reporters, have been working months and months cracking down sources and finding out that there has been, for the last decade, an investigation that involves the fbi over the tampering of computer chips and motherboards

made by supermicro. it is important to note that there is no indication whatsoever that supermicro had any knowledge or complicity in this. there is no sign of wrongdoing there, but we have 17 sources who say this investigation has been underway for the last decade. francine: what does it .2? these are distinct attacks. where they all laughed -- what does it point two? these are all distinct attacks. marty: one thing is common, and that is the information went back to china. so it does raise the very important issue of supply chain integrity that even joe biden has mentioned is going to be of primary importance in his administration. tom: marty, ask for joining us

on a friday. this is a follow on story from x number of years ago. the key to station i see is the idea of a trail of institutions and law enforcement in the united states poking around. there is a lot of criticism about the story, a a lot of pushback from china, even from amazon and apple with the previous story. but the distinction for me is the amount that we chronicle, law enforcement involvement. what are they doing? marty: they are actually trying to trace back to the sources of this hack to find out just what methods and what information was accessed in these breaches. you know, investigations oftentimes are never made public. this one was never made public. in order for the investigators

to dig deeper. tom: to learn their processes. i get that. go ahead, please. marty: i was going to say that it is also important to note that while this traces right back to china, this is done by the russians, it is done by the united states. so this is a world in which everyone is trying to gainre ou. tom: our reporters have spent their time on this. it has been a major focus for years and years. are we any smarter now than when the story broke years ago? for anyone -- can anyone watching this program say i am on the server or am on the amazon cloud or whatever, and maybe i am more knowledgeable that these chips that send data back to wherever are not on those boards? marty: i think that is an

extremely important point to make, tom. it depends on every company. they have never stopped purchasing supermicro products and all kinds of sensitive places like the u.s. pentagon. and it is really unclear individually where packs are taking place -- where hacks are taking place. but this story and others have pointed to this whole supply chain issue over the years, and we have become much more aware of the risks. francine: marty, is there any information about what they are trying to gather? is this espionage -- is it at the margin like political espionage, or is it purely corporate espionage? marty: it could very well be both, and it is unclear from our reporting so far exactly whether there is a common thread to all these hacks on what they are

trying to access. but it is wide-ranging. it is in private and public networks, and, you know, it has been going on for a decade. francine: does the u.s. do the same? marty: i mean, this story does not address this, but it would be highly -- it would be malfeasance if the u.s. was not doing it. you assume that nationstates all over with computer capabilities are doing the same things. tom: the delicacies here go to a two hour conversation with the presidents of china and the u.s. the other day, and i believe taiwan came up in the conversation. this is about china, beijing, but also about the supplier based out of taiwan. what is the delicacy here that the americans, san francisco based supplier, is involved with taiwan versus china and their

espionage? marty: taiwan come as you know, tom, is a major supplier of computer chips, which are now in short supply. the relationship between china and taiwan and the united states at its core from a commercial standpoint is about the semi conductor industry and how supplies reach the rest of the world out of taiwan. it is a very delicate and major issue. francine: thank you so much, marty schenker, bloomberg editor-at-large with this important story. supermicro says these allegations are inaccurate, and it has not been accused of any wrongdoing. you can find that full story that came out minutes ago on the bloomberg terminal, and of course on our website. let's get straight to the bloomberg first word news with ritika gupta. ritika: house prosecutors have concluded that convicting donald trump in his senate impeachment trial. they say they have proven that

the former president an insurrection, when a mob of supporters stormed the u.s. capitol. trump will -- the trump team will make its own case today, producing video. the house committee has approved the $1400 payments to millions of americans. those checks will be part of president biden's 1.9 trillion dollar coronavirus relief package. the panel also located tax credits for children that will be mailed out on a monthly basis. the u.s. has wrapped up a deal for 200 million additional seen doses from pfizer and moderna. president biden says that will give enough supply to inoculate all americans. the u.k. and the european union are still locked in that standoff over northern ireland. the brexit deal effectively kept northern ireland in the e.u. customs union and single market, and it imposed checks on goods

moving across the irish sea to great britain. some in the conservative party are seriously opposed to that. global news 24 hours a day, on air and at bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries, i'm retaken. is bloomberg. tom? tom: let's look at data on the friday. it is a swirl come a turn, ms, edit has been an interesting nuanced week. i am going to call it fractional, s&p futures -10. the vix has not moved in three weeks. yield income of that is a big story. short-term yields -- i have not done the math yet. i'm going to do it on the break. two year yield, .1070. i'm looking at brent crude, 16.71. what have you got? francine: you're right, the vix is not moving, but what is really moving his u.s. volumes. trading in u.s. equities -- i know you don't like the word frenzy, tom, but it looks like. it shows no signs of abating,

and goes to levels in march. it gives you an idea where valuations could go. global stocks sliding. i'm looking at oil futures falling for the second day, dollar strengthening. coming, david rally, -- david riley, bluebay chief asset manager. looking at all the optimism, borrowing without giving back for 100 years. we will talk about that shortly, and this is bloomberg. ♪

francine: this is "bloomberg surveillance." of let's talk about the market, talk about the reflation trade, but also some

of the european stories out there with david riley, lupe asset management -- bluebay asset management chief of investment. with all of the optimism, mario draghi finally being confirmed, bringing all these foreign political factors together, there is a suggestion that he should just go for the optimism, have a 100-year bond in italy. if you did -- if he did that, would you buy it? david: i would take a look at it. i want to see what is going to be the program of the new government. hopefully mario draghi is in the right place at the right time, but i think the government will have quite a narrow agenda but a very important one, which is to effectively that the 200 billion euros or so that will be received over the next few years on the e.u. recovery and next generation budget. this is a crucial opportunity, i

think, for mario draghi and global italy to try to boost growth. if it is a credible program, borrowing in order to help fund some of the program in addition to the e.u. funds it will be receiving, then i think italy, the italian assets in bonds would look pretty attractive. but right now, given the rally that we have had, we were buying btp's back in april when the spread was in excess of 250 basis points over burns. the current spread is not so obvious that this kind of reward makes it a compelling sort of investment at this point in time. it will be interesting to see what a program of this government is going to be. francine: david, is there anything else in europe that looks attractive? politically, europe -- there is

a presidential election in france in 2022, we have german elections coming up in the fall. is it just a riskier region to be invested in? david: it is definitely not too risky to be invested in, particularly with fixed income and credit. i've said this before, and i know it has become a bit of a cliche, but when the ecb is buying billions of euros of corporate bonds, every month, that is providing some backdrop. i think the interest rate risk, the duration risk, which is a risk in the u.s. because i think there is more chance of a proper reflation, if you like, doesn't exist within europe. valuations were generally across the market, you have to look quite hard to find the sort of positive convexity, if you like. i think that will be an

opportunity by european banks in some of the corporate hybrids, and playing some of the shape of the curve as well, for example. tom: david, some of the moves -- and i will target november 6, the biden election, and you may have a different date -- put some of these moves are extraordinary. how do you reposition a portfolio after so much success? david: well, you have to have your investment thesis and then, you know, look to invest in those lines and take into account what is happening in terms of valuations, what is happening in terms of market price action. but don't get -- don't try to adjust your portfolio, some of the portfolios that we have on a daily or weekly basis. all you are going to do then is

incurred quite a lot in the way of transaction costs. we are probably transitioned, and we have been before november, before progrowth recovery happened. so we do think that we will see pressures, value between high-yield and investment grade. we have seen a lot of that play out already. we like cyclical assets, assets like emerging markets as well, dollar credit, as well as emerging market, local debt, convertible bonds. you have some -- you face some hedges on if you think the market has gone a little bit complacent or -- tom: give our audience an example of the yield pickup of bancshares or conferred a bonds. it has to be, what, 400 basis

points the echo david: you can get -- basis points? david: banks like santander for example, that is we think providing value that is still actually being priced at a greater credit risk and a much lower rate than european corporate borrowers as well. and if you look again at things like emerging markets, emerging-market credit performed very well, but again, it is trading at a sort of historical premium against u.s. credit in terms of high-yield. so you have to look around, look for the value. there is a dispersion within the credit market. you can still pick up some

value, but you have to work harder at the evaluations, and i think that is one of the biggest concerns, that valuations are, generally speaking, at levels where there is not a lot of cushion for the sort of bad news, if you would like. with the reopening of economies. francine: what is issuance going to look like in 2021? david: i think in terms of issuance of corporate bonds, we are expecting issuance to be less than it was in 2020, which was a record year as companies borrowed to offset the cash flow shortfalls for government mandated lockdowns. that being said, it is also the case that the sense that i have from a credit perspective is that we are hoping the companies will continue to focus on producing levels over the

leverage that we have, but with yields and spreads so tight, you know, and a lot of private capital on the sidelines as well, we might have some companies that start shifting to a more sort of shareholder friendly rather than credit friendly behavior. but broadly it speaking -- broadly speaking, expecting huge amounts of sovereign borrowing. in europe by the european central bank obviously, and in the u.s. i think the treasury market will have to continue to observe a lot of federal borrowing. tom: david riley will continue with us, from bluebay asset management. futures at negative nine, dow futures at -67. i am going to call it a turn to the market. -- h schoen to the market full -- i will call it a schoen to the market.

this is bloomberg. good morning. ♪ want to save hundreds on your wireless bill? with xfinity mobile you can. how about saving hundreds on the new samsung galaxy s21 ultra 5g? you can do that too. all on the most reliable network. sure thing! and with fast nationwide 5g included at no extra cost. we've got you covered. so join the carrier rated #1 in customer satisfaction. and get a new samsung galaxy starting at $17 a month. learn more at xfinitymobile.com or visit your local xfinity store today.

ritika: this is bloomberg surveillance. i'm ritika gupta with the bloomberg business flash. a surprise fourth-quarter profit for disney, posting a surge in disney plus streaming customers. a loss of the theme parks has

crippled that has been crippled by the virus. 1.2 million disney plus customers shows that the shift is paying off. a sign of how the pandemic is hammering the travel industry, revenue plunged 67% the final three months of the year for expedia. the ceo told analysts expect it to be bumpy for a while. a company catering to women and led by women has made the 31-year-old female founder a billionaire. bumble founder whitney wolf. that is your bloomberg business flash. tom: thank you. on bumble, women make the first move. we are leveling the playing field and changing the dynamics of dating.

i will say, with a stock move price like that, francine. are you kidding me? francine: i have a friend who works for a friend who works for bubble, and i have not asked her if she is a millionaire yet. if you look at the fashion, the retail -- it is basically selling to women who have in the last 30 years have more of an income and more to be in control, it is amazing to see on the first day of the ipo how well it did, tom. tom: on bumble, women make the first move. we are leveling the playing field. francine: tom can't believe it. tom: i'm not on bumble. francine: this is bloomberg.

>> last year our economy experienced a significant shock,

and while there are signs of resilience overwinter, what is clear is many families and businesses are experiencing hardships. francine: that was the u.k. chancellor of the exchequer discussing the economy. if you look at gdp over the year , the worst is 1709. i do not know if tom keene has a chart that goes back to 1709. i would point to the fact that if you look at what the economy did in the fourth quarter -- it is not bad. we are back to talk about the u.k.. there is a bad figure, 9.9% contraction, but the fourth quarter when the economy was open was not that bad. you expect a huge bounce back and what does that mean for the u.k. market? david: it is likely we will get

a contraction in this quarter. whatever -- while the fourth quarter was better-than-expected i think it is likely the u.k. economy contracted in the first quarter of this year. thereafter i think we will get a strong recovery in u.k.. it will still lag. clearly the united states recovery but even relative to larger parts of europe. there is light at the end of the tunnel. the u.k. is benefiting and will benefit from the successful vaccine rollout, and then the border reopening. in terms of sterling, in terms of u.k. assets more generally, i think there is further upside. the u.k. is a devalued market.

a shift in rotation from investors globally to value asset. if that gathers pace you would expect u.k. assets to do quite well against that backdrop of equity. you would have the big headwind for the u.k. economy. as you have been reporting at bloomberg, about the impact of the post-brexit relationship with the eu particularly with financial services. within financial -- tom: within financial services, with a run on the banks we have seen in the united states, are we going to see the same equivalency in eu banking? david: i think it is more challenging for european banks because the interest rate environment is a much flatter yield curve in europe then compared to the u.s..

that hinders european banks. fundamentally there is a bigger profitability challenge. that being said, we are talking about value. the deepest of value is from european banks. i still prefer european bank exposure than i do as a shareholder -- as a creditor than i do as a shareholder because there are too many banks in europe and there needs to be consolidation. i still think european banks will be liking the u.s. for some years. francine: thank you so much, david riley bluebay asset management chief investment strategist. now let's get straight to the bloomberg first word news. ritika: house democrats spent three days trying to show why donald trump should be convicted over the storming of the u.s. capitol. now it is time for trump's lawyers to make his case. they say they will need only

four hours or less. one of the former president's lawyers dismissed the democrats video heavy presentation. he accused them of using it for entertainment value. u.s. -- has plunged about 16% this month, now the lowest level since mid-november. arizona, new mexico, utah, and california led the decline but hospitalizations in new york rose 6%. donald trump reportedly was sicker with the coronavirus than anyone publicly acknowledged at the time. according to the new york times it was so bad officials believe the former president we need to be put on a ventilator. he was said to have had low load oxygen levels and a lung problem associated with pneumonia. president biden's victory is leading to consequences for wall street. regulators are scrapping a trump era policy that critics say helped insulate firms with tougher penalties.

at issue are waivers financial institutions must obtain to protect themselves from sanctions. the agency will now make it tougher for firms to get the waivers. global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. i am ritika gupta. this is bloomberg. tom? tom: this march what we have done is try to bring you the best worldwide on this horrific virus. the story is simple. in america the story is not one, but does covariants that are the full attention of medical professionals in america. the conversation always goes back to the most qualified person in south africa to speak on this. years ago he was at king edward's hospital. it was the black hospital and he was in pharmacology. more than anyone in south africa he has firsthand knowledge the

heritage south africa has. francine: we are delighted. he was finance minister. we are delighted to have the cabinet minister, south african minister for public enterprises joining us today. thank you for being on bloomberg surveillance. a lot of questions about reopening the economy and how south africa deals with the virus, and then i want to specifically talk about the privatizations that could go on and some of the specific companies under your control. when you look at south africa right now, when do you expect the country to be able to deal with this horrific pandemic? >> good morning to both of you and thank you very much for having me. who knows, francine, about when this pandemic will end or what twists and turns it will take next. the whole world is grappling, like we are, with balancing

saving of lives and managing livelihoods and keeping the economy going to the extent one can in the difficult circumstances we find ourselves, also the closure of borders, the lack of access to vaccine in the african continent and others as well. the low production capacity for vaccine in the developed part of the world, and all of these issues will leave us in a world of uncertainty as we go forward. pharmacist cannot talk much about the variants, but what we have learned is not many

countries have the scientific capacity to map out the progress of the virus and detect the mutations the virus undergoes. it is only more recently we are talking about a french variant, a u.k. variant, and so on. i bet they have other variants that still need to be detected. it is a huge compliment to south african scientists that they hold their own amongst the scientific community. the economy is certainly making progress. francine: you are in charge of public enterprises and we have had many interviews in the past. over the last five to six years, all i have heard is south africa wants to sell non-core companies they are in charge of. when will that happen? is privatization of non-core assets still on the cards? minister gordhan: a lot of that

happened in the 1990's when this particular department was created as a speckle mechanism -- a special mechanism to deal with inherited state entities at the time. we then went through a period of state capture and production of a significant order in many of the key state owned enterprises. thirdly, we are in a period of reconstruction after the period of corruption. secondly, we will have, as the president announced yesterday, many instances in which private sector partners will be brought on board and minority shareholders or majority shareholders, depending on the assets we are looking at, thirdly, the private sector will be involved in major projects as far as structure is concerned that the president announced yesterday.

many of the bigger entities have to undergo quite a significant business model change as the market in which they operate change. energy being one example. aviation being the second. thirdly, in the logistic side. tom: i want to talk about the great fears of the western world on this virus. it is remarkable how at this moment on this friday everyone is looking at south africa. what does your nation need from the world bank? what do need from the imf? what you need from mr. malpass to properly attack the domestic virus question to help the rest of the world? minister gordhan: there is no doubt that what the world requires his support in the form of keeping the fiscal balances

right. secondly is to enable the support we are providing, both in the form of social grants, which the president extended yesterday by three months, but also for the unemployed. in our country 6 million people are unemployed at this time. they need all of the assistance they can. the multilateral institutions play an important role in that regard, but also ensuring flu facilities like the world health organization, there is a more even distribution of the vaccine across the globe. no country can isolate itself from the virus. this is a global phenomenon that requires a global solution. tom: president joe biden

announces another 100 million doses procured with the wealth of america. how would you and your leadership speak to president biden about moving the efforts of moderna and pfizer to south africa? what do need from president biden? minister gordhan: certainly backing in spirit, if not otherwise, to ensure those vaccines get to african shores. secondly, the minister of health and the ministry of health more generally has been interacting with all of the big pharma, pfizer, moderna, astrazeneca, and the institute in russia, and based on scientific evidence the utilization of the johnson & johnson vaccine and other vaccines as well. secondly is to ensure production capacity for investing.

thirdly, support for manufacturing capability on the african continent so we do not have a dependence on a few when vaccine supplies concern. and a commitment that this is a global phenomenon that requires both country-based solutions but also global solutions as well. francine: when will we have the final plan to reorganize f,? this is a huge issue for south africa. when you expected to be a thing of the past? minister gordhan: in the next three to five years this will become a thing of the past. let me inform you and your viewers -- firstly, in 2019, at the behest of the president we had a roadmap developed and that

roadmap is now being implemented . secondly, south africa has published a resource plan which sets out how much renewables and other forms of basic energy will be supplied. francine: what you think will be done now? we are familiar with what happened in the past. when will we have clarity with what happens to the debt, does it go to the government and will we know more in the budget this month? minister gordhan: you might not know we have a compact side with business and labor and communities in south africa where there is a commitment to resolve the debt issue. i would say the broad direction would be known in the next three to five months in terms of where the debt goes. it will not necessarily be a burden, there might be more creative ways of finding solutions. francine: tom and i talk about

the airlines that are under severe pressure because of the virus and lack of traveling. have you found an equity partner for south african airways? minister gordhan: we have three that we have identified. the board is engaging with all three. soon government will make a decision about which recommendation of the board we accept as an equity partner. that is hopefully in the next month or so. francine: thank you so much for the conversation. we have to speak with you very soon. minister pravin gordhan, south african minister for public enterprises. coming up, jenny yan will talk about the lunar new year and the year of the ox and what the lack of traveling in china at this important time for families means for retail. this is bloomberg. ♪

tom: getting you ready for a friday into the weekend. these interesting markets. futures negative five. one of the interesting things has been the recovery of china. there was a bloomberg news story this morning on china semiconductors chips, but mainly there is a discussion of the chinese economy. jinny yan is at icbc standard bank in china. we are thrilled she can join us. the gdp of china, is it sustainable at higher levels? jinny: at the current rate

things are looking quite stable. if we look at the components of gdp growth, net trade but also consumption and investment, the laggard has been consumption. it is only sustainable if all three key drivers of china's economy continue along. as for the new year of 2021, what we are looking for is consumption to start to pick up the slack. so far it has been a laggard. investment has been the driver of growth. tom: well said. what is the linkage of china consumption and particularly the urban consumption with all of the reports of shadow finance fragility, whether it is total social financing, goldman sachs with an important note, what is the linkage of consumption into that complex domestic financial structure? jinny: it is very important for

us to distinguish between household consumption and overall aggregate consumption. as we know consumption is not only household consumption but also government spending and corporate spending as well. it is very blurred for the shadow financing comes in. the point is to unleash consumption. urban consumption and rural consumption. at the moment income growth is not strong enough to unleash that mass consumption power, especially as china's savings rate is still high. post pandemic there is a lot of precautionary savings. the key to unlocking spending is to boost confidence further, to encourage social spending so that more urban and rural household start to consume. let's see during the chinese

holidays whether there is more digital commerce spending. that will be the key highlight. we are seeing that post pandemic. the e-commerce sales have started to accelerate. really, if we want to see consumption becoming a main driver of china's growth, we need to see more in terms of unleashing the savings rate. tom: when you look -- francine: first of all, happy year of the ox. we are both wearing red. when you look at the uneven economy in china, is it an urban versus rural divide and how to address this? jinny: there are many imbalances in china, not only in china but also globally. there is inequality when it comes to incomes, there is also regional inequality. clearly, that is what a lot of the policy focus will be trying

to address. the western regions tend to be underperforming because wealth in those reasons -- in those regions is not as much as those in the eastern provinces. same with a lot of sea cities and provinces that benefit from trade, what we have seen is global trade starting to perform much weaker. we are seeing england provinces starting -- we have seen in land provinces starting to take up that slack. a much more even distribution of economic activity across china. that is where technology comes in. technology enables the balances to be addressed. tom: too short a visit. let's do this again. jinny yan. later today, view on wealth. expedia and all it means. me and francine, peter gives an

update in the 10:00 hours. futures at -10. this is bloomberg. ♪

tom: inflation this, inflation

that. that has been the theme of the week. we do a data check around one single data point, that is the real yield. we started the week with jim caron of morgan stanley making clear -1.50% is a big deal. it will be fascinating to see into 2021 how the nominal yield inflation expectations and the real yield play out. to help it that, conversation with ronald temple of lazard asset management. this is timely. the path forward given massive negative real yields. this is bloomberg. good morning. ♪

♪ tom: this morning, the birthday

of abraham lincoln. four score and forever ago, scott -- stocks declined in price. a wall of liquidity. the dollar this morning resilient. the euro weaker. two year yield neil all-time lows. the percentage change is huge. -- the two year yield near all-time lows. and republicans and democrats desire a vote on guilt or innocence for president as early as tomorrow. i am tom keene in new york celebrating the chinese new year in london is francine lacqua. i have my 19th-century paris tie on for old abe and you go with the red to celebrate the lunar year. i thought what we learn from jinny was extraordinary about the resilience of the chine