good morning welcome to "street signs." i'm joumanna bercetche these are your headlines the top commander. the head of the lead quds force. >> iran's revolutionary guard's death. airlines move lower with travel and leisure the worse

performing sectors investors search for safety following the attack seeking safe haven assets like gold and yen. hitting record highs on the first trading day of the year. good morning and welcome to "street signs. our top story today, the pentagon confirmed iran's top leader qassim soleimani was killed he was the head of the quds force. the general's death marks an escalation in tensions between tehran and washington following the u.s. attacbeing attacked at

embassy. we are seeing brent up to $68.44 you can see about 3.3% wti, $63 now up equal amounts about 3%. looking at some major oil companies as well. you can see a lot of those are positioned in the uk you can see bp royal dutch shell up about 3%. on the flip side, we've got travel companies trading deeply in negative territory. france air down. higher oil price not a good thing for the airline industry let's talk a little more about the politics and ramifications here let's get out to our correspondent who is in l.a.

today. talk us more through the ramifications of what the u.s. did manage to achieve in the last 24 hours. clearly soleimani was a key figure not just for iran but the area as a whole and had his hand in many different countries. >> no doubt about it, this was the targeted assassination of the mastermind of iran's foreign policy leader, the head of the quds force, the elite paramilitary arm this was the man who was behind hezbollah's actions as well as in south america and europe and what we saw in 2010 and 2011 with u.s. troops in iraq and

really the backing and training. this man definitely has american blood on his hands that was on the mind of the trump administration in this move this was an administration you know said there was a red line they said if a u.s. serviceman had been killed and we know there was the move earlier this week no doubt played a major re role to go after soleimani this is a man that could have been targeted many times it was thought to be a bridge too far but then the trump administration decided to ratchet it up. officials speaking to me and actually really taking it to the mattresses, if you will, in

terms of really pushing the dialogue and the limits of u.s. foreign policy in the region what we have to think about next is what the retaliatory measures will be on iran's part it is not a question of if but a matter of when they will retaliate? are they going to be more targeted and look and focus on the persian gulf and the straight of hormuz are we talking about mining the sea, targeting tankers or focusing on oil infrastructure we are not just talking about the vul ner blts of the saudi aramco, we brought you live those images the destruction was quite intense. very much targeted at the facility but also in the south of iraq. several major international oil

companies operating in the last several years despite of all the violence to the south will those become a target. if that were to happen, you have to take a step back. there are a lot of questions about why he decided to take it this far, this fast. we are in an election cycle. he wanted to look less like jimmy carter and more like ronald reagan. folks that seemed to think we are on the wailing of the war. watching this region through the u.s. politics. this is a president playing to a base that elected him on the idea he wasn't going to draw the base into more wars. the idea that he would put thousands of troops into saudi arabia for oil supplies to keep that oil price lower the bigger question of whether or not he would ever see united

states go head-to-head with iran neither side would want that >> thank you for spelling that out. the potential issues that could come out of the killing. let's get into more detail joining us on the phone. the deputy head of the middle east and senior policy fellow at the council. thank you for joining us can you spell out how significant a deal the developments are overnight and how disstabilizing you are expecting it to be from the region already we are looking to hear from the cleric. saying he's calling for the rearming they have said that they want to fight to the very end. talk us through some of the ramifications on the region as a whole. >> amid the pressure campaign on

iran what we are seeing is that the trump administration essentially through a hand grenade into an extreme tense situation in the middle east. we've gone from covert military operations, cyber attacks to open and boastful assassination of one of iran's top figures he's not just a general but part of the iranian state he had extremely powerful links across the middle east, iraq, syria. all areas where clearly the united states has assets, interests and has essentially, i think this move has exposed every american boot on the ground to a possible retaliatory attack this is why we have seen the u.s. now call on its citizens in

iraq to leave immediately because i think what we are going to see is at least a greatly heightened risk of iranian attack but remember, iran and the u.s. are almost neighbors when it comes to sharing forces on the ground across the middle east. i think we have to buckle up for a very tense period to come. as you said, i think a very interesting question mark here is why has the united states now decided after so many years of surveilling to take this very provocative steps now. we are already in a very tense moment in u.s. and iran situations iran's responses could come

across the spectrum of measures whether that is on the middle east or the nuclear program or through covert actions like cyber attacks on the u.s. territory. >> in the moves overnight, you are getting responses from all sides. i want to bring you the responses going into the race. elizabeth warren tweeted saying. soleimani was responsible for the death of americans but this wreckless move increases the likelihood of more death reading between the lines, it sounds like you agree with her and that the decision overnight is some what wreckless and not well thought through >> well look, i think the u.s. now has to accept full responsibility to the

retaliations that are to come. again, we are dealing with an actor like iran that has proven to be very capable at executing kinetic responses across the field. the seizure of tankers and the downing of the drone we are not just dealing with a third rate country responsible the capacity of the u.s. dwarfs that of iran this president promises that he would get out of the u.s. war in the middle east. it seems now with iran, he has increased the likelihood of military complex directly or indirectly of the military territory in the election year

>> we are going about to see a sea change the approach has been one of pulling out of the region. iran was an exception. that so far has been via sanctions rather than direct military attacks what does this tell you about the approach to the middle east in this election year and potentially if he does get reelected for another term >> it is extremely difficult to predict the trump administration's policies, frankly. there is a lot of people left scratching their head at what the sanctions campaign against iran has actually achieved we have seen not so much iran holding back the region and the nuclear

program expanding. with this assassination, we are likely to see iran up the ante this will force the u.s. to reengage much more expensively with the middle east i'm nod so sure that even iran's regional rival and enemies like saudi arabia or israel want to welcome a conflict in the region because they know what happens in iran doesn't just stick to iran, it will affect all of them for example, remember that iran's close ally in lebanon, hezbollah has the rules of engagement with israel israel is not in a position given to what has happened domestically to want to open

pandora's box with the lebanese hezbollah. i think we are in a tricky and frankly unpredictable few months ahead. the chances of a diplomatic breakthrough are close to zero i wouldn't rule it out completely but the attempt to bring them together. we've now had a real turning point with this assassination. what we are likely to see is the u.s. being forced by this move to reengage more heavily on the military side in the region. >> absolutely. we'll leave it there thank you for your views the senior policy fellow of the deputy head of the middle east, north africa, foreign relations. we talked about the reaction of oil overnight with brent

about 3% higher now. with me in the studio is the associate director for oil from s&p plot let's talk about the energy reaction today back in the summer when we had the attacks, we saw similar move in brent actually about $10 on the day but it fizzled out fairly quickly and risk didn't stay embedded is this situation similar or can we actually see lasting premiums staying here >> you have to look at the fundamentals of the oil market right now. those are slightly changing. the market was well supplied when the attacks happened. aramco should be the market. that was the case. again, you look at the fundamentals here. where is the loss of supply

right now? there isn't any? >> you just had that opec meeting where they pledged to cut. your point is that it is a razor thin balance compared to what we had in the summer. >> if the cuts continue and we get tighter balances, that creates a greater vulnerability to the oil market to the risk. if the oil market tightens, you have to remember the oil market is well supplied there is also u.s. shale and the way it can quickly react to the market especially higher prices. there is those factors >> there is another factor as well what if iran goes down the route of the strikes they can go down the route of a being taing the commercial ship lanes. if theydo that, surely the ris premium of what we saw today,

the big spike has to stay embedded if you are an investor, there is not a risk like this that will happen >> i think a lot of people in the market like to use the word risk premium if you translate the fundamentals you've got to be careful about extrapolating and how long that will last. the lasting dispute. it is an election year remember trump's voters. don't want gasoline pump prices going up too high. there is that factor in the market it is tricky to extrapolate from what is happening now to where it might happen but certainly the stakes have been raised compared to further attacks on infrastructure >> if there is military

conflict, where do you see oil headed we haven't even broken through the mark we saw last summer. >> you have norway, guyana the key question around u.s. shale. a lot of people have come back from the bullish views about how much shale can come on if prices start increasing, again u.s. shale comes back on i still think even with the geopolitical risk, you still want some kind of ceiling provided by u.s. oil production and the floor by opec remember, if it would get this bad, there are places where there are loss of supply >> since you mentioned shale various times, the numbers does

show there has been a fall, a drop in the rigs in the u.s. do you expect that to continue in 2020? is it purely a tucks of where that is trading? >> yes, it's a function of where it is trading. us companies needs to see oil prices above $50 a barrel tore those returns. that is key to picking those up in interest. investment has dried up. people are investing in shale and across the oil market. >> all right, we bare in mind in light of the move we are seeing today. >> that was the associate director at s&p oil platts money is flooding into some of the safe haven currencies. you can see the yen is about

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signs. let's take a look at how broader european markets are reacting. you can see a lot of red almost all of the stoxx 600 is red in trading as many different sectors coming to terms with the news overnight that the u.s. have killed a very senior iraqi general and that is going to have -- iranian general. that should have a lot of repercussions in the region and on oil let's talk about the individual places in the uk, there are a lot of oil sensitive stocks and companies. those are the names

underperforming. those are the reasons why the ftse 100 is down the dax is down. some of the names there, luf tanza down this morning on the spike of oil that is a key cost input for the airlines one of the reasons why the air lanes are trading heavy. cac is down almost 0.6%. ftse mib down about 1.1% you'll see the picture is not so pretty across the board. almost every single sector is trading red. we had a positive start across all of the sectors we are seeing the exact inverse. auto is around 1.8%. we've been very focused on that.

travel and leisure have been down the only major green spot this morning is oil and gas jumping in line with the reaction we are seeing in brent and crude. oil and gas up about 0.8%. we had a good start to the trading day yesterday. not looking like a good start to the day. dow opening almost 300 points lower, s&p down about 35 and nasdaq down around 112 here to talk more about this, the cio of waiverton investment. the questions i will ask you today are a little different than i would have yesterday

given this risk being forced to be factored into the market. when i was having these conversations with other analysts, the question i was asking is where could the tail risk come from in 2020 most people have the view of the trade war, we are getting the signing. no one sees the real escalation there. perhaps we are confronting a real war this time around and should investors be more aware of that? >> obviously, when you get a situation like this, they are very difficult to predict. we've had the issue in bagd of the iranian sponsored malitia. this appears to be a response to that whether that leads to further escalation, some of it will depend on the iranian response

to this. this will be an escalation it is a contestant in the middl east this is the sort of the environment we get a risk of >> it tempers optimism we are coming on the years of a strong stock market, s&p up 30%. can that performance be considered >> the estimate was helped by the federal reserve doing a you turn on the monetary policy. we went into last year carrying on whether they would cut rates. you'vehad this activity in the repo market. that is interpreted as another boost to liquidity the latter is still helpful for the market last year, actually earnings growth was flat in the u.s. and

down globally. all of that performance came from a rewriting of the market the fact thar that may hold back is that valuation. that is not extreme by the standards of say, 1999 but it is a lot higher than it was that is one of the things that tempers our encruise yachl tempers are stretched in the u.s. >> to your point, about rerating we saw those things go higher. we didn't see earnings growth. going back 12 months, i was sitting here having a conversation with analysts we ended up getting zero in the u.s. i'm having the same conversations this year and similarly expecting single digit growth in earnings per share what are you seeing. does it matter anymore >> i think it does matter. the share price would be

expected and adds up to the index. it does matter the issue for us is that the market is skeptical for the forecast for the earnings growth as you said, you did have a negative earnings growth you had earnings falling if we look at how that would be again in 2020, you have a real hit. what you need is the positive earnings growth of some time if we get plus five, that probably supports the market for us, that will make the market go significantly higher from here. i'm not sure that is enough to generate thebig return we are neutral equities globally we do see the sector and market. we have to be a little caution primarily because of the valuations >> what about the fixed income we've had a sneaky sell off in december not many people are paying

attention to that. >> fixed income is very challenged it is not going to be a big spike given what policymakers will give what they want we don't have at the moment the inflationary pressures if the oil price stays higher. the inflation and the oil price tend to be positively correlated that could be another challenge for fixed income i think that is challenged still something to have but very much to have as a health rather than something you think will generate much of a return. >> makes sense in this environment. bill, i just want to bring to the audience some data we are getting out of the uk. we should be getting the pmi numbers, the construction numbers, so when i have them i will bring them to you

this is the reaction in the pound, down half a percentage point. just to bring you the numbers. the construction pmi in the uk come in at 44.4 versus the november print of 45.3 this is less than the bull of 45.9 going into it this is another disappointing data out of the uk this is a small part of the uk economy to begin with. it doesn't paint a very positive picture in line with some of the weakness we've had in manufacturing as well. that is the picture for pound this morning thank you for joining me on the show actually, no you are staying with me another five minutes the cio from waiverton investment coming up in a few moments ghosn gone investigations around the world

ramp up into carlos ghosn's dramatic escape. more after the break

welcome back to "street signs. i'm joumanna bercetche these are your headlines oil prices surge as the pentagon confirms the u.s. strike has killed the top commander qassim soleimani the head of the elite force. the iranians vow to avenge his death. >> airlines dropping around 7% investors search for safety following the attack seeking refuge in gold and the yen. u.s. futures point to a lower open after hitting fresh record highs on the first trading day of the year. geopolitical concerns are the

number one focus of investors. that's why most are trading in the red. let me take you to some of the price action we are trading. ftse 100 down about 0.4% we have dipped through the 7,600 mark central dax in determine any down 3.1%. lufthansa is down and the big spike in oil has not been good for the airline industry in italy, we are seeing a lot of red on the screen as well. not a very good start to the day today after a very positive start to the year yesterday for the stoxx 600 and all the other indices tracking with the geopolitical development let's talk about the impact we have had on oil. you can see this is the picture for brent now trading up about

$2.30 higher at 3.5 percentage points we got about $2 higher it has come back and you can see the picture is one of strength for oil trading about 3.5 percentage points stronger up 20% whether geopolitics or opec there is a balance that has been pushing energy higher. no surprise we are seeing a bid for safe haven the dollar yen is trading about half a percentage point and trading that much firmer versus the u.s. dollar at 1.08. we are down about 0.2 percentage point. the euro down too. we are seeing some strength in dollar versus g 10 currencies and safe haven like the yen are

gaining a bit. not so much the swiss frank today. we are seeing a lot of movement in european equities and currency markets on the back of the geopolitical markets let's look at how the us futures are shaping up all of the three majors are shaping up that is the picture for u.s. markets. joining us in singapore with a look at what the asian markets have done. >> thank you for that. it has been a mixed performance as most have shot for the trade. we have india reacting for most of asia, the mixed performance starting the day strong coming in from wall street the newest low from the middle east picked up with the death of soleimani coming through leading to an immediate sell off

in asian equities. by the time we shot sharp, things stabilized some what. it is still not conclusive there is a lot of uncertainty to contend with largely speaking, you can see breaking it down with specific performances in the markets being a mixed bag. the performance was squarely focused on the australian markets. so positively linked to oil prices these markets did well largely the story that has been impacting is the sentiment about how the china came in weighing in on the issue saying the u.s. must exercise restraint. that stability in the middle east must be upheld. most of asia shares with the

middle east in terms of getting a major chunk of oil supplies from the region. over the course of the last 10 years, the middle east has stepped up where their market share has gone up from 0 to 15% reported last year that is something that makes asia have its skin in the game when it comes to tensions in the middle east. iraq and saudi arabia are key suppliers. so the safety around the strait of hormuz and the persian gulf is very important for the positivity and stability in the region we'll see how things play out in the coming week and through the weekend. there is a lot of news flow coming in thick and fast on this developing story

>> something we are watching closely. who would have thought 24 hours, such a difference about markets. interpoll has sent a request to lebanon to arrest former nissan boss carlos ghosn they received a so-called red notice that calls on international authorities to arrest a wanted person the request has not been sent to lebanon's judiciary. police in several countries have launched an investigation to his is cape. he faces trial in japan. he has denied wrongdoing >> meanwhile, carlos ghosn, the movie. he pitched his story to a hollywood producer during a meeting. ghosn cast himself as a victim of the japanese justice system

clearly he's gone on to create his own hollywood story. let's bring in the managing director of east/west interface. as a bit of a background you are the founder of east/west interface. this exists with cross border operations in the context of the story, i want to ask you your take on how this is reflecting on japan as a whole. we are all beginning to learn unsavory elements about the japanese legal system here >> thank you i want to start by highlighting the elements of the business culture. it is very different from western practices and networks it has made room for the behavior anyone breaking the rules openly

will bring shame down on japan we have seen here, they are punished with little mercy he is viewed as an outcider. you've got elements of how japanese ceos are to operate with more of an enabler. you've got carlos ghosn gone in there as a rule breaker. he's extremely individualistic it is no surprise to see him abusing his position by the japanese that was the context to this, as i see it i can't comment on the legal aspects of it. it has highlighted many weaknesses on both sides the japanese corporate governance was very weak there was no monitoring in

place. keeping ghosn in check what has happened here, he's seen as having broken the rules and the commissioning. >> also the fact that he slipped through the crack is slightly embarrassing for the system that prides itself. >> it couldn't come at a worse time they are looking at changing the way they are coming across because they are looking to attract global talent. they are needing more diverse idea y ideas and people to be globally competitive. this sense of the shame element, i'm worrying that it is not going to be spoken about and won't be a point of change and that japan can use it. >> they've got a demographic issue. they need to have people come into the country from the outside world.

what type of perception and harm is this going to do for the long term for anyone considering moving in japan and working in japan given the high-profile case of carlos ghosn >> this is a very high-profile case it is not the norm there are a lot of non-japanese working in japan it is going to have an impact for the concern of people going there. are they going to be treated fairly can they go in and implement new ideas or will they get knocked down it is a fair comment to say it is a comparatively low number of japanese executives on board in management positions they are looking at changing that a lot of businesses have recruitment in place it is a slow process there is a lot of change needed. i don't want this kind of sku

the conversation in a way that you are going to get arrested if you go to japan but there are things that need to be addressed here by both sides the japanese side, they've got a massive need to be seen as an open business environment. i don't think they are there yet. closing down and not having a discussion about it, you know. >> it has evolved into a pr issue as well. >> it has. we are talking about the olympics but pr, as well, is so important. i work a lot with the gender element and having more female empowerment and being seen it is okay to have the government saying, yes, we are going to address corporate governance and be open but there has to be a fundamental change in the business culture. that is a really hard thing to achieve. >> we'll have to leave it from thank you for your time today on

the show the founder and managing director of east/west interface. >> stay with us. the fed is set to release minut minutes where it flag plans to keep rates on hold more after the break i'm really into this car, but how do i know if i'm getting a good deal? i tell truecar my zip and which car i want and truecar shows the range of prices people in my area actually paid for the same car so i know if i'm getting a great price. this is how car buying was always meant to be.

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welcome back to "street signs. the fed is set to release minutes from the december meeting today, which is a friday the central bank kept interest rates ske rates steady saying rates would be on hold unless there was a consistent change in inflation. let's bring in randy watts the messaging from the fed is one that they are basically not going to do anything for all of 2020 can it be a boring year after the many fire works and u turn

>> i think that's what the fed is hoping. 13 of 17 forecast no change of rates for 2020 after that last meeting. i think they believe the 75 basis points of easing they did do in 2019 is sufficient they are going to sit back and see those cuts work their way for the time being >> they expect the fed to be accommodative. he does believe that those 75 basis points worth of cuts were actually substantial and enough to provide a good boost to the u.s. economy do you share that view >> the other two things is first that fed has stopped with the size of the balance sheet. the other thing people will be looking for is the fed repo

operations the fed has been providing liquidity to the banks at the short end of the curve that has been providing liquidity into the financial system over the last couple of months >> i want to bring in another perspective. i have another guest on the show here we are talking about the prospects of the fed you said one of the big tail winds is the fact that the fed did this u turn and cut rates. investors are hoping for more out of the fed this year are likely to be disappointed. >> you have to wait until december this year before you get a 50% probability of the cut. the market buying into sort of no change. your other guest pointed out in these minutes is the repo operation. what powell has said that won't go beyond the beginning of q 2 >> how significant is that for

investors. i think about it pro the perspective of markets plumbing and keeping rates in check as a stock market investor, why do you care about that >> i think they have a response. central banks increase even though i don't think they are doing qe, they are doing technical work around the scenes on the money market. the feed through has been on investor sentiment very pavlovian balance sheets and i'll buy some equities >> i'll get your take and whether or not you agree the repo operations and balance sheet is important for the stock market and for the u.s. dollar and what that could mean and if there is further tightening what that could pemean for the green back the rest of the year. >> the fed balance sheet got to

4.5 trillion they drew it down to 3.8 trillion they are rising again to about 4.2 trillion if you look at the time period for september when they started up until today, they've done about $240 billion roughly of liquidity for the u.s. financial markets. that's not all going into the stocks but overnight even sow, it's helping liquidity which is generally good for stocks in terms of the u.s. dollar, the geopolitical today is good for the dollar, it is a safe haven the dollar had pulled back a little bit but overall the dollar is likely to stay firm over the next couple of months >> one last question on the geopolitical developments overnight. some are ready to talk about the prospect of stagflation.

at the same time, global growth has stayed muted do you see that as a risk for this year? >> i really don't. oil has backed off for the highs. it is up 3.5%. the fed has not been able to get inflation up to that 2% mark it has been running under that i really don't think inflation is the big risk to financial markets right now. >> randy, we'll leave it there randy watts, the chief financial strategist just to sum things up, looking ahead to this year, putting everything together. you said you are some what neutral energy markets what would change your view? >> anything that would suggest we are going to get a different cut policy this is one of those situations where a bit of bad news could be good news.

the other thing is simply if all of this stimulus does show up in the real economy looking stronger that feeds through to the market growth and makes us stronger through the equity market. >> the possibility of the u.s. coming back quite strong most people settled around 2% and there could be an upside >> potentially, if that happens. that is great and that could feed into earnings growth too. >> we'll leave it there. the cio of investment strategy all the three majors pointed in the red. that is it for "street signs." i'm joumanna bercetche "worldwide exchange" is coming up in just a few minutes

breaking news. the u.s. attacks and kills a top iranian commander. oil stock falling. and on wall street, investors bracing for a broad market sell off. details as "worldwide exchange" begins right now