good morning welcome to "street signs." >> these are your headlines. >> international calls for calm from beijing to berlin officials urge restraint from both the u.s. and iran as escalating rhetoric threatens to collapse the 2015 nuclear deal and raise tensions across the middle east. oil stocks rally as brent crude and wti drive higher on the tensions equity markets fall with sharp

declines across the middle east and asia, impacting early trade in europe. a slowing in china's services expansion weighs on sentiment but trade tensions lift as beijing prepares to send a delegation to washington to sign the phase one deal with president trump. and japan vows to tighten its immigration rules after the country's first prosecutors break their silence on carlos ghosn's escape, calling it illegal and unjustifiable. welcome to "street signs," everybody. our top story today, there have been international calls for calm after iran announced it would abandon its commitment to the nuclear deal following the killing of general qasem soleimani. they have urged washington to, quote, not using force while calling for restraint from both

sides. germany worries the roll back on iran's nuclear commitments could be the end of the 2015 commitment javad zarif said the pullback is capable. we are seeing reactions in the market today >> a sentiment has certainly taken a hit on the back of this escalation and tensions in the middle east. the worst performer of the bunch, looking across the major regions is germany the dax is down 1.9% this escalation is marked by iran saying they will no longer abide by the commitments set forth in that 2015 nuclear deal. now we're awaiting what steps they may take from here. we'll discuss in more detail throughout the show. in addition in germany in particular, the chemical stocks are taking a bit of a hit. there's been negative broker comments weighing on the cyclical names across europe, sentiment

certainly negative to start the week out extending losses from friday and services data from china overnight not helping either let's take a more deep dive into the oil majors that we are seeing a boost for the equities. of course, this comes alongside a strong bounce in the oil price itself that stronger oil price filtering through to stocks. let's take a look at where we stand for brent and wti. we had a very strong reaction on friday with brent and wti rising they are extending gains this morning with brent up 1.9% just under the $70 per barrel handle wti trading around $64 a barrel, up 1.64% clearly strong support for the oil price as we look to see what happens next. >> let's talk about local markets as well because saudi default krid swaps have jumps 60%. long dated bond yields are moving higher to the tune of 16

to 15 basis points shares in aramco, a stock trading now, are under pressure. trading at their lowest level since the oil giant's ipo on december 11th. and iraq's dollar bonds have added to falls from friday's session. now also testing one-year lows meanwhile, the streets have tehran were packed with mourners today for the funeral procession of qasem soleimani this is after his coffin was transported from iraq, where hundreds of thousands took to the streets of baghdad to mourn his death. they led a prayer for the man designated a prayer by the u.s the remains of the general will be taken to the city of qom, one of the main centers for shia muslims before being buried in his hometown on tuesday. staggering images coming out of baghdad. we have been monitoring these

developments all weekend these images this morning of people mourning, mass mourning, mass grief across the country is quite a stark contrast with the mass protests we had a month ago with iran. is it fair to say the assassination of soleimani has actually served to unify the iranian people at this point >> certainly he was a hero to the iranian people and many inside iraq as a result of the swift and decisive action he took following the rise of daesh, the islamic state it was the iranians and iranian backed militias in the early days to beat them back, so to speak. this is a person who for decades served to really carry the torch, if you will, of the islamic revolution abroad because it wasn't about taking on countries directly. it was about being able to infiltrate various countries

around the region, syria, lebanon or elsewhere this was the person who was taking the islamic revolution to the streets of arab countries. and i think what's going to be really interesting over the next several days is to watch what we see in terms of the retaliatory measures it's not a question of if. we know it's a question of when and how the retaliation from tehran regime will take place. the americans, however, standing very, very firm, at least the trump administration in terms of the decision to assassinate soleimani. let's listen in to what the secretary of state had to say yesterday. >> we would have been culpably negligent if we didn't take this action american people would have said we didn't protect american lives. president trump said we'll reserve risk there's tremendous risk. we're doing everything we can to make sure we take that down and protect american lives that's the mission set >> the secretary of state mike

pompeo saying had they not taken this action to assassinate the head of the quds force they would have been negligent. he's referring to all the actions out of iran, whether it was the attack on aramco, the attacks on the tankeres in the persian gulf no one is really talking about this within the terms of head-to-head conflict between the united states and iran the question will be how this destabilizes the region and, in particular, what happens in the next few weeks in iraq itself because one of the things that we've heard again and again is not just whether or not this was a justifiable action in terms of taking out soleimani, someone who was, in fact, a man with american blood on his hands. it was about the fact that the americans under the trump administration doesn't seem to have any kind of plan for off the back of this particularly with reaching out

to those who are pro-american within the iraqi government at this moment. remember, it's a caretaker government this leaves these iraqis between a rock and a hard place because they have a serious iranian presence in that country since 2003, a growing presence one that doesn't seem to be going anywhere if the united states were to be expelled as a force from that country, it would certainly leave those in the pro-american camp without a feather to reply with, if you will. it will be very interesting to watch how that seems to work out over the next several days certainly, if you're an ioc operating in the south of iraq or if you're sitting in tehran, if you're sitting in an aramco facility or in the persian gulf with a tanker, you have to wonder what this actually means for you. guys >> thank you for the comprehensive breakdown, hadley. certainly, the world is watching very closely to see, in fact, what does happen over the next coming weeks and days as you mentioned. let's bring in another voice the head of middle east.

great to have you with us, neve. the killing of general soleimani, who at the end of the day was the master architect of iran's military strategy, probably the second most powerful man in iran, would you deem this to be a tactical or strategic success on the part of the united states here or do you think they have misstepped in terms of the reaction we're seeing from various middle eastern countries in the last 24 hours? >> that's a really key question for us we feel that it's a mistake because how does it further u.s. interests in iraq itself, and then in the region if we take iraq, it doesn't bring any more stability to the political situation. we know there's a caretaker government, a number of other issues if you look at its strategy with iran, president trump has been very clear, he wants to bring iran back to the table and yet he doesn't want war. how does this further those aims

so, if you consider that it was taking out someone who was very senior, undermining u.s. aims, strategies in the middle east, it's a tactical goal, but ultimately i feel it will undermine u.s. interests in the long term. >> the justification that the u.s. administration so far is that they had intelligence suggesting that soleimani was planning an attack we don't have more details than that that is certainly the reports that have been coming out of the u.s. over the weekend. there are also some conflicting reports saying there's not enough evidence to that effect do you think that the u.s. administration has a duty to actually declassify this material so that the broader public can understand the justification for the attack and eventual assassination, not just, obviously, of soleimani but other people who were in that convoy as well? >> as we saw earlier this morning uk time, nancy pelosi saying that, you know, she wanted more congressional action on the part of this.

and i think that that's something for the executive and congress and u.s. to work together on. admit thely the trump administration has been quite minimal in the amount of leeway it's given congress to oversee, you know, president trump's actions and decisions. but ultimately that will be something for congress to decide. >> if we shift gears and look at the iran iran side of things we've heard from iran via state tv that they will not abide by their commitments as set out in the 2015 nuclear agreement, but in terms of potential actions from iran, what do you think is the most likely course of action they take? are they going to pursue a military type of revenge, retal tags or much more likely to pursue is cyber attack or, perhaps, cutting off the rest of the world from oil, the flow of oil? >> to take your first points, we need to specify they said they'll commit to having

international agency assessment in iran. it's another step in that general direction with the jcpoa but they're not removing themselves from the agreement entirely that's important to remember the kind of action they'll take, we're expecting more missile attacks on u.s. personnel in iraqi bases. remember, there are iraqi troops there as well in those bases there will be cyber attacks, i anticipate another sort of indirect mechanism to try and sort of strike at american interests. we don't foresee any sort of direct confrontation or what could be described as direct military confrontation i think we need to be quite clear on what we mean when we say that ultimately something like that, a war as it were, is going to be an exchange of missiles. i think we're a very, very long way from that even with the tensions as they are. >> nato ambassadors are planning to meet today. this is a conflict that goes

well beyond the u.s. and iran and iraq would you expect any sort of international coordination in response to this we've heard bits and pieces, obviously, from different european leaders but no major coordinated response. >> not yet there has been the statement from the leaders of germany, france and the united kingdom late last night. there's absolutely going to need to be a coordinated response also you've seen statements from the russians and the chinese working together the armanis and indians as well. at this point it's the rest of the world stepping in for that coordinated response rather than the americans, as we've come to expect. >> just quickly, your take on the iraqi parliament decision, nonbinding decision yesterday, for u.s. troops to be withdrawn from the country what does that mean for american policy and how is that going to affect the overall relationship, obviously, in the u.s., in the middle east, between the u.s. and its key ally on this terror?

>> president trump is very clear how he felt on that. saying he would issue sanctions. that's quite a strong response as it is a nonbinding resolution. i expect this to take months to materialize. the legislation in and of itself but also it's not clear their caretaker government can actually pass this so, yeah, watch this space. >> certainly a lot to think about. thank you very much for bringing in your perspective. the head of middle east and north africa at verisk maplecroft we've also been getting some european data this morning let me just break down the composite numbers we've had out of the eurozone at this morning. the december comps at pmi index has come in at 59.4. this is versus 57.9 in november. meanwhile, theservices pmi at the backlogs of work has come in at 51 versus 49.7 in november. just the point that the

composite pmi is the highest number since november. but that's for future outputs. just to remind viewers that we had the german services pmi number come in at 52.9 versus the forecast of 52, so higher than expectations. and obviously the french forecast as well came in line with expectations. we're seeing a bit of a bounce on the euro on the back of these higher than expected pmi numbers for november. ghosn on the run fresh retails emerge that has turned the tycoon into an international fugitive ♪ when you look at the world, what do you see? ♪

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welcome back to "street signs. the japanese government has vowed to tighten immigration rules after the escape of former nissan boss carlos ghosn from house arrest in tokyo. the statement marks the country's first official response to ghosn's flight from the country last week. the auto executive faces trial in japan over financial misconduct

he has denied wrongdoing tokyo prosecutors have condemned the escape branding it, quote, illegal by unjust methods, saying his action ignore japanese laws and are being investigated ghosn has repeatedly criticized the country's justice system, calling it rigged. new details from around the world have emerged about ghosn's dramatic escape. "the new york times" reports that ghosn was accompanied on his flight out of japan by an american security consultant a turkish charter jet company said its planes were illegally used to transport ghosn out of the country. he's alleged to have flown to istanbul before arriving in lebanon. speaking to cnbc last september, lebanese prime minister hariri weighed in on ghosn. >> they have lawyers they are taking care of this and anything they need from us, we will do

i think this is a legal case in japan. lebanese government cannot, you know, do much about it we can give support to the family we can talk to the japanese government, but in the end of the day, this is a japanese issue that, you know, his lawyers are dealing with we support him we hope that he gets out as soon as possible. >> were you concerned by the way this case has gone quite irregular. >> sorry yeah, it is. but, you know, as prime minister of lebanon, i would rest to say, you know, let's sit and watch and see where it goes. >> that was back in september. obviously, things have changed a lot in the last couple of months it's worth noting that the lebanese embassy to japan has formally denied involvement in helping conjure up his escape. in comments over the weekend, it

seems he hired private companies, and there are various reports emerging on how they managed to put together the escape from japan to lebanon, being routed through turkey. he will be giving a press conference on wednesday, so that will be widely watched and i think what is interesting here is not only what he has to say about the japanese justice system, but also whether or not he could start speaking out about the practices at nissan. because he's in a position now he can say actually whatever he wants. he's sitting in lebanon that doesn't have a formal extradition law with japan he can certainly dish the dirt if he wants to on other involvement at a very senior level at nissan. so, clearly, that press conference on wednesday is going to be very, very key for the company as well. >> i think for markets the key here is much more about what happens to the alliance between renault and nissan we've seen a reassertion of both

companies' commitment to to that alliance he was the mastermind. both companies need to cut costs and they've been paralyzed by what's happened in this saga around carlos ghosn. the question now, i think investors are asking, should they merge or should they inwind their cross-holdings clearly they have a structure that's been unsatisfactory for many shareholders. and as you say, it will be interesting to hear in carlos ghosn has specific gripes he looks to air around nissan it could be potentially market-moving. >> we spoke to bank analysts about this and the underperformance of those stocks over the last 12 months. they cite specifically management changes at the top. and the fact it's been rather chaotic. anyone who has had a loose association with carlos ghosn has been removed from their job. they're looking for successors all of that turmoil has not reflected well on the financial performance. certainly, the story is far from being over certainly, we'll get a lot more

detail as well from the nissan side of things when ghosn speaks on wednesday watch out for that. elsewhere, dozens of hong kong demonstrators were arrested over the weekend after hundreds marched to protest against china's so-called parallel traders. they buy duty-free goods to sell on the marketplace they complain drives up prices the marches took place after hundreds of thousands took part in marches on new year's day. following more than six months of anti-government protests, replacing zeman as head of the hong kong liaison office lo had previously served as top official official for forcing communist party discipline he has never held a hong kong related position

they have been accused by beijing of exaggerating the gravity of the hong kong protests. president trump tweeted on new year he's eve that the sign will take place on the white house. he will go to beijing for phase two talks at a later deal. china's services sector expanded at a slower pace in december with the pmi coming in at 52.5. meanwhile, chinese business confidence fell to its second lowest level on record according to a survey of services firm it indicates chinese businesses remained wary despite a raft of stimulus projects and stimulus deal with the united states. the latest cut to cli niece banks reserve requirement ratio

comes into effect today. the people's bank of china aims to inject some 800 billion yuan into the market going back to the south china post comments you mentioned, it's interesting to take note of the differences between the way the trade negotiations are being portrayed in the western media and in the chinese media because they are pointing to the fact that beijing is offering a much more measured approach in contrast to president trump touting this as a big win. very, very different way that these sides are being portrayed. >> international market attention has been shifted with the geopolitical developments in the middle east but this was the big story of 2019. we spent the year talking about the trade war and the implications it's had on growth. almost every single analyst we spoke to last year said this trade war has not been a good thing for growth at least we're at the point of

no further escalation and, perhaps, no further escalation is a positive for markets. then you see, you know, china is still very much going along the lines of wanting to stimulate their economy more, injecting more liquidity into china's economy. we'll see how that will play out from a growth perspective there. stay with us we're not just talking software with boeing. boeing uncovered a new potential design flaw in the max 737 what does that mn teatohe troubled air giants?

welcome back to "street signs. >> these are your headlines. >> international calls for calm from beijing to berlin, officials urge restraint from both the u.s. and iran as escalating rhetoric threatens to collapse the 2015 nuclear deal and raise tensions across the middle east. oil stocks rally as brent crude and wti drive higher on the tensions but equity markets fall with sharp declines across the middle east and asia impacting early trade in europe.

a slowing in china's services raises tension but they lift as china prepares to send a delegation to washington to sign phase one deal with president trump. and "1917" and "fleabag" take the big awards at the golden globes. while hbo and disney win on the front while "frozen 2" loses in the animated category. we're just awaiting the uk pmi data we had the eurozone pmi data coming in better than expected and the uk number coming in at 50 versus flash estimate of 49 positive. >> better. interesting the data on the pmi front has been better than expected across the board. the eurozone pmi also being

revised higher and providing a nice boost to the euro if we take a look at sterling, we have seen sterling around 1.31 ahead of that data, trading 20 basis points higher so, some support for sterling as well as the euro on the back of those pmi numbers. let's take a look at how some of the other -- well, currency and some safe haven currencies are trading today given the geopolitical developments over the weekend and the last 24 hours or so. you can see gold still very much in the spotlight up 1.6% this morning trading close to a seven-year high now, gold just shy of $1,600 keep an eye on that as we continue to see inflows into the precious metal also we mentioned some safe haven currencies we're seeing a bid for the japanese yen and in the u.s.

we're seeing a bid for fixed income the ten-year note is trading around ten basis points lower than a week ago. that's the picture for safe havens how about oil? we are seeing a big bounce in oil. in fact, one of the only sectors trading positive in european sectors is the oil and gas sector brent just shy of $70. $69.70 we briefly broke through that earlier on in the session. have come off a little bit but still up 1.6%. wti up 1.4%. a big spike in the price of energy markets a lot of that is on back of risk premium being priced into these markets. as for european markets, friday was a day of red today wouldn't be any different. you can see there is a lot of red on the board ftse 100 down 1.1% despite the fact some oil stocks are doing well bp is big today but other names

are declining. xetra dax down north of 5% this morning. some industrialing names getting hit. cac in france and ftse mib some banks underperforming. as for u.s. markets and friday was a day which saw the three indices in the red, about 0.8% lower across the board on friday, worst day in the month today doesn't look like it will be any different s&p and dow, nasdaq, all seen opening up in the red as well. the world is really gripped by the geopolitical events that are occurring. all eyes on the middle east and how things develop between the u.s. and middle east in coming days. meanwhile, house speaker nancy pelosi says the house of representatives will vote this week on legislation to limit president trump's war powers as tensions with iran continue to

escalate it comes after president trump ordered an air strike killing major general qasem soleimani. mr. trump did not consult with congress before taking that military action. iran has announced it will not adhere to its commitments to the nuclear deal it signed with western powers in 2015 it comes amid tensions of u.s. killing the general. nbc's ali arouzi has more. >> reporter: a massive funeral procession for the death of general qasem soleimani. a tide of people have flooded the streets of mashhad and ahvaz where the funerals have taken place. crowds were very emotional and a sense of anger in this country there is a sense of revenge in this country and there is also a sense of fear as to what is going to come next while there is just an official iranian government announcement

saying it's going to completely shed its commitments to the nuclear deal, it is not going to abide by any restrictions on uranium enrichment, the number of centrifuges they have, how advanced they are or on research and development. also we're seeing calls from the iraqi government to expel u.s. forces from the region there are also varying calls across this country from senior officials calling for revenge and saying that it will be swift. the head of iran's national security council said that iran will not only strike back militarily, but it has other options available to it as well, which could include choking off the flow of oil and cyber attacks. ali arouzi, nbc news, tehran. let's take a look at the corps. air france klm shares are sharply lower after the airline announced it would run its entire flight schedule amid

nationwide protests. some crew union members are calling to join the protests over the government's move to reform the pension system. air france said it plans to operate at full capacity today and tomorrow and it's a new year but the crisis at boeing continues the aerospace giant says it's reviewing a wiring ground on the 737 max which the faa has flagged has potentially catastrophic the latest issue is likely to further delay any faa approval of the max and may even require a redesign it comes as boeing attempts to repair relations with regulators amid a corporate crisis which has thus far cost the company $9 billion and a ceo. well, this may come as somewhat of a surprise but 2018 was one of the safest years to fly, despite the crashes involving the boeing 737 aircraft there were eight fatal accidents in 2018 -- '19, according to the

aviation consultancy 270 compared to 13 in 2018 at least it's moving in the right direction. what does 2020 have in store for the airline industry let's bring in the managing director and associate director of research at citi who joins us great to have you with us, mark. >> morning. >> reading your notes, seems like you're quite positive on the airline industry in 2020 it's been a rough couple of years. let's park geopolitical concerns for a moment why are you so positive? there's still a lot of risks out there? >> i think you're right. it's hard to park the geopolitical concerns, as you mention. i think there are a few things to be aware of we've come out of, as you say, one of the best years, we're on the best six months we've seen in airlines for a while. demand looks like it stabilized out of particularly the uk market and french markets. for what it's worth, the german market still looks like a bit of a struggle the most important thing is supply supply right now is tracking at

zero to minus 1% in the european market that's really good for pricing and really good for airlines. >> let's talk about capacity one of the things that has been keeping airlines down is that of extreme capacity, a lot of competition in the space how is that changing and how is this set up for 2020 now also, how does it differentiate between long haul and short haul flights? >> in terms of competition, the best place to be it the north atlantic three alliances running 80% of the market share that's typically the best place to get pricing in the world. the landscape saw a lot of consolidation in 2019. we saw names like wow, premiere, cobalt go by the wayside we've seen a lot of supply from some old names,the alatalia, norwegian supply shuttle, negative and in terms of of maxs being

pushed further to the right, that shows consolidation and capacity constraint and sets up a nice h-1 in regards to the pricing environment. >> the supply/demand side but you can't look at the sector without looking at the geopolitical side of things. we've seen a spike in oil prices airline stocks have taken a hit on the back of this. how well prepared are these airlines for higher oil price and what's the kind of impact you're looking for >> you watch out for pest lance and war. in the case of geopolitical back drop where there's a risk of war going forward, it's clearly not the time to buy airlines, is what some analysts would argue i'm looking below the surface of geopolitical and say oil is 30% of most airline p&ls 100% of the top line, namely pricing, is more important than 30% of the p&l, which is related to oil on top of that, in the next 12 months, what you have is ultimately airlines largely

hedged the worst hedge is 50% we have good hedging levels and that top line going well in the face of 30% of the costs, as you mentioned, on fuel not going in the right direction. listen, i understand your point. clearly, if the geopolitical back drop is not good, most generalistist pms would not be massively excited about the airlines. >> from a bottom up perspective, perhaps a buying opportunity >> good point. >> you mentioned the dough memec demand stabilizing particularly the uk. give us a picture of the demand. is this from corporate or more consumer passengers? and what does a new government mean be for demand moving forward for airlines in the uk >> i think everyone was calling the end of the uk consumer we saw it in early march where there were profit warnings in the airline space. as we got into september, and airlines confuse pricing with

demand when they see lower supply, pricing goes up and, therefore, they talk positively about the demand side of things because it's outpacing supply. uk is relatively better than some other economies for example, ger germany, we've seen weakness in the domestic market there part of which is some of the themes we talked about before, which is flight. that's affecting the domestic market in germany. >> a huge topic we've been talking about is becoming -- people are becoming much more conscious about the number much flights they take. >> very much so. it's not just on the consumer side, it's also on the corporate side as well i have a funny suspicion corporates will use this as a reasonto cut costs in 2020 and ultimately, therefore, you'll see fewer corporate flights as well as consumer flights. >> interesting angle there thank you very much for joining us, managing director and associate director of research. meanwhile, in the auto space, u.s. auto sales slowed in 2019 as carmakers were hit by cooling demand but as phil lebeau reports, the

sector did see some green chutes at the end of the year. >> the u.s. auto industry ended 2019 with a strong december and as a result, it looks like 2019 will go down as the fifth straight year where u.s. auto sales for an entire year topped 17 million vehicles. a mixed bag for some major auto players. general motors, a little weaker than expected in the fourth quarter. largely because of the uaw strike which limited the number of vehicles they could deliver to their dealerships and ram also powered fiat chrysler to a relatively strong fourth quarter down slightly but ram had record sales. but the big story in the fourth quarter is tesla, which did better than expected in terms of total deliveries, which came in at 112,000 as a result, for the entire year of 2019, tesla deliveries topped 360,000 vehicles, which was the minimum the company set for its guidance not surprisingly, shares of

tesla moved higher and the company's market cap now tops $80 billion. phil lebeau, cnbc business news, chicago. let's take a look now at the auto sector here in europe under a great deal of pressure today. you can see shares down 3% daimler down 2% as well. fi yat chrysler down 2%. there were some specific -- some stock-specific headlines hitting fiat and puget as we were mentioning earlier, nissan and renault in focus as we look to hear comments fresh from carlos ghosn and how that might affect those two companies and that alliance. >> certainly very heavy day for auto stocks. france says the u.s. will face the might of the eu if it imposes, quote, highly disproportionate trade tariffs for digital tax on companies such as google and amazon. the french finance minister has

written a letter to robert lighthizer warning against the move assist the u.s. government considers its response as what it calls growing european protectionism. he says it will deeply affect the transatlantic relationship he's due to meet the eu trade commissioner phil hogan tomorrow another front to potentially watch on the trade war. coming up, british stars dominate the golden globes showing hollywood how it's done. we break down the biggest winners of the night later on in just a few moments stay with us i remember thinking about things i did

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welcome back to "street signs. you with looking at live pictures of the funeral procession for qasem soleimani thousands took to the streets over the weekend and continue to march to mourn the military commander. fed officials are, meanwhile, concerned low interest rates may lead to excessive risk taking and financial market imbalances, according to minutes from the central bank's december meeting

when the fed kept rates steady following three cuts in 2019 steve liesman spoke with key fed policymakers at an event in california and filed this report >> reporter: federal reserve officials interviewed at american economic association annual meeting in san diego taking note of rising tensions between iran and the united states and developments overseas, but saying the u.s. economy looks to be in good shape and able to withstand, at least for now, the fallout. >> labor market is strong. labor market is at 3.5%. trend growth is 1.75%. i think, again, above trend growth maybe we'll get lucky or maybe the uncertainties will hurt us a little bit i think growth is good i'm expecting labor markets to stay strong. >> reporter: and dallas federal reserve president robert caplan said oil prices matter less than they used to because of the huge increase in u.s. production. >> i think you would have gotten a different reaction ten years

ago, certainly 20 years ago. and i think it's indicative of the united states now producing 12 million barrels a day where we rival russia and saudi arabia in terms of energy production, we're much more energy self-sufficient. >> reporter: kaplan said they should look at the amount of money they lend to overnight lending markets. >> now that we've gotten past year-end, i want to find ways to grow the balance sheet more slowly that would be my objective i'm sure there will be disagreement about that, but that's what i'd be advocating. >> reporter: equity markets have gone straight up any hint it may reduce liquidity could cause concerns in markets but kaplan said he wasn't yet ready to make the call on what the federal reserve should do. steve liesman, cnbc business news, san diego. join, us live from his company offices in new castle,

chief economist at pantheon, macro economics. ian, thanks for joining us today. let's pick up on our colleague's package around the fed's latest commentary last year i think it's fair to say that the u.s./china trade war dominated the risk outlook for the federal reserve. as we kick off 2020, geopolitical risk has returned to the fore. how is this poised to affect the fed's decision-making relative to how the trade war affected their decision-making last year? >> well, the trade war in some ways is easier to predict, if you like, easier to deal with because we knew what it was doing to business sentiment. we could track it through the surveys. once it became clear it was proving to be quite dablging, the fed knew what it had to do the problem with geopolitics is the uncertainty is much more extreme. nobody knows what iran is going to do, when they're going to do it, what impact it will have on oil prices and what impact it

will have on risk assets in general. what we're seeing at the moment is sort of an immediate kn knee-jerk reaction everyone is nervous. from the fed's perspective, i guess what they need to do also is wait. they can't preempt here because they don't know what iran's response is going to do and what it will do to markets. it's kind of a free-floating cloud of anxiety which i expect will hang around for some time i don't think we're anywhere near the point where the fed thinks their response needs to be to cut rates. the reaction in equity markets has been downwards but small compared to the gains we've seen over the last few months we don't need to do anything yet but they need to think about it as we go through the next few months >> ian, let's talk about the reaction in energy markets we have brent trading close to $70 here tell me, higher oil prices, is this a good thing or bad thing for the u.s. economy obviously good for producers not good for consumers

>> yeah, exactly the balance has really swung over the last few years. you know, it used to be a very clear idea in the u.s. when oil prices go up, it's bad for the economy. consumers see gas prices go up, they cut back their spending on other things it's very clear. and the impact on capital spending in the oil business used to be slow and quite modest things have changed. with the shell revolution, producers respond to rising prices very quickly and capital spending rises within a few weeks of an increase in prices we will get the consumer hit but we'll get a gain from the producers. and now i would say those things are at least in balance and it may well be now that the positive impact on oil producers actually outweighs the negative impact on consumers which is a completely different world i'm not sure models have kept with it. i'm not sure media has kept with it either but the fed has acknowledged it. they know this is a much less clear story than it used to be and the idea that oil prices/economy bad doesn't work

anymore. for europe it does for japan it does, clearly, because they don't produce any oil. in america where production is up 40% in the last five years, it's a different planet. it's not clear that the fed's response should be oil prices are gone up, the economy will tank it's not like that anymore. >> we're coming on a couple weeks to the potential signing of the phase one trade deal between u.s. and china with the chinese delegation reportedly set to go to the u.s. january 13th how confident are you that we see not only the phase one trade deal signed but for the rest of the 2020 things remain relatively calm on the u.s./china trade front >> well, i'm not sure about calm i think the phase one deal will be signed but i also think it's not very important it doesn't offer any relief to manufacturers who will be stuck with the 25% tariff on pretty much all imported chinese capital goods and intermediate goods and tariffs on imported consumer goods but still 7.5%

and back in july they were zero. we still have a business sector struggling with the tariffs. they are being paid by americans, no question about that it's a drag on growth. i have to say i think the chance of getting a phase two trade deal about the election is very slim i think the chinese are biding their time i think they're expecting they'll find it easier under a different president after next november they certainly don't want any more tariffs to be imposed which is why they have done the phase one deal but i think we'll be stuck with the uncertainty all year. >> ian, thank you for your time. chief economist from pantheon macro. hollywood has wrapped up one of its most high-mroe file awards ceremony. brit stars were among the big winners. let's get out to jennifer bjorklund who joins us with more we talk about british stars cleaning up but one british presenter, ricky gervais, who

ruffled a few feathers, didn't he >> reporter: i would agree he kept saying this was his fifth and final times hosting the globes, in a way meaning he knew he wouldn't get an invitation back. we'll have to wait and see a lot of feathers definitely ruffled. the big winner, surprise winner was a world war i epic "1917," a movie set more than 100 years ago. best drama, best director for sam mendes who said there was not one director there that room who wasn't living in the shadow of martin scoresce with "the irishman" was shut out renee zellweger for "judy" and

joaquin phoenix for "joker" and quentin tarantino with best screenplay awkwafina, a first-time winner for the golden globes. best actress in a music or comedy for "farewell" while taron edgerton for "rocketman. television wins included hbo's "succession" and "fleabag" for comedy and lifetime achievement awards for tom hanks and ellen degeneres. a big, big night in hollywood, the kickoff to the awards season. >> thank you for breaking it down for us. i definitely have to watch "1917. that's it for our somehow today. "worldwide exchange" up.

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markets in turmoil stock futures pointing to another day of losses as middle east tensions continue to surge. iran is threatening to back away from the 2015 nuclear deal and president trump ramping up his own rhetoric as well, threatening dozens of iranian military and cultural sites if that country takes any kind of revenge. major reaction in oil, gold and key global haven markets this morning. all of this as "worldwide exchange" begins right now