Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

Here in u. K. , there was a general election. We are in a blackout period until the polls close at 10 00 p. M. Pound at 1. 3020. 2 . Toxx europe 600 gained day two of trading. It is above 2 trillion in terms of valuation. Plus oil supply cuts will not prevent a surplus in 2020. That is according to the ia. We speak to the president of the Swiss National bank. That interview, 10 30 a. M. U. K. Time. Lets get to bloomberg first word news. Today, the u. K. Goes to the polls. It is the nations first election in over a decade and the first since the brexit vote. It is the first december vote in nearly a century. Polls close it 10 00 p. M. U. K. Time. The House Judiciary Committee is set to conclude a debate on articles of impeachment against trump. The likely result is a partyline vote that will send the measure to the floor of the house. The democratic majority is expected to beat back a number of republican amendments. Israel is headed for its third election in less than a year. The parliament has until midnight to find a lawmaker who could form a governing coalition. This after Benjamin Netanyahu ad failed to form government. The u. S. Sees troubling implications north korea may be pulling for a major publication. Usingkim jong un on longrange missile technology. Withned to attack the u. S. Nuclear weapons. A potential king phillipe has asked Prime Minister to try and form a government. Last months election, sanchezs socialist emerged as the biggest party. He is already sealed a pack with the on test area group. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Francine. Francine youre looking at live , theres of the s p leader u. K. Is holding its third general election in five years. Voting will continue across the country until 10 00 p. M. It is exactly when our special results show kicks off. Dont miss that. The electoral laws are quite different than they are in the states. Here in the u. K. , today we are in a total blackout period. We cannot talk about the leaders or voter turnout. On to other things. The Federal Reserve have left Interest Rates unchanged, a signal that will keep them on hold until 2020. Belooking ahead we will monitoring effective ways for policy actions on the outlook as we assess the appropriate path of the target. Emergese, it develops that cause material reassessment of the outlook, we will respond accordingly. Policy doesnt preset course. It here is how is telling you this is a fed on pause for a long time. It reflects the fed is groping in the dark. Nehru is not getting wage acceleration or inflation here. Why is nehru above 4 . The next move is predicated on flushing. Inflation. Ed on this is a fed that is tilting toward accommodation because the risks of the outlook. The next move is probably a cut, not a hike. It is a cut because of inflation and the risks are still out there. Investment spending is negative. So i think taking away, the biggest part of the economy. Consumer spending is hanging on. It is a different regime for that policymaking and even if they do start raising rates, they are barely raising rates. This is a far car far cry from normalization. It is not a real consistent message. Francine joining me to discuss about the fed is lena komileva. Thank you for coming in. Have a great chart looking at inflation. The biggest risk for 2020 you on inflation picks up . Lena absolutely. This is the key risk for 2020 thiswe have had is interaction between Global Economic risk and central banking function. What we do not have is an understanding that we are in a double economy that isnt consumer demand decisions. There is a burning need. Central bank policy has limited away from normality back towards crisis era. When you look the real Interest Rates, reflationary territory. When you look at Capital Markets at large, there is no sign of liquidity. Does it mean we are crating bubbles . Lena this is another quite great question. We are probably in the lowest cycle than we have ever been. That has created an understanding level of anxiety. It suggests this social banks will do whatever they can to throw the global economy. Part of that weakness is to deal with the structural. It is to deal with a tugofwar between a recessionary global economy, the good heavy metals, even the auto sector. A downturn led by chinas reindustrialization but by the global trade friction. On the other hand we have a consumer led economy. Consumer demand and that is creating a shift in capital fast. It will be inflationary in the longterm. Certainly not something for Central Banks to address. If Central Banks do focus on that, we are blowing bubbles. Francine in the older economies that are much more oldschool led, they often depend on the dollar which is a euro economy. It seems like things are more interconnected. If there is a downturn in the u. S. , and Everything Else follows. Lena that is a great question. We have the economic power. The breakdown, the more intellectual trade systems which have had a profound impact on how such a banks on how Central Banks do. Value, the u. S. 10year yields which is a reflection of how under hedged in the Global Financial performance. Interactionamazing of risks. That is leading us to a situation where we have a disconnect between Global Economic fundamentals. How this ends up is a story for 2020. Risk. Too much asymmetric there isnt enough risk. Francine equities and bonds going different directions. We will go back to it a little later. Coming up, madame president , Christine Lagarde shares her first policy looking at European Central bank. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. Lets get straight to the Bloomberg Business flash. Good morning, francine. Saudi aramco surging for a second day reaching a 2 billion market cap. It had to settle for a lower offering an International Interest waned. Nestle is selling its u. S. As cream business to a joint venture. They will now own the branch including heloise and drumstick. The deal is worth 4 billion. They want to grow the business to challenge the Global Leader in ice cream. Addictions of another 15 predictions from an faa risk into boeing 737 max released by congress in put together after the first of the two deadly crashes that claimed over 300 lives. Faa administrative said officials asked it in good faith by not grounding the plane until after the second fatal accident. That is your Bloomberg Business flash. Isncine Christine Lagarde lagarde will likely be judged on how convincingly she communicates the plan to restore prices instability. Still with us is lena komileva. Howdid Christine Lagarde was quitting the guard viewed . Lena what we have had is this extraordinary turnaround from the fed and the ecbs efficient direction of the policy. We had a shift away from the ,eutral toward crisis era Interest Rate and expanding balance sheet. What the fed signaled last night is an open ended extended reflationary mode. It will take a more significant change of conditions but at the same time it will have to take a significant rise in inflation for it to do any tightening. That is precisely the most we will do to get from Christine Lagarde today. Breakdown and the other one is Mario Draghis legacy. He is going to color the outlook for 2020. Francine how can she bridge that divide . We heard from various members this divisiveness. It hurts the mechanism. Lena this is a great time for the ecb to have a conservative base. That was never a disagreement about the two core things. That divide is not just in the governing council. Is lagarde may well announce a formally stem policy review. That has that is six or seven months underway. I loved your coverage about it was great because it created in genesis for marla draghi in the last two meetings. The governing second, mario draghi did the unthinkable. He married Monetary Policy onto the actions. A sustained and significant increase in inflation toward asymmetric 2 target. What that means for madame lagarde is she doesnt have to do the same heavy lifting and defending negative rates. All she has to do is point. Francine go to frankfurt, outside of the headquarters. Julius baer, thank you for joining us. A quick take on what you think should be the bar to change the inflation. Debate but ig think the first task for madame lagarde is not really changing but it is unite the council behind the economist strategy. No matter how you change the inflation target, the big question is how the ecb will achieve that and how it can achieve that. Negative Interest Rates but also changes. What the ecb needs to think hard about and the inflation target makes whatat other inches what instruments they have at their disposal. The fiscal policy so the other policy makes it necessary to achieve any inflation target. No matter if it is the current one. What do thevid, markets want to hear from Christine Lagarde today . She is extremely famous. She is one of the most recognized faces of global finance. A lot of people dont really know her view on stimulus and at what point does more harm than good . Best thingably the for Financial Markets can get from the press conference is a more united governing council. It increases the credibility of the ecb and credibility is a key ingredient to guiding markets in the right direction. Some risktaking in markets. The most that markets except from the ecb. It seems ready to company markets. Francine eurodollar by the end of the year and then mid2020 . David it depends really on what the policy mix will be pure we expect the euro will appreciate in the next year. We see a target of 115. It is not the ecb which this to strike theay euro higher. Some pressuret away from the ecb and build more Interest Rate cuts which are negative. Fiscal policy comes into play, less room for the ecb and we see the euro higher. Francine david, thank you so much. David cole there. Do not miss our coverage. Conference, the news 1 30 p. M. London time could we have special coverage of the u. K. Elections right here on bloomberg tv. The action starts when the polls close at 10 00 p. M. London time. This is bloomberg. Francine u. K. Election and this is jeremy corbyn, the party head of the labour party voting today. We did see surgeon that are on. He voted also earlier. We cant say much more than that because we are in a blackout period. Voting will continue until 10 00 p. M. Today. Voting takes place in schools halls and we cannot talk about the polls or the leaders. What we will talk about is the exit poll that could move the currency, the pound. Especial show starting right here to neglect p. M. On bloomberg. Sort again in a second day trading trading on the real stock exchange. The stock climbing. The evaluation seeing the old giant leapfrog at microsoft to become the most valuable company on the planet. Lets get more now from matthew. We understood there wasnt enough people selling the stock which is why valuation was at 1. 8. What happened today . Today we have seen another big surge. We saw the stock go limit up today in contrast yesterday when there was a very thin liquidity. It pushed the stock up to the limit. Today we have seen much more dramatic volumes of around 340 million shares trading hand and the price move all over the place. Around 8 and the shares trading around 38 real. In terms of hitting the crown princes magic number, the share price needs to be over 37. 5 real. It is just over that now. We are seeing a lot of volume in the stock now. Francine matthew are we expecting a lot of volatility . Is it likely to stay at the 2 billion cap . Matthew what we are expecting to see from the saudi market is a lot of support coming from government bonds to these early days keep the trade the share price. What we will see over some time, once you have seen the price go up for a few days in the doubledigit range, that some of the early investors will start looking at taking some money off the table. This ipo has been entirely place with saudi investors or saudi corporates and they have all leveraged quite heavily in the aramco book. They will be looking to sell up and pay off those loans fairly soon. Francine matthew, thank you so much. Coming up, 20 days until 2020. We will look at the biggest risks. This is bloomberg. Francine lagarde kumutha lagarde, the ecb president. 2020 vision. It will do the same through next year. And voting is finally underway in the u. K. s third general election in five years we will bring you the results as they happen in our special coverage this evening. Good morning, good afternoon, good evening. This is bloomberg surveillance. I am Francine Lacqua in london. Lets check in on your european stock movers with dani burger. Dani one of the biggest movers to the downside this morning is metro, the wholesale in food supplier. Through fiscal year 2019, looking at the numbers, there is no real big surprise. Even the market is not taking it very well. It seems declining profits. This is after its plan to sell its china business, which metro says should be completed shortly. Now we are seeing prices fall, at one point following the most in two months. Balfour beatty a gainer this morning, up more than 4. 25 after a trading update. The Construction Company says its fullyear view is slightly ahead of what it previously saw. It also says its order books at the end of the year is in excess of 14 billion, and revenue should come in at 5 higher than last year. Percentore than 2. 5 gains there after Morgan Stanley gave out its top calls for 20. Europeanany is the Top Technology call. Its valuation looks reasonable, there is more upside to come from. Also it has a partnership with alibaba and ebay, which helps it out but he calls the stock the best in its class. Francine thank you so much, dani burger with the latest stock movers are now lets get to first word news. Good morning. The federal last night the fomc kept Interest Rates on hold , forecasting no changes through next years residential election. Chairman Jerome Powell saying current policy will remain appropriate unless the outlook changes. Another rate cut is looming in turkey. President erdogan saying Interest Rates will be moving to Single Digits in 2020. Most economists disagree with the view. Everyone in a Bloomberg Survey toward thatrch policy continuing. Ratesrland is keeping back at rock bottom. The central bank holding a policy rate and deposit rates at 7. 5 . At times denmark had the lowest benchmark in the world, meaning the National Bank experiment with negative rates is set to enter its fifth year. It shows no sign of ending. Rate by its benchmark half a percentage point, the social bank cutting back to 4. 5 . Any Analysts Expect policy markets to signal an end to the easing cycle. That left the door open for additional cuts. In more than 120 countries. I am leighann gerrans. This is bloomberg. Francine there are just 20 days until 2020. With the fed signaling u. S. Rates are likely to stay unchanged for that next year. How should investors be positioned heading into the final days of 2019. Howard, always great to have you on the program. Guess are the fed, i there are more Central Banks in the world than in 2019 and 2018 and you are trying to figure out 2020happens, go back to with the risk in the fed. The head of the liberal democrats just finished building, getting into the car. We now have all of the major party heads having voted, and we will see how the day pans out. We have exit polls at 10 00 p. M. Howard come we cannot, under no circumstance, duck about the talk about the do you worry that there is anything at stake apart from the fed . Fedrd know, i think the has more visibility than all of us. They have the experience, the knowledge within their organization, and they will do what is necessary to keep the American Economy in the right direction. I know you said that they are bankers to the world, but their duty is to look after inflation and unemployment in the u. S. They are know confident that the u. S. Economy is still on a growth path. Francine is there a danger that there is too much inflation all of a sudden . Howard i think we would all love a bit of inflation. I think everybody is scared that inflation might signify a change in the economic outlook, in economic confidence. I dont think that is likely to happen anytime soon. Francine how do you look at u. S. China trade . If we have extra tariffs on december 15, on sunday, what do you what does that mean for where you see in value in the markets . Howard this is going to be a medium to longterm problem. The americans see china as an adversary. Americanerstand from policy officials, they are not going to away to go away anytime soon. We may seek progress in 2020 ahead of the american election, maybe two steps back again in 2021. So i think the markets have gotten used to that element of uncertainty and factored in. Francine i also want to talk about the delisting from the london stock exchange. You are so comfortable that they were undervalued and thats why they made the decision . Howard i think every business entrepreneur and owner things his stocks are undervalued. Put that to one side. For us, 70 of the company is owned by management. The stock is highly liquid. We dont need to raise capital. We did not see a benefit in staying listed. You look at some of the market functioning, some founders are saying it does not make that much sense to be listed. You do see a lot of Big Companies being taken back private. Howard everybody has to evaluate why they listed and what the benefits are for that particular company in terms of shareholders and all the other stakeholders in the business and make the decision and the stakeholders interest. Francine but is it too shortterm that you worry about . I dont want to make you Say Something like there is a bigger of what you did apply to others, it is just a personal howard i dont think so. We found ourselves in a situation where we have been publicly listed in the u. K. For 19 years. We did not feel we needed to continue, and it was not a benefit. Francine the markets have changed in 19 years. What do you see the biggest lift in 2020 . Are there the quiddity concerns out there . There there was is liquidity concern out there . Howard there is always liquidity concern. The risks are nothing we have not thought about, but it is not the u. S. China trade war. It is something that we have not thought about. There are opportunities out there. We will get you back on. Howard i think the u. K. Could be a very Strong Economy in 2020. Tom we cannot talk francine we cannot talk anything about anything, so dont get anyone in trouble. Howard the social democrats in cdu to are pushing the spend more money as a condition think there is a good chance it will happen. I think it will be convenient for the cdu to have that excuse. I think an element of reflation theermany, refleeting by government in terms of fiscal reflation to be good for germany and good for europe. I can see that happening and i think it is an interesting prospect. Francine is this what your needs, and will germany spend to make a big difference . Howard i doubt they will spend enough to make a big difference, but the fact that they changed policy will encourage people to be more optimistic about the european economy. Francine if you look at the to0 pound out, europe seems have taken a lot of the. Would you be more attracted to the u. S. Because the economy is something that has been unloved like european stocks . Values i think capital are vulnerable because we have market, andr bull it needs to grow to sustain value. I think there is value elsewhere, and i do think it could be value in the u. K. For reasons we will not talk about. Francine we will not talk about it, howard. Not until after the election. After there joins us break. Kicking off at 10 00 tonight when exit polls close. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua in london. Israel is headed to its third election in less than a year after president netanyahu and his main opponent failed to form a majority. The problem is another election might not resolve the countrys political prices. Executive editor joins us now. What is at the heart of this . Is the primeeart minister himself and the indictment that he is under now. The Opposition Party basically is saying they would like to go into coalition with the ruling likud party. And the likud party is saying they want to do this coalition. But the opposition is saying not as long as that yahoo is under indictment. They do not want to do the deals then. And at the same time, the likud party is saying basically sticking to netanyahu as their leader. Francine how does this play out . Any insight on what would break the stalemate . Riad it is hard to tell. What would break the stalemate toif the likud party decided remove netanyahu as its leader, of which right now there is very little sign of that happening. If kthrough would be after a third election, as most people are expecting, it is basically with a similar result, gantz says ok, we may do a do with him after all. There is no indication this indic this election result will be any different. Francine what does it mean for the Prime Ministers future, Benjamin Netanyahus future . In tough spotsen before, but this really it does not look great for him. There is an indictment. He is very keen to get the parliamentary majority to vote on a deal that would give him immunity while he is Prime Minister. On that. Focused it does not look like that is going to happen, so his future is very much in doubt. It is hard to see how he can continue. Ourcine thank you so much, middle east executive director, riad hamade. Leighann saudi aramco is surging for a second day, bringing its to trillion dollar market cap, he value much touted by saudi arabia, that it eventually has to settle for a low offering as International Interest wanes. The offering only consisted of 1. 5 of saudi aramco stock. Nestle is selling its u. S. Ice cream business to a joint venture with pai partners. Brand own the heloise anding drumstick. The Global Leader in ice cream. Productions of another 15 deadly crashes over 45 years, from an the 737 assessment into max, released by congress after the first of the two deadly crashes that claimed over 300 lives. Faa administrator say officials acted in good faith. That is your Bloomberg Business flash. Francine thank you so much, leighann gerrans. Still with us is howard shore. We are talking about the is really election, which is difficult to see how the stalemate gets fixed. If you look at geopolitics in 2020, and we look at central much do you worry about geopolitics taking hold in 2020 and the markets not having enough tools to model the right tools to model them . Howard taking a step back, i think, curiously, some of the middle Eastern Countries are quite happy with Benjamin Netanyahu being Prime Minister in israel. We have got this sort of new alliance between israel, saudi dhabi, andait, abu that is providing more stability in the middle east then perhaps we have previously seen. I think that is a good thing. Is reallye tension going to be increasingly over the next five to 10 years how this americachina thing plays out. It is not just about trade, it is really about strategic power. And who controls what. Withe that clearly allowing and the debate. Francine saudi aramco is that a strategic play . The worlds most valuable company, quite a way out. Does that mean that the saudis will defend the oil price more . Howard looked, it is a big fundraising, but it is a tiny defense of the company that is being put on the market, and it is not the kind of flotation that we would regard as conventional in the west. So when we talk about a 2 trillion valuation, people are being encouraged to support it in a way that probably would not happen in the west. So i think that is just a kind of desire on the part of the saudi government to diversify, to show saudi arabia is strong. I dont think it impacts the way they try and influence the oil price, and we know that now with fracking in the u. S. , the price goes up to a certain level, the price increases. The saudis have less control and they know it. Francine part of the markets, i dont know if it is Investment Bank or how much is it disrupted in 2020 . How much will your industry go through change . Howard it has been, radically. There is continuous change in banking and all aspect of said financial services. Banking is disrupting every industry, and it is hard to predict because the speed of change is something we have never seen before. But it is exciting in terms of opportunity. It is also worrying for people in business because things can change quickly. Francine do you think people will consolidate and merge . That does not howard that does not necessarily help if you have the wrong Business Model. What youre asking is, what kind of Business Model should we have. That is a different question. With the idea that size matters, and critical and better, does it make the company a better one . Howard it is a wrong reason to merge. You will address that not from a defensive point of view but from an optimist point of view. Francine what do you worry about . Howard i worry about everything. I am old enough and have been around Financial Markets to worry about everything. Francine what do you not worry about in 2020 . Howard what do i not worry about in 2020 . That is a good question. I suppose the world wont fall apart. You know, things like brexit francine which we cannot talk about. We cannot talk about anything u. K. Related, howard. We can go overseas. Tell me something fun about the u. S. Do you u. S. Do you worry about the u. S. Economy . Expect Elizabeth Warren to get in. Very bad for the bad, but it would not be as for countries outside the u. S. Because the less checks and balances, the more effective. Ecb of thehe last year, the first one for Christine Lagarde is markets are trying to figure out exactly what she wants in terms of stimulus and whether she thinks the u. S. Will do more harm than good. That News Conference at 1 30 p. M. Today. There are just 20 days until 2020. Bank of america is morning of a lyric quiddity of a liquidity crunch. That is coming up next and this is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. As we enter the final two days of 2019, bank of americas warning of a liquidity crunch in the s p 500. Lets get to the details with dani burger. Dani this is another voice in the choir warning about a lack of liquidity at year end. Bank ofes courtesy of america. She says that any liquidity could fuel it at year end. She says the write down will force them to force them to sell after you have vulnerable, mutual ands mutual funds, hedge funds owning similar, concentrated stock of those stocks in the s p making up about 25 of the index. Finally, and this is something we heard from the bif earlier this week. And that is that banks have retreated as the role as market maker. Bank of america said this is likely due to heightened regulation that has caused them to pull back. This charge of data comes this is a drastic reduction, that hampers their ability to provide that day to day trading when it comes to the repo market. What has taken their place . Bank of america says its etf and highfrequency trading. A lot of research is saying highfrequency trading, whenever there is stress in the market, there is pullback from the stress whenever that liquidity is needed most. Bank of america says trading has become an extreme sport. Francine thank you so much, dani burger with the latest on the concerns over liquidity. Bloomberg surveillance continues in the next hour, tom keene joining me in london. Our conversation with the Swiss National Bank President in the next hour. What we will not talk about is the u. K. Election paired we will not mention the effect those poles or any id anything ls. T will affect those pole francine the ecb tenant finally has a chance to shake off draghis shoshadow at her first press comment. Signaling it will do the next same for next year. Voting is underway in the u. K. General election. We will bring you all the results as they happen in our special coverage this evening. Good morning, good afternoon, good evening, everyone. This is bloomberg surveillance , tom and francine from london today. The focus is on the u. K. Election. We will not talk about it. We will cover it at 10 00 p. M. Convenient that Christine Lagarde scheduled this around the british election, knowing that we cannot talk about it. I dont get it. You can write about it in print, but there are rules where you cannot everybody, not just Bloomberg Francine everyone, if you are on the air, broadcasting, on radio, you cannot talk about the election. Ae leaders are talking about blackout period, and i am here to make sure tom doesnt say anything about it. Leighann today the u. K. Goes to the polls. It is the nations fourth election in a decade, and the second since the brexit vote in 2016. It is also the first december vote in nearly a century. Polls close at 10 00 p. M. U. K. Time. Dont miss our special election coverage. Aramco is part of the market arabiasght by saudi de facto leader. Gains surged by the daily limit on the second day of trading. That pushed its value to 2 trillion, the evaluation originally sought by mohammad bin salman before the ipo, but he is now convinced that was too ambitious. Making it clear that the fed will be in no rush to reverse its three recent Interest Rate cuts, that even if the economy picks up steam and the odds of recession reseed. Policymakers predict no change in rates through next year. Global news 24 hours a day, on air and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in im than 120 countries, leighann gerrans. This is bloomberg. Tom . Francine . Tom a debt equity a data check right now, equities, bonds, currencies, commodities. With a substantial move even within the meetings, the futures up seven. That is a good thing we are seeing. We rebound a little bit. Eurodollar showing that strength, 1. 1128. That is a substantial dollar weakness, measurable dollar weakness, trailing and lower for longer. Rates in oil, i would note rather than west texas 59, however how about brent . Vix, 14. 89. There is the 10 year spread, sterling 1. 3192. The dollar index way under that 97. 5 statistic, 97. 17. Francine it is clear the fed outlook was taken with treasuries and stocks, this after jay powell indicated rates will remain steady unless there is a meanie for change in the economic outlook. We are looking at is a meaningful change in the economic outlook. Markets and traders are figuring out exactly Christine Lagardes thoughts on Monetary Policy. Tom i voted three times this money, and before that i made this chart quickly. This is an aramco chart, and i will clean it up over the next couple of days. But at 2 trillion, it is important. The ugly white line at the top is two days of aramco trading, and this puts it in scale with the Apple Computer market cap, down 1. 2 trillion as well. That interesting blue circle below that is exxon at its 2007. F october exxon now well below that, at 291 trillion. Capn is 1 8 of the market roughly of aramco. I will improve that, but i have two vote six more times before the election is done. Francine vote early and vote often, some people say. This is a great way of charting what Christine Lagarde needs to navigate today. Inflation u. S. Versus europe, Christine Lagarde, ecb president today may take the opportunity to proclaim the first Strategic Review in 16 years with the ecb, but that will track questions on inflation goals close to 2 . Christine lagarde chairing that first policy meeting at the helm of the ecb. She will likely be judged on how convincingly she can indicates the institutions plan to restore price stability. We are now joined by matthew , in frankfurt. What do markets want to hear from Christine Lagarde . How much do they want to hear about her Monetary Policy stance . Matt it depends on who you ask in the market, but in general, the expectation is that she is going to hold steady to Mario Draghis path of the past eight years, at least at the beginning. You mentioned the strategy review, which i think is one of the most exciting parts because the last time the ecb conducted a strategy review was 2003, so it has been some time. The other thing is, markets want to see if she has been able to heal the risk that we saw the rift we saw forming over the last few meetings with the ecb governors. Frankfortl in the office told me that madame lagarde took all the ecb governors to some castle outside frankfurt and they had a little retreat to get to know each other better and maybe get more of a positive vibe going. We will watch to see if that positive vibe is apparent in this new meeting. Tom matt miller, will there be a difference in the language at the press conference . Dol it be draghi redux, or you look for dramatic change . Matt i think it will be very different, tom. I have been going to these products conferences for years these press conferences for years with draghi in charge, and he has very much been the focus. His right and lefthand, but they do not speak very much at all. Occasionally he will allow it question to go to one, occasionally christine will remind him of something. Allfor the most part it is about mario draghi. I will watch to see if it is the same thing with Christine Lagarde, or if she will share the spotlight a little bit. I imagine that it will be she will be a little more personal right away. It took draghi a long time to warm up to the journalists in the room, and i think Christine Lagarde will do that very quickly. Francine thank you so much, matt miller, bloomberg market open anchor in frankfurt. Ecb, theal coverage of first News Conference of Christine Lagarde, starting at 1 30 p. M. , and we will take that life. Joining us to talk about fixed income in the ecb is steven major, global head of fixed income research. To have ae exciting new ecb president. Know what she things on Monetary Policy what will you be looking for . This review is interesting and it is all speculation at this time, the similarity would be inflation the makeup of how they go about it is going to be completely different. The challenge for europe is the lack of safe asset. Riskfree lack of safe asset. We are relying on the bond there is not enough paper. There could be that some of the steps taken by governments and Central Banks in the next year or so start to do with that. Francine your thoughts on inflation. Is what we have right now too loose because maybe a lot of markets want to see it overshoot, or do we need continuity . Steven inflation is way too low compared to target their there is plenty of narrative from banks and Insurance Companies containing about it, but that does not make it help with policy. The policy rate is set for the real economy, and ultimately maybe the central bank should start communicating that it is safe for a long time. I know people dont like negative rates, but it is there for a reason. It is an outcome of what was before, may be a necessary outcome. We overindulged. You had an equity call in december of double digits, you had your bond call. Lets bring up a chart that justifies steve majors terrific year in fixed income. This is the fiveyear forward on the United Kingdom, United States, and particularly the blue indicates the persistence of this in this lower for longer trend. How does madame lagardes job change given what is going out . Same academic question, but the market question to you, how do you adapt to the lower for longer . Steven there has been a load of papers from the u. S. And europe which is recognition that the natural rate of interest is lower than previous cycles per that is the first thing you have to take on. With inflation below target, it is difficult to imagine how nominal rates can be much higher than they are at the moment. The challenge is just to recognize that reality, not fight it, and start to communicate that we are going to be here for a long time. That is the inevitable outcome. She is a politician as well. How does she know the politics of we need better nominal gdp, better societal animal spirit . Steven it is quite simple in this regard, because the ecb can say given the current mandate, they have to keep cutting rates if inflation stays low. They have to keep easing. If they do that, the Financial Sector will not like appear therefore, what will the government do to help the real economy and the Financial Sector . Say toy, the ecb can governments, what are you doing to help . The allstar might stop falling if you could change the outlook for growth levels or the productive capacity of the global economies are there is this narrative about fiscal policy. I think it is true that in some countries there is space, but overall we should be careful because a lot of money has been spent already. That is really the problem. I dont like this idea that there is a simple case of listening to fiscal policy and all the worlds problems are solved. We have to get realistic here. Tom thrilled that steve major can be with us today. It is an election day. Under the strict rules of the United Kingdom, we are not talking about it. That changes at 10 a clock p. M. , with that important at 10 00 p. M. , guyedwards, jon ferro johnson leading that coverage 10 00 p. M. From london. Stay with us. This is bloomberg. It is telling you this is a fed that is on pause for a long time. Isit reflects that the fed groping in the dark. We are not getting wage acceleration really, or inflation here, so why is nehru above 4 . Predicated move is on inflation. The fed will try to keep inflation from going even further down. This is a fed that is tilting toward accommodation. The next move is probably a cut, not a hike, and it is probably a cut because of inflation and because the risks are still out there. Investment spending is negative. We see factory shipments that are going negative. The biggest part of the economy, Consumer Spending, is holding up. I think it is consistent. It is a different regime for fed policymaking. Even if they start raising rates, they are barely raising rates. It is a far cry from normalization from years ago. Consistent,real coherent, tied together message. Tom considering a fed meeting to, i thought it was very , and withr. Powell us, steven major, to talk about the path forward in 2020, he is with hsbc. What a bank up here for bonds accommodation, price up camille down . Steven it is a good point. You can pick anything, highyield, ig, inflation linked bonds, normal linked bonds. All about close to 10 . It is mainly because the fed capitulated pure this time last ,ear, the Market Expectations based on the fed guidance as well, were more than 3 . Now here we are with a one handle. Tom this is really important, and this is why we have mr. Major on. The idea that stuff happens you wrote about this brilliantly. What happens in the bond market after a double digit year . Is it a total return year . Proverbially clipping the coupon . What do you do the year after a bang up here . Steven we are coming out of the year where my mother could have made money just by being invested. Tom i didnt make money. Whats wrong . Steven i think being too active is probably wrong. We have to hunker down. I cannot do bearish bonds. Looking for yields to go up a little bit in the first half so i can get longer gain. On 1. 5st is one. 5 untenured treasuries our forecast is 1. 5 on 10 year treasuries. Thats way to see what stuff happens. There is this tension between the stocks that pull the yield down and the stuff that says reflation or some kind of behind the curve kind of thing. So we are sort of stuck in the middle. 1. 8 is informed by those two tales. To me, if the fed does anything, they will probably cut. It will be later in the year, not earlier. Be more do you have to selective in 2020 . Steven one of the calls we are making at the start of 2020 have you noticed the total return on inflation link is mimicking the normal bonds, conventional bonds, almost tick for tick . The real yield is moving in line with nominal yield. That means you are getting the same kind of performance as the conventional bond, but you are getting almost a free option into inflation going up. So i quite like tips, and we are recommending the 10 year. Francine thanks so much, steven major of hsbc. Is only day two of trading for saudi aramco, and the crown jewel has already trillion the 2 trillion goal. This is bloomberg. Leighann this is bloomberg surveillance. Lets get your Bloomberg Business flash. Unionized workers in the u. S. Have renewed contracts with united auto worker United Auto Workers say 71 of voting members approve the new deal. It is the last of three agreements negotiated by the union. Fiat chrysler promised 9 billion of investment and that it would add 7900 jobs. Says theecutive Wireless Company will not last for long without a takeover from tmobile. A federal trial will determine whether the merger can proceed. Federal regulators approved the deal, but several states sued on antitrust concerns. That is your Bloomberg Business flash. Tom . Francine . Francine shares in the worlds most Profitable Company soared in the second day. Saudi aramco valuation jumped to 2 trillion today. Joining us is matthew martin. Whether theyn would be starting to look at elsewhere outside saudi arabia . That has always been the intention, the whole goal of the offering was to attract money from outside of saudi arabia and to bring it into try and fund mohammad bin salmans economic plan. There has not been a huge amount of foreign investment, and the potential of the jewel listing in other markets, is perhaps still in the cards when i put this to the ceo at the listing press conference yesterday. He said the focus at the moment was just on the listing. They have a 12month lockup period where the government cannot sell any new shares. I think the government will be looking at it. The question will become a Foreign Investors have already said they do not want to invest at the 1. 7 trillion valuation that it ipoed at. Now that is even higher. Will they be even more willing to jump in than a couple of weeks ago . Tom is there a belief within the Financial Media that the reason for the lift was simply a share scarcity, and it came up because there was nothing for sale . Matthew well, certainly, if you look at the trading on day one, there was a very small number of shares that changed hands yesterday, and that enabled the big share price jumped you sought to get it up, almost immediately just around 30 million shares traded. Today, we are seeing much more higher volume, much more activity in the share price. You have got notes out from saying that if you are an investor you should cash out now. I think if you look at the share toce, it is now just dipped just under the 2 trillion valuation now. There ise people going to be volatility. Is if there is a lot of volatility, with that come in a couple of months from now . Matthew well, the government has a 12month hook up period that they cannot sell anything beyond they cannot sell another big steak then. Although that lockup period does give them a bit of the ability to sell to Strategic Investors also, another 450 million shares, which can be sold into the market as well. Exercised, then that could put a bit of pressure on the stock with more supply coming in. Tom matthew martin, thank you for the brief. In dubai, are middle east finance reporter. Coming up, our conversation of the day on economics with the Swiss National bank. Mr. Jordan. This is bloomberg. Good morning, everyone, bloomberg surveillance. Thrilled you are with us. Election day with very different rules. Francine do not talk about it, that is all you need to know. Tom and we can print about it, and bloomberg did some great printing about it but all of the u. K. Cannot talk about it. Francine we have similar rules in italy and france because of the influence so you cannot talk about polls, voter turnout, or the leaders, to make sure you do not influence the vote. Tom we can talk to steven major. , and doubleeld down digit return in so many places. You talk about inflation and the dynamics of the real yield is the place to be. Two shadesaway from of credit from hsbc sees. What do i need to avoid next year . Of aen there is the risk credit bear market starting to and up, and a flat curve some of the movement in cyclical data might be indicating that. Our approach has been to take a Machine Learning approach, to use all the models, and it would appear we are much closer to the credit there market. We have to be cautious. Europe is relatively better placed because you have the ecb buying program for credit bonds. It is the u. S. I worry about. Tom give us an example of an important factor that has weighed out more heavily. Steven consumer confidence. Tom interesting. Steven and the u. S. Yield curve and how it applies to the rest of the global credit markets. Believe it or not, the shape of the u. S. Curve does matter. Can really only see the recessions after they have happened. The yield curve has been flat for a long time. Francine we have a viewer question. Tom, i am a little bit disappointed by your chart. This person is writing in saying you believe the curve can bear steepening for a while . Steven if that person knows me, they know the answer is no. It is an outlier and it comes into the strawman discussion. Whichthis term strawman is a fallacy you construct that you can tear down. You need a radical government, right or left somewhere, that launches a big fiscal loosening, bigger than we have seen before, and changes the Central Banks reaction function. That is an awful lot to happen at the same time. When i talk about steepening as a strawman, many people think it will happen with high inflation or fiscal policy, but you need a central bank that will ignore what the government is doing. In the past when you have had a fiscal impulse, what happened . The fed hiked and the curve flattened. It is difficult to imagine a bear steepening unless you deanchor the inflation expectations. Francine negative rates, we touched on it. How do you defend negative rates for switzerland . Steven they get a bad rap and you have the s p. Maybe smb. Maybe talk to them about it. It is about communication. If people are led to believe it is a bad thing and it is bad for them, their behavior will compound that. This is just an outcome of what went before. We have to be patient. Negative rates are part of the target. Tom are we communicating when we limit negative rates to High Net Worth products . Would it be more of an experiment if we diffuse negative rates across more of german and Swiss Society . Steven maybe that is what needs to happen and we are seeing examples of markets operating below zero. You have seen more issues with the negative rates and maybe that is what needs to happen. It could be around for the next decade. Tom Marvin Goodfriend tragically dying a few years ago, he said we have taken a half step toward negative rates. Many want to pull back and you suggest do what is good for incentives, do more . Steven if you look at the constraints, it has been in cash. In the u. K. And other countries, cash is being eliminated from society. Do the officers at hsbc say when mr. Major walks in and says, i want a deeper damp deeper amplitude of negative rates . Steven nobody says anything to me. Mostine what do investors misunderstand about fixed income . Steven the idea that the yield is in any way relevant, the yields maturity is one of the most misunderstood characteristics of fixed income. It assumes you hold to maturity and assumes you can reinvest the coupon index at the prevailing rate, which is also unlikely, unless you have a bond that is priced apart. There is two assumptions and the fact that you have 1. 8 yield does not mean the return will be 1. 8. You could have a 10 plus or minus return with a 1. 8 coupon. Tom of course, you need a bloomberg terminal to effect the screen to do a better total return, Something Like that. Steven Something Like that will be done. Tom steven major with hsbc. Here is leighann gerrans. Leighanne the u. K. Goes to the polls. It is the fourth election in the deck in a decade and the second since the brexit. Polls close at 10 00 p. M. U. K. Time. Do not miss our special election coverage. Leaningan senators are towards a quick impeachment trial for President Trump. Majority number of the wants to let democrats make their case and they would vote without calling witnesses. President is expected to be acquitted. Israel will hold its third election in less than a year. Netanyahu norin benny gantz have been able to form a Majority Coalition so the next election will be held on march the second. There is a continued stable stalemate. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Gerrans. Hann this is bloomberg. Tom leighann gerrans, thank you so much for the news. Harrods. , by demand, we go tonight spread. Just consider harrods, the new harrods, the revamped harrods. We consider the rossi leopardprint suede pumps separately. The beauty court, the only fishbar, harrods all new fishbar, harrods. Streetom Queen Victoria in london, bloomberg surveillance. We are preaching about the election, not on tv or radio. In the print media. Lots to talk about, including the ecb meeting in germany. Right now is a joy, because if you go to harrods, everybody has a certain way to walk in the door. For me it is simple, you have to eat first because you spend less money if you eat first so i go to the fish bar. Michael ward has been brilliant joining us today as he has itsne the fish bar back to brilliant splendor. Michael we have done 250,000 square feet and the center of it is that beautiful room taking it back to 1900, 1905 splendor. Tom how do you bring back the dreaded beauty room . Do you bring it back or forward . Michael the whole beauty room has been redone in the most stunning, gold flecked marble. Tom you can take my gold . Michael i can take your gold. Francine what are you getting right when so Many Department stores are getting it wrong . Is it the heritage, the tourists . Michael no one is investing like us. We are investing to make at the palace of night bridge. You just do extraordinary products and people want beautiful things. We sell, yes, expensive things, but they are stunningly beautiful. Our staff gives unbelievable service. People have forgotten the basic rules of retailing. Francine are you selling to mainly tourists . Michael tourists are a small part of our business because most of the people who buy from us our london residence. Residents. Francine tom is a big part. Michael we have a strong business in the middle east and the u. K. And lvmh has Three Corners van cleave has the other end around the corner from van cleave is bergdorf. When did harrods come to new york . Michael new york is a difficult place to do this. That quality of prices is not there, so it might be a little while yet. And iin harrods guess i go back to shoe have been you have to reinvent heaven you have to reinvent every three or four or five years. Is it inhouse . Youou consult the vision have . How do you get the harrods vision . Michael we have the best merchants in the world to buy the best rod ox, and we get the products, and we get the best people from the Design Industry to help us. Tom designers want to help you, or do they want their separate, freestanding stores . Michael they want their freestanding stores, but this is harrods house so when you walk through the beauty house, the whole thing is a standardized experience which the customer loves. Within the various rooms, the browns can personalize. Francine how is brands can personalize. Francine how is Technology Changing retail . Michael technology is a huge a hugeut there are number of people who want to touch and file product. Corners do you have for selfies . Corners that would look good on instagram . Michael we have areas to make sure people can get there instagram. In our technology apartment, there is a huge golden hippopotamus emerging and it has no relation but it looks cool. Tom how is the Holiday Season . It is a big time of year. Michael we have got no problems. We are on track to deliver our budgets. Sales are good. All of the areas we have refitted the customers are loving. If people produce something the customer walks into the room and it is just, wow, this is beautiful, they will come back and come back. Think try to trade and the asset out at the last minute, no one wants that ink the acid out, no one wants that. Wencine michael ward, and will get back to stephen measure. Theill bring coverage of u. K. Election. This is bloomberg. Bloomberg this is surveillance. Nomura holdings has agreed to buy american boutique Investment Bank Green Capital advisors, a rare overseas acquisition. And sell wind and solar farms. The terms were not announced. Shares of lululemon were lower in trading, reporting another quarter of doubledigit sales growth but not enough to boost a stock that has almost doubled this year. The market expects the result to be flawless. That is the Bloomberg Business flash. Francine we are just a few minutes away from the latest Rate Decision from turkey, president erdogan sounding off, saying the country will be moving to singledigit Interest Rates in 2020, as inflation jumped into double digits in november. Back with us is steven major. Theging markets go back to dollar. What does the dollar due in 2020 . Steven it is going up according to our fx analysts. There is always a risk the cyclical pillar is pulled, that key support. At the moment, what is not to like . You have higher yields in the u. S. And developed markets and high real yields as well. It is dangerous to buy everything. Francine trying to stay away from the countries where politics could go wrong. Steven you have the risk of the bear steepening you spoke of before, so countries like mexico are offering a decent rail yield and on real yields and on balance, they are overweight. Tom do you hedge the trade in currency when you buy that bigger coupon . Steven the way the rate curves are set up as it will cost you money. Tom it will cost you money. Steven you end up giving it all back, so you have to go into em unhedged or partially hedged. Tom here is your numeral coupon and you have a gross normal coupon and you have a gross up and you come right back down. Steven you might even go into negative territory. It might cost you more to hedge, so that is the challenge for em. Relatively higher u. S. Rates with the flat curve is a challenge. Francine when you look at china, not looking at the geopolitics, how depressive is that . Steven china has been slowing down for three years. If you look at the swap yields is one thing. E they are in easing mode. It is an outright buy, because they are going to cut rates and that is the theme for 2020. Francine how do you play that . Steven you buy government bonds or receive swaps. It is an outright long for us. Tom i want to get back to where fixed income fits into the retirement program. Annuitycked at the level for pensions in the United Kingdom, no one can make it anymore. Fixed income, equity growth. Where does steve major see fixed income making it into anyones actuarial assumption . Steven i think the assumptions and unfunded liabilities that have been created are a short position in fixed income. By their very actions of promising returns they cannot hope to get, by making assumptions into the future, these unfunded liabilities are effectively a short position in fixed income. Tom price down, yields up. Steven they are not actually short of bonds, but they need to buy bonds and that is the same thing. People are looking for long or short positions to figure out where the market is going but these special bonds are short. Tom are they properly positioned or does it get lower for longer for years . Is there a steven major desk desperation . Steven the fact that they are not properly positioned makes the yields go lower. This is around the world. Until they are properly positioned the yields will go lower. They are at a mean reversion, which is the greatest sin. Tom we have been doing that for 10 years. Francine given the strikes in france, do you see value in european bonds . Steven the French Market has been a Good Alternative to bunds. When hedged back in, it has historically worked. It does not work so well today. The French Market has lost one of the big buyers outside of france, so if you get uncertainty the temptation is to see the spread go wider. Tom this has been fabulous. I just got in a message from jon ferro that whoever wins the election will provide fiscal stimulus to perform less to him so maybe they can start winning some football games. Steven major. Coming up, Moritz Kraemer. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone wifi up there . Uhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your local xfinity store today. Tom this morning, and economic in economics, the word slack is associated with chair yellen. Powell saysn he sees slack in the economy. The dollar weakens. In the United Kingdom, it is a data vote. An important election. In the market, so much cash and so little time left in 2019. Good morning, everyone, this is isveillance this bloomberg surveillance from london. Important information from china. Francine elocution lessons for some of the polling stations you were going through. Saying that prudent Monetary Policy should be flexible and appropriate. They are talking through the sayl news agency, and they chinas economic downward pressure is increasing. They will prevent speculation in the Property Market and it feels like they are getting ready for something. Major of hsbc definitely saying that the tilt is to more accommodation for china, and that would go back to the narrative they should be ready for anything that happens, including tariffs on sunday. Tom China Economic meeting calls for lowering tariff level, no question about that, but how does it dovetail into important decisions three days on . In turkey, Interest Rates moving lower. This is the dynamic of turkey with a lot of politics, and you can see the difference of a struggling economy of a 12 level versus the developed economies. Here is viviana hurtado. To the the u. K. Going polls for the fourth election in a decade. It is the first december vote in nearly a century. P. M. U. K. E at 10 00 time. The u. S. House judiciary set the likely result is a partyline result and will send the measure to the floor for debate and a possible vote. They will likely be back republican amendments. Value rpassing the surging by the daily limit again, pushing its value past 2 trillion. That is also the valuation the crown prince sought before the ipo. Investors convinced him that was too ambitious. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Tom thank you so much. Equities, bonds, currencies, commodities, a post fed churn, dollar front and central, futures up three. Stronger euro off the powell press conference. The Second String is more fed based with curve dynamics. A flatter curve earlier and we move onto a slightly steeper curve this morning. Sterling, 1. 3161. Francine i looked at sterling amid the voting. Smbs franc rising after the released a staunch defense of negative rates while leaving them unchanged. European stocks unchanged. Minutes ago, we heard from china but they are ready to act if necessary in Monetary Policy. Tom we have lots of things to talk about and one is the European Central bank. Talking to jeanclaude trichet a few days ago, talking about the ecb, a younger institution. Us, chiefemer joins economic advisor. What will you listen for today . Moritz good morning. It is good to be back. Today is a pivotal meeting for the ecb and lagarde specifically. No one would expect policy decisions to be taken today. I think there is broad consensus , but there will be scrutiny and the press conference at half past two local time about the Strategic Review that has been so much discussed. I would expect she would let out the information on Strategic Review, what should be talked about. The last reviews happened in 2003 and a lot of things have changed. I would not expect her to give any answers, but it would be fair to assume she would give us some inkling on what the questions are she would discuss. During that Strategic Review, and that is critical for the early part of her 10 year, she needs to square the 10 year, she need tenure, she needs to square the circle between the hawks and doves on what to be mean by price stability . There is a big debate. Been so distracted with the United Kingdom election and other matters. This is fundamentally important. Would you suggest we will see a triple nuanced mandate from this institution . Moritz i think the mandate will not change. The mandate is fixed in the treaty. There is no appetite for treaty change. It is about interpreting the mainy which said the ecbs responsibility is price stability, which is defined is just below 2 . Presidency ats averaged 1. 2 . Creditor countries would argue that is consistent with price stability, 1. 2 percent is price stability, so there is no point in pushing rates further down. There may be a discussion coming up on what do we measure with inflation. Contrary to what is happening in the u. S. , the euro area inflation does not include computed rents of homeowners. This alone, according to some calculations, would increase the. 3 ,tion rate by. 2 or bringing us closer to the target. This may be one area to discuss which might narrow the gap between the different positions in the governing council. Whatever the debate will be, she will need all the diplomatic skills that are typically attributed to her, not to reinflame the tensions once the Strategic Review will conclude. Point i would hope they discuss is the governance of the ecb. Francine is it important she yields the divide on the governing council . Moritz that is very important. What we have seen after the september fireworks that draghi set off in his last real meeting , we have seen how deep the golf is between gulf some of the governing council. We need structural governance that allows the dissenters to speak in a more orderly way their position. Theyptember, draghi said did not vote because there is a big enough majority. That is not viable going forward. It will be better if the ecb moves to formal vote and publishes the vote, which is what pretty much all Central Banks do. This will allow the minority view to be heard in an orderly way, rather than the ambush strategy we have seen. Francine talk a little bit about how the markets will test madame lagarde. Out byey try to figure testing her with moves to figure out what her Monetary Policy is . Moritz that is exactly right. There is going to be a backandforth that is a learning process. There will be a lot of questions about what her views are on the negative side effects of policy currently inssed europe. She spoke more sympathetically about it. The Financial Stability report of the ecb hinted on the risks related to negative Interest Rates, so i think they will push her to see whether this would preclude further Interest Rate cuts going forward. ,he market is still priced further easing of policies next year, has pretty much reverted to rates remaining at the current level throughout the next year. So much, thank you Moritz Kraemer stays with us. We will bring coverage of the u. K. Election on bloomberg tv. We will not be able to talk about it until 10 00 p. M. , when closing pole it polling closes in the u. K. That is one we have the exit polls. This is bloomberg. It is telling you this is a fed that is on pause for a long time. It reflects that the fed is groping in the dark. We are not getting wage acceleration or inflation here, so why is nehru above 4 . The next move is predicated on inflation so the fed will try to keep inflation from going further down. This is a fed tilting towards accommodation because of the risks of the outlook. The next move is probably a cut, not a hike, because of inflation and the risks. Inflation spending is negative, factory shipments are going negative, so taking away the biggest part of the economy, Consumer Spending is holding up, so it is consistent. Even if they start raising rates, they are barely raising rates. This is a far cry from normalization. Consistent, a real coherent, all tied together message. Tom terrific coverage led by scarlet fu yesterday. What i heard in that punditry is an exceptionally important point. Some of those guests were talking about the rate structure, the rate dynamic, and less about the job market but Economic Growth and economic dynamic of the United States of america. Moritz kraemer is with us. As we speak of the ecb, we can talk about the United States with a different mandate. Forward for chairman powell, will it be an analysis of inflation or an analysis of gdp and the spirit of Economic Growth . Think the fed has a geo mandate, so they do not only look at inflation where things are looking fairly decent. They look at employment where things are looking spectacular. It should not have come as a surprise that there were no rate cuts yesterday. The only thing that did surprise me is the fed out of its statement, which was copied from the previous session, took out the reference to the uncertainty. Foundt any explanation, i it puzzling because not of the problems we were looking at in november have been resolved in terms of trade war, in terms of the future of the u. K. European relationship and so on. Strongly, which reflected in the dot plot, but the markets are not currently believing the fed, they are fighting the fed in their opinions because there is expectation that further cuts will happen next year. I think that would only occur if we really have a surprising negative economic development, which can happen any time given the policymaking philosophy of the administration. There is nothing i would see cut would prompt the fed again, especially with employment being so robust. Tom bring up the dots. It is the idea of lower for side, not 3 right but 2. 5 . I want to fold in the china headlines. China speaks of proactive fiscal policy and prudent Monetary Policy. Will we see china provide the fiscal space necessary to begin to assist weaker growing economies . Chinese havenk the a direct record of whenever the economy slows more than they feel comfortable with, they throw everything out it, monetary as well as fiscal. They have done this for a decade and the space is not unlimited that they have, so one of the consequences has been that the debt levels and china have risen spectacularly, and that creates a Financial Stability risk. The authorities are acutely aware that this tradeoff has increased and the room for maneuver has diminished. What they just said moments ago is not very spectacular, saying that Monetary Policy should be appropriate and so on, but it does signal they are ready to throw more at the problem if the economy were to slow further, which is something i firmly expect to happen. Francine thank you so much. Tradingly day two of first saudi aramco and the crown jewel hits the crown princes 2 trillion goal. What happens after . This is bloomberg. As bloomberg surveillance, tom and francine from london. Tonight, we will have special coverage as soon as the exit polls come out. Valuable company are again in their second day of trading, saudi aramco jumping to 2 trillion today. Joining us is Helen Robertson. Thank you for giving us a little bit of perspective on what comes next. How much volatility will we get first saudi aramco . Two days running they are hitting 2 trillion. Helen what we have seen since the shares listed is quite a surge. Yesterday in terms of volume. Down inseen that drop terms of the actual share price, down 5 at the moment. If 50 drop in a matter of a couple of hours. It is early days, day two. We have seen an extraordinary amount of volume trade hands, so about 370 million, up from 36 million yesterday. In is it easy to buy shares new york and des moines . Is it easy to buy shares . Helen aramco shares are only listed locally and the saudi government has made efforts to essentially make sure that it is mainly local investors. They have done all sorts of things for incentives. They have been scoping opportunities for potential listing in asia, but it is only concretely listed in saudi arabia. Tom Helen Robertson reporting for Bloomberg News on a transaction that flat out surprised people. Moving into 2020, where will aramco be and where will the markets be . Moritz kraemer, we are thrilled he could continue with us. Give us a paintbrush of your view. I have heard so many things and i want to go back to chairman powell where he said not only are we halffull, but the dynamic of the glass is more than half full. Do you agree . Moritz you could also say the glasses twice as large as it needs to be, meaning we have thrown sort of already more than enough stimulus at the economy globally in some parts, in others less. Before the break we talked about china. I sound like a broken record, the growth model we have been seeing over the last decade is not sustainable. It is too much based on an investment ratio that is not credible in the long term, 40 of gdp, so the incremental growth you buy has to be declining. We will see potentially downward orprises over the next year two coming out of china. This is a big ticket item, the second largest economy in the world, and all of this would be exacerbated as a continuation or escalation of the trade conflict we are seeing, which is why i said earlier on the program i am surprised that powell took out the reference to the uncertainty , because for me, it is still very much there, especially going into a president ial election year. Next year, we will not see a further drop in global activity, but i think we are sort of trundling along the current level. I dont think the Global Growth potential is that much higher than we are observing now, given the demographic change and the structural changes we are seeing. Francine Moritz Kraemer, thank you. Do notg about the ecb, miss our coverage of the last ecb Rate Decision of the year, the first one for Christine Lagarde. There is anticipation on twitter about her messaging. London, 7 45 a. M. London, and the press conference ,tarts 45 minutes after that 8 30 a. M. In new york, 1 30 london. Bonds edging upward after the policy decision. This is bloomberg. Bloomberg surveillance, good morning. Special coverage tonight, 10 00 p. M. Of the United Kingdom election. Lots of talk on twitter. The worlds of tv and radio are different. No talk on tb tv, every network. We are truncated on that today. Here is viviana hurtado. Viviana north korea may return to launching long raise Ballistic Missiles longrange Ballistic Missiles. The ambassador said kim jonguns regime is poised for major provocation and has threatened to take what they call a new path in Nuclear Talks unless donald trump makes a more favorable offer. Oilenergy agency warning market still faces surplus, even if opec delivers cuts. Inventories will grow by 7000 barrels a day. Israel will hold its third election in less than a year. Netanyahu norin benny gantz have formed a governing coalition. A vote will be held on march 2 and there still continues to be a stalemate. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Tom thank you so much. To speak of china, that is why we have ted alden on, who has been brilliant and the nuances of the trade war. Andy it is different, nafta the new nafta, the potential passage and maybe the signing as well. Legislation the new to the old nafta . The president says it is all new, all original, brilliant, and i hear a lot of other people saying, maybe not. Ted if you look at the economic impact, it is not hugely changed. There are some things in the Digital Economy that will matter. , thenafta was negotiated internet essentially did not exist, so some updating will have economic impact. The big battles were over important symbolic things, having to do with labor rights, outsourcing to mexico, so those are the battles that have been fought out that led up to the deal that got announced this week. Tom i have eight more questions, but china beckons and particularly with the breaking news of a substantial set of on their put out balance sheet, on their Monetary Policy come on the future direction of china. Monetary policy, on the future direction of china. From know what we need china or is there a misunderstanding . Ted there is always somewhat of a mystery. It is hard to know whether chinese numbers reflect what is going on in the economy. We are seeing a significant slowdown in the chinese economy and it is hard to know how much of that is a consequence of the u. S. Trade war and how much is internal factors. The chinese are pumping credit into the economy to make up for that but they have overcapacity in real estate and office buildings, so the chinese are in some real difficulty. It is hard to get deep insight into what. Do we have any idea what happens with the tariffs on sunday . Ted the consensus is they probably get delayed. President trump does not want to launch this tranche. It is all consumer products, apple smart phones and everything we see in the store. To do that before christmas would be a grinch move so there is reason for the u. S. To want to delay. It does not look like there is a deal that will come together this week. There are some real differences with chinese negotiators that there were probably be some punting to the new year. Describe how would you what President Trump wants to do with china . Ted he wants to have a great big trade deal that he can trumpet is the greatest thing ever that remakes the chinese economy, and that will not happen. We will get a narrower trade deal focused primarily on agricultural purchases and politically, that matters. Farmers have been hurt by this trade war. They need the stability of the market and for the president to go, i have increased your opportunities in china, that will be a good thing for him. It will be a small deal that will matter in the heartland of the country. Tom i know you want to tackle the next edition of your book so lets failure to adjust out to the future. Do we have the ability in the United States to adjust post trump, whether it is now or four years from now, do we have the ability to find a multilateral or bilateral difference . Always been an optimist about the United States. If you look at the trade competition with japan, we eventually rose and wound up out competing. The convulsions this time are much larger primarily because what the u. S. Is doing in the world. We have seen the wto ceased to be a functional organization because of what the americans are doing. That will be hard to recover because there will be mistrust in europe and other places of, can we work with the United States . ,he u. S. Is an adaptable place we always have been. We will adjust again, but it has been a challenge. Tom is the past path from uruguay dead . And multilateral agreements, are they dead . Ted i think the wto functionally is dead. Multilateral agreements, not necessarily so. There have been smaller agreements within the wto framework that have moved forward. We are back to the old dat system prewto where you have rules that most countries will see it in their interest to follow those rules, but you will not have a binding procedure. I do not think that kills multilateral trade, but it makes it uncertain and we will have to deal with that uncertainty. Every day you talk about how Companies Deal with that uncertainty, and that is the new reality. Francine how are Companies Dealing without uncertainty . Are they changing supply chains . War, whoa trade benefits from this . Think there i dont are a whole bunch of winners. We are seeing some investment come to the United States. The biggest winners have been places in asia, vietnam at the top of the list. Places that are heavily invested in china are looking for sources in other areas. I think mexico will come away as a winner. It varies from sector to sector, furniture, a lot of movement to ,ietnam, textiles and apparel movement to vietnam and bangladesh. Companies will have to build a level of redundancy into their supply chains they have not needed because they were confident about the rules, so that will eat into profits. They will have to have a plan b and a plan c if tariffs are put into place. Werenies for a long time hoping the trade war would be a blip and would get back to normal but clearly we are not getting back to normal. Francine ted alden on the council on foreign relations. We will bring special coverage of the u. K. Elections on bloomberg tv. We started voting at 7 00 a. M. Local time and finish at 10 00 p. M. , when the exit polls come out and one hour special coverage starts, brexit and beyond. This is bloomberg. Francine this is bloomberg surveillance, tom and francine from london. Christine lagarde sharing her first policy meeting at the helm of the ecb and will be judged on how quickly she can implement price stability. We are joined by Matthew Miller in frankfurt with a great hat. I am so jealous. Policy tary tom thats what we do for Christine Lagarde. Francine what do we expect from Christine Lagarde . Matthew she can wear whatever she wants. They are all focused on her tone. Comparison ofeal Christine Lagarde to the mario draghi of the last eight years. That will be the focus. Important of the first presentation is the cadence and the pace. Will it be more draghi like . Will she make an abrupt shift, or do you expect elements of what we have seen . Matthew i expect the policy language to be very similar to what we heard from mario draghi, but she is i think a much more open person. It took draghi a long time to warm up to reporters who come to the press conference, and she may be more experimental. There was a great story about how she had informal conversations about the possibility of the ecb developing its own cryptocurrency. That does not mean it will happen or it is around the corner, but it is a sign she is open to thinking outside the box, if i can use a horrible cliche. She is conducting the first strategy review in 16 years, so people are looking forward to details. Francine what fires is she fighting . Is it negative rates and she needs to make sure the governing council stays on message . Is it fiscal policy in germany . Matthew the biggest fire she is fighting is the risk. At the end of Mario Draghis governorsere were strongly against cutting further and a reopening of the bond purchase program. Andrtheless, they did it, you heard some outspoken colleagues disagree with draghi in the press. That is the first and biggest fire to put out. She has to get them on the same page, and apparently the ecb went to way retreat at some castle outside of frankfurt in order to boost the positive vibes and get to know each other. Tom you are one of the best people in the world at gauging the german people and their desire for fiscal stimulus. We saw headlines in the last 90 minutes on china. Guess what . Once again, china will effortlessly move toward some form of fiscal stimulus. Is there any glamour within the culture of germany glimmer within the culture of germany to do what madame lagarde desires . Matthew there is. The german people are starting to get really worried about the manufacturing recession. Remember how many millions of people work in the auto sector, the Manufacturing Sector in germany. When they see headlines about the fact that electric cars will require 1 5 the workforce, it makes them nervous. Climate change has become a huge part of the conversation, even those in the center right. That is a path they see that spending more money and getting fiscal stimulus out there that does not feel like they are just breaking glass windows to replace them. There is a path towards that. Tom tell us about the turnover in frankfurt. Is it a whole new team, or are the people in the offices of mario draghi still with her . Matthew it will be mostly the same people. She wants to that sense keep some consistency. When the ecb holds a press conference, it would be mario draghi and on his right his deputy and on his left, the head of communications. We are expecting it to be exactly the same. She is keeping the most important people on the team and in the back office, we do not see any new names. I am sure she will bring her own team with her, but you will not see a real changing of the guard in terms of personnel. Thank you so much, matt miller. Guess what . There is a meeting 7 45 in new york, madame lagarde with those headlines. It is far more important, according to mr. Miller, the 8 30 press conference. We will have that on radio and television. In the United Kingdom, in london, this is bloomberg. This is bloomberg surveillance. Shares of lululemon are lower in premarket tram trading. They reported another quarter of double digit sales growth. That was not enough to boost the stock that has almost doubled this year. The market expects results to be flawless. A sprint executive says the Wireless Company will not survive long without a takeover by tmobile, the testimony coming in a federal trial that will determine if the merger can proceed. Several states sued on antitrust concerns. That is your Bloomberg Business . About thelets talk changing media landscape. Wieserjoined by brian with us from paris. Braving the strike to get to our bloomberg terminal. In 2020,look at media will we see consolidation, Technology Changes . What will be the number one change for your industry . Brian the most notable thing is deceleration. Really inline line with Global Economic trends that are not as favorable. We have 14 countries that will decline in terms of their advertising growth rates in 2019. Countries like china are even feeling this. 1. 4 percentting growth in china next year, so growth is looking pretty dour. Francine is this because it is a mature market . France and germany growing before average rates, brazil above average and india probably the world leader. Brian some of it is because the world is maturing and a lot of the emerging markets that drove so much growth the first part of the century are underperforming now. They have gotten to a size that is more normalized. That is definitely a factor. The other thing that is playing out, you mentioned technology. Hnology driven Countries Technology driven companies have driven so much growth and that starts to play into it as well. Francine what part of media growth will do better, online sales, programming around streaming devices, or Something Else . Brian Digital Advertising will grow faster than Everything Else. Double digit growth should happen in most major markets, certainly the u. S. And u. K. The most isat is up Outdoor Advertising where you see solid singledigit growth in most countries aside from china and japan, where it is somewhat weak. That is relative into investors because of the number of companies focused on that sector. Other than Outdoor Advertising and digital, media is flat to going downward forward going forward. Media . Outdoor media the is investing so much in Digital Signage which makes it more robust, that has a negative impact but it is illustrative of what the broader Industry Needs to be. To the extent that media owners are willing to invest in the longterm, there is more growth to be had. Take what disney is doing, investing in streaming services. Those businesses will be lower margin in general, but it is almost necessary if you want to see longterm growth. Or you could harvest your Business Today and keep your margins up. Wieser, joining us from paris today. If you look at equities in europe, they are moving sideways. We have special coverage of the last ecb Rate Decision of the year, the first under president Christine Lagarde. York and a press conference 45 minutes afterwards. We will talk about the u. K. Elections at 10 00 p. M. Alix Christine Lagarde takes the spotlight. The new ecb had delivered her first policy meeting with markets watching for strategy review. The tall put is alive and well. A more dovish powell sets the bar very high for another rate or hike. And the 2 trillion win for the crown prince. Saudi aramco hits 2 trillion valuation on it second day of trading. Welcome to bloomberg daybreak on this thursday, december 12. Im alix steel. Centralbank bonanza over the last few hours. In the markets, we are still looking ahead to position for 2020. Jp morgan says you are going to want to buy some risk, like equities and emergingmarkets. Equities totally flat after that more dovish surprise yesterday from the fed. Eurodollar flat as well. A teeny bit of selling in the backend. Et on the oil