Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

Stoxx 600 at a record high. On top of that encouraging news out of china. The pound, 1. 3363, getting a little bit of data with manufacturing. 45. 9 but it is still also indicating contraction. Lets take a look at a share price of electoral a come of , those are down. Mark carney will present the financial report. Thats from 5 00 p. M. London time and we should be a week away from the nomination of the new bank of england governor. Lets get straight to bloomberg first word news in new york city. Boris johnson will appoint new ministers to his cabinet after his landslide victory in the u. K. Election. The Prime Minister will welcome 109 new conservative members of parliament to london. They will take their seats in the house of commons. Downing street saying the government will introduce a law to deliver brexit before christmas. That will pave the way for the eu divorce and take place by the end of january. The International Effort to rein in fossil fuel pollution stumbling after u. S. Talks water down language agreed in previous years. Left the meeting after more than two weeks of discussions agreeing only on those urgent need for deeper cuts to greenhouse gases. Work and work on failed to agree on the finance needed to fix this potential disastrous problem. The chinese premier reiterating beijing firm support for hong kong leader carrie lam. The remarks as lee hosted lamb for her annual duty visit to the capital. Another weekend a protest had roads blocked and Commercial Area of hong kong. Demonstration seeing black bottles and other items thrown at police. English Football Club arsenal facing a backlash from china after one of its top players attacked the treatment of muslims in province. They pulled the arsenal game from screens and you may nba was this year the slammed after similar criticisms from an executive showed support for hong kong democracy protests. Global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Back to you, francine. Francine we are getting some news on a possible merger in the car industry, this has been talked about and anticipated and are set tond they sign off on it possible Fiat Chrysler merger plan. We will have a close eye on what that means for electric vehicles and what it means for the car industry as a whole. Chinas economy showing signs of stabilizing and regaining growth momentum according to the good news for the nations outlook after a phase one trade deal with the u. S. Was reached. Joining us now for more is our economics correspondent, great to have you on the program as always. As we get a reaction from beijing. Lowkey withquite a working level and contact, but te no real sense china has been flying below the radar on this, 11 on the front running to be done by the u. S. In some respects. Weve had some reporting out of beijing making the point that chinas Securities Regulator is in talks about allowing access to the books, this is an old long running story on the u. S. Side they want to have a better ask so it could be taken another step towards china trying to patch up relations between both nations. The key will be what kind of deals or announcements we get over the coming week as these are finalized ahead of the trade in january. Francine what was the take away from the data we had in china today . Coming against the backdrop of the trade news it was already a relief for china. Its not a game changer. We had some good numbers for november showing a pickup in investment and industrial output and retail sales. Economists are a bit divided in terms of what it means, some are upgrading their forecast, saying the overall economy should do better next year. Some are saying we are looking at something of a modest stabilization. No real time for a big rebound. Its not just a trade war thats been dragging on the chinese economy but also domestic policies around getting a handle on the level of debt. A policy push the authorities are sticking by with enough time to unleash a torrent of fiscal spending or anything like that. Segue from the numbers today were pretty positive, it does appear the chinese economy is stabilizing and coupled with the trade agreement you have it heading for his good a 2020 has a could hope for. Francine thank you so much, our chief asia economics correspondent. Thank you both for joining us. We have a phase one deal, what does it mean for the World Economy . I think it buys time. Its important and basically in basically ending a phase of a constant escalation and basically it may not be massively substantive but it buys time for the Global Economy to heal a bit more. From that perspective i think its very positive. I agree with that. I think the way the market is looking at it is different from the way businesses are looking at it. The snapback provisions in this deal, monitoring the possibility of putting these in place, we have to find out whats the frequency of this monitoring. If its every month it will be nerveracking. If its a year from now we can all breathe a sigh of relief. I think there is still a lot we dont know. We have not seen the legal text. There are some things that will ,ompletely implausible particularly the amount chinas most import going up over two years. But i think the market likes it because it sort of confirmation but for now at least, no further escalation. Francine this is a concern is that there is no further escalation but they could roll it back and go back to square one a couple months. I think thats right. Its very clear the politics of and it looksmount rushed out before christmas, the rollback was on consumer goods and as aaron said arend said, the provisions are still to be revealed. The provisions are likely to remain big so that we dont go period ofconstant rollbacks during the campaign. Both sides will be reasonably skeptical about the enforceability of the deal. This is really about buying time for the election. The ability to codify an agreement between the u. S. And china is immaterial development. Francine how does europe benefit from phase one deal. Not a whole lot. Will the way we think about it is with the tariffs were doing is creating u. S. Weakness which transmits freetrade channel. But at the margin weve looked at our u. S. Growth a tiny bit. I dont think its very material. The old link people would cite but one trip to china deal we move onto the car tariffs, i dont think i think thats not the case anymore. So my guess is its relatively immaterial of an outlook. Francine how much do we understand this is something the Trump Administration wants because its christmas and so he doesnt want to burden the u. S. Consumer or is it something they are committed to . I think we can only speculate on that. One of his longstanding his longstanding complaint is about trade and so from that perspective i think one should assume he is quite serious about changing chinese behavior, there are still a lot of variance not addressed by this deal. There is an element of the deal which is plausible deniability in case something goes wrong or in case there is a feeling you need to reescalate. Part of this could be influenced by the u. S. President ial campaign and depending on who the Democratic Front runner is you can see material changes in behavior regardless of what china does. Gene and arend stay with us. We are expecting a new cabinet. Nejra chancellor of the peoples government and with this new government we await the appointment of three new cabinet ministers, i will look ahead to all the challenges of a new government focusing on getting brexit done. In 2020. Here outside 10 downing street. This is bloomberg. Francine this is bloomberg surveillance. Lets get straight to the Bloomberg Business flash. In new york city. Internationa flavors and fragrances reaching an agreement to buy duponts nutrition division. The deal sees the u. S. Company beating Irelands Kerry group. The dupont unit specializes in projects such as sweeteners and emulsifiers and has seen growth in areas such as plantbased meats and probiotics. World is dubai Cineplex Cineworld is to buy cineplex. They hope to offset declining numbers of visitors. They operate 165 movie theaters across canada. Bowing considering temporarily halting production of the 737 max. Thats a clearance for the ground that just returned looking recently likely to use flip young 2020. They believe a temporary pause would be less disruptive than a further slowdown in production. Thats your Bloomberg Business flash. Francine thank you so much. Lets get back to the u. K. , Boris Johnson said to a point new ministers to is a cabinet. Two his cabinet today. He is pushing ahead after securing a victory in last weeks election. Nejra cehic is downside downing street. Outside downing street. How quickly can we expect a vote on the Withdrawal Agreement through parliament . The governments priority in terms of getting brexit done and Boris Johnson is expected to bring the law to parliament before christmas in order to get out get that done by the end of january. In terms of today what we are looking ahead to his some cabinet appointments so we need a culture secretary, welsh secretary and environment minister. Later in the week, the queens speech will be delivered which outlines the plans for the government expected to include an extra 34,000,000,000 pounds, 45 billion dollars of spending on the National Health Service Every year until 2024 and thats a big battleground during the election. Thats how this is shaping up. Beyond that into 2020 big challenges for Boris Johnson even after the landslide victory is conservative scott in the election last week getting it done actually means negotiating the new trade agreement with the eu. Will he be able to do that in 11 months or will they need to ask for an extension on july the first . And then the other challenges the Scottish National party who have renewed their call for a referendum on Scottish Independence and beyond that, questions over the bank of england succession and on Spending Plans, we understand will it be a big spending boom, end of austerity doesnt necessarily mean a big spending move. Expected to spend 1 pound for every six is opposition candidate Jeremy Corbyn had promised. Francine thank you so much. The very latest with the priorities of this new government. Does this mean for u. K. Assets . The markets were on a tear. I dont know if there was just such a big majority. Gene i think its a combination were primarily around the majority. As you said we had quite a rally. We see major Downside Risk in the short term. Youink there is some hope could actually see a pivot from the government and out of the government has a Strong Majority , basically pushing aside the erg and those two some transition arrangement, extension and in that context you could actually get something then a barebones trade agreement which is what we are working with. The trade to get brexit done you need to know what kind of relationship post Withdrawal Agreement you get, will we have another that will put the markets ids if we need to extend . We wont find out soon. So my guess is we will get the Withdrawal Agreement out of the way and get the middle of the year and at some stages it will become apparent we need more time and thats sufficient time majority, ie a big think it does really open up the freedom for him to maneuver and be more market friendly. Francine what is it mean for the pound . s constructor for the pound but i think if you get close to the june date and it becomes apparent there will be no extension at the end of 2020, the upside becomes much more constrained. Things we will be looking for that would give us more upside, stronger recovery, more fiscal stimulus then what is in the budget. And some clarity around the transition that leads to a better trading arrangement than what we might currently expect. Francine this is looking at the 200 week moving average, when do we know whether its a good time to actually have confidence in the u. K. Economy longterm . I think this uncertainty about whether or not you get an extension beyond 2020 is important. If you look at where hiring intentions in the u. K. Are end of the lowest level since 08 or 09. The economy has virtually stalled at this stage. If you take out the government spending, you are basically growing at. 03 . They are coming off an incredibly weak economy. Its going to take months, youll get a nearterm verse boost. The business is to be really confident and what amount of paperwork you will have to do, i would be surprised if you see that any next year to be honest. Is pimco invested in u. K. Assets . Weve been optimistic on the outlook of the pound. Weve been more negative on gilts. Its a reflationary fee since, but as he said, the one thing i wanted to add is we have to recognize we had a conflict its base with the auto sector weakness globally so we are getting a abatement of all three shocks at once. His he gives us three chances, not one, to see some recovery. We shouldnt expect a strong recovery but it does suggest there should be immaterial amount of reese relief. Francine staying with us. Coming up on bloomberg, mark carney will present a plan Financial Stability report coming up later today. Our live coverage from 5 00 p. M. London time. This is bloomberg. Francine this is bloomberg surveillance. Stocks in new york have started week on the front foot reaching an alltime intraday high as key risks are into the year end. It only took four years and some change but here we are finally at alltime intraday highs for the stoxx 600 joining its american and global world benchmark peers. This is again a new high for the First Time Since april of 2015. The one thing to point out for these games is just gains is the breadth is not as they are in terms of geography as people would like to see. Really end of regional benchmarks they havent hit an alltime high. Maybe this is less about Service Earnings stories or perhaps a Global Growth story. Maybe its these key risks that are off the table. They have added the most of the benchmark over the past five days. See a lot of things. Hsbc, lloyds, another london list of company that the u. S. Story not some tech is in there as well. Perhaps it has to do with the trade narrative with the phase one deal being reached. Risky risks catalysts gone helping us get to new highs. Its wavered in terms of the morning. The white bar is where we actually are, the blue bar is the 20 day average. So the first couple of hours the first half hour of trading we didnt see is volume as high as we would like when youre hitting an alltime high. It has started to pick up and you can see this is the projection for the rest of the day so this is a crucial function to keep a track of as we continue to track these alltime highs. Francine thank you so much, a lotta focus on that till year end. We will bring you this story next and have a full roundup of your markets, this is bloomberg. Francine a double burst of good news. Sendreement on trade deals stock higher. The stoxx 600 reaches a record high. The brexit lineup Prime Minister Boris Johnson names his new cabinet after securing an historic victory. And there will be consequences. China threatens retaliation if germany bans huawei. Afternoon,g, good good evening if you are watching from asia. This is bloomberg surveillance peter we are getting some u. K. Data, interesting on the back of that election. We are hoping to have an idea of where Boris Johnson wants to take brexit, especially into negotiations with the e. U. Services pmi falling. Manufacturing, 47 point four. That not only indicates a contraction but it is worse than the 49. 2 forecast. Ubs coming up with some news. Being charged by the u. S. Chief executive with the rising with devising a plan to revamp the ultra High Net Worth unit. We understand he plans to restructure the unit that serves the banks top billionaire clients in the first Sweeping Change since he has been appointed. We will have more on that. Just over 1. 5 hours until the trading day, so lets check in on the european stock movers with annmarie hordern. Annmarie the stock 600 this morning hitting a record intraday high. What is pushing that higher is minors. Up more than 2 . Trade oneith the phase deal, but on top of that, positive data out of china this morning that is helping the minors. Off a warning in north america, they seem to be electrolux seems to be facing a bigger hit than expected. Cineworld to the downside, down more than 3 . They are buying cineplex in canada for more than 1. 5 alien u. S. Dollars. 1. 5 billion u. S. Dollars. We have seen a lot of consolidation in the Cinema Theater world. After another weekend of protests, china reiterated beijing from support for carrie lam. Turning us from hong kong to bring us all of the latest from dan. Kongs bloombergs what are we expecting from the meeting between carrie lam and beijing . Dan we just heard from president xi jinping as well, who said the who called this the worst crisis since china took control from the brits in 1997. Not a lot new as far as policies go. They basically reiterated support for carrie lams government. Very unpopular among the protesters. Many would like to see her go, but it is unclear from beijings standpoint what they would get right now. From that. They basically encouraged her to hang in there, and for the police to be enforcing the rule of law here, which to beijing means locking up a lot of the people responsible for the violence. Francine thank you so much, dan 10 kate. Lets get straight to bloomberg first word news in new york city with viviana. Viviana Boris Johnson appoints new ministers to his cabinet after last weeks landslide victory in the u. K. Election. The Prime Minister will later welcome 109 new conservative members of parliament to london. Ae government will introduce law to delivered praise it before christmas or that will pave the way for the e. U. To deliver brexit before christmas. Suspend trent the Chinese Ministry of financing, it will also refrain from imposing duties on vehicles and auto parts shipped from the u. S. Also a continued suspension of tariffs on a combined 126 billion worth of american imports. The u. S. Trade representative weighing in. We dont have a date. Finale to get the translations worked out, the formalities. We are going to sign this agreement. What i will tell you this, the second phase is going to be determined by how we implement phase one. Phase one will be implemented right down to every detail. It really is a remarkable agreement, but it does not going to solve all the problems. They are agreeing only on the urgent need to cut greenhouse gases. They failed to agree on the finances needed to fix the problem of fossil fuel pollution. All of this watering down language agreed upon in the past. Global news 24 hours a day, on air and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, viviana hurtado. This is bloomberg. Francine . Francine the Chinese Ambassador to journey has threatened to retaliate if germany resistance against huaweis growing, but there are also hints a band could impact german cars built in china. Ene frieda joins us from pimco. This is more of an idea that the trade war come if we have a deal between the u. S. And china, moose elsewhere. . Hat does it mean for bonds i think it gives you a clear sense of what you should still own bonds because it is telling you that there is a lot of risks. Inty, and a lot of the question marks about trade and technology will be hanging over us probably for the rest of our lives. From that perspective, you will see the threats come up between countries, which gives you a vision of a worstcase scenario. In the case of the chinagermany dispute, this is a case of the ruling party, the cdu wanting to put tighter restrictions on huawei. But the cdu Party Conference already rejected a motion on this. So the odds are you end up with a compromise in the government. This is a credible threat from the chinese to hurt german autos, so we expect that it means more regulation, but it does not mean complete decoupling. How difficult is it to model th these . How difficult is it to understand the medications of something coming from Huawei Technology . Gene we are in the fortunate position not to necessarily have to understand that. It is about constructing a portfolio that is robust against those kinds of shocks. When you do the researcher get about what kind of providers can rollout 5g, it is almost impossible if you want to do it without with a realistic timeframe without huawei. The Manufacturing Sector is effectively in contraction. You have unemployment going up about 36 of all unappointed districts. Halfway i think to National Unemployment going up in germany. We are seeing manufacturing weakness spreading to services and other parts of the economy, but we are not there yet. One of the crucial things now, based on what happened with brexit phase one, is how quickly the manufacturing starts to recover. We got 40 minutes er disappointing because everyone hoped we reached the bottom, 40 minutes ago is disappointing because everyone hoped we reached the bottom. It keeps dragging on longer than we expected. See. Will have to wait and germany is the poster child for manufacturing weakness affecting the rest of the economy because they have such a high manufacturing share. Francine arent supply chains moving . Manufacturing tends to come back unless supply chains are shifting irrevocably. You are actually seeing two things. You are seeing diverse effect where europe is gaining significant market share in the u. S. , so it is probably the biggest market beneficiary. You are also seeing the shifting supply chain. You are seeing chinese manufacturing relocate to taiwan, japan, korea, etc. My guess is the phase one deal does not interrupt that process. Francine thank you both. They will stay with us. We will cut we will discuss Christine Lagardes debut press conference. And whether the euro zone is showing destabilization. This is bloomberg. Francine this is bloomberg surveillance. Viviana we begin with an agreement to buy dupont nutrition agreement. The deal sees the u. S. Company beating Irelands Kerry group. The dupont unit specializes in products such as sweeteners and emulsifiers, seeing growth in areas like plantbased needs and probiotics. Cineworld is to buy cineplex for 2. 15 billion canadian. Operators hope combinations will help them gain efficiencies that will offset declining numbers in visitors. Cineplex operating 160 five movie theaters across canada. An english Football Club facing a backlash from china after one of its top players attacked the treatment of weaker muslims in the promise of she and jan. Clubss despite the attempt to distance itself from the star players remarks earlier this year that you may remember the nba was slammed in china after an executive showed support for the prodemocracy protests in hong kong. Ba aic chinese automaker is considering doubling its the move would put almost 20 of the German Company in the hands of two Major Chinese owners. Mercedes says they will delay the u. S. Debut of its First Electric vehicle by one year. The brand will start sales of its crossover model in 2021. Instead, it is choosing to support growing ev demand in europe. Francine Christine Lagardes era as the ecb at the ecb has begun with her debut conference on thursday per she showcased her initiative for a yearlong review of Monetary Policy and expressed hope for the economy to stabilize. After the meeting, she said she was neither a dove nor a hawk but wanted to be an owl. Francoise says the euro area is stabilizing. He said there is the beginning of stabilization and we stopped revising down on inflation forecasts. Still with us, gene frieda from pimco, Arend Kapteyn from ubs. Should we focus on what she says . Gene i would rather do that. My spirits and wildlife is lacking. I think so. Francine what did you learn with the press conference . Gene very little. The goal from her perspective was not to make any mistakes, be defined as one thing or another, a hawk or a dove. There is not much new to say. Theyre going into 2020, they will have a mandate review. It is interesting that they are talking about stabilization recovery. Saying, the evidence of stabilization is still very tentative, so the notion that you can talk about what is next is premature. Francine how difficult is it to decide whether we need to change inflation . I have heard both arguments. One is that we need stability, so if we change it now, we dont have anything to compare it with. The second is that we have missed the target so much, it is time to move on. Arend it is never a good sign. They are not just looking at that there they are also looking at redefining inflation, which is rather than bring the target down to inflation come you can bring inflation up to the target, doing things like there are other changes you could make. One surprise, the only surprise from the conference for me was how expensive the review looks to be. Theres quite a bit of discomfort on the part of some people in the council did not want to make it too expensive and that youre opening a can of worms. You do not necessarily want to put everything on the table, and she seems quite open to putting everything on the table, which is interesting. Francine what does it mean for bonds . Is it more difficult to get . It is not difficult with what the euro zone is doing anyway. Gene the starting point of the bond market is extremely accommodative Monetary Policy. The labor market is reasonably tight, so if you are going to normalization of policy anywhere in the world, it would probably be in the euro zone. Not because the outlook is great but because the starting point is such loose policy. Point, putting everything on the table will create uncertainty on the shortterm horizon, which is not to pursue the review. But in the event your redefining inflation, the market will speculate as to what it means for how accommodative policy should be over time. Francine what does it mean for euro . What kind of euro does the euro zone economy actually need . Arend very little of it has to do with ecb. We think what is driving the ecb what is driving the euro is a low growth environment. To break out of that bottom quintile before people want to take foreign currency exposure. Everyone is staying in the dollar, and things are going nowhere. So the euro has had the lowest, the narrowest trading rate since early 1970s. With everything that has happened this year. It is telling you we are a little bit stuck. We have a synchronized slowdown, a synchronized easing of Monetary Policy. Now you can get a sink and iced uneasing of Monetary Policy, and it is unclear where the euro whether the euro goes anywhere. Gene i dont even think you need a much more positive growth environment. I think the bar is low for the dollar to start soft globally and for the euro to rally. To your point, it is going to be an unloved rally from the perspective the ecb and most european governments because it is a reasonably weak economy. But you have such a large foreign account surplus. If you are going into a 2020 environment where the u. S. Is slowing, europe is picking up, i think the euro can probably rally. Francine are inflation risks in the u. S. To the downside or the upside . Gene i would say inflation risks are balanced. I dont see material upside pressures. We are probably all a little complacent to the notion that with type of a this type of a lieberman with this tight of a labor market, i think our own view is that inflation is pretty flat, a little higher on the shortterm, lower later in 2020. Francine you need that consumers to stay there. Arend we are worried because we think the tariff damage from the may escalation and what is left from the september escalation is working its way into the data. You will see pressure on retail into the first half of 2020, so accelerated store closures. 20 of the traditional bricks and mortar space in the traditional retail segment in the u. S. Is running at a margin of less than 3 . So even with an increase in the cost from china, it erodes your margin. Francine do you agree with that . Gene i completely agree to that. I just think the fed will look through it. Unless youes have continued tightening in the labor market relative to where we are today, a strong power probability the fed looks to francine how much pressure from President Trump . All of the u. S. China trade war was to make sure the fed was at a place where it sustain the economy until the election year. Gene with the equity market up here, with the labor market as strong as it is, i find it hard will be a that there lot of pressure from President Trump. As things change, we will start to see that ship. It is not unrealistic to imagine that you start to see a softening in the labor market, particularly during the first half of the year. And the fed is under pressure to cut rates. Francine thank you both for joining us. Gene frieda from pimco, Arend Kapteyn from ubs. Coming up, the events were are watching this week. We could see a government shutdown. We will explain why. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance , and here are the events you should be watching this week. Today the bank of england publishes its Financial Stability report that will outline the Central Banks views on the Financial Bank system. In the u. S. , investors will keep an eye on the repo option. On thursday, Vladimir Putin delivers his annual yearend news conference. On the same day, the bank of japan announced a final policy decision of 2019 and finally u. S. Gdp is out on friday or lawmakers face a deadline to continue funding the government or shut down. On two corporate news. Ubs finds to restructure the unit that serves as the bank top billionaire clients. This is a Sweeping Change. Lets go straight to the finance reporter. Patrick, what have we learned today . We have a scoop out in the last couple of minutes. As you say, ubs is trying to restructure its ultrahigh network unit. That is important because they spent the last 10 years building up under the leadership of joe stogner. Now think theyll con has come in a couple of months ago and he is planning to dismantle that structure. It will definitely ruffle some feathers in zurich and will lead to a reduction in management layers. Francine how much more changes will we see . We understand the chief executive of ubs gave 60 days to put a mark on it. Patrick thats right. He was given 60 days to come up with some solutions, some ideas as to how to rejuvenate Wealth Management at ubs. A chain of part of things that we could see that has not become clear yet. Whennk in germany when ubs referred reports its earnings, we could see an update. This ifow does you put everything in context with the rival since whistling, it is ubs getting right . What is crit suisse getting right that ubs is not . Patrick in the last couple of years, ubs is seen as the leader but maybe not the bank that was growing fastest. Credit suisse was always catching up. And spearheading that Credit Suisse was iqbal khan. What you might expect to see is ubs definitely accelerating its own plans. I think one structural thing that you might see from ubs, part of their thinking, is that you need to increase the abou at of business that you do with individual clients and not necessarily go taking up new clients in the future. Francine thank you so much, powering winters patrick winters. Bloomberg surveillance continues in the next hour. Francine a double dose of good news. Solid retail data out of china and an agreement on the trade deal send stocks higher. The stoxx 600 reaches a record high. The brexit lineup. Prime minister Boris Johnson prepares to name his new cabinet after securing a historic victory. There will be consequences ifna threatens retaliation germany bans huawei as a 5g equipment. Ve ge tom, if you look at stocks, we briefly had a record high for the stoxx 600 peer this is on trade news, the fact that we reached a phase one deal, and the fact that things seem to be going better when it comes to u. K. Stocks because people think that a brexit will be done and more certainty will come to the United Kingdom. Tom trying to get to the holidays, francine. All sorts of tensions, including mr. Schumer, the democrat going after mr. Mcconnell about the senate trial upcoming after the house impeachment. At other than that, some really important trade nuances under the radar, including on the new nafta, a raging debate out of mexico. Francine we will have a lot more on that and the impact it could have on the emerging market stocks. Lets get to bloomberg first word news with viviana hurtado. Viviana this week a crucial test for more than two dozen vulnerable democrats are they represent districts President Trump won in 2016. A number have not decided how they will vote. The democratic majority in the house hinges on keeping those trump leaning districts index yours election. Boris johnson is on a collision course over the future of scotland. Scottish leader says there should be another referendum on independence. She says london cannot imprison scotland against its will, but johnsons team ruling out another vote. A huge transaction in the Food Ingredients business. Aternational reaching agreement for duponts nutrition agreement. The transaction will create a new Company Dupont shareholders owning 55 . Global news 24 hours a day, on air and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, viviana hurtado. This is bloomberg. Tom thanks so much. Equities, bonds, currencies, commodities. Some interesting moves with the general list in the market. Futures up 10, dow futures up only 40. There is a little bit of a deal encourage there. We will see how that shapes up as we get close to the euro strength of last week. Onto the next screen with a big showing. Huge equities shift. This is a huge deal, the vix at 12. 44 versus a middle 13 level, a Seismic Shift that we got off the china deal and off the u. K. Election. There is the dow setting on friday. Serling sterling turns. Francine shares were mixed in asia. You were wanting strengthening offshore. That you have the trade truce, treasuries edging lower per the one thing that has moved in the last 30 minutes or so is the pound. It was up on the big majority, but tories announced trimming their advance, or its advance after data showed u. K. Factories posted the week is performance in seven years. Tom interesting to see today, to say the least. Francine . Francine so back to our top story preach china has welcome to the signing of phase one of a trade deal with the u. S. By pledging to spend just in all tariffs on certain imports from to suspend additional tariffs on certain imports from america. In the u. K. , Boris Johnson is set to appoint new ministers to his cabinet today. The british Prime Minister is pushing ahead with brexit after securing a historic vote in last weeks election. Nejra cehic. From hong kong, the bloomberg chief asia correspondent, enda curran. Enda we have a subdued reaction in terms of the official press on any commentary. We had the Foreign Ministry spokesperson saying some contact is still going on with the official level, but they gave no firmer signal beyond that. We are waiting see what details will be provided. We havegreement some news out of beijing from colleagues inches that security regulators are talking about greater access to the accounting books of China Companies in the u. S. It is another example of how both sides seem to be fighting for middle ground on some of these issues. Francine what can you tell us . Bout brexit Prime Minister Boris Johnson wants to get it done, but we dont know if theres a transition agreement in place. Nejra exactly getting brexit done remains the number one priority for the government. We are expecting Boris Johnson and his government to put that , and itto parliament could happen this week in terms of the Withdrawal Agreement to take britain out of the e. U. January 31. The transition agreement, working out the trade deal with e. U. , to could take a lot longer. There is a lot of uncertainty around that. In terms of the focus at 10 downing street, three new cabinet ministers are expected to be appointed. We are looking at the well secretary, culture secretary, and environment minister. On thursday, a queen speech delivered by the monarch via Boris Johnson in terms of the new government plan, expected to include an extra 34 billion pounds, 35 billion of spending year on the National Health service through to 2024. Tom thank you so much. Nejra cehic, enda curran in hong kong as well. Were thrilled to bring you kristin keller, are clays head of economic research. 2020re you rewriting your view after what we have observed in the last three days . Gratefully, i dont have to rewrite it. We wrote it with an optimistic outlook. And it was threatening last week that it may not come out the way we predicted it. An ambiguousve positive end of the year. U. K. Ve clarity on the politics. We have a trade deal with the u. S. And china. Most likely also with mexico, even though there has been some lastminute issues. You take that together, those three issues, and you have both Central Banks, the fed and ecb, telling you they will stay on hold. Also for any hiking, it is very high, meaning youre going into this year with uncertainty removed and an outlook for Monetary Policy to remain accommodative. Nominals the linkage of gdp to better revenue, could we get stability or better gdp numbers into next year, and that will fold into a better revenue stream for corporations . Whattian broadly that is our equity strategists predict. We are relatively cautious, from what i can tell come on earnings projections. But we do think it should be a decent year for equity. Overall, we think this is the time to execute more exposure to risk assets to overweight equity and fixed income . Francine what good will come out of 2020. Is there anything that will go better than expected . Christian i think the positive be on the economic dynamics. Europee saw the pmi in coming in worse than expected, we could see manufacturing dynamics, the way they came down almost 18 months, from the beginning of 2018 from where we were a few months ago, that could turnaround. We were sometimes surprised by how synchronized these moves are. If you look at data out of china, if you look at some of the industrial dynamics, there is a chance that we maybe get some upside surprises in the manufacturing trade, industrial dynamics next year. Francine do you worry that inflation in the u. S. Will pick up more than expected in 2020 . Christian i think as an economist there is always a concern that overall inflation is the big threat overall because it would mean that Monetary Policy has to adjust and the markets are not ready for this. Do i think that it is a real concern in 2020 . I dont think so. All the dynamics suggest that if you look at inflation expectations, how core inflation develops, it does not look like it. Tom are we doing an analysis of bubble characteristics into this year . I get the idea that we cleared out uncertainty. I get the idea we have had an acrossasset lift here. Do we look at the essence of a bubble or is it controlled and managed based on traditional value metrics . Christian i think if we look at some of the equity valuation metrics we are getting to upper bands of historic valuation. On the other hand, if you take into account valuations of fixed income, and where key assets are, it would seem that we are not that stretched as it may appear if you look at Something Like a certain p e ratio. At the last 20 or 30 years. We have seen the risks. Look at the dynamics right now, if you look at where assets are, safe haven assets, we should be looking to sustained evaluations sustained valuations. Tom year on year with the dollar with all this new uncertainty as well did playablefeel it is moves in foreign exchange, or is it as leaden as we have seen . Christian if you look at our forecast, we have tended to for a while now, this talk about dollar weakness, which started last year, was overdone. We stuck with a view that the dollar is a currency that is , toly on an index basis appreciate we have read lowered those forecasts now. Then the dynamics that dollar may have peaked. What i can tell you is that there is a bunch of investors out there, particularly in the emerging markets universe, just waiting for the dollar to have onked, to go out straight into risk assets. So far they have been playing it from the credit side. They are willing to extend to emergingmarket credit. Not yet willing to go into fx, but if the dollar has peaked, if we ccny is the trade deal to remain below seven, there is more willingness to go expose themselves to fx, for example. Francine Christian Keller of barclays stays with us. As we go to break, we will look at ubs. We did have some ubs news early on. Iqbal khan trying to give us a sense about how he wants to shape the private client business, and we will have more on that throughout today. This is bloomberg. Tom good morning, everyone. Bloomberg surveillance. Thrilled youre with us. Back in new york after a lament this time there. A massive shout out to the surveillance team. Conversation after conversation about that historic moment. Lets get to the wall. Weve got to have a wall. They greeted me with a wall here. It is not a wall of worry, it is like a wall of, ok, what next . This includes three worthy candidates. We talked to sir howard, clearly a front runner, andrew bailey. There is a name, kevin warsh come of the federal reserve, former governor of the fed. That is an interesting name. Trish and joins us from barclays. Christian, explain to the global audience, United Kingdom history of going outside to get other names like mr. Carney and like mr. Warsh. That is absolutely original, isnt it . Christian it definitely is. Being german myself, the bundesbank and many other banks are much traditional. Gois unusual for a bank to from such a wide array. We talked about other potential candidates. I think it is a good thing. It really shows that you are picking the most able from an International Audience and do not limit yourself to one nationality. It is a true british tradition. It is a positive thing. The technical post, precisely said, do they need a lagarde . Warshthat because kevin came in with, yeah, yeah, another wall street guy, great. Everyone raved about his 10 year service with the bank with the federal reserve. Does the bank of england need a technician . Do they need something in between . Christian i think you Say Something that is very true in the sense that central banking, through what it did after the Global Financial crisis, through getting into qe, europe, buying government bonds off the variance countries the various countries, exposed their way to politics. Madame lagarde is someone with great political experience. She said she wants to involve not directly politics but in a review she says she wants to include Civil Society groups and the european parliament. This is where the journey, broadly speaking, is going. And i do think you make a fair point that even at the bank of england, the person who runs it has to have a certain abouttivity or savvy Monetary Policy. Francine she says she is an owl. It is a new is it a new stocks naming boxes idea . Tryingan i think she is to find a new bird, in the stereotyping between hawks and doves. An owl is an animal with very itd vision, and to even can fly at night, so i guess maybe she is trying to play on not being ideological but trying ,o be to have a strong view clarity. As i said, i am a bit overwhelmed. I will look into it over the vacation. Francine we will have plenty more on ecb policy. Christian keller stays with us. Stay with bloombergtv as we bring you the latest coverage of the Financial Stability report, bank of England Governor Mark carney. Coming up, there will be consequences as China Threatens retaliation should germany pose a ban on huawei. This is bloomberg. Viviana this is bloomberg surveillance. Boeing mayas learned temporarily halt production of the 737 max. It appears unlikely the company will get Regulatory Approval for the grounded jet to return next month to the skies. Boeing executives are convinced a temporary pause would be less disruptive than another slowdown in production. Theeot maker psa getting backing of its most important shareholder, this for the plan to merge with Fiat Chrysler. Bloomberg has learned the french government signed off on the deal. The new company would be based in the netherlands and would be headed by the psa ceo. Goldman sachs tightening its policy on fossil fuel financing. Goldman is pledging to decline financing, directly supporting news from coal mines and upstream arctic oil exploration. That is your Bloomberg Business flash. Francine . Tom . Francine china seppi ambassador to germany has threatened to ambassador chinas to germany has threatened to retaliate. Lets turn to patrick donahue, who has been covering the story out of berlin from the very beginning. The concern with germany is that it is not only Angela Merkel who can make a decision. I imagine germany is stuck in the middle, you either please the u. S. Or china. Rick to it has been ace patrick there has been a running battle in berlin between the chancellor and the economy on the other hand. The interior ministry has been much more concerned about security issues. Hassecurity side consistently wanted to have the ofls to keep while way out 5g networks. Francine when do we know that a decision will be taking place . Can germany survive a fight between germany and china . Patrick it is tough to say what china will do. Those comments from the ambassador are very interesting. And people here assumed there would be some retaliation. There would be some consequences. But to hear it articulated like that, this will play out until next year. Merkel has been calling for e. U. Standards. But what were seeing right now is that law makers in the german bund is tag are working to keep while way out. Tom there was a beautiful treatment on this with a huge polarity of opinions on this. Do we just get back to First Principles . Is has anybody found that while way has spied or done things nefarious . Butick not at this point, the complaint from at least if you look at the chairman, the top Intelligence Agency in germany, the Intelligence Agency said in october that while way does not belong in the core 5gwork, the core network. You so much, patrick donahue. I dont think this is the end that we will see on this topic, either in germany or certainly in the United States as well. It is a simple chart. It is a chart of the greatest bull market since my grandparents. It has been miserable. That is a 10year chart. Off to the left is the lehman low. Amazing return. 185 , in the Standard Poors 500 with the banks and bank up moves the last 90 days. I say this because i am in the triple leveraged cash fund. Up 26 this year. It is eli mannings new york [speaking foreign language] tom managing the message. The leader of hong kong, carrie lam, in beijing after meetings with mr. Xi and others. Interesting sideshow in hong kong to all of the other overarching trade issues. This weekend, upper over the arsenal Football Player in english football who made comments about those of western china, which was taken is ill by many in western beijing. In new york city with our first word news, here is viviana hurtado. Viviana televised drama in washington, d. C. , has done little to change opinion about President Donald Trump and impeachment. A new fox news poll survey says pollority 46 on a cbs favor impeachment. On a previous poll, those numbers are relatively unchanged. This week, the house is set to vote on impeachment. The u. S. Is urgent kim jongun to drop his hostile tone and return to nuclear talks. To notlso being warned engage in provocation during what an american diplomat is the sacred Christmas Holiday calling the sacred Christmas Holiday. A vote in beijing for hong kongs embattled leader. Jie zheng paying telling xi jinping telling carrie lam that the government will continue to support her. He says he recognizes the courage. In india, violent protests over the new religion citizenship laws. Parts of new delhi locked down, police using tear gas to disperse protesters. Ople fromarred pe bangladesh and pakistan from seeking indian citizenship. Global news 24 hours a day on air and at tictoc on twitter, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. The economicst wrapped into the markets at the moment. Mark, usually planted in singapore, head of all of our gritty markets, moving. How many people have participated in this equity market rally . I know it is an unloved bull market. That is a cliche. Our people on board or not . If you like bloomberg news, check us out on the radio, the bloomberg app, bloomberg. Com, and in the u. S. , on sirius xm. Mark i dont think people are is on board as they would like to be. I was one of the people who was quite adamantly bearish in the summer and it was only kind of at the end of october that i kind of returned to the bullish side. Overall, there is a lot of money invested in this rally. It is kind of a nuanced answer. Lots of money in passive index tracking. The markets turned drastically negative quickly. A lot of the hedge funds are underinvestment. Some dont know that 10 is a correction. 18 is a bear market. Confidence invades and potential convexity goes through the roof. Convexity a massive move . Mark i think we do have that and the percentage is probably much further than what people thought. I think it is probably where you get to 15 . Etfs innloading of the technology sector. If you got Something Like a 15 move, you could see stocks go 30 plus quickly afterwards. It is not close. Francine what do markets misunderstand about geopolitics . Mark great question. I am not sure i understand it as much as markets what at the moment. The biggest thing this year, there are two sides to the u. S. China trade war. They very much look at the trade war through trumps lens. Of course there will be a deal because trump wants a deal before the election. I think the reason why i still dont believe there will be a grand trade deal anytime soon is because china does not want one. Geopolitics, it is trade, economics, how difficult is it to model the resurfacing of i guess even breaking up phase one trade deal in 2020 . It is simply what it means for trade. That, anyway, we did. Earlier, we thought we see escalation of tariffs, 5. 5 growth. We moved it up to 5. 8 or so. What you say is perfectly correct, that uncertainty we start doing this now, the economic profession, it does something to investment, productivity. It is incredibly difficult. That is why markets i think dont know what to do with it either. Big uncertainty. You fear it but you dont know how much it will cut off growth. Tom you are living emergingmarket, living singapore. It did not happen this year. It was supposed to happen this year. What is the catalyst ems need inequities . That itght be the fact has not happened for so long that there is a massive discount in emerging markets now. It does not necessarily mean that mobile growth will take off again or we will get a grand trade deal, it is just that we are pricing in at the tail risk excavating again. There is still money on the sidelines that needs to change back into this market. Equitiesll say, u. S. Are exceptionally expensive. Emerging markets are generally very cheap. If you believe in this mobile narrative, that is where all the ketchup is. I think more and more people will shift from the u. S. To look at the u. K. Market. I was talking to an Equity Fund Manager last night saying they have been nearly fully invested in u. S. Equities all year and that therell fund what turned to a focus in the u. K. Fund wouldir whole turn to a focus in the u. K. Tom is there a leveling of Economic Growth in the emerging markets . What you willhink see this year is a bottoming out of the larger economies. You have a brazil that is probably going 1 , good prospect of going to. 5, 3 next year. You have a pressure at 1 . You have a turkey in deep recession. India could be doing better next year then this year. Very disappointing performances this year. It could also go up next year. I think that could be a catalyst. Secondly, people need to be convinced that this is the end of a dollar appreciation story. I think investors want the confidence that the dollar continues to go up and up. That is the catalyst, the dollar. Francine we will discuss dollar dynamics next. Lets also take a look at some of the other events that you should be watching out for this week. Tuesday, the u. K. Parliament reconvenes after the conservative party gained a large majority on thursday. Russian president Vladimir Putin delivers his news conference. Lawmakers face a deadline in the u. S. To fund the government or face a shutdown. This is bloomberg. This is bloomberg surveillance. Lets focus on the positives and the negatives for 2020. Quite a lot going on. This we kept talking about wall of worry. These two trade, with things may be on a better footing, we focus on other walls of worry. Fiscal policies still there. Manufacturing malaise and what Central Banks will do next. Kellerith us, christian of barclays and mark cudmore. What does dollar move on the back of . Is it just the u. S. Economy and what the fed does or is it with china also trying to get their own currency out of this . What is the risk we are talking about. I think a lot of people think the right number of catalysts to bring it to the downside. Some of those have been on the radar for a while. The u. S. Election is one of those things, the idea that we will get a renewed focus on between deficits in the u. S. The fact that the u. S. Has been an out her for the past four or five years how to perform or for the past four or five years. When you say, what do we worry about, we worry that the dollar will not make the turn we all think will happen. Francine do you agree, christian . Christian yes. Reluctantategist was to make the call for the weaker dollar. A lot of people were waiting for it. Return on the u. S. Invested capital are still good. U. S. Differentials will not come down if they stay on old. Inwth dynamics, they support a way that they invest into the u. S. You are right, we could have said some of the same things a few months ago. The longer this extends, the longer the rally will run. I think the backdrop for the dollar to at least stay on hold becomes more likely. Tom lets go graphical. This is the bloomberg dollar index im actually very good math, pooling in all of the different pairs versus the dollar. Crisis of 2007, the massive dollar strength, these huge spaces. Thatis the possibility instead of this being a trend chart, what we call reds zone, green zone, that we were at this level, now we are at this level, and we stay there. No one is really calling for that, or they . I do agree that the majority thinks we do come down from that multiyear plateau. I would be in that camp that january 2017 was the longterm peak of the dollar index. I think people are worried that we are not seeing the next move lower. Everyone expected 20 that we might see a bit of a bounce. I think there is a worry that may be the dollar is relatively stable, given that fx volatility has kind of died, that we are buying into this that we will get this new fx trends again. That is a big worry for markets. Tom if we get dollar stability, what does that mean for the toolkit of the u. S. Central bank . Is the fed restricted with a deflationary tendency . First of all, i would say the fed is relatively privileged in terms of having decent appreciation. They are not grappling here with disou save you say inflationary trend, maybe, but they are far away from these risks. At the moment, everyone is relatively comfortable with where we are. Europeans can live with a weak euro. The u. S. Is living with a relatively strong dollar. If that starts to move, i think relatively quickly we would hear commentary in the u. S. From the white house about the dollar being too strong and the europeans cannot afford appreciation, etc. The possibility of a currency war continues to loom. Tom Christian Keller, thank you. Mark cudmore, thrilled you are with us this week. He is mliv managing editor. They cover the markets. Next, we have to look at what has completely taken washington over, the impeachment of the president. Stephanie baker helps us to look forward to a senate trial. This is bloomberg. Francine you are watching bloomberg surveillance. Lets get your Bloomberg Business flash. Restructure a unit. It is under the new cohead of management. They would break ahead some of the alternet ultraHigh Net Worth units. Some japanese bankers are taking a hard look at their most important clients. Some privately said that they are less comfortable with the management of softbanks vision fund. In the last quarter, softbank recorded eight 6. 5 billion loss blamed by falling valuations on investments by we work and uber. Chairmann investments may scrap and offer to take it private. Mes follows complaints for minority shareholder. From a minority shareholder. Hudsons pay owns saks fifth avenue. Tom with us in london, Stephanie Baker of bloomberg writer, original reporting on cyprus and ukraine, and now we turn to the next step of the impeachment process. We have an impeachment in the house and now we go to a senate trial. The zeitgeist this morning is that the democrats would like to be part of the discussion in the senate just as they would like to be in the house. Do the republicans and democrats have to play together . If you look at the way bill clintons impeachment trial was handled, the democrats did work with republicans in an effort to present a trial that could be viewed as fair. Hope we have seen over the weekend, with Chuck Schumer coming out and proposing a way forward in an effort to work with the republicans. What remains to be seen is how that offer will be responded to. Mitch mcconnell, the Senate Republican leader, has said he wants the trial to go quickly. They dont want these star witnesses. I think the democrats want this to be treated as a serious trial where the public can view the facts and evidence and make up their own mind. Tom is it a trial . This is a key point that has just come into the radar. Do we have any understanding of it, astrial is, or, is was quoted in the New York Times today, the contours of a trial . Stephanie i think it depends how Mitch Mcconnell decides to handle it. Does he allow the airing of evidence . Do they go ahead with what Chuck Schumer has proposed, issuing subpoenas for john bolton, calling mick mulvaney, trumps chief of staff, both of whom did not testify in the house hearings. One of the articles of ofeachment is accusing trump obstructing justice. Hearing from those witnesses are key. On the other hand, trump wants to hear from what he views as star witnesses. Hunter biden as well as the whistleblower. How they work this out remains to be seen. If it is a quick trial and it is wrapped up quickly, i think you can question, is it really a trial . Francine u. S. Citizens, do they care, are they engaged . It seems like opinion polls have not really budged on this. It is unclear whether or not a , wheren the Senate Witnesses are called and evidence is aired, whether or not that would change things. It looks like the American Public has made up their mind on this. A truce between the u. S. And china, is that kind of what influences polls or Something Else . Another thing is, everyone is so distracted by the holidays at this point. Come january, minds will focus. I think the republicans want this over quickly, trump once it extended so that it eats into the february primaries. It looks to me like they will push forward with a quick trial. Tom think you so much, Stephanie Baker with bloomberg news. More coverage on this through the morning and through the week. Coming up next, we look at dollar dynamics and particularly at the relief over trade. Futures up nine, dow futures up 42. Stay with us. This is bloomberg. Tom this morning, from the house to the senate. Senate democrats want testimony. Schumer and mcconnell will huddle over the contours of a trial. Britain still responding to the contours of the trouncing of mr. Corbin. Mr. Johnson goes north. We consider the brexit calendar and the path of pound sterling. The s p has lifted. How about we sing happy birthday . Happy birthday to you happy birthday to you happy birthday for being on the green happy birthday to you 34 and holding. Francine 32. I will give you 34. I basically just huddled in front of a furnace to make sure i was warmer. Thank you for the birthday wishes. A year younger, as we like to say. Will sing like i marilyn monroe. Viviana we begin with your first word birthday wish for francine. This week, the Impeachment Vote in the u. S. House, crucial test for more than two dozen u. S. Democrats who represent intricts President Trump won 2016. Democratic majority in the house hinges on keeping those trumpleaning districts in next years election. Boris johnson is on a collision course over the future of scotland. Scottish first minister Nicola Sturgeon says there should be a referendum. London cannot imprison scotland against its will. While way as a supplier of 5g equipment. China is threatening retaliation. Some german lawmakers are proposing a bill that would ban untrustworthy 5g vendors. The millions of cars German Companies sell every year in china. The Food Ingredients business, International Flavors and fragrances reaching a 26. 2 billion agreement. Irelandsg bid from kerry group. The transaction would create a new company. Dupont shareholders would own 55 . 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. Tom let me get to the data. Currencies,nds, commodities, a continuing lift off the good news from trade on friday. I know oil, that is american oil, 60 per barrel. 65 pers brent crude at barrel. Onto the next screen, fixed income. 12. 40. Hange, down to the dow on the close friday. That is all i have got. Treasuries hedging closer. The yuan did strengthen offshore. Also some data out of china. What i also want to show, the pound was gaining quite a bit. About an hour and a half ago, 90 minutes ago, showing that u. K. Factories posted the weakest performance in more than seven years. Tom chart of the year, i want to show it to show where we need to go. A lot of people would like tariff reduction including the chinese and including many in america. We are out almost six standard deviations on custom intake into the u. S. Government. This is a very rare chart, that you would see such a well displayed trend showing a six standard deviation move. This is all the room you have to come in with lower tariffs. Francine a double shot for markets, for beijing. Industrial output and retail sales jumping after a tentative trade deal with the u. S. Was reached. By bloombergs trades are trade czar. How much of this was a surprise and how can we be sure it holds . Brendan not much was a surprise. We had reported in the weeks leading up this would include things like agricultural purchases, currency stability. Sure enough, they released the announcement on friday that there were basically seven issues that the two sides agreed to. Where we go from here will be key. Spent ironing out the fine print. The american side are ofo that they can get this thing signed sometime in january. Tom this may be unfair but i will ask it anyway. The gentleman from mexico is flying to washington because they are really, really unhappy with the new nafta. How unhappy are they and are they going to scuttle this announced transaction . Interestingwas an tweet storm from the lead mexican trade negotiator over the weekend. The new renegotiating nafta is in motion. It will be voted on later this week. It is hard to say if this official can change the mind of it iss. Side, but certainly something to keep an eye on, whether Something Like this could blow the agreement up at this late stage in the game . Tom can mexico unilaterally scuttle the agreement . Brendan they cannot do anything to the u. S. Legislation that was presented on friday. It sounds like this particular official was worried about the putting of labor attaches in mexico, american officials who would basically oversee enforcement of the labor provisions of the agreement. Fromhat does not look good mexicos perspective. Be two imagine it would sides talking things out. Francine brendan murray, leading all of our trade coverage. How do you look at this trade truce . Does it hold . Two the markets care . Do the markets care . It should care. Now we have the first example of, we could have some rollback. I think it is very much a function of headlines generating too elevated expectations. The big picture, we have the first instance of rollback. Obviously, there is some formality in january, but it is going to be very hard for both china and the u. S. Not to sign this document. Does the agreement go right over to an em play . Every currency is different, but can you go long em . Jens i will give you a clear answer, yes. Tom which pair do i make my health on . My alpha on . Jens we have already seen em turning for about 3, 4 weeks now. Last week, when we had quite a bit of a roller coaster ride, we did not have a roller coaster ride in ems. There is something new going on trade deal of the with china. The u. K. Election the matter as well. We have had these two global risks that everyone was worried about, these pigtail events coming out of it. And aade war escalating brexit going wrong. Those are now dampened to a degree that it will be much easier. Thata tradable move, so is generally do we get back to some real excitement . The rate structure that we got. These em trays are typically grinding trades. With big moves, with deutschmark, you could have a 10 move quickly. The ecb has aggressive guidance. Kickert get the same from Interest Rates moving with the cycle. Draghi managed to disable that mechanism before he left the job. Tom that is fascinating. Jens nordvig, his wonderful book on the fall of the euro a few years ago as well. We have to look at the United Kingdom. Gdp for the United Kingdom at heathrow. An update and some perspective from nejra cehic. This is bloomberg. Francine this is bloomberg surveillance k update after you left us on friday. On Boris Johnson set to announce new ministers for his cabinet. Pushing ahead with brexit after historic victory in last weeks election. Joining us is bloomberg daybreak europe anchor nejra cehic. How quickly will he do the withdrawal bill now that he can get it through parliament . Expectedris johnson is to do that before christmas, which means pretty much by the end of this week. Sticking with plans to get brexit done is pretty much the main priority. At downing street, looking ahead to a new welsh secretary, environment minister, and also culture secretary. No big, big changes. We did see the chancellor of the exchequer step outside earlier. Did not really address reporters, just walked past, and said welcome to the peoples government. We will hear a queens speech where we will find out some of the governments plans, including spending on the nhs, expected to amount to 45 billion u. S. Dollars of extra spending every year until 2024. Francine do we understand a little bit better about what kind of brexit relationship between the eu and u. K. That Prime Minister johnson wants . Find that outt today. Up until now, he had to placate certain hardliners in the party but now, with such a huge majority, biggest since 1987, a majority of 80, there is a sense that Boris Johnson and get the brexit that he wants. Going into 2020, the on the Withdrawal Agreement, that is when the negotiation begins. That is when there is a little bit more uncertainty as to whether he can get that trade deal by the end of 2020. The traditional conservatives of london and the new conservatives of north Dudley Dudley north, whatever it is. How much of a fiscal gap is there between those two different conservatives . Some there are definitely comparisons to be made. Some more interesting comparisons would be with labor. On the spending per se, the end of austerity, on friday, when this new government won that landslide. It is not necessarily going to mean a big opening of the fiscal cap. Boris johnson is expected to spend an extra pound compared to six pounds for labor. , the comparison would be less than 40 . If you want to compare this to europe, it means spending in the u. K. Will look more like spain rather than germany. It does look like the end of austerity and a different party, a peoples government as sajid javid would say. Watch. Ive us the corbyn when does he leave . Nejra not entirely sure when he leaves but there are a number of people vying for that position as labor leader and that is something people will have to turn to this week, as well as some soulsearching as far as what went so wrong for them with the election. They kind of overshadowed the Spending Plans they put forward that apparently a lot of voters were quite keen on. A number of names put forward but in terms of a date for Jeremy Corbyn to stand down, that is not something we are aware of. Another thing we are keeping an eye on, the Scottish National party which did very well in the election. That is Something Else Boris Johnson will have to fight comedy calls for a referendum in forland fight, the calls a referendum in scotland. Jens, as is a chart, we go into a chart. Doom and gloom, world is going to end with a jacksonian bounce. , truly buyingde the rumors . Jens one thing you have to look at the what is the float situation . Had an interesting situation where the average fund has been somewhat underweight the pound but there are some specific funds that have been aggressive and have taken the long bed already. Already. Ng bet that is why we have seen these ups and downs in eurosterling at the same time. Francine i am a little bit perplexed as to why the market is positive on brexit. There is another deadline in june. Is the market just ignoring that . Jens i have had the same question because that deadline is here when we think about sterling. What is Boris Johnson going to do . Is he going to pretend it is something to create hard brexit risk again . Bit. Is the tricky otherwise, we will have this hard brexit tail risk coming back. It is pretty ironic given that this election was about reducing risk altogether. Francine thank you very much, jens nordvig stays with us. Bloomberg will have full coverage as mark carney presents stability reports. This is bloomberg. Francine this is viviana this is bloomberg surveillance. Bloomberg has learned boeing may temporarily halt reduction of the 737 max. It now appears unlikely the company will get Regulatory Approval for the jet to return next month and the skies. Boeing executives are convinced a temporary pause would be less disruptive than another slowdown in production. Getting the backing of a shareholder with plans to emerge with Fiat Chrysler. The french government as signed off on the deal. The new company would be that is the Bloomberg Business flash. Tom emergingmarket currencies with jens. I am making up a chart right now. Singapore dollar, a proxy, state trading nation of singapore. From the 1980s after the financial crisis, then the grade level then the great leveling. What has the leveling meant for those city states and adjacent cities to china . Yearshad like 10, 15 where em growth was incredibly strong. We have had like five years now where Global Growth has been very weak and em growth as disappointed. You can look at the ups and downs. The shift in the Global Growth dynamic. The key question for next years with a will have some kind of bottoming next year is whether we will have some bottoming of Global Growth. Is there potential for those expectations to be exceeded . The chinese data is starting to bounce. The trade deal is there. There are a number of reasons Global Growth will be better. Tom if i can extrapolate out of the chart we just showed, where you could get to on the strength of these em currencies . Do they want stronger currencies . They are advancing on a weaker dollar, arent they . Debate abouta big currency manipulation. The u. S. Treasury has been more aggressive about naming countries or warning that they will be named as currency manipulators. It is also the case that when you look at integration look at intervention trends globally, there are fewer. Is still aggressive in their currency. The question for next year, for those once, can they continue to do so . Francine thanks so much. Break, lets take a look at ubs. Khan, who joins ubs after an acrimoniouss let split from Credit Suisse, looking to bring greater profit to the Wealth Management. We are starting to hear the beginnings of plants. He will restructure the unit catering to the superrich. This is bloomberg. Francine this is bloomberg and francine tom from london and new york. Lets get straight to the bloomberg first word news in new york city with viviana hurtado. Viviana we began with washington. It has done little to change perception about President Donald Trump and appeasement. A new fox news poll says half those surveyed says President Trump should be impeached and removed from office. 46 favor impeachment here this week, the house is set to vote on impeachment. The u. S. Is urging north Koreas Kim Jongun to drop his tone and return to nuclear talks. North korea is being warned not to engage in provocations. This during what an american diplomat calls the Christmas Holiday. It conducted the second test, it boosted its nuclear capabilities. A vote of confidence for beijing for hong kongs and battled leader. Chinas president xi jinping telling carrie lam beijing will continue to support her. This as she deals with months of protests. He says the government recognizes the courage and responsibilities she is demonstrating. Violent protests over the new religionbased citizenship law. Undocumented muslims from pakistan, bangladesh, and afghanistan from seeking indian citizenship. Global news, 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Francine, tom . Tom thank you so much. Again in washington, all distracted by impeachment. There is a process here of the house, and then over to the senate for a senate trial. Jens nordvig with us of exante data. We are pleased to bring with you this morning terry haines, pangaea policy advisory, simply on what is next for the senate. Terry, what does a senate trial like . Does it look like clinton or nixon, or is it a new kind of trial . Terry um, i think it looks much more like clinton, tom. Lesser memory, nixon lets remember, nixon resigned before it got to a senate trial. Probablyon trial it goes faster than that. There seems to be a developing consensus about what they will try to do is listen very respectfully to what the house prosecutors have to say and then vote without giving a whole bunch more than that. As you know, there is already a lot of dissent within the senate about the strength of the case that is likely to come over to them. Democratic leader schumer wants more witnesses, more of this, more of that, and if anything else, that is a sign that many of his own members are convinced by the case. But i think it will be pretty quick and dried and gone. Tom it will be and gone. What are the ramifications after and gone . Do we wait for the election to figure things out . Terry [laughs] yes is the short answer. Nothing will be happening in this next year, election year. Nothing was going to be happening anyway. You have positive news on trade with the u. S. China phase one deal, the usmca ratification by the house, which is likely to come this week. You might get a little less later this week in uncertainty from washington, depending on how a spending bill comes down. There is a tax extenders piece of legislation out there right now that seems to be trending positive, but very much under the fog of war right now. That probably ends up happening. But it is very much in flux. But beyond that, you are not going to get anything in 2020 that you would have gotten otherwise, impeachment or not. Francine what moves the polls, terry . If impeachment is not move the polls, is it because we are close to the Holiday Season . What are people focusing on, citizens . Terry in my view, what moves the polls would be some kind of new evidence that implicates the president. You know, the house made a decision, and i am not saying critically or in any other way, but the house made a decision. The decision was to move forward with impeachment based on the secondhand evidence that they had. What would move the numbers probably is if you had more firsthand understanding of what was going on with the president and why he did what he did, and secondly, what you would need to know is whether or not this was about some sort of personal political vendetta, or whether it was actually an interest in working with ukraine on corruption. Those seem to be both open questions, but the vast majority of citizens think that the democrats the people that are protrump, to them, this is more evidence of democrats going after trump. And the people who are antitrump, it is more evidence of the good news or the good way that they need to keep going after the president. But it is, at root, you know, not a pollchange or in any way. Francine terry, if you look at what americans will vote on in 2020, is it only on the economy, or is it Something Else . Terry no, it is quite a lot of things. One thing i have always that is the economy will be a big part of it, but the president is relatively unpopular. You know, the converse of that of course is that most everybody who is running against him is relatively unpopular also. There will be a trump fatigue element of this, weather after four years, the people that voted to put him into office are tired of what they might perceive as the constant drama, the constant this, constant that, and they might also be looking to, you know, frankly to look for a change personally, and, you know, much of this is going to depend on who the democratic nominee is. Tom terry, i guess the solution is infrastructure. If we are going to get anything done, as in the United Kingdom, it is build something. Jfk, the cost of restoration is somewhere in the vicinity of 13 billion, and you know that is going to go up. Due we have any ability to iowa or jfkad in out of this congress . Terry no, actually we dont, tom, and it is something i have been saying for an awfully long time, probably since the beginning of this administration. The policy split is pretty simple, and i know, by the way, since you talk about the u. K. , that Prime Minister johnson is talking about borrowing a lot of this money. Tom yeah. Terry what the congress what republicans would want to do is certainly finance 1 trillion of it or so, and they would happily be willing to forwardfund that, but democrats have insisted on paying for it in a variety of ways, usually through tax increases. Is a policyyou have disconnect that is very unlikely to be resolved before 2021. Tom nicely explained. Terry, thank you so much, with pangaea policy advisors. Listening to this right now, again nordic, out in copenhagen jens nordvig, out a copenhagen, a beautiful airport. The taxes are high, but it is a beautiful airport. What does a guy like you look when you go through jfk, dulles, they are fixing up lax, but what do you think when they are fixing of american infrastructure . Jens [laughs] it will be nice to get home to your family quicker. That is what i am thinking with airport trips. The deadlock is there. Seems very unlikely we will get infrastructure spending. Next year in the election. Why would democrats give that away . In terms of going back to the polling, the Approval Rating is incredibly stable, right . It is always 42 , like, almost regardless of what kind of news cycle we have, so we need Something Else to shock it. I do not think it is a new piece of evidence. It is something on the economy or a totally different scandal that is going to rock the boat there, and the economy is clearly the focus of trump now, and that is why he wants to get these trade deals done. Francine thank you so much, jens nordvig of exante data, terry haines of pangaea policy. Here is what you should be watching. The u. K. Parliament reconvenes. The Prime Ministerss spokesman just announces that the government will introduce a brexit bill to parliament on december 20. Finally, europe gdp is out on friday. Lawmakers face a deadline to continue funding the government or face a shutdown. This is bloomberg. This is bloomberg. Tom bloomberg surveillance thank you for being with us on a monday, francine lacqua, also with us on her birthday. She could have taken the day off. With us jens nordvig. And terry haines with pangaea policy, terry, single best chart, lets bring it up right now. It was the chart of the year last year, deficit, fiscal and trade, they summed up to a deficit, on the edge of reagan, we are really getting down here to 8 drummed in as well. Is there any concern about our deficit in washington . Terry you know, i think both parties my view of this is both parties come along ago, made the decision parties, long ago, made the decision not to worry about deficits. When either party is in the icit, that concern goe is in the majority, that concern goes out the window. 2017 tax bill, when the drive was to get the rate as low as possible, and how you get that is the agreements to increased deficits by 1. 5 trillion over years, and officially come you can go to members and say, look, it is only 100 billion a year, and it will get mostly made up with growth. Come on, why dont you just be with us . And that is what is up happening. Tom jens nordvig with us as well. Theres some academic papers long ago that said we should not concern ourselves with the 20 deficit, that we are conflating two very the twin deficit, that we are conflating two very different economics. Do you agree with that . , it certainly from a trade is negative from the currency, but if you trade that, that is the strategy could often companies have a deficit but grow reasonably well that have strong currencies. The 20th, and we have seen that play out over the last couple of years. It has not been damaging the dollar so far. Francine jens, do you worry about liquidity . We have been talking about 2020. Two types ofres liquidity, the shortterm tension that we have that is making a lot of people who have Interest Rate decisions very worried, but i think the fed is getting all that dynamic. Then there is a broader issue, ok, what is the Balance Sheet looking like for Major Economies and Central Banks there . We have the ecb coming back to their qe, and obviously the contraction we had in the fed Balance Sheet at least stopping, so that is a big change, relative to what we had for a couple of years. I think that also fits in the better Global Growth narrative. That is absolutely key for 2020. Francine ok, jens, what is one thing people misunderstand about the Chinese Renminbi for 2020 . Jens i think one dynamic that is probably not appreciated quite enough is that the chinese bond market is just starting to get demand for foreign investors. In is literally just starting it is literally just starting. The people buying chinese bonds initially were Central Banks, but the private investors are just starting in recent months. If that really gets going, that could be a 100 billion flow easily and 2020, and that will make the balance of payments. I think that is quite important. Tom terry haines, jens mentions china. Is there anybody that is going to be free trade out the next 18 months . We forget about the election, two years, three years, is there any whisper of free trade in your washington . Terry well, i think, you know, my view of this, tom, is trump has been far more free trade then was generally supposed at the beginning of this administration, and he has largely lived up to that. I think there is a misunderstanding with many in the market about what the Political Goals and the policy goals of the administrations trade reset has been. Lighthizer did a very good job of running through that in an interview yesterday. Tom i agree that he did, but terry, just because of time, simply here, go tell that to the farmers. I have a six standard deviation increase in custom intake, which is a tax on american business, right . Yeah, absolutely, but what lighthizer says, and we will see if it comes to pass here shortly, is u. S. Exports are going to double, and by implication, ag is going to be and then some. These are people that politically support trump anyway, so by and large, it is a net plus for them politically as a policy sense, both. Francine thank you so much spirit we will get back to terry haines, pangaea policy advisory founder, and jens nordvig am a exante data and jens nordvig, exante data. We will discuss the boeing 737 max next. This is bloomberg. This is bloomberg. Viviana this is bloomberg surveillance. I am viviana hurtado. Ubs plans to restructure the unit that serves the banks top billionaire clients. It is the first Sweeping Changes under the new cohead of key management, iqbal khan. Ubs would break apart the ultraHigh Net Worth unit from lessrich clients when he moved into the regional division. Japanese bankers are taking a hard look at their most important client. Some privately said they are less comfortable with the eccentric billionaires management of softbanks vision fund. Softbank reported a 6. 5 billion loss based on valuations on investments and we work and wework and uber. Richard baker may scrap an offer to take the struggling retailer private. This follows complaints from a minority shareholder. Hudson bay owns saks fifth avenue. The company was valued at one point at 4 billion. Dman sachs is pledging to this that directly supports new thermal coal mines and upstream arctic oil exploration. The firm is also targeting 750 billion for what it calls Climate Transition and inclusive growth finance. That is your Bloomberg Business flash. Francine . Francine thank you so much. This is what your stocks are doing today. Two made pieces of news moving the markets in the last couple of hours. First, hopes that this partial traded between the u. S. And china means that there is less risk out there. Certainly this was one of the key risks for investors heading into yearend. I am looking at treasuries, they are down. I am looking at pound, significant after that large majority of the tory run on thursday. The pound strengthening now. Gains after u. K. Factories posted the weakest performance in more than seven years. We also want to focus on chinas retaliation against germany, if it excludes huaweis 5g as well as equipment. That still shows tensions remain elsewhere. We have the china trade deal being better than the u. S. Setting its sights on germany or china setting aside its sights on germany. Boeing temporarily halting production of its 737 max, thats as clearance for the grounded jets return looks increasingly unlikely. Joining us now is the bloomberg Senior Editor of Global Business in berlin. What is the thinking of this . You delay it so you dont disappoint customers . Yeah, so it looks as if the 737 max would indeed returned to service this year. That was the timeline from the boeing side, and it in indeed noisesgulators have made along that line, but now it looks as if it is slipping to next year, and the tone between the faa, the u. S. Regulator, and boeing is becoming a little more frosty, boeing might be making statements accelerating the reintroduction, and the faa does not want to be rushed here, so boeing in a situation now, where they have to decide what do we do with this plane . Because right now, they are still building it, but it is piling up on lots, where it is in storage, or do we put a hard and reintroduce it into service, and until now, we do not produce any more . That is where we are now. There was a Board Meeting that was scheduled previously, and they will decide that. Francine why cant they get out front . Why cant they get in front of these concerns . Is it just that people do not trust the plane . Benedikt there is obviously that element of the public trust, but the complexity of what really caused these crashes, just to remind people, the plane has been grounded since march. 346 people have died in those t wo crashes, it a lot revolves around the certification around whether this constitutes a new plane or not great of an existing rain, and that is one of the concerns, and that is why we are seeing this really slick into next year. Francine benedikt kammel, thank you so much. Again, bloomberg will have full coverage of the bank of England Governor Mark carney presenting reports. This is bloomberg. Reports. This is bloomberg. What are you doing back there, junior . Since were obviously lost, im rescheduling my Xfinity Customer Service appointment. Ah, relax. I got this. Which gps are you using anyway . A Little Something called instinct. Been using it for years. Yeah, thats what im afraid of. He knows exactly where were going. My whole body is a compass. Oh boy. The my account app makes todays Xfinity Customer Service simple, easy, awesome. Not my thing. Alix your move, bojo. U. K. Prime minister Boris Johnson picked his cabinet, setting the stage for brexit. Phase one trade deal done. Now what . Phase two sets the stage for 2020, while germany and china begin their own fight on technology and autos. Global economy fine, not awesome. Manufacturing and service is barely eke out a gain in europe. Welcome to bloomberg daybreak on this monday, december 16, the last full trading week of the year. Im alix steel. S p futures clinging to their gains, up by 0. 3 . European stocks hitting a record high. Global stocks friday closing at a record high. Cable rate jumping out to the highest level, at least when it comes to the euro, since 2016. The euro climbing higher despite iffy economic data, particularly out of germany. Yields in the u. S. Backing up by about