And taiwan. You have elections coming up. Keep your eye on that. We are either flat or slightly higher. Safe havens, looking at dollaryen above the below the 200 day moving average. You are looking at oil pushing towards session highs, new york 1. 6 to the upside. In case you missed it, breaking news out of iraq, the top iranian commander was killed in a u. S. Airstrike with reports in the last 30 minutes or so. Thena lets get more on markets. David was just mentioning this news about the commander being killed in baghdad. What does it mean . What are you watching her . I think it means we will have geopolitical tensions coming back in the new year. The s p 500 in reversing earlier gains, and the yen is being beat up. But i dont think this is going to last. I think after the dust has settled and the markets continue to focus on the fundamental improvement, this liquidity part can still continue after china with liquiditya banks. An era for the emerging markets. Same macro theme. It will be Global Recovery. As the course of the year we are seeing more evidence of a rebound in the Global Economy, emerging markets will derive the rally. Drive the rally. There is a hypothesis to support this view. Will accelerate to lead higher while the u. S. Expansion is moderate. , performers to the u. S. Have shown a tendency to close the gap. This is another thing you see. Outperforming u. S. Growth. And secondly the variation is quite attractive from last years rally. Emerging market index shows for valuation, near 2002 lows versus s p 500. The dollar is moving more of its clout and it will and it will be weakening. Intowill show a flow emerging markets out of dollarbased assets. Be it will be a very promising year for emerging markets. David it is 20 of which puts us in a bull market. I think the question, given the run we have seen is, the macro data is supportive and you have Central Banks continuing to support the economy. Do you think we are slowly moving from optimism to euphoria . Think you are right. Last years rally was basically driven by sentiment for easing and optimism over global recovering. Theeally needed to see evidence of data improvement. It continues to support the rally. We are seeing in the global rebound, it is kicking off especially in the tech industries. The Semi Conductor prices, quite in a sharp upturn in december and this trend will continue into this quarter. We will see how much global. Ecovery could take place we will see the continued strength in the emerging markets and risk assets. David quite fitting. You are there in korea. Keep warm. Thank you. lets bring in a portfolio specialist. Thought it would be quiet and then these things happen. We can talk about the rally but i want to ask about geopolitics. General thoughts. Geopolitical noise continues to plague the markets. That is why we felt 2020 we will continue to see volatility. Like what we saw in 2019. We are not back into the 2018 levels were there was a lot more sort of ups and downs in the markets where there were 70, 80 days of asian equity markets down more than 1 . Last year we only had 40 or 50 of those days. Anduse of the elections some of these uncertainties going on, that will continue to plague the market. Positive like to see news, but we dont live in that world at this current juncture. You will hope for the best but look at the worst. The junes up to contract, we dont know if it will continue. The question i have is at some point we have to start worrying about inflation. We do. We had similar specs in 2019 where we had some spikes. That did not impact inflation per se. We will probably not see impacts. We have to be careful. If tensions continue to persist and things get out of hand, oil prices go up significantly, it could have an impact. If this is a bit of a blip and things correct in the near future, that is going to have a big impact on inflation. What do you see as the key political geopolitical risks . Are the 2020 elections just noise . How does that compare to the trade relations . You hit the nail on the head. Trade will continue to plague the markets in 2020. Everyone is assuming what is face to going to look like phase two going to look like, and how will it impact the Global Economy . Because of the progress being made with phase one, between china and the u. S. , there is optimism and that is where we have seen a bit of a rally with the hsi and chinese equity markets. I think people are somewhat skeptical. They want to know more what is likely to come in phase two especially got given there are people in the u. S. With various positions who are somewhat concerned of what will happen with phase two of the deal. Selena and asking reportedly Companies Like trip. Com and daddies to also list on the hong how significant is this and are you expect more of these Chinese Companies to go to hong kong . Alibaba was a start and we expect companies who want to get into show listing in hong kong, it does help them. These Companies Listed in the u. S. , it provides an additional Funding Source for them. When you look at it for a lot of the mainland investors who currently cant buy adr stocks, when they get listed in hong kong and could be accepted, it will be a lot easier for mainland investors who have not had exposure to some of these Companies Listed in the u. S. Lots more to talk about with you. He will be staying with us. If you have any questions, get them in through tv. Of your firstate word news. Lets get to our top stories. A Senior Iranian military commander has been killed in a u. S. Strike. He was head of the elite Iranian Revolutionary guard. Iraqi state tv said he was killed along with a our group when the convoy was hit when airstrike. The response appeared certain and will escalate tensions. Behind chinas temporary hold on the link between shanghai and london stock exchanges. We have been told the uks start with the hong kong protest is one of those driving the position. It was to allow Companies Listed on one exchange also to have shares on the other. Turkeys parliament has authorized deploying troops to support libyas internationally recognized administration against rival forces. The government is battling malicious backed by russian mercenaries. Militias backed by russian mercenaries. They say foreign interference is complete getting the situation. The u. S. Is warning the argentinian president that the early Foreign Policy moves may jeopardize support from the imf and american investment. Saidr of Trump Officials shouldering the bolivian president and engaging with Nicolas Maduro could cut backing for them. Onbal news, 24 hours a day bloomberg and on quick take by 2700 journalists and still ahead, as protests set to rage on in 2020, we get you in outlook on hong kongs property sector. As the fed plans to raise rates in 2024, we discuss Central Banks and which one will be leading the easing. This is bloomberg. Welcome back. If i havent already happy new year. It is a time where we find where Central Banks are moving or poised to move. You,range countries tell the benchmark is expected to be unchanged. You have the red which are the Central Banks in countries expected to take rates down and the blue is unknown after what happened in december. The rate cut out of the fed. A lot of this is contingent on what the fed does and whether they hold or not. If you look at china, not expected to do anything on the benchmark but they have been moving on other things. They have other tools, the rrr cut is a good example. The pboc telling the banks, benchmarkthe one year lending rate as far as moving your loans and pricing and referencing them based on the new lending rates. Japan, while we are not expecting anything, even if the economy does improve, expect the economy to be under a very low Interest Rate regime. We got to talk about australia. The market is relatively split on this. The blue line is when the rba told us a few months ago is when we should Start Talking about qe. We are to rate cuts away. It was less bad. Bill evans who made on them for himself correctly calling this, says we get intimate by june. The other view is we dont. The other thing to point out is when it comes to real rates, over the rest of the region, so inflation which we talked about, could be an issue. It is probably not that it is something to watch as well. You have food inflation in china and in india pushing higher now than the benchmark lending rates. It means in india and china these lines here, we are looking at negative real rates because food inflation is headline inflation and that messes with your map. Watch us if you want to get a clue of where things will move. I could get used to that. I just got used to 19. The repo market when it releases minutes later friday. Officials expect rates to stay unchanged through the Election Year. With us in hong kong is east spring investment asia portfolio specialist can want. Wong. What are your strategies for the emerging markets . In an Election Year we dont expect them to move the market in terms of making harsh moves. What they are going to do is try to stabilize the economy and look for signs if there are weakening of the u. S. Economy which is not likely as what we would expect in 2020. , weee a large deterioration expect the fed to stay put for most of 2020. Financial markets had a strong year in 2019. You have the likes of the boston fed president concerned that the elevated assets could lead to financial risks. What is your view . That is an ongoing story, not only in the u. S. But having an effect globally. We have been living in a low Interest Rate environment for the past 10 to 12 years. As a result you are seeing a lot asset prices being inflated over the years. There are pockets and areas where there seems to be bubbles forming. There are opportunities out there within the various spaces where investors can continue to look. I will put together the top conviction call with the top contrarian call. They say look in evaluations. They see opportunity. Go into em. We start to see a bit of a rally in em during the latter half of 2019. There are a lot of positives going for em at the moment. Where we are, if the dollar continues to weaken, i have seen news out of the fed, potentially looking at where we are with valuations and also specifically freemount of positive cash flow. It provides good opportunities. In asia, china, valuations are in the midrange cycle. You look at msci chinese equities, they are 11. 5 times more than earnings. It is not the cheapest but it is not expensive. Given we are going to see 10 Earnings Growth for 2020, that is a good opportunity. Even if we see valuation levels at 11 times earnings, you will get a potential brome potential bump rise. Even if we see conservative assumptions, it makes sense. , 10ations in hong kong times earnings. What sort of assumptions do i have to make for this to rally . The markets are already seeing a rally. And when you say look at current ones, you have a bit of geopolitical noise. What is happening is the fact earnings have dropped a little bit for certain sectors. We look at the real estate sectors. You are working on a low basis. Towards the second half of 2020 see a bit of recovery. Looking at hong kong stocks, you cant give rest macau stocks. Get past the cow stocks. But there is a lot to like because when you look at a lot of these companies whether hong kong real estate or macau stocks, chinese have a big impact. To break some headlines crossing the turmoil the terminal. Brent oil dropping jumping 3 after the news of the iran commander being killed. We are singled and yen dropped jumping, breaking the risk on sentiment. I want to jump to what we are seeing in terms of the 300, back to twoyear highs. How much further can this run go . We have got to be careful comparing onshore and offshore. Because unsure a shares have outperformed on sure a shares have outperformed, we have to be careful. When you look at a shares, homeless msci increases the inclusion factor for a shares, youre seeing a temporary halt for some of the large foreign inflows we have seen into the is sharemarkets of the a markets. Shares,e growth among a there is no reason they cant rally into 2020. Comparing onshore and offshore, we like unsure because on shore because it outperformed. One asset it would not touch. We have to be careful in terms of what is happening in europe. There is still a lot of questions surrounding what will come around with rex it. There is uncertainty. When you look at a valuation perspective, there is a lot to like. And nonsensical. Off ofar could be a play cyclicals, emerging markets, asian markets, it could have a bit of a rebound in 2020. Happy new year. We will see you back here on the show. Thank you. We will hear from some of the key voices at the fed. The minutes are due out. We have the chicago fed president joining us 11 00 new york time. Joining us out of asia, Early Morning saturday. We will hear from the red a. This is bloomberg. Here is latest business flash headlines. Two new chinese names entering the race for a Digital Banking license in singapore. This one submitted an businesson to the times. Another comes after as at financial made its own bid. They are offering a five permits. The exchange is said to be discussing secondary listing options for chinas Tech Companies including travel provider trip. Com and a gaming company. There has been no comment from either company. They have a combined market value of 60 billion u. S. Alibaba raising 15 billion in its own secondary share listings. Talking apple shares having a sweet start to the new year, above 300 for the first time in the game. It is a stark contrast to the dismal start last year when they cut the Sales Forecast for the first time in 20 years. But apple went on as you see to outperform all other mega tech stocks with the highest annual gains in 10 years. Lets get a quick look at the movers on the msci asiapacific. We saw some of the gains going back after middle east tensions flared. The asiapacific still up. 2 . Leadingics rallying and gains. This company developed handset components. And you have this one rallying more than 10 . That is after china announced it will award safety to syndicate safety certificates for gmo corn. Tracking events elsewhere in the world, how these are affecting markets. Killed. Anian mentor was we have confirmed commander was killed. We have confirmed this. Look at the massive move in oil prices. 67 rom march to december, on the march 20 29th contract. Quite a big move. Developing story. The other board, look at this, gold is at session highs. The dollaryen 108. Treasury futures. This is bloomberg. Whether youre out here on lte or here on a wifi hotspot, Xfinity Mobile has more coverage to keep you connected to what matters most. Moooo. Thats because its the only Wireless Network that automatically connects you to millions of secure wifi hotspots and the best lte everywhere else. Save up to 400 a year when you switch. Plus, unwrap 250 off our best phones. Click, call or visit a store today. Welcome back to Bloomberg Markets asia. Looking at the markets, the Mainland China markets are Holding Onto Gains from yesterday after the euphoria after the pboc cut the reserve requirement rates and expectations that they will continue the easing. We are seeing the s p active futures paring back gains, down. 5 after news a Senior Iranian military mentor was killed. Whether or not the defensive position will hold depends on a response from iran which could be a strong response given the exiting tensions between the two countries. And how they think and frame this, the significance of it, to help answer the question. The Senior Commander has been killed in an airstrike by the u. S. Lets bring in Jodi Schneider to tell us, the markets tell us it is a big deal. Is it . It is significant. This is probably the highest escalation in tensions between the u. S. And iran since the end in 2011. Aq war it happened in the Baghdad Airport. Unusual direct assault by the u. S. It was a very direct assault from the u. S. And this is in inaliation for that hit which the American Contractor was killed in the rocket attack. In Iraqi Military base. Tensions between iran and the u. S. Have been growing. President trump didnt sign on to the Iran Nuclear Deal that European Countries have been part of and are still. The u. S. Signed on to it in 2015. Things have been going up. Escalation, a big direct hit your the Baghdad Airport. Before we get into the relations and significance, we havent heard from the iranians nor the white house. Remind our viewers why we are here. What led to the airstrike . Tensions had been escalating and we have seen in recent days the march on the embassy in baghdad. Iously a very concerning the u. S. Secretary made comments saying the u. S. Was moving from responding to iranian backed attacks to anticipating them which is the kind of message you get before you see further action. We have seen this. Escalationmilitary point. The u. S. Has brought troops over after the embassy fled. But now we are seeing another military action. In anlso puts iraq interesting position. Y have been trying to come trying to smooth tensions, staying on the u. S. Good side which maintains troops after the iraq war. Inflamee not wanted to tensions with iran oil is up 3. 5 . We are getting reports out of sky that Iraqi Security forces have surrounded and shut down baghdads green zone. That takes you to the iraqi war in terms of terminology. Is at session lows if not the lowest here in a couple of months. We saw dollarchina go through a key moving average. I know there is lots of moving parts in the story. We want to hear the statements. We want to hear the u. S. Tell us what is behind this, what is next. That is all important. The we also want to hear is statements from iran. The general, he is a household name. He was a veteran of the iraniraq war. He was a key in keeping isis out iniran and to defeating isis iraq and syria. This was a big hit. Take out froms to the u. S. , this will not only escalate tensions, it could escalate tensions in the region. Haven markets are reacting. Thank you so much. I imagine you will be back to take us into late. Rosalind chin is here. She has the update. A standoff developed over the impeachment trial between House Speaker nancy pelosi and Senate Majority leader mitch mcconnell. Bloomberg has learned that no negotiations have happened as to how a senate trial would be handled. Sending theing articles to the senate, wanting to see a fair trial. The main contenders in the taiwanese residential race suspended their election campaigns after the Head Military officer was killed in a helicopter crash. One one person among 13 killed. Were executed. The cause of the crash isnt known. Finally going to a new government. Party toist separatist help him take office. To a vote thated gave sanchez the coalition. We have been without a proper government since march. Google said Artificial Intelligence can spot Breast Cancer more accurately than doctors. The use of ai to improve the identification of confirmed and negative cancer cases. They are training machines to help if a patient is likely to live or die. They are mining thousands of data points to help predict outcome. 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 rosalind chin. This is bloomberg. Headline,er breaking the Iranian State tv has confirmed that the commander was killed. We will bring you more throughout the show about the implications and what it means for the future relations. I want to go to hong kong where six months of violent protests have rocked the economy. We will look at how exactly the protests are impacting the economy. Retail sales numbers. Joining us now is eric lam. What are we expecting . The forecast for november for the retail sales is we are going to see a continued weakening. The last record for retail sales value was set in october, 24. 3 . The forecast is for a worse forecast 26 . The best gauge we have going into this number is the latest visitor arrivals numbers for hong kong which just came out. Seeingose numbers we are the evaporation of visitor arrivals worsening. Decreases of more than 50 for the overall number, almost 60 for visitors from china which are the vast majority. Were records for the biggest decreases on record. The indicators are that we will see even worse numbers. I will ask him a what is the implication for the economy . As we have seen over the last six months, the Retail Sector has been the most affected. Looking ahead into next year, there are some glimmers of optimism. The quarter on quarter figures forecasting positive growth after it and expected continued contraction in the fourth quarter. One of the causes, one of the biggest ones is upside from retail, the other part of the hong kong economy is the trade side. There is a lot of stuff from the trade deal. There is some reason for optimism. We might see a rebound. Hopefully that side fixes itself and the other it is making the start base comparisons. Thank you so much. The latest numbers should be out after the markets close here. Lets talk about how it is influencing and impacting the property when it comes to commercial property. Our next guest believes that meant will be limited because of the uncertain economic environment. This is the head of research for Greater China and hong kong at jail nelson. What is the question you have been getting for clients from clients . How do we see the property markets in 2020 . The property markets have turned south. Commercial or residential . All sectors. In the second half of 2019, we are entering into this year with a lot of headwinds. We are forecasting a meaningful drop in rents and prices across almost all sectors. Magnitude, the extent, it will depend on a whole host of developments. The Global Economy, situations, and the demand for properties. One thing we have to make a baseline assumption is about the social situations in hong kong. Is that we dont expect the situation to deteriorate from the intense tension in november last year. That is an important point because businesses and individuals who need to have certainty about what their future,ions, over the or their prospects. That is when they can start to make longer term plan. That is one we expect demand to emerge when longerterm plans are made. Another question many people owners,ering, the shop at what point do landlords really soften the blow it comes to the rent . As for as Government Data is concerned, is rent coming down but not by a lot . They have stood their ground so far. You mentioned rent will come down. We start from the Retail Sector, one of the most impacted ones. Retail shops have already 50 when0 , more than there was structured change in the profile of arrivals. We expect 50 drop in retail rents. Businesses are going to be challenging especially on the high street. We think landlords will have to adjust. As for the residential sector, is going to be more vulnerable because of the withdrawal of p. R. C. Demand and some discussed sales. Resilient more because of supply demand dynamics which are more favorable in supporting prices. You elaborate on the waning demand from the prc and if you see the investments that would have been going back into the mainland . Demand has been supporting factor for the property markets in general. They have been leasing space. They have been buying Residential Properties and they have been involved in a number of sizable investment deals. That is on the back of relatively loose capital flow from china in the past few years. Already over the last 12 to 18 months we are seeing or have been seeing that shrinking. That can change in a short time. Pboc or the Central Government in general has been turning the credit cap a little bit loosening as well. That will drive the demand from p. R. C. Investors back to hong kong. That is something we can look forward to. The signs are positive. We will have to see. Selina you have this system reform which could be a boost some have speculated to the lower tier cities. How do you see that household registration change impacting property markets . Positive for to be residents of housing in china. The systems, the registration lendingand mortgage policies have been relatively conducive to property purchases especially for management properties. If you look at that list of developers for listed in hong kong or china, they have been able to raise the sales almost yearly five 10 to 50 for the bigger ones and for the Smaller Developers the sales growth have been strong. Fairly strong of demand among the population. We have seen chinas average house to income ratio jumped significantly. Is there a bubble forming . There could be. This is going to be very confined in certain smaller cities where supply is not checked. In the major cities like beijing, shanghai or shenzhen, the surprise situation is more disciplined. Bubbles arek happening in those major cities. Thank you so much. Nelson one. You plenty more ahead. This is bloomberg. Welcome back to the program. We have breaking news out of the pentagon on the story the u. S. Confirming it did kill an iranian commander on the order of President Trump. That is our top story. As you can see from basically everything moving across, you see oil flow prices are higher, the dollar is pushing higher, gold is on the way up. Confirmation out of the pentagon the u. S. Did in fact kill the commander on the order of President Trump. Joining us from d. C. Is a director of the future of iran initiative. She is a nonresident senior fellow at the atlantic council. Joining us on such short notice. You followed this story for a long time. Us remind our viewers. Give us a profile of who was this man and wife was he a target . Something called the kurds forced which was the elite force, kind of a special forces and cia put together. He was having it for 20 years. Always an enemy of the United States. After 9 11 the force worked indirectly with the United States to overthrow the taliban government. It was a u. S. Decision to invade in 2003 that turned the force into an enemy of the United States through its support of a variety of iraqi militias. Over the years, it is said some 600 american serviceman died in attacks that were connected to the iraqi groups supported by iran. Certainly we have seen incidents in recent months. I am worried about the prospects for further escalation. Im worried there will be retaliation against american diplomats or military personnel or civilians. It was a very risky step. the pentagon is continuing the statement that he did plan an attack on u. S. Diplomats. To your point that you are worried about a response, take us through the possibilities. Iran is a fluent influential country. It has an alliance with hezbollah in lebanon which has agents around the world including in the western hemisphere. I think it is going to take the iranian government a wild to digest this. A while to digest this. They will find a way to strike back. Is most concerning, iran has a nuclear program. End of think this is the that remained of the nuclear deal. They will be very aggressive about building up that program again. Against other kinds of targets in the region, nonamericans, people seen as allied with the United States, things have been tense since the United States quit the nuclear deal but they will be worse now. Selina you are saying it is the end of the nuclear deal, that there is no way to salvage this . I cant see how there is anything to salvage. Prospects the the prospects were fairly dim but no president could sit down with donald trump after Something Like this. Series ofis marks a violent incidents. In terms of the broader implications of future where do we go from here and would things change if trade 20 leads to a different president . If 2020 leads to a different president. . This is the worst it has been in 40 years, since iran held american hostages at our embassy. This is a huge crisis. I am not sure donald trump understands the implications of what he has unleashed. Tweeted theump image of an american flag. Conclude what you want. Hero. Thinks he is a big a lot more people are going to die because of this. David should we start considering, not think we will, but that the u. S. Will get into a regional war . It is hard. Inhave to see what happens iraq. How does the government survive this . It wasnt just the man, but a the prominent iraqi, one of militia heads and someone with a great deal of political power. We will see the ripples flowing out from this for a long time. U. S. Said this was aimed at deterrence. The general had been planning attacks. We make of that and what would have been a more appropriate response . Privy to the information the Administration Says that it had. I think that the United States overreactive with the killing of the 25 members of the militia which led to an effort to the siege the u. S. Embassy. I think they made a big mistake when they pulled out of the nuclear deal very that is what set off this spiral. Is going tos now depend on the actions of those in tehran, how they evaluate this, how their friends throughout the region do and a president that has no experience in a crisis like this, who is operating with advisers who have very little experience in such a crisis, the socalled adults in the room that came in with the Trump Administration are all gone. I understand why the price of oil is claiming high. This will be a White Knuckle time for many people for quite some time. I would appreciate if you would elaborate. You said there are u. S. Lives in danger. What would it look like . Agents in many places in the world where we have embassies. Where we have soldiers stationed. Are goingnow how they to respond to this. This man was a huge figure in the system. Go they wont let this stuff without some form of retaliation. Go without some form of retaliation. Thank you for coming on. Her first reaction to the breaking news out of iraq. The u. S. Has confirmed that the airstrike has killed an iranian general it we are seeing reaction across the board when it comes to general. We are seeing reaction across the board when it comes to markets. Oil prices are off highs for the day but we are up 2 on the contracts. Safe havens have also been bit up. Selina we saw the mainland markets paring that gains. The post new years party didnt last for too long. We will be bringing you more of the shows ahead with this iran news. This is bloomberg. Haslinda. David lets get to your top stories. Some breaking news out of iraq. The u. S. Airstrike killed a top iranian general. An attack planned on u. S. Diplomats. Risk in sentiment. Oil prices spike while gold and the yen also gain and u. S. Futures point lower. David President Trump gave the order for that attack, he has made no comment, but has tweeted the image of an american flag. This is Bloomberg Markets asia. Haslinda just like that, it is risk off after that attack in the middle east. Paring gains. 0. 5 one average of. 5 . Asian stocks currently flat. Has turnedng index somewhat. It was rising for a second day. It has given up all its gains. Lets take a look at where we are in terms of those haven plays. Taking a look at gold. Gold has been on the rise. Crude naturally also rising. As much as 3 . David breaking lines right now. Guardlamic revolutionary now out with a statement in response, saying that iran will take revenge on the u. S. For of course that u. S. Airstrike that killed that iranian general. Substantially. The next market to open up is india. Have a look at futures. Long story short, closed on a high yesterday. Likely not going to see that. There is your down arrow store late story. Risk has been completely taken off the table. Lets get to the top story. The u. S. Has in fact now kill over near the Baghdad Airport. The Market Reaction was swift. Brent crude was up 4 after that attack. Lets bring in Jodi Schneider, our Senior International editor. Also for the Market Reaction, our guest is with us to talk through that. Let me start with you, the significance of the attack every it very significant. Probably the most significant escalation in tensions between u. S. Ad and tehran and the since the end of the iraq war in 2011. This was a significant general. A leader who led an elite revolutionary force card. Beloved, revered in his country, really a household name in iran because he was a veteran of the iraniraq war. More significantly, he had helped lead to the defeat of isis, the islamic state, in syria and iraq and largely kept them out of iran. It is someone that has been sanctioned by the u. S. Since 2007 and the entire revolutionary guard corps was labeled an International Terrorist organization earlier this year. So certainly someone very well also givene u. S. And his stature in that country, this is a big escalation. We had heard from the defense secretary justin the past day saying that given the escalating tensions after that attack on the baghdad embassy, the u. S. Embassy in baghdad, that the u. S. Would look at significant actions. This is now seeming to play out. We have just heard from iran that they will take revenge. This is a major escalation in tension, which have been heightened in recent weeks. This is now taken to a much, much higher level, basically a military level. Haslinda not surprising that Market Sentiment has taken a turn. We have seen how gains have disappeared. There was also that inherent correlation between oil and currency. Yes, of course. Because the strikes took place in the middle east, it is not surprising that crude oil is the biggest mover since the announcement of the incident. At one point, we were up around 4 in crude. It has come back a little bit since then. Then you have the usual suspects. Dollaryen is lower. S p 500 futures have fallen. Those are the kind of things you would expect. How far it goes during the day probably has a lot to do with what other announcements come out. If this is a contained, oneoff situation, that could be a risk off move. It does not really spread through the rest of the globe. Certainly, there is a risk that it does continue. Markets are coming off a very bullish point. Beenrs would have positioned fairly aggressively on the long side. This is always a dangerous thing in the shortterm. More people may want to lock in gains that they still have. It might be a bumpy day right through, particularly if there are signs that this is going to be a continuation by the u. S. And just not a single strike in iraq today. Dont yes, i know you look as closely at the oil markets and the specifics within that market, but what is your gut feel. Could be a kneejerk reaction. It could well depend on some of the factors you mentioned, as well. Of this magnitude sustainable . That is what i want to get to, if indeed we do get to that point. What is interesting about the oil futures in particular is that people have been expecting a fairly tight range Trading Market for the early part of this year, so there will be significant option positions on both sides of the market above and below where we have been trading the past couple weeks. That means you could have a real scramble of people. If we push through 70 on brent oil, that could trigger a fast mover. It may come back down pretty fast as well. People are not position for oil to break out of its trading range. The relations are already strained between the u. S. And iran. We can only expect things to escalate. Not only between toronto and washington, but this could spread through the region. That is probably what mark was talking about in terms of seeing the oil move today. , iraq,s been baghdad which has been trying to stay in relatively good terms with the u. S. Since the end of the war. In a difficult position given that this has happened. We saw that there was an airstrike in which an American Contractor was killed that led to u. S. Action and then we saw that action in the American Embassy in tehran, in baghdad, im sorry. This is what the u. S. Is now saying, that this was in retaliation for that and also out of concern that this iranian general was going to take action against u. S. Diplomats. Of words inen a war recent years, ever since President Trump pulled out of that 2015 Nuclear Accord with iran that had been done by his predecessor. Now, we are seeing them on the ground with real airstrikes. David developing story, big story. It is a big deal. Thank you so much. Jodi schneider in the studio talking politics. Mark talking us through the intricacies of the financial market. To discuss more on what we should expect when it comes to oil markets, joining us on the phone is the president of the shore group. Good morning from hong kong. Thank you for joining us on short notice. As you would imagine, it is a big story. We were up at 1. 4 on brent. Absolutely. Going to get are that kneejerk reaction similar to september. Iran attacked the saudi aramco facility. You did have that major spike in oil prices on that sunday night leading into the trading week back in september, but prices quickly pulled back because there was no military response from saudi arabia or the United States. This time, it is different. We had the recent siege in the u. S. Embassy backed by the iranians, kind of harking back to the 1979 seizure of the embassy in iran. Donald trump is not jimmy carter and we had a very sharp response by the United States. Changed now. Has the political military calculus has changed and we have now opened up a potential new front for oil prices. We are getting off to a very rocky, volatile start the year and as we expected for the last expected. Was to be i do think the individual that you just had in the program put it very well, that the market is not position for this event. That is to say, when we look at the money flow in the option market, the significant amount of upside protection that was sold between 62 and 55 in the nymex wti market, so if we begin to broach that 65, 66 range, you were going to have a lot of option riders that are going to panic, which could propel a shortterm price spike. That is the risk in the pricing side. This will all be reflective of how iran responds and does this lead to a new plateau in the growing chasm between the she aside of opec and the sunni side of opec, saudi arabia the United States. Howd just your gut feel, do i play this if im a trader right now . Do i look at the spot market, the futures market, or do i even have to look at the Options Market . Stephen yeah, the Options Market, option riders, the guys who are selling options, those are considered the smartest guys, gals in the room. They have sold a significant amount of upside production, upwards of 65, 60 six dollars a barrel. Price area you want to respect. All thewhere quantitative models can take you. If we begin to break that level, the rubber band has snapped and we can go significantly higher from that point. That is your jumping off point right now. If we cannot hold resistance in and im, 66 range looking at right around 63 we are right around the beginning of that resistance area, but that is what im really going to be focused on for the next several weeks. How quickly can the sentiment in the oil market rebound given expectations of recovery in the Global Economy outside of the u. S. . Is that enough to provide some kind of buffer . Stephen i dont believe so. Ist we are looking at here here in the United States, for all of my analysis, it tells me that the u. S. Industrial side of the economy, the factory economy , 1 8 of the u. S. Economy, we are already in recession right now. You are not going to get any sort of lift. The real consumers of energy. Tocourse, this is correlated the ongoing trade rift between the United States and china. China does not have any sort of incentive to settle a trade dispute with washington until they know who is going to be the president of the United States in 2021. There is not going to be any meaningful resolution throughout this year. Bet means there is going to a significant industrial demand track on Energy Prices at this point. So, if we get a nice resolution that we dont see any sort of further provocation geopolitically in the middle east and then when we add in the pullback, the drag on industrial demand, then this spike we are currently seeing in oil prices is going to be shortlived. So, the risk really now here and if you are iran, this is a risk. The only way you make money if you are iran, you sell oil. If Oil Prices Spike at the same time industrial demand in the United States, europe, china is lagging, you were just going to exacerbate that demand destruction. Ultimately, you are going to be a loser in this proposition. Haslinda all coming at a time when opec is saying the output is falling. Shortfall could that potentially be . Stephen right now, the shortfall, all conservative estimates is that if opec lifts rhetoric,s up to its if it expands its production quota from 1. 2 upwards to 1. 7 Million Barrels a day, which is what they stated, then ultimately what you will see is dovetailduction will with the amount of demand growth. Quarter, lets take the geopolitics out of this, we should see a rebalancing of supply demand in the market going to the first quarter, which thats a very good stage for Oil Prices Going into the Second Quarter and the peak demand season of the summer in the northern hemisphere. So, that is the game plan. All eyes now are going to be in the will opec actually live up to its commitment . Keep in mind, the United State Oil production is going to grow probably upwards of one Million Barrels per day through 2020. Whatever opec pulls off, the United States is going to mitigate that by the oil they will be putting onto the market. If you are a gambler, it is almost of a push right now. I think this is why when we go back to gambling, you talk about the option riders, why they were valuing a ceiling to this market in that 65 dollars, 60 six dollars range. Markets taken by surprise. Brent and wti up by 3 . Thank you so much for your insights today. This is bloomberg. Haslinda welcome back. Our top story, brent jumping as much as 3 after a top iranian commander was killed in the u. S. Confirming it killed the iranian general, saying that he planned the attack. Lets bring in simon. I is this impacting emerging markets . Has emainly, it concerned. There are three levels that we should be looking at. First of all, it is kind of a risk aversion shock. Anything that has significant positions in it, like long korean won, are suffering this morning. The second level is thinking about how this is going to affect oil prices. If this results in a particular oil price Persistent Oil price shock, that is going to be negative for a currency like the rupee. Thirdly and finally, if people believe that this will interrupt the Global Recovery in growth, that is going to be bad for all asian currencies, which procyclical. Quite david something tells me that we are going to get a rock on dollarindia. Everything that we discussed , throw in the renminbi as well, what potentially changes from those views on this story and what doesnt . Baseline is that the overall story for 2020 does not change. This will not be a significant enough event to derail the recovery in global growth. Loosening andus financial conditions that could lead to a significant pickup and that should be good for the close procyclical currencies. A problem is that that was slightly populated trade, which is why it was selling off today. Otherwise, things like india, if this is not a Persistent Oil price shock and im not an expert here, but my assumption is that this is just a oneoff event or it is not going to have a persistent impact. Well is still reasonably positioned. Growth should be recovering. It has a juicy real yield. I think it will probably recover after this initial shock. With that we should expect that in opening today. Haslinda thank you so much for that. Lets bring in our guest. A course, we have to take look at the currencies. Where are they headed . As a first response, the petrol currencies should benefit from a higher oil price. We have to think about how long this spike will last. And to what extent. I think it is too early to tell. I agree with the earlier speaker that it really depends on how the one responds. To bear in mind that it is slightly different from the oil picture of yesteryear. The rise ino limit oil price in todays environment. As a first response, i think the tends torrencies benefit. I think it is difficult to tell anything. At the same time, the risk off environment tends to hold it back as well. Haslinda we talk about oil surging, but they are still in the 60s. Much much far off from the 100 we have seen before. Going forward for currencies like the indian rupee, for instance, susceptible to the movements in oil, how will that be affected . Rupeehink the indian tends to lose out when the Oil Price Goes up. I think the domestic story at the same time is starting to stabilize and that should be positive for the indian rupee, in the sense that the federal bank has been loosening Monetary Policy and helping growth to stabilize. I think the outlook for this year is going to be a better environment for the rupee itself. Change whichs it currencies are the preferred currencies . Not really. See somerge, we stabilization in the Global Economy. The pointagree with that it is a bit of a crowded trade going into the end of last year. Perhaps depending on how iran responds, if the response is limited in nature, the overall, it may create an opportunity for trades. David right. Nice to see you. Happy new year. The broader inflation story, it has been a while since we had to talk about the threat of inflation. Do oil prices have to stay at these levels for us to really talk about breakevens moving higher . A i think you need to see sustained rise in oil. The long did oil price versus the current rise. I think at least for a few months for inflation to be a real concern. For those things to be true. David right. I guess that does take us into the broader conversations of the fx markets. Is a basicsense question whether the dollar rolls over further from here. Your thoughts on that . Thought is that the dollar is probably close to peak. Thedoldrums we saw in dollar was probably as a result of the recent environment. That is something to change. New year, new risk. For as too early to call big dollar declined from here. I also think the dollar will be supported by the fact that the g10 wont. I think with the fed not likely to move anytime soon and it is probably in a good place, the dollar will be supported. Im still looking for dollar weakness in the year ahead. Modest dollar weakness. The dollar moved a bit too fast in terms of the weakness we saw at the end of last year. Haslinda goldman says there will only be dollar weakness if the you in appreciates substantially. Why substantially . How strong must to the euro or theyuan be . I think it comes from the angle that the yuan and the euro or large trading partners of the u. S. And therefore a large trading percentage of the dollar basket itself. Euro, it is the still too early to shed its funding currency status at this point in time. There are some positive in terms of stabilization of European Growth picture and perhaps the prospects of greater stimulus in europe itself. I think it is too early to get really excited about the euro itself. The yuan, there is broad stability, i think. I wont get too excited about the phase i deal. Haslinda the fed still has room to cut, which could lead to dollar weakness. I actually think the fed is pretty happy. You look at the u. S. Picture, they have slowed down, it is slowing down back to trend growth and things are stabilizing. Haslinda our guest stays with us. Dave, a look at the markets . We had this if conversation for hours ago, i would say green on the screen, emergingmarket center the bull market, which they did, and we are now pushing toward over bond levels in some markets. But then again, we had very events very early in the morning that resulted into where we are right now with oil prices essentially spiking higher. One point, in case you are just joining us right now, we were looking at oil at 4 . Chinese markets are doing this ahead of the lunch break. We were up at the open and then gave those away. I would imagine japan would be under pressure, seeing how far down dollaryen has come down as well. Last we checked, it was barely above 1. 08. We should still be at those levels. We are watching for the indian rupee on the other side of the break. Something tells me that will be in a rocket. This is bloomberg. Haslinda the middle of the trading day. Effected ing affected by the middle east. Taking a look at one sector important to the singaporean residents. 1. 3 the previous quarter. Another sign that cooling are certainly working. Just to tell you about breaking cutting prices in 3s. Built model hoping to capitalize on its presence in the chinese market. Lets get the first word headlines in hong kong. A Senior Iranian military commander has been killed in a u. S. Air strike in iraq. He was head of the elite Iranian Revolutionary guard. Iraqi state tv said he was killed by an air strike. Tensions have escalated between tehran and washington. Turkish parliament has troops forsupporting the Libyan Government battling militias backed by russian mercenaries, egypt, and the united arab emirates. President trump spoke to president erdogan warning him that foreign interferences complicating the situation. Is warning that his thenian mesh argentinian president that his moves may jeopardize his relationship to the imf. A loss it could cause in u. S. Funding. A standoff over President Trumps impeachment trial. Bloomberg has learned that over the holiday break, no negotiations happened over how a senate trial would be handled. Nancy pelosi has delayed sending the articles of impeachment to wants ate, saying she fair process for the trial. Day,l news 24 hours per powered by mor than 2700 journalists. This is bloomberg. David a quick market check. Complexion,ts, the risk in intone. Tone. K on in the rest of asia is down, as well. The only bright spot is your Energy Sector in the back of oil prices. Some weakness coming through in the Oil Sensitive currencies. We were up as much as 4 . Brent futures march to june. U. S. Futures up to a lesser extent in the news out of iraq. Really catching the options traders off guard. It looks like we could be looking at a higher elevated trading range the next few days until we get more clarity on the extent to which this plays out. The response from iran, which they have said they will respond and what the u. S. Will do. Are essentially exploding higher. We are joined on the phone from sterlingvirginia sterling, virginia. From defense priorities, specializing in u. S. Policy in the middle east. Extensional substantial experience in the middle east. Your initial reaction to the news and how bad can it get . My initial reaction was the timing really could not have been any worse because we had just got things calmed down from the protests against the embassy. This is almost certainly going to flame those backup. To shedbody is going any tears in the United States over that general because he had a lot of american blood on his hands. This just underscores one of the things i been warning about for many months. It places a target on the back of all American Military forces and diplomatic forces and we really do need to withdraw our forces. There is no more mission for american security. We now run the risk of potentially getting caught up in the cycle of retaliation and escalation, which could potentially result in war, and that is in nobodys interest. The timing could not be worse. Are you saying that President Trump made a mistake in sanctioning this attack . He certainly has access to more things than i have, but i can tell you pretty authoritatively that this has the high probability of resulting in morning farias actions from iran. Not what we are looking for. Im all about people being held accountable when they have killed americans by all means, but there was a right way and a troubling way to do it and im not sure this was the best way. Haslinda of course, iran and the u. S. Shifting now to open confrontation. What do you suspect irans move would be . Well, that is going to be the big question. Tot they think they can do not make their own situation worse. I cant imagine someone as highprofile as this general, them not doing something in retaliation. They have to be careful because if they spark a Strong Military reaction from the United States it could literally bring down their regime. They probably will have a measured response. I expect he could potentially see other assassinations. Possibly even an attack on american diplomatic or economic personnel in the region and other American Military personnel scattered throughout iraq and syria. That is one of the reasons i say we need to be doubling down on defense and protection right now and it makes sense for them to withdraw from the region. David just a reminder of yours, you have 21 years of active service, you were deployed, if im not mistaken, four times in combat zones. Im not sure if i should be asking you this, but the concept of war and getting into a new regional war is something that is in some peoples minds right now. Do we need to Start Talking about that . From your experience, do what extent do you think is reasonable at this point in time, given what has happened . Yes, i can tell you unequivocally that any war that broke out between the United States and iran would be tremendously worse than the worst we have seen in iraq. The level of sophistication of a lot of the iranian forces, if they are pushed into open conflict is a lot higher than the iraqi regime of 2003 and certainly with these forces and some of their militia forces that are located all over the place, they could really reek a lot of havoc and it would be so destructive for everybody. Iran, possibly even israel. It would be completely out of control. That has to be avoided at all cost. Iran has we know that a nuclear program. How quickly cannot ramp up . How quickly can it accelerate that program . The ciading to some of estimates that ive seen, they say that if they really pressed and went all out, it could be as soon as a year. Im not sure that that is in their interest to do, not because they care what we think, but if they were openly, directly going after a nuclear program, we could knock it out with airstrikes, pretty punishing airstrikes in short order. I think they will be careful about doing that, but that is something that could happen if they want to us the issue. David ive got to ask you what the political implication is in an Election Year, quite literally read we moved into 2020 a couple days ago. Does the prospect of president ial election, should that factor in the appetite for troops on the ground, just your thoughts in your experience . Certainly shouldnt. Historically, Foreign Policy hands at the waters edge and they are usually of one mind on this. It remains to be seen what the Democratic Party will do. A lot of it will depend upon what happens here on out. Does this thing spiral out of control, are there even more american casualties . Does the situation calm down esther and mark to iran gets the message and there is more stability. That is theoretically possible. That would play to the president s political or personal benefit. Americans elected him to get out of these wars that they are tired of and he has been talking about that and americans want to see if he is going to do that and this seems to be potentially going in the opposite direction. If it works out where it makes iran back down, he will be seen as the big hero, but if it goes the other way, it wont work out very well. Davis,a colonel daniel think you so much for your insights today. Now, lets bring back our guest. We talked about asian currencies. One currency that has been in thailand currents. Best performer up year to date. The bank of like thailand intervened to weaken the currency. We have seen it reaching a threshold in terms of the strength itself perhaps hurting the economy. Thailandhy the bank of has earlier in moved to ease Monetary Policy, as well to encourage capital outflows through changes in the regulation itself. Environment, the thai currency is likely to strengthen, given that it is perceived as a safe haven in terms of positive correlation with gold. I think we would likely see more response from the authorities in terms of trying to curb the currency strength. Haslinda they have drawn the line in the sand. I would say it is not drawing the line in the sand. Where they have tightened scrutiny of currency policy, it is difficult to draw the line in the sand. Theink if the pressure on currency does increase in terms of appreciation, you will certainly see a response in terms of greater measures. Haslinda if we take a look at the yuan, that could be the impetus for the baht to weaken. Im not sure. Im overall thinking that the yuan will be stable this year. I think we probably get a phase one deal. I think the underlying issues will not be resolved. It will be difficult for it to appreciate where growth is slightly subdued in china itself. David right. Earlier on, we were talking with the bid onguest on inflation. You brought up the chinese currency. Food are two places where inflation has pushed up headline inflation. If you look at that measure, it has pushed real rates in india and china below zero. I think my question to you is do those negative rates matter at this point . Is it a big deal . I think negative rates at seen thet, we have , it wentank of india into a surprise pause. China, in the case of there is a sense that while inflation might continue to rise , but we have seen a decline in prices. Way is probably paved the for the response. In it is positive for the rupee. They have loosened Monetary Policy. Up and we areking seeing the environment where oil prices are rising, as well. David right. I want to ask you about the euro. At some point, i will probably find myself traveling to europe. Im sure has will. [laughter] david do we change our money now or closer to the trip . Is the euro going to go up or down . I think you should change your money now. The next big move in the euro is likely to be higher. You do have some time to change your money. There is no need to rush because i think the euro, it will still be difficult for it to shed its funding currency status at this point in time. As i pointed out earlier, there are some positives for the euro. Given that it is not going down, it is probably likely to go up at some point in time. In ae probably still stuck prolonged consolidation phase for the euro, waiting for the catalysts to become more concrete that will drive it up. In short, change your money now, but there is no need to rush for it. Haslinda i will do that just after the show. What do you think is the biggest risk for the currency market this year . Forget about the effect the attack that we saw today, but the rest of the year. Geopolitics still . X i think it is geopolitics i think it is geopolitics somewhat. A lot of the risks are still lingering. They could come back to haunt. We had the u. S. Election, as well. That might be a currency mover in the later part of the year. Haslinda europe in three weeks for me. Our guest joining us from the bank of singapore. Looking at the markets, about time. Strongyes, certainly into this morning. Completely out of the news. Most markets are down. Point 5 is down zero we will update you on more of the Market Action a bit later on in the program. There you go. Equity markets in india are starting this last trading session of the week on the back foot. 0. 3 . Nothing to write home about. Coming up, we are staying in india. This new chapter. The feud with the former chairman. We will go to mumbai for the details. This is bloomberg. Welcome back. You are watching Bloomberg Markets. Oil prices in the way up in the back of news that the u. S. Confirmed an airstrike near the Baghdad Airport that killed one of the top Iranian Military officers there. The Iranian Revolutionary guard have now essentially promised to respond to that attack. Markets are caught in the crossfire here. Risk assets in the back foot. Havens and oil prices up substantially. How is that playing out. Lets see where we are right now. A couple of minutes into the session. Good morning. David. Morning, not necessarily the best of morning for asian indices. You know, earlier on, we were looking at trading with a lot of gains based on the kind of upward move we saw yesterday. That news with respect to the u. S. Strike has certainly had an erosion in the sentiment for indian equity markets, which is why they are looking at about 0. 3 cut. There is a little more weakness in the banking indices every it this may well mean some selling coming as far as institutions are concerned. The indian rupee, not too much to speak for. We are going to continue to keep our eye on that one. A very quick word on some of your oil companies. We are looking at gains, but beside that, there isnt too much to look for at least this morning as this morning is concerned. Haslinda thank you so much for that. Staying with india. It petition filed in the Indian Supreme Court taking apart an order that directed the company to rehire the chairman and hired in 2016 prolonging the biggest feud. Your with more, we are joined by our guest from mumbai. This is a story that keeps on giving. That is true. Group lawyertata has confirmed that they are approaching the Supreme Court against the appeal court order to rehire the chairman they fired in 2016. Followedeems they have through by sacking the former chairman. They have sought some time to file various timelines before the court. The court will start the hearing on january numeral six. They will be opening then. We are not sure that the case will be heard then or on the ninth. It is very crucial because january 9 is the board meeting. There are very interesting things unfolding early this year. Haslinda how confident is tata . They are very confident because they had a very strongly worded petition they are filing in front of the Supreme Court and because it is very critical and crucial for them. This restrains them from making any major decisions. For example, if they want to they have been barred from taking any major decisions. This is very critical for them to go ahead with any major decisions. It is also very important because it is a moral victory for them. 2020 is going to be very interesting in terms of one of the biggest courtroom battles from the boardroom battle. Haslinda thank you so much for that. Plenty more to come. This is bloomberg. Lets take back to singapore. An application has been submitted for a wholesale license in singapore. Making the banking race even more crowded. Bloombergs managing editor for asia finance joins us with more. It looks like it is pretty competitive. It is definitely going to be an interesting year for the Banking Sector are in singapore. Which is following the likes of the u. K. And hong kong which have open up their markets to take on incumbent, traditional lenders. We are slowly getting a sense of who is going to be in the fray for the five licenses up for grabs in singapore. Already, we have one of fig of southeast asias startups partner. Ytedance is also planning to apply. Razor has teamed up with homegrown entrepreneurs. They are going to be footing there hat into the ring. I think the most worrying for some will be chinas Biggest Online financial platform which ord it will be bidding applying for a license for one of these virtual banking licenses. We are still waiting to hear from a few more. Yet on not had word whether they applied or not. It isnt looking all that crowded. There are five, at least at this stage, but we might hear of more names coming through. I think one of the reasons for that is the regulator has made this quite a stringent process. Of the five licenses that will be available, two our full Digital Banking licenses, which will allow whoever gets them to offer services to all kinds of clients. That supplies 1. 5 billion in capital. Haslinda all right, we will await the result. Looking at the market, it is risk off. Gold comfortably above 1500. David yes. 15 30 1530 last i checked. The news out of iraq giving oil bulls something to put their hats on. Have a look at gl co. Potentially where you go for prices on oil. Have a look at the changes. That is daily changes. 2. 7 all the way through different contracts and different rates. The other thing we want to point out within the equity markets, it is not already. Because of this move up and oil prices, we are getting the energy space up 0. 9 . It is generally a down day across these equity markets as we wrap up the first and quite short trading session, but equally eventful session of 2020. Haslinda thats right. Really interesting to see. Brent up i to. 9 . Up brent up by 2. 9 . This is bloomberg. The top story we are tracking this hour, a u. S. Airstrike kills a general. He was planning an attack on a. Ate raid up. And again on the way [no audio]