Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20240713

Japanese yen is a safe haven. I must say actually, the japanese yen is up than u. S. Dollar and is holding up. Oil is definitely on a buy. Wti, to give us a sense of the volume. Brent crude is saving four times its volume and w. T. I. Is trading six or seven times. The markets are definitely moving with this geopolitical news overnight. Its time for the Global Exchange from around the world. From london to istanbul to prints on, new jersey and washington. Our bloomberg voices are on the ground with this mornings top stories. We begin with tensions in the iddle east where one of irans most powerful general killed. The u. S. Active International Terrorism targeting and assassinating is extremely dangerous and a foolish escalation. The u. S. Bears responsibility for all consequences of its ogue ven chur churism. Mark, what is the reaction . Ive seen some demonstrations already in iran. Yes. There have been protests in iran which is the city where he was born. The key thing to remember about him is hes not just a commander. He was the commander who constructed and executed Iranian Foreign policy across the middle st and he was also seen as a potential political figure. He was enormously popular and in essence, iranians looked at their own country as stable in terms of attacks and so on. Compared to other countries in the middle east. And they attribute a lot of that to him and his taking the war as they saw it to irans enemy outside the country. David part of the story is that the general was a war hero back in iran because of the iranVirginia Tech war and close to the leader. Went the ayotollah says there has to be retaliation, doesnt really have so some sort of ounter to the United States . And there would be a response. What exactlyion is do you do . They have Ballistic Missiles which they have pointed out, can reach u. S. Bases in bahrain and qatar. That seems unlikely. They have a range of shi shia militias that sol was the key figure in soleimani was the key figure in creating and using. The real question is how do we do this . We want to make absolutely clear that there is a proportionate response but what is proportionate . Do the u. S. And iran see proportionate in the same term . David proportionate but like throw be asymmetric at the same time. Now we go to the subject of oil. It is spiking to almost 70 a barrel. Its highest since the attacks on the Saudi Arabia Oil facility back in september. For more, anne marie joins us. Give us a sense on where oil is right now. We havent seen these levels since the attack since september, most notably the attack there. There is a geoPolitical Risk premium and one thing we need to take into account is that 4 , 3 is definitely a huge move on oil and we are seeing bullish signs that it is becoming more expensive to protect against future spikes but the fact that analysts say this could trirg a war, the move is not as massive. There is other options out there, most notably u. S. Shell and others from norway, brazil and guyana and the u. S. Can tap the s. P. R. The second thing is this is clearly just geoPolitical Risk no. Oil facilities or production has been taken out. So right now, supply and demand remains the same. Its just that geopolitical escalation about what this means about destable san diego in the egion. David shell stocks trading up at the moment. And from washington, we heard nothing from President Trump apart from a tweet of a picture of the u. S. Flag. Emily do, we have any sense when will we hear from the president . We dont have any sense at this point. President trump tweeted out a picture or the flag fairly late yesterday evening. He does tend to tweet a lot in the morning. Ive got my alert set up and im looking for something to come from him. At this point, we have seen reaction from lawmakers. It is pretty divided. Republicans including romney and graham have been very supportive of these actions saying that it is justified. Meanwhile democrats including president ial candidate senator Elizabeth Warren and former Vice President joe biden have said that soleimani has american blood on his hands. They are concerned about this escalation and how the u. S. Will be able to respond it to what it might eventually become. House Speaker Nancy Pelosi called for lawmakers to be ereaved. Riefed Mitchell Trubisky was going to Mitch Mcconnell was going to speak on impeachment so we will see how this news impacts that. David at the same time, the proper response depends usual loin what the facts are and we were told the Defense Department came out and said there was an imminent threat on soleimani including diplomats. Who might give us a sense on what that threat was and what justifies this attack . We are definitely following that this morning. The department of state recently released an announcement saying that all american citizens in Virginia Tech should be looking to leave the cub right now. Country right now. There is a sense of potential danger for americans in the region. David thank you for joining us from washington. Also in the middle east or that general area, Turkeys Parliament authorized the government to support troops for the administration against rival forces. For more we are joined in istanbul. I was surprised that turkey was getting involved in tripoli. But what is this about . It is about turkey saying that they are going to send troops to libya at the request of the international backed government of the Prime Minister to help against forces rival to command a half star. Turkey hopes that this government prevails in this civil war because its contractors has billions of dollars of payment that it hasnt paid for past projects and hopes they will honor this and repay these this money. Now what also has happened at the end of last year is that turkey and libya finalized an agreement to designate maritime borders in the Mediterranean Sea and this is also extremely significant to turkey and it hopes libya honors this agreement as well. But turkeys involvement has drawn International Criticism from countries such as italy and egypt saying turkey has no business there. But turkish president disagrees. David ok, thank you so much. Really appreciate your report today. And another event is the release of the fomc minutes. Joined from re princeton, new jersey. So the thing that everyone is focused on given the Political Risk is going to be about the funding markets. So the repurchase market had a bit of a hiccup. The Federal Reserve has been intervehicle regularly on a daily basis into the treasury and agency mortgage. Funding markets. So what is their plan with that Going Forward . Anything thats said in these minutes after the overnight news on Monetary Policy has to be taken with a grain of salt and some of the speakers today from the fomc who are out at the American Economic Association Meeting in san diego, thats where youll have to get your Monetary Policy outlook from. David ira jersey, thanks so much. I want you d. U. I. Stay with Bloomberg Television for the fed from the the American Economic Associations Annual meeting in san diego. That will start at 11 00 right here. Coming up, more on your morning trade and analysis in todays fir take a look. Live from new york, this is bloomberg. David its time for bloombergs first take a look. This is what we give you the news and you get to see the analytics. So we need a macroperson today before last night. We thought we were going to be talking about 2020 and the fundamentals and things like that but we have to take a moment and say what happened last night and how might it be expressed across various markets and what do investors make of isnt it this is a geopolitical shock. We dont know what ultimately the consequences are going to be, but in the long term, the fundamentals of course always win and so for me, i bring it back to is this a systemically important event for the fundamentals of our markets . And when i put those three pieces together, in terms of Interest Rate that is the feds have told us, were not going anywhere. Theyre sort of left the building if you will for a while. And that leads to the final point which is valuation. If i could find an issue with the market is that the forward piece at 18 1 2, it front rams an expected improvement in earnings and now those earnings have to come through which i think they will. Im looking at maybe 8 Earnings Growth in 2020. But 18 1 2, there is not a lot of margin for error so when you add something geopolitical like this, its not the same as being at a 15 p. E. So that leaves the market vulnerable at least over the near term. David so lets start with the most immediate one, oil. It spiked up right away. Brent and w. T. I. Both. Initially, we are going to see a response from iran. It is not going to be too short term. How long it progresses Going Forward, its going to be interesting how china weighs in. This will adversely affect their economy as well. So theyre going to try to calm the situation down if they can. David there was a report that the secretary of state want to reach out to them. Its now in the hands of iran and we obviously, the ayotollah could overreact. And if we get a repeat of september attacks on saturday oil fields, were ratchet the price of oil to a new base level and i dont know that we can see u. S. Shell produce a sufficient amount adding to that supply as we spoke earlier to reduce that geoPolitical Risk. Fundamentals matter for sure but over the short term in a market like this where volumes are down, its going to be technical and a lot of to the volumes in brent crude are technically driven. Thats the bottom of the range since the middle of 2018. Everybody who is risk wants to break below it but were not. Another failure there. And we could see lot more of that. Same thing in gold and the same thing in a lot of the spreads. You see people buying in c. D. X. A lot of these protection trades which have gotten fleet right hand now going to be coming back in vogue ahead of the new year. David one of the fundamentals was the fed. What happens with internet Interest Rates and were going o hear some. Its unlike the fed would raise a lot. Could they go more accommodative to market the protect the markets . Theyre happy with where things are and theyre unlikely to move unless we see a whole new down leg in the Global Economy or if we see persistent rising inflation. I dont think were going to see either. And if you look at where our star is the natural rate, the fed is now comfortably below it. So if the Global Economy actually improves even if its only modestly, the fed is dubish rel turf where the economy is and that leaves financial conditions in a pretty favorable spot. Credit spreads are fairly tight. Stock markets are up. Today notwithstanding. And the dollar seems to be piquing and thats one of the most important stories for 2020 because if the dollar starts to come down, then s p revenues will come up a few quarters later. And that will be a booster earning. David you think the dow will go down for a while. Yeah, well talk about that is little later. Where you think the dollar is going to go depends on which index you bet on. There are different weights to the bbd. Points, is f your how much risk do you want to take into the new year . Im talking about the shorter terms guys. When your portfolio is marked to market and in early january and its dropped 300 dow points. If that continues because of an escalation over the weekend, i would be loathed to take risk into the weekend and well see a selloff to the end. How much that drives goes and in the shorter term traders to give this market another kick lower, well see. But its unlikely were going to finish off in a good place today. Four new voters on the fomc. We see loretta, a little bit of a closet hawk and we were just talking offline. Would it change the dynamic the way the fomc is going to make decisions . Probably not. But some of the things that we touched on specifically, my colleague is not wearing a tie because hes been working painlessly overnight but the two things that stand out for me is was there an unspoken agreement between the feds about the uncapped repo facility through year end to smooth things out or provide liquidity when they need to because the big banks couldnt. Were going to get a little bit of color there. Im excited to see what Loretta Messer has to say. If you look at the 2020 consensus estimate, it started at 186 and it always starts too high. Thats a typical trend. Right now, its come down to 175. If you look at the historical drift, you could see another dollar of decline to 174. That would be an 8 increase over the 161 that were likely to get for 2019. Of course 2019 was only a 1 growth but after a 22 growth rate in 2018. So 8 would be good. And thats sort of my base case. And again, as i said earlier, at inflection points which is what the market things were at, we wont know in real time, the p. E. Always ramps before the e. So you see this dislocation between the p. E. s. So the p. E. s up 30 yearoveryear. Admittedly coming off a low f4 base. So now its the earns turn to kind of come up and if we see an 8 growth rate, the market will sort of grow into that valuation pretty well. David thank you so much. I want to recap some things that the secretary of state is saying over on fox business channel. He said that germany is concerned with irans provocations is not just the United States. He says the United States needed to take action to restore deterrence. President trump soleimani strike decision was necessary. Pompeo tells fox and u. S. Government trump prepare to respond appropriately. Secretary pompeo says to the threat of retaliation is coming from the Supreme Leader ayotollah. And a reminder, you can find all the charts by running gtv go on your terminal. Live from new york thinks bloomberg. Bloomberg. This is bloomberg daybreak. The turkish chartered jets ompany says he didnt know carlos ghosn was on board the plane was illegally deployed using falsified record that didnt mention ghosn as a passenger. Wall street is pessimistic that tmobile will complete its 26. 5 billion takeover of sprint. Spread is at its highest point since the deal was announced in 2018. The f. C. C. And the Justice Department have oked the transaction but 13 states have gone to court over it. They say the deal would lead to high prices and weaker service. The hong kong protests are having an impact on big name retailers. Louis vuitton will close the store on the citys shopping district. The owner of them all reportedly refused the french Luxury Brands request to lower rent. They have redesigned some hong kong sales stocks to china because of slumping sales. And thats your Bloomberg Business flash. David thank you. Were taking a live look right now at hong kong where protestors are taking to the streets once again tonight continuing the demonstrations that have playinged the city retailers, large and small are suffering. Overall, Hong Kong Retail sales fell over 23 in november, the 10th straight month of declining business in part of fewer tourists, arrivals from Mainland China which account for the majority have a record of 58 in november. Coming up here, well have more on tensions in the middle east, michael will hand Michael Ohanian will join us this is bloomberg. Bloomberg. Would stay negative for a very long period of time. David this is bloomberg daybreak. Im david westin in for alix steel. The markets across the board are moving with the move on u. S. Attack over in iraq killing an iranian general. The futures are red across the board. This is the first gap down since october 7 for three months now across the board and futures for u. S. Equities. Stocks, 600 over in europe is down as well. About three quarters of a percentage more or less. Lets switch it out now and go to see what happens with bonds. Up six basis points with sovereign bonds over in europe. Japanese yen is a safe haven currency. Other currencies are down against the japanese yen even ore. And the big mover is crude. Both brent which is up under now at 4 and w. T. I. And very increased volumes on both brent and w. T. I. Crude as people are buying oil for fear of what might be the fallout for what happened over in iraq. For more on the implications of the u. S. Strike, we welcome now on the telephone, Michael Ohanlon Brookings Institution senior director of the foreign olicy program. This could be a watershed moment. Why are they saying that . Michael it could be risky and i cant predict whether its going o be a net plus or net negative. This guy deserves it. He was a lot of the behind a lot of the resistance in iraq. Hes the main architect of irans covert and blocksy activities in the last 20 years. And dastardly, extremely effective and really essentially in the military chain of command. His name is general soleimani, after all. This is not a brazen attack on a civilian. This is an attack on a military commander. Iran will view this as the equivalent of attacking a high ranking u. S. Official in a civilian official and theyre going to try to portray it that way. And theyre going to take some retaliatory measures of a type that i cant predict or specify. And also a lot of their proxies will take things into their own hands locally whether its inside of iraq, inside of lebanon. You have to expect more antiamerican violence. So this is going to be a very tumultuous period or a very tense period in the days and weeks ahead. They had chance to shoot at this guy and chose not to because they didnt want to essentially play roulette to that degree and President Trump made another call. Its not a crazy decision but it is very risky. David and it is always possible that the facts are different this time. The Defense Department had credible intelligence that indicated an imminent threat the u. S. Interest, the u. S. Intelligence in the region. Is it possible that we did know something that we didnt have much of a choice but to eliminate this individual . Michael well, thats possible. You and i dont know what we dont know. But on the other hand, this guy, soleimani, was involved in active operational planning with lethal intent throughout the iraq war. So if he was looking to carry out lethal strikes again, its not the first time but even to so in the bush and obama years, when people had a shot at him, they did not take it. They chose to tolerate whatever sort of low to midlevel ongoing operational hand he had on attacks on americans rather than risk the retribution that could follow, which were now about to see what it could be. But, you know, tend to be critical at President Trumps Foreign Policy but im not really opposed to this. I think it is extremely risky but this guy soleimani was in the operational chain of command killing americans, iraqis and others. Hes a different kind of fish than a politician or a i feel civilian leader. David the question i suppose might be tactically, it is better that hes not there. He did an awful lot of evil around the world but strategically, is it better . Is it possible that our judgment was that iran may be more vulnerable . They had some problems in lebanon and hezbolla and yemen. Even in iraq with people protesting against their intervention. Is it possible they dont have quite the same control and the same resources with respect to their surrogates . Michael you ask the right question. This could be defensible tactically and it could wind up being a strategic mistake. I dont know. I dont consider myself smart enough to figure that out or even to have a clear prediction in my own mind but i think theres a decent chance that as you say, iran is not only a bit on its heels but aware of the downsides of escalating this further and on the other hand, theres the danger that iran feels like a cornered animal that has all this economic pressure on it that now has its top field commander assassinated and that needs to do something by way of pushing back. So i think we just have to recognize that were rolling the dice and a lot of its going to depend on what iran does next and what we do next. We have to be ready for a number of potential scenarios across the broader region and the number one issue is to work with the Iraqi Government is to are pair the breach in baghdad because it is going to be crucial to collaborate with the vegas if we want to make sure that iran doesnt profit from a vacuum of power that would develop if we left. The vacation are mad about this but vegas are mad about this iraqis are mad about this and so if we play this right, we may still be able to repair the relationship. David thats Michael Ohanlon of the Brookings Institution in washington bonds are rallying on the flaring mideast tensions. Joining me now is the chief u. S. Interest rate strategist and he is ira jersey. He is still with me in new york as well. Give us a sense, did the fed take into account with things whats going on in iraq and iran, do they really feel thats ot their business . Like on main street or financial markets, i dont think that this changes the overall tone of their policy stance because we really dont know what the longer term ramifications are what any retaliation might be but it moves things slightly easing by as opposed to just being on hold and the Market Reaction this morning is partially in response to that. The fact that you have lowering yield is more of a response that you have equity markets that are down a few percent. David lets go back and talk about whats going on with the American Economic association out in put aside iran. What should they be talking about . The fed basically said were off the table. Ira they look at the real economy and the financial conditions. And they run a path to raise rates significantly a year ago and then the real economy actually stayed pretty robust even though the p. M. I. Fell below 50. It was the bond market on yield curve telling the fed youre too restrictive and the fed respond quickly. The fed feels like theyve done enough and that it will take a big change for them to sway in ne way or the other. And it is too early to see the eopolitical stage. If the yield curve were to reinvert, maybe that would get their attention but my sense is theyre going to stay out of the way for the time being. David so ira what, about thatyearold curve . We were so worried about it in the opart of 2019 and now, its really steepened quite nicely for the first time in about 18 months, almost. Ira some people were worried but others were not. So the yield curve is the greatest predictor of in a lot of models for will be theres be a recession in the next 12 months to two years . The thing is that the yield curve inverts because of a policy area. The Federal Reserve continues to like Interest Rates hike Interest Rates. So i think that this Federal Reserve did something that was pretty unprecedented over the past 35, 40 years which is as soon as the curve inverted, they stopped hiking and thats something that you have to give them a little bit of credit for. And when it comes to Monetary Policy over the course of the next year, its not going to be what they do this particular year thats going to matter but its going to be how are they going to respond to things the out year. So one of the things that you have to Pay Attention to in the next Federal Reserve meetings and in their minutes, theyre doing a Monetary Policy review. What comes out of that review . Are they going to target new Interest Rates . Are they going to maybe shift the way that they conduct Monetary Policy in the future with their Balance Sheet being as large as it is and will quantitative ease or something new and innovating be the new response . So over the course of 2020, those are the types of things that youre going to have Pay Attention to with the fed more than will they hike or ease. Because quite frankly, we wont know that until the third quarter. David i find the monetary review interesting. We have lagarde and they want to take a fresh look. Is there possibly we will have a shift in paradigms at the fed and the e. C. B. And in how we approach the overall question of Monetary Policy in the economy . Jurrien i think so. Weve already talked about average inflation targeting. The inflation rate has been below the feds 2 target for most of the last 10 years. So obviously theres something going on there and this notion of the phillips curve is dormant but its about to awaken, i mean, that was the impetus for the fed to normalize rates in the first place and that hasnt materialized either. So maybe the whole world has gotten so amazon that well never see inflation but if we see more of a push towards fiscal expansion which in japan, weve had for years and in europe, we havent but in the the u. S. So the big question for the next not one year but the next five years is in we see a soft version of m. M. T. Where theres consistent fiscal expansion that needs to be partially or fully monetized by Central Banks, will that create finally inflation and what would the response be by the central bank in that scenario . Now, theres a lot of ifs in that and thats a long term but that certainly, you know, the inflation trade has been m. I. A. For so many years that for asset allocators, that is a juicy question to really think about. David that is a juicy question. Thank you so much. Ira jersey of Bloomberg Intelligence and euro urotimmer of fidelity. The meeting will start at 11 00 eastern time. With the n update first word news. In the u. K. , Prime Minister johnsons government is looking for weirdos and misfits. His top advisor says he wants to overhaul the way the government worked so hes seeking people with different skills and backgrounds. Couplings said the government needs diversity cummings said hey needs needs differity. Those Deadly Wildfires have ended the honeymoon for scott morrison. His clumsy handling of the crisis seconded to criticism over his judgment. Some of thats coming from fellow conservative. Morrison went on holiday to hawaii, a day after declaring a natural disaster. The fires killed 20 people and left 28 missing. Bill gates started the decade by pledging to give away his fortune to turkey. Now he wants his fellow billionaire to pay higher taxes. Gates say u. S. Lawmakers should raise the estate tax and increase the Capital Gains tax. Gate is the worlds second richest person worth 114 billion. This is bloomberg. David . David thank you. Coming up, Warren Buffetts bet on apple is paying off, helping driver the equity portfolio it is next on our wall street beat. You have a terminal, check out tv go. Click on our charts and graphics and interact with us live. This is bloomberg. This is bloomberg daybreak. Sales cut the starts price of its china built model by 9 . To lure customers into the Worlds Largest electric vehicle market. Model 3s base price is over 46,000 after zibs from the Chinese Government putting the some electric vehicle makers. Shares of apple begin at a record high oaf the 300 mark. The first time on a split adjusted basis. There is optimism during the holiday quarter. Thats due to demand for wearables such as air pods and Services Including streaming tv. Its the best news for the manhattan Real Estate Market in two years. Home sales fell 1. 2 in the Fourth Quarter. Thats the smallest yearoveryear decline in deals since buyers started retreating in 2017. Thats according to a report by appraiseers. Thats your Bloomberg Business fact. David as we come back, we have heard from the president for the first time after those attacks over in iraq that killed the iranian general. He has now tweeted iran never won a war but never lost a negotiation. So clearly, hes not too concerned about iran going to war with iran. Hes more concerned with negotiating with them and we havent gotten any clue about what the intelligence that said there was an imminent threat. So well keep you posted as we hear more from the white house which is operating in florida. We turn to wall street beat where we cover three things the wall street is buzzing about this morning. First, bankruptcy pink slips. 2019 was a record year for a number of jobs cut because of bankruptcies and was led by some of those big retailers. And the apple of buffetts eye. It did well but including some big financials. And black rock dominant in e. T. F. s. Last year, it added more than any other issue for the sixth year in a row. Nd joining us is shennaly. With 52,000 jobs lost within all of those bankruptcies in a soaring stock market. You have to wonder if the rest of america is feel the gains from the rise of the stock market. Its a point that i make a lot because more companies are staying private and the next election cycle, people are going to Pay Attention to the role of private equity here. The pension is one issue and then it depends on whose measures you look at. Private equity makes a point that they create jobs but the Retail Industry is one of theis phases where a lot of bankruptcies are happening. So how do you pair that off . I dont know the job losses are the most weve seen since 2005 and surpassed what weve seen in the recession. So its certainly not what youre seeing in terms of people prospering overall. David and running against private equity is not an unpopular thing. Whatever the merits they say is almost always a sure winner. From bloombergs estimates, 1. 3 million jobs were lost and a lot of that owned by private equity. That is no small number. 62,000 alone last year, mostly led by the retail sector. David second story, Warren Buffett still a stock picker. Yeah. The thing thats interesting about is because his equity postal portfolios rising. But he has more than 100 billion in cash. David yeah. People are very mixed on how to invest in berkshire. He hired new people into the stock market but some have left. And david has left because he believes that buffett has not really participated in the gains of the broader stock market. Hes been lukewarm on a lot of these tech stocks only recently entering amazon but apple was a big part of his rise in portfolio and amazon helped as well. David and the third story we have here is e. T. F. And its quite a story about blackrock. I didnt focus how big they are. My favorite part of the story is blackrock and vanguard pulled in two thirds of the industrys total. So blackrock bought in 116 billion. State street only added 24 billion. Can you imagine the differential . Scale really matters in this industry and these all types of e. T. F. s. But there are some quarters last year where blackrock pulled in more money and fixed income e. T. F. s which bring in less in fees. David thats what im curious about. Size matters but by definition, people are going to e. T. F. s because they dont want to pay very much money to manage them. Exactly. Thats a big question in the industry. If you go to goldmansachs, they have a lot of products so does j. P. Morgan. So how do you compete with a blackrock . And then you have Morgan Stanley which who says were going to avoid these products and pull in more higher fee, you know, assets. David work on the margin rather than the volume. Exactly. David coming up here, the tale of two dollar indices. Well look at how two measures of the dollar could diverge in the traders stake. Tune into Bloomberg Radio heard across the United States and sirius xm channel 119 and on the Bloomberg Business yes, maam. Live from new york, this is bloomberg. David time for our traders take. Joining me is the voice of the bloomberg audio squawk. You can listen to vincent on our radio. Im pulling a chart for you as fast as i. There you go. What i want to talk about is a lot of people and we talked about this earlier and were going to talk about this every day. The majority of the market sees the dollar lower next year. And my take on this depends on which index you bet on. There are two main index, the bloomberg dollar index which is derived from the wall street journal dollar index which im the coinventor of and the ice index which hasnt been reinvented since 1972. The bloomberg dollar index takes into account a broaderer group of currencies and the emerging markets and riskrelated currencies such as the aussie dollar. And we call it the eurodollar index. The euromoves it more than anything else. Going into 2020, if we believe that the economies are going to grow which we believe the story of the trade war is behind us, the bloomberg dollar index will probably fall and the ice dollar index which is more attached to europe between china and the u. S. With potential autotariffs could go flat if not go higher. And we expect this big divergence. So if we want to bet on a lower dollar, you have a better chance of bet on the bloomberg dollar. Thank you, vincent. Coming up here, more on flaring tensions in the middle east with the general retired Brigadier General. This is bloomberg. Severe retaliation is what irans Supreme Leader Ayatollah Khomeini promises after u. S. Air forces kill soleimani. The markets move. Money runs to bonds and stocks fall as the new year bring as new world of geopolitical conflict. And the role of Central Banks in a world of strife. Central bankers and world economists meet in san diego. Does the conflict in iran change the feds stance . Well hear from those who will be asked that question. Welcome to daybreak. Im david in for alix. You can see futures are down led by the s p futures down 35 points at this point. Theres a gap down in u. S. Futures for the First Time Since early october. The 10year is on a buy. The yield is down about six basis points. The japanese yen is up against the dollar. Its up against every currency and up against other currencies more than the dollar. And brent crude is up a little over 4 as is w. T. I. The volume is noteworthy. Something like four times the normal volume and w. T. I. Is Something Like six or six plus times the normal volume. For more on the implications of that u. S. Strike that killed one of irans most powerful generals we welcome on the phone general mark kimmitt, former assistant of state for Political Affairs and former deputy secretary of state for the Defense Department. Welcome. Thank you so much for spending time and explaining this to us. Youve been on the story for a long time and been in iraq recently. What do you make of what happened last night . Mark weve taken the ladder out ofed woodshed. The response were seeing from iran is predictable. I would hope secretary esper and pompeo have a few options up their sleeve for the inevitable response we can expect to see from iran. David mark, how important is it why we did it. The Defense Department came out with a statement they had credible intelligence of an imminent threat. One contractor was killed by the associated militia in iraq. Should we be going out should the president and somebody else go out and lay out for the world and the United States public why it is we felt we had to do this . Mark i think thats what the congress is calling for right now on both sides of the aisle. It could well be that was the reason Qasem Soleimani was coming back into baghdad to actually direct that strike or a series of strikes against high valued targets of the United States. They could have been planning attacks against the embassy or planning attacks against military facilities where american troops are. In any case, i think, and i would hope that the president and his National Security advisors took some time to think their way through this and understand the implications of what is expected to happen. David the Supreme Leader over in iran, Ayatollah Khomeini said there will be severe repercussions and we probably have to take him at his word. I understand this wont be a military against military situation. Iran is not up to taking on the u. S. Military directly but what should we be looking for . Mark i think they can take us on militarily. Theyll just take us on in a way that they do it which is not conventional. We wont see aircraft, we wont see tanks, we wont see artillery. They have a significant missile capability they could use. Theyve demonstrated their drone capability. They have speed boats in the persian gulf that could harass or do damage to the ships that we have in there. They have a significant cybercablet. So their unconventional capability is probably what theyll employ rather than a direct conventional fight. David tactically i heard most people say certainly it was a good thing to take general soleimani out because hes done a lot of evil around the world, strategically was a good move but the timing, that is to say iran was a bit back on their heels as you reported on bloomberg before, we had demonstrations in the streets from younger people saying we dont want iran having so much of a role in iraq. Lebanon is not as strong a relationship with the hezbollah as it has been in the past even in yemen there are difficulties. Is it possible theyre a little weaker in their ability to use the surrogates than they have been . Mark its a matter of degree. Qasem soleimani is probably a genius when it comes to fighting that type of disruptive warfare, instability warfare around the region. So if hes a little bit off, it is not as strong as it used to be. Its still too strong and still threatens governments around the region. I think the real answer, david, is we have to find out or we have to believe that the attack that was being planned by Qasem Soleimani was going to be so significant that the president had to take this action to save lives and property. Well know when he tells us. David indeed. Well look forward to hearing that. Thank you so much, mark. Appreciate you being with us, retired general brigadier joining us. With us is a Global Wealth management head of trading strategy. Good to have you here. This news is really dominating the markets as we can see right now. Give us a sense from your point of view, when you look at this, do you regard this as a blip that will settle down or something that have longer ramifications for investors . Most often it will be a blip. A few weeks ago we had an attack on Saudi Oil Facilities and the reaction was very, very similar. The reaction today is almost exactly what i would have predicted if someone had given me advance information about the incident. I think what it does is underscore the first thing that we tell all investors ad naseum and that is yes, stay invested, dont try to time these things and second, to be diversified. Geographically and across Asset Classes as we see today. David we see for example Airlines Taking a big hit. Obviously the Oil Companies will not do particularly well in this world. Bonds on the other hand had a great year last year and were predicting would be tougher for bonds at the moment but looks pretty good. Vinay and oil has gone up a lot. David as has gold. Vinay being diversified makes sense because there are many different parts of the world you cannot predict. What happened today is not predictable. And you cant ralkt to it. You have to be prepared for it. You contact react to it. At this point, what should have happened has happened and barring facilities of the kind that the Brigadier General suggested we would not see, we dont expect a conventional war, markets should come back and regain their footing. David there may an difference between this attack and the one on the refinery in saudi arabia. That was a question should we retaliate for that and didnt do it and it died away, similarly on tankers in the straight of hormuz we didnt retaliate. This one we took action in response to an action they took with respect to u. S. Interests and we have the Ayatollah Khomeini saying were going back after you. This was a very senior general with a very close relationship with the spreek leader himself. We can be pretty sure there will be some reaction . Vinay yes, as the general said. Im not an expert. David and what is the followon, could it ripple . Vinay this is a very volatile part of the world and you look at what oil prices did last year, the return on being long front contracts and oil has been really handsome and over 30 including rollup, right . But the market is saying that on the forward looking basis, it is oversupplied with oil and the reason Oil Prices Went up has something to do with opec plus russia cutting back on supply in response to the surge in u. S. Productions, over 12. 5 Million Barrels a day what is being produced here in the u. S. So from an Oil Disruption point of view, you know, barring sustained hostilities, the oil prices should go back to the way they are. David part of the reason the world doesnt act more and stay up higher longer is because now we have shale oil in the United States and capacity in the United States and were not as dependent in the middle east for this. Does that perhaps shift the emphasize back . We see today the futures and equities for the shale producers are up and perhaps does it say shale is a pretty good investment because it protects us a bit. Vinay we exported a couple quarters but yes, were protected and produce 12. 5 Million Barrels and therefore the impact to our economy from incidents like this is much lower. The impact on the World Economy therefore is less but its a dangerous place in the world and therefore being diversified, going back to my original point, diversified, we see more value in equities versus bonds on a long term basis but doesnt mean shoe have zero bonds or zero gold or commodities. David we hear from experts all the time you should be diversified and is a point of example youre saying that. This is the sort of thing you have to protect from. Vinay absolutely. David vinay will stay with me and a representative from the bank of research joins us next. She expects two tactical changes this year. S year. David before the attacks last night in iraq, 2020 was looking like it could be a continuation of the runup we saw of the markets in 2019, maybe a little less so. How much has it changed since we woke up this morning . Joining me is Jill Carey Hall, chief u. S. Equity strategist and vinay of Global Wealth management is still here. Good to have you here. Lets get an overall look of how lieu at 20206789 what are you looking for . Jill we think this coming year will be a good year for equities, not nearly as good as we saw in 2019. David hard to be that good. Jill were looking for limited upside. We have a target of 3300 on the s p and think it will be a year Earnings Growth drives returns rather than multiple expansion driven year like we saw in 2019 and historically thats what you see when you see years of big multiple expansion driving earnings and usually followed by years of flattish to down multiples. Were looking for 8 Earnings Growth for the s p next year. David do you get 8 Earnings Growth if you get what you expect now will it support the valuations right now . Jill thats a big factor and one of the rotations weve been looking for to continue in the market is the rotation out of a lot of the crowded and expensive growth in momentum stocks into value and see a lot of reasons for that to continue but one of the biggest drivers is really just the profit backdrops and found when profits growth is accelerating investors dont need to pay up for expensive Growth Stocks and if you see a backdrop where profit grow picking up support a rotation in values. We think profits growth will be bottoming out and a pickup in quarters to come. David where are you on u. S. Equities, are you concerned theyre overbought or overextended or overvalued . Vinay in the sense weve had a runup the last several days but this is not what our investors should care about in their long term liabilities in private wealth. Out here given the news we have, the u. S. Equity market is fairly priced and were seeing more opportunities, especially in markets that have severely underperformed since the trade war started in winter or spring of last year. David emerging markets . Vinay emerging markets in particular have underperformed the equities market 33. 0 . As you know, china is a large part of the emerging market universe and what we like about it is less exposure to trade war in the sense that strong growth, consumer oriented economies where there is room for policy to respond. Monetary policy as we saw in china yesterday and potentially fiscal policy. David how material is the call on u. S. China trade relations to your expectations in the markets . Whether it gets worse or better or the deal is signed or not signed . Jill the fact were seeing some form of a deal take shape and likely potentially could be signed as early as this month is a positive. We have been expecting a deescalation of trade tensions as we move forward towards the u. S. Election but dont think this is over. So our view is once we get past the u. S. Election the trade war could morph into more of a tech war, a National Security war. So i think, you know, near term the fact we got relief on tariffs, you know, this is a positive and you know, thats what were assuming based on our earnings assumptions this year. But we did lower our sector call from tech from overweight to market weight and given the market we saw tech is up over 50 this year and given the National Security concerns could continue to move up. David you like small caps, is that part of the reason the small caps are more insulated from the trade issues . Jill weve been pretty cautious on small caps all of last year and expecting them to underperform large caps and small caps are more domestic and tend to have a higher proportion of u. S. Sales but a lot of the stocks were hurt bied trade war where suppliers to the multinationals and theyre not easy to ship their supply chains or price through and a lot of the small caps were hurt more than investors expected and just the fact were getting resolution and the u. S. Economic data continues to improve and the rotation to values should help small caps as well and were bullish on small caps and was a change in our view as we went into the year ahead. David as youre particular in emerging markets. Vinay catching up if i can put it that way. David do you think their markets will be growing close to the u. S. Or ahead of the u. S. . Vinay thats part of the equation. The trade war deescalation is the right word the one you used. The problem is not over and will be a longterm problem that well live with for many years. But the deescalation is positive news. The key thing for emerging markets and even the u. S. Market. Lets talk about the u. S. Market for one second. I would explain 2 3 of the price return of the s p last year in 2019 by the decline in rates. The u. S. Makes Interest Rates for the rest of the world, most of all for emerging markets. The recovery we saw in emerging Market Equities last year does not reflect how much Interest Rates fell in the u. S. , how much room there is for Interest Rates to fall in emerging markets. We were have been recommending long positions in emerging market bonds because of the cutting rates because they are other than a few exceptions pretty solid financially. And that is what is giving us the confidence to go back into a market thats been severely punished by the trade war. David this is a interesting point, talking about u. S. Equities, how much of your projection in 2020 is a result of accommodative policy from the fed essentially . Were still growing the vouchy and dont call it q. E. And is good policy so far. Jill the fed has stepped in to ensure we werent going into a downturn with something that was certainly helpful to equity markets in 2019 and think the fed will remain on hold in 2020 and think g. D. P. Growth is around trend and the fed will remain on hold now and theyre willing to step in if the data deteriorates and if we continue to get improvement in macroeconomic data, the fed wont need to cut rates again. David thats all pretty positive. Whats the biggest downside risk, what worries you if anything . Jill just the fact that the trade war has been a big factor to equities though it is interesting given all the trade tensions we saw in 2019, one of the best performing at tripute of the quantitative factors we tracked was stock with high foreign exposure. One could say though trade is a big issue it certainly didnt have as much of an effect on foreign stocks as one would have expected but certainly a reescalation of trade tensions, really the impact there is more indirect because on business confidence, thats something weve seen as corporates have capex k on cap ex spending and given the deescalation we would see pentup demand being released and fed might spend more this year but if theres overhangs from trade or whatever it may be and corporates are unwilling to spend, that could be a head wind to the pickup in innings were expecting. David thank you so much, vinay and Jill Carey Hall of bank of america. Oh, youre staying with me. I dont want to say goodbye to you. Automakers release their Fourth Quarter u. S. Sales numbers with tesla reporting 112,000 deliveries in the Fourth Quarter. Well talk about that next. This is bloomberg. This is bloomberg daybreak. I have your Bloomberg Business flash. The turkey jets company that flew carlos gomes from japan to lebanon didnt know he was onboard and the plane was illegally deployed using falsified records that didnt say he was a passenger. Turkey retained several people including four pilots. The Fourth Quarter beat analyst estimates and came in at 112,000 and the estimate was for 103,000. Fourth quarter model three production came in at almost 87,000. Thats your Bloomberg Business flash. David . David stay on that story about tesla. Were bringing in now craig who covers bloomberg for america. Well get numbers for all Auto Companies before the day is out and starting with tesla because they beat expectations. 1 112,000 that puts them at the low end of their guidance this year and theres a lot of skepticism especially early on in 2019 they would be able to come anywhere close to that because they had a really disappointing first quarter. Second quarter was a little better and then they had a record third and Fourth Quarters. So a real legitimate question whether or not we may see something similar in 2020 because we have a situation where the u. S. And countries like the netherlands, china, theyre either taking subsidies down a little bit or removing them altogether in the u. S. You dont have a federal tax credit. A year ago we were talking about that going from 7,500 per vehicle down to 3,750. Its now nothing. So this is a company that is showing some Real Progress and had some momentum but as we saw last year, the first part of every year is a seasonally slow time for people buying cars and so we shouldnt be surprised if they have a little bit of trouble on that front. David thats my question, is the issue of tesla supply or demand . For a long time there was a concern they couldnt get them out of the door fast enough or produce them fast enough. Earlier this week i heard people saying im not sure people want that many electric vehicles. Craig supplywise theyll be fine because one of the ways to answer the question for them is starting production in china and they have a plant outside of shanghai they said in this mornings release demonstrated 3,000 units per week capacity and demonstrated a ability to actually doing it is a matter for some discussion. You know, just within the past week theyve talked about being able to do 1,000 units and actually doing that. So thats going to be a serious factor early this year that maybe will help them sort of offset the seasonal weakness in demand. There are some real sort of debates among analysts whether or not there is saturation issues and youre seeing that with the model s and model x, the much higher priced vehicles. Those have struggled for quite some time now. Really the demand is centralizing around the model 3. David to keep up that demand in china they cut the price on the model 3 which elom musk said he would do but has done it now. Craig thats what we expected our team in china has written about the idea as they localize more of the content for those vehicles, as theyre able to bring down costs, you know, and sort of get over the hump of getting that factory up and running, bringing the cost of those cars down and being able to unlock more demand from that market. David it unlocks demand, what does it do to margin . Craig good question. We heard elon musk say theyre putting a bigger priority over scale and emphasizing deliveries over profitability. Well see if hes able to balance that in the next few weeks for the Fourth Quarter. David what a tech approach, you know. Craig yes. Very silicon valley. David thanks, craig, for being here. Coming up, the feds rate hold resolve. Markets will be watching what fed officials said in its december meeting when it releases its minutes later today. That will be coming up next. You see as we go to break, the futures are down across the board in response to that u. S. Attack over in iraq killing the iranian general. Live from new york, this is bloomberg. [ dramatic music ] this holiday. Ahhhhh ahhhhh a distant friend returns. Elliott. You came back and while lots of things have changed. Wooooah woah its called the internet. Some things havent. Get ready for a reunion 3 million light years in the making. Woohoo yeah david this is bloomberg daybreak. I am david westin in for alix steel. Markets all being hit by the u. S. Strikes on the iranian general in iraq. S p and nasdaq down substantially, the biggest gap down since october 7. You can see it is 227 points on the dow jones. , the stoxx 600 down. Equity selling off around the world. Bonds up, u. S. 10 year down five basis points. Germany is down six basis points. The japanese yen up against the dollar. The fleet to save currencies. It is up more against other currencies. Gold continues to rise. 1545. The big story of the day is oil. 3. 7 onude and wti up brent. The other story about oil is the volume. At one point brent was up more than four times the volume that normally traded and wti was up more than six times the normal volume. Now i want to turn to Monetary Policy. The American Economics association is having its big meeting in san diego, and Michael Mckee is on the scene. Not one but from two regional fed president later today. Great to have you here. Before the iran attacks, what was going to be the main thing on the agenda for you out there . Michael a lot of people talking about the fact that the fed will be on hold through the year, which would bring the policy review front and center. How they will change their Monetary Policy act Going Forward. It is not due until june, but everybody wants to know what happens then. If you go into recession, what you do if you have Interest Rates already so low even qe cannot help. Now we have the iran situation. A layer of complexity for fed officials Going Forward. Prices go up. Not something that will hurt the u. S. Economy at this level. We have been through this before. The uncertainty about what happens next. We have already seen ceo confidence is down. We are not seeing a lot of corporate investment. If this keeps people on hold longer, that may change the calculation in terms of staying on hold for the rest of 2020. A lot to talk to them about, even if they do not have answers yet. David to a lot of people in new york or around the country, people are asking if this is a temporary blip or is likely to have a longterm effect. We will not know for a long time to come. Part of this is the direct effect on the price of oil and gold. It might affect the csuite if they are thinking about investment and hiring. Michael that is the question. Business has been concerned about the uncertainty of trade wars. Now the uncertainty of real war, then there will be a definite pullback in the desire to spend money. One of the interesting things is we are hearing possible retaliation from iran could involve cyberattacks on american businesses. If youre going to be watching out for that, you could be concerned less with adding jobs, building the economy Going Forward. It is very early to say. It is something they will keep in mind and it shows the best laid plans, the best late longrange forecast do not last long. Back to want to come the overall policy review process at the fed. We have a reasonably new leader with jay powell the fed and a brandnew leader with christine lagarde. Is it possible they will be talking with one another as they talk about how to address the question of Monetary Policy . Michael they do talk to each other and meet on a regularly basis. The question is what has happened to inflation, why doesnt it rise even though growth has been so strong . If they cannot figure that out, it is hard to know what you do in terms of how you manage inflation. They would like to bring it up in the u. S. And need to bring it up in europe and the u. K. No good answers yet. That is what these policy reviews are designed to get at. The question is, even when they come up with a solution, how will markets react . David michael, thank you so very much. Stay with Bloomberg Television for mikes interviews with chicago fed president Charles Evans and cleveland fed president. That walster off about 11 00 this morning eastern time. Is Jill Carey Hall of bank of america global research. You mentioned the effective Interest Rates on u. S. Equities. What are you projecting . Are you taking the fed at its word . Yes, not just the fed never 20 Central Banks across the world have cut rates. They have not just cut rates, there also accommodating expansionary fiscal policy. The reason for that is we are reaching the limits. Many major countries do Monetary Policy and in other countries the room to cut is limited. It is a combination of fiscal expansion and accommodative fed supporting growth in risk assets. Turn to the risks we are concerned about, it is not a base case that rates rise from here. If the fed achieves its objective for inflation, how would markets react . If it happen happens in the context of more sustainable growth, there is enough push on an equity risk premium for compression to cushion that. And inflation led selloff in bonds, not our base case at all, is what markets are not prepared for. What i want to bring into focus is risk management. Haveeople who do not access to sophisticated instruments like options there should be some sector balance so youre not too exposed to trade. Who can employ sophisticated strategies, many of the viewers of this channel, there are option strategies we can talk about later that are appropriate for Interest Rates going this way or that way. David what about the risk of inflation . Is it something Central Banks are talking about what happened to inflation. What if it comes back . Jill it has been absent. We are expecting muted inflation. Area you have seen it is inflation over the last few years. Where youve seen it show up is in some of the more laborintensive sectors of the economy. That is where you have started see, even though margins some of the areas like restaurants and retailers and high employees to sales ratio, these are areas where you see margin risk. We are seeing minimum wage levels raised around individual states. According to the washington post, that is driving a lot of the wage increase. Jill to these areas that have more margin risk, if you see a broader base pickup and positive, we are still on the overall consumer backdrop. ,ithin the Consumer Sector certainly areas like restaurants and laborintensive areas are the ones with more margin risks. Given the employment backdrop and given the Consumer Confidence data, we are overweight consumer discretion. David we have an Election Year coming up and theyre a very different approaches to the economy from plausible candidates. Vinay that is one of the reasons we are neutral on the u. S. David because of the risk . Vinay yes. Generally markets look past Political Risk with the exception of the u. S. U. S. Elections matter for the u. S. And everywhere else. Rightly or wrongly, investors focus on the election in an Election Year and because the range of use are pretty diverse the range of views are pretty diverse, and it is not obvious who will be nominated, that is one of the things that will hold back investors. David jill, when do investors start paying attention . Thus far weve yet to see any reflection in the market of what is going on politically. Does it take the nominations . When if ever do investors say we are paying attention now . Vinay jill investors have started asking about the election, even for much of last year. There was concern if we would have a more liberal democratic candidate that could target sectors of the markets that have done well that could become a headwind for these areas. Economy tends to matter more for the market then local parties. For certain sectors, health care is a key example, this is one of the sectors where we are equal wait for this year even though the sector looks good. There has been this Political Sentiment on multiples for health care stops and a lot of investors do not want to step into that sector ahead of the election. David a lot of those issues you can rely upon a split congress from getting anything done but there a couple people agree on. China is something democrats tend to agree on. Drug cost is something democrats and voters tend to agree on. Thereare some areas where is not as much protection from a divided congress. Vinay that is one of the reasons we are under way tech, we are overweight the Consumer Sector and overweight Consumer Sector. The trade story was negative for two years. Turned less negative and last month or so. David deescalation. David many thanks to vinay pande and Jill Carey Hall. Lets get an update on what is making headlines outside the business world. Ritika gupta is here. Ritika irans Supreme Leader is bowing to retaliate over the u. S. Killing of one of the nations top general. The attack has killed Qasem Soleimani. President trump authorize the attack in baghdad. Waspentagon says soleimani developing plans to target american diplomats and troops throughout the region. Oil prices jumped after the attack. Those Deadly Wildfires in australia have ended the political for the Prime Minister. The Prime Ministers clumsy handling of the crisis has dont criticism of his judgment. Some of that from fellow conservatives. The fires have killed 20 people and left 28 missing. In the u. K. , boriss government misfits. G for the top advisors says he wants to overhaul the weight the Government Works so he is seeking with people with different skills and backgrounds. He also says the government needs cognitive diversity instead of gender identity diversity. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. I am ritika gupta. This is bloomberg. David coming up, we take a look at how tensions are affecting oil prices, airlines, and logistics. Craig fuller joins us next in todays bottom line. Bloomberg users interact with the charts shown by using gtv. Browse recent charts to catch up on key analysis and save charts for future reference. Live from new york, this is bloomberg. Ritika this is bloomberg daybreak. With youra gupta Bloomberg Business flash. Shares of apple begin the day at a record high. Is increasede optimism throughout apples performance during the holiday quarter. That is due to demand for and advances including streaming tv. It is the best news for the manhattan real estate office. Home sales web fell 1. 2 . To a report byng an appraiser. Decade by started the pledging to give away his fortune to charity. Now the cofounder of microsoft once his fellow billionaires to pay higher taxes. Gates says u. S. Lawmakers so it should close loopholes and raise the Capital Gains tax. Bill gates is the worlds second richest person. He is worth 114 billion. That is your Bloomberg Business flash. David time for the bottom line, where we take a look at Companies Worth watching. Im joined by brooke sutherland, Bloomberg Opinion columnist. We take a look at how the escalation of tensions in iran might affect sectors. I will start with sit shale i will start with shale. In iran, people are saying it is good the United States has all of that shale. Brooke the question is do they pivot from the place where they have been where they are focused on discipline and getting returns to shareholders. They borrowed a lot of money and have to pay it off. I am taking a look at the airlines. For the airlines, easy oil prices go up, that could mean jet fuel prices are also going up, and that is the largest expense for airlines after labor costs. Airlines have a lot of pilot contracts coming up for renewal, so they could be seeing a rise in labor expenses. The way you upset all of these costs is through fare increases, but you also have the boeing 737 max. That couldnch keep a lid on their ability to raise prices. This could be a perfect storm for the airlines. David when is the 737 coming back . Brooke your guess is as good as mine. We had the ryanair ceo said he was not getting the jets until october. We could be waiting quite a while. Story, we arehird delighted to have craig fuller, the ceo of freight waves. A leading source of what is going on in freight markets all around the country. Let me start with the iranian question. Particularly looking at rail and trucking with respect to crude oil, could we see a direct effect. Craig it should increase demand for oil. We think it is a net increase of demand. If there is a military impact isolated in the middle east, that could also increase Industrial Production and industrial demand, which will drive freight volumes. Brooke freight has been in a recession for a significant period. Could this be a turning point for the railroads . Craig we think freight broadly has been in recession since october 2018. It has been a tough year. We think it bottomed with the Trucking Industry midyear of this year and we are starting to see increases. We had a good Fourth Quarter. Freight volume in december was up 6 overall. We are seeing comeback in the industrial side of the economy that suggests the softness in the broader freight market is behind us. David why is it in recession . The economy is growing. People are buying more things. We have amazon and everybody delivering, why isnt it doing well . Craig the industrial side has been struggling. David manufacturing . Craig it is a manufacturing, oil, commodities issue. Housing has taken a toll. The housing softness we saw has taken i told on the freight demand. Tol is heavily exposed freight. Exports of agricultural good has a pretty profound impact on the cycle of the freight economy. What we have seen is a lot of companies have shifted demand. We saw a huge amount of demand in 2018 as they were trying to absorb and protect their supply chain. In 2019 there was a hangover related to the excess supplies. That is all cycled through and i ,hink the news around tariffs at least the comments are positive and there seems to be some progress. I think that will be bullish for the broader freight market into 2020. Brooke to pivot to the logistics companies, we just wrapped up the holiday season. There were concerns it was the shortest period between thanksgiving and christmas since 2013. Concerns about package getting to customers. Did they succeed . Craig in terms of service demand they succeeded. December was great in terms of freight volume. We saw significant surges in december versus last year. Hopefully that continues through the Fourth Quarter. Kept themer has trucking market alive. It has been soft, but it has kept it alive and hopefully the industrial sector will play a role. Brooke when you say the consumer has been soft, does that reflect a slowdown in holiday demand . Craig the consumer has been strong, the industrial side has been soft. The consumer has kept the freight market going in spite of the industrial sector. In 2020 we should see the industrial sector play a role. David it was just last year we heard ups and fedex were having problems, now they are going to sameday delivery. I did not hear any complaints. Craig fedex has been struggling with a lot of Company Specific issues. Ups has done well. They have maintained a Strong Alliance with amazon, whereas fedex has had an adversarial relationship. That has played a big toll on their operation. Ubs has seenoke an improvement in their margins. Do you think that holds . Ubs isi think wellpositioned ups is wellpositioned in this cycle. Amazon, whether you like it or not is a factor in all of this. Ups has had a positive relationship with amazon. Fedex has had an adversarial relationship. A month ago we saw amazon informant sellers they cannot use fedex ground any longer. It looked as if there was a toxic relationship. It appears there is a toxic relationship with the companies. If you look at the service data, it appears there is fundamental reasons for that. David craig fuller and brooke sutherland, thank you for being with me today. Coming up, more on Market Reactions and tensions in the middle east in todays technically speaking. If youre jumping in your car, tuna deliberate radio, heard across United States on sirius xm tune into Bloomberg Radio, heard across the United States on sirius xm channel 119 and the Bloomberg Business app. This is bloomberg. David it is time for technically speaking. Bill maloney, chartered market technician and voice of bloomberg equity squad joins me now. You can follow bill on the bloomberg by typing in squa < go. Bill everything is moving in the wake of the killing of the top iranian commander. Gold futures are up. Look for resistance brown 1570 announced. Ounce. Nd 1570 an wti crude futures are also up. They are up 4. 8 . Looking at a one year chart, it has been in this range. The trend is higher. Toce october, resistance 64 67. Wrapping things up on yields, the 10 year yield fell as low as 1. 79 . Now around 1. 82 . 50 day, 1. 83 . 1. 77 is still your level in the 10 year. David that is the whole day wrapped up in 30 short seconds. That was terrific. That does it for bloomberg daybreak. Coming up on the open, Mohamed Elerian will be joining jonathan ferro. That does it for me. Alix steel will be back on monday. This is bloomberg. Jonathan from new york city for our audience worldwide. Im jonathan ferro. The countdown to the open starts right now. Jonathan coming up, u. S. Airstrikes in iran killing one of irans most powerful generals , sending oil markets rally as irans Supreme Leader threatens retaliation sending stock markets lower. With 30 minutes until the opening bell this morning, good morning. Here is your friday morning price action. Equity futures lower, much lower. Down 1 on the s p 500. In the bond market, crude higher 3. 64 . At 63. 44. Tensions escalating in the middle east after donald trump ordered an airstrike in iraq, killing one of irans most powerful generals. The u. S. Defense department writing at the direction of the president , the u. S. Military has taken decisive defensive action to by killing Qasem Soleimani