Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

The stoxx 600 flat, u. S. 10 year yields back to a level beside couple weeks ago at 1. 85, on the back of an easing of tensions regarding the u. S. And the middle east. Looking at brent crude, wayside volatile week, but ending friday at 65 and . 23. Coming up later, we speak with mary kudlow after the u. S. Jobs numbers are released, and that time. 2 30 p. M. London lets get straight to the bloomberg first word news in new york city. Bill begin with a brexit that clears the u. K. House of commons. It puts an end to the parliamentary gridlock that caused theresa may her job. The bill passes to the house of lords. Johnson wants it to become law by the end of the month. Federal reserve Officials Say policy is appropriate amid solid u. S. Growth, but there is a risk inflation that continues to fall short of the 2 target. The vice chairman telling the council on policy is in a good place. The fed leaving rates on its final on hold at its final meeting in 2019, signaling policy is on pause. Designed by clans and supervised by monkeys, how one boeing employee described the mats the boeing 737 max in newly revealed messages. The communications threatening boeings attempt to rebuild public trust in the max. An interpolnking red notice for carol ghosn. Interpol has already issued a red note for her husband, carlos, and it is lovely this move by the japan to put pressure on the former auto executive after his surprised escape. Blackrock adding weight to its campaign to get the worlds biggest polluters to change their ways. Members of Climate Action 100 plus now have 41 trillion of assets under management. The group is pushing Corporate Giants to disclose their co2 emissions. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Lets discuss the latest on the situation in the middle east. Prime ministers have said that the plane that crashed near tehran this week was private was probably brought down by an Iranian Missile. The iranian government denies this. Meanwhile, foreign officials are in brussels today to discuss the future of the Iranian Nuclear deal. Lets get the view of michael fallon, who served as the defense secretary from 2014 to 2017. Thank you so much for joining us on such an important week, something that took a lot of people by surprise. As a former defense secretary, are you concerned the u. K. Was not consulted before the strike of soleimani . It is not possible to consult everybody before you take operations like this. The americans had an embassy abated and they were aware of an imminent threat to their own service personnel. If that threat was imminent, then they were right to act. I did act in those circumstances to protect british personnel. There is no surprise that they were not able to consult everybody in advance. Francine how does this strike change the future for the middle east . Mr. Fallon it draws a line. Iran has been allowed to get away with an incredibly disruptive amount of behavior in the neighborhood, destabilizing other countries, attacking western interests, attacking oil tankers, oil refineries. Finally, the president has said there is a line beyond which you cannot go. You cannot start killing or threatening u. S. Servicemen. He has drawn a line. We have seen a response from iran, and i hope we can get iran back to negotiating some kind of normal relationship with the rest of us. Francine but how big of a gamble was it actually . Where we almost on the brink of world war iii . Mr. Fallon i dont think it was a gamble, i think it was necessary to protect American Service personnel from ethereum that threat. A very imminent threat. If we had to act in a similar circumstance, we would, in similar circumstances, do everything we could to protect reddish personnel and interests. Francine do you think the Iranian Nuclear agreement is dead . Mr. Fallon no, it has to be built on. It was called joint conference of, but it was not really comprehensive joint comprehensive, but it was not really comprehensive. I think we now need to work towards a better, bigger deal that actually says to iran, if you want to have access to international finance, then youve got to behave as a proper state and stop destabilizing your neighbors. Francine given whats happened in the last 10 days, whats the likelihood that iran comes back to the negotiating table . Mr. Fallon iran, i think, has always been interested in negotiating a deal. They want access to the International Financial markets. They want sanctions lifted. They have seen iranians will not tolerate attacks on american interests. That got every interest, i think, interning again towards negotiations. I hope that after the assassination of the general, after the retaliation from iran, all sides now will deescalate, get back on the table, and start working on a much broader deal that will help iran back into the international community. Francine because of the retaliation from iran, does it mean iran does not want an escalation . Mr. Fallon no, in fact, it was quite a limited response by iran. They ended up not killing any western servicemen. We have British Service people in those particular bases as well. It was a limited response, and i think that shows that on the part of the regime, they realized that one day they are going to have to come back to the negotiating table. The old deal was not good enough and the president withdrew america from it, quite understandable. Some of us never liked the deal in the first place. I hope everybody concerned will get going on a better deal and, in the meantime, do what we can to work with the United States to protect our interests in the gulf. Francine what do you think about the boeing plane . Mr. Fallon it looks as though the plane was shot down by a missile, and iranian authorities now owe it to the families of those who lost their lives, to the various governments involved, canada, ukraine there were british citizens lost as well to investigate this thoroughly and properly, and to publish the findings. If a mistake was made and i hope if it was a mistake, it was unintentional if a mistake was made, acknowledge responsibility. Francine how much of a mistake could be made . Mr. Fallon thats a matter for the investigation, but it is possible, i suppose, that someone on the radar thought it was a different kind of plane. The best they can do is open up the investigation, call for international cooperation, publish the findings, and if there is response ability to be accepted, accept responsibility and explain to the families of those who lost their lives exactly what happened. Francine does the u. K. And europe still need a large american presence in the u. S. In the middle east . Mr. Fallon we all need to be in the region. We need americans to stay in the region. We need to stay in the region. We havebeen i guided been invited into iraq to help defend a very fragile democracy from terrorism. We in britain and the americans have a common interest instability in the region, and in my view, we ought to stay the course. As long as they government in iraq wants us to continue to help, and we also need to protect our own interests, and that means the europeans starting to work closely with america in patrolling the strait of hormuz. Francine do you expect the u. S. Iran relationship to remain volatile in the coming months, and what does that mean for isis . Mr. Fallon it is clearly a dangerous moment. Any kind of space from american withdrawal will be occupied by isis, and that is a danger to all of us, to those of us in britain, to western europe. Terrorism inisis the far east and the United States. It is a danger to get that death cult anymore space to flourish again. We have spent years and a lot of blood and treasure in dealing with that death cult in iraq, and really we dont want to give it any more room to breathe and any future. Francine how difficult is it for Boris Johnson to have a u. K. Foreign policy in the middle east and iran and iraq, if at the same time he needs to keep President Trump on side if he wants a trade deal . Mr. Fallon it has always been a balancing act. We have european interests, but we are very Close Friends with america. There is always a balance to be struck. Ive think you saw i think you saw in the statement by the Prime Minister with french president and the german chancellor a very moderate approach, not criticizing the american action, but calling for deescalation, making it clear that we too have an interest in the fight against terrorism and in the search for greater stability in the middle east. Francine does brexit make the Defense System of the u. K. Less operational . Mr. Fallon it should not do that. We are still the biggest defense power in europe. We have the largest navy in europe, and we have our seat in the united nations, and we need to devise, and the negotiations are going to start after our formal exit. We need to work out a proper Security Agreement with the rest of the union that enables us to continue the cooperation we have had on terrorism and serious crimes. Francine can we get some kind of agreement by the end of 2020, like Boris Johnson promises, for the security of this country . Mr. Fallon i hope so. I hope the security will be put in place quickly. Both sides agreed on the target date of december 20. It is not just a british ambition. It was in the document of the european union. Nobody wants this to be any more protracted than possible. Francine but at that time, they thought the actual Withdrawal Agreement would be signed much earlier. Mr. Fallon they did, but it is still in the Withdrawal Agreement that both sides want to conclude the trade agreement by the end of the year, and the house of commons passed the agreement yesterday. There is nothing stopping people from getting on with this, and i think it is in the interest of business and our wider security that those agreements are put in place. Francine do you think its achievable . Mr. Fallon i hope, with a lot of hard work and goodwill, its achievable. Francine thank you. Stay with surveillance workout we get back to the markets surveillance. We get back to the markets. Gold trading where it was before u. S. Iran tensions flared up. Francine this is bloomberg surveillance. Lets get back to the markets. Here to recap a jampacked week is our dani burger. Dani definitely a lot of drama this week. Last friday, things kicked off at 1 50 a. M. London time, when it was announced the u. S. Killed a top Iranian Military general. That caused both gold and oil prices to spike. As tensions continued to increase, we saw gold move above 1600 an ounce. But we have seen it fall back near to where it started before last week. There are two ways to look at it. Perhaps tensions have eased, so thats how investors are trading, or experts are more investors are not experts when it comes to diplomatic issues. Another remarkable thing that happened in markets this week was that issuers of bonds rushed to the market, concerned that the increasing tensions would mean they could not borrow as cheaply as they had as those tensions boil markets. Investors rushed to ig bond funds, absorbing some of that. This week, eight billion dollars was piled into investmentgrade bond funds. Thats a record, the previous one set in 2014. Francine dani burger with the week that was. We are also getting news out of bern and howard liquidating its asian funds. As soon that headline crosses the bloomberg terminal, i think a couple of people are nervous that there might be something more to it, but we understand somethe money pool managed 468 Million Dollars at the end of november, and it was wound down last year, according to people with knowledge of the matter. We will dig deeper to see if there is anything else. We understand that mr. Ernst will remain linked to brevan howard. Lets get back to the markets and geopolitical risk. Thank you both, and happy for coming on. And happy new year, for coming on. It has been a terrific news flow when it comes to geopolitics. Are the markets pricing it correctly . They seem to have gone over the worst that could happen between the u. S. And iran. Yes, as always with these events, the markets will have a kneejerk reaction, then there will be a reflection, and we are now in the watch and see period, frankly. I suspect that they will be monitoring developments on an hourbyhour basis, and that is likely to be very much the thing that will be in the background for investors for many months to come. Francine we are going to look at earnings and some of the margins, but overall, is geopolitics still your biggest concern . Its one of many things that can derail the outlook, but it is obviously a big one. Francine can it impact your earningspershare decisions . Absolutely, as it has in other instances. Francine has it changed your outlook on defense stuff . Nadia no, at the moment, we have a on in stock because of where we are in the cycle. Positive look on the talks we maintained. When you look at havens, julian, are they behaving differently because of geopolitics . Julian not really. Immediate reaction. Gold was rushed into on friday, and the oil price went up as well, and that has calmed down. Probablynvestors will continue to have a reasonable waiting in treasuries as we go through this period. Gold is a much more speculative play. Francine i was going to talk about gold, actually. What did you do with gold . Julian i was commenting to one of your colleagues, i have never been a gold buyer, and throughout my career, i have tried to talk people out of holding too much gold in their portfolios. But we have, in the last 18 months, because of the more uncertain economic backdrop as well, begun running a position in gold, and we will continue to do so as a hedge, but only as a hedge. Francine thank you for joining us. They both stay with us. , what takes a flexible approach to inflation . More on that next. Francine this is bloomberg surveillance. It has been 16 years since the ecb last revised its policy framework. Now a senior figure has weighed in on the inflation targets. He says at the central bank is seen as a ceiling, we have less chance of reaching it. Julian. Th us, nadia and julian, i guess bringing it back to basics, the concern is that if you change the inflation target or change anything like that, you it is very difficult to measure it to the last decade. Is that fair . Julian absolutely, and we are in the process of the fed as replacing their inflation targets. And as an investor, one is always concerned that when you start moving the goal post slightly, does that mean an accident is about to happen . Thats when a lot of investors will be debating, whether we change the inflation target, they targeted a new level, and inflation becomes much more of an issue down the line than it has been in the past 10 years, almost. Francine is there something to be said i know you follow u. S. Equities but is there something to be said to having it on a global measurement term when it comes to following inflation . Nadia i dont really have a strong view on that. It would make sense, but bearing in mind the particular hedges of the different domestic the european construct is very different from the u. S. It is a lot easier to measure and look back. Francine and the mandate is extremely different. Is the review too broad . Julian yes, in a word. I think we need to see how it pans out, but in all honesty, i think that they are going to have to hone in on specific targets. Francine thank you so much, nadia and julian. Coming up, can the worlds biggest economy continue its longest ever growth . We will focus on the u. S. Next. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Jet crash. Justin trudeau says there is evidence. Tehran dismisses the theory is not possible. Odays payroll numbers of all the week in the markets a volatile week in the markets. Morning, good afternoon and good evening, depending on where you are in the world. You are watching bloomberg surveillance. Francine lets check in on your european stock. In thebiggest mover stoxx 600 is ryanair. The high end was about 900 Million Euros before. They came in at one billion euros. January are 1 r higher than they were at this time last year. We are seeing other Budget Airlines like easyjet gain in todays session. Ryanair up more than 6. 5 . Drive did not do well. Those numbers are set to disappoint and it might erase their profit for the entirety of this fiscal year. They are trading at an october low. We are seeing some retailers also trade lower this morning. Looking at the entirety of the over 420. We might see it hit another record, watching matching its u. S. Peers. Francine thank you so much. Lets get straight to the bloomberg first word news in new york city. Thehe likely cause of ukrainian jet crushing in iran, a missile. That is according to World Leaders in australia. It was likely and a rainy and missile by accident. They are calling for an international probe. We have intelligence from multiple sources, including our allies and our own intelligence. The evidence indicates that the plane was shot down by an iranian air missile. Missile. E to air this may well have been unintentional. The u. S. Have representatives voting to limit authorities to strike iran. They said congress should be consulted. It is a mostly symbolic move. Endangers they it national majority. Seeking a red notice for carlos ghosn. Carol ghosn. They have already seek one for carol ghosn. Her husband, carlos ghosn. Global news 24 hours a day, on the air at tictoc, on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. Francine thank you. Numbers for payroll december will provide a clear perspective on the underlying hiring trend after a strike at gm. Bloomberg economics protects 205,000. And says nadia, you follow u. S. Equities. You can have one print and validation by another one. The point of the matter is that the picture here has been strong for a long time. It should continue to be so. It is a constructive background. Francine would you agree with that assessment . Yes. We are looking at strong numbers today and continuing employment growth in the states. Francine it all boils down to inflation. Yes. In the shortterm, and the next six to nine months, inflation targets will not be an issue depending on what the target may be. I think inflation will remain pretty benign. I think the concern may be as we run pass the president ial election, whether we see a pickup in inflation, that is something they will worry about. Also, how strong will we recover in the industrial sector . Talk that value is the place to be in 2020. We remain slightly skeptical. We are going to continue to grow around trend growth. Indeed, we should see a recovery from that ip compression that we had last year. All that should bode well for u. S. Equities. Find the where do you most value in that picture . We have a balanced approach. That there is upside to the economy and better recovery on the industrial side. The question would be for how long. If we have that trend growth in bodeconomy, it does not for longlasting performance. Have a way to industrial. We will favor a lot of the tech names that have secular, organic growth. Francine what do you expect in terms of earning . To expand butes margins are down. Margins went down in between 19 but there were a lot of recurring acts. You had pressure from trade. You had the stronger dollar. The impact of apple and facebook, that will not recur next year. The media margins were larger than the average market margins. The Big Tech Company that had Big Investments last year that pressured margins, that should not recur. If you look at the world, where do you see the most value in 2020 . Terms, for the first time in a long time, we are putting more moneys work in the somewith the view that Business Sentiments improved and the u. K. Looks cheap. Francine we are talking about the u. K. We will get back to you. Thank you so much for joining us. Includinge to come, brexit gets done, almost. We will discuss that next. Plus, designed by crowns and supervised by monkeys. Crayons and supervised by monkeys. That is how one person described the boeing 737. This is bloomberg. Ben bernanke gave a speech out there which i think was a last hurrah for the Central Banks. He argued that Monetary Policy will be able to do with the next time. I think that is pretty unlikely, given that, in recessions, we usually cut Interest Rates by five Percentage Points and Interest Rates today are below 2 . I just dont believe that quantitative easing and that stuff is worth anything like another three Percentage Points. The former fed chair recently said that the central bank will likely fight off the recession despite low levels of Interest Rates. Watch more of that interview on bloombergs wall street week. P. M. Every friday at 6 00 lets get back t to the bloombeg business flash. We have more information on the story francine broke. Brevan howard shattering its hedge funds. The fund had nearly half 1 billion. It never had a negative year. Ryanair is raising its profit outlook for the year. That is after stronger than expected bookings over the christmas period. The carrier targeting earnings the 950 million to 1. 0 5 billion euros range. 1. 05 billion euros range. Job is not at some cuisine outlet. We are talking about taco bell. The fast food chain is hoping to attract top level staff and keep them. Thank you so much. Hounded. Ay wass has yesterdays business was conducted. Boris johnsons majority means the u. K. Is set to leave the e. U. In three weeks time. There is more risk. David, a million things can happen in renegotiating the trade agreement with the e. U. Will we get it done in time . The Prime Minister says december 2020. Yes, this can be done. A canada style Free Trade Agreement has to out. Shed out. Also, this fully fledged deal is impossible. This thing does not have to all be done. Not going tont was be the same for this trade deal. Hashedcan probably get out. Many extensions perhaps to the status quo. For both sides, it is in no ones interest to have some sort of big fight at the end of the year. We are seeing the code as more constructive, we will have to willif it will extend it have to be done in the summer. He said he will not do that. Does that mean that we have taken off the risk of leaving not leaving the e. U. But of not having a trade deal with the e. U. . I think the point that we have made is the point that we have been concentrating on. There will be a headline agreement and then the deals will be done 3, 5 years down the line. The market could worry when we june day. To this there could be posturing about i am not going for an extension. Agree that Boris Johnson, they had an amicable meeting. That is a better backdrop for investment to come back into the u. K. Francine do we know what the priority of the johnson government is to renegotiate in doing business . Or do we not know yet . We dont have the details, yet. We know the big sticking points will be. Regime,this equivalency will they hash that out . Has more of a gulf between britain and the e. U. Event theresa may. They will not stick to rules on the environment. We are going to do our own thing. That means you will get some consequences. There will be more barriers to trade. It is a harder brexit than the theresa may addition. We dont know the details are. You told us you were looking constructively at u. K. Assets. Again, we believe that because the u. S. Has been forgotten about by a lot of International Investors for some time, at least three years, that we will see some International Investment come back in. That will come in the broadbase. We think that all ships will rise with the tide. And then people will draw down. We look at areas of largecap growth and some more defensive names. We are also then looking to see how domestic names, we have the retail is difficult. Other areas of domestic market, we will look at. Francine we have headlines. I wanted to talk quickly, is the bill done . They may try to stick to amendments. This is the world we are in. This is just a formality. The drama of this has gone out. The bill will pass into law and we will be out at the end of the month. Markete the u. K. Labor is not tightening further. What are you expecting the b. O. E. To do . Carney is leaving office. Consequently, i think they will see how the economy pans out. Growth may surprise on the outside. It will be below trend. There is no doubt about it. Francine i have to correct myself. Joining us. Th for next, boeing shares reports that the plane crash was not a mechanical mishap. The latest ongoing is next. This is bloomberg. Economics, finance, politics, this is bloomberg surveillance. The markets on the move. There has been a lot going on and there has been a lot going on since the beginning of the year. Let me talk you through it. When you look at u. S. Futures, they are gaining. The big data is the jobs report of 2020. Treasuries drew to a close. I think there is a bit more conviction in the markets. European stocks did fluctuate. Tensions eased. That is giving a bit of lift to the market. , u. K. Foreign ministers are discussing the followup killingof the soleimani and the future of the iran nuclear deal. Rate isployment forecast to hold steady at a 50 year low of 35 . The election of taiwan is on the saturday. Designed by clowns and supervised by monkeys. That is how one employee described the 737. It signals growing unease with ve beens that haf grounded since march. Joining us now is benny. First of all, some damming comments. To think officult anything more damming than these kind of comments. List of emails released by boeing to the public paints a picture of employees, important senior employees and people involved in the flight testing and engineering of this max aircraft who are deeply uneasy about this aircraft and the way it is designed. Designed by clowns and overseen by monkeys. This is particularly bad news for boeing. It paints a picture of a company that had a topdown culture. Management, Senior Management was more concerned with getting thickly andt circumnavigating crucial tests. Circumnavigating crucial tests. Thatis coming from emails have been made public. Boeing says this is unfortunate and it is a small group of employees. It is something that sticks and has stuck with the max story over the past month. Boeing sort of rushed this plane to market and did not use precautions in terms of testing to get this plane out. We expectingn are the max to fly again . Nobody really knows. Especially after this email, it might be longer still. Middle of this year is what some people have hoped for. We have seen any reentry date be pushed back further and further. It is a huge problem for boeing. They have about 400 builds but they have not delivered maxes, they are sitting on the tarmac around their factories. It is not generating any revenue. They are sitting there and that is a huge problem for them. For 2019et the numbers from airbus later today. That will show a huge disparity in deliveries between airbus and boeing. It is not a fair fight boeing not being able to deliver its key plane. It shows the crisis this company is and at the moment. Francine talk to us about the that western intelligence says iran shot down. Has boeing said anything about it . Boeing has said very little on it. They came out with a statement briefly after the initial crash, saying we are ready to stand by and ready to help in anyway possible. As we reported, these are very difficult circumstances for a u. S. Company and u. S. Agencies to inject themselves in. Normally, what would happen is that the country where a plane went down, iran, would take the lead. And then they would bring authorities and experts from around the world. Unders hard to imagine the circumstances, the geopolitical circumstances we are in. We are seeing this unfold because iran is saying it was not a missile whereas the u. S. And other intelligence agencies are pointing in that direction. Francine thank you so much. Bloomberg surveillance continues in the next hour. Tom keene joins me out of new york. We will look at markets. It is jobs day. This is bloomberg. Jet crash blame, Justin Trudeau says the downed there is evidence the downed boeing plane was shot. Todays numbers could show rebound. Volatile week in the markets. Risk assets end on a high note. Gold trending back where it was before u. S. Iran tensions. This is bloomberg surveillance. Francine lacqua. Tom keene is in new york. We look at the inflation targets because is significant countries are placing their flag of how they see the review going two weeks before the review starts. Internationale relations, viviana will get to that. The extraordinary thing is the rebound and what we have seen over the last two days, led by apple shares. The markets are just extraordinary. Francine they certainly are. We will get more on the markets throughout the day. Thats get straight to the bloomberg first word news. Our top story, evidence mounting that an Iranian Missile shot down a ukrainian passenger jet. U. K. , canadaf the and australia say they have evidence that backs up the theory. The New York Times obtained a missilet shows a hitting the plane. This is from ground level. This is moments after the plane took off from tehran. Iran calls these allegations a big lie. The u. S. House wants congress to be consulted before donald trump escalates the conflict with iran. Democrats say yesterdays vote defends constitutional powers. Republicans say it endangers national security. The resolution is symbolic. It is a long shot to be approved by the republicancontrolled senate. S of between 19t of 2019 are Strong Enough to hold the Unemployment Rate down. It is expected to stay at a 50 year low. Happy birthday, kim jongun. That is a message from President Trump to be north korean leader. The president asked south korea to deliver the message to him. His birthday was on wednesday. It is the latest exchange between the leaders. They have been adversaries for decades. Global news 24 hours a day, on the air at tictoc, on quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. Tom thanks. Currencies,nds, extraordinary markets. Some correlations. Futures continue to advance. That is remarkable. At dow futures 29. The vix, 12. 48. There is the dow closed from yesterday. Close from yesterday. Tom, when i look at my markets, they are similar to yours. Bonds are rising. You will have full coverage of the u. S. Jobs data. If you look at the asian markets, they were also up. I cant talk today. It is friday, tom. I need to be on my weekly day off. I was trying to say that european bonds are moving a touch. Our team has pieced together nicely. I suggest, francine, that we need to do more next week on the new finish, four days a week, six hours a day. Maybe you and i need to move to helsinki. Francine that would be great exit. Do tom i can see it. Francine [laughter] so i will do this quickly we can get to our guests. I weakness is what we have seen. Crudelygo, we have broken through the seven level here with new yuan strengths. Francine tom, i am looking at inflation. I am looking at inflation in the u. S. And the 2, 5, and 10 year breaks. Ahead of the ecb regime, he is arguing for lex ability. We will have more on the ecb. Tom we will do the markets in th a bit we must open with International Relations. The director of research for to intelligence towards us. What happened this weekend, what happens monday . Can there dare be the illusion that there is a stare down and it is over . No. It is not over. Cleark there is impatience from d. C. And tehran. Expect much happening over the weekend. The issue is not over. They arehat in tehran, trying to get the u. S. Out of the middle east. Tehran always looks at this from the longterm point of view. Bit. N relax now, a the issue is certainly not over. As for the weekend, lets keep an eye on the election in taiwan. We are focused on these trade deals. Taiwan is still there. There is an election and the threat of china has been one of the key themes. Tom we will go to brussels later in the hour. When i look at the response of europe, is it every nation for themselves . Can there be a coalesced opinion out of brussels . The new commission was announced, this was going to be a Geopolitical Commission with brussels going out there to try to set the stage. Has taken a week into the new year to show us that europe is not in the position to set the stage anywhere. It inre not able to do terms of libya. Watching. S they are trying to coordinate and generally failing as we have seen for some time. Francine i want to talk about the economy in a second. What we have not ask you is was President Trump right to strike general soleimani . I dont think it is right or wrong, it depends on which point of view. The question is when the decision was taken, what were the potential consequences . Were they analyzed and considered or not . The iranians or the administration in Russia Washington knows what to do next. We are at a bit of a paradox. Trump is saying he wants to get u. S. Forces out of the middle east. Iran intends to get the u. S. Out of the middle east. Meanine what does this for highpriced risk in the markets . And the general sentiment . Are we predicting big shifts correctly . I dont think so. I think trump is a big risk factor in the world, fundamentally. Hey liked the stimulus they liked the deregulation. As we just talked about, whichever way one thinks, it feels like trumps foreign policies are not thought through. They are random things he brings up and are illinformed, whether it is trade policies. It is not priced correctly. Tom david westin will join us in the next hour. Thatll come back and talk economics of talk the economics of europe with eric nielsen. Conversation, always, after the jobs report, Lawrence Kudlow on the statistics. Jonathan ferro will crowbar at the from mr. Kudlow 9 00 hour. Stay with us in london. In new york, this is bloomberg. This is bloomberg. This is bloomberg surveillance. Lets get your Bloomberg Business flash. Designed eye clowns and supervised by monkeys. It is by clowns and supervised by monkeys. It is a direct quote from boeing employees about the 737 max. The Biggest Discount airline in europe, raising its profit. Ryanair reporting a surge in lucrative lastminute bookings. This is over the christmas and new year holidays. Grubhub is pushing back against reports that sent it stocks surging. They say the company is not for sale. Grubhub is confident in its growth strategy. That is the Bloomberg Business flash. Tom thank you so much. We have been looking at the International Relations that we have been living since one week from last friday. Markets, i want to ask a simple question. Ascribe the lift 100 or 80 to centralbank accommodations . Thinking hard about this. This will be the defining issue of 2020 in economics. Swedes are leading the way in terms of reversing e rates,m negativ we will see what the ecb does. Monetary policy, something has to give. We are basically at that turning point. Whether that comes in six months or 12 months is hard to say. Tom there are nuanced correlations. What are you observing . Is it what em is doing or International Equities . What is a set of tea leaves out there that you are focused on as you write your friday evening note . Thanks, tom. I worry about what we talked about before with geopolitical stop i could mess around with oil prices. Stuff that could mess around with oil prices. I think we will get the first signs of recession in the u. S. In about one years time. Probably still satisfied in america with jobs numbers and earnings. Society is not looking so good. In our recession probability model, this is the weakest point of them all, i think. We dont have any big moves. We dont understand what is going on with inflation. What you see is that people are increasingly giving up on thinking we can get 3 inflation or what have you. , centraltant thing banks increasingly appreciate that the fiveyear is not a meaningful index to look at or parameter. There are examples in the past where expectations should go up or down in market prices figure a way out. That inflation tomorrow will be what it was, yesterday. Francine the crossover between geopolitics and consumer sentiment, i dont know what you are expecting for 2020 in terms of stability. Us, it is for interesting to see big geopolitical events. There is a huge amount of liquidity. Theproblem is confounded by fact that governments can do nothing at all. It is not just a question of whether they are able to soften the impact of geopolitical events. The willingness to deliver is undermined by the fact that the markets are not putting any pressure on. The problems are still there. Nothing gets done about it. Tom i want to frame the market. Future is up eight. Dow future is up 60. Spx, i am on the 3300 watch. It feels wonderful to be in the trouble triple leverage, i am killing it this morning. , our interview of the day. Stephen cooks essay on Foreign Policy is as straightforward as you can get. Leave iraq and leave iraq now. We will speak to stephen cook at the six clock hour. Stay with us. This is bloomberg. Ben bernanke gave a speech out there, which i think was a last hurrah for the central bankers. He argued that Monetary Policy will be able to do it the next time. I think that is pretty unlikely, given that, in recessions, we usually cut Interest Rates by five Percentage Points. 2 . Rest rates are below i just dont believe that quantitative easing and that stuff is worth anything like another three Percentage Points. Bloomberg tv and radio will bring back one of the most iconic people, shows. Joined byin will be guests to bring perspective. Willweek, Larry Summers join david in conversation. Weekan catch wall street every friday at six clock p. M. In new york. P. M. In new york. Larry summers was talking about the challenges of Monetary Policy going forward. Do you believe it will gain traction . I dont think so. It is a step too far. A lot of things will happen before they become serious. Recession could get a and it becomes worse than a normal, cyclical thing. We could get combined fiscal easing. It smells like it. More or less, it is explicit or implicit. We are expanding the budget, you are buying more of it. Francine for all of this liquidity we saw for the last 10 years, it is a real nuisance. Unintended puts so many unintended consequences at the forefront that it does more bad than good. Are gainingis we time but not much gets done. Reforms at the eurozone level and country level, we have not seen much at all. Put yourself in the shoes of a policymaker, they are struggling to win elections. They are dealing with more traditional government. Why would you waste Political Capital to do unpopular things when you are able to sell yourself. That is the problem. ,hen we say lets look at italy lets look at germany, what have we seen since 2012 . Reform, we have seen a lot before. Differently. Ke it i think we have done and a an enormous amount. You are too impatient. We have done a good deal of ranking. Banking. Beforethe stuff was done 2012. I promise you, from a bank point of view and european bank, the world has changed. Francine it was slower. But it has been slower than people are expecting. Yes. These are huge reforms. There has never been such reform between independent countries before. This is the most profound thing that you have seen. If you look at history, you look at the United States and any other country, to do things within five years, it never happened. , theuestion for me is question is if it can hold long enough given social media and everything else. This, i dont have the answer to. We are continuing the conversation. Up next, we have jobs day. This is bloomberg. Bloomberg surveillance, cow Francine Lacqua planeillance. We like to and we love to blow up the show. We are doing that with erik nielsen and Wolfango Piccoli. It is so important not only for the future of europe and capitalism, but the xaxis of timeline. This harkens back to the London School of economics and charles why plots in switzerland who constantly assist the x axis and timeline of how europe clears its market and solves its monetary, fiscal, and real economy markets. How urgent is it in 2020 two get to it now versus delay . Important, andy i think we will get it. I am a bit more optimistic than my colleague at the table. It always goes slower than we want but i think 2020 will see Good Progress on banking unions. The fiscal power we will not get and it is not as important as the Capital Market for the eurozone to work. Europe see a more robust in many ways this year politically and internationally. Europe will never shape the middle east. Eurasia group came out with the six risks in its outlook that say we will see europe change. Von der leyen is more stubborn and she has Emmanuel Macron. Tom how vulnerable is europe to a shock . If it is a monetary shock, real economy shock, or political europe rightked is now . Say if i wantcan to put myself in eric bang are in a better place than 2009. We created institution so a lot of the work has been done. Politically, if we were looking for the majority that allows us the work onhe esm, the banking union, the political majorities in the core are simply not available. The point i made before, absent mark and pressure in my view market pressure, in my view, the Capital Market, fine, the banking union, i doubt. What is missing is the market pressure and the political backdrop is much worse than 10 years ago. Francine market pressure only comes when you do not have a central bank. Should madame lagarde withhold stimulus . Wolfango i am not saying that. To do what forced mario draghi has been doing since 2012. The room for maneuver is somewhat constrained. We will see a bit more of the same, absent changes in the isket, but the policy fear much worse than it was eight or nine years ago. Those majorities are no longer available. Erik i disagree also. Italy is complicated politically, but what you have seen as the outlook for brexit, you have seen the risk of the far right. The nationalists have been reduced somewhat. Someoneattering from working in the Financial Market to say the market has to put political pressure, but our job is to look at capital. You are seeing increasingly theians swaying more youth asking for more environmental policies, so policies will change and it is not the market pressure. Francine who should it come from . Erik from the population, through the media and what people want. It is Climate Change stuff. You have a 16yearold swedish girl changing policies. The politicians suddenly see that young people are starting to say, i might start to vote and im voting for somebody else. The green in germany are doing exceptionally well in their opinion poll. This is how democracy works. Francine the far right in certain countries and antiimmigration is doing well. Erik that is a concern for me. We saw the election that once the democrats took some of the nasty policies on migration and i dont like it because im an immigrant and a refugee it is a nasty path, but once they shook them they killed the farright. Wolfango can they come back with that . Spain, majority with one vote. France, macron is fighting against everybody and the pen is still there. Le pen is still there. Italy is a basket case. My point is that if we get into trouble for whatever reason, it will be much more difficult to take those decisions that were to 2012 the 2009 period. Right wing is still very strong. Germany. E pen, italy, there is a green revival in certain countries but the nasty right wing is very strong. Erik exactly. Tom what is the generational makes of that european populism mix of that european populism . I am thinking about the labour party in the United Kingdom and what we are seeing in the United States with the senators from vermont and massachusetts. What is the population makeup of the tension in europe . Wolfango the disclaimer would be, country by country there are variations, but we have seen young voters who did not bother to vote until now, they are looking for new alternatives. It has been a huge beneficiary of people who do not vote for a long time, especially among the youth. The same in spain for vox and salvini for the five Star Movement in italy. It depends from country to country, and what is striking is the inability of the mainstream Political Parties to recapture the vote. Even in italy which was initially supported by university students, they lost the majority in the last election. I dont think they will be able to go back anytime soon. The mainstream are struggling to reinvent themselves and capture the young voters. Francine staying on this theme of europe speaking with a common voice, we will get back to erik nielsen and Wolfango Piccoli, but lets crossover to brussels where they have said the ukraine passenger plane was probably brought down by an errani and missile. Iranian missile. Discuss the future of the Iranian Nuclear deal. Lets get straight to maria tadeo. What the 100 change europeans want on the Iranian Nuclear deal . Maria good morning. I am not sure if it changes the state of play, but it has changed the tone around the meeting. The europeans want to find out it happened to the plane. The revelation that maybe it was not intentionally shot down, the ukraine is not a member state of the e. U. But the e. U. Has a close working relationship with the country and wants to find out what happened the second talking point today is the fact that there is criticism of foreign ministers, that it took them a week to come together let alone come up with a joint proposal that can help create tensions in iran. This is a delicate rowans and they were caught off guard by the actions of the u. S. And they are not naive that iran has crossed the delicate crossed many redlines. Tom do they want to use brussels as a shield or is it every nation for themselves . What is the sense of nationalism you see . Maria there are countries like france, like Emmanuel Macron who want to taken open stance and a strong line of negotiation. Almost aeeing emily bilateral relationship between france and iran. As thee to do this european union, one voice. They are crossed between two lines, the u. S. And iran. Dead and theeal is europeans do not have ammunition to play a big role. They think the situation could deescalate, and the only place they can debate would be here in brussels around the nuclear deal. Francine thank you so much, maria tadeo. If you look at the european position, how do they need to deal with iran . Wolfango the concern is trying to escalate. They will try to keep this deal artificially alive. It was kind of dead before. Lets think of this from the tehran point of view. You look at how the u. S. Has dealt with iraq and libya, how the u. S. Has dealt with north korea. If you are iranian leadership, i would think nuclear potential is my only survival chance. There is a question of what iran wants to do and given what they went through recently, i think they might still want to engage with the europeans in terms of trying to help them on the oil market, the banking side, and so on, but that is a tough one. Tom erik nielsen and Wolfango Piccoli, this is been an exceptionally good conversation. They will be attending and nurturing forward the conversation between the royal family and sussex this year since you seem to be so good at arguing. [laughter] tom thank you, gentleman, for what we do at surveillance, engage in fabulous conversation. We will come back with more good conversation. It is jobs day in america. Francine this is bloomberg surveillance. The house of commons has passed the brexit deal after a knife edge vote. They sought theresa may pounded out of office yesterdays business was conducted without a hint of excitement. Boris johnsons majority means there is still plenty of risk for the Prime Minister. Erik nielsen and Wolfango Piccoli are still with us. As a great student of politics and gestures, how would you describe that meeting between boris and ursula von der leyen . Wolfango if you compared to the disastrous dinner between juncker and theresa may, it was all happy days. Yesterday by barnier, the line has not changed. If you want a comprehensive deal, you have to abide to e. U. Regulations and regulatory standards. And it start from there is going to be for Boris Johnson to decide what can be done. Majorityays, the big is going to be important until the 27th of january when we complete the parliamentary process for the withdrawal appeal. What becomes more important is the capacity for the u. K. To articulate clearly what they want. Francine even if we have a clear position of what they want, and they just managed to get a trade deal by 2020 . Erik not a chance. Mr. Johnson needs to spend more time in berlin and understand europe. He lives in london in a closed room and they dont understand. Saying was quite clear you cannot negotiate this in 11 months unless you take everything europe wants. If you sign off, you become norway. This is just uphill. Tom i look at the brexit thing and i think we have lost track of the schedule. What is next . What is actually next . January 31, they will rubberstamp a decision. What happens next . A lot of people are unclear. For outside politics, nothing happens because we have a standstill until the end of the year. Then the negotiations begin. We will see that divorce happened and the politicians talk about how to share the children and the future life together in a different way. That is what i was referring to before, it is not realistic to happen in 11 months. Tom will the lines change at heathrow . When . Wolfango potentially starting next year, depending on what we get done meanwhile. The next step. His for the European Council to give the new mandate to barnier by the first of the march. Have from the first of march to the first of july for meaningful conversation and if things are going slower than expected, as will be the case, mr. Johnson has to decide whether to ask for an extension. The clock will start ticking from the 31st of january and the deadline is the 31st of december. Suggesting, they are when living in lala land they thought the europeans thought they were throwing that under the bus for the sake of the deal. It will not happen and there is plenty of work to do. Francine i imagine on february 1 they start negotiating the trade deal. What deal do they want . Wolfango barnier does not have a mandate from the European Council on what they want him to do. Then we will Start Talking about the trade deal. What can be done in the shortterm term is a barebones trade deal. But intalk about tariffs the u. K. Economy it is not a big deal. The question for me will be the sequencing. Will we start addressing the easy stuff or the difficult stuff like fisheries, like the issue of citizens . That is still unclear. Tom lets come back, erik nielsen with us and Wolfango Piccoli. Day, we areobs thrilled to bring you Ellen Zentner from Morgan Stanley. , on thebeen dead on makeup of american consumption. We will talk to her before the jobs report. This is bloomberg. Surveillance. Good morning on a jobs day friday. Looking forward to davos in one week and two days time. Willt to the chase, this be a very different cut to the chase, this will be a very different davos. Francine i think we are expecting the Iranian Foreign minister to show up as well as President Trump. The mood is different. We will have a number of Central Banks are bankers. Thetimes davos encapsulates concerns over your head, the big geopolitical risks in 12 months that happen afterwards. What three things do you worry about most . The chinau. S. Story will be there and will be more focused on the tech side, the trade side, so that is one to watch out. This brexit story will linger. It will go up and down but will not disappear, and could become fairly turbulent by the end of the year. On the emergingmarket front, you have to pick and choose. Lots of the ems need to event their invent their model of economic event, and which ones are politically able to do that and which ones will struggle . That willt of caution require some geopolitical due diligence. Erik trump, trump, trump. It is an election year. The guy is completely random and crazy. Russia, but the middle east, iran, these are playing the long game and trump is playing the short game. Europe i think is playing a longer, more stabilizing game then you may think or agree with. The big thing next year is trump. That depends a lot on how he does in america. If the consumers are still happy, the elections chance is higher. An do we still have International Relations . If you look at the last week and the marketing mocks will go to mucks will go to davos . Ridges making it up as we go . Does are we just ticking it up as we go . Wolfango it depends on what you want to pick and choose. And morem is cracking importantly, nobody seems to care that much in the sense that the u. S. Is regarded so well that trump would be elected or i dont think the u. S. Will dramatically change the tone. The u. S. Engagement will continue. China only cares about certain things. Protects struggling to some sense of their action, so that is the problem. The system is crumbling and nobody seems particularly to care. Erik we care, we just dont know what to do. Tom erik nielsen, Wolfango Piccoli, thank you so much. We will drive forward the conversation through jobs day. Jim caron coming up with Morgan Stanley, linking the oddities in the fixed income market with his great full market in equities. Jonathan ferro with lawrence hour. And the 9 00 this is bloomberg. Tom this morning, it is jobs day in america. Americas job is to keep buying apple shares. The dow at 29,000. Interest rates low. We are fully employed from sea to shining sea. Lawrence summers says stagnation is upon us, we are not a fully employed america. You need to go to cash and there are bubble characteristics. Confused . I am. The Islamic Republic and President Trump recalibrate after a poly video of death and destruction. Headlines breaking right now from dow jones. Forward iraq drives the conversation of american exit. Francine this crust the bloomberg terminal crossed the bloomberg terminal, they have requested the u. S. To put the mechanism in place for the exit of american troops. Tom in this hour, steven cook will join us, his incandescent essay on Foreign Policy. He was visiting iraq and mr. Cook makes no bones about it, leave iraq now. Right now in new york city with the first word news, viviana hurtado. Viviana a flash of light. Do you see it . Of the adding evidence final moment of the ukrainian jetline in a ron. Ron. Iran. Surfacetoair Missile Launches reportedly came from the airport , a wrong calling the allegations a big lie. Wants house yesterdays vote on a resolution defends congresses constitutional powers but republicans say it endangers national security. It is a longshot to be approved by the republican senate. The jobs report is likely to show hiring is moderating but Strong Enough to hold down the unemployment wrote. That employers added 130,000. The jobs release 130,000. The jobs release is at 8 30. Jongun,thday to kim that is the message from President Trump. It is the latest exchange between leaders of the first of the two countries that have been adversaries for decades. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. Tom equities, bonds, currencies, commodities, a lift in the equities. A remarkable roundtrip we saw the last few days. Dow futures up 54. 29,000 print on the dow. Nymex, and brent crude,. Francine it is all about the u. S. Jobs report. There is a large chunk of the market that believes the u. S. Iran conflict will escalate and gold has been winding up. From look at what we heard the bank of france governor about what he thinks the ecb should focus on. Lets get to our top story, geo volatility volatility we saw in the market this week. When you look at what we heard, the iraqi president requesting that the u. S. Representative to put the mechanism in place to withdraw u. S. Troops. Can they say no . It is complicated. It is a caretaker Prime Minister and there is a lot of debate about whether he has the right to make a formal request to the u. S. To withdraw. Parliament requested the government to do that. Legally, constitutionally, we will have to wait until there is a Prime Minister in place in order to do that. It is complicated. Ifre are some moves to see the majority in parliament can reverse the vote that had been with the current Prime Minister and allow him to continue in place. Be ablee, they may not to do that. Tom thank you for your coverage the last week. Let me give you what to our conversation answer in 30 seconds. Shia . Government sunni or marc the parliament as majority shia. Nd the government is there have been quite mixed governments. The president is kurdish, but at the moment the government is dominated by the shiite faction. Francine we are getting breaking news out of ukraine, ukraine saying they have obtained important data from the u. S. On the plane crash. The plane crash complicates everything. Accidental, then could there be further sanctions on will it not make a difference . Marc sanctions have left the issue. It could be an extremely important domestic issue with any ron if the terms out thatn iran if it turns out during the course of delivering missiles to u. S. Bases that were designed not to cause casualties, iran shot down a plane with more than 80 iranians on it. This is a complicated message at home where we are trying to develop the regime is trying to build this narrative around the killing of soleimani as a hero and retribution and active national pride. Pride. Ct of national tom we will show the video again. This is from the new york wass and they claim it triangulated to show it was authentic. Bloomberg news has not authenticated this video. , i look at the new headlines that ukraine will meet with the secretary of state of the United States. How is secretary pompeo greeted by iran, iraq, and the peripheral countries of europe involved . Iraq tween iran and iran and the u. S. At the moment, there are not direct contacts. There havent been for a little bit now. The iranians have been quite sharp in their rhetoric about pompeo in particular, because he has kind of led this hawkish line of u. S. Policy on iran. In other places, the u. S. Still has an important relationship in iraq and iraq has remained respectful to the politicians from washington, whether they are in the Trump Administration or not, doesnt matter to them. Is this discussion about pushing u. S. Troops out, that is not a discussion that is finished within a ron. Iran. There are bodies that want to couldhe u. S. In and this be a negotiated process where combat troops go and other forms are able to stay. It is nuanced. Francine if there is a withdrawal, it is not necessarily a 100 when four iran and isis . Marc we have to remember that when the headline comes, it will be the stance of the negotiations within iran and the u. S. That may end up with the u. S. Completely out. President donald trump himself is fairly keen to get troops out at some point. He said now not now but in the future he would like troops out. It is not over. Champion, thank you so much. I have been dying to talk to jim income at Morgan Stanley. Our bonds in this booming stock bonds in this booming stock market correlated . Jim they are not. This is one of the biggest risks. I expect there to be a change in the ism and manufacturing data the first quarter. This could create an upward surge in bond prices which could disrupt good news. Tom people do not know your background, but the geometry of the situation we work in leeds in almost every dynamic to in almost leads every dynamic to ambiguity. Higherant lower rates or rates good for stocks . Jim uncertainty is something the markets can price. Ambiguity, the markets cannot price so that creates disruption and lack of clarity. This is an ambiguous point in the market cycle. Data is Getting Better. Equities are Getting Better but bonds are following. This has to do with the Central Bank Policies put in place to keep rates low. Rates are low because they see asymmetry of risk. If i asked to name 10 things that were really positive about the u. S. Economy, that would be hard to do. That wereed 10 things negative, you could probably do that quickly. Market expectations are hedging for the downside in the market waste, keeping this q skewtplace, keeping the towards market rates. ,om i will put out on twitter what mr. Caron was just talking about, Peter Bernstein against the gods, where we look at uncertainty and ambiguity. Lawrence kudlow will be with jon ferro post jobs day, that 160,000 statistic. Good conversation on the american economy. This is bloomberg. Ben bernanke gave a speech which i think is a kind of last hurrah for the central bankers. He argued Monetary Policy will do it next time. I think that is pretty unlikely given that in recessions, we usually cut Interest Rates by five Percentage Points and Interest Rates today are below 2 . I just dont believe that quantitative easing and that stuff is worth anything like another three Percentage Points. Tom what you see there is what we are trying to do, which is conversation. Yesterday a gentleman put out on twitter is autographed copy of the wonderful book from 1974. The weight is on david westin to find. You want to pay homage to wall street week. Sondersweig and liz ann , and yet you want to break forward. David we didnt have cnbc and stock pickers 24 7. I want to preserve the essence of that, having some really smart people around the table, a conversation about two or three issues that affect economy and finance. I want to go to balance of power, Fareed Dzhokhar area dry drivingd zakaria forward the conversation. The president does not have a Foreign Policy, has a series of isolationism, unilateral ration is him, Ellicott City some of them contradictory. One might surge at any particular moment, triggered by usually trumps sense that he might look weak or foolish. David it is clearly the position of the foreign establishment policy. President trump might read that piece and say, so what . It didnt work the other way. Nice articleave a on this yesterday, a huge body of americans support this president. David he is not the only world leader you could say that about. People say president street president putin is a strategist. He is not the only one that does not embrace a longterm strategy when it comes to Foreign Policy. Francine a lot of people in the u. S. Want the withdrawal of troops from iraq. David the president has signaled that and said not right now. The acting iraqi Prime Minister about gettinglk the troops out. I think iran only has greater influence on iraq and that was not the point. Tom did vice chairman ferguson survived the show . Wasd he is a smart guy and terrific. The conversation between larry and roger was magnificent. Was more earold marc Roger Ferguson david david Roger Ferguson says we will have our muted returns and Lawrence Kudlow saying we have not gone far enough. Tom i cannot say enough about this project he is putting week,er for wall street another time and place forward. Do not miss that this evening, 6 00 p. M. With david westin. It is jobs day, much more to talk about jim caron talk about. Jim caron of Morgan Stanley. This is bloomberg. Surveillance, it is jobs day in america. With us, jim caron from Morgan Stanley. And the hugece dispersion of opinion that i see, the vector of the 10 year yield lower and others gloomy on the economy. Zentner get ellen together, are you on speaking terms or are you poles apart . Jim we are close on how we see things and ellen has had a phenomenal call over the past few years. The jobs number is more of a range than a consensus. 125,000een numbers from to just over 200,000 over 200,000. Adp was very strong. Tom what is the range in the bond market . I dont have a handle on where im going in bonds and yields. Jim if we believe we are in a recovery, it would argue that bond yields should gravitate higher. How high . I dont think much. 2. 25 inget up towards the 10 year if things go well but not much above that. On the downside, i think we have seen the low. I would argue that this year is shaping up from an expectation standpoint, a low volatility year in terms of where peoples expectations of where the 10 year yields may go based on the economic data. Francine this is on the assumption that inflation in the u. S. Does what . Jim it is supposed to gravitate higher. It has been coming down, core pce around 1. 6 . 2 are not getting up to the threshold the fed is looking at and until we meaningfully get above their, it will be hard for yields to sustainably move higher. Growth has to be above 2. 5 . If you want treasury yields at 3 , you need growth well above 2. 5 percent and inflation around the 2 level or you will not get it. Positions will matter. Bonds are overcrowded, a lot of inflows into bonds into 2019. That could correct itself and im worried about that in the u. S. Treasury market and the Corporate Bond market. Longduration strategies have worked well and if rates rise and andd get pain overshoot in fixed income positions. Francine what would it take for u. S. Interest rates to rise . I imagine President Trump will do everything he can to stop that but i dont know whether that is going back to a u. S. China trade war. Jim the fed is off the table. What you could see is a natural recovery. ,f you get a cyclical Recovery Energy prices higher, wages higher. 3 andre only running usually later in the cycle they are 3. 5 , 4 read that creates inflationary shock that could push inflation higher. Central banks are starting to become comfortable with the idea of high inflation. Tom we do this with dow futures at 29,000. Ourng up without question, interview of the day on iraq and baghdad, steven cook of the council on foreign relations. This is bloomberg. Surveillance from london and new york. Fromve seen the headlines the Prime Minister of iraq saying we need to get a movement closer on u. S. Troops from iraq. Steven cook from the council on foreign relations, his book is absolutely exceptional with on the Ground Research across the middle east. You stopped the International Relations world in Foreign Policy magazine the other day. There is nothing left for the americans to do in iraq and you forcefully said believe and leave now. Leave and leave now. What has been the response from the pentagon . Steven interesting response across the board. I have had folks who served in 100 ,ell me they agree that they do not understand what we are doing. As far as the policy world goes, folks still believe we need to be in iraq and the argument is we have been there for 18 years and cannot just leave. Iraq for ast were in substantial amount of time and not just at the peninsula hotel. You were out and about. What is the dialect now . Dialectic now . Sunni, kurd, no one has trust in the Central Government or each other. All the conditions are there for what we are seeing in iraq, the terminal collapse of the country. Francine if the u. S. Were to withdraw troops completely from now, would this not be a big win for iran and isis . Steven it is a great question that i have gotten over the course of a few days. Iran already is the most influential country in iraq. That has been a fact of life for the last five or six years. It is this strategic consequence of the invasion of iraq. As far as isis goes, everything the Central Government and iranian patrons are doing are making it impossible for isis to come back in a strong way. Unless the United States wants dollars andlions of hundreds of thousands of forces into iraq, it does not seem that the relatively small presence, yet the large sums of resources we spend, is worth it. Thatine would you not say Islamic State is not placated but subdued . Steven i would not say that there are parts of that. There are parts of iraq that remain with Islamic State cells, and it is clear that the United States can fight them in a number of ways, that we dont need a zombie embassy working with people who are not our partners. Tom speak to the americans who have enjoyed sending family at great risk to not only iraq but afghanistan in this 17 year war. What would you say to the parents . Steven i have extraordinary respect for the men and women in the u. S. Armed forces and that is one of the reasons im saying we should understand precisely what the situation is in iraq, what the situation is in afghanistan. There is no strategy, no policy, and little reason for them to put their loved ones in harms way. Trump, there from were the two officers of the joint chiefs of staff standing behind the president. Are you suggesting they do not have a strategy . Suggesting there will be civilian control of the military. Strategist set the policy and the military carries those out it is hard to discern those out. It is hard to discern the strategy in iraq. Francine how much has the strike on general soleimani caused them to hate the americans . Incoherence inic the middle east, the president has wanted to put massive pressure maximum pressure on the iranians. Hasassassination consolidated support for the regime in iran rather than undermine. Tom thank you so much, steven cook on the council on foreign relations. They just put on an important essay whether you agree or disagree. Dawn. R his book false here is viviana hurtado. Viviana iraq moving forward with that demand for u. S. Troops to leave. The iraqi Prime Minister has asked the state department to decide the mechanism for americans to leave. Calling on western governments to prove their claims that the ukrainian jetliner was shot down. They say they have intelligence showing the plane crashing near tehran after being hit by a missile. This flash of light that you see reportedly shows the moment the missile hit the plane. This is video obtained by the New York Times. Spy satellites detecting two Missile Launch is far from the crash site. Next week, that is when u. S. Senate republicans expect the impeachment trial of donald trump could begin. Will pelosi says soon she send the articles of impeachment to the president. The president says he would not stop john bolton from testifying but he needs to protect his executive privilege. Life on the run is proving expensive for carlos ghosn. His futures shrinking by 40 . Lebanon may have cost 15 million or more, plus the 14 million in bail he posted in japan. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Hurtado. Ana this is bloomberg. Tom two years ago, they did a panel at davos on the financial crisis in banking. I am trying to line up a panel on negative Interest Rates. We drive forward that conversation as we look to the meetings at the World Economic Forum Next Week with jim caron of Morgan Stanley. Negative Interest Rates were not in textbooks. Jim no. What the world is realizing is we are getting closer to the reversal rate. That means you can lower rates up to a point and then things start to get worse. , in in europe and japan japan, the boj is talking about removing yield curve control, allowing the yield curve to steepen because they realize that credit is not impacting or getting to the real economy because banks are not able to transmit that under a flat yield curve. Negative rates flatten yield curves and that does not help the broad economy. Tom we have a little math on friday so we will try to be careful. Lots of functions, lovely, smooth curves. We will go to calculus first and second derivatives and then kinks. S bernanke knows, is this a smooth academic exercise or is it junk conditions along the way . Jim the design would be smooth. Tom the intention would be smooth. Jim the reality is probably junk. As the Central Banks put Inflationary Pressure into the market, they will succeed. We will not go from accepting negative lower rates to slowly moving away. If you look at 2019, the inflows into fixed income was at record levels. When the markets start to realize Interest Rates might not rise, then i think there is going to be a vast exit and the question is how does that impact risky assets and financial conditions, and does it create a bigger problem down the road . Two,nk we are a year or maybe three away from that, but things tend to happen faster than textbooks suggest. Francine monitored monetary theory seems to be getting a lot more traction. Are we going to see it or go through with it . Jim we are already seeing it. We are seeing fiscal stimulus and calls for fiscal expansion. Bond yields are low and you hear the rhetoric that if you are not going to invest now, when are you going to do it when yields are so low . The debt is starting to rise and debt to gdp is starting to significantly rise all over the world. When we look at the fiscal deficit to gdp, it is essentially a sovereign countrys default rate. The deficit to gdp ratios are starting to rise. At some point, when is that going to matter . I dont think it matters necessarily now because rates are so low and we have been able to contain them at low levels, but there will be a point when that is not necessarily the case. When that happens, currencies devalue and bond yields rise. Which currencies versus which other currencies . Which pairs . There will be winners and losers so that is what we have to worry about and try to solve for. Francine when will we be seeing this . The timeline to pinpoint. 2024, 2025, i will put that date on this because that is when the demographics of the u. S. Rise quite a bit. The baby boomers rise into retirement age, a rapid move around that time. Entitlement spending in the u. S. Starts to skyrocket exponentially and that is when you see the debt to gdp ratios blow up. We have known about this for the past 15, 20 years. This is nothing new but we have not done anything about it. All of the easing things you could have done five or 10 years ago have not been done. You can either raise the retirement age, cut Social Security benefits, do a lot of popular unpolitically to do. That seems to be the course we are on now. We dont have a plan or strategy to get off of this and it will become a problem. I dont think it is until 2024 or 2025 based on the demographics. Francine jim caron of Morgan Stanley investment management. The iraqi premier has asked the u. S. To send a team to discuss the exit of their troops. This is a caretaker Prime Minister and some of the legality has been put into question. Later today, it is jobs day in the u. S. Jonathan ferro will be in conversation with larry kudlow at 9 30 a. M. New york, 2 30 p. M. London. This is bloomberg. Surveillance, good morning, everyone. Iran, andout of iraq, washington. It is jobs day. We will get to Carl Riccadonna in a moment. Jim caron with us of Morgan Stanley. I want to figure finish up the negative rate call was switzerland and davos. The pernicious nature of this is amazing. Way out it goes all the to the 30 year. How does a society do that . Jim it is about the currency of said switzerland. Tom the leakages through the currency . Jim the swiss have to try to protect against the swiss franc in times of trouble getting overly strong. It is very expensive. Tom 30 more in switzerland. Jim the idea by the swiss is to push rates as low as they can to keep their currency relatively competitive, so you get to these crazy levels. Tom there is a perfect segue, push rates lower until you get to weigh 100,000 employment statistic from this morning. A 100,000ou get employment statistic from this morning. Carl we are probably close to full employment because we are seeing very faint signs of an upward sloping vector for wage pressures, but not a significant acceleration that would tell us things are running hot, in the language of jerome powell. The average over the last decade has been 185,000. Today. S were at 205,000 the Construction Center sector should be helped by temperate conditions in the first part of winter so that should push us above the underlying trend. The gm strike over the last two months, we are free of that so this should give us a better perspective. Tom francine and london. In london. Francine the trend from here you are expecting to get better or you are unsure . Carl i think we will see it improve in things like manufacturing and tangentially related industries. From the macro perspective, topdown, we are looking at slower gdp growth this year, 2 compared to 2. 25 last year. And labornomy slows becomes incrementally more expensive, we should see moderation in the pace of hiring so im looking for sub 200,000 as an average for 2020. The replacement labor force is 20,000 to 25,000 so it will grind lower over the course of this year. 3. 5 foroking at 3 to year end. Francine what do you expect for Hourly Earnings . Carl that should be up around 3 , 3. 1 year on year. Not a very dramatic acceleration. You listen to Carl Riccadonna go on about an eisenhower economy. The president has a huge nostalgia for the 1950s. Why dont we feel like it is the 1950s or 1960s . Jim the curve is flat. We have a strong labor market and wages at around 3 . Typically later in the cycle, you get much higher wage pressures, 3. 5 , 4 . You are not getting that so if you dont have the wage moving higher, you do not get inflation pressures. Maybe that is why you end up getting job prints that are good. Carl full employment is much lower than in those prior eras and it is technology, globalization, more worker insecurity in general, so you guess get less bang for your buck in economist speak on the phillips curve. Francine we are exiting somewhere warmer, warmer climes. Tom new york is warmer . I dont think so. Carl riccadonna, jim caron, thank you. We will drive forward the conversation through the day, migrating to 6 00 p. M. Tonight for david westins wall street week. Boeing, their worst nightmare, employee emails. Not good. This is bloomberg. Are watching bloomberg surveillance. Designed by clowns who were a directd by monkeys, quote about the 737 max from a boeing pilot. This is just one negative emails about a batch of from pilots. Mirailly will acquire jim cash1. 1 million in an all deal. Eli lilly says the acquisition will help it expand its immunology pipeline. Discount airline in europe raising its Profit Guidance ryanair reported a surge in lastminute bookings. Upear ago, reservations are 1 . On firsttimes buyers has paid up. Quarterly earnings be expectations, from a year earlier soaring 38 . There is boosting demand for kb properties. Dable following ons reports the company may be sold. That is your Bloomberg Business flash. Francine thank you so much. The final u. S. Jobs report for 2019 is due today and economists are showing expecting it to show 160,000 jobs in december. That will move markets. It has been a tumultuous week with the geopolitics, iran and the u. S. A lot of traders will be glad to see the end of this week. U. S. Jobs will give us an idea at what happens at the beginning of the markets in the u. S. , and translating that into next week, bonds rising in europe, treasuries moving unchanged. Gold flipping, one of the most volatile weeks since august 2019. It is jobs day. Jonathan ferro will be in conversation with larry kudlow. Interview, 9 30 a. M. New york, 2 30 p. M. London. This is bloomberg. Pres. Trump our economy is booming, wages are sorrowing, workers are thriving, and americas future has never, ever looked brighter. Alix President Trump doubles down on the economy at a Campaign Rally as the markets await the next jobs number. By an airplane designed clowns. One pilot said it was designed by clowns who were supervised by monkeys. It very special welcome to you on this friday, january 10. It is jobs friday. The markets closed at a record high yesterday across all indices. Apple closed another record. We saw a huge inflow into bonds. All of that helping indices stay up. Is it going to be fundamentals or liquidity driven . That is something we will be