Will it make its way back to zero . Seems to be part of the conversation building in markets. Barrelumped above 65 a as supply disruptions in iraq brought concern to geoPolitical Risk. With more is Annmarie Hordern. Detention we are seeing in libya and iraq come very different in nature. What is the impact of these on oil supplies . Annmarie they are both geoPolitical Risks to the oil supply. In libya, the government says we could go to 72,000 barrels a day. This has to do with the eastern military commander. He has a blockade now on the port, so actual supply is not disrupted. The market may be shrugging off a little bit because in days or hours, that blockade could be lifted. Iraq, while it is a minor disruption, which is producing more than 4 Million Barrels a day, it opens up a window of worry. Just last thursday, the iea says iraq remains very vulnerable. It is more about could the supply threatened become much bigger. Anna they are overproducing their opec target. Annmarie this could bring them back into opec compliance. Anna that leads into how much impact this is having or not having on oil prices. We saw Oil Prices Jump up, but they have come off highs. Annmarie annmarie this is the third time in less than six months we have seen the market completely shrug off geopolitics. Brent was at 72 a barrel. Now libya and iraq, theres just too much oil in the market. The iea says theres a solid base of inventories. The u. S. Is now producing 13 Million Barrels a day. They say by the end of next year, it will go up to 14 Million Barrels a day. Then theres brazil, guyana. On top of that, we are dealing with a market that iran and venezuela are tightly squeezed, and saudi arabia is cutting production. So there is enough oil in the market. I think that is what traders are looking at when they see these geopolitical tensions. Perhaps was also weighing on equity markets. We see some of those losses being paired right now. Annmarie hordern, thank you, for the latest on the oil sector. Joining us on set is david owen, jefferies chief u. S. Economist chief european economist. Thank you for joining us. Lets start with the oil story and the implications for your world. What kind of oil price matters to you as an economist, when you look at brent at 65 a barrel . David if it went above 80 or well below 50, that would make a substantial difference to the theo outlook, but at moment, the Oil Prices Moving in a band, so it is not a major issue. I would say that squeezing real issue for growth. If inflation picks up and real wages get squeezed, obviously that takes the momentum out of recovery. At the moment, the oil price isnt a major factor. Anna some people talk about the oil price as a tax on the consumer. As we talk more about Climate Change and the hunt for alternatives to fossil fuels that Gains Momentum in some places, do we see the oil price changing its role in the way it feeds into inflation . Or is that a consistent story over the last couple of decades . David it is still important for the inflation rate, but economy changes are a big issue. Obviously, Climate Change anyways to address that are major issues, and you need a fiscal response as well. We will see in the u. K. On march 11 if they actually have any proposals to combat Climate Change and make the u. K. A leader in those sort of sectors. Anna is a Green Investment plan going to be the smokescreen that many countries get to hide bignd when they announce Public Investment, big expenditure . That sounds more negative than perhaps i intended it to come about this fiscal stimulus get wrapped up with a green agenda . David thats exactly right. For the eu, they should be allowing countries which have big Public Investment programs to borrow to invest, but maybe that is a step too far. But if you just move towards green policy, that would give countries much more headroom, and some countries will actually react by spending more, and even if they are borrowing at a slightly higher rate than they would for normal sovereign, it does make steps. It does make sense. Thats where weve got to go. I just came back from touring europe, meeting investors. Issuee change is a major and major investment vehicle. Anna that does seem to be something of a consistent theme for the start of 2020. Many investors and economists telling us Climate Change has moved to center stage in terms of their conversations. We will talk about the u. K. In a moment, but let me ask about the euros in and keep on the theme of fiscal stimulus. To what extent are we going to see that happening, for example, in germany . Are they going to stick to that policy of not wanting to open up their fiscal taps, or are we going to see some leeway . David they announce some Infrastructure Projects around railroads, which actually, we aew look at the numbers, relatively significant, but it is only a small step. If they actually freed up the francein countries like that are up against the limit, they could start spending more in these areas. It may force germany to follow suit. Thats the way i think to do it, to nudge these countries to get to a better space. There is general acceptance that fiscal policy is what is now needed. You need a fiscal response. Anna our National Governments getting mixed signals from brussels . Dear voices saying you need to spend more for scilly to tomulate more fiscally stimulate, but on the other hand, they have strict rules on the amount of debt they are allowed to go into within the eurozone. Are there mixed signals there . David it is just changes. At the end of the day, that is how policy rules run in most countries. Anna why has that become so difficult to achieve . David i have no idea, particularly with Interest Rates at these levels. For high bond yields in countries like germany, they need to spend their fiscal space. And they do need to address Climate Change. In terms of the countries within , what is viable at the moment is buying bonds regardless. Anna we have seen the big stance last week in terms of coal production. Very interesting. Case in germany do you think we need very interesting case in germany. Maybe the 3 is too simplistic because it depends very much on what you are borrowing for. David it is also what is happening here in the u. K. At the moment. Withincountries did that the eu, that would lead to a much better outlook. Theres lack of investments by the Public Sector. Way toward it. E anna anna thank you very much. Esvid owen of jefferi stays with us on the program. Lets check in with the bloomberg first word news here in london. Reporter irans sixyear push to integrate with the Global Economy appears to be coming to an end. Today, iran threatening to withdraw from its last commitment to the 2015 nuclear deal. Meanwhile, they pulled out of the Economic Forum in davos. Khomeini accused the u. S. And europe of trying to bring iran to its knees. Trumpss say president pattern of misconduct made a threat to the rule of law. Alan dershowitz spoke on abc. If the allegations are not impeachable, then this trial should result in an acquittal, regardless of whether the conduct is regarded as ok by you or by me or by voters. But what do you think . That is an issue for the voters. Reporter an outbreak of pneumonia in Central China has now gotten even bigger. More than 200 people have been diagnosed with the virus, and three have died. Theres evidence that the illness is spreading from people to people. Rocket company is after crucial safety tests. Spacex has cleared its last hurdle toward a historic crewed flight. Spacex demonstrated dragons ability to eject from the rocket during an emergency. 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. This is bloomberg. Anna thank you very much. Coming up on the program, we are about two weeks away from the day britain leaves the European Union. 31 january looms on the calendar. We will speak to the former leader of the liberal Democrat Party in the u. K. We will talk about brexit and much more beyond. This is bloomberg. London, im anna edwards. This is a special edition of bloomberg markets, live from london because it is a u. S. Public holiday. It is about two weeks until the u. K. Leaves the European Union. The past three years of brexit have been difficult. The next few months could be even more so. One of the biggest challenges, a freetrade agreement. Joining me now is vince cable, former leader of the liberal Democrat Party from 2010 to 2015. David owen of jefferies is still with us as well. Very good to see you this morning. We started talking about brexit, two weeks to go until we either get big ben sounding our departure or not, depending on a lot of domestic, politics which but let meve alone, get your thoughts on the trade deal ahead. I assume you will say it is too tight a timetable to strike a deal. Vince i think there will be some type of agreement. It will be fairly minimal. Terms which they are approaching it, which is divergence, not convergence. Any agreement, any freetrade , this is essentially what we are talking about. They want to make sure we dont have any disasters around aviation and planes being grounded, that kind of thing. I think that will probably be smoothed over. Industriesf british dependent on the rules will face new investment. We have to all achieve by december, what are the risks . Thee ive always used analogy, i dont think we were ever going to get some massive explosion of chaotic results, but those British Industries that adjusted to european will either have to bear the costs and just put up with it, or some of them will adjust by moving somewhere else or running down the investment here, and the key issue its around the city. People in the city have put much ofcepted that 10 European Business is going to go, and they will have to adjust to something else. The really big issue which i think its going to come down the trap rather quicker than the trade negotiation is the immigration rules. Legislation in parliament, and i think the signals are that this is going ,o be fairly outlined delivering what they promised in terms of the economic cost. I think that is where we will see brexit made real. Anna do you think some business might find fault with that, that notnesses might object to getting jobs, the Public Sector as well . You know, a lot of companies are going to struggle, some publict sectors. Anna what preparations do you es have made, or how far away are they from being fully prepared for brexit. It would seem to suggest we have all had a long time to get ready for this, but if you are in business theres a lot of detail. Anna whats happened is a lot of people vince whats happened is a lot of people were spooked by does no deal scenario, which was never very likely, but a lot of businesses invested time and money into dealing with that problem, and theyve now got to deal with a real problem, the gradual decoupling of regulation. Anna as we head towards january 31, theres a lot of expectation of Interest Rate cuts still some of the u. K. , and the data has been quite negative. What is your expectation for how the bank of england can support the economy to go through this . David i wouldnt think the bank should be considering cutting rates at the end of this month. Anna the market seems to be pricing that in. David in terms of brexit, i think the considered response should be on fiscal side. Througha budget coming march 11. Try and soften the blow from the supply shock for brexit, and it is a regional story. For that, i think we will bounce back pretty quickly. Off of the again financial crisis into thousand eight in 2008, 2009. I will be looking closely at the budget to see which form of disco expansion that contains. The numbers hes taught form of fiscal expansion that contains. The numbers hes talking about simply arent big enough. Anna on what front does he need to extend it further, the investment side of things . David absolutely. Anna or on supporting daytoday businesses and families that might feel the pressure . David start with publicsector investment. , it isns he outlines simply not enough. He needs to do a lot more in terms of education, science research, infrastructure, everything. But that needs to be done as we leave the eu. Its not really to bank of englands job to support the economy through this. Anna i wanted to talk to you about some other themes in u. K. Politics at the moment which are really interesting. One of them is the nature of government we see at the moment. There are different interpretations of what we have seen from the government over this. One is that this is a confused story policy bailing out a private business that doesnt need to be bailed out. Others say this is pragmatic leveling up because regions need conductivity. How do you see this bailout that we are seeing . Vince i think on this kind of issue, this is not ideological. They have now acquired a new political constituency in the north of england, and anything that looks as if they are betraying it would not look good. There is a genuine issue of conductivity. I think the better way of doing iuld have been to have think the much bigger question in the next days is theres a danger here of getting the worst of all worlds. Terminus opportunity costs, they could be using the money in different ways. The north of england, which was potential he going to benefit, could just be forgotten. Anna wont it be difficult for them to back away from the birmingham northwards constituency . Vince birmingham is already up in arms about this. They are on the horns of a very difficult and expensive dilemma. Anna finally, around huawei, i know you had some dealings with them. What is the right path forward you think . The u. K. Seems to think it has no other choice. That seems to be the line we get from the Prime Minister. Theresa may reached a sensible compromise that there are some worries, potential worries. Huawei is a good company. Theyve never caused any problems with the intelligence is some, but the cost underlying worries which keeps them out of the core, security related infrastructure, but let them come in otherwise. This compromise is in danger of being thrown aboard. U. K. Is desperate to have an agreement with the americans, and the american say, do what we say. You very much. That is vince cable, former leader available leader of the liberal democrats. We will be talking about inflation later on this week. This is bloomberg. Live from london, im anna edwards. This is bloomberg markets. Its time for a Bloomberg Business flash. Heres leighann gerrans. Leighann europes biggest defense firm bae systems has agreed to buy u. S. Technology assets worth close to 3. 2 billion, made possible by the merger of raytheon and united technologies. Raytheonsbuying airborne tactical radio operations. In the u. K. , theres a sign that the conservative win in decembers election has boosted homebuyers confidence. Property website, values rose this month by 2. 3 to an average of 400,000. That is your Bloomberg Business flash. Anna thanks very much. When we come back, we will talk about what is going on at the ecb. This is bloomberg. London, im anna edwards. This is bloomberg markets. Later this week, ecb president Christine Lagarde is set to unveil a strategic guideline of the ecb monetary review. For more on the future of the ecb, david owen of jefferies is still with us. What is at stake here . We hear them talking about maybe turning a slightly more vague inflation target into one those very specifically to percent. What is it stake . David they did a major review back in 2003. Most people thought the inflation target was too low. Decided to change the tool. Then published a load of papers justifying why they hadnt changed very much. Hopefully i dont spend such a long time on the inflation target this time because i think theres much more important things like stability, Climate Change, that is much more important than the inflation target itself. Just comeey should out with a special inflation target of 2 , but make it clear they are looking over policy relative to the horizon, which is two or three years. The market depends too much on the here and now. They should be setting policy much more in terms of where we are going. Anna we will get to Climate Change in just a moment, but what is the implication for rates if they do that . If the implication is that the ecb will allow inflation to run hot, if it were to ever get there . Think all of these Central Banks, and the bank of england, mostly want inflation back to where it was, and the world has changed. Back in the 1800s, we had reasonable growth and no inflation. Central banks must be also very clear, but having the inflation rate of 2 isnt the beall and endall. That much more important the economy is doing well overall. , it is up to it. Sustainable growth and high rates of employment are the second half of this mandate. That often gets forgotten. The inflation target itself is one thing, but it has to be sustainable growth. Perhaps they will have difficulty getting inflation back to 2 to 3 over the next two years. Just have to accept it. Anna i was reading an interview with the bnp paribas ceo that negative rates are a lasting phenomenon. Is that the case . Movements deepseated into the psyche. David i wouldnt be that pessimistic. But going back to the 1800s, bond yields at these levels are highly unusual. Inflation rates are not unusual historically. You have the physical response, if you have stronger growth, that is required. Interest rates in the bond market would rise. Doesnt of the ecb, it want to get trapped into doing qe. At some point, they will want to presumably move back towards normal rates. I think that will hope in over the next year or so. Anna but they might need fiscal coverage it is that. David i dont think we should be too hung up on the inflation target. Anna you mentioned sustainable growth. Climate change and all that. On . Should the ecb focus Christine Lagarde herself has mentioned Climate Change quite a lot. Other voices in the easy be said let only pet engine to Climate Change when it impacts inflation or growth expectations. David Climate Change influences social banks thinking in two ways. How much will your Balance Sheet be worth underwater . That is part of it. Then youve got these very large central bank Balance Sheets which are getting larger. Should they actually think about , you know,to buy sort of dirty bonds . Anna companies that operate in the coal sector. David exactly. Maybe they should be putting a different price on it. You are exposing your Balance Sheets to risk because you are buying bonds of companies which may not exist in 20, 30 years. I think Central Banks have to think seriously about Climate Change, and also, it is a supply shock. Very similar to brexit. Volatile. Ke data more Central Banks have to thing about Climate Change from a multicultural policy eventually. Anna do we need more disclosure from corporates around Climate Change . Mark is leading a force trying to encourage companies and instruct companies to give more details on the risks to their. Peration is that something we will become more and more aware of . David absolutely. You are a fund, fund manager running an equity portfolio, you know it may influence the price over time. It is not a reason to buy one stock and not another. Fundsow, so many of the that out on purely is one thing they are trying to change. Central banks could lead people in that direction. I think the ecb should think seriously about its Balance Sheet. It should seriously think about changing the mix. Anna to buy the things that are not damaging the climate so much. Is there a Financial Stability risk around certain parts of the economy that are becoming uninsurable . David yes, there are already withts of companies difficulties. That is another factor which toe to which has to going be thinking. At these levels of interest about you worry more fiscal. The Dutch Central Bank is really worried about this level of yields leading to bubbles in their commercial real estate market. They are also buying into commercial real estate. By the end of the day, inflation targets are fine, but you can hit the inflation target and have a banking crisis. You dont really want that. Anna you mentioned the importance of communicating the relative time horizon in Central Bank Speak so you know how far into the future they look. Are there arguments forgetting centralbank targets that are longer in time horizon and the ones that we have at the moment . It is going to take a very long term thinking. To i the ones we talked think are very aware of Climate Risks are a very long berm. At the end of the day, these pressures of the climate, of from lows stabilizing yield, will continue, and Central Banks have to act now. Coming back to Christine Lagarde , in terms of the overarching policy, these issues matter much more than the inflation target. Anna we havent talked much about the underlying eurozone economy at this point. Are you in the camp that thinks we have seen a turn in the data, things have bounced off the lows, or is it still very weak . David we are bullish about the eurozone. The reason they didnt match expectations in 2019 was purely to global trade cycle turning down. If you look at consumption, investment, that actually held up very well. Growth in the euros and was surprisingly robust, but that comes against week investment growth in the u. K. On the u. S. We had the corporate sector in going back to such. German companies are borrowing. We are actually optimistic. We expect to surprise on the upside in 2020. Anna anna david, thank you so much. David owen of jefferies stays with us a little bit longer on the program. Lets check in on bloomberg first word news with leighann gerrans. Leighann in baghdad, Security Forces fired tear gas at antigovernment protesters. It is the latest in a series of uprisings that began last october. Iraqis have taken to the streets to protest corruption. Downgraded hong one full point. President trump is headed back to davos. He will deliver remarks at the world Economic Forum tomorrow. At about the same time, his into impeachment trial will be his impeachment trial will be getting underway in the senate. In richmond, virginia, authorities are braced for a demonstration by guns rights activists today. Virginias governor has declared a state of emergency that has allowed him to ban all weapons from the demonstration. Militia groups and White Supremacists are expected to join the progun activity. 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. Im leighann gerrans. This is bloomberg. 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. This is bloomberg. Anna thank you. Coming up, we will bring you interviews from the annual gathering of Global Business and finance leaders. Thats coming up next. This is bloomberg. Anna live from london, im anna edwards. This is bloomberg markets. Leaders of politics and business gather in dapos, switzerland ash in davos, switzerland for the world Economic Forum in davos, switzerland for the world Economic Forum. One person who wont be joining is carlos ghosn. Are joined by aceto horry by yoshito hori, globis Capital Partners managing partner. Very good to speak to you today. In the wake of the scandal surrounding carlos ghosn and his flight from japan, how much damage has this done to the image of Japanese Corporate culture globally, do you think . Yoshito well, i cant talk about what is the image of Japanese Corporate culture and governance globally, but what is true is that japanese citizens work right citizens work quite surprised and quite upset that he escaped from japan. This bring about any changes . Is this just going to be the criminal Justice System being scrutinized in japan as a result of Carlos Ghosns flight . Or will they be other changes or will there be other changes in japan domestically . Yoshito there are debates being started about what to do about and whatl bail system, we should do in terms of the accompanying lawyers and hearings with the prosecutors. Positive discussions have been going on. At the same time, i think we devise two issues. One is about the escape of carlos ghosn, and the other is about decode system and the japanese judicial system, which has to be amended. Anna so you would like to see some change. Yoshito yes, we like to see the changes. Anna let me ask you a little bit about your investments at this point. Your eventual capital your , youre capital business were an investor in one of the first japanese startups to achieve unicorn status. T will achieve macquarrie rytypehieve merca results for you . The news in the u. S. Is quite divided as to left and right, but a provides but ai. Rovides uses this is a very neutral application. [indiscernible] so you are very excited about both of those. About the you infrastructure and the backdrop that creates unicorns. There seems to have been a lot of investments in infrastructure and in other areas to create the climate for creating new startups. Theres the same impression that more unicorns are not needed. Yoshito if you compare with china, the u. S. And japan, the size of the economy is smaller. Therefore, the number of unicorns are fewer. However, if you look at the climate infrastructure, it has totally been changed in the last 25 years. Availablere capital in the mindset has become better, and the ipo markets are better. In terms of the mindset of our younger generation, my son intention for working for a big corporation. At the universities [indiscernible] anna thanks very much. Good to get your perspective from davos. , managing partner for globis Capital Partners, joining us from switzerland there. You see a host of big names in banking there. Stay with us this week for all of our coverage from davos. Still with us today, david owen of jefferies. This time of year, we see the great and the good to send on listened as they pick out the themes. One of the themes intersects with your world, whether weve got globalization weve got peak globalization. Do you think we have . David when we think about brexit, that means obviously the u. K. Is withdrawing from the eu, and then with think about china and the u. S. Most Companies Globally will be thinking about margins come up yet a company which currently has supply chain running from the u. K. All the way through into somewhere in germany. These things are slowly but surely going to get ripped out. Moving inso, we are developed markets more towards a subspace economy. For services, it is actual access. Going back to brexit, it is not just about commercial services. It is about legal services, advertising, all the sorts of things that require access to be able to trade with another country. Seein the eu, we can countries getting closer and closer together, but outside the eu, we are going to see increasing issues about whether companies have access to a particular market. Anna that was always one of the issues with the eu from the u. K. Perspective before the brexit vote, that a lot of influence was trying to open up parts of the Services Sector within europe, that through nontariff barriers was not open to tease u. K. Investment. Do using the eu is going to managed to break down those barriers . David the oecd has a really interesting database first servicebased companies. The eu market is the most open globally for services. The u. S. Actually isnt that open. Anna statebystate regulation. David exactly. So a lot of u. K. Companies may have complained about access, but actually, they did have access. I think it will be interesting to see what goes forward when we do actually leave the eu. They may see more complaining. [laughter] anna david, thank you very much. David owen, jefferies chief u. S. , good to speak to you today. We have special programming coming to you from london. Still ahead, we will hear from Kevin Cirilli and u. S. Secretary of state mike pompeo. We will get the line coming from the u. S. Administration. About what is front and center. This is bloomberg. London, im anna edwards. This is bloomberg markets. We turn our attention to latin where Kevin Cirilli is on the road with secretary of state mike pompeo. What is going to be the theme of his visit . Counterterrorism come i understand, is high up there. Kevin precisely. , am here in bogota, colombia traveling with secretary of state mike pompeo. Yesterday we were in berlin at that conference with chancellor Angela Merkel. I asked him about his plan for this evening, and he said he looks forward to meeting with the u. S. Recognized president of , that he juan guaido wants to meet with him. Juan guaido has defied a travel and traveled to columbia two colombia. It comes at a time which u. S. Foreign policy is under scrutiny for the developments in venezuela. Secretary pompeo telling me last night on the plane that they are optimistic that sanctions against them will hold. On a different story, secretary pompeo saying he is grateful and appreciative of chancellor to theas it relates situation overseas. Anna . Anna thank you. A lot of attention on venezuela. Thank you very much. Just time to tell you that the European Equity market is under pressure now, 0. 1 , so a little bit of weakness coming through. U. S. Futures looking ahead to tuesdays session because there will be no trading of equities in the United States today. Coming up on the program, we will have more from the world Economic Forum in davos. Richardss ceo anne will join us next. This is bloomberg. Hi were glad you came in, whats on your mind . Can you help keep these guys protected online . Easy, connect to the xfi gateway. What about internet speeds that keep up with my gaming . Lets hook you up with the Fastest Internet from xfinity. What about wireless data options for the family . Of course, you can customize and save. Can you save me from this conversation . That we cant do, but come in and see what we can do. Were here to make life simple. Easy. Awesome. Ask. Shop. Discover. At your local xfinity store today. Oh no, here comes gthe neighbor probably to brag about how amazing his Xfinity Customer Service is. Im mike, im so busy. Good thing xfinity has twohour appointment windows. They have night and weekend appointments too. Hes here. Bill . Karolyn . Nope no, just a couple of rocks. Download the my account app to manage your appointments making todays Xfinity Customer Service simple, easy, awesome. Ill pass. Anna its 1 00 p. M. In london, 8 00 a. M. In new york. Im anna edwards. Welcome to bloomberg markets. Especial addition of the program because of the holiday in the United States. Plenty talk about globally. Lets talk about Global Markets for you. Ive got the European Equity market for you. A little bit further than halfway, and some downside to the European Equity market, down by 0. 1 . Let me have another quick look at the breaking news for you. The imf coming through with these forecasts around Global Growth, interesting on this day when we have no u. S. Trading. 2020 Global Growth forecast of 3. 3 from 3. 4 in the month of october. The Downside Risks are still prominent, but less skewed, this in the context of having seen a phase i trade deal being signed. Maybe not enough to take all the negative off the table. We are also going to talk to Gita Gopinath of the imf a little later on in the program from davos. European equity markets down by 0. 1 percent, the ftse 100 down by 0. 3 , as is the cac 40. Some of the comments over the weekend perhaps instrumental. We should also focus on what is going on with oil. Theres been some developments in iraq and libya. 65. 38. Our bloomberg voices are on the ground at the world Economic Forum in divorce. Francine lacqua is speaking to the in davos. Francine lacqua is speaking to the fidelity ceo Anne Richards. Francine thank you so much for joining us. The imf lowering their growth ofecast to 3. 3 instead three point 4 . What are your main risks in 2020 . What the fed signaled last year when it moved from a tightening stance to a loosening stance. In a way, we shouldnt be surprised there has been a little bit of a pullback. But what we saw last year is how to thatmarkets respond increase in liquidity that came from the loosening stance they adopted. I think our feeling for this year is that we are still going to be in a scenario to escape recession, but nonetheless, i think it wouldnt be a surprise to us if we were to get ahead of the pointing. Francine are we going to see a lot of volatility in the market . We started 2020 with quite a volatile environment, but given the geoPolitical Risk, the market held their own. Anne 2019 was a terrific year for just about every asset class you could imagine. So when you had a year that where youve seen, and a way, as that prices rise probably ahead of earnings, youre always a little more vulnerable to some degree because people are locking and profit. I think that is going to be a bit of the theme. Weve also seen some of the geopolitical tensions that have waxed and waned. Ifwouldnt be surprising we saw market setbacks, but it doesnt feel like the pieces are in place for a substantial Market Correction unless there is something meaningfully different in the picture. Francine you always talk about sustainability. Blackrock saying last week they will not only look at sustainability, but look at the company. It is much more cane creek it is much more concrete action. Change . Your company you seen across the industry seen across youve the country a meaningful attempt at collaboration across climate, whether it is related change. I think it is really helpful and beneficial. The industry isnt going to have all of the answers to this on its own, but it is clear that it has a major part to play in encouraging the businesses we taket in to really seriously some of the stuff we will be talking about this week at davos. Francine there is such a big chunk of the markets that is passive. That is in vince one of the tools anne one of the tools you always have is the decision to invest on index funds, but it is a , our view is that youre first starting point is engagement because it it its when you really have leverage to talk to management. You can get into the room, bring your views really only push them to change in the direction you feel they need to, and every company is different on that. For us, the power of active management is being able to have those questions, so we will ultimately invest in a company if we think we are not getting the traction we need. For us, that is a last resort. Passive funds ever have that tension, so they are always holders unless the index itself changes. Francine is 20 20 the year of active investment coming back is 2020 the year of active investment coming back in force . A positive year last year in terms of flows. Youve got the right capability that meets a certain client demand and performance is good. I think thats one of the dangers of looking at the average companies and looking at flows in aggregate. 2019 for us was a very positive year. Into into acted active equity, but into fixed asset as well. We think if you have developed the capabilities a client needs, theres still a lot of have to still a lot to face up there, but weve got to a knowledge that passive is a threat. Seen, we peaked at some thing like 17 trillion negative bond yield. That has come back a little since then. Sweden has normalized rates since then. I dont think any of us who watch bond markets would say we are out of the woods there yet. The central bank to discussions around Monetary Policy are beginning to get really interesting. Had a great piece of analysis recently about whether deposit versus lending rates would be an additional tool. I think theres some real imaginative work beginning to go on in terms of Monetary Policy, which might help with some of that, but nonetheless, negative rates are a very depressing effect on Consumer Behavior in the economy at large. We want to get beyond the point where negative rates have become a reality for quite a few markets around the world. Francine what do your clients ask right now . Wee theres a lot around talked about, and 1 am i Fund Managers actually set a few weeks ago said that in the entirety of his career, he had Something Like three or four. Areers until last year it is fascinating to see that flip. Be ai going to\ strong theme for some time to come. We are seeing thematic funds or people are not just looking for , but things that really touch specific themes. It could be around climate. Water and waste is another one. That is another area. Finally, how you can put the Building Blocks together to deliver something that produces some level of yield without too much volatility, given the fact that bond markets used to provide that and dont provide that anymore. That is a constant demand around the world. Doian do you francine you see people not wanting to be invested, going to cash . In switzerland, it is a real challenge. One of the areas where we see clients beginning to look more closely again is in asia, emerging markets more generally in a part of the world where you get some sort of positive real yield, where people can see there is an underlying gross characteristic in markets. We are definitely seeing people look a little further afield in the quest for yield, but none of these things are riskfree. They are different risks. Francine where do you see the biggest risk coming from . Anne i think theres two things which i would call out. The first is just the risk that markets have moved ahead of the underlying economy. The u. S. Market has been pretty concentrated in the tech sector. Whichk theres an element is a potential risk. I think the more broad ones specific to 2020, we see when we look across the landscape of liquidity isat becoming a bit stickier. We are seeing capital being allocated to being almost trapped within individual legal entity, which means we are getting this odd spike. Rico markets, currencies have seen this rico markets,urrency markets have seen this and i think this remains a risk. Francine if you look at the repo market, they say it was something that was a little bit mechanic that the fed has now fixed. Anne when you talk privately to central bankers, they would express a little more concern about this then they do publicly. I think its because nobody is quite sure if a series of videos and craddock event of idiosyncratic events are related or not. Are they evidence of too much stickiness in the system, or is it just happenstance . I think because we know what it feels like when the market finds the liquidity it needs at the. Ight moment impeded some of the flow of capital. I think that means we have to be really live. Maybe it isnt idiosyncratic. Perhaps we have to be ready to move quickly if something does happen. Francine Anne Richards, thank you for a great conversation. She is the chief executive officer for fidelity. Anna thanks very much, francine. Anneine lacqua speaking to richards, the Fidelity International ceo. Lets get a check on the bloomberg first word news. Lets go to leighann gerrans. Leighann baghdad Security Forces have fired live rounds and tear gas at antigovernment protesters. At least 13 demonstrators were wounded come of the latest in the series of uprisings that began last october. Thousands have taken to the streets to protest government. Orruption and outbreak of pneumonia and Central China has now gotten even bigger. More than 200 have been diagnosed, at least three have died. Health experts say evidence shows the illness spreading from people to people. House democrats and the president s legal team filed a first formal brief for the impeachment trial over the weekend. Conduct made his him a threat to the nation and the rule of law. The trial begins tomorrow. 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. Im leighann gerrans. This is bloomberg. Anna thank you very much. Coming up, oil climbs as political unrest in two key producers weeknights concerns over geoPolitical Risk. We will get the latest on a rock in libya on a rack in libya on iraq and libya next. This is bloomberg. Anna live from london, im anna edwards. The price of oil has jumped back above 65 a barrel as tensions in iraq and libya reignited concerns oversupply. With us now is Annmarie Hordern. What is it that has caused to spike up . Annmarie in libya, we have khalifa have to are we have r marching. Ta , it has become a powerhouse over the last decade, so the window of worry that supply could be worse for iraq is really the trouble. We are only above 60 cap dollars a barrel above 65 a barrel. Anna we see Oil Prices Spiked up on geoPolitical Risk, and those spikes are not sustained. Annmarie this is what we have seen in the last six months. The simple answer is theres just too much oil, and notably everyone talks about u. S. Shale. It is a very different market than 5, 10 years ago. Anna Annmarie Hordern with an update on the oil price, thank you very much. Lothar mentel of tatton investment joins us now, as we watch the conversations unfold in davos. Very good to see you. Let me pick up on the oil story. I talked to david owen earlier on and asked him what oil price for an economist, and he said below 50 and above 80. As an investor, what are you looking for in the oil price at this point . Lothar we are looking at it quite similarly come about at this point it is not one of the big pivot points unless it really changes. As we all observed come a pretty major things can happen and not that much happens to the oil price. Why is that . It is not so capacity constrained anymore at the moment, and therefore it is not going to derail the Global Economy. Anna maybe that is some good news, the fact that oil prices managed to sustain higher levels. The imf and the last 20 minutes or so has predicted the World Economy will strengthen in 2020, albeit at a slightly slower pace than they previously anticipated. Trade tensions and tensions in the middle east part of the story behind this. What is your expectation for Global Growth . Lothar it is really interesting that since before christmas when we got all of the 2020 forecast reports, things seem to have moved on slightly. That is not in the case of the imf to the down. It is more to the, well, what if it is all going to play out a little bit better then what is currently forecast . So we are seeing a bit of a turn in sentiment to the upside, despite that trade deal not looking particularly exciting. It looks more like a trade troops. Truce. A trade if it really leads to an uplift in emergingmarket currencies and the dollar coming under slight pressure, that is really some stimulus for global trade. As we know, that was the lacking factor last year. Everything could look a little better than it does in the market. Anna if you see brighter signs of the manufacturing cycle turning, do we expect to see a turn in that cycle, or have we seen it already . Lothar its not there yet. We can see a turn in asia, but in the u. S. And europe, no. That is quite disconcerting. I would agree with Anne Richards that there is quite a possibility that we get a bit of a Market Correctional wobble at some point in time. The difficult thing for our strategists is we cant be quite so sure about it because if we for globaln manufacturing and trade, it could just be another thing like we have with the middle east. Anna the top down story as part of it. If you look at the micro picture, Anne Richards was making the points that one of the risks for 2020 that markets may have moved too far too fast, near alltime levels on u. S. Equities before todays market holiday. That is what happened in the absence of any proof. Is that a vulnerability you are aware of . Lothar that is a vulnerability this could end up in a bit of a wobble. But in the absence of a recession, theres not much talk about a recession chance, youre thinking, well, it feels uncomfortable that is so high, where are you going to react . We could actually see some pretty high multiples for a while, while slowly the earnings come back up. Anna thank you very much. Lothar mentel of tatton investment stays with us. Stick with bloomberg. We mentioned the revision the imf has made to its Global Growth forecast. We will speak to the imf chief gopinath froma davos. You thep, we will give top performers for hedge funds, next. This is bloomberg. Anna live from london, im anna edwards with this special edition of bloomberg markets. Hedge funds made 178 billion for clients in 2019. Joining us now with analysis, bloombergs hedge fund reporter. Lets talk about some of the winners. Who has come out well in this piece of analysis . Reporter anyone who had Long Exposure last year obviously did exceedingly well because the s p 500 rose by almost 31 last year. Capital, of edgerton han. Chris all of these Fund Managers were exposed to the rising market. Anna did any of them do as well as the rising market . Nishant that has been a longrunning thing now in the market. We are in the middle of the longest running bull market in equities, and many of the hedge funds have given up their and are maintaining long portfolios. That sparks an interesting question for hedge funds, that while doing so, they havent fully captured the long side of the markets. Butif merck it crashes if the market crashes, they are in a good position to protect the downside. We cant say it for all of them, but many of them are behaving like glorified, expensive mutual funds and etfs, basically. Anna we will keep that in mind. Thank you for bringing us this kumar bloombergs deshawn bloombergs nishant kumar. Still ahead, we speak with the head of canadas biggest pension fund, mark machin. He will be joining us next. This is bloomberg. Anna live from london, im in at work spirit i am anna edwards. U. S. Markets out of action. We are trading in europe. A mixed picture coming through with the dax outperforming other major markets. The stoxx 600 under pressure. Slight negative moves. Rent is up 65 a barrel on that geopolitical tension in iraq and libya. A downside move in the pound. Ongoing conversations about how quickly we will see a rate cut from the bank of england and the underlying weakness in the u. K. Data story. Interesting to put in there the german 10 year yield. A lot of the conversation in davos focusing on Interest Rates and how they will be sustained. Whether we will get that back to zero is an interesting talking points. Rates a bigerest part of the conversation with ann richards. We will be back on the slopes of davos talking about pension funds. Negative Interest Rates will feature in that conversation. In the long view of history will we say this is an experiment that was worth it or an experiment that did not deliver . Your thoughts. We are still there in some european economies. In the longterm history we will say it was what had to be done to overcome the aftermath of the financial crisis. That has been 10 years ago and there is an argument the Collateral Damage the ultra low Interest Rates are causing is perhaps as much as the positive it still provides in stimulating economic activity, particularly towards the banks not functioning as well as they should and would in europe. If we can at least get the yield curve to steepen and longer maturities in positive territories, that would be a good thing. Anna are you betting we will get the bond yield back above zero anytime soon . The poor of europe seems to be moving in that direction. Bundr we are betting on yields going up. Whether the german tenyear we get through the zero, that manufacturing in general in germany. Anna i spoke to david owen of jeffries. He was saying european Central Banks will be able to get out, but they will need fiscal stimulus in order to get Interest Rates higher. Is that the way things will play out in 2020 . Lothar it would be great if they did. When you look at germany at the moment producing a budget surplus, a good part of that is because they did not manage to invest the money last year. I cannot see the fiscal going that quickly. My hope in physical is relatively low. There will be some, but if it comes to the help at all it will be were it will be more from the sentiment side. If the government is blinking plans to invest maybe we can coerce them into more business investment. Anna will it be part of the story in the u. K. . Lothar it should be. The north is certainly expecting not handouts, but serious investing. Even here the question is still how quickly can you get the rubber on the road. Anna how quickly do you think the bank of interests the bank of england will be cutting Interest Rates. David herod thinks it should not be the bank of england cushion in the economy at this point. The market is increasingly positioning itself around Interest Rate cuts. Lothar we are pretty certain they will cut a quarter of a percent by the end of the month. That is more to participate in hopefully the upswing we will have an activity levels in europe while we are still part of the club. U. K. Depends how much do we participate in that demand that comes from europe. The lower sterling is, the better. With sterling higher, the lowering of the rate should help us participate in the u. K. In any upswing there is. I do not expect there to be much after that. We will hopefully see Economic Data improving. The bad data came from the raab to the general election. Anna what will be the uptick in the euros m data in the eurozone data, that is what the bank of england is trying to make the most of, given we have seen the trade one the phase one trade deal signed, what kind of upswing will there be . Lothar we are looking for pmi to get better. Once we get closer to 50, once the rate of change starts, it does not have to be over 50. Anna thank you very much. Good to speak with you. Joining us from london. Whereondon to go to davos bloombergs sonali basak is with Market Basket mark machin. Sonali thank you for joining us. A big theme everyone is talking about is slowing Global Growth. How are you transforming your investment portfolio to account for that. Mark there are mixed views about slowing growth. When you look at the views of the generally economists on the street, there is a view that maybe this rapprochement between the first and second largest economies in the world may create a platform for renewed growth. That is one view. Our view is more of the view you are suggesting, that on the surface that may be a rapprochement, but probably these tensions will continue and therefore will create weight on increased Global Trading and Global Supply chains and technology and many other things. , there is nowhere to hide from that. You can diversify. We are diversifying in many different markets. Sonali does that mean it is time to be selling . Mark if you sell, you have to hold something. For us, we would have to invest in something else, whether that is cash or a physical commodity. If we have a portfolio designed for longterm investing, you want to be deployed, but we want to be invested in a broad range of assets, and assets that may perform well on the slow market. Some may perform less well. We have to diversify the portfolio. That is typically the strategy. Sonali youve been at the forefront of private equity investing. What does this mean for the private equity portfolio . Does it mean it is time to exit some of these positions while the market is hot . The trend with private equity is still pretty robust. When we look at expected returns in different Asset Classes, private equity is still robust. North america private equity, to some extent european private equity, asian private equity is still a decent asset class to be invested in. I continuously ring the alarm bell on not to be too invested in illiquid assets. Inf hour portfolio is illiquid assets. We are comfortable with our risk model. I do worry about the expansion of funds like ours around the world into private illiquid assets and what you could see if there was a large downmarket, and then people reline the liquid things to sell. If everyone is selling the same liquid at the same time, risk models trigger. People have to be very careful to make sure they truly understand their liquidity position, understand if the thing they are relying on turns out not to be liquid and they can still pay their pensioners were there university. Sonali i am glad you bought this up. Are you saying many more in the industry than people think are overextended in terms of illiquid assets . Mark it is a trend i would encourage people to keep an eye on. It could cause a significant lurch down and exacerbate the lurch down when the lurch down happens. Horizon,nothing on the i am not sounding the alarm it will happen tomorrow or next week or next month, but it is something people should be careful about. Isis going to create it one of those things that could create a systemic issue down the road. Sonali and the private equity issue, that is one place we have not seen a lot of pressure. At one point does that have to give . Financeme something in that has maintained its speed over the last 40 years . The argument is it continues to create value for investors. We are one of the biggest private Equity Investors in the world. We also do a lot of direct investing alongside those funds, the funds we have great relationships with. That is one way of reducing the feed rag for us. It is showing little signs right now because of the continued into more asset owners like us are reporting more capital into private equity. At some point therell be pressure, but not on the horizon. Sonali right before we had this conversation you venture you mentioned Venture Capital is one of the next big exciting places in the market. How do you feel about the Asset Classes after some of the big hippo some of the big hiccups in the ipo market . Mark i have also said this is not a market call. If anything, it is the opposite. We decided to go back into it this time because we want insight into all of the companies that have been private for longer. Weve reached out the accelerating speed of disruption in the world. Some of the earlier companies were a little less clear eyed on the changes then we would like to be. I would not say we are blind, we have a lot of different Investment Strategies to get closer, we have a thematic investing strategy, but getting into Venture Capital is one way we hope we can partner with them to get better inside. Davos world at the Economic Forum we have been talking about sustainability and Climate Change. That inou deal with your own portfolio, especially when it comes to fossil fuels in the Big Oil Companies . Mark this is one of the most important issues in the world. We identified this 11 years ago as a major issue for longterm investment. Our job is to identify all the possible risks and investments we make in the portfolio we have, whether they are physical changes, whether they are regulatory changes, Consumer Preference changes. All of the changes create risk. We need to, for every major , be assessed that the teams identify all of the climate risk so we can make sure we are being fully compensated. Sonali thank you so much for your time. Anna, back to you. Anna thank you so much. Machin. Asak and mark interesting conversations. Coming up, we will look at the impact of the oil price lump on the largest crude producer outside of opec. We will talk about the broad evan flow of oil prices with the commerce whor of is joining us shortly from davos. This is bloomberg. \ anna live from london, i am anna edwards. Yemen is the Largest Oil Producer outside of opec and has been battered by the slump in oil prices. , we are in davos with the yemeni minister of commerce. Oman also in the news after the passing of its alton. Omans minister of commerce and industry joins me now. How will oman navigate the turmoil of the region . Thank you for having me. Majesty has been sworn in just the day the announcement came over the passing of his majesty. He made a statement to oman and the world he would be consistent with the policies of oman which have been there for 50 years and ofwould carry on the work his majesty, and his relationship with the world would be unaffected and he would expand on economy and add more work to the private sector. This message is clear. Omanshes out and shows commitment to the world in the region. We believe in the security of the region. We believe in stability. We seek peace. We contribute toward peace. At the same time we are and inward looking ancient. We also look at and inward looking nation. Consistent and reform at the same time. Consistency, about are we talking about peace or policies Going Forward . Alial consistency in the values of oman. Through history oman has been outward looking, it is a welcoming nation. Consistent in that way, that it is wall for peace and security will remain. Reform is inevitable because of the crash of oil prices, our gdp dropped tremendously. To 26 from 50 billion billion in 2014. Now we are back at 30 billion and now have to get economic reform and enable the youth in the private sector to carry the future. His majesty has also been the head of vision 2040. He is very wellinformed, and he is looking forward to it. Is oman comfortable with where oil prices are and what oil prices would help the economy revive . 26 was not helpful. Now we are at 65. Very helpful. We were hoping to cross 70, but even if that does not happen, we are now becoming to a budget and we will be running a budget like that. We did a bit of restructuring. People are paying the fair value fuel. Major manufacturers are getting used to it good getting used to it getting used to it, but what would it take . 65 oil . The economy is getting revived at 65, but 70 would be a comfortable price for those of us in the region. And evenat 65, between 60 and 65, we are able to look at manufacturing more seriously, tori jump, fisheries tourism, fisheries, and logistics. I would like to talk more about logistics. We have a big theme in davos on logistics. We have five airports and have spent 3 billion u. S. Dollars on them. We have roads where we have spent over 6 billion. We have three major ports outside the strait of hormuz. We are very well situated for logistics. How concerned are you you are achieve your gross target for the year . Any risks that would have to be revised downward . Unless Something Big interrupts the neighborhood, we are looking at 2. 5 to 3 annual growth. I think we are able to do that, because if you look the history of oman since 1970 we are on a growth rate of 6 . It only hurt when we saw Oil Prices Slump from 114 u. S. Dollars way down to 26. 25. We were able to remodel , nowlves and reengineer what we are looking at is the new changes brought by the new Foreign Investment in oman. Oman has restructured a sector in 2004. Because of that we are able to grow at 15 instead of 5 . Just one more question. What you intend to when you intend to implement stat to help your finances . We are looking at 2021. This is something we do not like but something we have been lobbying for. Omans minister of commerce and industry, thank you for your insight. There you have it. Back to you. Anna time for a flash. Look at some of the biggest business stories in the news today. Awash with is natural gas and it is about to get worse. Despite depressed prices, shale gas output keeps going. Shale drillers are pumping so at that level, u. S. Producers do not make any money, enforcing the wave of multibilliondollar writedowns, layoffs, and spending cuts. Apple ceo tim cook says everyone knows the Corporate Tax system needs to be overhauled and he is hoping the debate can take place at the global level. He spoke in dublin. Apple is appealing a 14. 4 taxes frome for back the European Commission. Airbus is looking for a way to guard against falling ticket prices. Its new derivative space Trading Platform could also save growth. Chinas airbus subsidiary will trade futures and options that captures fair fluctuation. That is your Bloomberg Business flash. Anna thanks very much. Still ahead, we will look ahead to what you can expect from the world Economic Forum this week. It takes place in switzerland. Will give you our davos diary, a look at some of the scenes and some of the great guests. We will talk about tomorrows lineup, which includes Steve Schwarzman of blackstone, carrie lam, the chief executive of hong joins, as well as representatives of the south african government. This is bloomberg. Anna welcome back to bloomberg markets, special edition for this Public Holiday in the United States. I am anna edwards in london. , investors, and politicians will be discussing the biggest topics and looking ahead to a new decade. Bloomberg sonali basak is on the slopes of davos and she is with us with the davos diary. I know inequality is a big theme. Sonali Climate Change is a huge theme but inequality is something we are seeing executives unclear how they should grapple with the issues. Oxfam came out with a report saying the richest 1 is wealthier than 60 of the worlds population. Meanwhile, the ceo, what is their role . I talked to matthew prince, the ceo of one of the upandcoming Ipo Companies and he said there is a real risk to ceo as a pungent. We will see as a pundent. We will see these people grapple with what role they are supposed to play. Anna inequality and Climate Change both to the four. Both to the fore. Certainly the Climate Change issue seems to be moving on quickly. Thank you ray much to bloombergs sonali basak. Coming up, a lot more from davos. Economist the imf chief economist will be live from davos. More on that shortly. This is bloomberg. Guy 2 00 in london, 9 00 in new york. I am guy johnson. Welcome to bloomberg markets. U. S. Ean markets are open, markets are closed. Volume light in europe. Down 40 off where we would normally be. Equity markets are marking time until we see the return of the u. S. Tomorrow. Good stories down dragging is lower, some of the luxury stocks are trading software. The reason for that, concern about what is happening with this virus in asia. The pound is softer as well. A big day for sterling as we try to work out whether or not the bank of england will cut and we have issues in iraq and libya. Both of those factors are setting the price of crude lower. Within the last hour we have seen the imf downgrade its forecast for 2020, but it is also talking about the fact that risks look scary. Lets get a sense of where we are. Bilal hafeez is a ceo and inner of macro five. Bye joined shortly bloomberg opinion. Imf forecast looks in line with where the market is, but there doesnt to be a sense growth is stabilizing into 2020 there thatseem to be a sense growth is stabilizing into 2020. Bilal a large part of the stabilization is the trade piece between the u. S. And china. Given this is an Election Year i think trump is unlikely to want to rock the boat. That is a force of stabilization. We get pmi data for u. K. Economies, that will show whether there is a bounce. Thee look at the u. S. Side, housing sector is starting to rocket. Guy the data last week is solid. Gita that shows the bit bilal that shows the fed. Us in his is having an effect on the economy. All of these seem to show the economy is stabilizing. At the moment at least, for the next three to six months we are at a point of stabilization. Convincehat going to farmers, industrial ceos they want to invest . Purchases,ltural theoretically the economy should be stabilizing as well as this hold, but will it be enough to convince Key Stakeholders they want to put money to work. If that does not happen, the industrial sector looks like it will remain quite weak. Bilal i think it will be more tentative than a forceful shift toward investment. One issue is we do not know what the next phase of the deal looks like between the u. S. And china, and we have an election which could mean we get a democratic candidate in power. Year,e it is an election that will hold things back somewhat. I think you be tentative investment rather than anything forceful. Guy what the corporate earnings of look like . Stabilization there as well . Bilal some stabilization at the moment. More positive rhetoric around improvement in the trade talks. Also generally speaking, the Consumer Sector is holding up quite well in most parts of the world. That is some stabilization. Guy there is consensus you want to invest outside of the u. S. In 2020. Is that your view . Bilal my take is that while that has been the narrative for a long time, performance wise it has not worked. U. S. Equities has typically outperformed the rest of the world. Also you have to remember more than half of the earnings of u. S. Companies is attributed to foreign earnings. , u. S. Want the global pay tech in particular, u. S. Companies can capitalize on this. Im a big believer in trying to overweight the rest of the world versus the u. S. Guy part of that narrative is about the dollar. Where you see that going . Bilal the dollar is fairly range bound. Adult perspective. A doll perspective. A dull perspective. We are unlikely to see Central Bank Action that will drive bureau higher or lower. Europe has a huge surplus. Eurodollar is somewhat range bound. Many emergingmarket currencies could do well against the dollar. You could see dollar weakness against many em currencies, and as a result flows start to pick up in the em market. Guy michael joins us from bloomberg opinion, as to see you. Nice to see you. Lets talk about what you see 2020 looking like. The imf is more pessimistic on growth, but seems the Downside Risk is looking tamer. Michael the imf are sporting the obvious and they are never particularly good of it spotting the things which may be good for the upside. I think the imf downgrade is logical, always logical, but it is always after the fact. Interesting to hear what my colleague to the left is saying. There are some bright spots. Proofk the imf may be under optimistic. Guy what is the reason to be more optimistic . Marcus i see more inflation. I see the trade talks are in phase one. That will take a hand break off the u. S. Economy in particular. What that means for emergingmarket countries and more important. That adds 15 to u. S. Growth, the fact that there is a not that adds. 5 to u. S. Trade growth. The u. K. Is in a great place. Europe will suffer, we shall see. They have had a lot of hammering. Guy i thought europe was the high beta trade on some of this. Marcus u. K. , i think. Germany has ongoing problems. We have had the flu, the rhine ,evel too low, the china thing a sequence of four or five years which has been bad news for germany. There may be a problem with the german manufacturing model. Guy you talk about the fact that you see stabilization in ,he European Data in particular the pmi manufacturing date of germany is weak at the moment. Later in the week do we start to see some indications that bounces back . Bilal we should start to see stabilization in the European Data. Some of the broader pmi has been much stronger than the manufacturing pmi. China is recovering and that should provide support to europe. There are structural issues around the auto sections in particular as the world moves to electric cars and so on, that does harm the german auto sector. Generally speaking, with china stabilizing, that should help europe. Very elegantly put, but the point was china is stemming the tide of the inevitable. 6 . Is only the point is they are able to keep it at 6 . That leads to two important things for europe. One is the capex drive of china is over, because they do not need it or they can make it themselves. The most importantly, a u. S. China trade deal is bad news for europe. Where they not going to buy from . A lot of that will head through to europe and related products that provides china. Europe will struggle, particularly germany. Hafeez joining us from bloomberg opinion. Lets take on bluebird first word news. On bloomberg first word news. The International Monetary fund predicts the World Economy will strengthen, but not as much as previously forecast. The fund says growth will accelerate from 2. 9 to 3. 3 . That would be the first pick up in three years. The imf trimmed the forecast from last fall. In baghdad, Security Forces have fired live rounds and tear gas at antigovernment protesters. At least 13 of the demonstrators were wounded. Is the latest in an uprising that began last october. Thousands of iraqis have taken to the streets to protest government corruption. An outbreak of pneumonia in Central China has now button even bigger. More than 200 people has now gotten even bigger. More than 200 people have been diagnosed with the virus. There is evidence the illness is splitting from people to people. President des in trumps impeachment trial have previewed their argument. House democrats in the presence legal team filed their first legal brief. Democrats say the president s pattern of misconduct made him a threat to the nation. The president s lawyers called the impeachment and attempt to overthrow the 2016 election. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. I am laura wright. This is bloomberg. Guy thank you. Coming up, the world Economic Forum returns to davos. We will bring you interviews from the global gathering of finance leaders. Oil trimming earlier gains. Supply concerns featured. We are talking about iraq, talking about libya. This is where crude is now. Brent trading up point now in. 9 . Nt brent trading up this is bloomberg. Guy from london, im guy johnson. This is bloomberg markets. Lets talk about what is happening in the markets, and we need to talk about the oil story. Here is annemarie horden. Annmarie the ftse down. 4 , s p futures are lower as well. We are seeing muted volume this morning, a little bit lower as we have the Martin Luther king jr. Holiday in the u. S. The u. S. Markets are closed. The stoxx 600 being brought down by retail and travel stocks. It is a cyclical move as we have a lot of event risks today. It is the calm before the storm. We have a lot of fresh corporate results this week, on top of that Central Banks coming up. Tomorrow the boj, thursday the bce, and executives are meeting in switzerland. Any move in terms of policy potential could move some of the markets. We have to talk about oil. Brent crude trading above 65 a barrel and this comes as we have geoPolitical Risk and supply disruption to libya and iraq. On libya, the National Oil Company has declared of force majeure. The eastern leader military the Eastern Region military leader stops the courts. It could be days or weeks depending on when that will come back online. The second and iraq, a minor disruption but it could be a window into wakeup call to what could be bigger supply disruptions. Iraq is the secondbiggest part of opec. They have 4 Million Barrels a day in the ih has said last week they remain vulnerable. Guy thank you very much indeed. Annemarie on the markets. The imap trimming its forecast for Global Growth. The imf. Lets go to the Economic Forum in davos where we are seeing the imf announcing. Bloomberg is standing by with the chief economist. One of the guests talked about how the imf was under optimistic, a change to a case of the imf being over optimistic. Jeter drop in math is the imf opinath is the chief economist for the imf. Gita the biggest cap comes from india. We had significant revisions to growth in india for 2019 and 2020. That explains a vast majority of the downgrade. How did you factor in the phase one deal . How did that factor into your calculations . Gita that had an impact on numbers for china. We upgraded china. 2 for 2020, and most of that came from the u. S. China phase one deal. There seems to be a lot of optimism about the deal, but having said that the u. S. Maintains tariffs through november. That is not good news. But wee welcome the news also pressed for more on this front. There has to be a more comprehensive deal. It has to be durable and longlasting. That wills returned, undo improvement in policy uncertainty we have seen recently. It is a bit of a way to watch at this point. Having said that, what are the Downside Risks to your projection and how likely are we to see that . Gita the trade issue remains an important one. We have had positive news but trade could spread to other areas. We could have more tensions between the u. S. And the eu, china trade tensions could return. In addition to geopolitical fairly widespread social unrest in many countries. How about the u. S. . How resilient is it . Should we be talking about recession . Gita the u. S. Economy will slow slightly. It will be 2 in 2020. Itll will be a very healthy risk to growth. They have record low unemployment rates. Spending is robust. We should expect it to slow towards its potential because fiscal stimulus will fade. The fed on hold is the right move . Gita we believe that is appropriate given where inflation is. How much capacity does inflation have should the u. S. Sink into recession after the election . Gita the typical recession has been more than 500 basis points in rate cuts. That kind of move does not exist right now. The central bank has been experimenting with unconventional tools like quantitative easing. The evidence suggests those have a scene of get affect on the economy. There is more space left on that front. It is important for fiscal policy to plan important role. What about the banks and asia . Are they in a good spot if a recession were to hit . Gita there are many emerging markets that have had inflation declining over time. They certainly have more space in terms of cutting nominal Interest Rates. At the same time, one needs to be careful about not generating financial instability risk in the system. There countries needing to worry about that. Atwhen you take a look markets, there seems to be some euphoria. The s p keeps testing new highs. Is there a risk investors could be disappointed in the month ahead . Gita the euphoria from the market comes from the very low Interest Rate environment. The very low Interest Rate is probably the number one factor driving up stock prices. Three months ago it looked like earnings forecast were more pessimistic. We are seeing more optimism there on the earnings side. Marketshere are some that are slightly overvalued, and if there were a reversal in financial conditions, those can have an impact. Right now, we find the stabilization and we expect the low Interest Rate environment to stay for long. Are you watching oil prices . Hovering about 60 a barrel. You talked about how india and how you are concerned about how it is progressing. How does that factor into your calculation . Gita to give you the number in our forecast, we have assumed the price of oil to be 58 a barrel. With the middle east tensions, we expected to go up three dollars or four dollars a barrel. This is not a large change. The reaction in terms of Market Reaction has been relatively muted. We do not know how the tensions will work. It could become far more severe. These prices could go up more substantially and countries that rely on imports like india, it could affect them significantly. At what oil price would you have to reconsider the numbers you released today . Gita i do not to give a number. It is not just a price, but if theres a volatile swing over 10 a barrel, those have an andct for both exporters importers. A call for been governments to tap physical measures to drive growth Going Forward. Do you see 2020 being the year where fiscal measures will go back up . Gita some governments have started implementing fiscal measures. The question is how much should they be doing. The environment is stabilizing. There are economies around the world that need to raise potential growth. The way you look at it is you are able to borrow negative Interest Rates and youve projects that will give you a positive return. This might be the time to do it. A costbenefit analysis. That is an argument we still make. It is good fork countries to prepare and have projects in the pipeline if and when there is going to be a more severe slow down. I am not saying there will be, but if there is a more severe slow down, they can hit the ground running faster than in the past. One question before we let you go. What is the worst Case Scenario for the Global Economy . Gita what is doing a lot of support to the Global Economy is financial conditions. There are many parts of the world where the debt level is high but because Interest Rates are so low it is not posing a problem. The question is suppose there was an escalation of geopolitical rest. Suppose trade tensions grew wider. Those trade tensions could change. Given where we are with the debt levels around the world, that could be a trigger for risk, which is why we emphasize the importance of macro regulation at this time. Thank you for your insight. Opinath, imf chief economist. Guy thank you very much. Still ahead, more from the world Economic Forum. This is bloomberg. Guy live from london, im guy johnson. This is bloomberg markets. Time for your Bloomberg Business flash. Renameis being urged to the 737 max. Why . To deflect travelers safety concerns. The founder and chairman says the brand is damaged after those fatal crashes and the long grounding. He has asked boeing to get rid of the word max. , bae systemsspace has agreed to by u. S. Defense Technology Assets worth 22 million. Those assets have been made , so bae is buying military gps businesses, and a bunch of businesses out of utc. Airborneing raytheons tactical radio operation as well. In the u. K. , there are signs the conservatives when in the the decemberin in election has boosted homebuyer confidence. Homebuying increased more than any december on record. It rose to an average of 40,000. In this country, we do use pounds. That is your business flash. Still ahead, we will hear from Kevin Cirilli. He is on the road with the u. S. Secretary of state mike pompeo. Yesterday in berlin, now in columbia. Well talk about what he is doing. That is coming up. This is bloomberg. Guy live from london, im guy johnson. Lets check in with bloomberg first word news with laura wright. Laura President Trump is heading back to davos. He will deliver the opening remarks tomorrow. He will celebrate his trade deal with china while warning against socialism. At the same time, his impeachment trial will be getting underway in the senate. In norway, the Prime Minister has lost the Majority Coalition he fought to build. Government quit the over a disagreement to repatriate a norwegian woman who fought for the islamic state. In richmond, virginia, authorities are bracing for a protest by thousands of gun rights activists today. They will demonstrate against the democrat plans to past guncontrol legislation. Virginians governor has declared a state photo of emergency a state of emergency. Militia groups and white suppresses does it militia groups and White Supremacists are expected to join the activity. Historic hurdle towards its first crude flight. The flight launched from Kennedy Space center. Spacex demonstrated dragons ability to jettison from the flight during an emergency. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. Wright. Ra this is bloomberg. The u. S. Secretary of state mike pompeo is now in columbia. He has been meeting with the president and is also expected to sit down with the venezuelan opposition leader, who has defied a travel ban. We will find out how that takes place. Kevin cirilli is on the road with secretary pompeo and joins us from bogota. From berlin to bogota, lets talk about the timeline. What happens in berlin is moving the oil markets. We saw the talks around what is happening in libya. Lets start there and then talk about the venezuelan story. What approaches the u. S. Taking pompeoa and do secretary see a chance for progress . At the moment, the libyan oil is getting locked out. Kevin the u. S. Perspective would like to see the United Nations take the lead. Secretary pompeo telling reporters from berlin to herein the united he wants nations to take a role in the process. Angela merkel hosting a conference that felt haphazardly thrown together. There is division amongst the europeans, division in russia and turkey as a relates to libya with the general and the Prime Minister agreeing to put together a list of names to report to the United Nations to form some type of committee with the hopes there might be a more permanent ceasefire in the works. Guy lets talk about what you are doing in bogota and what the secretary is doing. He will meet with juan guaido later on. What our expectations looking like . Guaido, this is the president of venezuela that the u. S. And 50 other countries recognize, anticipated to attend a Counterterrorism Forum at a Police Academy in bogota. Last night, i asked secretary pompeo for an update on u. S. Venezuela policy. Take a look at what he told me. He is the duly elected leader in venezuela. I look forward to having a meeting with him. Our mission in venezuela has not changed. We are convinced the venezuelan people deserve a better 2020 than they had in 2019. Millions of people have had to flee the country. Our mission is to continue to work through all of the diplomatic channels to achieve the outcome President Trump set out 18 months ago. Kevin meanwhile, there are reports juan guaido is looking to attend davos. There are also reports the u. S. Is considering additional sanctions. Secretary pompeo told me he would like to meet with juan guaido if theyre able to make that work. Guy that would be a fascinating meeting. Chief washington correspondent Kevin Cirilli joining me from bogota. Hafeezback with bilal and Marcus Ashworth. Early on, the economist talking about trade being the biggest global risk. At the moment, it quiet. From a geopolitical point of view, is it the biggest risk and what are the risks of it resurfacing in 2020 as a major disruption for the market . Bilal it is one of the biggest geoPolitical Risks and i think it will resurface. If the last year was anything to go by, it tells us agreements change quickly. There was a larger issue between the u. S. And china in relation to the technology story. That relates to the 5g rollout globally. Is europe going to accept what weight as a supplier huawei as a supplier for 5g . Does the u. S. Than introduce restrictions in u. S. European trade . There is also the broader issue of what the u. S. European trade deal. Lots of questions that still need to be answered. A longerterm story of the u. S. China technology story, which is independent of the tariffs. Guy what kind of risks does europe face . The president likes using tariffs. Were rumors surrounding what was happening in iran that said europeans were threatened with tariffs if they did not toe the line when it came to iran. We are debating what is happening with the french, that could be resolved in davos or not. Where to the risks lie with europe . Marcus i think they are huge. Foreign policy and trade policy has been desperate and success has been few and far between. I suspect that pattern will continue. Donald trump knows where he can press the sore points and he will do that, and why wanted t . Why wouldnt he . He settled with china, cynically, on phase one. I do not expect to see others i do anything until after his reelection or whatever happens with the next president of the United States. The next thing, before the is to not mess with europe. The triangulation of u. K. , u. S. , and europe is ideal for him to disrupt. That is what we have seen him do for the last two or three years to a greater or less extent. He knows economically he needs to back away from china. That would give him a boost in gdp, and that will pay through and allow him flexibility if he wants to, for political reasons, make another fight in europe. Guy you see that coming before the election or after the election . In some ways the president is weak in the Industrial Areas of the United States and made a boost. Bashing german autos could be one way to achieve that. Bilal before the election, the most likely front for the trade war is u. S. Into europe. It would have to play in a way that would not destabilize the stock markets too much. If there is going to be a european tax on u. S. Tech companies, that would impact u. S. Stocks. Him playing hardball with europe could benefit u. S. Stocks. Guy how would leadership in europe respond . How united would europe be . How clearer response would we get . Would it be symmetrical . What comes the other way . Bilal that is true. Although you have the commission, you have a disunited stance in relation to many of these issues. France is leading the charge on the digital tax size tax side. , do not have as much of a stake in these negotiations. That allows the u. S. To exploit these differences. Do is aneuropeans can additional tax. Another would be on agricultural imports in relation to gm and so on, and then more generally, kind ofuld be some agreement and terms of the Financial Sector and the regulations around the european Financial Sector. Guy if you are taken on optimistic view of the u. K. , you could argue the u. K. Could play the u. S. And europe against each other. Is that Wishful Thinking . Marcus that would be far too cynical. Strike that thought from your mind. Have do not expect there will be a level Playing Field with the eu. That is a signal to european manufacturers divide and rule. 2,have seen with nord stream they have stop that, the u. S. Theyre playing hardball with germany with regards to russian gas. This will not stop. Signal the clearest trump could say is i want to do a deal with the u. K. That means the u. K. Has a situation where they can play against the European Union. Unless the eu response to that in a positive way, the deal does get done, a narrow one by the end of the year, then i think the eu could be potentially in a difficult way. Up being as much if not more on the eu side. Guy how does the president avoid this becoming a stockmarket issue . How do you prevent that kind of come from aay european or transatlantic trade war . He likes to harold the fact that the s p is at record highs. These are big issues. Bilal in an Election Year, he cannot get away from that. That reduces the risk of an escalation of the trade war. He is very sensitive to the stock market move, and he would do enough to stabilize those things. That said, it does not mean we have a continued smooth ride until election, door does it mean that after the election the gloves come off. Guy bilal hafeez and Marcus Ashworth will stay with us. Coming up, we take you back to davos. Plenty of great interviews. Stay with us. This is bloomberg. Guy welcome to bloomberg markets. For more on the markets in the central bank story we face, bilal hafeez and Marcus Ashworth. Marcus, is the bank of england going to cut this month . Marcus no. Bilal yes. Guy why not . Pmius on january 24 the will show the sharpest ever jump. If you see the revision from the flash forecast in december to the actual, if you extrapolate that, that is a number in the mid to high 50s. That makes up the difference between the flash and the overall. There is a lot of pentup enthusiasm. Barclays, lots of other stuff as far as hiring is concerned. I think the number will be big and that will make the bank of england look bullish look fuller. Look foolish. Guy why you think they will . Bilal inflation is weak. Sales are low. The government has said they will delay the transition. You have the prospect of hard brexit down the chute someone out to an insurance cut . Marcus they should wait until may to have a clear context of backward looking data from gdp. L sales to cpi to the all of the election and essentially before what will happen with brexit. They need to see whether or not this is a confidence boost coming through. There is plenty of time to assess by may. I have called for them to be cutting rates in the next move. They should not shift to it now. Guy hang your hat on that piece of paper on friday. Marcus they are talking down the economy. Guy if that data is not up to levels, would you change your mind . Wanted, i think for all of the long all of the wrong reasons. Retail sales is the long thing to look at. Cpis looking back, volatile things like air and hotels. If the pmi is not 52 and upwards, i think they will find enough excuses for themselves to cut. Im a realist. Markets had to move that way. Mark carney has done the final flipflop and you believe is a present on the way out. Guy the bank of england finds itself in a difficult position because it has teed the market up to such a degree. Is it possible to back down from the point we are now at . Bilal i think with the number of bank of england members talking about the possibility of a cut, it is hard for them to turn it around. We do have market data. ,f these are shockingly strong perhaps they could start to roll things back. I do think there is data we have had over the past few months and also the fact we have been told by the government we would not have a delay in the transition, the biasis would keep much more toward the cut. Policy willh fiscal we see announced, how much money do you think the chancellor will spend . Marcus i think it will be 30 upwards. We have seen it already. And uplift in issues of gilt. To k is looking forward not the full 100 billion he will spend, but at least a third of that announced and it will be bigger than the manifesto they are going to overpromise, under promise and deliver. Bilal i think we could agree. I think all of the signs are there could be seen if you fiscal stimulus. Guy we will leave it there and see how the gilt market reacts to physicals to millis. Ashwortheez and marcus. Lets get back to davos. Executives, and politicians will be discussing a slew of the big topics. Sonali basak is there with the davos diary. Sonali Climate Change is the number one thing people are talking about. A couple of times today people have been talking about the irony of Climate Change and sustainability while private jets are being thrown it at that davos. Thrown into we will see how this progression plays out throughout the week. We spoke with Philipp Hildebrand of blackrock and many agreed with him when he said this would be a progression. We spoke to the evercore ceo who said this is a 50 year journey, things will not change overnight. Another thing people are asking executives about is strides are being taken to make changes for Climate Change, but how far does the ceos role go . How much can they do deserve the other needs of stakeholders, which accounts for employees and other aspects of the communities. Minimum wages have not been discussed, or ceo pay. Lets see how much executives are willing to look inwards to make changes. Guy i am assuming you came off the train from zurich. I am assuming many of those headlining, private jets are a feature. How can you have an event focused on state ability unsustainability when that is the mode of transportation . Sonali that is the question and that is the hypocrisy that has been pointed out since i got here. There was a great story in the New York Times about davos searching for at soul. The founder of the world Economic Forum has come to terms with these hypocrisies. The question is can they turn around and talk to the ceo about some of the issues the world is saying while also making change from within . Guy thank you very much, indeed. Looking forward to seeing you. Sonali basak at the world Economic Forum in davos. Blackrock vice chairman Philipp Hildebrand spoke to Francine Lacqua and began by asking about risk and the push toward sustainability. Lipp this is a major shift, this is no different than some of the shifts we have seen related to the baby boom after the war. We believe this is fundamentally shaping the finance that will entail significant reallocation of capital and relative price change. In the short to mediumterm, this is an opportunity to get better performance and not a problem. Francine have you been frustrated by the fact that it is difficult to define or force companies to measure the impact lima change will have on them . Hilipp that has been the problem. The good news is we now have standards. This is been the fastest process, to make sure we do have initial common standards with disclosure. The Public Sector has been involved as well. Governor carney has been at the forefront. Every year we will see a convergence in some of the standards. A lot of work remains to be done. If we do not have common standards, it is hard to judge. We are well on the way with these initial standards. Francine would we not be better off forcing companies to disclose it . Regulation. Re is we should have no illusion. Climate change cannot be tackled by the private sector. This is a government problem that will require coordinated government response. There will be laws and regulation. The private sector adapts to that. Guy blackrock vice chairman Philipp Hildebrand speaking with bloombergs Francine Lacqua in davos. We will carry on the conversation with the finance sector throughout the week. Look at the great names we have lined up. Last week was about u. S. Bank reporting, this week is it is about bloomberg talking to the biggest bosses of some of the u. S. Biggest banks. They are all coming out of the world Economic Forum over the next couple of days. This is bloomberg. Guy live from london, welcome to bloomberg markets. Time for a Bloomberg Business flash, a look at the biggest business stories in the news right now. Cook sayso tim Everybody Knows what is going to be going on next in terms of the tax story. Let me bring you what is happening with that. Need to get more details. Timfind that story cook is saying Everybody Knows Corporate Tax systems need to be overhauled and he is hoping the debate can take place at a global level. He is speaking in dublin. Apple is appealing of 40. 4 billion back taxes from the European Commission. Lets turn to what is happening with airbus. The company is offering airlines derivativeits new Trading Platform could help clients of the airbus subsidiary will trade futures on indexes capturing fair fluctuations. It will be based in london. Lets turn our attention to what is happening with the markets. This i can definitely talk about. Very light volume. The u. S. Is closed for Martin Luther king jr. Day. The stoxx 600 down but only just. Brent up on iraq and libya supply concerns. The pound is down as well. More to plenty come. This is bloomberg. Guy 10 00 a. M. In new york, 3 00 p. M. Here in london, 4 00 p. M. At the world Economic Forum in davos. Im guy johnson. Welcome to bloomberg markets. In some ways, it is a very Light Trading day. We are seeing 40 volumes around europe, with the u. S. Closed for Martin Luther king jr. Day. We are seeing very light volume. The stoxx 600 absolutely flat. We are waiting for some sense of direction. The pound is a little bit weaker. There are concerns we will see weak data out of u. K. This week. Weve got some labor data tomorrow, the big pmi data friday. If the data friday is weak, the market isnt is biting the bank will cut, but that is pretty much priced by now. 1. 2996 is where we are trading on the cable rate right now. The ecb has an extended meeting this week, which is certainly something to focus on as well. We will be competing with the world Economic Forum and that press conference from Christine Lagarde on thursday. Lets talk about what else we need to know. Here with the details, laura wright with first word news. The imf says growth will go from 3. 5 this year to 3. 3 . Tradeed threats relate to and pensions in the middle east. In baghdad, Security Forces have fired live rounds and tear gas at antigovernment protesters. At least 13 demonstrators were wounded in the latest in a series of uprisings that began last october. Thousands of iraqis have taken an outbreak of pneumonia in Central China has now got even bigger. More than 200 people have been diagnosed. At least three people have died. Health experts say there is evidence the illness is spreading from people to people. The two sides in President Trumps impeachment trial have previewed their arguments. House democrats and the president s legal team filed their formal briefs over the weekend. His conduct was a threat to the nation and the rule. Of law. And the rule of law. 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. Im laura wright. This is bloomberg. Guy thank you very much, indeed. Lets get back to the world Economic Forum. We are talking to some fantastic guests from the world of investment. Lets talk about one 300 billion investment fund, the Canada Pension Plan investment board. Mark makes an talk mark machin talked to sonali basak about why he seems to be worried assets. Liquid for us, we would have to invest in something else, whether that is cash or some physical commodity or something. When we have a portfolio designed for longterm investing, we want to be generally deployed, but we want to be invested in a broad range of assets. Some may perform well in a slower market. Some may perform less well, but weve got to diversify. That is typically the strategy. Sonali obviously, youve been at the forefront of private equity investing. What does this mean for the private equity portfolio . Does that mean it is time to exit some of these positions while the market is so hot . With i think the trend private equity is pretty robust. When we look out at expected returns in different Asset Classes, and look out even riskadjusted, private equity is still quite robust. Private equity, european private equity, asian private equity is still a decent asset class to be invested in. The thing that i continuously ring the alarm bell on his not to be too invested in illiquid assets. Inhave half the portfolio illiquid assets. We are very comfortable with our risk models and what we would do in various lurches down in markets, but i worry about the expansion of a lot of funds like ours around the world into private illiquid assets. What you could see if there is a lurch down in markets and people rely on the liquid things to sell, if everybody is selling the same liquid stuff at the same time, suddenly it is not liquid, risk models trigger, etc. I think people have to be very careful to make sure they truly understand their liquidity positions, that if the thing they are relying on to be liquid is not liquid, that they can still pay their pensioners, whatever it is they need to be paying. Canada engine Plan Investment board ceo mark bache and mark match and mark machin. Capital markets is going to spend a little time with us. Nice to see you, adam. Lets talk about the events coming up this week and what we need to be focusing on. Weve got the boj tomorrow, the ecb thursday, a lot of macro data as well. Lets start off and talk a little bit about where you see the yen going from here. In some ways, fiscal and japan is starting to do some of the heavy lifting. What is the expectation for what is continuing to be the safe haven currency that is trading at an eighth month low . Onus is reallyhe shifting for fiscal policy. The expectation is the boj will do very little in the meeting overnight. I think when we get to the march boj meeting, potential he a little bit more interesting, when we got a clearer picture of the economy. Weve got the figures for the Fourth Quarter as a whole, and there is a risk that those look disappointing, and the debate on boj easing starts to reopen Going Forward. That would reinforce a negative trend. It would reinforce a negative trend in the yen. We are dollaryen positive, yen negative, Going Forward. Adam in terms of what guy in terms of what happens with the chinese story, to what extent is good news for china bad news for the yen . Adam in a nutshell, that is really the picture. The yen, along the swiss franc, is still the market choice for safe haven currency. Those correlations are still very robust. Anything that would cause these markets to go riskaverse, and china has been the main cause of that over recent months, will tend to play out as yen strength. But if i look at the event risk in the first half of the year, mostly things look quite benign. Weve got phase i having gone through in u. S. China, the Political Risk in the [no audio] would typically be associated with yen weakness. Guy for you expecting from Christine Lagarde . Shes expected to start laying out the outline of the policy review that is underway. That sounds great, but do we get anything that is market moving . Adam not at this stage. We know that review formally starts, but we are likely to get very little in the way of publicly available information on where the debate is going until much later in the year. The ecb, shorterterm, has also laid out the stance of policy in the near term, so i think of the four centralbank meetings we get this week, the ecb is likely to be one of the less interesting. Guy ok. I understand why you would say that, adam. As you say, laid out the shortterm. Mediumterm is going to be discussed. , doese policy situation the market fully understand that . Is there pressure to explain a little bit more . The data is still relatively bad out of the eurozone. Is there going to be more in the medium nearterm . Adam i would certainly be skewed in that direction. The data are just less negative than they have been recently, certainly not turning positive. The pressure for more easing could easily reemerge later in thats onend i think of the reasons people are less confessed for the currency that still seems to be the consensus. Whilst the policy pressure is doing that direction, there are good reasons to question that. Guy you guys have a pretty negative fed call. We will come back to that a little bit later on. Adam, thanks for sticking around. Thanks for joining us from rbc. Beenine lacqua has speaking to ursula von der leyen come the European Commission president. The conversation happened a few minutes ago. Lets take a listen. Commissioner von der leyen we union andrican the European Union and other crucial players, and they all agreed to keep a cease fire, to go into a process where we have committee negotiations, and to have a structured process for reconciliation, reconstruction, and finding a political approach. Francine fred europe to have a bigger voice for europe to have a bigger voice, is it time for the eu to have an army . Leyen of course, it is important to have a lot of interoperability between the armed forces, to have a common system of procurement which we are building up now, and the European Union needs to have hard power, but always together with diplomacy and crisis prevention, so only that together is conference of security. Francine what are you expecting from President Trump tomorrow . Comm. Von der leyen im very curious and eager to listen to in the dialogue. That is what davos is therefore. Im interested in the trade topic and technology topic, so i am just curious to hear. Francine do you worry that there could be tariffs against france, germany, and the European Union as a whole from the u. S. . Comm. Von der leyen isaac the first thing is to listen to each other, to sit down and negotiate. We have so much in common, and there are so many fields where we should Work Together to improve things. I think it is important not only to talk about the trade topics, but also about the topics where we have common interest. Francine where do you see the next relationship between the u. K. And the eu . We heard from the Prime Minister that he will not be dictated by the eu. Comm. Von der leyen of course he will not because we are going now into negotiation. Of course there is a difference between being a memory state and having complete access to the Single Market gang a member state and having complete access to the Single Market and being a third party. We know that we want to have an excellent relationship together. Francine do you worry about not having a level Playing Field when it comes to regulation between the u. K. And the eu . Comm. Von der leyen it is a matter of the u. K. s choice to decide the easier the access, the larger the Single Market we have in the world. The more defensive, the more barriers will be there. For the moment, the tone of these negotiations francine for the moment, the tone of these negotiations are fruitful, or antagonistic . Comm. Von der leyen we want to build a strong relationship together. Of course, it is a question how close to the sickle market the u. K. Will be or not. This is what we have to figure out. Francine critics say there is not enough new money coming in. What do you say to that . Comm. Von der leyen there will be european money. There will be national cofounding, private money, and a lot of leveraging by the. Uropean Investment Bank that is a huge amount of money that will initiate a green wave because we want to invest Clean Technology in green new procedures, and we know theres a lot of innovation behind it that we need to step forward. Francine what sectors will benefit from this . Pres. Von der leyen a lot of sectors. We have two parts. One is innovation. Research, science, deeply involved. But of course, the small and Medium Enterprises and the industry because they are the ones who have to go through the transition, and for the people because we do not want to leave anybody behind. Forave a tradition fund, example, for coal mining regions that have to go through a deep transformation. They will have a lot of support to help them to step up to cleaner industry. Francine what is your biggest concern for europe now that we have u. S. China trade . How much is that helpful for European Growth . Pres. Von der leyen it is good that there is a u. S. China agreement. This is very positive. That for us, it is important to figure out the Investment Agreement with china that we are working on to go into this year, but also to have a very close and fruitful conversation with the United States where we have to sort out things. Francine is the u. S. Your hardest relation ship to manage . Pres. Von der leyen no, the United States is our friend. There is a deep and Solid Foundation built over at least 70 years of friendship, of cultural exchange, so we should never forget about that. I know on what side of the table i am sitting, and this is the side where the United States are sitting, too. But of course, we have issues, and we have to solve them. Francine what do you want here for participants at the world Economic Forum . Pres. Von der leyen engage in a deep dialogue of how we are going to build and sustain economies because Climate Change is sitting at the table. Francine and you feel it, that companies are engaged and that countries what a difference . Pres. Von der leyen yes. When you look at the global risk report, the top five risks for the economy are all climate related. You see it in other reports, too. It is clear we have to step up. We want the industry in the European Union to be front runner, so we will invest in this. Guy European Commission president ursula von der leyen speaking to Francine Lacqua a few moms ago in davos. Lets speak to francine now and get her sense of that conversation. She didnt seem particularly worried about the trade threat posed by donald trump. Using thats real . Do you thing thats real . Francine she didnt sound particularly optimistic either. I also asked her whether the most difficult relationship she had to manage what the u. S. , and she actually laughed and said we are allies for 60 years, nothing is going to change. I imagine she will be, if not at the front row, certainly at the front tomorrow when President Trump dresses the world, forum. A lot of questions about the world Economic Forum. A lot of questions about trade. We understand he will talk about socialism. When it comes to the digital tax and all of that come of all of that, because france is trying to impose it, it is all a bit of latency. A bit of wait and see. Guy we talk about europe. Is europe united when it comes to the issue of the United States . Germany and france not exactly on the same page right now. Francine no, and you could argue that germany and france are not really on the same page when it comes to many things. Libya, they have a peace program, but it is difficult to see exactly what the europeans want. The tax against technology companies, on how to deal with President Trump. You could also argue a lot of the countries differ when it come to the middle east. When you look at europe and the member states, it is clear that you could say they have a lack of commonality because a lot of the leaders have their problems at home. President macron wants certain things in dealing with the u. S. Because it makes him more popular at home. Difficult for Angela Merkel maybe to get behind. I think the job for ursula von bringyen is to everyone behind her, and may be tackling Climate Change and the green deal, which is getting a lot of criticism, maybe that was one way of unifying the eu in more ways instead of focusing on geopolitics or having a common army, which is more difficult to get everyone on board with. Guy absolutely. I think that topic is going to get a great deal of coverage over the next few days. Thank you very much indeed. Francine lacqua joining us from the world Economic Forum. More still to come from davos. This is bloomberg. London, im guy johnson. This is bloomberg markets. U. S. Markets closed today. Lets take a look at what is happening elsewhere. Heres Annmarie Hordern. Annmarie most markets have been in the red throughout the day. U. S. Markets closed for that Martin Luther king jr. Holiday. The ftse down more than 0. 2 . U. S. Futures relatively flat. It is kind of a calm before the storm. It will be a huge week for Financial Markets. Central banks will be in focus. On top of that, we have fresh corporate results, and we are waiting on policy makers and World Leaders to speak in davos. We heard from some of them today. Across assets, im looking at brent up 0. 6 percent, above 65 a barrel given but itll supply disruptions in libya and iraq. When libya is already missing one Million Barrels a day, there seems to be too much oil in the market. Betweend at one dollar 1. 2991. S at potentially, the boj could raise their growth forecast. Guy it will be interesting to see what happens there. Certainly, the story front and center in japan as well. We will be covering that overnight. This is bloomberg. Bloomberg markets this is bloomberg. From london, im guy johnson. This is bloomberg markets. Time now for a Bloomberg Business flash. Boeing is being urged to rename the 737 max to deflect travel safety concerns. Is damagede brand following the two fatal crashes. Firmes biggest defense has agreed to buy u. S. Defense Technology Assets worth close to 2 billion, made available by andmerger of raytheon united technologies. For aother rough quarter star investor. 2. 3s at his fund fell by million after making bets on argentina and one against u. S. Bonds. Both flopped badly. That is your Bloomberg Business flash. Still ahead, we are giving you more updates from the world Economic Forum in davos. That is the scene there. This is the scene with markets. Markets a little like today in terms of the market picture, unsurprisingly. The u. S. Is out, and that is translating in europe into around 40 less volume the normal. Ftse down 0. 2 . The dax faring a little bit better on a quiet market. This is bloomberg. Guy from london, im guy johnson. This is bloomberg markets. Lets get the bloomberg first word news. Wright. Laura laura President Trump is heading back to davos to speak at the world a comic forum about the same time world Economic Forum about the same time his impeachment trial will be getting underway in the senate. Angela merkels main ally quit the government. The antiimmigration Progress Party decided to leave the government. In richmond, virginia, majorities racing for a third protest by thousands for a protest by thousands of guns rights activists today. Militant groups and White Supremacists are expected to join the program activists the progun activists. Spacex cleared its last major hurdle to a historic first crewed flight for nasa. Dragonsmonstrated ability to eject from the rocket during an emergency. 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. Im laura wright. This is bloomberg. Guy lets talk about some of the risks we may face in the market in the year ahead. Eu finance ministers are meeting in brussels for the you rogue Group Meeting. They are the your Group Meeting the euros Group Meeting. Lets welcome maria tadeo from brussels. Any progress here . What are they talking about . The french and the u. S. Are at loggerheads over this issue. Maria exactly. We dont actually know what the conclusion will be, but we did hear from the french finance minister that he is hoping there is a resolution by the end of the week. Just to give you some context, we know there has been a huge backandforth between the french government and the u. S. Administration over the french digital tax. The french will tell you the only reason we are doing this is because these companies are not paying enough. They are making a lot of money. This is not political. It is just because of the transactions and the money they are making. The u. S. Believe that if anyone is going to tax a company like facebook or google, it should be the u. S. Secondly, they also believe the story is political. The reason by the europeans want to tax American Companies is because they cannot compete on the innovation. The reason why we are talking about this now is because there is a deadline coming up. If there is no agreement by then, by the end of the week, we could see retaliation from both the u. S. And the french imposing tariffs on each other. Guy maria, how united is europe on this story . Maria i have to say come on a public level, they will say they stand with the french, and there is that idea that if we do see retaliation from the u. S. On the french, they would all get together and post tariffs on american products. But behind the scenes, there are some who will tell you the french made a strategic error when they went along with this tax and introduced their own legislation. They should have waited for the eu and the oecd to get to an agreement. Now it is too late for that. Guy we will see what the results look like at the end of this week. Thank you very much indeed. Maria tadeo joining us from brussels. Dowsget back to and welcome to dad a two bloombergslcome sonali basak. Sonali you were just talking about the digital tax, and executives of facebook, google, microsoft are all here in dive a vos, and so are they regulators. A lot of what we are reporting is should companies be more used to governments playing a bigger role. Of course, we have trump here tomorrow. Part of his message will be about the dangers of socialism, but again, that pushes way back on the message of davos, which is saying maybe we have let companies go too far with the shareholder being the main focus. Guy sustainability is going to be a big topic. We talked about this in the last hour. How can you talk sustainability and show up in your private jet . Sonali it is the biggest question on earth here. Blackrock has really led the charge here, coming out last week with what they would do about Climate Change. Another thing they would the, the apocrypha hypocrisy of people coming here and there private jets, i would also mention that the environment is not the only stakeholder. How are ceos going to be addressing all of the different people that they have to take care out, including the issues of minimumwage and ceo pay . Climate change needs to be something that is measurable for a lot of people, but even that seems to be another halfcentury journey ahead of us, so there are a lot of issues being discussed here. Is perennial issue at davos how much can be fixed with the meeting of 1700 executives meeting here this week. Guy absolutely. Nice talk, though. Sonali basak joining us from davos. Lets bring into the ,onversation now tim graf state street head of the mea microstrategy of e. M. E. A. Acro strategy markets seem really complacent about some of those risks and what effect they are going to have. Everyone seems pretty comfortable with what is going to take place in 2020, yet weve already seen the iran story. A little bit of an idea that we could be thrown off course pretty quickly. To some extent. The iran story is a really interesting test case. We had a big Market Reaction to it, but it was pretty quickly digested and then reversed, at least in terms of the move in oil, within about a week. Compare that last year to the attack on the Saudi Oil Facilities thought to be by iran. That took a little bit longer, but yet again, digested pretty quickly, and all of the talk for a new risk premium for oil in both cases was quickly forgotten as supply and demand dynamics balanced out. Unknowns, unknown markets seem to be pretty relaxed about. How that changes, im not quite certain, but we do seem to be in this period where volatility and other measures you might think of as complacency indicate that. Paul, lets go down the rumsfeld scale a little bit into the known unknowns. The trade continues to be something the market is concerned about, but i still struggle to understand what the market is concerned about this year. We got phase one done. Usmca is on the books. Europe feels like a risk, but i still havent had anybody tell me clearly how they see that unfolding. The digital tax story is going to be debated this week. Im sure trump is going to have a pop at the europeans. How high is that in terms of the hierarchy . I think itl paul is something definitely on the anxious aboutd, the possibility of trump going after european carmakers now. On the other hand, the dax is on the cusp of a record high in ofmany, so it is a question it is a risk, but really not that much of a risk based on where markets are pricing things. Youve got central bank liquidity. Its looking like a great environment for people that want to chase risk this time. Guy how much of that is already there, the . Timothy i dont know, but if you look at the private Sector Forecast for eurozone growth, they are not really seeing any sense of the green shoots of recovery. Guy the markets have priced in an awful lot at this point. The economy seems to be tumbling along at a fairly monday level at best. Timothy it is, but i still think the expectations are pretty low. The markets are may be accounting for those expectations being reversed, but i think there is a sense in this pricing that europeu. S. Dynamic wont flare up, and the digital tax issue is an interesting one in that u. S. Corporates, it istionals in europe hard to know because you have low tax domiciles within europe that corporate can take advantage of. Not this emerges as a risk, who knows . But i struggle to see it emerging in an immediate fashion. Guy we talked about the Central Banks. Youve got the boj tomorrow, the ecb later this week. You talk about the liquidity. Be fed still seems to there with this level of liquidity. If you are trading on debt for equities, it is a great greenline, isnt it . It usually has a pretty positive effect on equity markets. Paul you would think so. Borrowing is so cheap at the moment, so we saw a massive boom in credit issuance in europe last week. Even companies that are struggling a little bit with their financing can get access to this cheap cash, so that can keep the equity levels going and the idea of stock buybacks. Positive environment. Like you say, risks are out there. We dont know exactly how friendly to markets the ecb is likely to be when they have their policy review. That could cause people to took a little bit on their lunchtime idea if the ecb gives the timelimited in some way, but that is a pretty out laying risk at the moment. Guy and also a concern about spillover effects into asset prices, and may be Central Banks are starting to talk a little more out about the effects some of these policies are having. Even the fed talking about the idea that the repo operation has some qelike effects. Youre going to stay with us. Coming up, a crude awakening, trimming earlier gains on supply concerns. We will talk about that next. This is bloomberg. Guy from london, im guy johnson. This is bloomberg markets. Lets bring in Bloomberg News emea editor will kennedy. With the spike earlier on on outage concerns in libya caused by the war taking their, and also in iraq, you look at the market effect, and it is tiny. This is repeating time and time again with all of these what normally would have been positive oil story for the price. Walk me through what has been going on in the market today. Betweene big difference now and 10 years ago is when you had these events in the middle east, people would worry theres no oil to replace it. Now the shale boom is an inbuilt hedge. Shale is incredibly sensitive to every rise in oil price. That is reflected in physical production a couple of months down the line, but perhaps for days like today, it is affected and Financial Markets. There are a lot of shale who have this inbuilt selling on the futures market into any rallies. So youve got Shale Oil Producers who look at the rally and use that to lock in their prices on production. Guy it is hard to see a big upside and oil, though. Will it is. The Financial Market is just reflecting what would happen in the physical market a few months down the line if these High Oil Prices sustained. It would bring more oil into the market, so you will have this balance. That said, if any of these actually became prolonged, i think theres an expectation that what is happening in libya at the moment is posturing on the part of haftar and that oil will come back online. Likewise, we were all very concerned after the killing of general soleimani that would spark off a wider conflict. That didnt happen. Each of these conflicts ebbed a way, or there is an expectation they will. The market would be vulnerable a sustained delay in production because there is not that much capacity in the middle east. They produce the right kind of which the asian industry relies. They also still like to have some buffer. It is not like texas has Spare Capacity that would accelerate the increase in capacity. There is some difference. Guy the story out here is that crude increasingly those to china, and as a result of which, that kind of desire to have any meaningful military action in the gulf is going down and down because the iranians in the chinese physically have an understanding that you dont want to shut the straight of hormuz down the strait of hormuz down. Will absolutely. It would be a disaster for iran my disaster for asia. The americans have said it would represent an active war on the part of iran. I think that risk is overestimated, but i think the risk is still there in the , like what we saw last year. Timothy thank you guy guy thank you very guy thank you very much indeed. Ofare back with tim graf state street and paul dobson. Market looks really the calm to at the really becalmed at the moment, and you still make money selling it. That is my question. Does that just carry on . We are at very low levels on the vix, but it still looks incredibly low. Timothy i was looking at this today in currency. Look at eurodollar. Guy record lows. Timothy 4 on an annualized basis. Typically when you start to see it reprice higher, you do start to see these systematic volatility selling strategies to extract that premium that is typically there, or at least are to become less profitable and get back towards breakeven. That hasnt happened yet. Its not to say you want to pick up the nichols in front of the steamroller the nickels in front of the steamroller, but that has been working. If past is any prologue to the current situation, that is the case. Would you sell eurodollar vol at 425 . You are right at 4. 25 . You are a braver man than me if you do, but that is still working. Guy how can we extrapolate that into what the year ahead looks like . Year. Was really low last is it even more dell this year more dull this year . Paul my colleagues in emerging markets will say it is where theyexciting are. You pick up the difference between the two, plus because of what has been going on, emerging markets still looked pretty cheap on outright basis. You have the ability for capital appreciation, plus any extra money on the side. Guy guy but carry is the story. Paul it could well be the story. We have seen that a little bit and what has been going on with europe because the swiss franc, typically a peculiar choice for borrowing in order to invest elsewhere, has been strengthening. That has been pushing people who have been using it as the funding currency for their carry trade into other areas. It is not so much at the long end of the problem. It is which is the best currency to shirt on to short on the other set of the equation. Timothy ive turned tail on the dollar a little bit. I think it is now a bit expensive. Its had a nice, long run. Technically, shortterm it has broken down. What is likely to happen this year as part of the known unknowns is a fed that is likely to let the u. S. Economy trundle along, and if they get their wish, run hot. Over a longer term scenario, that he roads the purchasing power of the dollar. That argument makes the dollar less attractive. Guy does the dollar go down against everything . No, i expect it will do fine against the year and again and it will do fine against the your and the yen euro and the yen. Looking at things like korea or the time one dollar or the taiwan dollar. Fx, whatou look at em did they tell you about some of the geoPolitical Risks . Russia, for instance, a great performing currency last year, you are seeing some geoPolitical Risk. To what extent does that offset the trade that tim just laid out . Paul youre right, there are pockets of risk. Theres always idiosyncratic risk. Thats what you have to take on when you weighed into the emergingmarket environment. If you look broader, you might hope to get out on the couple of them, take low on a couple. People are talking about latin america even again from what ive been hearing, which had a really tough time last year. In thef nasty flareups same kind of space for emergingmarket investment. Now people are looking maybe not at argentina, but some of the other stories looking at pockets of growth again. Guy thank you very much indeed, state streets tim graf, bloombergs paul dobson. Details coming up. This is bloomberg. Guy welcome back. You are watching bloomberg markets. Its time for our stock of the hour. Heres Annmarie Hordern. Annmarie fevertree under immense pressure today, losing after theyvalue released their profit warning. They are blaming a lot of u. K. Holiday sales, and the fact that profit dropped some 5 . Also looking shaky for the company is the United States. They are saying growth is going to slow from 33 . Our people just over expensive gin and tonics . Fevertree is very much a novelty company, a niche come up against massive brands like cocacola looking to get into these cocktail mixers. Fevertree is really under immense pressure, as i say, not just here in the u. K. , but also in the United States. Guy guy thank you very much indeed. Bloombergs Annmarie Hordern with our stock of the hour. We are going to carry on our coverage out of the world Economic Forum next. We will talk about what is happening with the markets as well. With the u. S. Close for Martin Luther king jr. Day, we are seeing really liked volume. We are down by around 40 in volume. London a bit of a laggard as you can see with the dax, but we are seeing the real weakness coming through in the cac, in part due to what is happening in china. The luxury stocks are beginning to price in the risk around this virus spreading around china. This is bloomberg. Hey. Hey. You must be stevens phone. Now you can take control of your home wifi and get a notification the instant someone new joins your network. Only with xfinity xfi. Download the xfi app today. 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. Guy this is the european close on bloomberg markets. Im guy johnson. It is a reasonably quiet day in thepe, unsurprisingly given fact it is Martin Luther king jr. Day in the United States, which means u. S. Markets are shut. They will return tomorrow. Volume is down by about 40 in europe. Cable looking a little soft. We are looking at labor data tomorrow out of the u. K. And pmi data friday. Bid in brent a today, but it has faded earlier on. Basically, you see a spike in crude prices, you get the u. S. Shale producers selling into that in the forward market. That tends to suppress any upward momentum in oil prices at the moment. It is another factor that is kind of suppressing these markets. You see it was Central Banks, in the oil market, it is just
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