The australian treasurer says the Budget Surplus is now by no means certain. In the absence of u. S. Markets being online on account of the u. S. Holiday of Martin Luther king day, lets see how things are shaping up in asia. It looks like asian stocks are set up for an even open after the cosby closed at nearly record highs. 0. 3 right now. It looks like jitters in the oil market last week, we saw the signing of the u. S. China trees deal bolstering markets. Trade deal bolstering markets. Well see how markets are impacted by the sarslike virus that originated out of china but now sees cases in japan and south korea. The fund is predicting the World Economy will strengthen and 2020 but at a slower pace. On the economic calendar, we will be looking ahead to taiwans fourthquarter gdp data. Expecting taiwans economy to have grown. Japans of the bank of monetary policy, they are all expected to stay pat, after the fiscal stimulus. Officials may be looking for a slight uptick in terms of those gdp. Also looking at trade data and any news that comes out of the World Economic forum. Lets get the first word news with su keenan. Su we start with a new report published at the World Economic forum in davos. It says the proportion of ceos expected Global Growth to slow this year has risen tenfold since 2018. The survey says the more than half of the 1600 bosses question see a slowdown, and that is the most since pwc began asking business in 2012. Executives were pessimistic in every region, with confidence at its lowest since 2009. Hong kong has seen its rating as a longterm commissioner of debt lowered a notch by moodys. Both blame the longrunning social unrest with moodys pointing to inertia in government and the absence of any tangible plan to address the concerns of protesters. There is some hope for the future with moodys raising its hong kong outlook from stable to negative. Kongs australia saying they cannot confirm a Budget Surplus. He said the fallout will hurt everything from tourism to household consumption. Impact the full economic from the fires have yet to be seen. Isnas mystery virus spreading across asia. Mainlandging on the and the central study of wuhan, north and beijing, and south in guangdong. They are stepping up testing at ports and airports worldwide for symptoms that include fever and coughing. Global news 24 hours a day on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im su keenan. This is bloomberg. The International Monetary fund is trimming its outlook for Global Growth, still seeing expansion this year but at a slightly weaker pace than previously. They said the economy will expand 3. 3 this year, down slightly from its projection in october. In october, we were able to forup the Economic Forecast our judgment on the economy. Now it is four words. Stabilization, sluggish recovery. Asiats bring our chief economics correspondent. It was a pretty mixed bag. What was your take away . It felt like whatever positive aspects came out of the trade deal. Lifting sentiment for everybody now. The survey shows that executives are still worried. The big takeaways were the imf seeing a lift, stabilization for trade tensions. Not just the u. S. And china. We after member that borrowing is very cheap. Financial conditions around the world are very easy. Ofquantified the impact central bank easing on growth. Global growth will be 3. 3 this year versus 2. 9 last year. Japansve the bank of policy decision. What did they have to say about the boj . In theirwas a standout overnight. Japan was the only major economy that they upgraded the boj meeting today, they expect japans economy. A lot of that is because the government is trying to increase fiscal spending this year in response to its own consumption tech consumption increase last year. ,he external outlook is better it talks about brexit, talks about rising pessimism and slowing global trade. When you consider the imf view, i would imagine it holds today. China was a bit of an improvement. A slight pickup for china as well. People would expect a better pickup there. Go, 6 . Be in and still demonstrating a nuanced strategy, not going gangbusters. If they stick to it, there will be our next guest is cautious about 2020, warning that the longest bull market in history will not last forever. Thank you so much for joining us this morning. Outlook,t defensive and with that, you are preferring value plays. That has somewhat faded going into 2020. Do you see that reviving . I do, largely because if you look at how the end of 2019 kind of went, you can see that fundamentals start driving stock prices. Because value stocks remain makes sense that it would pick up again in 2020. Where in that space do you see some outliers that perhaps allow for that driver . We really Like Health Care right now. We think the overall macro picture in Health Care Makes sense. Aging populations not just in the United States but most of the developed world. Those two things put together increase demand for services. That companies have a lot of cash on their balance sheets, it drives increase dividends, increased m a, and potentially increased stock buybacks. I want to throw up a chart looking at valuations. Past 12 like, for the months now, we have been talking about the late stage of the cycle. Valuations keep climbing. Forward p forhe that index has been the highest level that we have seen out of this bull market. There are two different definitions of value. Valuations are low on absolute terms, then you have relative versus history. The discrepancy between how value stocks and Growth Stocks have participated in this rally, if you will, is different. Value stocks participated a little bit in the fourth quarter, than that kind of went away. Estate, areaseal that should find opportunity when you look at valuations. How is that impacted by the uncertainty associated with the election and the political and regulatory aspects of uncertainty and risk this year . I dont think there is as 2020 asthat going into you would imagine. The s p has positive returns. Positive returns for the s p 500. Those are periods we were going through economic upheaval. So assuming we dont get an out there democratic nominee, i dont think the Election Results will drive that much change in how the markets behave. If you look at history, it as muchasnt mattered as the Market Conditions at the time. With volatility, three key things i am looking for. The fed staying steady. Anything unexpected from the fed would be bad for me volatility standpoint bad from a volatility standpoint. I want to see employment in the , anything that is concerning and unemployment, i think you would see a rise in volatility as a result. Policy missteps would you anticipate if there was any move from the fed . I think the fed intends to stay steady right now. I think the bigger risk is that they raise rates unexpectedly. It would not offset the market terribly if they lowered rates more although i would be upset by that because i dont think it is necessary. I do think, if they were to raise rates in this sort of environment, that would be a cause for concern, and i think that would be a risk. Subpar Global Growth does remain tangible despite the inflation we have seen in some economies. You are quite bullish on emerging markets, especially through the invesco etf. Where are you finding strength in that space . One of our Biggest Holdings is the invesco px8. We think the valuations there and center for growth, while it a be slowing, could potentially be higher. In emerging markets stocks. Well we do think you should see whileg growth globally, em could be slower, it is still higher than anywhere else in the world. People we have spoken to saying that the u. S. Consumer story, which has driven stocks substantially so far, is starting to see weakness. Would you say the consumer story would be better in emerging markets . I do think it is better. My biggest concern is if the u. S. Consumer starts to weaken. That is again why i mentioned the employment markets in the u. S. I think job stability, waged ability drives confidence. And they feelyed like they are getting those raises when time comes, they will be secure enough to go out and buy things. The emerging market, the consumer story is even stronger. That supports Consumer Market economicich on an growth faces are even stronger. I think they have driven the u. S. Economy to be one of the best developed nations. Always great to have you. Sel, orion advisor director of investment due diligence. Joining us, the imf chief, Harvard Kennedy schools rei nhart, as well as a conversation with the u. S. Transportation secretary elaine chao. Later, we will discuss the issues at the World Economic forum in davos. Plus, we will be live in bogota as venezuelan opposition ado renews hisi push to topple maduro. This is bloomberg. This is daybreak australia. Haidi oil pared gains after rising to the highest and more than a week after plentiful world supplies countered concerns about disruptions in iraq and libya. It feels like market is conditioned to look past any kind of even relatively serious disruption to supply because of how much supply there is. That is right. What we have seen over the past couple of weeks is a considerable build. There are quite a lot of supplies out there. That being said, i think you cant underestimate the extent of the disruption in libya. The disruptions are ongoing. Commander have to are is really playing hard all. Preventing exports from coming out of the country. Triedmany on sunday, they to hammer out their differences. The reports basically suggest there was no breakthrough. The standoff and disruption continues. If it continues much longer, i think it will have more of an impact. For the moment, the market is taking the view that ultimately this is just gameplay from the commander and they will resume production and bring those prices back down. This is part of a negotiation process. How about the Energy Demand side of the equation . A lot of supports suggest a lot of gloom out there. That is even with the phase i one trade deal announced last week. We have got that uncertain band picture and the supply picture still looks pretty rosy even with the disruptions in libya and iraq. Of course, another wildcard in iran tensionss continue to simmer over there. Reports overnight that they might press ahead with their Nuclear Program if the eu does not play ball on the sort of rum thatof the original deal donald pulled out of last year. There are plenty of headwinds to any upside progress and that is what we were seeing yesterday with that initial spike. For 2020, do we still see a uation where u. S. Shale there is a strong outlook for shale production, that is another thing keeping a lid on the price gains. It is a fine balance. The market does swing backwards and forwards. U. S. Ve got that strong shale supply. As long as inventories in the u. S. Remain strong, the market will likely be capped. Thank you so much to bloombergs Energy ReporterJames Thornhill in sydney. Bloomberg subscribers can go to dayb on their terminals. Speaking to the Goldman Sachs global head of commodities later today. U. S. Secretary of state mike pompeo has met with venezuelan inosition leader juan guaido columbia as part of guaidos campaign to oust nicolas maduro. Describe the visit to us. How did it go . It was quite remarkable. Secretary of state mike bail with theeo meeting colombian president as well as venezuelan Opposition Leader the guaido, as they honored one Year Anniversary of the terror attack here in bogota. Secretary pompeo meeting oneonone with the venezuelan Opposition Leader who said he will be traveling to davos to rally support with european leaders to once again go on the offense against maduro. Guaido is backed by the leaders of more than 50 different countries. We have seen in the last years, seen it expand and grow, and we will get this hemisphere freedom. We are prepared to work alongside president guaido to deliver democracy. It is interesting because maduro gave an interview in the last 24 hours to the Washington Post where he was quite critical of the sanctions the u. S. Had placed in he urged for the Trump Administration to start negotiating with maduros regime. I can tell you that there is no way that is happening anytime soon. Kevin, i know you are in polkadot but of course you are what in bogota but you are still watching your normal beat, impeachment proceedings at home. What are we hearing from the president s team and the house . Kevin President Trumps attorneys asking for a quick and speedy trial in the senate. The senate is set to formally begin the trial in the next 24 hours. President trump commemorating the Martin Luther king memorial holiday in washington, d. C. Anticipating to be called for their opening remarks , beginning tomorrow. Our chief washington correspondent, kevin cirilli, joining us from bogota, colombia , where he was traveling with the secretary of state, mike pompeo. Of course, the secretary will be weveling to davos next, and will be there as well. The prime ministers of norway, greece, the netherlands will be joining us. This is bloomberg. Check of the latest business flash headlines. Apple says it is optimistic that deal amidill strike a talks with the European Union over a demand. Aboutm cook says a debate Multinational Companies at a global level. The oecd governments and businesses to address concerns that firms particularly in tech are not paying enough tax. Its the European Union says it will not explicitly banned huawei or other vendors. They release a report at the end of the month and say the measures will be strict and vigilant. This comes after the u. K. Prime minister Boris Johnson indicated last week that he is unlikely to ban away from 5g in britain. Boeing is being told to rebrand the 737 max jets. Reports say the brand name is damaged following two deadly crashes. Told, closingre in on a 10 billion loan from a group. Dont miss out on our exclusive interviews at the World Economic forum in davos. Asian Business Leaders including executives. This is bloomberg. I am here in sydney. The market opened is 30 minutes away. Futures looking largely positive. 3 when the session begins. Accountkets closed on of the Martin Luther king jr. Memorial day holiday. Sydney futures looking positive. Trading at all time highs. Youre watching daybreak australia. Lets go to daybreak news with su keenan. Su brands in the u. S. Have reached a truce on digital tariffs. President macron tweeted that his counterpart had a great discussion and they will Work Together to avoid an escalation of tariffs. The accord brings france and the u. S. Back from the brink of a fullblown trade war for taxing digital revenue. Civil aviation authorities in iran, meanwhile, have released a second report into the downing of that ukrainian passenger two. , saying it was hit by missiles after takeoff all 176 people on board the boeing jet died when it came down outside tehran on january 8. Iran initially blamed technical issues but later admitted the plane had been wrongly identified as a cruise missile. The first day of the extradition case against huaweis cfo has seen her defense team to announce u. S. Fraud charges as a facade. Lawyer says she should not be sent to the u. S. Because her defense do not meet canadas legal test for extradition. The hearings are her first chance to avoid being sent to the u. S. Where is accused to line two banks about huaweis dealings. A 10thng has rackedu up Straight Year as the worlds least Affordable Housing market. Withuver came second sydney and melbourne third and fourth. Hong kongs median Property Price was found to be just over 20 times the average Household Income last year. The ratio for second place vancouver was only 12 times the average income. Wow. 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 su keenan. This is bloomberg. Is toning down its risk warnings. It still sees expansion but at a weaker pace than previously thought. Speaking to us and davos is a chief economist and tells us what is driving her forecast. The biggest explanation for the small cut we have is the. 01 comes from india. We had significant revisions to growth in india for 2019 and 2020, and that explains the vast majority of the downward what are the Downside Risks to your projection . The trade issue still remains importance. One, we have had positive news but trade can spread to other areas. U. S. China trade tensions could return. There are other countries using tariffs, too. In addition, geopolitical risks are an important factor. A social unrest in many country. Haslinda when you take a look at the market there seems to be some sort of euphoria. The s p keeps testing new highs. Is there a risk that investors could be disappointed in the months ahead . The euphoria from the market come substantially from the very long frustrating we just explained about what is driving up stock prices. Very low Interest Rate is the number one factor. The one change we have seen was three months ago it looked like earnings forecasts were more pessimistic. Were seeing more optimism on the earning side. Again, we do flag that there are some markets that are slightly overvalued. And, you know, if there were a reversal in conditions those can have an impact. Right now we are seeing signs of stabilization in the global economy. We expect a low Interest Rate to stay for long. Haslinda there is been a call for governments to tap fiscal measures to drive growth. 2020 being the year were fiscal measures are implemented by governments . Governments have already 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 to look at it is you are able to borrow it negative Interest Rates, and you have projects that give you a positive return, this might be the time to do it. Im sure the costbenefit analysis that is an argument we still make. We also do think its good for countries to prepare, have projects in the pipeline so if and when there is going to be a more severe slowdown, if there is a more severe slowdown, they can hit the ground running. Imf chiefs the economist speaking to us in davos. Lets take a look at Global Growth prospects and how this and other key issues will be covered at davos. The ceo ofheidi International Capital firm. Always a pleasure having you on bloomberg. We had a great story on the bloomberg yesterday talking about it feels like we are at a moment where its exhibition peak to so many things. Peak, capitalism peak Climate Change in geopolitics. H how is Something Like davos which is this festivity of capitalism fit into this . Can solutions be found . Heidi this is the gathering where you have all the right people there, but you know, the is, the big theme this year stakeholder capitalism as an umbrella to tackle the same, familiar issues that have been talked about for quite some time is increasing inequality, the rise of populism, polarization, the threat to democracy. The big one on the agenda as theyre leading baskets of risk has to do with Climate Change. So, the idea is are we at that Tipping Point . And, if we are, one of the challenges for this year is to see can the participants overcome the disconnects . Because you come to davos, and then you have to implemented over the other 51 weeks of the year. Can you practice what you preach . Because there are some very good ideas on the table. But, at the end of the day, you is goingave to see what to be incremented to tackle some of these very substantial challenges . Moreah, and none i think substantial than the challenge of Climate Change. We had this report from the bank of International Settlements overnight saying the idea of a g reen swan of it could be another shock to the global economy. Do you see willingness to apply solutions to this challenge . Policys like government and centralbank policy are going to have to really step up to. Deal with this. Heidi it is it is a you said centralbank policy, because i think one of the topics is to what extent Central Banks really need to take Climate Change into account and really stress test whether or not there are vulnerabilities for the financial sector, for the insurance sector. Are there potential housing areas or commercial property that is in a particular region that is susceptible. Also, the larger economic effects. To what extent the Central Banks really need to focus on this as a rising risk. Mark carney was out in front. Christine lagarde without an front talking about this. Place whereto a they want to start to look at these risks. Another thing i would flag is youve seen from the investor community, particularly publicsector pension funds, very large Institutional Investors starting to put a lot of pressure on, on the, you know, the managers they outsourced to. Also to companies they investi in that is something they are aware of and caring about. As a result, that is where the becauseits the road, they are in charge of the capital and the investments. When it comes to governments, how much more of an active role should they take in economies given the big challenges facing us in the next decade, including Climate Change and inequality . Heidi all hands on deck for both of those. Importance,flag the obviously you have government in ty as a decisive role hose both inequality and the types of economic policies that could alleviate inequality as well as the regulatory and the investment, particularly the support for investment in new green finance. At the same time, i listen to a number of analysts over the past couple of days talking about the great performance by a lot of Financial Institutions over this past year. Where are they going to invest their capital . Theously, the elites in finance world are talking about inequality, and when they get back to have the Analyst Community saying, you need to invest. Revolution, industrial revolution, thats great. Threat and opportunity to worker s, but if you are going to invest in employees, then youre going to be, are you coming back . And investing in technology that is going to displace your back office or front office . How are you thinking about this investment in the employees that are in the companies that actually have not necessarily invested over the past couple of f capital outf o there. Of investment. T we had a recent survey the had an outlook when it comes to Global Growth. They were concerned around issues around trade along with overregulation and a certain economic growth. Should corporate chiefs take . So, i look to the fund, i look to the fed. Right now i would absolutely agree with the assessment right just explained earlier in the show. The one thing that would not aree is the fact that they also looking at, they are warning that to be complacent, because there are risks out there, particularly the issues around trade, they are shortterm alleviation of an issue that is going to be around for some time, particularly with the u. S. And china. So, weather, regardless of who same,the white house, the more existential issues, that brought us the trade war have not been addressed. But they will have to be. Likewise, social unrest, we have seen quite a bit of it in 2019. We could easily see more in 20 20, whether you are looking at many countries in latin america, libya, hong kong. For a lot of the same, the same types of reasons, anti corruption, weakening economy, lack of faith in the government to follow through and provide the kind of Public Benefits and do. That it is there to so the social unrest, geopolitical risk is still there. There is a shortterm alleviation. Has basicallyis given a platform for markets to move forward in the near term, but there is definitely a call benot be ov complacent complacent over the next year. Heidi creborediker, International Capital strategies, ceo. We will speak to some big executives later this week from davos including for Morgan Stanley and goldman and the bank of America Brian moynihan. This is bloomberg. Markets in the u. S. Have been closed on account of the Martin Luther king memorial holiday. Setting up in asia. Selinas in beijing. Selina we saw european stocks pull back from record highs. 2 at the close. We saw real estate in Health Care Shares lead the way in canada. We did see those european stocks as lower and u. S. Futures pointing to little change as investors are waiting for a fresh round of corporate earnings. They are taking a look at commodities. In terms of oil prices we saw it continue past 55 a barrel. Paring some of those earlier gains as a result of oil, libyan production remain halted after the armed forces blocked p orts. Its lowestfell to level since 2011. This next chart will give you more detail. This chart shows in particular outputading libyan has been volatile since the 2011 uprising. This country comprises 4 of opec output. Daily production will be cut to 28. 8 million barrels, down from 29. 6 million barrels. That reduces the share by another 1 . Sophie for more on what to watch and markets we have our asia assets editor in tokyo. We are putting a satellite on davos. Donald trump is due to deliver opening remarks this tuesday. That will be closely watched. Thats right. Selina was saying the key point in markets is what is the corporate earnings outlook . We have had some scarce about the u. S. China trade war. That is on hold for now. We have had worries about the global economy. Latest Economic Data show encouraging signs on that score. E industrial output. U. S. Retail sales. The key thing now is, ok, are businesses back in expansion mode . Are they ready to boost Capital Spending . Are they ready to get going again in the Manufacturing Sector as well . And so, thats going to be, feeding into that is people are going to be watching carefully what happens at davos. And particularly President Trumps remarks tonight. The u. S. Europe trade tensions have been a bit of a cloud over the outlook. So, weve had a report overnight that the u. S. And france have declared a truce in their dispute over french proposals to tax American Technology companies. Do we hear this kind of positive mood music from President Trump in davos . More broadly, do we hear from the finance leaders from the Business Leaders a sense of, you know, now that weve had the u. S. China trade truce we are ready to get going again, ready to expand and ready to boost investment, ready to take advantage of the rock bottom borrowing costs across the globe . That is going to be the key thing for investors looking for the next leg higher in global stocks. Yeah, investors will also be looking at the situation in hong kong. Really no momentum which is part of the problem and part of what said caused the downgrade for hong kong ratings. There are not tangible political plans, it seems. Chris this one notch downgrade by moodys overnight is going to feed into the narrative that the bears on hong kong have propagated. Those that are trying to short the hong kong dollar saying it pointingtain its peg, out the recession in the economy in hong kong. Pointing out the anecdotal signs that maybe there is a little bit of capital moving out of hong kong. It feeds into all that. But if you take a step back, moddodys isnt telling us anything we did not already know. The economy tipped into recession last year. We know it has got major headwinds given the lack of tourist arrivals, given how the protesters disrupted the Consumer Market there. But, from a fundamental standpoint, you know, hong kong still has an in norman supply of deposits an in norman supply of deposit, 1. 8 trillion. We have not seen any evidence there is a capital flight out of hong kong. So the impact on markets may be fairly limited. Asia editor in tokyo. Thank you. We will have more on moddys downgrade moodys downgrade on hong kong. And we will speak with carrie lam live from the World Economic forum on wednesday. This is bloomberg. We want to invest in clean en features,in gre and we know there is a lot of innovation we need really to step forward with the European Green deal. This is a major shift thats just about happen. This is no different than some of the ships that we have seen related to the baby boom after wartime. Reshapingfundamental that will entail significant reallocation of capital and price changes. Haidi some of our guest on bloomberg tv speaking and down vote. Year ago, the australia treasurer was declaring the country back in the black and promising the first Budget Surplus and 11 years. Stillr, these bush fires continuing across the country have put that at risk. Paul allen is watching this for us. What are the chances we will see a deficit this year, given how much we do not know about recovery . Paul the treasurer says the Economic Impact is uncertain. Its interesting he will not commit to that Budget Surplus after saying we are back in the black. Everybody said that is the disclaimer. We plan to be back in the black and now reality has eset in. We had bush fires destroying an area the size of england, tourism taking a real hit in the treasurer saying, well he says good Economic Management means we have the flexibility to respond to things like this. Thatn all savor the irony decades of neglect is threatening core economic policy. Sophie us tries biggest banks have committed to tackling Climate Change. How was the report card looking . Paul mixed would be the best way to describe it. Commonwealth bank leading the charge. They are committed to exiting coal by 2030, well ahead of the other three big four banks in line with the paris agreement. National australia banks made the same commitment by 2035. The other two do not have a formal policy to cut coal. That siaid, none of the big four have financed a new coal project since 2015. But renewables catching up. 11 billion went into that sector less year. There was a rising commitment from the big four. Sophie thanks. A quick check of the latest business flash headlines. Economy say they no longer expect a rate cut in may. They expect to keep the official cast rate cash rate at 1 . More Government Spending is in the pipeline and inflation has reached targets and Housing Market has strengthened. Haidi iron ore rose 4 in the second quarter, keeping is tops learning unit on track for annual output numbers. Oil production from the bhp three lines through december was 68 million metric tons. Now expect a Strong Performance in the second half of the year. Said to be is ai chasing one of the largest european infrastructure deals of the year. A French Private Equity Firm and firm are also in the hunt. A deal could be worth more than 3 billion. This is bloomberg. Sometimes your small screen is your big screen. And with the Xfinity Stream app, which is free with your service, you can take a spin through on demand shows, or stream live tv. Download your dvrd shows and movies on the fly. Even record from right where you are. Whether youre travelling around the country or around the house, keep what you watch with you. Download the Xfinity Stream app and watch all the shows you love. 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. Haidi a very good morning. In sydney where markets have just come loline. Come online. In beijing. Welcome to daybreak asia. Haidi our top stories this tuesday. The imf still sees expansion in the World Economy this year but now at a slower pace. The wo