Transcripts For CNBC Street Signs 20240713

Declines across the middle east and asia, impacting early trade in europe. A slowing in chinas Services Expansion weighs on sentiment but trade tensions lift as beijing prepares to send a delegation to washington to sign the phase one deal with President Trump. And japan vows to tighten its immigration rules after the countrys first prosecutors break their silence on Carlos Ghosns escape, calling it illegal and unjustifiable. Welcome to street signs, everybody. Our top story today, there have been International Calls for calm after iran announced it would abandon its commitment to the nuclear deal following the killing of general Qasem Soleimani. They have urged washington to, quote, not using force while calling for restraint from both sides. Germany worries the roll back on Irans Nuclear commitments could be the end of the 2015 commitment javad zarif said the pullback is capable. We are seeing reactions in the market today a sentiment has certainly taken a hit on the back of this escalation and tensions in the middle east. The worst performer of the bunch, looking across the Major Regions is germany the dax is down 1. 9 this escalation is marked by iran saying they will no longer abide by the commitments set forth in that 2015 nuclear deal. Now were awaiting what steps they may take from here. Well discuss in more detail throughout the show. In addition in germany in particular, the chemical stocks are taking a bit of a hit. Theres been negative broker comments weighing on the cyclical names across europe, sentiment certainly negative to start the week out extending losses from friday and Services Data from china overnight not helping either lets take a more deep dive into the oil majors that we are seeing a boost for the equities. Of course, this comes alongside a strong bounce in the oil price itself that stronger oil price filtering through to stocks. Lets take a look at where we stand for brent and wti. We had a very strong reaction on friday with brent and wti rising they are extending gains this morning with brent up 1. 9 just under the 70 per barrel handle wti trading around 64 a barrel, up 1. 64 clearly strong support for the oil price as we look to see what happens next. Lets talk about local markets as well because saudi default krid swaps have jumps 60 . Long dated bond yields are moving higher to the tune of 16 to 15 basis points shares in aramco, a stock trading now, are under pressure. Trading at their lowest level since the oil giants ipo on december 11th. And iraqs dollar bonds have added to falls from fridays session. Now also testing oneyear lows meanwhile, the streets have tehran were packed with mourners today for the funeral procession of Qasem Soleimani this is after his coffin was transported from iraq, where hundreds of thousands took to the streets of baghdad to mourn his death. They led a prayer for the man designated a prayer by the u. S the remains of the general will be taken to the city of qom, one of the main centers for shia muslims before being buried in his hometown on tuesday. Staggering images coming out of baghdad. We have been monitoring these developments all weekend these images this morning of people mourning, mass mourning, mass grief across the country is quite a stark contrast with the mass protests we had a month ago with iran. Is it fair to say the assassination of soleimani has actually served to unify the iranian people at this point certainly he was a hero to the iranian people and many inside iraq as a result of the swift and Decisive Action he took following the rise of daesh, the Islamic State it was the iranians and iranian backed militias in the early days to beat them back, so to speak. This is a person who for decades served to really carry the torch, if you will, of the Islamic Revolution abroad because it wasnt about taking on countries directly. It was about being able to infiltrate various countries around the region, syria, lebanon or elsewhere this was the person who was taking the Islamic Revolution to the streets of arab countries. And i think whats going to be really interesting over the next several days is to watch what we see in terms of the retaliatory measures its not a question of if. We know its a question of when and how the retaliation from tehran regime will take place. The americans, however, standing very, very firm, at least the Trump Administration in terms of the decision to assassinate soleimani. Lets listen in to what the secretary of state had to say yesterday. We would have been culpably negligent if we didnt take this action American People would have said we didnt protect american lives. President trump said well reserve risk theres tremendous risk. Were doing everything we can to make sure we take that down and protect american lives thats the mission set the secretary of state mike pompeo saying had they not taken this action to assassinate the head of the quds force they would have been negligent. Hes referring to all the actions out of iran, whether it was the attack on aramco, the attacks on the tankeres in the persian gulf no one is really talking about this within the terms of headtohead conflict between the United States and iran the question will be how this destabilizes the region and, in particular, what happens in the next few weeks in iraq itself because one of the things that weve heard again and again is not just whether or not this was a justifiable action in terms of taking out soleimani, someone who was, in fact, a man with american blood on his hands. It was about the fact that the americans under the Trump Administration doesnt seem to have any kind of plan for off the back of this particularly with reaching out to those who are proamerican within the Iraqi Government at this moment. Remember, its a caretaker government this leaves these iraqis between a rock and a hard place because they have a serious iranian presence in that country since 2003, a growing presence one that doesnt seem to be going anywhere if the United States were to be expelled as a force from that country, it would certainly leave those in the proamerican camp without a feather to reply with, if you will. It will be very interesting to watch how that seems to work out over the next several days certainly, if youre an ioc operating in the south of iraq or if youre sitting in tehran, if youre sitting in an aramco facility or in the persian gulf with a tanker, you have to wonder what this actually means for you. Guys thank you for the comprehensive breakdown, hadley. Certainly, the world is watching very closely to see, in fact, what does happen over the next coming weeks and days as you mentioned. Lets bring in another voice the head of middle east. Great to have you with us, neve. The killing of general soleimani, who at the end of the day was the master architect of irans military strategy, probably the second most powerful man in iran, would you deem this to be a tactical or strategic success on the part of the United States here or do you think they have misstepped in terms of the reaction were seeing from various middle Eastern Countries in the last 24 hours . Thats a really key question for us we feel that its a mistake because how does it further u. S. Interests in iraq itself, and then in the region if we take iraq, it doesnt bring any more stability to the political situation. We know theres a caretaker government, a number of other issues if you look at its strategy with iran, President Trump has been very clear, he wants to bring iran back to the table and yet he doesnt want war. How does this further those aims so, if you consider that it was taking out someone who was very senior, undermining u. S. Aims, strategies in the middle east, its a tactical goal, but ultimately i feel it will undermine u. S. Interests in the long term. The justification that the u. S. Administration so far is that they had intelligence suggesting that soleimani was planning an attack we dont have more details than that that is certainly the reports that have been coming out of the u. S. Over the weekend. There are also some conflicting reports saying theres not enough evidence to that effect do you think that the u. S. Administration has a duty to actually declassify this material so that the broader public can understand the justification for the attack and eventual assassination, not just, obviously, of soleimani but other people who were in that convoy as well . As we saw earlier this morning uk time, nancy pelosi saying that, you know, she wanted more congressional action on the part of this. And i think that thats something for the executive and congress and u. S. To Work Together on. Admit thely the Trump Administration has been quite minimal in the amount of leeway its Given Congress to oversee, you know, President Trumps actions and decisions. But ultimately that will be something for congress to decide. If we shift gears and look at the iran iran side of things weve heard from iran via state tv that they will not abide by their commitments as set out in the 2015 nuclear agreement, but in terms of potential actions from iran, what do you think is the most likely course of action they take . Are they going to pursue a military type of revenge, retal tags or much more likely to pursue is cyber attack or, perhaps, cutting off the rest of the world from oil, the flow of oil . To take your first points, we need to specify they said theyll commit to having International Agency assessment in iran. Its another step in that general direction with the jcpoa but theyre not removing themselves from the agreement entirely thats important to remember the kind of action theyll take, were expecting more missile attacks on u. S. Personnel in iraqi bases. Remember, there are iraqi troops there as well in those bases there will be cyber attacks, i anticipate another sort of indirect mechanism to try and sort of strike at american interests. We dont foresee any sort of direct confrontation or what could be described as direct military confrontation i think we need to be quite clear on what we mean when we say that ultimately Something Like that, a war as it were, is going to be an exchange of missiles. I think were a very, very long way from that even with the tensions as they are. Nato ambassadors are planning to meet today. This is a conflict that goes well beyond the u. S. And iran and iraq would you expect any sort of International Coordination in response to this weve heard bits and pieces, obviously, from different european leaders but no major coordinated response. Not yet there has been the statement from the leaders of germany, france and the United Kingdom late last night. Theres absolutely going to need to be a coordinated response also youve seen statements from the russians and the chinese working together the armanis and indians as well. At this point its the rest of the world stepping in for that coordinated response rather than the americans, as weve come to expect. Just quickly, your take on the Iraqi Parliament decision, nonbinding decision yesterday, for u. S. Troops to be withdrawn from the country what does that mean for american policy and how is that going to affect the overall relationship, obviously, in the u. S. , in the middle east, between the u. S. And its key ally on this terror . President trump is very clear how he felt on that. Saying he would issue sanctions. Thats quite a strong response as it is a nonbinding resolution. I expect this to take months to materialize. The legislation in and of itself but also its not clear their caretaker government can actually pass this so, yeah, watch this space. Certainly a lot to think about. Thank you very much for bringing in your perspective. The head of middle east and north africa at Verisk Maplecroft weve also been getting some European Data this morning let me just break down the composite numbers weve had out of the eurozone at this morning. The december comps at pmi index has come in at 59. 4. This is versus 57. 9 in november. Meanwhile, theservices pmi at the backlogs of work has come in at 51 versus 49. 7 in november. Just the point that the composite pmi is the highest number since november. But thats for future outputs. Just to remind viewers that we had the German Services pmi number come in at 52. 9 versus the forecast of 52, so higher than expectations. And obviously the french forecast as well came in line with expectations. Were seeing a bit of a bounce on the euro on the back of these higher than expected pmi numbers for november. Ghosn on the run fresh retails emerge that has turned the tycoon into an International Fugitive when you look at the world, what do you see . Where others see chaos, we see patterns. Connections. Relationships. When you use location technology, you can see where things happen, before they happen. With esri location technology, you can see what others cant. Welcome back to street signs. The japanese government has vowed to tighten immigration rules after the escape of former nissan boss carlos ghosn from house arrest in tokyo. The statement marks the countrys First Official response to ghosns flight from the country last week. The auto executive faces trial in japan over financial misconduct he has denied wrongdoing tokyo prosecutors have condemned the escape branding it, quote, illegal by unjust methods, saying his action ignore japanese laws and are being investigated ghosn has repeatedly criticized the countrys justice system, calling it rigged. New details from around the world have emerged about ghosns dramatic escape. The New York Times reports that ghosn was accompanied on his flight out of japan by an American Security consultant a turkish Charter Jet Company said its planes were illegally used to transport ghosn out of the country. Hes alleged to have flown to istanbul before arriving in lebanon. Speaking to cnbc last september, lebanese Prime Minister hariri weighed in on ghosn. They have lawyers they are taking care of this and anything they need from us, we will do i think this is a legal case in japan. Lebanese government cannot, you know, do much about it we can give support to the family we can talk to the japanese government, but in the end of the day, this is a japanese issue that, you know, his lawyers are dealing with we support him we hope that he gets out as soon as possible. Were you concerned by the way this case has gone quite irregular. Sorry yeah, it is. But, you know, as Prime Minister of lebanon, i would rest to say, you know, lets sit and watch and see where it goes. That was back in september. Obviously, things have changed a lot in the last couple of months its worth noting that the Lebanese Embassy to japan has formally denied involvement in helping conjure up his escape. In comments over the weekend, it seems he hired private companies, and there are various reports emerging on how they managed to put together the escape from japan to lebanon, being routed through turkey. He will be giving a press conference on wednesday, so that will be widely watched and i think what is interesting here is not only what he has to say about the Japanese Justice system, but also whether or not he could start speaking out about the practices at nissan. Because hes in a position now he can say actually whatever he wants. Hes sitting in lebanon that doesnt have a formal extradition law with japan he can certainly dish the dirt if he wants to on other involvement at a very senior level at nissan. So, clearly, that press conference on wednesday is going to be very, very key for the company as well. I think for markets the key here is much more about what happens to the alliance between renault and nissan weve seen a reassertion of both Companies Commitment to to that alliance he was the mastermind. Both Companies Need to cut costs and theyve been paralyzed by whats happened in this saga around carlos ghosn. The question now, i think investors are asking, should they merge or should they inwind their crossholdings clearly they have a structure thats been unsatisfactory for many shareholders. And as you say, it will be interesting to hear in carlos ghosn has specific gripes he looks to air around nissan it could be potentially marketmoving. We spoke to Bank Analysts about this and the underperformance of those stocks over the last 12 months. They cite specifically Management Changes at the top. And the fact its been rather chaotic. Anyone who has had a Loose Association with carlos ghosn has been removed from their job. Theyre looking for successors all of that turmoil has not reflected well on the financial performance. Certainly, the story is far from being over certainly, well get a lot more detail as well from the nissan side of things when ghosn speaks on wednesday watch out for that. Elsewhere, dozens of hong kong demonstrators were arrested over the weekend after hundreds marched to protest against chinas socalled parallel traders. They buy dutyfree goods to sell on the marketplace they complain drives up prices the marches took place after hundreds of thousands took part in marches on new years day. Following more than six months of antigovernment protests, replacing zeman as head of the Hong Kong Liaison Office lo had previously served as top official official for forcing communist Party Discipline he has never held a Hong Kong Related position they have been accused by beijing of exaggerating the gravity of the hong kong protests. President trump tweeted on new year hes eve that the sign will take place on the white house. He will go to beijing for phase two talks at a later deal. Chinas Services Sector expanded at a slower pace in december with the pmi coming in at 52. 5. Meanwhile, Chinese Business confidence fell to its Second Lowest level on record according to a survey of Services Firm it indicates Chinese Businesses remained wary despite a raft of stimulus projects and stimulus deal with the United States. The latest cut to cli niece Banks Reserve requirement ratio comes into effect today. The peoples bank of china aims to inject some 800 billion yuan into the market going back to the south china post comments you mentioned, its interesting to take note of the differences between the way the trade negotiations are being portrayed in the western media and in the Chinese Media because they are pointing to the fact that beijing is offering a much more measured approach in contrast to President Trump touting this as a big win. Very, very different way that these sides are being portrayed. International Market Attention has been shifted with the geopolitical developments in the middle east but this was the big story of 2019. We spent the year talking about the trade war and the implications its had on growth. Almost every single analyst we spoke to last year said this trade war has not been a good thing for growth at least were at the point of no further escalation and, perhaps, no further escalation is a positive for markets. Then you see, you know, china is still very much going along the lines of wanting to stimulate their economy more, injecting more liquidity into chinas economy. Well see how that will play out from a Growth Perspective there. Stay with us were not just talking software with boeing. Boeing uncovered a new potential design flaw in the max 737 what does that mn teatohe troubled air giants . Welcome back to street signs. These are your headlines. International calls for calm from beijing to berlin, officials urge restraint from both the u. S. And iran as escalating rhetoric threatens to collapse the 2015 nuclear deal and raise tensions across the middle east. Oil stocks rally as brent crude and wti drive higher on the tensions but equity markets fall with sharp declines across the middle east and asia impacting early trade in europe. A slowing in chinas services raises tension but they lift as china prepares to send a delegation to washington to sign phase one deal with President Trump. And 1917 and fleabag take the big awards at the Golden Globes. While hbo and disney win on the front while frozen 2 loses in the animated category. Were just awaiting the uk pmi data we had the eurozone pmi data coming in better than expected and the uk number coming in at 50 versus flash estimate of 49 positive. Better. Interesting the data on the pmi front has been better than expected across the board. The eurozone pmi also being revised higher and providing a nice boost to the euro if we take a look at sterling, we have seen sterling around 1. 31 ahead of that data, trading 20 basis points higher so, some support for sterling as well as the euro on the back of those pmi numbers. Lets take a look at how some of the other well, currency and some safe haven currencies are trading today given the geopolitical developments over the weekend and the last 24 hours or so. You can see gold still very much in the spotlight up 1. 6 this morning trading close to a sevenyear high now, gold just shy of 1,600 keep an eye on that as we continue to see inflows into the precious metal also we mentioned some safe haven currencies were seeing a bid for the japanese yen and in the u. S. Were seeing a bid for fixed income the tenyear note is trading around ten basis points lower than a week ago. Thats the picture for safe havens how about oil . We are seeing a big bounce in oil. In fact, one of the only sectors trading positive in european sectors is the oil and gas sector brent just shy of 70. 69. 70 we briefly broke through that earlier on in the session. Have come off a little bit but still up 1. 6 . Wti up 1. 4 . A big spike in the price of Energy Markets a lot of that is on back of risk premium being priced into these markets. As for European Markets, friday was a day of red today wouldnt be any different. You can see there is a lot of red on the board ftse 100 down 1. 1 despite the fact some oil stocks are doing well bp is big today but other names are declining. Xetra dax down north of 5 this morning. Some industrialing names getting hit. Cac in france and ftse mib some banks underperforming. As for u. S. Markets and friday was a day which saw the three indices in the red, about 0. 8 lower across the board on friday, worst day in the month today doesnt look like it will be any different s p and dow, nasdaq, all seen opening up in the red as well. The world is really gripped by the geopolitical events that are occurring. All eyes on the middle east and how things develop between the u. S. And middle east in coming days. Meanwhile, House Speaker nancy pelosi says the house of representatives will vote this week on legislation to limit President Trumps war powers as tensions with iran continue to escalate it comes after President Trump ordered an air strike killing Major General Qasem Soleimani. Mr. Trump did not consult with congress before taking that military action. Iran has announced it will not adhere to its commitments to the nuclear deal it signed with western powers in 2015 it comes amid tensions of u. S. Killing the general. Nbcs ali arouzi has more. Reporter a massive funeral procession for the death of general Qasem Soleimani. A tide of people have flooded the streets of mashhad and ahvaz where the funerals have taken place. Crowds were very emotional and a sense of anger in this country there is a sense of revenge in this country and there is also a sense of fear as to what is going to come next while there is just an official iranian government announcement saying its going to completely shed its commitments to the nuclear deal, it is not going to abide by any restrictions on uranium enrichment, the number of centrifuges they have, how advanced they are or on research and development. Also were seeing calls from the Iraqi Government to expel u. S. Forces from the region there are also varying calls across this country from senior officials calling for revenge and saying that it will be swift. The head of Irans National Security council said that iran will not only strike back militarily, but it has other options available to it as well, which could include choking off the flow of oil and cyber attacks. Ali arouzi, nbc news, tehran. Lets take a look at the corps. Air france klm shares are sharply lower after the airline announced it would run its entire flight schedule amid nationwide protests. Some crew Union Members are calling to join the protests over the governments move to reform the pension system. Air france said it plans to operate at full capacity today and tomorrow and its a new year but the crisis at boeing continues the Aerospace Giant says its reviewing a wiring ground on the 737 max which the faa has flagged has potentially catastrophic the latest issue is likely to further delay any faa approval of the max and may even require a redesign it comes as boeing attempts to repair relations with regulators amid a corporate crisis which has thus far cost the company 9 billion and a ceo. Well, this may come as somewhat of a surprise but 2018 was one of the safest years to fly, despite the crashes involving the boeing 737 aircraft there were eight fatal accidents in 2018 19, according to the aviation consultancy 270 compared to 13 in 2018 at least its moving in the right direction. What does 2020 have in store for the Airline Industry lets bring in the managing director and associate director of research at citi who joins us great to have you with us, mark. Morning. Reading your notes, seems like youre quite positive on the Airline Industry in 2020 its been a rough couple of years. Lets park geopolitical concerns for a moment why are you so positive . Theres still a lot of risks out there . I think youre right. Its hard to park the geopolitical concerns, as you mention. I think there are a few things to be aware of weve come out of, as you say, one of the best years, were on the best six months weve seen in airlines for a while. Demand looks like it stabilized out of particularly the uk market and french markets. For what its worth, the German Market still looks like a bit of a struggle the most important thing is supply supply right now is tracking at zero to minus 1 in the European Market thats really good for pricing and really good for airlines. Lets talk about capacity one of the things that has been keeping airlines down is that of extreme capacity, a lot of competition in the space how is that changing and how is this set up for 2020 now also, how does it differentiate between long haul and short haul flights . In terms of competition, the best place to be it the north atlantic three alliances running 80 of the market share thats typically the best place to get pricing in the world. The landscape saw a lot of consolidation in 2019. We saw names like wow, premiere, cobalt go by the wayside weve seen a lot of supply from some old names,the alatalia, norwegian supply shuttle, negative and in terms of of maxs being pushed further to the right, that shows consolidation and capacity constraint and sets up a nice h1 in regards to the pricing environment. The supply demand side but you cant look at the sector without looking at the geopolitical side of things. Weve seen a spike in oil prices Airline Stocks have taken a hit on the back of this. How well prepared are these airlines for Higher Oil Price and whats the kind of impact youre looking for you watch out for pest lance and war. In the case of geopolitical back drop where theres a risk of war going forward, its clearly not the time to buy airlines, is what some analysts would argue im looking below the surface of geopolitical and say oil is 30 of most airline p ls 100 of the top line, namely pricing, is more important than 30 of the p l, which is related to oil on top of that, in the next 12 months, what you have is ultimately airlines largely hedged the worst hedge is 50 we have good hedging levels and that top line going well in the face of 30 of the costs, as you mentioned, on fuel not going in the right direction. Listen, i understand your point. Clearly, if the geopolitical back drop is not good, most generalistist pms would not be massively excited about the airlines. From a bottom up perspective, perhaps a buying opportunity good point. You mentioned the dough memec demand stabilizing particularly the uk. Give us a picture of the demand. Is this from corporate or more consumer passengers . And what does a new government mean be for demand moving forward for airlines in the uk i think everyone was calling the end of the uk consumer we saw it in early march where there were profit warnings in the airline space. As we got into september, and airlines confuse pricing with demand when they see lower supply, pricing goes up and, therefore, they talk positively about the demand side of things because its outpacing supply. Uk is relatively better than some other economies for example, ger germany, weve seen weakness in the domestic market there part of which is some of the themes we talked about before, which is flight. Thats affecting the domestic market in germany. A huge topic weve been talking about is becoming people are becoming much more conscious about the number much flights they take. Very much so. Its not just on the consumer side, its also on the corporate side as well i have a funny suspicion corporates will use this as a reasonto cut costs in 2020 and ultimately, therefore, youll see fewer corporate flights as well as consumer flights. Interesting angle there thank you very much for joining us, managing director and associate director of research. Meanwhile, in the auto space, u. S. Auto sales slowed in 2019 as carmakers were hit by cooling demand but as phil lebeau reports, the sector did see some green chutes at the end of the year. The u. S. Auto industry ended 2019 with a strong december and as a result, it looks like 2019 will go down as the fifth Straight Year where u. S. Auto sales for an entire year topped 17 million vehicles. A mixed bag for some major auto players. General motors, a little weaker than expected in the Fourth Quarter. Largely because of the uaw strike which limited the number of vehicles they could deliver to their dealerships and ram also powered Fiat Chrysler to a relatively strong Fourth Quarter down slightly but ram had record sales. But the big story in the Fourth Quarter is tesla, which did better than expected in terms of total deliveries, which came in at 112,000 as a result, for the entire year of 2019, tesla deliveries topped 360,000 vehicles, which was the minimum the company set for its guidance not surprisingly, shares of tesla moved higher and the companys market cap now tops 80 billion. Phil lebeau, cnbc business news, chicago. Lets take a look now at the auto sector here in europe under a great deal of pressure today. You can see shares down 3 daimler down 2 as well. Fi yat chrysler down 2 . There were some specific some stockspecific headlines hitting fiat and puget as we were mentioning earlier, nissan and renault in focus as we look to hear comments fresh from carlos ghosn and how that might affect those two companies and that alliance. Certainly very heavy day for auto stocks. France says the u. S. Will face the might of the eu if it imposes, quote, highly disproportionate trade tariffs for digital tax on companies such as google and amazon. The french finance minister has written a letter to Robert Lighthizer warning against the move assist the u. S. Government considers its response as what it calls growing european protectionism. He says it will deeply affect the transatlantic relationship hes due to meet the eu trade commissioner phil hogan tomorrow another front to potentially watch on the trade war. Coming up, british stars dominate the Golden Globes showing hollywood how its done. We break down the biggest winners of the night later on in just a few moments stay with us i remember thinking about things i did and wondering if that was the last time i was going to do that thing. Coming to the Cancer Treatment centers of america, they treat the whole person. Everything is here. Imaging, infusion. I dont have to go anywhere else. They care about me as a person beyond just being a cancer patient. Theyre my second family. Some things are too important to do yourself. Get customized security with 24 7 monitoring from xfinity home. Awarded the best professionally installed system by cnet. Simple. Easy. Awesome. Call, click or visit a store today. Welcome back to street signs. You with looking at live pictures of the funeral procession for Qasem Soleimani thousands took to the streets over the weekend and continue to march to mourn the military commander. Fed officials are, meanwhile, concerned low Interest Rates may lead to excessive risk taking and Financial Market imbalances, according to minutes from the Central Banks december meeting when the fed kept rates steady following three cuts in 2019 Steve Liesman spoke with key fed policymakers at an event in california and filed this report reporter Federal Reserve officials interviewed at American Economic Association Annual meeting in san diego taking note of rising tensions between iran and the United States and developments overseas, but saying the u. S. Economy looks to be in good shape and able to withstand, at least for now, the fallout. Labor market is strong. Labor market is at 3. 5 . Trend growth is 1. 75 . I think, again, above trend growth maybe well get lucky or maybe the uncertainties will hurt us a little bit i think growth is good im expecting labor markets to stay strong. Reporter and dallas Federal Reserve president Robert Caplan said oil prices matter less than they used to because of the huge increase in u. S. Production. I think you would have gotten a different reaction ten years ago, certainly 20 years ago. And i think its indicative of the United States now producing 12 Million Barrels a day where we rival russia and saudi arabia in terms of energy production, were much more energy selfsufficient. Reporter kaplan said they should look at the amount of money they lend to overnight lending markets. Now that weve gotten past yearend, i want to find ways to grow the Balance Sheet more slowly that would be my objective im sure there will be disagreement about that, but thats what id be advocating. Reporter equity markets have gone straight up any hint it may reduce liquidity could cause concerns in markets but kaplan said he wasnt yet ready to make the call on what the Federal Reserve should do. Steve liesman, cnbc business news, san diego. Join, us live from his Company Offices in new castle, chief economist at pantheon, macro economics. Ian, thanks for joining us today. Lets pick up on our colleagues package around the feds latest commentary last year i think its fair to say that the u. S. china trade war dominated the risk outlook for the Federal Reserve. As we kick off 2020, geopolitical risk has returned to the fore. How is this poised to affect the feds decisionmaking relative to how the trade war affected their decisionmaking last year . Well, the trade war in some ways is easier to predict, if you like, easier to deal with because we knew what it was doing to business sentiment. We could track it through the surveys. Once it became clear it was proving to be quite dablging, the fed knew what it had to do the problem with geopolitics is the uncertainty is much more extreme. Nobody knows what iran is going to do, when theyre going to do it, what impact it will have on oil prices and what impact it will have on risk assets in general. What were seeing at the moment is sort of an immediate kn kneejerk reaction everyone is nervous. From the feds perspective, i guess what they need to do also is wait. They cant preempt here because they dont know what irans response is going to do and what it will do to markets. Its kind of a freefloating cloud of anxiety which i expect will hang around for some time i dont think were anywhere near the point where the fed thinks their response needs to be to cut rates. The reaction in equity markets has been downwards but small compared to the gains weve seen over the last few months we dont need to do anything yet but they need to think about it as we go through the next few months ian, lets talk about the reaction in Energy Markets we have brent trading close to 70 here tell me, Higher Oil Prices, is this a good thing or bad thing for the u. S. Economy obviously good for producers not good for consumers yeah, exactly the balance has really swung over the last few years. You know, it used to be a very clear idea in the u. S. When oil prices go up, its bad for the economy. Consumers see gas prices go up, they cut back their spending on other things its very clear. And the impact on Capital Spending in the oil business used to be slow and quite modest things have changed. With the shell revolution, producers respond to rising prices very quickly and Capital Spending rises within a few weeks of an increase in prices we will get the consumer hit but well get a gain from the producers. And now i would say those things are at least in balance and it may well be now that the positive impact on Oil Producers actually outweighs the negative impact on consumers which is a completely different world im not sure models have kept with it. Im not sure media has kept with it either but the fed has acknowledged it. They know this is a much less clear story than it used to be and the idea that oil prices economy bad doesnt work anymore. For europe it does for japan it does, clearly, because they dont produce any oil. In america where production is up 40 in the last five years, its a different planet. Its not clear that the feds response should be oil prices are gone up, the economy will tank its not like that anymore. Were coming on a couple weeks to the potential signing of the phase one trade deal between u. S. And china with the chinese delegation reportedly set to go to the u. S. January 13th how confident are you that we see not only the phase one trade deal signed but for the rest of the 2020 things remain relatively calm on the u. S. china trade front well, im not sure about calm i think the phase one deal will be signed but i also think its not very important it doesnt offer any relief to manufacturers who will be stuck with the 25 tariff on pretty much all imported Chinese Capital goods and intermediate goods and tariffs on imported consumer goods but still 7. 5 and back in july they were zero. We still have a business sector struggling with the tariffs. They are being paid by americans, no question about that its a drag on growth. I have to say i think the chance of getting a phase two trade deal about the election is very slim i think the chinese are biding their time i think theyre expecting theyll find it easier under a different president after next november they certainly dont want any more tariffs to be imposed which is why they have done the phase one deal but i think well be stuck with the uncertainty all year. Ian, thank you for your time. Chief economist from pantheon macro. Hollywood has wrapped up one of its most highmroe file awards ceremony. Brit stars were among the big winners. Lets get out to Jennifer Bjorklund who joins us with more we talk about british stars cleaning up but one british presenter, ricky gervais, who ruffled a few feathers, didnt he reporter i would agree he kept saying this was his fifth and final times hosting the globes, in a way meaning he knew he wouldnt get an invitation back. Well have to wait and see a lot of feathers definitely ruffled. The big winner, surprise winner was a world war i epic 1917, a movie set more than 100 years ago. Best drama, best director for sam mendes who said there was not one director there that room who wasnt living in the shadow of martin scoresce with the irishman was shut out Renee Zellweger for judy and Joaquin Phoenix for joker and Quentin Tarantino with best screenplay awkwafina, a firsttime winner for the Golden Globes. Best actress in a music or comedy for farewell while Taron Edgerton for rocketman. Television wins included hbos succession and fleabag for comedy and Lifetime Achievement awards for tom hanks and ellen degeneres. A big, big night in hollywood, the kickoff to the awards season. Thank you for breaking it down for us. I definitely have to watch 1917. Thats it for our somehow today. Worldwide exchange up. Looking to get your business off to a fast start in the new year . Its go time switch to comcast business and get fast internet on the nations largest gigspeed network. Plus, complete reliability with 4g lte backup. And, cloudbased security to help protect the devices on your network. Greenlight your business in 2020 with fast internet and voice for 99. 99 per month. Act now, and get 1 year free of wifi pro. Call today. Comcast business. Beyond fast. Markets in turmoil stock futures pointing to another day of losses as middle east tensions continue to surge. Iran is threatening to back away from the 2015 nuclear deal and President Trump ramping up his own rhetoric as well, threatening dozens of Iranian Military and cultural sites if that country takes any kind of revenge. Major reaction in oil, gold and key global haven markets this morning. All of this as Worldwide Exchange begins right now