A lot of focus on the u. S. Jobs report we saw in the u. S. As you look at the pound its 1. 3003, we need to look at the trade relationship and negotiations between the u. K. And eu. Up versus dollar currently 109. 68. Coming up we talk all things geopolitical and geopolitical at 11 00 a. M. London time. Lets get the first word news in new york city. Volcanoe philippines, a eruption is prompting evacuation of thousands. Triggered earthquakes and spewed ash across manila. Markets were suspended, experts morning a hazardous explosion explosive eruption is possible within hours or days. U. S. , the nation is looking at reviving semiannual talks with china. There will be used to discuss the economic relationship between the company countries. Today, chinas vice premier heading to the u. S. To sign phase one of the trade deal on wednesday. Many shortcomings, that is the conclusion of the report during hong kongs recent unrest. The investigation finding a lack of communication, no clear guidelines when firing tear gas. It could be made public in the next few weeks. In taiwan, the president winning a landslide victory. She says it shows the people of taiwan rejecting chinas call for one country, two systems. She says taiwan will continue to refuse to bow to pressure from its neighbor but any move to formal independence is unlikely. Beijing says taiwan is part of china, whatever happens. A first date thats literally out of this world. A japanese billionaire planning on flying to the moon and is looking for the love of his life to join him. The catch, he hasnt found her yet. He is taking applications for someone to join him. Global news 24 hours a day on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. Hurtado, this is bloomberg. Francine i love that story. Such hard work for a first date. Its a long conversation you have to have. East and middle antigovernment protesters rallied in iran for a second night after tehran admitted its military accidentally shot down a ukrainian jetline. This came after days of denying it. The iranian army said human error was to blame. Joining us from dubai is our reporter. Irans usually based out of , how big are these protests . Tehran youve seen them taking place in various districts so they are not contained to one area but they started in one of tehrans maine universities downtown and the downtown area has several landmarks and junctions that are usually a candlelight vigil for the People Killed in the plane crash and then turn into a protest. Theres also been reports of demonstrations in the northeastern city, another small city and also some reports of protests in the southwest as well. They are very vocal these protests, i think the profile of them is different. I think we are seeing a lot more middleclass people out on the street, but i think so far tehran is where we see the most of the anger right now. Francine how are officials reacting to this . It has been interesting to see how the state managed news agency has been reporting things today. There is a kind of impression overall that i think state run media doesnt want to use it just doesnt want the death of Qasem Soleimani and his funeral to become a clip eclipsed by this news. Interesting to see there are far more stories still about his killing and the impact of his death then there are about the plane crash. The stories regarding the plane crash seem to be mostly stories about officials insisting that they are going to provide transparency and they will get to the bottom of what happened. It doesnt seem to be a huge fornt of efforts effort the People Killed in this crash and who they were. Francine thank you so much. Joining us for the hour is the director of g10 fx bank of america global research. This has many twists and turns and will change the u. S. Foreign policy in the middle east, will change the middle east and iran. Where do you think we go next with these protests . Right now, the u. S. President doesnt seem eager to wage further into it. The impact on the overall policy between the u. S. And iran from this position might be limited and iran got out by saying its an accident, we wont do it again. That might state might take some of the heat out of it. Interesting question is what does it mean for iran itself. What we saw was a brief moment of National Unity in anger at the u. S. Killing of a top general, that is gone because of this admission that they knew they had accidentally shot down the plane and they did tell the iranian people that. We are seeing that in the protests. That possibility of National Unity, irans economy has seen great strides. Theres been months of protests, so what we are seeing now is adding to the general sense of the leadership. Francine does this almost embolden the iranian leaders . It raises some questions about the military at least which are highly elite and highly capable, how could this possibly happen. It raises questions about that. The leadership is in control of institutions. What we are seeing already are indications from their that conservative elements will try to regain control of the legislature. Francine what would this mean for currencies . We saw through last week a big play on some of these currencies, the yen, does this change dollar dynamic. At the moment we dont think it does. We are still bearish on the dollar. The key will be if the move in Oil Continues on the Global Economy that takes into a different dynamic. As the markets are brushed aside , renewed tensions, the canadian and the norwegian krone come up subsequently. Francine are the markets right to almost discount the escalation or is it because of Central Bank Actions that we saw muted market reactions or is it because we dont know how to price these . Interestingly enough i think the market goes through a number of these iterations. Number of conflicts around the world where the market now has become a lot more savvy in the way they trade these. They know that if the economy takes a little bit of a hit on geopolitical tensions that it will be there willing to accept. Francine thanks for joining us. Both staying with us. We talk oil, steady after its biggest drop since july. This is bloomberg. Francine this is bloomberg surveillance, i am Francine Lacqua in london. Lets get to the Bloomberg Business flash in new york city. U. K. Airline flybe is asking the government for emergency financing. It comes less than a year after a group fronted by Virgin Atlantic stepped in to rescue the carrier. On standby to handle a possible liquidation. More than 2000 jobs are at risk. Aston martin making a lastditch effort. The canadian billionaire is close to committing to a 200,000,000,000 pound fix. Controls half is inventing a Fish Oil Pill for bad cholesterol and will Start Testing and expensive phase of clinical trials. This 1 the company says its disappointed by the results. Analysts say could generate a peak revenue 145 million. The German Company is defined protest to abandon the deal. It says it has to balance the interests of all its different stakeholders. Thats your Bloomberg Business flash. Afterne oil is steady losing losing most of its gains last week. The iea executive director also expected an abundance of oil this year. There will be a surplus of more than one Million Barrels per day looking for buyers because production is norway,rom brazil, canada, lots of oil in the market. We were talking about some of the currencies linked to oil, does it move on geopolitical tensions or does it move on Oil Price Forecasts . It moves on both. Last week or so we headed towards that end currencies have followed suit. We had this very traditional large ction, the some of the other Asian Countries have come under pressure. It does have an impact on markets. Forecasts are important but the comments from opec have an impact. Francine whats amazing for a it seemsec watchers is the oil market has learned to live with it. There was the threat of conflict escalating quickly. Compared to what it would have done 15 years ago, nothing. Environment an where things are less predictable. Under obama we had tensions of policy of thee u. S. Administration was relatively predictable when it came to the middle east and north korea and what we are seeing under donald trump as he is willing if necessary to do anything, in this case especially against iran and that brings an element of and certainty. An element of uncertainty. Francine how much of it is shale oil in the u. S. . Kamal the u. S. Is the Largest Oil Producer in the world and to a certain extent is relatively shiftsed from the global in oil price historically its having a Material Impact on consumers. Hedging wise if youre going to get more volatility or expect more, that is the case for hedging. Francine if you look at global growth, the one thing 2019 was worried about was the u. S. China trade war. We have a phase one, will we get a phase two . Rosalind thats the question. Some people didnt think we would get to the first one. Given the unpredictability of the u. S. , where we go from here is unclear and also if the first phase of the deal sticks is unclear. We are only months away now from u. S. Election, how this trade deal impact to voting moves in key areas for donald trump and the democrats will be important in terms of how long that deal may last. At least on the chinese side you can see with the economic challenges china has been facing ,nd the questions over taiwan he really needs to keep the chinese economy taking over. We had expected a phase one deal. Is in game deal theory potential payoff territory. What do they get in terms of the optimal payoff, what would be striking a deal with donald trump or with Donald Trumps potential successor. Both sides will be exploring what the options are. I think the biggest thing for donald trump will be to make sure the economy remains resilient and the equity markets remain strong. Francine is taiwan significant . They rebuffed china in the latest election. Will this have consequences . Rosalind she was expected to win reelection which is astounding. She has come back to win. She took a strong stance on china. The mood has been supportive of the protesters in hong kong. Declare thebout to taiwan will be independent forever anything. She knows how to navigate a bit more. Still in a we are collision course between taiwan and china and that brings the u. S. As well. Its a redline for china and also an important player for the u. S. That tussle for influence globally, taiwan will be an increasingly important factor in that. Coming up, nissan report say the japanese carmaker is considering going at it alone. We discuss that next, this is bloomberg. Francine this is bloomberg surveillance. Going it alone. Reports from tokyo say nissan is planning for a possible split from renault amid the fallout from Carlos Ghosns escape from escape to lebanon. This would be a total split as well as a change to nissans board of director. It says renaults chairman has doubts about the alliance. Is bloombergw european transport reporter in paris. The Nissan Renault relationship seemed to improve in the past few months. What happened, apart from carlos ghosn escaping from to lebanon . The relationship has been better with the appointment of new managers and they were both working on projects involving electric vehicles. They were preparing for a big announcement on the project but what happened is i think the escape of carlos ghosn is stirring things up and giving ammunition to those who are critical of the Alliance Within the alliance. The engineering parts of renault. Nd nissan have always argued the escape is definitely playing a role right now. Francine how would the alliance look like if they split up engineering . The engineering is basically at the heart of the alliance. Without engineering, there is no common platform, no common car. Without engineering, its a slow death for the alliance. Francine is there a plan b for renault . Ania at this point there is no plan b. Therethere talks are talks, the stock price goes down. Renault had a plan b in form of a merger with Fiat Chrysler and when they decided to combine with fiat. Basically it looks like they choice but to find a way to reconcile. To setort mentions plans up engineering divisions while keeping purchasing together, purchasing as a source of large savings. We can imagine in the future and alliance that is slowly winding down but still keeping purchases together. Francine thank you so much. Bloomberg european transport reporter. Lets go to saudi arabia where the aramco chief is speaking for the first time after the companys ipo. Our reporter is chairing the panel. Attacks is also a testament of our reliability to product to our customer without interruption. Our reliability stems from three things, our resources and the way we manage them, are infrastructure our infrastructure which is excellent. Talents, the workforce that we have. What was attacks, this was our infrastructure. Our resources were not harmed and our people, we learned no one was injured in these attacks. To restore the facility is unmatched in the industry. We have shown this in all incidents that have happened with saudi aramco. The biggest was the simultaneous heads hits. Fires, almost 25 raging at the same time. And the team was able early in the morning was able to put hours,ires out in seven its a testament to the training, the development, the Emergency Response, we have drills and unless you take the seriously every time you conduct one, you will end up with a disaster. When things happen its a testament to how do you respond to these things. Andur Emergency Response the highly trained workforce made us capable of responding to restoring the facility quickly and Business Continuity. Our Business Continuity, there is no company in the world following the incidents we were able to mobilize and 24 hours. In 24 hours. These are contractors ready to execute. On you havebased the plans, we didnt go back to the drawing board to see what we need to do, we do what needs to be done. No interruption to any of our customers, International Customers in terms of supply. Done on applies were timely basis, and we maintained our reliability. So making sure you have the trainedy response, the and developed workforce that is capable to handle these situations, and the Business Continuity are all elements that are important to make sure that you maintain that reliability. Annmarie i think september really showed that you are a Reliable Company partner to work with, but about 15 of your production goes to upgrade. Is this a time to diversify across the kingdom . Approximately 5 million to what was 1. 5 Million Barrels, so if you combine the two, that is the 5. 5 million, that was the production of that day when the attacks happened. It used to be much higher than that, by the way. It used to be much higher than 5 billion, but we made the stabilization. 1. 5 Million Barrels was taken thefrom going to stabilizing facility. When we built, all new facilities, we had new stabilization at all these facilities. So slowly diversified. Diversified. That it is built in a way gave us a lot of stability. The way we built it, the distance between each vessel, each compressor, the drainage system. What helped us is something we call a super dump. You have a system that drains everything when you have an accident or you want to depressurized the system quickly. We have something that is unmatched in the industry, not similar to others called a super dump. So we are able in no time to depressurized all of these. Hours toble within 48 24 hours. Duction, and so basically because the way we built the facility, the standard gave us a lot of flexibility in terms of isolation and managing any incidents in any particular units of the facility. Annmarie i want to bring the u. S. Companies into this discussion because following the airstrike was thatll, that was Annmarie Hordern there, with the chief executive of saudi aramco. We are getting breaking news out of the u. K. The u. K. Economy unexpectedly shrinking ahead of general elections, casting doubt over whether there was any growth at all in the Fourth Quarter. This is from the month of november, so gdp so 0. 3 in november. Economist expected unchanged output. Was needed to prevent contracting in the Fourth Quarter. Just over 1. 5 hours into the trading day, lets check into your european stock movers with dani burger. Dani we have some big moves from carmakers, starting with aston martin, which last friday saw a big drop after a profit warning showing it needed a fresh injection of cash. Billionaire Lauren Strohl said putting as much as 200 billion pounds into the company, he is carn for racing points, the his son drives. The Chinese Company also looking at making an investment in aston martin as well. The downside, we are looking at renault, falling more than 3 . We were talking of with your reporter after the carlos ghosn dramatic escape from japan, they might look at manufacturing and engineering, this at a time when auto markers automakers are looking for more deals with the headwind. Igine,y, metta jean med after the company gained, an 80 effective miss rate after 24 consecutive months. Those now trading at the highest since last summer. Tom dani burger with francine dani burger with the stock movers. Lets go to first word news with viviana hurtado. Viviana for a second night in iran, mass protests after the government admitted it accidentally shot down a ukrainian jet. Thatllows days of denying it had anything to do with the incident. It was near a sensitive note terry site. Human error is to blame. Of the victims death the families of the victims will be compensated. Fires are devastating huge areas land, theand bush area twice the size of switzerland. Pressure is being put on the government of australia. Many shortcomings. That is the conclusion of the report of Police Conduct in hong kong during recent unrest or the investigation finds a lack of communication, no clear guidelines when firing tear gas. The report has not been released, but may be in the next few weeks. In taiwan, the president winning a landslide victory. Saying that it shows that people of taiwan reject the call for one country, two systems. Formal independence is unlikely. Beijing says whatever happens, taiwan is part of china. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, viviana hurtado. This is bloomberg. Francine . Tom turning to francine turning to france and the gridlock the government is experiencing, president Emmanuel Macron sacrificed a key major making 64 the age for full retirement benefits. Still with us, rosalind. Athieson and kamal sharma an how big is the concession . Is it a failing on Emmanuel Macrons part two able to reform france, or can investors live with that . Rosalind this is going to be difficult. He got tax and labor reform done, but pension reform is very important to the budget and the future of the country. You can see the decision after the unrest. What is the most important part is this reform. France has 42 separate regimes for pensions, and he is obviously set his sights on getting most unified into one simple system and putting out putting off the idea of raising benefits from 62 of to 64. Probably in the scheme of things in the longer run, that is the most important. It does have a fiscal impact because raising the retirement age would have saved about 3 billion in the shortterm, and in the longer term would have saved up to 12 billion. There will be a hit from differing this other change. Policy, euros is ecb with his massive review coming up, but do things like this matter for the currency echo ec . L for the currency kamal ever since president trichet, they have been calls for structural reform. It must, some disappointment that without the savings from the fiscal side there will not be enough, or there will not be room for fiscal stimulus, which is the big of for the market. Ondoes not have an impact policy, but we have stated that the emphasis needs to be shifted on the government, to do some structural changes. Francine when needs to happen for the year of not to be undervalued . Kamal i think we need domestic demand. Have abal trade tensions big impact on Chinese Business investors, spending, and on european exports, and that will lead the emphasis to more spending, more consumption. In the absence of that, it is difficult for the two francine we will talk about brexit in a second. , there isk at germany a pretty fragile government. His france the last man standing is france the last man standing echo rosalind certainly they have managed to get the reforms through. Certainly they are getting reforms done, so his popularity is not really under threat and france. Strong public support for the strike, so a large percentage of people agree with the industrial action. That does not mean that people do not also see the need for change and reform. It is mostly how he carries that out and how he brings the french people with him. Internally, it is interesting to look at them Emmanuel Macron. He is trying to establish himself as a new leader of europe, especially as Angela Merkel reaches the twilight of her political career. He is trying to come in and say that i will be the next one to be the architect of this broader european project. The question mark is his ability to do that. Francine thank you both. They both stay with us. Come and come bloomberg, the chief executive of from a giant from the pharma giant glass a smithkline. You do not want to miss this. This is bloomberg. Francine this is bloomberg surveillance. Lets get to the Bloomberg Business flash with viviana hurtado. Viviana Goldman Sachs plans to raise its number of jobs in china to 600. This doubles its headcount over there over the next five years. The state of hiring will hinge on beijing fulfilling its pledges and opening up financial markets. It is not the only international we spoke to ubs. Dark we already have the potential, but definitely over the next mediumterm, three to five years, that potential will continue to grow, and particularly for the banking side, i think we will definitely be adding as well. Viviana woodward is taking over hex all in a 6. 4 billion deal, creating one of the worlds Biggest Aerospace and defense suppliers. The deal is driven by efficiency, not because of the 737 max. The combined company would be cel. Ed woodward hex siemens is going ahead with a controversial project. Honoring its contract to supply tosiemens says it has balance the interest of all its different stakeholders. Activists say they will continue protesting. That is your bloomberg . Francine . Francine thank you so much, viviana. Lets get the latest on the leadership of the u. K. Labour party nominations. Securing the 22 nominations needed to get through the next round of the contest. The u. K. Economy unexpectedly shrinking ahead of the general election because of figures for the month of november. There is raging debate about whether the bank of england should cut Interest Rates in january or not. Still with us, Rosalind Mathieson and kamal sharma. Partyl come to the labour in a second. But this feels big. If you look at the pound movement, in the last hour or so, we had that figure about 15 minutes ago. It has declined steadily. Does it mean the chances of a rate cut our really there . Close, we were at five basis points from a rate cut in january. These numbers will have an impact. These are november dates. I think heading through the general election, there was an expectation that we would see a balance in the data. At that has not happened yet. We do think there will be a rate cut. There will be the chances of a january rate cut, that has increased. Over the last week or so, there is the signal of the rate cut. No you join haskell and michael saunders, and that is a rate cut. It looks like if we get more weeks data this week more weak data this week, that is the base case. Francine what are human is there against a rate cut . Be consequences . Kamal well, the economy is weak. Even you if even if you ignore brexit, on a plum and remains very low, unemployment remains very low. A traditional high street as the retail Sales Numbers are week. Are weak. Macro measures are being put in place regarding the housing markets. That shows help to a certain extent, but the bank of england has been clear that they do have a limit to where they are prepared to go in terms of rates before potentially doing some quantitative easing or nonconventional policy measures. Francine are we ever going to see negative rates in the u. K. . How much of a disaster would that be . Kamal i think it is doubtful. The governors have said that the lower bound for the rate is zero, above negative. It is unlikely that we see negative rates. Francine the labour party had there are four contenders and they are very different. Rosalind there are six contenders at the moment. We expect one of those to probably fall off today. It is a fair way till april, and what it tells us at this point is that the popularity of these sellinges, they are members of parliament. It does not tell us how popular they are with the grassroots, the trade unions, the parties outside the cities. That is up in the air. So the race could be wide open. Jeremy corbyn sneaked over the threshold at the last minute and became the candidate previously for the election. I think it was a surprise even to him. It is still wide open. The question is, how will these candidates differentiate or not from the policies of Jeremy Corbyn . Labor law significant grasp. Can they get those back, those seats . If so, do they stick with the radical party be the radical policies of corbyn . Ncine rosalind most candidates are saying they will stick to the policies of Jeremy Corbyn. Significantpect a move. The front runners at the moment are quite aligned with Jeremy Corbyn. A radical shift may happen a little bit as we get into the campaign, more to the re grassroots with their feedback. Kamal it does not take a leap of faith to say that the pound before the the pound woes before the general election if you look at some of the polling, the members polls shows that there is a popular grassroots potential leader. Partysly given where the positioned itself, that was not a favorable electoral move. It all depends on where the new leader are they prepared to move more to the center or keep these relatively left of Center Policies . That will determine whether it means there will be an impact for the pound. Obviously what we need is somebody that can through the crediblen provide a alternative or credible argument in parliament against the government. Francine thank you both for joining us. Andharma and robert roslyn matheson. Landslide victory for the prodemocracy party, providing eight clear majority. We are live in taipei next. This is bloomberg. Francine economics, finance, politics this is numbers surveillance. Im Francine Lacqua in london. Lets look at the events we should be looking at for this week. U. S. Bank earnings get underway. Announced ng airplane orders. On friday we will get chinese gdp figure for the Fourth Quarter, two days after the longawaited signing of the first phase of the u. S. China trade deal. Returning to taiwan, the elections over the weekend, the president has won with a landslide majority. Party is seen the as a rejection for beijings pershing push for one country, two systems. From here taiwan go after the result . Foro you have the mandate reelection, and a lot of it really hinged on the economy, but also what happened in hong kong. Kindreds a lot of spirits here in taiwan looking at what happened in hong kong. So how hong kong goes, taiwan rejected that one country, to systems framework for taiwan. That is out of the way. Now can the ruling party, the overwhelming an landslide victory, can they keep the economy humming . Indications are that they will. The markets are doing well. On shoring of manufacturing is coming back the chip cycle is on the upswing. The ducks are lining up in a row for taiwans economy for right now. The other question domestically is what will happen to the opposition, the old nationalist party. They are licking their wounds and will have to figure out how to appeal to a Younger Voting base. The big question, the big elephant in the room, is what is china going to do now that they have an independent minded party in for another four years in the presidency . Chinane how has responded so far . Pretty viscerally. Providing sharp commentary from the news agency. Tsai and the party used dirty tricks. They are not taking this well, and the ministry of Foreign Affairs in beijing has said taiwan is part of china. That is without question. So this is going to be something that is going to continue to ruffle their feathers. Even the senior dpp officials i talked to today talked about sovereignty for taiwan. Francine thank you so much, Stephen Engle there. Bloomberg surveillance continues in the next hour. Tom keene joins me out of new york. We will talk about geopolitical risk with Richard Haass. Francine no respite a second night of protests grip iran after the government admits it accidentally shot down a ukrainian jetliner. Autos split nissan executives reportedly step up a plan for a breakup with renault after Carlos Ghosns dramatic exit from japan. And a landslide. Will taiwan reelect a president who vows to defend his sovereignty. We are live in taipei. This is bloomberg surveillance. Tom, there is a lot going on with the pound for once. It is not brexit related. The economy in the u. K. Unexpectedly shrank. There is a lot of talk over whether we will see a rate cut as soon next week in january. Every data point matters, and we actually saw sterling declining and expectations of more boe easing. Tom i have a great chart on this. It almost changes the early debate as we go into davos next week over Central Bank Policy as well. Can you bring up this chart . I want to bring this up for francine. This is the bank of england back to 1920 and beyond, back to world war i. The basic idea is the low rates of the depression, and we are beneath where we were in the depression on Interest Rates. Is there any talk about the bank of england going to negative Interest Rates . Francine it is interesting. I asked this to our guest moments ago, kamal sharma of bank of america, and he said at the moment that would be almost impossible, but you keep an eye on it. You just cut deeper and deeper. It also depends on what kind of economy they are left with. Lets get straight to the bloomberg first word news with viviana hurtado. Viviana we begin in iran. Protests over there have turned violent. They fought with police and tear gas was fired at crowds over the weekend. I rans leaders reverse theselves over the ukrainian jet. Donald trump warning that the irani government should not kill protesters. A volcano erupts in forcing a massive evacuation in the philippines. More than 20 3000 people have been evacuated. Tore are plans to move up 2000 more. Financial markets have suspended training. A minor setback is how china is trying to or tray the results of the taiwan election. President tsai ingwen was a landslide winner. She opposes reunification with china. Beijing calls her election a fluke and taiwan says he reunification Senate Majority leader Mitch Mcconnell backing a resolution that would dismiss the impeachment if mrs. Pelosi does an send over the articles in implied time. She is expected to do that later this week. Global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries, i am viviana hurtado. This is bloomberg. Tom lets go to the data right now. I do not have weak pound up. Here, but sterling, 1. 2967 i guess the accommodation is on, on, on. Francine i am looking at what markets are telling us. European shares getting a little bit of a lift, a little bit because earlier they were a bit more depressed. Investors are trying to show some mild optimism at the start of a very busy week dominated by earnings, but also the signing of this partial china trade deal. Tom a quick sterling chart. Lets put it in perspective. We do that at bloomberg surveillance. Go, doom and gloom, recovery. A johnsonian rally, francine. Francine protest hit iran after it government admitted that accidentally shot down ukrainian jet, claiming 176 lives. President donald trump tweeted support for the iranians. Our Senior Reporter for International Affairs joins us. Thank you both for joining us. Last week it was antiu. S. Sentiment and we saw all you rainy ukrainians rally that we saw all iranians rally behind this strike that killed general soleimani peered how significant is this . Incredibly. You had a short period in which a polarized nation came together thatd a patriotic feeling here was a very prominent general who had been one of the most Popular Figures in iran who had been killed by the u. S. And all of a sudden now you are back to the situation similar to what you had in november with protests in the street, antiridging chants. Francine what does it mean for the leaders of iran. There are a number of things it women that it may well mean. One is that there had may be constrained. First of all, their reaction to these protests have been less brutal so far than what we saw in november when live ammunition was almost instantly used that has not happened this time, although there is plenty of teargas. The other thing is that that may beo constrain or conceivably the opposite. But probably constrain their hand as they try and respond to the u. S. , to continue to respond because they will be very careful about what is going on at home where part of the problem is people are looking at what happened so far and it is a response against the u. S. , no one died, and yet you have more than 130 iranians dead in various ways since soleimani was killed. Tom i have not seen in the last 72 hours an article, an essay, or think piece that explains the power or position of the Islamic Republic. I know we have protesters against them, but does the Islamic Republic, the government of iran, do they actually are they entrenched . Do they have power . Do they have a Critical Mass as these debates unfold . The answer to that needs to be yes. It is a regime with power. It has control over the military. It has units such as the revolutionary guard and the militias which are willing to use force in order to maintain the government in its position. It has a lot of levers. You are about to have elections to the parliament in february. The guardian council, a state body, just vetted the list of candidates who will be allowed to stand, and there are dozens of current mps, mostly moderates come who will not be allowed to stand. Have a lot of levers in order to maintain power, and yet they also depend on authority more than people outside iran think. That is eroding. So they are in a difficult position now. Tom we are thrilled to bring our guest from morgan stanley. Thank you for being with us, not only on oil strategy but the dynamic of oil this morning. What is the dynamic of oil . As you look one week into this iran and baghdad story, what is the dynamic that you see in oil on supply and demand . Sure. Thesee now seen geopolitical risks phallic factors are faded. Investors are relatively complacent about middle eastern risk. I dont think that is quite the right interpretation thinking about oil prices, it makes sense make sense to think about the future and the spread between the stock price and the future. Splitting these two, they tell an interesting story. The 12 monthsween forward and brent, it is not quite a decade high but it is not far off. It is arguably difficult to argue that candida spreads can widen from here. Normally such wide calendar spreads are steep inventory, i do not think you can argue that we are seeing that. So the spreads have a limited upside, but looking at the former prices, the the forward prices, there is a lot of weight on the forward prices. If the back does not move, the front can only move so much. At the same time you have a threat of conflict moving over the oil markets last week at the have all of the shale oil from the u. S. Moving with the middle east tensions. Martijn the market expresses this in these times spreads, but they can only go so wide. We need to get the front moving higher. As long as there is no actual physical disruption, that is a very hard case to make. So that is why these valleys are fading quickly. These rallies are fading quickly. Much for your so important perspective. We will move forward with marc champions comments. And a shockingly prescient essay in december out front of the crises in tehran, baghdad, and washington. Ambassador haass. This is bloomberg. Bloomberg surveillance. Good morning, everyone. We will be going to the Economic Forum in davos. Exceptionally detailed notes on hydrocarbon, and karen ward of jp morgan Asset Management as well karen, what do i do with success . How do i manage being up 20 something percent and then you get this early gift in january . How do you manage success in the equity markets . Karen i think it is about looking for a position that leaves you exposed to the equity market, but perhaps in a more defensive matter. In a more defensive manner. Thinking about largecap versus smallcap, value then perhaps being heavily skewed towards growth. From a regional perspective, something more balanced than focusing on the u. S. Markets, which are more tech focused, and then really screening on quality. Tom know we go into our meeting with martijn rats and karen ward. If you are searching for value as beleaguered, is oil the place to be . Not sure of all the sectors. Of all the sectors, oil is the place i would be most interested in. Changepect is that the in the elasticity of supply from the north american markets means you are never going to see those 100 oil prices, which i think would be really helpful for many of those stocks. If you are thinking we are back trade, and we are looking at value on that basis, the financials are more interesting than the energy sector. Francine martin, what do you expect from big oil, fourthquarter earnings . Unfortunately, a relatively muted oil season. 60 a barrel during the Fourth Quarter should be the headline as an all right price. Gas, u. S. European gas, they define they refine petrochemicals, they sell lng, and all those prices have significantly underperformed the price of brent. It used to be the case over the last decade that you could look at the price of brent as an indicator for the entire basket, but at the moment, all of these other commodities have disconnected from what brent is telling you. 10 re rolling earnings down for the quarter and 30 down yearoveryear. You cannot call that an encouraging quarter. Will we pray will we pay that price in five years if not 10 . Martijn this is the critical debate. It is surprisingly, frustratingly difficult to know this. At some point you would suspect that this might kick in. We have to say that this debate in 2015, after the oil price shed, and in 2018 we had in 2020 we will have more than 2 Million Barrels in growth. You wonder when it is going to kick in. Tom lets go to the sectors where i want to be. I do not to be in tech, and many agree with you on oil, and martijn rats comments are striking. Where is the allocation right now after we have seen the first 15 days of january . I think the recovery or the resilience that we expect is still likely to be very much in the consumer across the global economies, both consumer cyclicals, and we have seen some rise in the price of those already. That is where we see the resilience. I think if we are getting more optimistic, that this trade deal will hold and we are looking into a decent rebound through the course of the year, then i think the financials are worth thinking about. Francine financials in europe, the u. S. , or cross world . Karen i think it is a cross world story. If we think about what is weg how driven think global Interest Rates. If you want to see the reflation story gather momentum through the year, than it will very much be a global story, and the pricing of those is probably the cheapest in europe, so maybe that was skewed slightly toward your. Francine what is demand like for oil in emerging markets . Martijn improving a little bit. We have very weak demand in 2019, but at the end of the year more encouraging data is coming in. If you look at four indicators, from china, for example, you could argue that things could improve. What i find interesting on this question is that often we look at the headline price of brent, 65, much higher, and we think that is muted. But if you look at the price of diesel and diesel is really is aeason why it critical part of the barrel. If you look at diesel prices, 2013are close to 2012, levels, when brent was well over 100. Inno means are diesel prices em currencies low. That puts a little bit of weight on how much demand can grow. Much,ne thank you very martijn rats, there. Lets take a look at the events you should be watching out for this week. It eats u. S. Bank earnings, citigroup, it is u. S. Bank earnings, citigroup. Tomorrow, boeing will announce the 2019 commercial airplanes tota orders and deliveries. A lot going on this week. This is bloomberg. Viviana this is bloomberg surveillance. A merger between two boeing suppliers will create one of the worlds Biggest Aerospace suppliers. Woodward will combine with hexcel. Hexcel is valued at 6. 4 billion. Goldman sachs is ramping up its presence in china. Bloomberg has learned goldman plans to double its headcount there to 600 people over the next five years, provided that china continues down the path of opening up its financial markets. That is the Bloomberg Business flash. Tom thank you so much. Francine lacqua in london, i am tom keene new york. A chart which is a spectacular chart. You have to see it to believe it, which is the correlation of a 10year yield in white, lower, lower, lower. And we inverted the asset size of negative yielding debt. Karen ward came up with this joy your it at jp morgan Asset Management this is my lead panel at the meeting of the world Economic Forum, negative Interest Rate. Are they good for society echo karen lets talk to the channels by which they are supposed to work or they make private credit cheaper. To encourage private investors. What the central bank talks about less is their desire to use them to depress the currency. I think in that you could say they have been pretty successful. The other thing they are designed to do is to make financing cheaper government and to allow governments to spend more money. The two channels by which they are most supposed to work are the ones the Central Banks do not like to talk about. When you remember that and you can say they are having a pretty good effect. Tom i am going to go to a gym beyond cochart where it shows yields higher, yields higher and down we go. Do you see rates at a zero bound and negative rates at europe . Is there any vision they can succeed in reflation . Karen not obviously yet. I think that is the important point of that chart because one of the new charts in our quarterly guides of the market. If europe continues with konta date of easing, this year into next, that will pin down the rates in europe, and that has global ramifications. We need to see, regardless of what is happening in the u. S. , we need to see europe lift those. There are no signs of inflation lifting in europe. The pressure will be on doing more, not less. R squaredchart, the in that chart is an act of god. What a correlation. Francine one thing that caught my eye was margin pressures. Is that how we will judge companies in this current earnings season . Karen i think that is exactly right. There is more of a focus on how much of an economic rebound there will be. Will it be l shaped . When we translate that into earnings, not only do we have sales pressure, that we have some acute margin pressure. Labor markets are tight, wage growth has picked up, and there is no Pricing Power that inflation is giving margins subdued or that keeps a lid on how much earnings can really bounce this year and keeps us in a low singledigit world. Francine karen ward of jp morgan Asset Management. Coming up, taiwans prodemocracy party wins by a clear majority. We will be in taipei with the latest. Plus, tom and i have a pound chart. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york. I have a new sterling chart that looks at the forecast. I like this chart because we spoke at length about what we saw in the gdp forecast. It is just at a time when a number of members have come in and said they would vote for a cut in january. Dovish comments seem to have front run. We will have to see if the economy does warrant a cut. U. K. Ll get to more on the and the pound but first lets get to the first word news with viviana hurtado. Viviana we begin with this warning, dont kill protesters, Donald Trumps warning at iran. Protesters angry over the irani and shooting down of that over the iranian shooting down of that jet took to the streets. Authorities say the jet was mistaken for a cruise missile. The Trump Administration is concerned russia may be trying to undermine joe bidens campaign. Thats according to National Security advisor robert obrien. President trump told Vladimir Putin not to conduct any election tampering. Bloomberg reporting u. S. Officials are trying to determine if russia is conducting a Disinformation Campaign against mr. Biden. U. S. Treasury secretary Steve Mnuchin morning problems at boeing could cut this year a half percentage point from the u. S. Gdp. He said growth should still come in at 2. 5 . That is more upbeat than many economists. A Bloomberg Survey finding in 2020 they expect the economy to grow 1. 8 . In australia those wildfires hammering the Prime Ministers approval rating. Numbers have fallen eight percentage points. Acknowledges Climate Change was a contributive factor to the fires but was downplaying links to global warming. Global news, 24 hours a day, on air and on quicktake, powered by over 2700 journalists and analysts in more than 120 countries. Bloomberg. The landslide victory in taiwan has reinvigorated the financial markets. Ofis seen as the rejection beijings push for one country, two systems. Stephen, great to have you back on the air with us. As you look at what this means for china and the leadership of china, have they been quite forceful in coming out with comments . Absolutely. They have been forceful in the lead up to the selection that they put out quite a striking comment afterwards and that was the election results, a rebuke of what is perceived to be on the island, chinese interference, mainland chinese interference as well as what is happening in hong kong because chinas ultimate game is to unify taiwan back to the motherland and they would like to use the one country two systems model like they have employed in hong kong. We know the last seven months how that has gone. That was the electorate going to the polls on saturday and saying we dont want to test that in taiwan. Wonincumbent president who a second term said there is no systems isntry two going to work as long as i am president. Over towill trout washington and wave the flag and get support of the United States. Give us an update on the relationship of taiwan with in taiwan with the Trump Administration. Stephen taiwan and the United States still very bonded were the u. S. Will come to taiwans aid in cases of attack by the chinese etc. Atre is an envoy office here the American Institute of taiwan. They do have an envoy. One of her first visits after the election victory was to meet the envoy here. Weve also gotten comments from mike pompeo, joe biden, and others congratulating her. There is still a very strong relationship between taiwan and the United States. At this time of trade war with china, the bill has not been signed yet and taiwan is that buffer. Tom thank you so much. Join aow we want to discussion on a broader asian market. Karen ward with j. P. Morgan Asset Management is with us. Let me ask an open question. Int is the most key thing asia right now . Me tois interesting for have seen the results of the time election. Her to win acted second term and the magnitude of it was not that much of a surprise but the openhanded question for us is what does she do in her second term . In her very badly burned first term and she has to do a dance between the group in support of the protesters in being wary ofalso pushing china too hard because china has leverage over taiwan in aiken use them very deliberately and effectively. For her it is a dance between showing she is standing up to china without pushing china into punishing taiwan economically. At the same time, ensuring that taiwan is getting the support it needs from the u. S. Because that has been a question mark over the years, how much donald trump would come to the aid of taiwan if needed. Electionswhat to the in taiwan actually mean for hong kong . Is likely a symbolic support for the people in hong kong. Beyond that it is unlikely to mean much. Taiwan has been giving strong statements of support for hong kong for some months now. The key is whether we are going to see a resumption of momentum in hong kong. We have started to see it fade in recent months. The real question for hong kong itself is how long can you sustain these protests . How long can you have people coming out on the streets and what kind of change are you going to force from that . We have seen that momentum is a real challenge for hong kong. China is wearing them down, bit by bit. That doesnt mean the fundamental problems and the differences will go away. China is simply punting those down the track. It clearly does not want to do it right now. Francine because of the u. S. Trade war and tensions between china and some of these countries, will the supply chain stay at where they are at the moment . Karen you would imagine that. There are questions about the durability of that first phase trade deal and then what a second trade deal might look like. We are a long way from getting a full deal. There is a lot of uncertainty around that. Companies that have altered their supply chains as part of this, we will want to watch for a while to see if this deal holds and where do we go with a possible second deal. It comes down to the arch coal of q4, should i buy International Stocks and should i overweight asia and em . How has j. P. Morgan adjusted that in the last few weeks . Karen it is definitely worth thinking about if you believe that phase i is going to proceed toward phase two. You should be thinking about emerging asia because it would not only likely see the most impressive bounce in corporate earnings relative to elsewhere in the global marketplace, valuations are on the cheaper end as well. Ethic it is a little early to think phase one will progress nicely but if it does continue in that direction the next couple of weeks i do think that would certainly be what people are thinking about. Francine used to be tom it used to be simple, how do you play in equities in emerging markets . Is it just go to the consumer . How do you approach that . Karen i think it is about thinking about the longterm. What do we know . Demographics are changing, middle income is rising and it is thinking about what those rising middle incomes are going to do in terms of consumer passes. Changing how they Access Financial services as they start to upgrade Consumer Products they are buying. Its thinking about longterm plays where there are some fantastic longterm opportunities. Francine thank you both for joining us. Our bloombergs acute of International Government and karen ward of j. P. Morgan Asset Management. Both are staying with us. We have a number of things going on. We have to talk about oil prices because of what is going on in the middle east. Interesting to think about what has happened over the last couple of weeks and months in termsof supply it also in of statements the companies were issuing out. We have more on sterling. Coming up, scrapping the retirement age increase. The french government says it will make changes to Pension Reforms to push them through after protests. More on that next. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from new york and london. I have a great sterling chart. Turning and little more dovish and we have this data point that the economy and the u. K. Was much worse than expected for the month of november. Ronok at oil, we are into we are in duron. The story is what is happening and then and with iran fallout from the geopolitical things. Tom a lot of different stories and the market backed off as well. Equity futures up 13, dow futures up 125. Forward the conversation with a number of good guests including richard in a moment. Pulseimportant to get the. What i see from afar and [indiscernible] i am very much looking forward to it. I think the oil market doesnt think escalation is happening, so prices spiked to 72 and brent but is now 65 a barrel. I cant compete with the oil and how the situation is evolving. What do you think it will take for prices to remain elevated above 65 a barrel . Analysts say we could be close to a war. This is your second attempt in a month to try and drag me into talking oil prices. The man i look up to is alan greenspan. He does not talk about price hikes and i dont talk about oil prices. Trying to bring inventory to where it is within the contours and the average of 20102014. This is our drive and what we are going for. Very comfortable with the performance we have seen in acember, lb it albeit previous commitment. However we are hoping that in january we will see better performance and continuous good performance. I wanted to ask you because i will see you again in vienna in march. Iraq has yet to comply but is it going to be harder for them to comply now given the state of affairs in the country . Many say if there is going to be a supply disruption, it could be in iraq. It would be unpleasant for me to try and comment on these things. Ask is therson to iraq minister on how he will conduct his policy, his Iraqi Government policy on his commitment to cut, or whether their situation would affect production. What we know and what we do and what we have to say in public is that we wish iraq and its people thathe hopes and wishes everything goes back to normal and the ability and stability becomes continuous stability and hopefully prosperity and growth would take over the debate as opposed to what is going on now. Besides compliance, what are your hopes for march . Have you been speaking to mr. Novak . I speak to mr. Novak almost every to free almost every few weeks. We are close friends. We are always communicating. We dont want to prejudge march. We will see the numbers, the performance of everybody, how we are faring in terms of supply and demand. I think only then we will be able to make one more question about inside the kingdom. Is the crude chemicals project what is the status of that . I am not going to preempt. I leave that for another day to talk about the bigger program, a more Important Program which will integrate Additional Oil chemical. Highness, thank you for your time today. Thank you. Francine a Crucial Panel with the saudi aramco and she spoke to the energy minister. Politically you kind of see what a lot of these ministers there was a lot they are thinking but they cannot say as to not upset various parts of opec. Also it is shale oil. We covered opec 15 years ago, one of these ministers would Say Something and the price would rise or drop by five dollars. Now the u. S. Is one of the Major Players in the world. Tom we will come back. This is bloomberg. Tom bloomberg surveillance. Good morning. Will join us. Richard haass with us in a bit. Right now, karen ward with j. P. Morgan is with us to drive forward the conversation on earnings and what i call revenue season. We forget about revenues. Are revenues going to surprise on the upside . Karen possibly. We need to see the revenue story coming through. At this point in time, we are still looking at expectations and the high Single Digits in europe and low double digits in the u. S. Tom lets talk the stock market as proxy. Regressionter with a from 2005 and if i go back 14 how apples remarkable computer is basically on trend. Its a fancy chart but the point here, do you look at the market as on trend off of Business Revenue and Earnings Growth or is it ahead of itself . Karen i think it is a touch ahead of itself. We tend to focus on earnings where we are about 18. 5 times ahead of the s p. No red warning signs but certainly a little bit higher than the history would suggest and that means we do need to see earnings up, coming through on expectations. Thingne what is the one that markets have mispriced . If it is bubble territory or if we are measuring it wrong. Putting thenk it is bond market and the equity markets together. The one thing that concerns me is the equity market feels slightly like it is pricing in the best of all worlds, trade tensions are up, we will see a very nice strong recovery and yet we are not seeing that come through in any of the core bond market pricing. A little bit of volatility will help it to high up closely together. Francine what is your take on emerging markets . If you look at the u. S. , europe and emerging markets, is it still going to be that way of looking at the markets or is that oldfashioned . Karen as we think about the underlying problems we have seen, the trade tensions, depressing global manufacturing, the emerging markets and europe took the heat of that and if we are past that, we should see those markets benefit the most. The point i am trying to make is we are getting excited because of the trade tensions but we should be talking about the emerging markets. Tom bring that chart back up if you can. This is an extraordinary chart. Inis basically a moonshot september. They have caught up. Add to emerging positions here or do you look at that as a courtly oneoff . On a quarterly as a quarterly oneoff . Karen you would say the valuations are still most attractive. I do want to see a little more news. See i would like to hear that wont hear their momentum carrying from phase one into phase two. Much, karenou so ward with us from jp morgan Asset Management. Coming up, we move the conversation forward. Richard haass will join us from the council on Foreign Relations. This is bloomberg. Good morning oh no, here comes the 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. And with the sXfinity Stream app, screen is your big screen. 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. Tom this morning, what is next for iran and america . The Trump Administration cant or wont explain what the plan is. In tehran, protests. Risk on as earnings and revenue season is upon us. Jp morgan selected banks, they report tomorrow. Philippines, ash on the streets, 60 miles north. Good morning everyone. This is bloomberg surveillance from our World Headquarters in new york and london. Francine lacqua, is the right word shock on u. K. Gdp . Francine i dont think it is shock but certainly changing the conversation a little bit. First of all the u. K. Economy unexpectedly shrunk. This was early in the month of november right before the election. Given there have been so much rate cut debates in the last couple of days and certainly last week with governor kearney, there is a shift and pricing is more of a rate cut. Certainly the tone is changing. Tom luster talk about today including the united kingdom. News, hererst word is viviana hurtado. Viviana protests over the shutdown jet in iran have turned violent. Police fired tear gas at crowds. Saying there military mistakenly shut down the ukrainian jet. President donald trump morning the iranian government not to kill protesters warning the iranian government not to kill protesters. The volcano is located 40 miles south of manila, 23,000 people have been evacuated, up to 200,000 more may be moved. The Manila Airport has been closed. A minor setback is how china is portraying the results of taiwans elections. The president was a landslide winner in yesterdays vote. News agencyficial called her reelection a fluke and says reunification cannot be stopped. House Speaker Nancy Pelosi is accusing the Senate Republican leader of trying to coverup president Donald Trumps impeachment. Senate Majority Leader Mitch Mcconnell backing a resolution that would dismiss it if miss pelosi does not send over the impeachment articles within a specified time. The speaker is expected to do that sometime this week. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by over 2700 journalists and analysts in more than 120 countries. This is bloomberg. Up 13 , we saw those prints of 29,000 last week. Francine it is all about the earnings this week. Markets are trying to figure out season willings bring to them. Also looking at bonds and gold actually retreating. N to iran iran admitted one of their missiles was used to down a york a ukrainian jet. Fallout, canadian Prime Minister Justin Trudeau demanding justice for the victims. President donald trump supporting the iranian citizens. How much of a big deal is this for the iranian leadership . How much for the expecting the admission of what happened with the flight to actually fire back at this point . I think they would have definitely accounted for the huge amount of public outrage and anger. I dont think they couldve expected anything less than that. I think they would have also the lastared because few months we had protests in november but for a very different reason. I think that is what has happened. This has come from people who were students. I think there is a huge amount of anger right now and i think the government is clearly trying to manage that. We also saw from the reaction and some of those videos, pushing back against it. News from the Police Commander in tehran. This morning he said that there have been orders to Security Forces that they should avoid any shooting of protesters, avoid any particularly harsh counterattack against them. It will be interesting to see whether they continue. Tom with your commanding knowledge on the ground in iran, how deep, how persistent is the support of the Islamic Republic . The protests we saw, are they a side issue of the elite middleclass or are they varying in the different towns . Question. Good i think these protests touch everyone. Extremelyomething painful about your own country accidentally shooting down an airliner that contained avast a avast contained majority of nationals as majority of a vast nationals as passengers. What is interesting is in this protesters in this protest, people are coming from the more mainstream middleclass parts of society. Acutes the reaction to an economic problem we saw in november where we had workingclass young men come out into the streets. Still same time, there is svery sizable portion of iran population still in support of the Islamic Republic. That plays into a growing polarization in general. Tom a delicate question with all of your contacts in tehran, please explain confidence in the use of the tehran airport as we enter a new week. Is there a confidence that there is appropriate safety levels to the use of the toronto airport . Of the tehran airport . Morning, just an hour after they announced they made the announcement, i was actually on my way to the International Airport in tehran and it wasnt as busy as usual. The passport control kiosks were empty. People were getting on their flights. We have heard so far, we had some warnings from the eu agency airlines were advised against traveling. But the airport is open as usual. Tom thank you so much this morning. He is president of the council of the council on Foreign Relations and you often see him on television giving perspective. The haves the credit behind him he has the credit behind him to give his perspective. Haass and David Kennedy wrote a definitive essay on reagan and lebanon and robert dash and robin wright picked it up in the last 14 hours. Wonderful to have you with us. Are we struggling through a u. S. History from that horrific moment in lebanon of 1983 . Richard interesting question. Each side has its own history. 1953ran it goes back to and the u. S. British role rule. Is 1979,it states, it the hostage situation. Each side has its own history. One of the reasons we are where we are. Tom i want to go back to your december essay. Not knowing what was going to come in january. This is the project syndicate, let me paraphrase it. You basically said there is a strategic incoherence. How do we get coherent . Richard this administration talks about america first, it talks about the emergence of great power rivalry dealing with china is a priority for american foreignpolicy. Yet we are sending thousands of troops back into the middle east. Iran has the initiative because we dont know what theyre going to do next. I dont understand what this administrations policy is toward the middle east and where the middle east fits into the larger chessboard. Francine what does this mean for the leadership of iran . Richard the leadership of iran was under pressure and they are under more pressure. They will have to figure out how to weather this storm. They dont want to use force if they can avoid it but they will if they have to. For us it is an interesting question, this idea of regime change in the water. This is not a strategy. This is a hope, a wish. We cant base u. S. Foreign policy the idea that the regime is going to be overthrown or disappear. Tom asked me what we should do and i would say the biggest thing is we ought to say these sanctions will stay until and unless you make some changes and we should specify what the changes are in the nuclear realm, the missile realm, the regional realm and then let the iranian government make the choice. We should say this publicly. Specify what benefits would occur to iran. Let the regime have to explain to its own people why it wont adopt a more restrained Foreign Policy and therefore they will have to pay an enormous price. Francine should the u. S. Continue to get involved in the middle east . Richard we have to be involved to some degree. We have to worry about terrorism. We have commitments to israel and modern moderate arab states. We are not energy independent. The Global Economy on which we depend depends upon the middle east. This idea that somehow the middle east doesnt matter is wrong what on the other hand, it should not dominate american foreignpolicy to the degree it has dominated over the last three decades. Tom you have nurtured a glorious debate at the council of Foreign Relations. Stephen cook wrote a blistering essay in the last seven days that we should leave iraq now. Idea, you respond to the enough, lets exit . Richard we shouldnt exit unless we are forced to leave. The Iraqi Government said you have to go, lock, stock and barrel, we should and should not become an occupying force. The idea that we are going to sanction them is dead wrong. We may have to substitute a lot of visits in exchange for permanent presence. Was mr. Soleimanis goal . To remove the United States from iraq. Why do we want to make iraq a centerpiece of global terrorism . The idea that we would get out is not make sense. Tom do sanctions work, do they have efficacy . Richard sanctions have impact but it all depends on what your to what your definition of work is. We usee get sent can sanctions to get the regime to modify behavior . Quite possibly. How ambitious are you . The biggest mistake is often we ask too much of them. In this administration we dont often use diplomacy and sanctions and tariffs are the tools of choice that we tend to abuse them. Francine why has china not been more forthcoming in its involvement in the middle east . Richard they try to stay on good terms with everybody. It basically wants to maintain access to oil. Chinavily imports is heavily import dependent. Occupiedally it is with northeast asia, india and the south china sea. Tom very good. We will continue. It is an earnings week and i will say it is a unique earnings week. Here is a calendar. Unless it shops out with earnings. Stay with us. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york. Are set tod china sign the first phase of their trade deal at the white house. For more on this, we are back with Richard Haass on the council for Foreign Relations. Gina from Bloomberg Intelligence also joins us. Ambassador haass will we ever see it deal between the two countries . Richard not any time soon if ever, particularly if the essence of a phase two deal is that china has to dramatically reduce the role of the state in terms of providing subsidies to enterprises. China is not going to remake it systems because it is about implementation. The question is all about implementation. If we get a kind of ceasefire topause or commitment not introduce new tariffs, that is basically going to be it for the foreseeable future. Francine does this matter to the markets gina or is everything already priced in . Haassi think what mr. Discussed, there is an anticipation that things dont get worse, we see some sort of phase one deal and then trade becomes a nonissue throughout 2020. The risk is that trade is not a nonissue and even in the election cycle there is a risk, certainly this president has been unpredictable as to where he is going with trade policy, so i do think the risk is that we may still see some degree of trade tensions throughout 2020 in the market is not pricing for that. On the other hand they are not pricing for a phase two deal, it is just an idea that trade goes away. Tom my recollection is this time nearly everyone is doom and gloom. What is the big call that could stun us . Is it the lift of e. M. , the lift of international . Gina i think it is accommodation of lift of e. M. And all nondomestic stocks. It is also europe which asserted to break out which just started to break out at the end of last year. It could surprise us to the upside. Tom ambassador do you agree with that . Richard certainly with the uncertainty about brexit. People have been so focused on the middle east but the rest of the world is still on the surface is still, on the surface, relatively stable. Francine is anything changing in the supply chain that could give a lift to earnings . Gina more than likely it comes in the first quarter, Second Quarter earnings season. About thetalking Fourth Quarter season which should mark the first improvement we have seen since very early 2019. We should actually see some incremental improvement in sales growth which should improve the outlook for the first quarter. That said, a lot of this is a question of how much that sales growth filters down to the bottom line. Analysts are not expecting a lot out of fourthquarter earnings season. We are looking for expectations to carry market prices over the next four to six weeks. Tom ambassador haass, part of your work is on earnings being ok but with a trillion dollar deficit, the backdrop of richard the word optimism and my name appeared in the same paragraph. If tariffs dont go up and even come down a bit, if rates say low, the question itdebt, it is enormous but is one of those crises that is not a crisis until it is and that would require one of two things, either rates have to start going up or the rest of the world has to get nervous about continuing to finance american debt. Until either of those things kick in, it is not a crisis until it becomes one. Gina martin adams Bloomberg Intelligence. A look at Global Equity markets in a bit. Ambassador haass, much to talk about. This is bloomberg. Viviana you are watching bloomberg surveillance. Merger between two boeing suppliers will create one of the worlds Biggest Aerospace suppliers. Woodward will combine with hexce l. Efficiencysay driving the sale, and that has nothing to do with problems related to the grounded 737 max. Global deliveries rising a record 10 to 280,000 vehicles driven by demand. The german sports carmaker predicts this year its first all electric model will lead to further growth. Goldman sachs is ramping up its presence in china. They plan to double their headcount to 600 people over the next five years. That is provided china continues down the path of opening up its financial markets. That is the Bloomberg Business flash. Francine thank you so much. Lets take a look at what we should be watching out for. Deliveries will be announced. On wednesday, the russian president will make his state of the union and you will address. On friday, we will get china gdp figures for the fourthquarter. Plenty more to come. We have a lot more going on in the markets. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york. A landslide victory has reinforced a winning run for the taiwan financial markets. The Democratic Progress Party is seen as a rejection of beijings push for one country, two systems. Lets get to Stephen Engle who joins us from taipei. What are the implications in the region for hong kong and beyond . Stephen the electorate in taiwan obviously found a Kindred Spirit with the protests in hong kong. Reaffirmingd the rejecting one country, two systems for taiwan because of what has happened in hong kong. The people here took that to heart and they voted in favor of her party overwhelmingly. Turnout in total, 8 million plus votes, a record for taiwan, so clearly it is a rebuff of the basic beijing overtures saying they want to reunify at all time all costs but the taiwanese are saying no. Tom 110 miles wide, the straight between taiwan and china. How important for taiwan right now is it for the u. S. Navy to show their flag in those 110 miles . Taiwans confidence comes from having the backing of the United States but interestingly at this time as donald trump is about to sign a trade deal perhaps as early as wednesday with china, he has remained fairly quiet on this perhaps not toy, ruffle the feathers of beijing. They have already put out several statements saying they are not pleased. We did get comments from pompeo and joe biden but we have not heard from donald trump. Is there toitary support taiwan. Tom Stephen Engle, thank you so much. Richard haass with the council on Foreign Relations with us. We want to get your thoughts on this. Richard this is a situation that has worked well for four decades. It has been finessed, no solution on it. I am getting a little bit uneasy. You see people in the congress trying to increase the intensity of the u. S. Taiwan relationship but you have questions about the u. S. After what happened with the redline in syria and what we did with the kurds, what were doing with south korea and japan, holding them hostage over the bilateral agreement, people in taiwan are getting uneasy about the assurances from us. They see what is going on in hong kong and get nervous and the mainland is getting impatient. It is not a crisis but i would call this a precrisis. This is something people worry about, geopolitical risk. This is anything but solved despite the progress of the last four decades. Thatine is there a danger china handles hong kong with more of a heavy hand . Richard absolutely. Na will allow hong kong but they will not allow it to get out of control. They are more worried about the mainland. Even though they dont want to crackdown with force, that is only the second worst option for them. The worst option is for things to get out of hand and to have ripple effects on taiwan and the mainland. Tom Richard Haass is with us from the council on Foreign Relations. Lets get our first word news. Viviana a warning from president trump, dont kill protesters, to the iranian government. Iranians angry over the shooting gun of a passenger debt took to the streets. Police have fired tear gas at the crowds. The iranian government admitted they mistakenly shot down the plane. Just before the general election, the british economy unexpectedly shrinking. In november, gdp falling 3 10 of 1 and that is casting doubt if the fourthquarter had in actual atwth while adding concerns the bank of england, the officials debating if an Interest Rate cut is needed. In australia, those bushfires hammering the Prime Ministers approval rating. Since last month, his numbers have fallen eight percentage points. He now says Climate Change was a can factor to the fires. His government has been downplaying links to global warming. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by over 2700 journalists and analysts in more than 120 countries. I have viviana hurtado. This is bloomberg i am viviana hurtado. This is bloomberg. Has beenssador haass with us and Gina Martin Adams has been kind enough to hang around. Versus everyrent other earnings season . Gina a lot of it is the reflection on price increases that occurred the last couple of months. That may imply that the earnings season coming up, you may have earnings have to follow through in order to sustain those gains. I would argue dont need a strong earnings season because analysts have marked down expectations. The trouble is you need some affirmation that we will have recovery in the latter part of this year. Tom is there enough Free Cash Flow out there for Dividend Growth and to sustain Share Buyback with existing multiples . Gina there is more than enough. We are not in a situation where earnings or so suppressed we are not heading in any kind of earnings recession. Instead we are more likely to show stable Earnings Growth over the course of 2020. Unfortunately the reality of earnings is we are still contending with the tax reform of late 2017 which reinflate it reinflated earnings in 2018. Tom is it still working . Gina it is creating a lot of volatility. You will see that in the Fourth Quarter especially because still a lot of tax related volatility. Some of the tax reform is not effectively in the earnings stream so we will see that throughout 2020. Thirdquarter earnings, you do want to watch. Sales improving in the Fourth Quarter should be a sign that we are starting to stabilize from a broader economic perspective. If we dont get that better sales growth in the Fourth Quarter and some guidance that sales is going to improve, then you will start to see the market price in significantly less optimistic expectations. Francine where will margins be weaker around the world . Gina most of the world is going to show weaker margins for the Fourth Quarter. If you want to focus in, the fast majority the majority is going to be due to tax reform specifically. Longerterm, one of the areas we are watching margins is emerging markets. This is an underappreciated story of this cycle that emerging markets have been unable to take stronger topline stronger transition topline growth into stronger bottomline growth. That is a sort of margin shortfall and emerging markets. You need to see margins and emerging markets recover slightly and drive emergingmarket Stock Performance. It has been the missing link for 10 years now, people talking about emergingmarket. The shortfall comes in the margins. I would watch emerging markets carefully throughout 2020 from recovery in margins to drive recovery in stock prices. Tom some of these francine some of these emerging markets economically, things are slowing down in india. Gina i think there was a lot of expectation priced into india but when you look across the global regions we cover, we saw two markets stood out as stronger than the rest from a manufacturing standpoint which is what we find matters for stock prices. That is india and the United States. Indias problem is not necessarily a slowdown right now. They are the strongest in terms of general manufacturing activity. Will they maintain that strength is the question. Very similar to the u. S. Story. India has been a source of strength and stability in emergingmarket and that has manifested in Stock Performance over the last couple of years. It is a question of can it endure or do other economy start to bubble up and take away some of that performance strength . Francine im going to go back to some of the supply chains. Are there specific countries who companies will do better than others because they will gain and retain some of that supply chain loss from china . Gina taiwan comes first to mind. Taiwan is heavy semiconductors. Semiconductors have been linked to a couple different dynamics. The first is a tech cycle that has been very suppressed and in a downtrend for the last 18 months. That is anticipated to recover over the next year. One ofs been priced into the bestperforming emerging markets of 2019. The other thing i would say you want to watch is agriculture. A lot of trade is to agriculture specifically and that is why economies like australia and , all of the act centric economies all of the agcentric economies of the world are going to be affected by trained by trade. Much,ne thank you very geomet Gina Martin Adams of Bloomberg Intelligence. Coming up later today, the european close, a conversation who will join us from the Jp Morgan Health conference in san francisco. You can catch that interview. This is bloomberg. Tom good morning everyone. Bloomberg surveillance. An eventful morning to say the least. The councils from on Foreign Relations. Do ise thought we would almost an open block of any topics. Lets start with the Iowa Caucuses the next number of days away. Is anybody on those couches in iowa does anyone on those couches in iowa care about the world of Richard Haass . Richard if you look at the democratic debates, we have played a very small role. Candidates showed a real hostility to freetrade and what they call forever wars. The question for the voters, no but in the last week we have seen two things, one is iran move to the foreground and the other is the attacks from Bernie Sanders on former Vice President biden. This question of the 2002 vote about the 2003 iraq war. ,om what is interesting here and i say this with Great Respect growing up in new york and going out to the far west is that you have an authentic feel for the midwest of america. Look,eople were saying here is who fights the forever wars. Does that ever resonate into 2020, putting soldiers and officers at risk away from the elites . It does get narrow in terms of who serves in the military, so i think it is one of the problems. Wars take on a certain abstraction. Tom francine . Francine one thing i meant to ask you is what will people vote on in the u. S. . A lot of it has to do with the economy, a lot more has to do with policies but is there something we are missing . Richard if you look at the polls about what is going to most influence your vote, Economic Issues tend to be high. The fact that for the most part we are not involved in a Major International crisis means Foreign Policy issues are off to the side. Then you have local issues but i dont sense anything overriding. President sly the personality has played more of a role that would normally be the case. If you were quieter and tweeted last, i imagine he would be better. It is good for animating his base but it is good for animating opposition. Francine does the impeachment process mean anything to voters . Richard by and large, not. People are tired of it and see it as kind of washington politicians out of touch, more worried about they are more worried about the standard of living and that their kids may not be better off than they are. Impeachment seems very much inside the beltway. You own the analysis of Northern Ireland. It became a sleepy topic with this titanic election of boris johnson. It is off the radar. I dont buy that for a minute. You were there years ago, you wind in 2013. Give us an update on Northern Ireland off the radar. Richard a slight piece of good news, it looks like local institutions in the local assembly, getting back in business has been essentially out of action for several years. The interesting news goes way beyond that which is what dynamics does brexit set in motion . The issue is, do they now raise fundamental questions . If people want to stay in europe, then getting out of what is the u. K. Becomes a viable option. I would watch scotland and what is going on in Northern Ireland where i think for the first time as a combination of politics and demographics you may have a slight majority emerging from the north to merge with the republic of ireland. Tom your study of politics, can conservatives capture the liberal north . They did it once. Do you see that where people embedded in a system of beliefs can actually switch sides . Richard we have seen in this country, the ability to do that. We have almost seen tom the democratic south becoming republican. Richard also trump voters. A lot of them are not classical republicans. He has change the dna of the republican party. People who feel a grievance or feel frustrated might move in that direction, tired of traditional politics. I think in britain you have the same possibility with the labour party, just completely losing its hold on people. The conservative party is now very much Boris Johnsons party and the party of brexit. In both countries there is a lot up for grabs where traditional parties dont have an intensity of association between themselves and big chunks of their traditional base. Francine if you look at the labour partys about to vote in , doesxt couple of months the fact that there is now a existential question whether they need to become more centrist or stay with the left, can you read that into the concerns for the rest of europe in the coming years . Richard you are seeing it throughout europe, where centrist parties have been getting weaker and we are beginning to see multiparty systems and more radical parties. The most interesting case will be germany given its weight in europe and its history. I think one of one looks at the pressure in france, italy is a case on its own. You see what is going on in eastern europe. There is a sense that the traditional debate between centerright and centerleft parties that have informed years,for pretty much 75 those days seem to be numbered and we are now seeing a much more broader set of political challenges. I would think Coalition Governments that represent a bigger range of parties is probably going to dominate the next period of european politics. Is that a huge loss if he doesnt go through with it or because he gets through because he gets through the reform anyway, is that seen as a win . Richard it is not the end of it. There has been challenge after challenge from the street and it goes beyond micron mike roland goes beyond macron. What is the Public Sector going to provide them . Hast the sense that it broken down and i dont think we have seen the end on the national front. I think french politics will become more volatile and the assumptions we used to make about the choices were bounded and i dont think that anymore. I think the chance for a radical outcome for france is has gone up. Tom Richard Haass, thank you so much. Right now let me do a daily check. A very quiet market. We are going into earnings season. Gina martin adams adding a lot of value. Futures up nine. Oil under 59 a barrel. This is bloomberg. In all of these attacks, we bounce back immediately. We responded. There was no interruptions of our International Customers. The company was able to continue to be the most Reliable Company in the world, supplying to all their customers. Aramco is reliable because of our resources and the way we manage them. Have aree that we capable of dealing with anything. Dont wantat but you to go through that again. What is the Defense Strategy . Usthe Defense Strategy for is to make sure our business is ande and people are trained that government in terms of the events of the facility, they are doing a lot to make sure our facilities are secure and protected. From our side, we are making ,ure we increase our readiness our capabilities by making sure we have more and more ability to respond to anything that might come at us but the government is taking lot in terms of defense measures to make sure all facilities across the kingdom are protected. Francine that was the saudi aramco chief executive. Lets get straight to the Bloomberg Business flash. Viviana we begin with nissan, the Company Reportedly making contingency plans for a possible split from renault. The planning stepped up after Carlos Ghosns dramatic escape from japan. A separation would include a total divided manufacturing and engineering. They would also be changes to the nissan board. Amazon founder jeff bezos is likely to face unprecedented protests this week on a trip to india. Thousands of smalltime local retailers pledge to oppose amazon pricing and exclusive selling practices. That is your Bloomberg Business flash. Francine thank you so much. This is bloomberg. 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. Alix violent protests shake iran. The country admits to shooting down a civilian aircraft. Unrest spreads in the middle east. Big banks kick off earnings season this week in the middle of a liquidity driven rally from the fed. Where will the market find direction next . In the risk and reward of private credit. We speak about direct lending. Welcome to bloomberg daybreak on this monday, january 13. Im alix steel. You are seeing a little bit of selling in the bond market. Jp morgan had a note friday saying basically, it is time to sort the 30 year in the u. S. The dow is near a record. The s p was softer friday after the mixed jobs report. Time now for global exchange, where we bring you to these we bring you todays market moving news from around the world. Our bloomb