Replaces his long serving prime minister. Attention turns to the shape of constitutional changes to come. Manus a warm welcome to daybreak europe. It aresident because monster deal. The president calls it a monster deal. The meat and potatoes will come in phase two. China is the main loser in this major truce. The question we have to ask ourselves for markets is, this help globalally growth . Nejra the question is, because the tariffs made on two thirds of imports from china, the fact that china seems like the loser here, you wonder how the enforcement is going to work in the big question for markets is, is it phase one and die . We phase one and done . We ever moved to phase two . Manus indeed, those are the key questions. Profit, margins, and the sales number, all three coming through the top end of the estimates. What else do we have on the details . Nejra the First Quarter guidance for sales beat estimates, net profit was above all analyst estimates and for quarter growthth as well, the inventory decline may bode well for the chip sector. More for the chip sector, with 15 billion on tech and capacity in 20 to prepare for the advent of 5g smartphones in coming years. Thats may think its coming up in the runup to 5g phones because basically it was he customers from apple to huawei adopting more smart semi can semiconductors in smartphones. Manus weve had a huge shifting of gears, over 83 analyst have recommendation. Bank of america still very bullish on the stock. Let me take you through some of the markets, at the end of the day you got a little bit of a dip in the dollar here. The interestrate differential is a critical issue. Negative europe, negative japan, and calling for weaker dollaryen. Triple big on your face. Do we need to debate what is next for the dollar . I would say the bloomberg dollar index was a doubting thomas yesterday. Yre going to strive to do the oil market of nearly 1 . China has agreed to buy 50 been dollars of Additional Energy products. Inventory is to the downside. Ar the moment there is palpable sense that were over the line with phase one. Whatever the hurlyburly of phase two, we can debate. Nejra absolutely. If you look at the msci asiapacific index, its trading pretty flat right now. Its a bit of a mixed picture below the surface. Builds indicate we could on it somewhat today and the 10 year yield after dropping below 180 is edging up Still Holding below that level now. The phase i deal has been signed and President Trump said the accord is righting the wrongs of the past. That beijing needs to do more to crackdown on theft of American Intellectual property and avoid currency manipulation. Makinghina has been substantial and enforceable commitments with regarding to the protection of american ideas, trade setons trade secrets, patents and trademarks. In a letter, he said the chinese president said the deal was good for china, the u. S. , and the whole world. Some big issues on chinas economy have been left off. The agreement does nothing to address the claim that chinese backpacking of american inpanies will require reform phase two. Tom mackenzie joins us. He is our china open anchor. Good to see you. Said, but how has it been received in china . Just on the surface, you look at this deal, you have to think that at this point, it looks like a win for the u. S. When you go to that link, the tariffs remain in place on most of the commitments in china, from energy to manufacturing to commitments you got on licensing from insurers to the banks. We got nothing in terms of huawei or chinas tech sector and you do have an enforcement mechanism, but, and here is the caffe out. When you start to tread stress test some of those commitments in china, it becomes apparent they were already part of the policy agenda here in beijing, in china. That was already part of the plan. In terms of some of the commitments around enforcement of some of these issues, some of the licensing, again, that dovetails with chinas concerns. What it does is by china time. Of course there is initial relief that they dont get initial terrorist put on some of these products and they can work through some of the issues but the global stigma has been trying to stress the fact that some of the targets around purchases of Agricultural Products will be market driven. Either the state run companies it has to be market driven. Potentially trying to have concerns expressed by the europeans. The two sides are rewriting globalization to operate and sell their goods in the chinese market. Youve got that concern from the European Business conglomerates. The state run tabloid saying essentially the phase one deal, even before they get to phase two, the phase one deal is looking fragile. Is strategic relations between the u. S. And china that still declining. Executive chief officer of blackstone said the u. S. China trade agreement shows nothing has changed from the worlds economic superpowers. Phase two will cover a number of other things, which are important. Things that have not been resolved. There are some issues regarding tradeand nontariff restrictions. Us is the founder and ceo of ail. How long is it going to be enough risk assets to just have phase one without any clear signal that removing to phase two and enforcement of the issues defined in phase one . The structure of the deal has been driven very much with the u. S. 2020 elections in mind. The structure and the timing of it is in order to ensure that President Trump does not have a u. S. Recession in 2020, which reduces his chances of getting reelected. In that sense, i would not expect on in any volatility coming into the rest of the year until november. Any signs of phase two would probably be 2021 are beyond. This is just the first part of the truce. Manus good morning to you. The currency manipulator tag was removed. Goldmans says we dont see a lot of new things here. Deutsches says theres a lot to that remains to be seen on the enforcement side. Howimportant or underexposed are we to this currency chapter . It hasnt really made it to the top of the headlines. Does it irk you that theres not a better resolution function . Not really, because to be fair, theyve kept their renminbi at fair levels when thang the crisis, rather the currency weakening with all the other emergency emergingmarket currencies, theyve kept it stable. I would say if anything the manipulation couldve been on the others. , ands a lot of headlines thats an attractive headline to make. But i dont believe it is a structural issue. Nejra we have to remember that tariffs remain over two thirds of chinese imports. Have enough negatives been removed for Global Growth to pick up for 2020 . Totally. We turn positive, in fact. Ahead ofed some truce the 2020 elections for former forks President Trump. With the worst case scenario, in essence this has now been priced into the market, but it does remove that level of uncertainty that allows for medium to longer Term Investments to take place. I think there is a positive sentiment, but it will not shift things higher because of this now. There is a portfolio that is storming ahead and the china purchase commitment portfolio, to tag onto naras point about the Global Growth, how do you play the additional . Data . How do you add to the portfolio to take advantage of phase one and the momentum that might come from phase two . Thanos i think the way we look at it is looking to benefit from the countries that are more open to Global Growth. Countries whose gdp is reliant on trade and exports, such as germany, korea. Our preference is for investing in those countries to benefit from the easing of tensions, less uncertainty, so germany, south korea, and china as well. I guess stays with us. Lets get you up tos feed with up to speed with the first word news from hong kong. President Vladimir Putin has replaced his long serving prime minister. Hes also call for Sweeping Changes to the countrys constitution. He isled speculation that moving to extend his grip on power. Tocould take on another post show continued influence. In the u. S. , the house has sent two articles of impeachment to the senate. Its a first step to begin President Trumps trial, almost certain to end in acquittal. A super majority of senators would be needed to convict the president. Chief judges chief Justice John Roberts will preside over the trial with the senate as jury. The trial begins next tuesday. In germany, Angela Merkel has begun a deal to begin phasing out coal. Theyve set a timeline for shutting down Power Generation by 2038. 40 government will provide Million Euros for regional infrastructure as part of the deal. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra Annabelle Droulers in hong kong, thank you so much. Later in the program we speak to the Goldman Sachs chief economist and we will ask him about his 2020 outlook. Dont miss that interview at 6 30 london time. Coming up, the consumer is solid. Thats the view of the fed Robert Kaplan. Well bring you that exclusive, next. This is bloomberg. Is daybreak europe. Nejra Economic Growth was modest in the final weeks of 2019, according to the beige book. The report supports the decision to leave Interest Rates unchanged in december. The San Francisco fed president said the economy is in a good place following three rate cuts in 2019 and is positive about the feds inflation target. Goinflation will gradually back up to target and reach a sustainable 2 in 2021. Outdone, the be dallas fed president Robert Kaplan told bloomberg in an exclusive interview that the isacity of the u. S. Consumer strong. There may be months when the consumer pulls back and saves mourn doesnt spend, the but but the capacity of the consumer to spin is solid. Household Balance Sheets are in much better shape than theyve been in 10 years. Not perfect, but in better shape. The consumer has the ability to spend and over time, i think that will. Can i just take a little further, he warned about risk asset valuations and expansion of the Balance Sheet are things we ought to be sensitive to. Do you think this is a little bit of a rational warning about the potential for irrationality . Im grabbing at any fed leader that i can think of. Thanos i think that is right. The markets have rallied, unemployment is continuing and we got a census numbing in this year which is going to boost a little bit more of that. Seeingiew, will be inflation a little higher than what the fed expects, with Consumer Confidence levels at an alltime high. All of that would lead to a little bit of precipitation to the other side, and there are risks. Nejra is it that you see companies actually raising prices in response to higher wage growth . What are the signs that is giving you because market is already pricing much higher inflation. . Very true, but in our view a couple of things. The continuing squeeze of the labor market and there will be some wage push going through, especially as were coming for the middle of the year. We also have the continuing pickup and growth Global Growth on the back of the easing tensions. Less a pickup in commodity prices. More broadly, we see some inflation come through, and whats more important, its higher inflation than what the markets had inspected. In that sense, we could see the fed behind the curve and we expect u. S. Yields to continue rising. Manus lets take that a little bit further forward, on the back of what kaplan said. Say we need to start to communicate by the winding down of the balance , and thats one of the objectives, by tempering the Balance Sheet, can they really do that . Saying they will never be able to reduce this Balance Sheet, they need to keep it fully engaged. What do you make of the difference there between kaplan and macquarie . Thanos what kaplan did say is there is a debate that is taking place in that debate has not really concluded, that is his view. If there is the reduction of the Balance Sheet, it would have to be done very gradually and slowly. So it is a gradual reduction of the Balance Sheet, so i do believe that will continue but it will be gradually eased off within the fed. Nejra you said the deal will move higher because the fed will find itself behind the curve. If thats your view on inflation and on yields, how do you reflect that in the portfolio . Thanos in terms of the yields theg negative, in terms of dollar, and we went to the university together, so i respect him a lot, we were positive on the dollar the last couple of years. It was only december for the first time in two years that i went negative the euros. Thats because i agree with david that is the Interest Rate differentials that drive the currency but theres also economic differentials. I believe it will continue to favor the u. S. But it could shift toward more open economies. Europe may see a slightly more positive sentiment in terms of Economic Growth. Bloombergs get the business flash from hong kong with Annabelle Droulers. Parent is airways complaining about the u. K. Rescue of the regional carrier taken on flights with its rival virgin atlantic. Saying the u. K. s tax plan for the airline is unfair. Government denying that saying the passenger duties will apply to all airlines. Youre going to see a fullscale banking crisis in hong kong because youve got such a tightly wound economy in a stage of freefall from an economic perspective. The warning doesnt seem to be convincing markets. Shown nos markets have sign of an impending banking collapse who would Bloomberg Business flash. Manus thank you very much. Lets look at the vincent will be dominating the days agenda. Huge Interest Rates cuts over , andast four quarters continuing the u. S. Bank earnings season, morgan stanley, stand up and be counted at noon. Nejra and the south Africa Reserve Bank is expected to hold Interest Rates despite the struggling economy and oil uncertainty. Follow half an hour later by u. S. Retail figures from the holiday season. ,n goldmans biggest quarter but profits fell short of analysts estimates. Will bring you the latest, next. This is bloomberg. Youre going to see a fullscale banking crisis in hong kong because youve got such a tightly wound economy in a stage of freefall from an economic perspective. Speaking tobass bloomberg about the outlook for the Banking Sector in hong kong, not good. Call is not convincing the markets. The economy has risen us to threeyear high by tightening liquidity. When he speaks, everyone listens. This is a man who made a fortune betting against subprime mortgages. Part of that bet against hong kong financials is on the hong kong dollar but it has been trading on the upper end of its trading range against the u. S. Dollar while many think the economy will suffer from months of protest. Our guest is still with us. A final thought on earnings season as we keep getting Bank Earnings rolling in. Think the slightly higher curve in Consumer Sentiment is a positive. Nejra great to have you with us. Continue the conversation with us on Bloomberg Radio at 6 45. Later we speak to the Goldman Sachs chief economist. You do not want to miss that interview. This is bloomberg. Sometimes your small screen is your big screen. And with the Xfinity Stream app, which is free with your service, you can take a spin through on demand shows, or stream live tv. Download your dvrd shows and movies on the fly. Even record from right where you are. Whether youre travelling around the country or around the house, keep what you watch with you. Download the Xfinity Stream app and watch all the shows you love. Nejra good morning from bloombergs European Headquarters in the city of london. This is bloomberg daybreak europe. These are todays top stories. Manus phase one done. The u. S. And china signed on the dotted line to provisions and efforts to close the trade gap is seen as positive, but its a mixed picture for stocks amid concern of what comes next. Over to the senate, the house of representatives sent articles of impeachment against President Trump to the upper chamber. The historic trial is set to it is alluesday, but but certain to end in his acquittal. And a russian reshuffle, after paring losses, as president Vladimir Putin unexpectedly replaced his longest serving prime minister. Turnsn changes to the to the constitutional changes to come. Nejra phase one and done. How quickly will the markets turn their attention to the prospect of phase two, if that comes at all . U. S. Futures. 2 u. S. Equity markets that might build on record highs. We get all the action from around the world. Manus we do indeed. But aational exuberance, rerating to global risk in markets, some perspective from across the globe. Things kicking off in asian st