Will it make its way back to zero . Seems to be part of the conversation building in markets. Barrelumped above 65 a as supply disruptions in iraq brought concern to geoPolitical Risk. With more is Annmarie Hordern. Detention we are seeing in libya and iraq come very different in nature. What is the impact of these on oil supplies . Annmarie they are both geoPolitical Risks to the oil supply. In libya, the government says we could go to 72,000 barrels a day. This has to do with the eastern military commander. He has a blockade now on the port, so actual supply is not disrupted. The market may be shrugging off a little bit because in days or hours, that blockade could be lifted. Iraq, while it is a minor disruption, which is producing more than 4 Million Barrels a day, it opens up a window of worry. Just last thursday, the iea says iraq remains very vulnerable. It is more about could the supply threatened become much bigger. Anna they are overproducing their opec target. Annmarie this could bring them back into opec compliance. Anna that leads into how much impact this is having or not having on oil prices. We saw Oil Prices Jump up, but they have come off highs. Annmarie annmarie this is the third time in less than six months we have seen the market completely shrug off geopolitics. Brent was at 72 a barrel. Now libya and iraq, theres just too much oil in the market. The iea says theres a solid base of inventories. The u. S. Is now producing 13 Million Barrels a day. They say by the end of next year, it will go up to 14 Million Barrels a day. Then theres brazil, guyana. On top of that, we are dealing with a market that iran and venezuela are tightly squeezed, and saudi arabia is cutting production. So there is enough oil in the market. I think that is what traders are looking at when they see these geopolitical tensions. Perhaps was also weighing on equity markets. We see some of those losses being paired right now. Annmarie hordern, thank you, for the latest on the oil sector. Joining us on set is david owen, jefferies chief u. S. Economist chief european economist. Thank you for joining us. Lets start with the oil story and the implications for your world. What kind of oil price matters to you as an economist, when you look at brent at 65 a barrel . David if it went above 80 or well below 50, that would make a substantial difference to the theo outlook, but at moment, the Oil Prices Moving in a band, so it is not a major issue. I would say that squeezing real issue for growth. If inflation picks up and real wages get squeezed, obviously that takes the momentum out of recovery. At the moment, the oil price isnt a major factor. Anna some people talk about the oil price as a tax on the consumer. As we talk more about Climate Change and the hunt for alternatives to fossil fuels that Gains Momentum in some places, do we see the oil price changing its role in the way it feeds into inflation . Or is that a consistent story over the last couple of decades . David it is still important for the inflation rate, but economy changes are a big issue. Obviously, Climate Change anyways to address that are major issues, and you need a fiscal response as well. We will see in the u. K. On march 11 if they actually have any proposals to combat Climate Change and make the u. K. A leader in those sort of sectors. Anna is a Green Investment plan going to be the smokescreen that many countries get to hide bignd when they announce Public Investment, big expenditure . That sounds more negative than perhaps i intended it to come about this fiscal stimulus get wrapped up with a green agenda . David thats exactly right. For the eu, they should be allowing countries which have big Public Investment programs to borrow to invest, but maybe that is a step too far. But if you just move towards green policy, that would give countries much more headroom, and some countries will actually react by spending more, and even if they are borrowing at a slightly higher rate than they would for normal sovereign, it does make steps. It does make sense. Thats where weve got to go. I just came back from touring europe, meeting investors. Issuee change is a major and major investment vehicle. Anna that does seem to be something of a consistent theme for the start of 2020. Many investors and economists telling us Climate Change has moved to center stage in terms of their conversations. We will talk about the u. K. In a moment, but let me ask about the euros in and keep on the theme of fiscal stimulus. To what extent are we going to see that happening, for example, in germany . Are they going to stick to that policy of not wanting to open up their fiscal taps, or are we going to see some leeway . David they announce some Infrastructure Projects around railroads, which actually, we aew look at the numbers, relatively significant, but it is only a small step. If they actually freed up the francein countries like that are up against the limit, they could start spending more in these areas. It may force germany to follow suit. Thats the way i think to do it, to nudge these countries to get to a better space. There is general acceptance that fiscal policy is what is now needed. You need a fiscal response. Anna our National Governments getting mixed signals from brussels . Dear voices saying you need to spend more for scilly to tomulate more fiscally stimulate, but on the other hand, they have strict rules on the amount of debt they are allowed to go into within the eurozone. Are there mixed signals there . David it is just changes. At the end of the day, that is how policy rules run in most countries. Anna why has that become so difficult to achieve . David i have no idea, particularly with Interest Rates at these levels. For high bond yields in countries like germany, they need to spend their fiscal space. And they do need to address Climate Change. In terms of the countries within , what is viable at the moment is buying bonds regardless. Anna we have seen the big stance last week in terms of coal production. Very interesting. Case in germany do you think we need very interesting case in germany. Maybe the 3 is too simplistic because it depends very much on what you are borrowing for. David it is also what is happening here in the u. K. At the moment. Withincountries did that the eu, that would lead to a much better outlook. Theres lack of investments by the Public Sector. Way toward it. E anna anna thank you very much. Esvid owen of jefferi stays with us on the program. Lets check in with the bloomberg first word news here in london. Reporter irans sixyear push to integrate with the Global Economy appears to be coming to an end. Today, iran threatening to withdraw from its last commitment to the 2015 nuclear deal. Meanwhile, they pulled out of the Economic Forum in davos. Khomeini accused the u. S. And europe of trying to bring iran to its knees. Trumpss say president pattern of misconduct made a threat to the rule of law. Alan dershowitz spoke on abc. If the allegations are not impeachable, then this trial should result in an acquittal, regardless of whether the conduct is regarded as ok by you or by me or by voters. But what do you think . That is an issue for the voters. Reporter an outbreak of pneumonia in Central China has now gotten even bigger. More than 200 people have been diagnosed with the virus, and three have died. Theres evidence that the illness is spreading from people to people. Rocket company is after crucial safety tests. Spacex has cleared its last hurdle toward a historic crewed flight. Spacex demonstrated dragons ability to eject from the rocket during an emergency. Global news 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna thank you very much. Coming up on the program, we are about two weeks away from the day britain leaves the European Union. 31 january looms on the calendar. We will speak to the former leader of the liberal Democrat Party in the u. K. We will talk about brexit and much more beyond. This is bloomberg. London, im anna edwards. This is a special edition of bloomberg markets, live from london because it is a u. S. Public holiday. It is about two weeks until the u. K. Leaves the European Union. The past three years of brexit have been difficult. The next few months could be even more so. One of the biggest challenges, a freetrade agreement. Joining me now is vince cable, former leader of the liberal Democrat Party from 2010 to 2015. David owen of jefferies is still with us as well. Very good to see you this morning. We started talking about brexit, two weeks to go until we either get big ben sounding our departure or not, depending on a lot of domestic, politics which but let meve alone, get your thoughts on the trade deal ahead. I assume you will say it is too tight a timetable to strike a deal. Vince i think there will be some type of agreement. It will be fairly minimal. Terms which they are approaching it, which is divergence, not convergence. Any agreement, any freetrade , this is essentially what we are talking about. They want to make sure we dont have any disasters around aviation and planes being grounded, that kind of thing. I think that will probably be smoothed over. Industriesf british dependent on the rules will face new investment. We have to all achieve by december, what are the risks . Thee ive always used analogy, i dont think we were ever going to get some massive explosion of chaotic results, but those British Industries that adjusted to european will either have to bear the costs and just put up with it, or some of them will adjust by moving somewhere else or running down the investment here, and the key issue its around the city. People in the city have put much ofcepted that 10 European Business is going to go, and they will have to adjust to something else. The really big issue which i think its going to come down the trap rather quicker than the trade negotiation is the immigration rules. Legislation in parliament, and i think the signals are that this is going ,o be fairly outlined delivering what they promised in terms of the economic cost. I think that is where we will see brexit made real. Anna do you think some business might find fault with that, that notnesses might object to getting jobs, the Public Sector as well . You know, a lot of companies are going to struggle, some publict sectors. Anna what preparations do you es have made, or how far away are they from being fully prepared for brexit. It would seem to suggest we have all had a long time to get ready for this, but if you are in business theres a lot of detail. Anna whats happened is a lot of people vince whats happened is a lot of people were spooked by does no deal scenario, which was never very likely, but a lot of businesses invested time and money into dealing with that problem, and theyve now got to deal with a real problem, the gradual decoupling of regulation. Anna as we head towards january 31, theres a lot of expectation of Interest Rate cuts still some of the u. K. , and the data has been quite negative. What is your expectation for how the bank of england can support the economy to go through this . David i wouldnt think the bank should be considering cutting rates at the end of this month. Anna the market seems to be pricing that in. David in terms of brexit, i think the considered response should be on fiscal side. Througha budget coming march 11. Try and soften the blow from the supply shock for brexit, and it is a regional story. For that, i think we will bounce back pretty quickly. Off of the again financial crisis into thousand eight in 2008, 2009. I will be looking closely at the budget to see which form of disco expansion that contains. The numbers hes taught form of fiscal expansion that contains. The numbers hes talking about simply arent big enough. Anna on what front does he need to extend it further, the investment side of things . David absolutely. Anna or on supporting daytoday businesses and families that might feel the pressure . David start with publicsector investment. , it isns he outlines simply not enough. He needs to do a lot more in terms of education, science research, infrastructure, everything. But that needs to be done as we leave the eu. Its not really to bank of englands job to support the economy through this. Anna i wanted to talk to you about some other themes in u. K. Politics at the moment which are really interesting. One of them is the nature of government we see at the moment. There are different interpretations of what we have seen from the government over this. One is that this is a confused story policy bailing out a private business that doesnt need to be bailed out. Others say this is pragmatic leveling up because regions need conductivity. How do you see this bailout that we are seeing . Vince i think on this kind of issue, this is not ideological. They have now acquired a new political constituency in the north of england, and anything that looks as if they are betraying it would not look good. There is a genuine issue of conductivity. I think the better way of doing iuld have been to have think the much bigger question in the next days is theres a danger here of getting the worst of all worlds. Terminus opportunity costs, they could be using the money in different ways. The north of england, which was potential he going to benefit, could just be forgotten. Anna wont it be difficult for them to back away from the birmingham northwards constituency . Vince birmingham is already up in arms about this. They are on the horns of a very difficult and expensive dilemma. Anna finally, around huawei, i know you had some dealings with them. What is the right path forward you think . The u. K. Seems to think it has no other choice. That seems to be the line we get from the Prime Minister. Theresa may reached a sensible compromise that there are some worries, potential worries. Huawei is a good company. Theyve never caused any problems with the intelligence is some, but the cost underlying worries which keeps them out of the core, security related infrastructure, but let them come in otherwise. This compromise is in danger of being thrown aboard. U. K. Is desperate to have an agreement with the americans, and the american say, do what we say. You very much. That is vince cable, former leader available leader of the liberal democrats. We will be talking about inflation later on this week. This is bloomberg. Live from london, im anna edwards. This is bloomberg markets. Its time for a Bloomberg Business flash. Heres leighann gerrans. Leighann europes biggest defense firm bae systems has agreed to buy u. S. Technology assets worth close to 3. 2 billion, made possible by the merger of raytheon and united technologies. Raytheonsbuying airborne tactical radio operations. In the u. K. , theres a sign that the conservative win in decembers election has boosted homebuyers confidence. Property website, values rose this month by 2. 3 to an average of 400,000. That is your Bloomberg Business flash. Anna thanks very much. When we come back, we will talk about what is going on at the ecb. This is bloomberg. London, im anna edwards. This is bloomberg markets. Later this week, ecb president Christine Lagarde is set to unveil a strategic guideline of the ecb monetary review. For more on the future of the ecb, david owen of jefferies is still with us. What is at stake here . We hear them talking about maybe turning a slightly more vague inflation target into one those very specifically to percent. What is it stake . David they did a major review back in 2003. Most people thought the inflation target was too low. Decided to change the tool. Then published a load of papers justifying why they hadnt changed very much. Hopefully i dont spend such a long time on the inflation target this time because i think theres much more important things like stability, Climate Change, that is much more important than the inflation target itself. Just comeey should out with a special inflation target of 2 , but make it clear they are looking over policy relative to the horizon, which is two or three years. The market depends too much on the here and now. They should be setting policy much more in terms of where we are going. Anna we will get to Climate Change in just a moment, but what is the implication for rates if they do that . If the implication is that the ecb will allow inflation to run hot, if it were to ever get there . Think all of these Central Banks, and the bank of england, mostly want inflation back to where it was, and the world has changed. Back in the 1800s, we had reasonable growth and no inflation. Central banks must be also very clear, but having the inflation rate of 2 isnt the beall and endall. That much more important the economy is doing well overall. , it is up to it. Sustainable growth and high rates of employment are the second half of this mandate. That often gets forgotten. The inflation target itself is one thing, but it has to be sustainable growth. Perhaps they will have difficulty getting inflation back to 2 to 3 over the next two years. Just have to accept it. Anna i was reading an interview with the bnp paribas ceo that negative rates are a lasting phenomenon. Is that the case . Movements deepseated into the psyche. David i wouldnt be that pessimistic. But going back to the 1800s, bond yields at these levels are highly unusual. Inflation rates are not unusual historically. You have the physical response, if you have stronger