Transcripts For BLOOMBERG Bloomberg Surveillance 20200205 :

"bloomberg surveillance." there is a lot of concern about the coronavirus but it is not impacting markets as much. traders are focusing on the money thinking this can be contained, and earnings better than expected. happening, the u.s. 10 year yield 1.61. on "bloomberg surveillance" later this hour we speak to the biggest maker of diabetes drugs. let's get to the first word news in new york city. here in the u.s. we begin with the state of the union address, president trump striking a triumphant tone, stating his bid for reelection on the strength of the economy. >> america's fortunes are on the rise and its future is blazing bright. the years of economic decay are over. make no mistake, it was a deeply partisan affair, the president turning his back on nancy pelosi as she offered to shake his hand. when the speech was over, nancy pelosi ripping up the transcript of the speech. companies pushing into streaming is off to a swift start. disney plus soaring to $29 million by early february, suggesting the company can challenge netflix in the crowded market for online tv. that is coming at a cost, first-quarter profits partly down. saudi arabia's push for oil production cuts has run into more resistance from russia. the kingdom wants curbs on 500,000 barrels a day to prop up oil prices, but russia has continued to push back. their budget is more resilient for lower prices. discussions continue as the coronavirus hits all demand in china. amazon closing with a valuation above $1 trillion, the eagerness , thee e-commerce giant milestone adds to the wealth of jeff bezos. he is now worth about $127 billion. 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. moment we will get our exclusive interview with carlo messina, but first let's bring you the latest on the top stories. in hong kong we will be joined by rishaad salamat covering u.s. politics. and our markets reporter dani burger. the state of the union address, but it is all about iowa and pete buttigieg. upset fora surprise pete buttigieg, polls did not predict he would do so well going into the iowa caucus. it was a bad result for joe biden, who came in a distant fourth-place. it will give all men them for pete buttigieg going into new hampshire -- it will give momentum for pete buttigieg going into new hampshire and could hurt joe biden's efforts to raise money as he goes into super tuesday. by outcome is overshadowed the chaos of the reporting in iowa, and we do not have all the result in. and by trumps state of the union address which was squarely speech,ign claiming he is overseeing a booming economy and highlighted the dramatic theatrics of nancy pelosi ripping his speech afterwards. stark contrast between the chaos in iowa and trump delivering a strong state of the union address. on thee: a lot of focus coronavirus, markets were down and they seem to be taking it in stride. fragileis shows how markets are. markets in europe and u.s. futures started the day with declines. we saw them finally turnaround. there is sentiment that investors want to buy stocks. toestors have been nervous add more on given the valuation of stocks. a couple things could have served as the catalyst to turn markets around. there he minutes ago there was a report from sky news saying the u.k. on coronavirus vaccine testing had moved into animals. carrie lam gave a press conference without a face mask. any of these things could have turned markets around, and the question continues to be is the virus fully priced in. iron ore futures declining, investors think there is an economic toll the virus will have, and they need to price that in. a lot of pessimism. bank of america thinks u.s. 10 year yields will hit the lowest on record. barclays pointing out if the sars epidemic is any guide, european stocks could fall to 8% . now only down from 3%. francine: talk to us about the death toll. rishaad: 20,000 people now affected and 500 dead. 3200 severe cases, so the death .oll will rise in hong kong in the last few minutes we had carrie lam talking, and she is saying visitors from china will have to take a 14 day quarantine when they enter the territory. that applies to everybody. a cruise boat with 3600 people on board has been quarantined. they did have passengers on board with the disease, but they disembarked on january 24. china,sales in mainland a $135 million hit in terms of revenues. mcdonald's closing half of its stores, and the ones that are open are saying a lot less foot traffic. the economy will suffer, but the human price is too big to ignore. francine: those are our top stories. in a moment, our exclusive interview with carlo messina. heard from the world health organization, let's see travel andit has on aviation. thank you for joining us. what impact does the coronavirus have on travel? how many less flights and a less bookings do you think we will see? seene main impact we have up to now is a significant drop ,n traffic from and to china and ordinarily in the asian region when traffic drops, it is ,arly to give a precise figure a precise measurement. to the previous outbreak, sars in 2003, and the, we see that usually decline in traffic last five to seven weeks and then there is a recovery in the following 10 to 15 weeks. deduct.what we can we have learned from experience. francine: i know it is early, but can you quantify the loss of revenue that can come from this? is too early now. if we look back to the previous outbreaks, it was a significant of thence in the profile passenger demand and traffic. it is a bit early now to give a precise figure. there will be a negative impact, but it is too early to tell you. francine: how much positive news will come from oil? we saw that china is possibly using 20% less oil, is that a plus and that if it to the airline industry? re: there is a positive effect it could have. , the demand and oil will be reduced so we will see a second for the airlines, the see positive signal we can from that difficult period. we have learned from experience. we will give to our members guidelines, and to the airports , weowing the who guidelines thegive measures to contain influence of the outbreak and to ensure that it is safe to fly. francine: one final question about the 737 max. when do you expect it to fly if you expect it to come back? alexandre: that is a difficult question because it is a decision that is in the hands of make aulators, they will decision that should be midyear, but it is up to them to decide. it is not in the hands of the airlines. francine: thank you for joining us, alexandre de juniac, ceo iata. let's turn to our exclusive conversation. our guest is the chief executive -- he was general manager of the retail division, he has had to face a slowing economy and low interest rates. carlo messina, thank you for joining us. there is a lot of talk of upgrading your stocks. what is your biggest challenge for 2020? is there a black swan event that you care? summary, weu want a will grow in any case. there is some tension related to trade and the coronavirus, brexit, negative interest rates. but i see a positive trend for italy. francine: what does it mean in terms of earnings? what does it mean for dividends? sanpaolo, 2019 figures, analysts are trying to have a more positive approach to sanpaolo. sustainable increase in net income, and due to our strong capital position. the strongest net income generation in europe. and the strongest capital position. we had a business model leveraging managing -- leveraging management. francine: what do shareholders ask you? is it i try and politics -- is it italian politics? there is a lingering lyrical situation in italy that makes people nervous. , that isey are nervous something you have to consider. sanpaolo is a mix of the best part of italy, we are the , and the businesses between families, a portion of the public, so there is an exaggeration. clinical stability so families and companies, what we need is politicians to do the right job to give stability. with stability, the country can have the same spread is spain and portugal. francine: you are an international bank. .ou are italy-based is this a bigger concern for you than negative rates? carlo: negative interest rates are for sure in the medium-term a problem. for a bank like sanpaolo where we have wealth management, negative interest rates are an engine for us in terms of transformation into asset management. in the short term, this is positive not negative. in the medium-term, it is a drag , the negative interest rate environment. it is something that has to be changed in the future. francine: you have been one of the most ambitious chief executives to grow the bank, and you want to grow it in wealth management. if you do not find the right thing to buy, can you stick to internal growth to maximize revenue? carlo: we will start with internal, then we can talk about other opportunities. if you look at internal, the amount of money we can transform into assets under wealth management is equivalent to the major acquisitions you can do. we have out of 400 billion deposits, 70 billion euros in the last two years from families . we have an amount exceeding 200 billion euros. that would be to expand internally? can moveternally we into a conversion of 50 billion euros in the next three years. that is something that is to execute, so execution is a major point in terms of consolidation and acquisition. if you look at other targets, wealth management, the valuation is strong. if you are involved in international wealth management, you have to be sure to know what can happen if you make an acquisition. we want to remain concentrated on wealth management because we increaseit value and dividends for our shareholders. francine: shareholders have understood that? carlo: i think so, if we are the ,umber three bank in europe being italian, i am convinced we are number three because we are italian. francine: talk to me about cost , how much have you had to focus on cost cuts in 2020 and beyond? carlo: that is a strategic point. sector by definition andhave to work on costs, work with the social friendly approach. some plans in the next and, a reduction in terms branches.nt to reduce costs are a significant part of the story in terms of reduction. possibility for the european banking sector to survive without a reduction in costs. francine: when you look at eastern europe, is there value? europe is an important part of our net income we areion because gaining more than 600 million but inutside of italy, many cases we will remain freezing thein internal ability to generate net income. italy is outside of fundamental. in croatia, in serbia, in slovakia, we are the leader in the market and generating net income. we want to increase our ability to work on internal capabilities. francine: are you working with guarantees? carlo: we are in a position where we want to increase our internal ability to generate net income. francine: carlo messina, ceo / managing director, intesa stays with us. coming up, more from our exclusive interview with carlo messina. later this hour, we speak to the chief executive of the world's biggest maker of diabetes drugs. time.s at 9:30 a.m. u.k. this is bloomberg. ♪ francine: this is "bloomberg surveillance." . am francine lacqua in london let's get back to our conversation with carlo messina, ceo / managing director, intesa sanpaolo spa, italy's most valuable bank. we are talking about your ambitions for the bank, internal and external. what will you ask a politicians right now? is it reforms? i keep being told italians have money but it is the unemployed who need an opportunity if you want the country to grow. carlo: if you look at the country, you have an incredible aaa.t of savings that is ,f you look at companies aaa with the right job in terms of financial structure, families and companies are top performing. we need to work on reduction of public debt, but that is sustainable. there is a matter of credibility in the country. if you compare with spain and portugal and france, there is no these you can have spreads exceeding the ones of spain and portugal. it is a matter of credibility. francine: why? carlo: politicians change too much, and society is continually fighting the approach. if they are together, they start to give messages that they cannot compete on something. we need to have an approach in terms of delivering. it is not something that is so difficult. francine: carlo messina, ceo / managing director, intesa sanpaolo spa, thank you for joining us. we will have plenty more on the coronavirus and on iowa. this is bloomberg. ♪ francine: the coronavirus death toll climbs towards 500 with thousands quarantined on cruise ships in japan and hong kong. president trump tells congress the u.s. economy is on a tear. in the iowa caucuses, outsider pete buttigieg maintains his lead. as the world supper biggest maker of diabetes drug forecast profit, we speak with the chief executive. in london.e lacqua just over 1.5 hours into the trading day, let's check in on your your in stock movers with annmarie hordern. annmarie: it is all about earnings as well as the impact of the coronavirus. beating estimates, they are downplaying impact on the coronavirus on the chipmaking industry. this comes with the fact that we have seen easing of the tensions of the trade war, which is helping them rebound. down nearly 8%, they are abandoning their forecast for this year, and it all comes down to what happened in the u.s., given the fact that the u.s. is banning some of the vaping flavors. that might hit some of their sales in north america. and carnival, is slower this .orning, starting to gain some with due to a cruise ship many people still on board. 10 passengers have been tested positive for the virus. that is a stocks to watch. i will to talk about what is going on in the u.s. the story is all about the faang stocks, never so far ahead of the s&p 500. we have not seen these level since 2018. they are not just driving the index, they are beating index. these are big names in the index like apple, alphabet, facebook, but it all has to do with tesla. tesla has surged more than 100% this year alone. between last year and this year, doubling its share price. yesterdayd the stock when it surged over 13%. toncine: let's get straight bloomberg first word news in new york city with viviana hurtado. viviana: we begin with carmona virus p the death toll from china's coronavirus -- with coronavirus. the death toll from the -- the world health organization's says it has not shown much sign of rotation are caused a pandemic. the bulk of cases remain in china, sparking optimism. the impact of the outbreak will be limited. president donald trump striking a triumphant tone in his state of the union address. he is staking his bid for reelection squarely on the strength of the u.s. economy. america's fortunes are on the rise, and america's future is blazing bright. the years of economic decay are over. [cheers and applause] night a deeply partisan affair, the president turning his back on nancy pelosi as she offered to shake his hand, but when the speech is over, misses pelosi ripping up a transcript of his speech. now we go to iowa, where partial results are in, and the early leader in the democratic caucuses, pete buttigieg, the former mayor of south bend, indiana, is just ahead of senator bernie sanders. it follows a 20-hour delay in in results caused by rules tech issues. the ceo says, "we feel really terrible." 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'm viviana hurtado. this is bloomberg. francine? francine: let's focus on pharma. a modest increase in profits in 2020 with an expected rise between 1% and 5% per that is as the world's biggest maker of nordisk, --gs, novo let's get to copenhagen, where the chief executive joins us. thank you for giving us a little bit of your time. can you give us a sense of 2020 earnings and how you expect the next 12 months to develop? lars: we come out of a very strong 2019 where we see strong growth across outside of the u.s.. also strong growth in the u.s. we are in a situation where we decline ingnificant pricing per that is replaced by a new category, where you have the two leading products. and now also the first ever in an attempt that we are watching -- launching in the u.s.. so we have low dependence on insulin and a bigger growth opportunity coming from that. we need to go through this couple of years, and then we see strong growth beyond this. so i am quite interested in our growth profile. in 2020. francine: does the coronavirus change everything? lars: short-term it does not. we actually manufacture for china in china, and we have a supply chain where the -- our ourconcern is that we bring medicines to patients and they are safe. if you have diabetes and you rely on insulin, that is a life-saving medicine, so it is important for us to be there for the patient's and that there is a good supply chain. short-term we feel good about that. into months and years, it becomes more challenging. short-term we are in a solid place. francine: there are quarantines, travel restrictions, isolation because of coronavirus. can you tell us what steps you are taking for your stock in china, and i know you are not worried shorter term. but if this lasts for longer, how will you get those supplies into china and elsewhere? right, peoplere are staying put in china right now and so are our employees. they come out of the new year holiday, and we keep our activity level low for the first days. so that people stay home and a work from home. and also producing for the chinese market is not being ramped up after this vacation, so we collaborate with irregulars and how -- with the regulators in how we should go about it. for the short term, so that we can still provide the medicines for the chinese living with diabetes for some time to come. i know you do diabetes and coronavirus is different, but has it been dealt in the right way? do you have any insight? ,nd a lot of people are afraid the markets are questioning it, and a lot of people fear that they catch it. how has this situation involved? is it under control, or could it have been done better? lars: i think there are some -- i read the media like everybody else. it feels like the first days, weeks, maybe could have been handled better. i don't have the insight. i think from what i can judge, it looks like the virus as such is maybe not as dramatic, as dangerous as we may be first thought. i feel good about coming from the pharmaceutical industry were a number of my peers are doing research and development and coming out with medicines, vaccines, and that is good to be from an industry that mitigates such difficult situations, so hopefully overcoming in a few months and we will see the first medical information -- the first medical intervention to halt the outbreak. francine: i know you mentioned an outside clinical trial, testing a diabetes drug from the outside. how do you think that will change these particular diseases? a big issuemer's is for society, and as we grow older, more and more people live with alzheimer's or dementia. there is a hypothesis that one of the drug classes we have can be used against alzheimer's. it is important for me to note that so far nothing has been done for trials. thereas been done is that is an investigative response to trials, we have not seen this data. we expect to come out in a couple of months and that will help inform us what we should do. we have a more efficacious and it is this, indeed a clinical justification for this being used in alzheimer's, considering what we could do in the space. that -- a molecule an obesity medication that is being tested out in fatty liver. so it really it is a molecule that lends itself for many uses. but it is the early days. we do not have the clinical evidence, but we have hypothesis that could potentially work and we will pursue that if that hypothesis is supported by the data. francine: if we look at the actual trials or the drugs or the virus, if you look at financials, do you worry about currency volatility? do you have to hedge in 2020? saw a tail19 we would from currencies. we root profit by 6% in reported currencies. 2020. 11% for -- it was 11%. for 2020, we see that reducing by 1%. francine: i think we are having some satellite concerns actually , there. it happens with live tv beaming across the world, but we will get more from the novo nordisk chief executive, especially when it comes to currency swings. coming up, we will discuss the outlook for your cake real estate. we speak with the chief executive officer of luxury property developer. that is coming up next, and this is bloomberg. ♪ francine: this is "bloomberg surveillance." let's get straight to the bloomberg business flash in new york city with viviana hurtado. ,iviana: so for this year shares are continuing their parabolic surge, in two days rising 36 percent it gives tesla a market value greater and general motors. fiat chrysler, and volkswagen combined. other is up20 no even a quarter as much. on the owner of the new york stock exchange and a continental exchange saying it approached ejb to deal. but the ark asked the market aace did not engage in marketable way. a potential deal could value ebay at $30 billion. ryanair being told to drop ads claiming is europe's greenest carrier. the u.k. advertising watchdog says the statement is misleading, unsubstantiated, and based partly on all data. ryanair says the claim is based on its young, fuel-efficient fleet and high occupancy levels. that is the bloomberg business flash. thecine: let's focus on u.k. economy. pmi came in better than expected while at the same time asking prices for homes also rebounded. the chief executive of northacre joins us. thank you for joining us last time we talked, about a week before that december 12 election, we were wondering whether the markets would come back. e?ve we seen it bouncy ech >> remember when we were jittery about what was going on. we have done more sales in the last two months than we have done in the last two years. that is not just us, that is our competitors. several competitors have put up press releases that they sold substantial stock in this period. we have sold just under 60 million pounds in apartments in just under two months. therene: is this because is no longer the specter of jeremy corbyn in power? or is it because brexit has done and we can move on? the jeremy corbyn situation is one, and there is probably going to be a five-year government from the conservatives. brexit date ofis january 31 and a certain way is a watershed between these differences as well. francine: last time i ask you whether london was a concern that it would lose its appeal with the global wealthy elite. we still have to negotiate the agreement between the e.u. and the u.k. is it still at risk of london ?osing its bar he ech areolo: i feel that people sixty good off for nearly years now. so after six years because it is a lifestyle choice as well, they are getting on with it. francine: has the coronavirus impacted your business? niccolo: it has because chinese are a decent portion of sales for us and other luxury developers, and in general in the market they are probably the largest buyers, and how it works is that we go there and we do roadshows. forroadshow we organize february is no longer going forward. he won in march, probably not. while that is good news for the last two months, you will see a slowdown in first quarter sales due to that. francine: how does a roadshow work for you guys? is it the same people that buy one apartment or two in apartments, or can you do it via skype? when you are selling something that is 3000 pounds per foot, people want to hear the story face-to-face, so we have to go there. we have to spend time there, we do dinners, lunches, organized events, and all these not only to get across which apartment they want to buy, but also to get across the brand. francine: what is attractive about london for a lot of these buyers? is it the history? niccolo: education is one of the main drivers for them. london fact that i think is an incredible lifestyle choice and it has been for so long. chinese buyers are graduating now from buying midmarket to luxury market, and london is their number one destination. francine: so we are expecting a budget later in march. are you expecting any changes for property taxes, or is it going to be something else, that london will transform into? niccolo: rumor is there will be -- if that is the case, it will put a slight damper on the market like it did when it increased about four years ago. plain sailing going forward, i think we have the dark clouds out of the way and i think like every bear market it needs to work itself out a little bit more. francine: or your clients price-sensitive? niccolo: they are from the feeling that it is not just assets, it is the cost. it makes quite a bit of difference on the amount of cash. francine: thank you so much for joining us. , the chiefattieri executive officer of northacre. of a tech the founder startup. this is bloomberg. ♪ finance, economics, politics. this is "bloomberg surveillance ." says it hasstartup helped half a million patients across sweden, germany, france, and the u.k. but can immobile phone really help with health care? joining us is the chief executive officer and cofounder of crease. thank you for joining us. this is exciting news, given the number of people that have signed up for the app. 1.5 million. francine: how many patients have signed up, and how much bigger can it get? of theweden, 10% population has signed up with the services. we started with 5% of total volume. where still fairly early here in the u.k. and france and other european markets. francine: what is the limitation you can see? eventually, will jp's have to come to your house? if i have a sore throat or something, do i not want to be seen by a physical human being? >> obviously there are limitations, but there are things we can do. gp practices in the u.k., under another name in sweden and elsewhere, welcome it because it takes the burden off, or do they feel threatened by it? we work with gp practices here. we have a high quality of care, but there is an access problem. many of the gp processes are loaded, and we work with them here in the u.k. driving: if you look at cars, that has been disrupted. his health of the one that is starting to be disrupted but we have not really seen how much disrupted it can be? very much so. if you look at health care a hundred years ago, nothing has changed that much. now we are working very hard to change it to make sure that there is way more access to patients across europe. francine: does the coronavirus change anything? are there more people using your apps, or is it because you have to be tested for it? we have people that are reaching out to us with flulike symptoms every day who have not seen any cases of coronavirus. gp on theif i have a line, the symptoms are very similar to general influenza. what advice will the gp give me? johannes: obviously there are limitations. in sweden we have places where people can do tests, and some of those tests can be delivered to your home. tests that lot of can be done at the home or the workplace instead of having to go somewhere. it is great if you do not have to sit in a waiting room with a lot of other people. francine: talking about funding, are you moving around funding or are you fully loaded? we have more than 200 million -- francine: thank you so much. that is johannes schildt of crease. tom keene joins me in the next hour out of new york. we will talk about foreign-exchange with david blum of hsbc. we also had a full, full round of coronavirus. what it means next, what will happen. european stocks are gaining, europe futures are also up. treasuries reversing from other gains. gains in travel shares supported by pretty strong pmi readings that suggests that the year area economy in 2020 is on an unexpectedly strong note. i have some charts i want to show tom keene on that. the other thing to watch out for of course is the isolation we are seeing from some chinese companies in some of the quarantined cities. we will have a wrap from hong kong. this is bloomberg. ♪ francine: the coronavirus death toll climbs towards 500 with thousands quarantined on cruise ships in japan and hong kong. president trump tells congress the u.s. economy is on a tear. in the iowa caucuses, outsider pete buttigieg maintains his lead. and tesla's up cries, the electric carmaker doubles in market value in just over ash carmaker's electric doubles in premarket value in just over a month. good morning, good afternoon, good evening, everyone. we are global today, tom. i'm francine lacqua in london, tom keene is in new york. looking at the impact this could ,ave on your market coronavirus. and the loss-of-life. 71% of the results are in from the iowa caucus. it is a complete disaster, no question about that. and of course the pageantry of the state of the union -- i look at the pageantry of the markets right now. it is an extraordinary market lift, isn't it? francine: it is pretty extraordinary. we will try to figure out what traders are looking at. let's get to bloomberg first word news in new york city with viviana hurtado. viviana: we begin with the state of the union. the president used it to praise what he calls the great american comeback. hiss likely a preview of reelection campaign. night was filled with partisan tensions. when the president reached the dais, he exhorted nancy pelosi's outstretched hand. when he finished speaking, mrs. poulos he tore up her copy of the remarks or you can see it right there. the president's impeachment trial is expected to end today in an acquittal. and a big tree for pete buttigieg, a setback for -- and a big victory for pete buttigieg, a big setback for joe biden. buttigieg maintains his lead and the iowa caucuses. bernie sanders was second, and joe biden finished fourth behind elizabeth warren. it was a big disappointment for the vice president. the new hampshire primary is on tuesday. now for the coronavirus -- hong kong the taking -- taking new steps to stop the spread of it. visitors residents and entering via the international airport -- the numbers keep rising the death toll is approaching 500. china says more than 24,000 cases are confirmed. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i'm than 120 countries, viviana hurtado. this is bloomberg. francine? tom? go --l tom: thank you so much. we will go to stephen engle in hong kong in a moment. ,ow futures up 255 points significant curve steepening and a higher yield. oil with the fortinet handle at one point yesterday afternoon. in, screen, the vix coming not back to record high bull market, but certainly moving in the right direction. the close yesterday was up 400 big points as well. francine, i will leave it there. francine: if i look at the action i actually -- if i look at -- i actually regret not putting this -- the pmi in europe suggesting the europe area in 2020 beginning on a not especially strong note, which is why you see the stoxx 600 gaining at 1%. earlier treasuries reversing gains. there is a breakthrough in the fighting of the coronavirus, and investors are up on the latest corporate earnings that are not too bad. tom: keep that screen up. look at that control room. they are all half-asleep, staying up for the state of the 1.1026.nd they are up let's do this. let's look at the tesla bond right now let's go to the bloomberg, and this is extraordinary. i can honestly say i have never seen it. this is the tesla bond cratering down to 182 in the summer, dead, terrible.n lousy, moonshot, up 26%, up 36%, annualize and you still get a 4% coupon, trading nicely above par. the bond performance out six years, five years will be extraordinary. francine: we are both doing a tesla chart? i am in symbiosis with you, ,. this is my chart. it is a little bit different. -- you cany looks at see in white underneath the s&p 500, that is the estimated ratio, and tesla is doing so much better. is, isere asking today the tesla surge good or bad as an omen? chieftephen engle is our north asia correspondent, but that does not describe his decades of experience on the pacific rim. i spoke with anthony foxx a yesterday, one of america's and he madelogists, clear that this virus is about pneumonia. what is china doing about the bacterial infection and viral infection follow on from the corona virus, which is generally called pneumonia? do they have the medicine? stephen: this is a big problem in china. the hospitals are in short supply of medicines, of what kits to identify the virus, facemasks, and they are in critical shortage, exacerbated by the fact that wuhan and other places of the province are virtually sealed off from getting much needed supplies. i even read a story today where esque, whereotheris people are walking around in the streets without a mask and people are being told, "put on a mask, go home." the central bank governors, whether in thailand, singapore, they are showing that they are willing to ease. so the market kind of likes this on a global stage, economic-wise can be contained. but if you are on the ground in wuhan, and now increasingly here in hong kong. you are a little bit worried. not a little bit, quite a bit. francine: give us a sense of how many people -- i was reading the story about kathy pacific stock -- about cathay pacific stock. we understand how many people are home, how many are isolated, can medicine come even out of parts of china? stephen: in china there are about 250 2000 people under surveillance. 252,000. that is a good-sized city in the united states, about half of my hometown of seattle. but, not greater seattle, 252 thousand people under surveillance if not quarantined. the number of confirmed cases in china, 24,324. inthose, 3200 of them are severe or serious condition. the death rate is now at 490 people dead plus two outside china. in the philippines and one in hong kong. the mortality rate is 2%. sars was closer to 10%. so it is not as deadly, but then again 17 years ago we did not have the reporting as quickly and we did not have the size and scope that we are getting today. much,ne: thank you so stephen engle there joining us from hong kong. with us here on set, david bloom, hsbc mobile head of strategy. thank you both for joining us. it is difficult to measure the impact right now that it has on the economy, although we are seeing the first signs of it. longer-term, what does this mean? >> i think the big question for investors is whether an intensification of the coronavirus could be the trigger for a selloff and ultimately a global economic recession. we had ended the year on a pretty strong note. many of us are feeling quite positive. this is also not just a test for the global economy but for the chinese authorities, and their ability to contain it. it is going to be a major challenge. we talking about quarantining tens of millions of people. francine: what does this mean for currency markets? the currency market wants to know if china is strong enough to hold this at how much more can they do? >> you buy the dollar. thedollar went up, risk on, dollar went up. come on. we yen was moving, but when -- there was an equities rally, and the dollar is railing against the yen. if you want to play dollar yen, that is fine, but if you want to buy something that gives you a free insurance policy, you buy the dollar. that is exactly what has happened this year. we have been risk on, risk off, risk off. risk on, risk off, and the dollar keeps going up. so why not just on the dollar and stop worrying about all these other things. >> and i with think that would be a safe bet with the whole year given the key risk triggers. david: that as well have been arguing, but no one believes me. tom: i so believe david bloom era i cannot even find words for it. let's go to the dollar block. bring up the banner if you would on the roaring 20's. tina fordham, let me start with gdpas we look at china estimates. how have the two of you modeled down your china guesstimate? tina, are you below 5%? tina: i think it is time to consider whether china can meet that target. my new capacity in an advisory firm, i am not putting out estimates myself. tom: yeah, but it is "surveillance," come on. tina: i think we will see the usual dynamic, which is are we going to see transparency with the chinese authorities. the coronavirus on the back of hong kong is a test to governance and control and to institutions, which is my theme of the year. tom: with great respect to the hong kong and banking capabilities, what is your call, david, on china economic growth? david: we will see what happens. growth numbers have not been changed since the global quarterly came out, and one has to wait to see what happens. none of us are experts on this, so we don't know how it is going to pan out. what i do know is that global optimism of strong growth and the dollar going down ain't happening. global growth is getting weaker. we saw a rate cuts only last night. we have seen people loosen policy, and it is playing into the hands of the dollar. i am an fx guy, not an economist. it plays straight into the dollar's hand. when you buy the dollar, you get a free global insurance policy against bad things. that has been playing out. francine: we will talk more about the possible "bad things" david bloom is talking about. coming up, full results still coming in from iowa as pete buttigieg is maintaining a narrow lead. we will bring you the latest next. we will also talk about dollar dynamics. this is bloomberg. ♪ francine: this is "bloomberg surveillance." tom, we have been all over the iowa caucuses. endchaos finally nearing an with results trickling out in the democratic presidential race. with 71% of precincts having reported, pete buttigieg takes the lead in the polls with bernie sanders coming in a close second. the biggest setback was joe biden coming in fourth place behind elizabeth warren. david bloom with hsbc and tina fordham of aven hurst are still with us. do we trust these numbers? tina: trust the numbers, i think they just mean less than they used to. iowa has always held such a special division as a leading indicator, in the hole arcane u.s. caucus system. i think that the buttigieg result is super interesting, very encouraging for his campaign. we should not over interpret what that means. francine: what does it mean for the democratic race? is it different because of the botched results or because it is a much bigger democratic field, difficult to know what will happen in february to november 3? tina: the field is as spread out as it was before. the favourite, joe biden, has ended up much weaker than was expected. he could still make that up, but i think we are seeing a demonstration of what is at the heart of what is going on at the deming -- what is going on at the heart of the democratic party, and that is a very fragmented party. nots clear that they will support another democrat, so it means there is no clarity anytime soon. tom: i don't mean to go all hubert humphrey on you, but i am. that was the chaos's we are seeing now. what is different in the democratic party chaos now versus what hhh lived a million years ago? tina: it is on steroids with technology, tom. tom: well said. tina: we had an electoral malfunction with these apps? who needs russians and external interference when the leadership and the actual machinery of democracy falls down? david and i were just talking about hanging chad's, which some of us are old enough to remember, the little bits of paper. think, ang to be, i year of real gyrations between things that can go wrong. avonhurst. client of what happens at these conventions? republican convention and the perceived chaos of a new democratic party process? how do you perceive those conventions? tina: the thing i have been talking about since last year is about institutions and democratic legitimacy, and i think this is true not only for democrats and what happens next with a nomination process, but also with the shape of trump's victory, if it happens, that there is a bigger gap between electoral college result in the national vote. we are looking at real questions about the legitimacy of this result. what are we looking for? could we have a contested convention? what does that even mean? could there be a surprise? david's in someone in position, could have a hard time gaming out and looking for clear signals in this race because we have a ton of front runners, we have many things that can still go wrong. a contested convention would mean that somebody like bloomberg could end up, to the delight of many of our colleagues on wall street, doing much better than expected. a lot of wildcards. so don't bet on a binary outcome just yet. you soe: tina, thank much. a disclaimer, of course, michael bloomberg, running for the democratic race, is also a founder and majority owner of bloomberg lp, the parent company of bloomberg news. we will be back with tina and david of hsbc. here is what you should be watching out today, the argentinian finance minister -- they will discuss argentina's credit line. and earnings season continues. we will get results from general motors, and we also get u.s. adp jobs. for january. this is bloomberg. ♪ "bloomberg surveillance." tom keene and francine lacqua. we will talk about the state of the onion in a minute. strongeryou safe dollar, you're not talking about a vector up, you're talking about dollar stability. the weak dollar crew is predominant, and you are just saying sustained range bound dollar, right? david: that's right. we stay uphere, and there. nobody is talking about the dollar pulling ahead. where talking about all these people looking for -- is going to 1.15, one .17. no it's not, it's staying at 1.10. it ain't going anywhere. it is not bulleting up either. essay "roaringr 20's." unfortunately, after the roaring 20's, david bloom, it was not so nice. 2030's?ut the what does it look like? we know the comparison with the roaring 20's everything was brilliant and great, but it ended badly. and we have qe everywhere in the world and we know we are in a situation where global gdp is going down. we are asking ourselves, what are these central banks going to do? i don't know. the fed has firepower. francine: they've got the dollar. david: they have the dollar, .hey can cut interest rates do?cine: so what do they ? the one way you can loosen policy is through currency. francine: we had better-than-expected pmi figures. they are a little bit better, but not great. are thehat worried me chinese numbers that we got last night. that was weaker than expected, and it took place before we had the situation occurring. so obviously people are worried about global gdp. that whole optimism that we started the year with, the u.s. is going to underperform, global growth is going to pick up, that has been crushed. tina: rates are lower for longer indefinitely, though. david: you always say that, but it doesn't matter. sorry, tom. tom: know, this is good. david, what is the export-import dynamic of the david bloom dollar? what does dollar stability and dollar strength mean for american exports? avid: well, that is reasonable question, but remember that the u.s. is really a large closed economy, same with the year is same with japan. so, yeah, of course a stronger dollar, because it is not continuing leak -- continuously strengthening, that should not mean that much. exports and imports now with the current administration is about deals and putting it together, it is not just generally the old laissez-faire way of looking at things, and i think currency is -- less than they used to. you heading currency -- falling inflation and you worry about currency. that doesn't happen anymore. so the world has turned completely upside down, and it is the same thing for the fx market. tom: upside down, it would bloom is about new hampshire. iowa -- are we over i way yet? no. new hampshire, we are into it. next tuesday, look for special coverage, it :00 p.m. this is really, really different. and no cryan, no crying on -- and no crying or no crying on pay bills this is bloomberg. good morning. ♪ ♪ bloomberg "surveillance." markets really on the move, dow's upp 29 -- 25, over 29,000 viviana: high drama at the state of the union address, the president turning his back on nancy pelosi's outstretched hand. the copysi ripped up of his speech as he concluded his remark. -- the president described economic gains under his leadership. pete but a gag -- pete would it he maintained his lead in the iowa caucuses. bernie sanders a close second and joe biden finished disappointing fourth. next up, the new hampshire primary on tuesday. hong kong appears to be bowing to pressure to do something about the outbreak of coronavirus. they will quarantine people who have been to mainland china. medical workers have been on strike, demanding the government seal the border. a blow to long-suffering fans of the new york mast. -- that's. -- mets. longer going is no to buy the team. he was in talks to buy 80% of the team. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. i know this is crushing. tom: francine is going what? it is a great place to watch a baseball game, and they are terrible. fix it. francine: that is a lot of money. theyjust like the tots, got to get better. this goes back to woodrow wilson , the feel of the state of the union. madam speaker, the president of the united states, this is the fabric of the country. how shattered is this moment and what does it signal for the nation? unedifyings a pretty spectacle, the state of union, whether it was madame speaker tearing up the speech, the seeming refusal to shake hand, rand paul disclosing the identity of the whistleblower, and the mood music around the state of u.s. democracy is pretty poor. what scientists like to talk about is how it is a demonstration of weak political parties on the democrat side and strong partisanship. that is a useful conceptual framework for understanding what is going on. i would make the point to our international viewers who may not be so aware of this, given how poor president trump's reputation is, he is riding high in the opinion polls, up to 49%, the highest and see was elected. even though he was giving his state of the union in the midst of the impeachment proceeding -- only bill clinton had to go through that and he never spoke -- he was standing there after a china trade deal with the democrats helping him get usmca ratified as -- ratified. was, it wasg as it good for the president. tom: the strength of the economy , we have a lot of people modeling a sub 3% economy in q1 because of china and all of that as aercent how do you political expert correlate economic growth into the first tuesday of november voting? tina: here is where political scientists have something useful to say. ticker,at data on the day to day, week to week. people take some time to feel the impact of economic changes in their day-to-day lives, and longer for that to translate into differences in voting behavior, which is less like the in a partisan charged environment -- likely in a partisan charged environment. a softening of the u.s. economy probably does not hurt president trump as much as market observers might think. francine: what is the state of the u.s. economy? will you see a sudden pickup and inflation? david: come on. every year, the inflation will pick up, the bond yields are going higher, it is not happening. facingk of the world is more disinflation than ever before and rates are going down. higher inflation in emerging markets, we are seeing inflation and growth crushed lower. the economy is in reasonable shape. of course it is slowing down compared to last year. sterling is actually doing a bit better than last year and picking up relative to the others. that is why we are bullish on sterling. francine: we are jumping around. let's focus on brexit. we still have months of negotiation and we have heard rats from the boris johnson -- threats from the boris johnson side. david: the u.s. election, let's talk now. let's stop trading on foreign exchange what may happen in november and december. the u.k. has seen two dates broken that could not be broken. i think the economy is picking up from a relative point of view, and sterling, if you are looking for something alternative to the dollar. tom: i am not going to rip up up speech, i'm going to rip the thoughts on the roaring 20's. this is mr. pruden of russia -- putin of russia with foreign ambassadors as he is entrenched among oil-producing russia. what do the russias of the world do? the bloomberg economy index is testing -- what do you call on a basedand commodities currencies? david: we thought the selloff was too aggressive and you can see the selloff. we are selling the dollar and buying the ruble. you i-64 is the long -- wrong level -- you say 64 is the wrong level so let's sell the ball -- dollar. short-term,t in the people have gotten too bearish on russia, sold the currency, and we think it could make a comeback so we are optimistic on the ruble. tom: what is the dollar-oil linkage with the wti handle yesterday? what is that traditional linkage? david: the linkage seems to have been broken because people are worried about mobile gdp. -- global gdp. the dollar has come off because of your global view. whenly there is a linkage dollar goes up, oil price goes down. when you get downgrading global growth, the oil price goes down, the dollar goes up, and that is part and parcel of the same thing. francine: thank you both, david bloom and tina fordham. a disclaimer, michael bloomberg is a founder and majority owner of bloomberg lp, the parent company of bloomberg news, and is running as a democratic candidate in the u.s. presidential election. europeanay the commission economy and financial bloombergll be on market close with guy johnson at 10:00. this is bloomberg. ♪ ♪ viviana: you are watching bloomberg "surveillance." bnp paribas in the fourth quarter keeping pace with some of its biggest wall street rivals, posting a 63% jump in fixed income trading revenue after a rebound in rates and foreign-exchange activity. back, they are paring profitability because of negative rates. apple's main partner is cutting off -- cutting back its -- the chairman tells bloomberg the company is addicting a sales --rease of no more than 3% predicting a sales increase of no more than 3%. disney saying it can challenge netflix, profits soaring to almost 29 million. that success is not cheap. the quarterly profit is falling because it is spending more on movies and tv shows. that is your bloomberg business flash. francine: there is quite a lot going on. we have been using the wisdom of alex webb throughout the day and throughout the week. we have to talk about tesla and disney. alex webb makes us smarter on all things tech and cool. when you look at tesla, it is unclear how much value the company can have from here. pre-they are down, and elon musk -- premarket they are down and elon musk taking to twitter about opening a factory in texas. alex: the president saying tesla will build a factory in the u.s. giga will bee opened in texas. the stock has been on a tear. that has had huge implications for its cost of capital, and it is also suggested that this might be an opportunity for the ratings agencies to reevaluate tesla's debt it jumped -- debt. it jumped through a lot of hoops and its cast -- cost of capital is half. tom: i want to look up a pro chart. they look at logarithms. the y-axis shows percentage change in this is unusual to show a linear function like this since october, and this curve called log parabolic, and it is a move. white is where we are, with a 2% to 3% pullback. 'sw does this change mr. musk strategy? does he sell this to the next down person who comes along? what is the strategy? alex: the access to capital is a significant factor. they are getting better access to capital and are free cash flow positive, have been a number of quarters, so the opportunity to go to the equity or debt markets to raise money and therefore improve the finance offerings you have for the vehicles, that is a huge edge over the likes of volkswagen and gm have over tesla. investing in the manufacturing facilities, they have a huge amount of demand and not the supply. tom: how is traditional auto reacting to this story? how is traditional auto reacting to the apparent free cash flow of electric vehicles? alex: panicking, basically. volkswagen has said tesla has a huge lead. we have seen over the past few years, initially carmakers were terrified about google, apple, what they were doing with autonomous vehicles. there has been a recalibration, recognizing autonomous vehicles will not come until a decade perhaps. proportionately the electric vehicle issue is where they have been sideswiped and some say they are a decade behind inditex knology. -- behind in the technology. they do have the capital to catch up. francine: let's get back to some of the political things. the u.s. is mulling a plan to withdraw from a global pact worth $1.7 trillion in government contracts. we are talking about the wto. still with us, david bloom and teedo for him -- tina fordham. when you look at global trade, we have a phase one tried -- trade deal. will the u.s. go after wto or the u.s. -- europe? tina: one thing investors are not focusing on enough is a second term for trump, a reelection would probably lead to an acceleration of trump's move to dismantle world trading organization rules or starting piecemeal by saying the u.s. will not abide by judgment. if the u.s. doesn't, why would anyone else? francine: nafta two is similar to nafta. will tearing up the script be similar to what we have at the moment? tina: piecemeal will be an erosion rather than a total abdication of the global trading reidel -- global trading rules. it does hit the global economy. if the united states is not prepared to be the linchpin of the system, why would other countries subject them selves? if: is mercantilism working it is bilateral, unilateral, is it working as the president claims? david: it is for the united states, not for others. the u.k. is trying to enter into trade deals at a time where it looks like you do a deal with one country, maybe another feels less obligated to do it. we are living in a deglobalized world.d -- d globalizing global growth is not doing fantastically well. financial markets like globalization, but that is not the world i am living in. it is not the reagan, milton elton friedman 1980's world we are living in. -- milton friedman 1980's we are living in. tom: what is prime minister johnson's best outcome? david: we do a deal with the europeans and do deals with other countries, that is the aim. whether we will crash out in december, i don't believe that and that makes me positive on sterling. francine: what do you do about the swiss franc? it used to take the brunt of trade wars and now the coronavirus. david: for switzerland, they got on the list from the united states. in the you intervene path that is free where there is no political comeback is gone. it has infected the swiss dollar. the u.s. may put something on them that is quite horrible. the free option of coming into the market, manipulating a currency, giving someone else like iran such a problem, that is onset -- unacceptable, so the swiss franc could get stronger than ever thought possible because the snb cannot act. francine: has trade reorganized itself? southeast asia countries have done more trade among themselves than they have in the past because of the trade war. tina: we can go to the failure at the doha round to understand the unraveling of global trade norms has been for a long time. the move to bilateral is him and regional deals has been the case after president trump came along , and i suspect there will be more of that. that does accelerate deglobalization. brexit, the first country d globalizing itself -- deglobal izing itself. tom: the last five years, gm up 2% per year. tesla up 26% per year. far more about the bulls, lebron's hummer, and electric,. huymmer.ctric today ceo in conversation and will join us at 9:00. this is bloomberg. ♪ tom: a precious minute with david bloom of hsbc. the chart is simple, a brexit chart. what is the hsbc call for pound sterling? 1.45 for the end of the year, so if you have to go back to the beginning of the redline saying that sterling will go to the bottom of fair value, it should not be cheap. we don't see why it should be that cheap. we should get back to that count of range -- kind of range. if you are looking for a big alternative to the dollar and things are not great, we have found something that is cheap and the markets dislike for the wrong reason so we are bullish on sterling. francine: what happens if the u.k. leaves under wto terms? david: that is a different story. that would be poor for the u.k. obviously. we will find that out in october. sterling. until then, i believe it has value, and i do not believe we are just walking out without a deal and i do not believe in these six dates that cannot be moved. francine: you don't want to talk politics, but if boris johnson -- boris johnson says, i will not extend. he has an 80 mp majority. david: he has cards to play. francine: he says we will not extend. david: he said that last year, dead in a ditch, and all that. francine: the parties were forcing him to extend. david: it was someone else's fault. francine: you are telling me even if the prime minister says, i will not extend, ignore him and buy pound? david: i would not say it nor him because he is playing his hand. he has to have a credible threat, but if it takes a longer time, nobody wants to leave without a deal. the best solution is always a cooperative solution. we all know that. francine: it is like "surveillance." tom: david bloom, greatly appreciated. steve eisman joins from newberger berman. this is bloomberg. ♪ hi! we're glad you came in, what's on your mind? can you help keep these guys protected online? easy, connect to the xfi gateway. what about internet speeds that keep up with my gaming? let's hook you up with the fastest internet from xfinity. what about wireless data options for the family? of course, you can customize and save. can you save me from this conversation? that we can't do, but come in and see what we can do. we're here to make life simple. easy. awesome. ask. shop. discover. at your local xfinity store today. ♪ tom: this morning, risk very on. ofd down $30 on the 30th january. tesla less parabolic this morning. steve eisman on tesla costs shorting. it is a nightmare for passengers of the diamond princess. ships.ay on the cathay pacific has to take 122 days of unpaid leave. new hampshire is not iowa. results coming tuesday night, according to kevin cirilli. talk about rip up the script, bad form as the president avoids the gentlelady's handshake. bloomberg "surveillance" from new york. i don't know how to translate the state of the union and tina fordham was brilliant on how fraction it is. -- fractured it is. francine: we need to understand that for the 2020 election. stocks rallying, bonds sleeping. there is a hope there is a breakthrough for the coronavirus and there is a bit of optimism from the latest corporate announcement. tom: the vice president applauding. right now with your full report, she did not rip up her script. viviana: we begin with the state of the union, donald trump using it to address and praise what he called the great american comeback, likely a preview of his reelection campaign. withight was filled partisan tension as he big nor nancy pelosi's outstretched hand -- ignored nancy pelosi's outstretched hands and ms. pelosi tearing up her copy of the remarks. the impeachment trial is expected to end in an acquittal. a big victory for pete buttigie g. disappointing for joe biden. bernie sanders was a close second. mr. biden finishing fourth behind elizabeth warren. test for-- the next the democrats is tuesday in new hampshire. hong kong will quarantine people arriving from mainland china, including hong kong residents and visitors. the numbers keep rising, the death toll approaching 500. more than 24,000 cases confirmed. saudi arabia wants opec and its allies to cut oil production but that has run into an oil -- roadblock from russia. they are assessing the coronavirus and russians -- saudi sees cuts as a way to push back. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. tom: right to the data check as we get to stephen engle and steve eisman. 240.utures up a weaker oil with a 49 print. let me look at the second screen. yield,year yield, higher up three basis points. we had a pretty animated conversation with david bloom and there seems to be more central banks willing to act if the coronavirus demands. your areags in the seem to be much stronger -- euro area seem to be stronger. european stocks gaining 1.1%. tom: stephen engle in hong kong is kind enough to join us. i just mentioned cathay pacific with unpaid leave after june. -- out to june. a delicate question -- in china, hong kong, macau, is there a social safety net for people going on unpaid leave? stephen: not really. it is a free market, especially in hong kong, and we are seeing the rival airlines having trouble. it is part of the broader chinese group which has had that problems -- debt problems, all exacerbated by the seven months of protests. both have suffered. cathay pacific, this is another dagger for the company who is taking some heat from the chinese government and the executive team resigned, supporting people's right to protest. the convoluted answer to your question, we are seeing lots of quest -- pressure on lots of companies. company the parent makes most of your iphones and it is just north of hubei province where wuhan is. they will quarantine their workers for two weeks. you might not get your new iphone 11 on demand as quickly as you want because this is another case of a company being proactive and careful. francine: talk about the isolation. do we understand the secondary effect? are supplies being able to arrive? should we worry about edison -- medicine and the whole logistics? stephen: that is what we are hearing. testing kits are in short supply hospital -- short supply. hospital workers who are not overworked are in short supply and medicine is in short supply. people are being quarantined and cannot move. according toe chinese statistics are being surveilled for possible infection. it is a massive endeavor and here in hong kong, there is a shortage of facemasks and hand sanitizer and other things. tom: thank you for the hourly reports from hong kong. i am going to rip up the script because i have had emails about tesla and steve eisman. we will get right to it. steve eisman is that newberger berman, a senior portfolio manager. that does not describe his acclaim on the street looking at a holistic moment and acting upon it. let me cut to the chase -- are you still short ciesla? steve: i covered a while ago -- tesla? steve: i covered it a while ago. it has certain dynamic growth aspects. tom: do you have an auto industry view of looking at a more holistic problem and acting on it through individual securities? do you look at the global auto business like g.m. and mary barra, do you have a holistic auto call that you can act upon? steve: not a holistic auto call. we own g.m. it is dramatically different than it was. it is really a truck company with an option on autonomous driving. that is the only stock i have a view on. tom: it is not that it is a parabolic chart, but a company of this size, extraordinary. how do you explain that? the line is retailed in big. why on the parabolic move? .teve: i do not have a why sometimes things cannot be explained that well and if you are short you have to walk away because there is no glory in losing money. francine: talk about the difference between g.m. and tesla. steve: tesla is a dream about conquering electronic equals, which i don't think is -- vehicles, which i don't think is right. i think other companies will come out with electronic equals and that will be -- vehicles and it will be profitable. g.m. is reality on the ground. it used to be a poorly run company with a terrible balance sheet and terrible products. today it has a good balance sheet and good management and is no longer in europe. companyally a truck that also sells suv's very profitably. it has a real division called crews -- cruise, which is an option. francine: it will be tesla with autonomous driving. the two with autonomous driving will be google and g.m. down, wevirus movement had a tehran movement down. to those who are not as fans the has steve eisman -- fancy as steve eisman, what is your market recommendation? steve: the most important driver of the market now is the last year or so, re-money. -- free money. the role of the central bank seems to have metastasized from smoothing out the cycle to making sure the stock market goes up. why central banks think it is their job to make stock markets go up i am not sure, but that is what they think. tom: there is a wall of money out there. how do people watching participate knowing that chairman powell could take away the dream with one state? steve: that will not happen. chairman powell and the fed are heroin pushers. they are certainly not pulling the drug away in an election year so you have a year of free money. francine: where is the biggest bubble? yet a realn't see bubble. call me in a year and we will see where things are, but i do not see an enormous bubble anywhere now. you can argue things are somewhat expensive in certain areas but there is a difference between that and a bubble. francine: i want to go back to my chart. there is a huge rise in tesla but a huge risk that it is in a bubble looking for a correction. steve: that is one stock it will not drive -- one stock. it will not drive world markets alone. tom: one more question, it is like going on. -- going long. if you love shorting tesla at a certain price, you have got to love shorting tesla at $900. how do you set the reestablishment of a short in a stock you do not believe in? steve: people care about deliveries, profitability, margins. you will have to see some deterioration. tom: you have to see the fundamentals on tesla before you short? steve: i will have to wait and watch. francine: what do you do with gold? steve: i have no opinion on gold. i am an atheist on gold. you can ask me any day, any time. tom: do you like the new tiffany pop-up store? steve: i am definitely not going towards the tiffany pop-up store. it is dangerous. new iceman avoids the tiffany store. avoids the new tiffany store. francine: pete buttigieg maintained a lead. this is bloomberg. ♪ ♪ "surveillance." as you all know, the administration has a cabinet officer, the secretary of the department of the interior sequestered away while everyone is in the room for the state of the union for washington. at bloomberg, we do the opposite. be atk one lonely soul to the state of the union, jack fitzpatrick. he was up on the right of the president, looking at supreme court justices, assembled leadership. what was the body language like in the room and the energy? jack: that started out quiet because the president focused so much on the economy and some basic statements about how strong the economy has been that were tough to boo. it turned when he got into legislation and when he said, i will protect social security and medicare. there were boos from democrat. it got more and more negative as he got into immigration. a number of democrats cheered a protester who was one of the parkland parents who yelled out about gun violence when the president mentioned second amendment. it started out quiet but got very negative midway through. i will ask a kevin cirilli question. jack fitzpatrick, how does this suburban voters that kevin says are so important, suburban republicans, how do you think they digested this acrimony? jack: there definitely was a lot of acrimony to digest. it ended with speaker pelosi tearing up the copy of the speech that she had. that may be one of the more memorable moments just because it was a memorable image that you have burned into your memory. that would be probably the standout moment for a suburban voter looking for a return to normalcy, if they are considering voting for a democrat rather than president trump. tom: jack fitzpatrick, thank you so much. run the video again of the speaker ripping up the script. this she got from steve eisman when he got the script for the movie "the big short." what was it like? steve: it was weird. we read it and realized, this is really going to happen in our lives will completely change. tom: really frightening. should we worry about this? you are the grizzled pro. you have enjoyed losing money on tesla and other races as well. should -- places as well. should we focus on the politics or block it out? steve: i tried to block it out as much as possible because the most important thing is free money, the biggest driver of the market, and everything else is noise. francine: how do you look at the u.s. elections? are there opportunities to make money? steve: you are putting me on dangerous ground these days. francine: i can do it from london. steve: i am with the consensus. i am not making a political judgment. if trump wins, the market goes up anyone else, who knows -- , anyone else, who knows. francine: when do you start believing in the polls? steve: in what sense? francine: they are all over the place. conventions,the september. tom: the whole idea is when you look at the market in free money , what happens when it ends? your basic premise is it ever will end -- never will end? steve: i did not see net -- say never, but for it to end we need inflation. what the fed and central banks are missing is their free money policy is causing disinflation and they keep doing it thinking it will cause inflation. tom: i have to go to the money question right now, talking about the death of the boom bust cycle. as we come down to zero bound, the boom bust cycle gets drizzle down and away. is that right? steve: probably as long as money stays easy. someday it will end and it will end badly. this is what we call the debt super cycle, and it will end badly one day. the problem is that day could be five years from now. tom: we will come back, steve eisman with newberger berman. coming up, special coverage tuesday, we believe results tuesday night. i am kidding. new hampshire will nail it. this is bloomberg. ♪ ♪ "surveillance," stay with us for the entire day. equities, bonds, currencies, commodities, futures of 28, dow -- up 28, dow futures up. francine: pmi's suggesting better footing than a lot of economists thought. currencies are filtering through european stocks. stocks rally, bonds slipping. a bit of optimism from the latest corporate announcement. tom: we just heard from steve eisman of newberger berman, his enthusiasm on general motors. we will get a full report, mary barra trotting out all sorts of good ideas. we will speak to their chief executive officer, to look forward to the free cash flows of gm. next tuesday, new hampshire. this is bloomberg. ♪ to thee look back previous outbreak, the sars in 2003, and h1n1 swine, we see that usually the decline in traffic lasts five to seven weeks, and then there is a recovery in the following 10 to 15 weeks. aviation justlock because there is something in it is really not a specific fact. i don't know about it. for them to do what they did with the chinese cabin crew, whoever goes into china cannot go anywhere else for the next 14 days, they don't realize the operation impact it would create on an airline. tom: we know that our viewers and listeners are really interested in the aviation business. with us, steve eisman of newberger berman. delta from $10 a share to $60 a share. what is it in the airline, is it something analyzable or do you just avoid it? steve: i don't do anything in airlines. i don't pay attention. tom: is it a real business? steve: it is a real business with high fixed costs and it is volatile. give us an update on something that is maybe the operatives it -- opposite with ample free cash flow. we see apple and amazon doing so well. how do you play these nationstate technology companies? steve: you own them until the regulatory world goes after them in a hard way. lineis it at the revenue where their revenue and potential revenue seems just so outside that you could have a comfort in owning them? steve: they are oligopolies so the pressure you have in other sectors, you do not have. francine: what about retail? , macy's anything closing a lot of the stores. steve: we do almost nothing in retail these days. francine: what do you do that is changed in the last six months? i am trying to figure out where you are seeing opportunities or what you are worrying about. steve: the biggest opportunities are on the long side, and you can be selectively short individual companies where the fundamentals are deteriorating, but you have to be selective. tom: within the market -- i want to come back to the central bank view you started -- stated, low rates forever -- steve roach would say this is the definition of the third pillar, asset inflicted by the fed. is it a bubble characteristic? -- 1999og is back to 99 and 2000. steve: i don't think the markets are high enough for it to be a bubble. it is just something to worry about. if the markets can go like this for the next year or two, it will be bubble like and maybe the fed will start to worry and raise rates. until then, the path of least resistance is probably up. tom: steve eisman of newberger berman is with us. viviana: high drama at the state of the union address last night, the president turning his back on nancy pelosi's outstretched hand as he reached the dais. ms. pelosi ripped up a copy of the speech as he concluded his remarks. the president describes economic gains under his leadership. to a little-known mayor of a small indiana town, pete buttigieg is claiming victory in iowa, maintaining his lead. bernie a close second. joe biden finishing a disappointing fourth. next up for the democrats, the new hampshire primary on tuesday. to the coronavirus, hong kong appears to be bowing to pressure to do something and will quarantine people arriving from mainland china, including residence and visitors. they are demanding the government feel the border with hong kong. a blow to tom keene and other long-suffering fans of the new york that's. -- new york mets. not going to buy the team. league recordt a of $2.6 billion. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. eisman start the rumor, to buy the mets. us we willis with talk to somebody who understands the mechanism of the election. howdemocratic party, damaged are they after that fiasco in iowa? john: they looked really bruised after iowa. talkingnt three years about election security and integrity, and they showed when they are charged to administer an election in a small state, they were not able to count heads in a gymnasium. tom: what did you learn about liberal centrist democratic politics? mr. biden had a difficult night. john: joe biden definitely had a tough night. probably he comes away from iowa with the worst narrative, but we are seeing progressives in the party he were extremely excited about candidates like bernie sanders and elizabeth warren, but the man who stole the day was an underrated centrist and buttigieg. -- pete francine: let's go back to the fact that this is terrible for the democrats. will voters remember this? john: that is a great question. i don't think they do. i think the president will message on this throughout the campaign. run annnot build -- election, how do you expect them to run the country? remember when the iowa democratic party screwed up their caucuses? i guess i have to vote for trump. no one thinks like that so ultimately this does not matter. francine: when will the party get less divided, given what we saw in iowa? john: i don't know the answer. it depends on who the nominee is and how battered the other candidates feel, how angry they feel in how the primary plays out. rallyingee democrats and coming together under the unity of the -- of defeating the president, or you could see that unity crumble. tom: what is the governance to the convention? i have been hearing from kevin cirilli and others that the structure of the convention is so original they may not be able to get through a convention to a final constructive outcome. is that a tangible risk? john: i think a brokered convention is a real possibility and creates real risks in terms of unity within the party. there are old traditions within the democratic party, and some of the new reforms that were enacted created the situation. tom: is new hampshire different than iowa? john: in a variety of ways. it can be undermined by having two top-tier candidates in neighboring states, but ultimately what we get out of new hampshire is a different narrative, unless pete to judge -- pete to judge -- pete buttigieg wins. tom: who are you following? which candidate will you monitor in their actions as they raise intensely to new hampshire? john: absolutely joe biden. he faces a death knell for his campaign -- nail for his campaign if he is not able to win in new hampshire. if he comes in fourth in new hampshire and things are not foring good in nevada, primariesin -- four in for a candidate to have success, it is difficult for biden spin that with him as the winner. francine: come november, what will people vote on? can the virus change anything? john: i don't think the virus will change much, barring some dramatic change worldwide there will be two types of voters. there will be ones focused on the economy, and a lot of them will be voting for the president. inequality inists the success of this economy, and not everyone is looking at their check book and cheering on the stock market. a group of people voting on the economy will vote against the president. health-care costs are soaring, despite the president's rhetoric in the speech, and that is affecting american families. people want change and if the president is not able to deliver that, voters will be looking for an alternative. francine: john hudak, thank you so much. you should be watching out for today, the argentine and -- argentine finance minister. at the vatican, they will discuss the credit line. we will get results from credit -- general motors, and the adp jobs report from january and trade balance, more on those shortly. this is bloomberg. ♪ "surveillance," francine lacqua ed queen .ictoria street, tom keene with us, steve eisman, the state of the union, also talking about industry groups. later onave that out our digital view. iceman on the banks. you are long gm. how do you not be long fortress dimon? you have got to be long jp morgan, right? steve: the most important dynamic in u.s. banks is technology is having a massive role. jp morgan is spending in excess of $10 billion a year intact and it is hurting the midsized -- in tech so it is hurting the midsized banks. i really want to dive into the european view. madame lagarde has her challenges at the ecb. we have the u.k. banks, the disaster at credit suisse, and all of continental banking. strategically, could you play a short on european banking? steve: i think you could be selective. i am short a few banks in europe , some banks in scandinavian countries because of narrowing margin. i am short standard chartered and hsbc. tom: why? steve: i think hong kong is in a recession and those banks are most closely linked to hong kong, punto. -- period. francine: is that because of the virus? steve: i have no idea what will happen with the virus, but hong kong is in a recession. do you look at some of the swiss banks? they have negative interest rates. their model is being questioned. will they be taken out? steve: taken out i whom? -- by whom? francine: is there of consolidation phase? steve: the regulatory environment, we keep talking about cross-border deals, and the regulatory environment is not facilitated to deal with that. tom: deutsche bank is the most pressing and there is a book coming out on deutsche bank. what you do with a short where you have been successful and in play with a short? standard chartered at 1600 and, from -- if you are successful in that short, how do you stay in the short week to week? steve: i don't trade short. i have fundamental short. deutsche bank i had short for a long time. i covered it last year. it got down to such a level lowerit would not go unless it got to zero. standard chartered, you can stay short because the credit is about to deteriorate because of hong kong. for expansive growth on the pacific rim. i am looking at standard chartered four times the value of deutsche bank. fundamentalhe ratios as part of short analysis? steve: absolutely. tom: give us an example. steve: people value banks on tangible book value. r.o.e. toas a 10% trade 10 times book value and deutsche bank does not make money. becauset very squishy things get a little bit better if you go to .3. so unless you have a thesis a bank go to zero, and in free money a bank of that size going to zero is probably impossible. francine: what will happen to deutsche bank? steve: they are trying to right size the ship. it started very difficult because they had to cut costs and reduce balance sheet -- reduce the balance sheet. the shrinking process is very painful. .3 times tangible book, people will take a flyer. the best thing to do is stay away. francine: it has been a few days since brexit happened in theory and we do not know what the future relationship is. are you taking positions on the back of that? onve: i have a small short the world bank of scotland because it has profitability pressures. tom: merck spinning off units, are targetingthey 40% margins. how do you respond to the ceo crew that goes scale, scale, scale? they are breaking things apart or rolling them together. how do you respond to that? steve: in which industry? tom: in all of them. steve: and the banking industry because of the role of technology, there is tremendous benefit to scale. other sectors like the industrial sector, you get to a certain scale and the economy has to get to scale. it depends on which sector. tom: looking at industrials, they are at a lower multiple but it appears those multiples are way over anything historically that we know. what do you do with an industrial sector? steve: it is difficult to find real long investments. i don't have compelling revenue, and some of them like 3m have environmental liabilities which are potentially dangerous. tom: 3m has been lagging. or they a short candidate, is it so big and so owned that you cannot short it? do you short it or walk away from it? steve: 3m i think for now is a short. the fundamentals are impaired for the moment. markets are difficult. the wild card for gm is the p fast liability that may take -- pfas liability that will take years to unfold but will be very large. francine: steve eisman at newberger berman. we are getting news on the coronavirus. we will keep up to date on the impact it has on the market. later today, the european commission economy and financial affairs commissioner will be on with guy johnson on "the european close." this is bloomberg. ♪ ♪ viviana: you are watching bloomberg "surveillance." pace withs keeping some of its biggest wall street rivals in the fourth quarter, posting a 63% jump in fixed income trading revenue after a rebound in foreign exchange. they are paring back because of the impact of negative rates. disney is suggesting it can challenge right -- netflix. soaring to almost 29 million this month, but that success is not coming cheap. the quarterly profit is falling because they are spending more for movies and tv shows. apple's main production partner is cutting back on production because of the coronavirus. the chairman saying he does not expect a sales increase above 2%, well below estimates. ford ended 2019 with quarterly losses. the earnings slump is partly blamed on the rollout -- botched rollout of its signature suv, the explorer. that is your bloomberg business flash. francine: a lot of the focus this wednesday -- this thursday -- no, this wednesday, futures in the u.s. are up on hopes there is a virus treatment. bonds are falling. there will be focus on hong kong quarantine. president set for an acquittal, with the democrats second-guessing his strategies. this is bloomberg. ♪ [ fast-paced drumming ] [ fast-paced drumming ] that's why xfinity mobile lets you design your own data. you can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. all with millions of secure wifi hotspots and the best lte everywhere else. it's a different kind of wireless network, designed to save you money. switch and save up to $400 a year on your wireless bill. and save even more when you say "bring my own phone" into your voice remote. that's simple, easy, awesome. click, call or visit a store today. president trump: since my elections, u.s. stock markets have soared, 70% adding more than $12 trillion to our nation's wealth. >> president trump sells the economy in his state of the union, the great american comeback, with partisan tensions running high. a bottom for risk assets? the risk of infection for the coronavirus is slowing and potential treatments give hope to the market, while some investors go all in. and turbo tesla is almost the most valuable car company in the world. we speak to ross capital, who has a sell rating on the stock. welcome to "bloomberg daybreak" on this wednesday, february 5. i'm alix steele. in the markets, you're recovering from the best day for the s&p yesterday since august, and you are seeing some followthrough buying. futures up by .6%. the question is, how many of these are new positions or repositioning, and what will the stops be if we have any sort of negative headlines? euro dollar down d

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