Performing sectors investors search for safety following the attack seeking safe haven assets like gold and yen. Hitting record highs on the first trading day of the year. Good morning and welcome to street signs. Our top story today, the pentagon confirmed irans top leader Qassim Soleimani was killed he was the head of the quds force. The generals death marks an escalation in tensions between tehran and washington following the u. S. Attacbeing attacked at embassy. We are seeing brent up to 68. 44 you can see about 3. 3 wti, 63 now up equal amounts about 3 . Looking at some Major Oil Companies as well. You can see a lot of those are positioned in the uk you can see bp Royal Dutch Shell up about 3 . On the flip side, weve got travel Companies Trading deeply in negative territory. France air down. Higher oil price not a good thing for the Airline Industry lets talk a little more about the politics and ramifications here lets get out to our correspondent who is in l. A. Today. Talk us more through the ramifications of what the u. S. Did manage to achieve in the last 24 hours. Clearly soleimani was a key figure not just for iran but the area as a whole and had his hand in many different countries. No doubt about it, this was the targeted assassination of the mastermind of irans Foreign Policy leader, the head of the quds force, the elite paramilitary arm this was the man who was behind hezbollahs actions as well as in south america and europe and what we saw in 2010 and 2011 with u. S. Troops in iraq and really the backing and training. This man definitely has american blood on his hands that was on the mind of the Trump Administration in this move this was an administration you know said there was a red line they said if a u. S. Serviceman had been killed and we know there was the move earlier this week no doubt played a major re role to go after soleimani this is a man that could have been targeted many times it was thought to be a bridge too far but then the Trump Administration decided to ratchet it up. Officials speaking to me and actually really taking it to the mattresses, if you will, in terms of really pushing the dialogue and the limits of u. S. Foreign policy in the region what we have to think about next is what the retaliatory measures will be on irans part it is not a question of if but a matter of when they will retaliate . Are they going to be more targeted and look and focus on the persian gulf and the straight of hormuz are we talking about mining the sea, targeting tankers or focusing on Oil Infrastructure we are not just talking about the vul ner blts of the saudi aramco, we brought you live those images the destruction was quite intense. Very much targeted at the facility but also in the south of iraq. Several Major InternationalOil Companies operating in the last several years despite of all the violence to the south will those become a target. If that were to happen, you have to take a step back. There are a lot of questions about why he decided to take it this far, this fast. We are in an election cycle. He wanted to look less like jimmy carter and more like ronald reagan. Folks that seemed to think we are on the wailing of the war. Watching this region through the u. S. Politics. This is a president playing to a base that elected him on the idea he wasnt going to draw the base into more wars. The idea that he would put thousands of troops into saudi arabia for oil supplies to keep that Oil Price Lower the bigger question of whether or not he would ever see United States go headtohead with iran neither side would want that thank you for spelling that out. The potential issues that could come out of the killing. Lets get into more detail joining us on the phone. The deputy head of the middle east and senior policy fellow at the council. Thank you for joining us can you spell out how significant a deal the developments are overnight and how disstabilizing you are expecting it to be from the region already we are looking to hear from the cleric. Saying hes calling for the rearming they have said that they want to fight to the very end. Talk us through some of the ramifications on the region as a whole. Amid the Pressure Campaign on iran what we are seeing is that the Trump Administration essentially through a hand grenade into an extreme tense situation in the middle east. Weve gone from Covert Military operations, Cyber Attacks to open and boastful assassination of one of irans top figures hes not just a general but part of the Iranian State he had extremely powerful links across the middle east, iraq, syria. All areas where clearly the United States has assets, interests and has essentially, i think this move has exposed every american boot on the ground to a possible retaliatory attack this is why we have seen the u. S. Now call on its citizens in iraq to leave immediately because i think what we are going to see is at least a greatly heightened risk of iranian attack but remember, iran and the u. S. Are almost neighbors when it comes to sharing forces on the ground across the middle east. I think we have to buckle up for a very tense period to come. As you said, i think a very interesting question mark here is why has the United States now decided after so many years of surveilling to take this very provocative steps now. We are already in a very tense moment in u. S. And iran situations irans responses could come across the spectrum of measures whether that is on the middle east or the Nuclear Program or through covert actions like Cyber Attacks on the u. S. Territory. In the moves overnight, you are getting responses from all sides. I want to bring you the responses going into the race. Elizabeth warren tweeted saying. Soleimani was responsible for the death of americans but this wreckless move increases the likelihood of more death reading between the lines, it sounds like you agree with her and that the decision overnight is some what wreckless and not well thought through well look, i think the u. S. Now has to accept full responsibility to the retaliations that are to come. Again, we are dealing with an actor like iran that has proven to be very capable at executing kinetic responses across the field. The seizure of tankers and the downing of the drone we are not just dealing with a third rate country responsible the capacity of the u. S. Dwarfs that of iran this president promises that he would get out of the u. S. War in the middle east. It seems now with iran, he has increased the likelihood of military complex directly or indirectly of the military territory in the Election Year we are going about to see a sea change the approach has been one of pulling out of the region. Iran was an exception. That so far has been via sanctions rather than direct military attacks what does this tell you about the approach to the middle east in this Election Year and potentially if he does get reelected for another term it is extremely difficult to predict the Trump Administrations policies, frankly. There is a lot of people left scratching their head at what the sanctions campaign against iran has actually achieved we have seen not so much iran holding back the region and the Nuclear Program expanding. With this assassination, we are likely to see iran up the ante this will force the u. S. To reengage much more expensively with the middle east im nod so sure that even irans regional rival and enemies like saudi arabia or israel want to welcome a conflict in the region because they know what happens in iran doesnt just stick to iran, it will affect all of them for example, remember that irans close ally in lebanon, hezbollah has the rules of engagement with israel israel is not in a position given to what has happened domestically to want to open pandoras box with the lebanese hezbollah. I think we are in a tricky and frankly unpredictable few months ahead. The chances of a diplomatic breakthrough are close to zero i wouldnt rule it out completely but the attempt to bring them together. Weve now had a real turning point with this assassination. What we are likely to see is the u. S. Being forced by this move to reengage more heavily on the military side in the region. Absolutely. Well leave it there thank you for your views the senior policy fellow of the deputy head of the middle east, north africa, foreign relations. We talked about the reaction of oil overnight with brent about 3 higher now. With me in the studio is the associate director for oil from s p plot lets talk about the energy reaction today back in the summer when we had the attacks, we saw similar move in brent actually about 10 on the day but it fizzled out fairly quickly and risk didnt stay embedded is this situation similar or can we actually see lasting premiums staying here you have to look at the fundamentals of the oil market right now. Those are slightly changing. The market was well supplied when the attacks happened. Aramco should be the market. That was the case. Again, you look at the fundamentals here. Where is the loss of supply right now . There isnt any . You just had that opec meeting where they pledged to cut. Your point is that it is a razor thin balance compared to what we had in the summer. If the cuts continue and we get tighter balances, that creates a greater vulnerability to the oil market to the risk. If the oil market tightens, you have to remember the oil market is well supplied there is also u. S. Shale and the way it can quickly react to the market especially higher prices. There is those factors there is another factor as well what if iran goes down the route of the strikes they can go down the route of a being taing the commercial ship lanes. If theydo that, surely the ris premium of what we saw today, the big spike has to stay embedded if you are an investor, there is not a risk like this that will happen i think a lot of people in the market like to use the word risk premium if you translate the fundamentals youve got to be careful about extrapolating and how long that will last. The lasting dispute. It is an Election Year remember trumps voters. Dont want gasoline pump prices going up too high. There is that factor in the market it is tricky to extrapolate from what is happening now to where it might happen but certainly the stakes have been raised compared to further attacks on infrastructure if there is military conflict, where do you see oil headed we havent even broken through the mark we saw last summer. You have norway, guyana the key question around u. S. Shale. A lot of people have come back from the bullish views about how much shale can come on if prices start increasing, again u. S. Shale comes back on i still think even with the geopolitical risk, you still want some kind of ceiling provided by u. S. Oil production and the floor by opec remember, if it would get this bad, there are places where there are loss of supply since you mentioned shale various times, the numbers does show there has been a fall, a drop in the rigs in the u. S. Do you expect that to continue in 2020 . Is it purely a tucks of where that is trading . Yes, its a function of where it is trading. Us companies needs to see oil prices above 50 a barrel tore those returns. That is key to picking those up in interest. Investment has dried up. People are investing in shale and across the oil market. All right, we bare in mind in light of the move we are seeing today. That was the associate director at s p oil platts money is flooding into some of the safe haven currencies. You can see the yen is about half a point firmer. Gold is up 1. 1 and u. S. Treasury as well well be back and talk about where to go mkeinarts i tell trp and which car i want and truecar shows the range of prices people in my area actually paid for the same car so i know if im getting a great price. This is how car buying was always meant to be. This is truecar. What are you doing back there, junior . Since were obviously lost, im rescheduling my Xfinity Customer Service appointment. Ah, relax. I got this. Which gps are you using anyway . A Little Something called instinct. Been using it for years. Yeah, thats what im afraid of. He knows exactly where were going. My whole body is a compass. Oh boy. The my account app makes todays Xfinity Customer Service simple, easy, awesome. Not my thing. Signs. Lets take a look at how broader european markets are reacting. You can see a lot of red almost all of the stoxx 600 is red in trading as many different sectors coming to terms with the news overnight that the u. S. Have killed a very senior iraqi general and that is going to have iranian general. That should have a lot of repercussions in the region and on oil lets talk about the individual places in the uk, there are a lot of Oil Sensitive stocks and companies. Those are the names underperforming. Those are the reasons why the ftse 100 is down the dax is down. Some of the names there, luf tanza down this morning on the spike of oil that is a key cost input for the airlines one of the reasons why the air lanes are trading heavy. Cac is down almost 0. 6 . Ftse mib down about 1. 1 youll see the picture is not so pretty across the board. Almost every single sector is trading red. We had a positive start across all of the sectors we are seeing the exact inverse. Auto is around 1. 8 . Weve been very focused on that. Travel and leisure have been down the only major green spot this morning is oil and gas jumping in line with the reaction we are seeing in brent and crude. Oil and gas up about 0. 8 . We had a good start to the trading day yesterday. Not looking like a good start to the day. Dow opening almost 300 points lower, s p down about 35 and nasdaq down around 112 here to talk more about this, the cio of waiverton investment. The questions i will ask you today are a little different than i would have yesterday given this risk being forced to be factored into the market. When i was having these conversations with other analysts, the question i was asking is where could the tail risk come from in 2020 most people have the view of the trade war, we are getting the signing. No one sees the real escalation there. Perhaps we are confronting a real war this time around and should investors be more aware of that . Obviously, when you get a situation like this, they are very difficult to predict. Weve had the issue in bagd of the iranian sponsored malitia. This appears to be a response to that whether that leads to further escalation, some of it will depend on the iranian response to this. This will be an escalation it is a contestant in the middl east this is the sort of the environment we get a risk of it tempers optimism we are coming on the years of a strong stock market, s p up 30 . Can that performance be considered the estimate was helped by the Federal Reserve doing a you turn on the monetary policy. We went into last year carrying on whether they would cut rates. Youvehad this activity in the repo market. That is interpreted as another boost to liquidity the latter is still helpful for the market last year, actually Earnings Growth was flat in the u. S. And down globally. All of that performance came from a rewriting of the market the fact thar that may hold back is that valuation. That is not extreme by the standards of say, 1999 but it is a lot higher than it was that is one of the things that tempers our encruise yachl tempers are stretched in the u. S. To your point, about rerating we saw those things go higher. We didnt see Earnings Growth. Going back 12 months, i was sitting here having a conversation with analysts we ended up getting zero in the u. S. Im having the same conversations this year and similarly expecting single digit growth in earnings per share what are you seeing. Does it matter anymore i think it does matter. The share price would be expected and adds up to the index. It does matter the issue for us is that the market is skeptical for the forecast for the Earnings Growth as you said, you did have a negative Earnings Growth you had earnings falling if we look at how that would be again in 2020, you have a real hit. What you need is the positive Earnings Growth of some time if we get plus five, that probably supports the market for us, that will make the market go significantly higher from here. Im not sure that is enough to generate thebig return we are neutral equities globally we do see the sector and market. We have to be a little caution primarily because of the valuations what about the fixed income weve had a sneaky sell off in december not many people are paying attention to that. Fixed income is very challenged it is not going to be a big spike given what policymakers will give what they want we dont have at the moment the inflationary pressures if the oil price stays higher. The inflation and the oil price tend to be positively correlated that could be another challenge for fixed income i think that is challenged still something to have but very much to have as a Health Rather than something you think will generate much of a return. Makes sense in this environment. Bill, i just want to bring to the audience some data we are getting out of the uk. We should be getting the pmi numbers, the construction numbers, so when i have them i will bring them to you this is the reaction in the pound, down half a percentage point. Just to bring you the numbers. The construction pmi in the uk come in at 44. 4 versus the november print of 45. 3 this is less than the bull of 45. 9 going into it this is another disappointing data out of the uk this is a small part of the uk economy to begin with. It doesnt paint a very