The rates are held, but swedishs central bank is negative territory. Past the wall for us to go to zero. Kailey the house takes a historic vote to impeach president trump. Article two is adopted. Its an incredibly divided time in congress. Kailey as 2019 comes to a close, investors share a perspective on the global economy. The growth trend is firmly in place for 2020. You do have too much money piled into a lot of higheryielding assets. What were doing is definitely borrowing from the future. We will probably end badly. Kailey its all straight ahead on bloomberg best. Hello and welcome, this is bloomberg best. Lets start with a day by day look at the top headlines. Investors began the week in a risk on mood thanks to a dose of positive news on the trade front. The u. S. And china reaching the must anticipated phase one of the trade deal. 2 sides expected to release the agreement in early january. It involves a reduction in tariffs in exchange for more chinese purchases of American Farm goods, as well as commitments on intellectual property, forced technology transfers, and currency markets. Is this phase one considered a success . What is really interesting is we see a lot of people who you may call doves who had been hoping for something more substantive with the tariffs and trade war we have seen. The china hawks are quiet right now, they are happy because a lot of tariffs will remain in place. We have a deal that imparts the trade deal where it is, but there are still a lot of tariffs in place. Just when they thought it was stabilize, Boris Johnson wants to create a new brexit deal. The leader is looking for a stronger mandate. Sterling has lost most of its appreciation. We are back. No deal is back on the table, because Boris Johnson doesnt want to delay. The door has been opened again a tiny bit to a no deal brexit. Boris johnson is showing off that despite his win, we will not see a new reimagined software boris, we will see him draw a hard bargain. He will not be willing to entertain an extension. Dont think it can be dragged out. We follow and give that, we put it to say that i can. If we dont have a deal by the end of next year, we are going out anyway. Its him trying to set up his negotiating tactic before the talks start in february, so the arrangement is beyond the end of next year. More details are emerging how china would increase imports from the u. S. By as much as 200 billion dollars under the phase one trade deal announced last week. Its an ambitious target. What do we know about how far china is prepared to go . What steps will it take to meet that target . It is an ambitious target. China bought about 24 billion of agricultural goods. That has been a big focus for president trump. Supposedly china pledged to get to 50 billion. Thats a big jump. We are seeing details. One thing is ethanol. China wants to clean up the environment. It will increase the amount of ethanol it adds to gasoline. That is one thing china will buy more of. Another thing, 10 billion of goods routed through hong kong into china from the u. S. It looks like the Chinese Government is looking at ways that reroute that. The bank of japan has left Monetary Policy unchanged as a government stimulus package is helping to brighten outlets. Cutting rates into negative territory remains an option, but the boj is paying attention to the side effect on banks. They kept the key policy doves the same rate. The key is negative. 1. You have the yield curve control, the 10 year jgb anchored at zero. A range at that level. Right now, a big shift. The majority of economists think in the bojs next move will not be adding stimulus, it will be taking it away in 2020. The boe decision, no surprise. The key Interest Rate at. 3 . The vote is 72. They see inflation slowing. And they see the bond purchases unchanged. They do say it is too early to judge the impact of the election and trade war. No big surprise. This was pretty much as expected. The key will be to underline uncertainty about the outlook for the economy, even though we have the clear conservative victory in the election. Even though we know now brexit is going to happen, there is uncertainty about what kind of brexit it is. The most important one probably shortterm is we dont know what the policies of this government are going to be, the fiscal policies, in particular. Boris johnson in parliament announces the agenda for the u. K. After it separates from the European Union. Its not the british people want brexit down, though they do, they want to move politics on and move the country on. His main message was hes going to get his Brexit Agreement through parliament, move on to the trade talks, which he wants to conclude by the end of 2020, and he really wants us not to be saying brexit in 2020. He wants us to focus on health care primarily, but also crime, infrastructure, all of those things important to getting his new voters in the midlands, the north, labor voters that moved to the tories, to keep them on side for the next election. The u. S. House of representatives voted to impeach donald trump for the abuse of power and obstruction of justice in congress. This makes him only the third u. S. President to be sanctioned by lawmakers. The articles of impeachment will be turned over to the senate for a trial, where his acquittal in the republican controlled is all but assured. In terms of the next step, nancy pelosi telling reporters she might actually wait a couple of days to send the articles of impeachment to the senate, therefore delaying the process of the trial. Mitch mcconnell wants to have the trial scheduled by the end of the week. More than 3 dozen democrats who won district trump carried virtually all voted to impeach the president , with the exception of a handful. Republicans feeling unified heading into this trial. This is an incredibly divided time in congress. President trump is one step closer to his new nafta agreement. One day after voting to impeach him, the house passed of the u. S. Mexicocanada free trade agreement. If it were not expecting a free senate vote, what is next for the deal . It will be going on to the senate in january, when lawmakers return from the christmas holiday. Theres really no danger. It passed the house by an overwhelming majority with support from both parties. Democrats in the senate and republicans, as well, have said they are ready to take it on. The problem is they will be occupied with the impeachment trial. Once they begin that, they cannot consider any other issues or legislation. They will be focused on that. It probably will not be until late january, even february, before it gets passed. Theres really no danger of any backsliding. This has a full support of the white house and both parties. The head of the Financial Conduct Authority is to succeed mark carney at the uks central bank. He spent three decades at the boe, what do we know about how Andrew Bailey will navigate postbrexit transition . The first thing, Monetary Policy, he is a bit of a blank check. He hasnt been on the Monetary Policy committee, we dont know his views about Monetary Policy. What we do know is bailey has a lot of experience at the Regulatory Bank of england. That will be interesting as the u. K. Transitions to some form of brexit deal, some new relationship with the European Union. Thats probably ahead of the other candidates, the knowledge of the technical side that has put him ahead of the candidates. Kailey still ahead as we review the week on bloomberg best, an exclusive conversation with robert kaplan. Three legendary Global Investors ascribed the economic risk they see approaching. More of the weeks top business headlines. Hong kongs leader gets a vote of confidence from chinas president. Carrie lam has not really responded in a meaningful way, it continues to have the full support of beijing. Kailey this is bloomberg. Kailey this is bloomberg best. Im kailey leinz. Lets continue our global tour of the weeks top stories in business, finance, and global politics. The eu lawmakers approved a groundbreaking set of financial regulations. The European Union has agreed on a landmark finance regulation. It will define what is green and what is not. We could have implications for investors, all kinds of funds. What exactly is green taxonimy . It sounds very nerdy and technical, but can be significant. The European Union agreed to set out the framework to regulate sustainable. They really want to set out the foundations to really define what is green and what is not. They want to do this in a way to set a Global Benchmark for investment and the sustainable space. You have to look at the political context. The European Commission is determined to get ahead with the deal, get it done in 100 days. It would be a key pillar to define what is Green Investment in europe. Ended half a decade of negative rates, raising the benchmark to zero. Whats passable for us right now is zero. This episode is over. It is a different conversation if you imagine a world where rates stay negative for a long period of time so the perception will be negative rates are natural in the way things are supposed to be. Now we dont have to deal with that. Its also comfortable to get to zero. Chinas economy showed signs of stabilizing and regaining growth momentum in a november, adding to the good news for the nations outlook after a phase one trade deal with the u. S. Was reached last week. Retail sales coming in better than expected. Whats the take away . Significantly stronger on both fronts than the forecast bank had expected retail sales looking strong at 8 growth in november. Industrial production, 6. 2 versus 5 . What officials are saying is it some measures they enacted earlier in the year, in terms of tax cuts and support for parts of the economy have started to play through. Not to say theres not multiple pressures on of the economy, whether it is diverging inflation or exports that remain weak. Australias midyear budget update shows economic realities starting to bear down on government finances. Ministers lowered the forecast Budget Surplus over 12 months through next june and the following three fiscal years on reduced expectations of tax revenues over that period. Is it time to consider may be walking back on the idea of having the budget back in the black and following the example of japan and new zealand and doing what the rba wants to see, thats fiscal stimulus . No. We have delivered a significant income tax relief, we provided a significant stimulus to the economy. If you look at our Economic Growth performance in the first three quarters of 2019, they have been stronger than the last two quarters. We are heading in the right direction. Our outlook is positive. We are impacted by whats happening in other parts of the world. President xi jinping says hong kong has faced what he calls its grimest and most complicated situation since returning to chinese rule in 1997. He urged hong kong to come back to the right path as he hosted chief executive carrie lam in beijing. This is after more than six months of unrest in the city. Carrie lam has historically low Approval Ratings in hong kong. The city last month had a record turnout, 71 of the populace of the citizens who could vote voted for largely overwhelmingly candidates. It shows the populist is still behind the movement, and carrie lam has not really responded in a meaningful way, but continues to have the full support of beijing. North korea has successfully conducted a crucial test at a longrange long site, and boosted Nuclear Deterrent capabilities. What is this latest test implying . The latest announcement was an important, or significant test conducted on a satellite launching test site. We dont know exactly what sort of a test it was. By announcing it constantly and through its propaganda channel, it shows north korea is trying to apply more pressure on the u. S. In the price of north korea denuclearizing. What was offered in hanoi and vietnam was not enough and has given the u. S. Until the year end to bring forth another alternative. The operation to inject cash into the Financial System over the year and was oversubscribed again. Thats a signal participants are still hungry through the start of 2020. Its not a huge surprise. We saw it be the case the last couple of times. Right now, we have done three operations for the end of the year. 25 billion apiece. Those were all oversubscribed. The worrying thing was if it was under subscribed. That would be sending a signal that may be their Balance Sheets were getting a little bit full and the nonprimary dealers were having problems with their Balance Sheet and accommodating liquidity the fed was pumping into the system. They are not, it will be interesting to watch. We have a series of operations that will span the end of the year. It will be interesting to see how they continue to go and whether or not there will be more size adjustments. The top prosecutor in malaysia is ready to ratchet up a criminal case against Goldman Sachs in the one mdb scandal. Goldman is accused of ignoring red flags while billions were looted from the the state investment fund. Two or three rounds of negotiations, but they have not gone anywhere. Bloomberg learned goldman is in talks to settle another investigation. They could pay about 2 billion. They are having separate channels of communications with malaysia, trying to resolve the issue with them. They would like to have a global sediment that includes them and malaysia. The sooner they can get it done, the better it is. There is still a gap between what they are willing to pay malaysia and what they want. Theres not a lot of clarity on when that will be resolved. The Indian Government has banned public protests and shut down communications and the internet in some areas. Anger at the religiousbased citizenship law rages on. What is the latest . Yesterday was a big day. We saw protests all over india. Most were peaceful. There were incidents of violence that broke out. Maybe one or two deaths from gunshot wounds. Pretty much chaotic and bringing a sense of whats next in the movement. It erupted due to the citizenship laws. There are still things that can inflame religious tensions in the month ahead, including the construction of a hindu temple on a site raised decades ago where a mosque once stood. Kailey youre watching bloomberg best. Im kailey leinz. At the feds final meeting of 2019, Jerome Powell signaled the central bank wants to hold rates steady through 2020, no cuts, no hikes. Robert kaplan spoke with Kathleen Hays in new york this week. He sees no reason for rate cuts to move next year, and it would take a major shift in outlook to do otherwise. Theres to be a material outlook, for better or worse. I am baked into my outlook. We will have weak manufacturing next year, sluggish Global Growth, sluggish business investment. There would have to be some Material Change for the outlook. Which way are the risks in your mind . It is balanced. Im hoping for stabilization in trade. The moves the fed has made have been helpful. The risks are balanced. If you see the risks tilting toward the upside and the need for a rate hike, would it be hard to do in an Election Year . Would you consider it illadvised, something the fed would avoid . It will not be a factor in my thinking. Divorce Political Considerations and influences. We will try and make the best decision we can in light of the circumstances, use our best judgment. You repeated this morning, you expect to percent growth. 3. 5 unemployment. It sounds like you dont accept the passage of the phase i trade deal to have much impact on the economy, certainly not out of the gate . Thats probably correct. Ive been hoping there would be trade stabilization generally. This is part of that. I think the trade issues with china are going to go on for years, not months, but years. Most businesses are adjusted to that. These issues of intellectual property, technology transfer, and the deeper issues with china will be going on for a long time. Phase one is better than not having phase one, but it does not mean there will not be trade uncertainty. Kailey coming up on bloomberg best, more of the weeks top business stories. And another setback for boeing 737 max. Plus, forwardlooking conversations in front of the worlds most respected investors. Cutting around to embracing risk again. At least for the moment. Its hard to have any constructive view on the markets risk and the economy. Kailey this is bloomberg. Welcome back to bloomberg best. 2019 is almost in the books and this week some of wall streets most influential investors joined bloomberg discussion. David hunt is c. E. O. , a firm that overseas over a trillion dollars in assets. In an exclusive interview, he said he thinks the long term investors should be cautious going into 2020. You could kind of hear the collective sigh of relief, i would say, over the last weeks events. You had more certainty that were on a path to a reasonable brexit. You had the new phase one trade talks with china. You had the new nafta and a very calming statement from the fed but, like many statements that seem true on the surface this one has a lot of dangers because for the most part none of these tensions are going away any time soon. Were just starting on the brexit journey on how the new trade deals will work out. Were just starting on the negotiations with china about the real issues. Were just starting on a year of probably increased volatility as we head into the election here so while certainly a little collective sigh of relief is understandable, i think that people will rapidly in 2020 see that the uncertainty has not gone away at all. You sound cautious. We are cautious and i think were particularly cautious when you take a longer te