Dissatisfaction on the streets. Abigail can the u. S. Continue its expansion in 2020 even if the fed stands fast . Experts examine indicators and offer insight. Fundamentals for the economy are good. There is potential slack out there. There is still a lot of people who could work. Im happy with where policy is at the moment. Abigail it is all straight ahead on bloomberg best. Hello and welcome. Im abigail doolittle. This is bloomberg best, your weekly review of the most important Business News, analysis, and interviews from Bloomberg Television around the world. Lets start with a look at the top headlines. The final week of a volatile year for the Global Economy began with encouraging signals of a return to stability in china. Chinas Economic Performance improved in december for the first time in eight months with early indicators showing production in the worlds secondlargest economy accelerated as domestic demand stabilized and meanwhile, Chinas Central Bank has ordered lenders to adopt this new loan pricing regime for all prices next year. What does the scrapping of the old benchmark mean when it comes to Monetary Policy . Over the longer term, it means a more market led Interest Rate system, which should be more flexible and less of the command economy style we have seen from the pboc in the recent decade. In the shortterm, it might mean a bit of an Interest Rate cut for some borrowers, particularly those with floating rates. That could be a shortterm boost for the economy, as well. Selina fresh data out of china manufacturing pmi beat expectations, a positive sign as the improvement is crucial to stabilize the economy. The second straight month of expansion, 50. 2, what is your key takeaway . Its a good read. It adds to the theme the economy is bottoming out now so a good read for the new export orders index. Rose about 50 for the First Time Since may 2018. Commodities played a factor. There were Higher Oil Prices and steel prices that would have pushed things up overall. So it adds to the idea that sentiment is improving, chinas economy should be maintained until we get to the new Chinese New Year period, and then we will get a handle on how things are traveling into 2020. Vonnie it has been a year of geopolitical volatility and that is now changing on the final trading day. Turmoil ratcheting up in the middle east, dozens of iraqi militiamen and their supporters storming the u. S. Embassy complex in baghdad today, venting their rage over deadly airstrikes against iranian backed forces. What is the administrations response to the protests today . Kevin within the last hour, President Trump tweeting out they are blaming iran for orchestrating that attack against the u. S. Embassy in iraq. In terms of next steps, the president suggesting additional steps will be taken, whether that is another strike or additional sanctions or a combination of both, it is too soon to tell. David we have a date for the signing of the phase one deal. President trump tweeted, i will be signing our very large phase one trade deal with china on january 15. The ceremony will take place at the white house. Highlevel representatives of china will be present and at a later date, i will go to beijing where talks will begin on phase two. It is a good day, good start to the new year for china. Yeah, for sure. The signing of the trade deal is a big positive. It has been a big drag on the chinese economy, and this was the day that xi jinping gave his annual new years speech, in which he said he believes 2020 will be the year china becomes a moderately prosperous society, and its gdp may reach 100 trillion yuan. I dont have great hopes for the phase two trade deal, but it is nice they are signing phase one. Romaine ending on a somewhat high note. From wiretowire, january through today, 35 on the nasdaq, 29 on the s p 500 and 22 on the Dow Jones Industrial average. Vonnie we added 5. 9 trillion in value to u. S. Stocks, the s p 500 in fact. If i talked to you one year ago after the worse december since the Great Depression and told you all the headlines we would have in 2019, and i said where would you see the market, i dont think many people would say we would be near 30 up and have several new highs. We are closing out not just a good month, great year, and great decade, and i think there is room to run for this. The pboc has slashed the required cash reserve ratios for commercial lenders by 50 basis points, unleashing 115 billion into the financial system. Does this give us some signals about the outlook for stimulus from the pboc in 2020 . The key here is how they view the macro prudential risks. They are terrified of the next lehman crisis, and plainly with the amount of credit that has been extended into the chinese economy, it makes sense to worry about that. What we saw last year was initially a belief that the pboc was stimulating and the realization they were just allowing debt to be issued to clean up Balance Sheets. If they really are now confident that they have done enough Balance Sheet repair and they are not running major macro prudential risks, they will stimulate quite a lot because the communist party cannot afford to let growth get below 6 . Everything is up. Everything is up. Basically, if you own something today, it is probably up. All the safe havens are rallying too, and a bid to treasuries, stocks are surging, the money piling into safe havens. Some breaking news on iraq. A u. S. Airstrike near the Baghdad Airport kills the top iranian general. The pentagon says the general was planning attacks on u. S. Diplomats. The significance of this act. Very significant. This is probably the most tense moment and certainly the biggest escalation in relations since the end of the iraq war in 2011, and it is certain to escalate things in the region. Weve heard from iran saying they will retaliate, there will be revenge. Reverberating across Global Markets and in oil, moves of 4 in wti and brent. There are concerns this will escalate quickly, that iran will find ways to retaliate and weve already seen how oil is being used as a weapon in the region. Traders are fearful those kind of things will start again. Jon markets reacting swiftly, sending crude higher and stocks lower. Two extremes. War on the one side and on the other side, an effective deterrence going forward. Where do we come down at the moment . The market are coming down more toward effective deterrence. They are seeing this in the context of what has been a series of iranian aggression and they see this as the u. S. Drawing a line, and all that is reinforcing strong conditioning over the last few years, which is to fade the shock. That is why you see muted reaction in markets. We found out from u. S. Officials the pentagon is deploying 3500 more troops to the middle east. Whenever you send the 82nd airborne anywhere, it is a sign the u. S. Is prepared to take additional action if needed. U. S. Officials domestically are bracing themselves for some kind of retaliatory response from iran, whether that is military or Something Like a cyber attack, we dont know yet. Abigail still ahead as we review the week on bloomberg best, conversations with chicago fed president Charles Evans and cleveland fed president Loretta Mester. Plus, a preview of what 2020 will bring for Central Banks around the world as well as the outlook for emerging markets. Up next, more of the weeks top headlines, the fed continued recall operation as investors kept an anxious eye on liquidity. We have to keep an eye out because we do not know what is outside the gate. Abigail this is bloomberg. Abigail this is bloomberg best. Im abigail doolittle. Lets continue our tour of this weeks top stories with a twist in the saga of former renault and nissan chief executive carlos ghosn. It was the arrest that shocked the financial world. Automotive titan carlos ghosn was put on trial in japan for alleged financial misconduct and misuse of corporate resources, allegations he denies. And now there is a new twist. The former head of nissan and renault has fled to lebanon to escape injustice and political persecution. Carlos ghosn has been under house arrest since april. How on earth did he get out of japan under heavy surveillance . It is a mystery, really. Still, his lawyer today said he has his three passports, so perhaps he escaped from japan using a different name, different passport to get to lebanon, but he was under house arrest since april, very strict terms. A camera was trained on his door at home. He was barely allowed to speak to his wife, so there are questions about how japan let him slip through their fingers. It is quite an embarrassment for japan. Hong kongs financial secretary says the economy is set to contract in the Fourth Quarter as the city reels from six months of social unrest. We have seen the government put in place four rounds of stimulus measures since august. Can we expect the government to do more now . The financial secretary did say in his february budget, he will unveil measures to help businesses, and revive the economy in hong kong, which has been battered the last six months with the ongoing protests, but there are external factors with the trade war between china and the u. S. Not helping the situation. The Fourth Quarter gdp numbers for hong kong will come out in february. Hong kong kicks off 2020 with renewed protests and teargas. Running battles on new years day and into the night after thousands of Peaceful Protesters flooded the streets. Give us an update. Pretty much the same situation we have seen the last six months, only the date has changed. Now 2020 with no end in sight to the dissatisfaction on the streets on the part of the protesters and no change from the government. Not everyone, i must say, are turning to vandalism and violence, but the hardcore did and turned their vengeance on two icons of hong kong. The two hsbc lions are outside the headquarters here at one queens road central. This one, my namesake stephen, and the other one over here. These lions cast in bronze 85 years ago, and they have seen worse, i might say, but they have been painted in red spray paint and black spray paint with chinese graffiti that basically says hsbc has been dyed red by china. There are many people in hong kong that do not support the violence, do not support the vandalism of iconic structures or symbols like this and these but they are frustrated with the inaction from the government. North Korean Leader kim jongun has declared he is no longer bound by his pledge to halt major missile tests and will soon debut a new strategic weapon. President trumps Immediate Reaction was muted, saying he and kim have a good relationship. It doesnt matter what the strategic new weapon is. What is important as of now is kim jongun announced there will be a change in policy. There will be a shift in the stance in terms of upholding his commitment to not test intercontinental ballistic missiles, to not test nuclear bombs. This is the promise President Trump and kim jongun had made in singapore in 2018 when they first met and the promise that donald trump is pressuring kim to keep as well as other u. S. Officials are towards north korea. In terms of talks that show that kim is no longer going to be committed to the promises he made to trump. David euro areas manufacturing downturn deepened in december despite renewed monetary stimulus and easing of trade tensions. Euro area factory gauge came in below 50 for the 11th consecutive month. Not much happy news in europe and particularly germany. Paul the pmi numbers in the eurozone were not great. Germany was the worst affected, but italy and the netherlands had the biggest slump in Manufacturing Activities in six and a half years. Orders were down, job losses were the steepest since 2013, the tail end of the last recession in the eurozone. These numbers, pretty weak. There is a caveat to these. A survey was concluded just after the middle of the month and it may not have captured all the better news coming out on the u. S. China trade war. Similar issue in the u. K. Where we had the worst manufacturing slide in seven years. That did take into account the days after the u. K. Election, which Boris Johnson won with the majority, giving him the chance to move brexit forward. Some of the uncertainty lifted, but there are concerns over what happens next in u. K. David german chancellor Angela Merkel issued a warning on Climate Change in her new years address. She said she will do everything in her power to make sure germany makes a meaningful contribution to address global warming. We have a revival of the rise of her image as the climate chancellor as she put the threat of Climate Change to the center of her news. She said the warming of our planet is real and it is alarming and she pledged to germany she will do every thing in her power to make sure germany makes a contribution to tackling Climate Change. Austrias new government plans to push the boundaries of conventional Economic Energy and tax policies in its bid to reduce Greenhouse Gas emissions. Their pledge is to include a range of measures to put the alpine nation on a path to become climate neutral by 2040. The rise of the greens in political power has been one of the dominant trends we have seen in europe over the last couple of years. Weve seen them support ursula von der leyen, so it is a trend we are seeing. There is this dichotomy developing with the Green Movement on the one side and the populists on the other. It is a conflict that will play out. Vonnie the Federal Reserve wrapping up its repo operations for the year. So far, we are not seeing any Interest Rate spikes or any concerns for investors immediately. We had our third repo operation, fourth, in fact. Does that mean all is well and clear in the treasury market . Michael i feel like the town crier, 10 00 a. M. And all is well, but we have to keep an eye out because we dont know what is outside the gates. Yes, we have had two repo operations and one underway on the end both under subscribed. 15day, people only wanted 8 billion in repos for 15 day and the overnight repo operation, they took 30 billion out of 125 offered. It looks like they see enough liquidity for the time being and if you look at what is happening in the overnight repo rate, nothing, but it does not mean we are all clear yet so we will have to wait and see until we probably get into next monday before we know the issue is over. Vonnie House Speaker nancy pelosi and Senate LeaderMitch Mcconnell are in a standoff over President Trumps impeachment trial. Meantime, trumps personal lawyer Rudy Giuliani is willing to testify at the impeachment trial it seems. Nancy pelosi hasnt even delivered the articles of impeachment to the senate. We were supposed to be further along than this by now, no . There are a few procedural steps before they can send the impeachment articles over. They have to name the impeachment managers and will pass a resolution in the house officializing all of that. We didnt expect them to do that until they got back from their break tuesday, january 2. January 7. It will be interesting to see if it is a strategic moment. It is hard to see what pelosis end goal is, if she ends up delaying that process further, but for now, it seems there is a lot of uncertainty surrounding what her plan is, when she plans to move ahead on this, and what, if anything, she can demand of the senate. Abigail you are watching bloomberg best. Im abigail doolittle. This week saw the calendar flip from 2019 to 2020, and analysts told us how they see the most important issues facing the Global Economy in the year ahead. Lets start with the outlook for emerging markets. Emerging markets are about to embark on another year of Wealth Creation after adding 14 trillion to investor portfolios in the past decade. Developing nation assets will outperform developed peers with asia having the best prospects, this is according to a Bloomberg Survey of 57 Global Investors and traders on their outlook for next year. The outlook, even though we have had a fairly bumpy ride through 2019, is looking rather more optimistic. Certainly it has been a strong end to the year for emerging markets. The risks out there are dominated by the trade talks backdrop, and i think the way the u. S. Election will impinge on that particular dynamic will be significant, and we have the political protests in some parts of the emergingmarket world, most notably latin america and hong kong, so we see how that plays out and if it continues to cause investor worries, but largely netnet the overall picture into 2020 is one of optimism. Central banks are facing a moment of calm and Bloomberg Economics doesnt see the next downturn coming in 2020, with little room for maneuver, Bloomberg Economics expects cuts in emerging markets and a heavier reliance on fiscal policy. What were the dominant narratives for Central Banks in 2019, and are we going to see the same