♪ >> good morning and welcome to

daybreak euro. israel pushes against a call by france, u.k. in germany for a cease-fire calling it a prize for terrorism and tensions rise in the red sea which threatened global trade. fed officials push back against aggressive rate cuts saying it is too early to declare victory over inflation. china's iphone bana ramps up, staff are banned from bringing foreign devices into the office. let's get a quick check on trade, lots to process, then holiday volume. seeing futures higher but is this the start of a santa rally? if you are seeing a pullback in terms of global trade, it feels

like autopilot. ftse 100 futures are virtually unchanged but a defensive bid is really shown by the green you are seeing. it is normal to see it that at the top of geopolitical trade and when you have the last two trading days of the year. it's a similar dynamic with bond trade after the fed speak that we got after last week, 441 on the trade down three basis points and here is what is important. you will see dollar weakness come down as a result. the tailwind that creates for currencies is interesting given that people are talking about this idea that europe will be the first domino to fall in case of recession.

you are seeing euro-dollar at 109. this idea that it is higher, a few months ago we were talking about euro-dollar parity. is this dislocation? we talked about this last week and the consensus seemed to be that the trade going into the end of the quarter, end-of-the-year is sell the dollar first, think about everything else later and that's what you're seeing. a similar story with cable. 126 on the rate and it's important to keep in mind that when we talk about the u.k. economy they're dealing with pushback so how much is the boe weighing on the currency? is that something markets are position form? looking at brent crude higher by 6/10 of 1% and geopolitical tension on the contract. let's get to those conditions and get an update.

israel pushing back on calls for a cease-fire after france, u.k. and germany prevent the war. are they marching to their own playbook? >> we are seeing countries demanding a cease-fire after president biden told israel you're risking international support with the conduct of the war and reports of attacks in gaza. the death toll is reaching 19,000 in less than three months. there is no indication that israel is planning to change the course of the war.

their aim is to eliminate hamas and they don't say what that means. completely destroying tunnels, taking out commanders? there are no specific signs of what it means in gaza, yet we saw that the israeli army uncovered the biggest tunnel in gaza and that is near the northern border with israel. kriti: it's interesting what we are seeing take place in terms of how many regional powers are part of the story. you're seeing pushback from the u.s. about how this is being handled and we're getting news that three hostages were killed by israeli soldiers. they were holding white flags when it happened. what is the mood in israel after that? >> israel is reeling under the

weight of october 7 but there were some protests on friday and over the weekend. there were many demands for netanyahu and his cabinet to try to rescue hostages. this kind of just shows there is division not over the aim of the war which is to eliminate hamas and threat to israel, but division inside israel over conduct in the war. kriti: it all comes in the background of tensions in the red sea. tell us more about the attacks in the impact? >> last week we saw the escalation in the red sea. they attacked three container ships in two days forcing major

shipping companies to reroute voyages around the suez canal. this may add an additional seven to 10 days to the overall trip meaning more delays and expensive trips. the main concern is egypt's suez canal authorities are monitoring the situation but since november 19 there have been 55 ships rerouted away from the canal. that is out of almost 2000 ships. that number is small now but that does not mean that the number could not go higher if the attacks persist. the u.s. is in talks to form a coalition with their allies to stop these attacks. there is another risk. how iran will react to such a coalition and whether that would

raise tension and escalation if that happens. kriti: all over that story, thank you for bringing us crucial insight on the israel hamas war. as she was talking about, and want to expand on that. she talked about the red sea attacks and i want to put that into context for our audience so bear with me. the canal she's talking about is responsible for 12% of trade between europe and asia. a lot of that is oil revenues from the mediterranean sea. when you come through the other end of the canal it is the red sea that you hit. there are two u.s. navy vessels in the region dealing with a commercial threat. the suez canal talked about hitting record revenue, 9.4

billion dollars, the most they've seen in the history of the canal. if you see commercial attacks that will have major repercussions not just on egypt but on global trade. if you're talking about tanker rates and insurance costs, insurance costs are rising by 30% and if you add on the distance the alternative route goes all the way around africa, that adds 40% to the distance. this is an inflationary dynamic. if we don't see a return to progress or the normal shipping routes that is the concern to keep in mind. at the same time you will see it and increase in a rates as we talk about increased travel costs but there is plenty more around the world. april hong is standing by with

the story and is monitoring the readthrough in oil trade through the global story. i want to ask you what you're seeing in terms of digesting the inflationary story? >> we are seeing the impact of attacks showing up in asia shipping stocks. the chinese, japanese, south korean stocks are running higher and because of the disruption to shipping we will see higher freight rates, seen as good for stock prices. listings in japan and hong kong are surging but it's not just this sector, were keeping a close watch on apple suppliers after china expanded an iphone ban. employees of stay back firms are

told don't bring iphones to work. this is a move by beijing to wean off american technology. were not just watching the impact of geopolitics, it's also monetary policy so let's look at the cross asset picture ahead of the bank of japan decision tomorrow. consensus is no change but there are expectations we could get forward guidance, that will set the stage for normalization next year. we are seeing the nikkei and hang seng leading losses. it is cautious em, fx under pressure. it's about the fed and investors are paring back slightly bets about the aggressive rate cuts next year. kriti: a lot to digest. boj likely to throw a wrench

into what we see. thank you for the crucial report. april talked about divergence in fed speak and what is priced in four markets. two fed officials have pushback on the market expectations. fed president john williams told cnbc it is too early to think about lowering borrowing costs. atlanta fed president rafael bostic expects to rate cuts in 2024, but not until the third quarter. austin goolsby adding to the voices cautioning that u.s. inflation is above target. you're seeing that through markets but listen. >> 20 23 looks like a substantial reduction in inflation without increase in unemployment. that is the golden path but we are above the target.

we've got to get inflation down until we are convinced we are on the path to that. it is an overstatement to count the chickens. kriti: that is the austin goolsby take but there is division in terms of fomc in the past. i want to get insight from strategist mark cranfield from singapore. good morning. we're hearing about this decision in the market is falling on deaf ears. talk about the trade, what is the market getting right and wrong? mark: morning. there's been pushback by fed speakers and no doubt there will be more because the fed would like to avoid cutting rates in the first quarter of next year

and stand further into next year when they see lord kato. big picture is global traders have further from the chairman of the reserve. he outweighs everybody. powell was more dovish than expected. he set the tone which is why were having a goldilocks reaction where yields came down and equities are doing well in terms of u.s. markets. there is little to suggest that will change unless jerome powell pushes back on the things that he said. traders understand hierarchy. the fed sits at the top and at the top of the fed is the chairman so when you hear a message you take those instructions clearly and act accordingly. kriti: we are getting the boj

tomorrow, seeing perhaps not a dovish narrative but not hawkish. factor in geopolitics, the fact that we are talking about a conflict that was initially a wider escalation now impacting trade. i'm having trade war deja vu. is that on the radar? mark: you have to take it into the wider context of where things sit in a whole range of circumstances. bear in mind you're talking about something where supply of oil in the u.s. is rising so quickly and dampening demand for oil in the middle east as well. it's a new factor.

it's keeping things subdued and it's not likely to change. supplies in the u.s. will rise next year so no matter what happens they may try to cut supply to keep prices up. investors can already see. you've got a dislocation between earlier this year, central bankers were talking hawkish lee because i fixation's were higher , that is change completely. inflation peaked in most places and in several circumstances expectations are that they will ease. people can see reasons why inflation is going to go down. bloomberg expects core inflation in the u.s. to tumble next year, that is what jerome powell saw, that's why they were so dovish last week.

look at the european central bank, tried to be defensive but pmi data was not that good and there will be more suggestions that europeans have it wrong in terms of outlook. kriti: we'll see how that translates to ethics. mark cranfield, we thank you. coming up china ramping up its iphone crackdown. stick with us, this is bloomberg. ♪

kriti: welcome back to daybreak europe in london. chinese agencies have ordered staff to stop bringing iphones to work. apple asian suppliers are in the

red and i want to get details from debbie wu. we knew the ban existed. marley ramping it up? debbie: more state firms across china tell employees not to bring iphones and foreign devices to work. they request employees to carry yellow aprons only, a step up from the hit in september in which a small number of agencies and state firms in beijing told employees to not bring foreign devices into work. so the order was dispensed across eight provinces including coastal provinces, and up to

northern provinces. and what happens is for a couple of years now the china has been trying to reduce its reliance on or and technologies so bloomberg news reported china is also telling employees to replace their work pc within two years so this is consistent directive from beijing to try to reduce reliance on foreign technology and foster domestic tech supply chain. kriti: talk us through the readthrough into apple. china is a big market for apple but apple is not the biggest smartphone maker in china. what are the repercussions for the most valued company in the

world by market cap? debbie: the region that includes china accounts for 1/5 of apples total sales. on the other hand state firms and government agencies employ tens of millions of people on the mainland. so let's say the bulk of state firm employees and government staff cannot bring foreign devices into work, that could affect apples sales in china significantly. kriti: certainly something we will watch closely. we thank you so much for joining us. plenty more ahead, stick with us. this is bloomberg. ♪

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kriti: welcome back to bloomberg daybreak: europe. halfway through jamie dimon's incentive jp morgan's succession plan is unclear. bloomberg's su keenan has the details. su: jamie dimon is a fiery ceo not going anywhere anytime soon. he is famous for avoiding questions about retirement and made it clear in 2009 he thought it was in his best interest to avoid such questions which he referred to as drama. that has not stop speculation about who the front runners to succeed him might be. a management shuffle put to co-heads of the bank division in the spotlight as the bank gave jamie dimon a bonus to stay on for five more years. marian and jennifer are top

contenders although insiders say neither is the front runner, nor have they vied for the job. insiders are predicting a reshuffling to give contenders more experience to run the company. jpmorgan chase is more profitable than ever under jamie dimon who has been there for 18 years. stock is up 23% and hit a high for the year on friday. su keenan new york, bloomberg. kriti: sticking with those banks stricter capital requirements may get in the way of climate finance. j.p. morgan and goldman sachs say the increase in capital they would need to set aside would make projects harder to fund. the rules are part of the endgame regulations created after the crisis of 2008. sticking with the east coast a powerful storm works its way up the east coast.

south carolina seeing nine inches of rain as new york, new jersey and connecticut brace for heavy wind. concerns over flooding and power failures mount. the storm in the second day in recent days to hit the east coast. pay attention to the storm. what does that mean for oil demand in commodities? hurricanes hitting new york a couple of years ago you did see this into the markets. there was this idea that you saw that storms don't have as much of an effect in the winter because not many people do road trips in the winter. some are driving season is more crucial but we should pay attention to the commodity market which is why this chart is important. bullish bets on oil are dropping even though you see geopolitical tensions and were talking about

an inflationary readthrough in the red sea attacks. even domestically like the storms, look at what the hedge funds are doing. long positions hitting a record low. do people want access to volatility that we know has burned several traders around the world? that is the question. how much is fundamental versus a positioning story. i'll leave you about as we go into the back half of the show. u.k. and italy agreed to fund migrant repatriation to africa. m(jennifer)atriation to africa. tthe reason why golo customers have such long term success is because we focus on real foods in the right balance so you get the results you want. when i tell people how easy it was for me to lose weight on golo, they don't believe me. they don't believe i can eat real food and lose this much weight. the release supplement makes losing weight easy. release sets you up for successful weight loss because it supports your blood sugar levels between meals so you aren't hungry or fatigued.

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all of the work that we're doing, all over the world, and looks at the most effective ways, to get resources to them, to get services to them. the idea that we have saved five million people's lives, it's overwhelming. it's everything. kriti: good morning, welcome back to "bloomberg daybreak:

europe." i'm kriti gupta in london. israel pushes back against a joint called by france, the and germany for a sustainable ceasefire, as israel calls it a price for terrorism. tensions rise in the red sea as increased attacks on shipping threatened global trade. fed officials push back against bets on aggressive rate cuts next year, austan goolsbee saying it is too early to declare victory over inflation. china's iphone ban ramps up, more staff set to be barred from bringing foreign mobile devices into the office. a lot to digest when we talk about the macro and micro. mark critz -- markets are getting interesting but we are talking about thin trading volume. you are seeing futures pullback when you look at the european continent, but u.s. futures with real regional divergence. some of this will be a function

of the geopolitical tensions around the world. some of this is also going to be rebalancing. we will dive into that one when it comes to the equity market. there is more clear read through looking at two-year yields down two basis points. a lot of this is this idea that the markets are pricing rate cuts as we talk about geopolitical tensions and the change in tone from not just chair powell, but some of his peers at the fomc are. the markets are rolling with it the last two trading weeks of the year. weakness in the dollar will create tailwind for the euro and the pound. euro-dollar at 1.0 nine, cable hovering at 1.27 it is right on the cusp anyway. eller weakness having a bigger effect in brent crude, higher by 0.7% even though issues in the red sea are not creating a tailwind for oil as some expected, how much of that is a function of the holiday trade?

in the meantime, u.k. and italy have agreed to jointly finance migratory -- migrant repatriation's in africa after prime ministers sunak and meloni met in rome. joining me is alice andra -- alessandra, illegal immigration is a common issue for both of these leaders, what does this deal accomplish? >> good morning. it's kind of a p.r. basically act on the part of both leaders. this is yet another deal which we are not clear if it is going to work. you are financing people to move away. we are not clear on how that will work. they look good together, they are trying to do something that worries many voters in europe. with elections coming up next year.

sunak wants to show that he is not alone in his concern about migrants. that he is a hardliner on this point and is joining people like meloni on this issue. in any case, a way to show they are doing something. we just saw there are some very nice images of them. there was also the albanian prime minister because meloni is trying to put migrants in albania. part of an overall strategy the two leaders have to show that they will be tough on migration. kriti: you said it right there, two leaders, very tough stances on migration. two leaders of two major countries in europe. of those names, the name elon musk doesn't necessarily fit, yet the billionaire was arguably the star attraction of the event. what did he have to say? >> again, another publicity

stunt on the part of meloni. this was a small right wing conference. musk looked really nice. they discussed demographics. musk is apparently very concerned about density. he said european nations are losing their identity, and if they don't have children, their identity will get lost. whatever that means. they are concerned and he discussed ai. there was a lot on the table but he outright said during the meeting that he is worried europeans aren't having enough children. they need to repopulate their countries, particularly italy which has very low demographics. the old story about italians having lots of kids in the movies no longer the case.

that was one of the main points of discussion at this meeting. it was a big win for meloni, her little right-wing is becoming international. kriti: i am shocked that the movies are steering us wrong. alessandra joining us from rome. thank you for that crucial context on what is a crucial deal before the end of the year. i want to stick with the european story and bring in the russia element. vladimir putin says he has no intention of attacking nato countries. he says moscow has no territorial claims with the bloc's members. after president biden said russia would not stop at ukraine. the white house is trying to convince u.s. lawmakers to really $61 billion in military aid to kyiv. held up in a to speed republicans over border security.

-- dispute with republicans over border security. hungary vetoed a 60 billion dollar aid package last week. zsoltan is joining us from brussels. is there any chance the eu will release the money for ukraine soon? >> yes, i am joining from budapest. basically there is a fair chance. as you said, orban vetoed last week at a crucial eu summit financial aid to ukraine of 50 billion euros they were going to sign off on. orban was the only vote out. due to the workings of the decision-making, one country can veto really important topic. that's exactly what orban did. what he said earlier before the summit was that he is ready to compromise on financial aid. that sets the prospect that

potentially eu leaders come back to this in january and have a deal. if orban plays hardball again, then eu's senior policymakers have said they discussed potentially doing a deal of 26 as opposed to 27 member states, essentially circumventing orban on this crucial topic. kriti: does he still come as the troublemaker in this scenario? talk to us about viktor orban's next steps. >> very much. what this eu summit has highlighted is that orban is going to put aside the cora -- decorum, where eu states go along with other member states in important decisions great he shows he is willing to do that. down the line, it underscored

how transactional hungary's membership has become in the eu and that's a problem because for important decisions, they will need orban's support. down the line, it doesn't look pretty for the eu and its workings. kriti: something we will keep a close eye on, as this affects the fiscal budget for a lot of european countries. zoltan joining us from budapest. another story we are monitoring out of hong kong. security is tight as former media mogul jimmy lai faces charges in the city's highest profile national security case. he is facing trial for act of self-expression that were once openly permitted in the former british colony. the u.k. foreign secretary has described his prosecution as politically motivated. the united states has called on

hong kong to release the 76-year-old. rebecca choong wilkins has the update. >> we are here outside of west cowloon magistrate's court on day one of a landmark trial. jimmy lai facing national security and sedition charges. it is significant for the city because critics have said the proceedings undermine the rule of law that has for so long underpinned the success of hong kong as a financial center. the other thing that will be scrutinized is the condition of lai himself. having very few public images made available. in the last one, he appeared to be thinner. his own family had warned about some health conditions he is suffering. at third big element is geopolitics, and whether or not this becomes a flashpoint, particularly for u.s. relationships with china, and of the u.k., too.

we already had a statement from the u.s. calling for the immediate release of jimmy lai. kriti: bloomberg's asia government correspondent rebecca choong wilkins joining us from hong kong with that update. another top story this morning. the financial times saying the ryanair's ceo poised to secure 100 million euros as a bonus if the shares keep rising. friday, the budget airline shares reached a weekly record after gaining more than 50% this year. if it goes ahead, michael o'leary's bonus will be among the biggest in european corporate history. speaking of historical records, it's been a year in terms of inflation, job cuts, job little tensions and war. what does that mean for equities in 2023? what does that set up for 2024? our stocks guru tim trade could joins us from bloomberg intelligence. >> there have been a couple of

big surprises as we have looked back. one has been performance. yes, we know that the u.s. market has gone crazy, and it seems like europe has lagged. importantly, if you look at the core european markets, say the euro stoxx 50, which are only in europe, the big 50 is up 19%. that's not far from the u.s. it's u.k. and for swiss market's that have pulled the stoxx 600 down. if you look underneath with earnings, this chart on the screen is really interesting. european earnings have been better than the u.s. over the course of the past two years and one year. i think that would take a lot of people by surprise. importantly, as we look into 2024, that earnings picture starts to turn. revisions are negative in europe looking at three q -- 3q results, and we think we will

see the same with fourth-quarter results in january-february. u.s. revisions are starting to tick up. that's a picture that has been good for europe that we will probably see a fade on. kriti: investors will cover their ears and shake their head no. let's talk about valuations versus margins, what matters more in terms of diving into the european sector? >> valuation is crucial. it has caused the majority of swings in european and global markets over 2023. re-think moore is set going into 2024. the rally the past six weeks have all been about a central bank, and interest-rate pivot, and inflection. a lot of that jews have been played out at this point. -- jjuice has been played out at

this point. to get to valuation 13 times higher than the market we would have to see a significant further drop in interest rates, which we are simply not looking for over the next 6-9 months. kriti: valuations and margins matter. and geopolitical tensions matter as well. one metric will usually pull out ahead of the others. in this scenario, i want to call it an even split between the three. and the currency outlook matters as well. tim craighead, nor shortage of things for him to cover. he is from bloomberg intelligence. giving us his 2024 look ahead. the currency outlook is a crucial part of it. we will get the take. erik nelson from wells fargo joins us with how you play this market that seems plagued with dollar weakness. this is bloomberg. ♪

kriti: welcome back to "daybreak: europe". we are talking a lot about geopolitical tensions. we are coming off of central bank-palooza, we have the boj tomorrow. one of the most striking pieces of this market trade going into the last quarter, just of the rebalancing flows you are seeing, is the dollar weakness story that has created a tailwind for european currencies raid 1.09 on euro-dollar, 1.26 on the pound, even creating a tailwind in the japanese yen which didn't need that tailwind to begin with. what's interesting is how much of that is sustainable, how much of that is a disconnect? who better to ask than erik nelson, macro strategist at wells fargo, joining me bright and early. talk to us about this dislocation. euro-dollar at 1.09, cable at

1.26, yet the economic conversation seems to be when is europe going to break? erik: this is the challenge as we head into 2024. the european and chinese growth outlook still looks pretty bleak. in the u.s., these are still chugging along at a decent pace. we have seen a fair bit of the soft landing trade take place, maybe there is a little legs left in it. the challenge is the european and chinese growth outlook not getting better. the u.s. growth outlook, if it gets bad, you suddenly have global recession on your hands and don't want to be short the dollar. if it stays solid and we see u.s. continue to chug along, you still want to be long the dollar. the dollar wins in both scenarios heading into 2024 even though we have a couple of weeks left in this short dollar trade. kriti: when you look at the positioning story, you are looking at a lot of the quote-on quote smart money, you are seeing a lot of positioning to your point being on the long

dollar, yet we are seeing dollar weakness the last couple of days. who is driving the short dollar trade? erik: there is still positioning for long dollars, there is probably some unwinds going on trade yo see that in the futures data. it is hard to be short when a long dollar is moving against you. maybe it is short covering on the yen as we look to the rate cut trade, but the challenge is beyond short covering of some of these foreign currencies, it is not that we are seeing a huge shift of asset managers toward a short dollars. that's going to be a headwind for further dollar weakness. kriti: the narrative i heard in the last seven days around central bank stories was sell the dollar first, think about the rest later. is this the most obvious dislocation going into 2024? do we essentially see reversal of january? erik: it is one of those trades

that could up and the consensus early in 2024. it's a question of when do we see the u.s. narrative start to shift? right now we're in this goldilocks phase, we're still worried about the bears though as we get into 2024. u.s. growth, whether it goes in a bad a direction or stays in a good direction, both of those can cause dollar strength so we are still cautious on extrapolating that weakness. kriti: at one point does dollar strength become a problem? my favorite fun fact is january 2025 we have to deal with the debt ceiling conversation again, the very first conversation for a potential new president to deal with. that led to a lot of selling on the bond market on the long end which had a ripple effect into the dollar. in the face of the fiscal deficit concerns that seem to be pressuring exposure to the united states now, do you still want that long dollar trade?

erik: this is a long-term story. one to keep in mind as we get into 2025 his the dollar is pretty overvalued. it's not the most important factor for the u.s., but we still rely a fair amount on foreign investors to finance the deficit. as we think beyond what is potentially global recession next year into a recovery, we could see concerns about the twin deficit come back, and that could drive dollar weakness on the back half of 2024 on the other side of recession. kriti: we have done a little tour of the world. we have done europe and the united states, the stock about asia and europe. boj tomorrow, dollar-yen 142. 15. give us your yen call. erik: we are looking for men near-term gains, looking for it to go down to 135 the next couple of months which is a decent move. of course, these things can move quickly especially in a situation of carry

unwinds. it's not going be driven as much by the boj as by the fed and rate cuts, and we see those coming to fruition over the next six months. the boj will continue to move gradually, we're expecting no policy change from them tomorrow, and is probably more of a one-off 10 basis point rate hike. this hinges on the carrie unwind, and u.s. rates going down. that will drive yen strength going into 2024. kriti: carry unwind against the dollar, oregon's p.m. ---or against em? is that trade still there? erik: everything starts with dollar-yen, if you are doing that trade you are doing dollar-yen and dollar-mex. dollar-yen is at the center of this unwind. yes, we have seen a 10-point move, but the true carry unwind hasn't happened yet. that still to come in 2024.

kriti:135 on dollar-yen. 20 more ahead -- plenty more ahead. this is bloomberg.

kriti: welcome back to "daybreak: europe." there is a view charts i want to put ahead of our next program on your radar. we talked about the oil story and how you want to position going into 2024. this morning, it european futures are pulling back, but the united states getting that bid. right now a lot of the trade has to do with rebalancing capital flows, a lot of jargon that doesn't matter, but for january 2024 when it comes to exposure to the united states, what

matters is valuation. you are seeing the pe metrics or higher and higher, looking at a pel of almost 22. you dive into a market when you are talking about presidential election, even some fiscal deficit concerns that are lingering, but also dealing with potential global recession on the doorstep? talking about weakness in asia and europe. is the united states still the defensive play? the one hurdle in norway is that valuation story. go around the world and we are talking about inflation not decelerating the way we wanted to, which brings me to the japanese story going into tomorrow. the inflationary story is so important, they welcome inflation, they need inflation. this is the chart that matters tomorrow because the inflation story in japan has held pretty steady. it's been elevated. this is the concern for a lot of investors saying you're inflation story isn't as good as

a thing is you think it is. that is the story we are watching going into tomorrow's boj, specifically when the expectation is they will not change their policy. that comes into the spring. these are the charts that matter as we going to be european open in just a few moments. tom mackenzie will join me alongside mark cudmore. we will talk you through the geopolitics and data we need to know. later today, talking to the ifo president, as the latest climate data is released after 9 a.m. in london. stick with us. this is bloomberg. ♪

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♪ kriti: this is bloomberg markets today in london