>> a good morning from bloomberg's new european headquarters in the city of london. i'm manus cranny and these are today's top stories. \. theresa may faces ministers over plans to keep you cables aligned with the e.u.. to asianimbed down stocks sent towards the longest losing streak in two years. and all talk and no action. u.s. president trump will declare jerusalem as israel's capital through the white house warns any actual move could take years.

a very warm welcome to you. "bloomberg daybreak: europe." it is 6:00 a.m. in london. and the bears are showing their angs this morning. copper is taking injuries. dr. copper has gone on holiday. 1843 is your chart if you want to have a look. copper valued by 15% in 2017. is it a shock people want to take money off the table? it is the metal with a phd. it tracks the economy. there is something much more prophetic for 2018. what you are seeing are the stockpiles in shanghai. they are rising for the fifth straight week. if you have such synchronized, robust global growth, would you still be seeing a rise in stockpiles and perhaps not a draw? we have talked about it yesterday to results and roads,

railways, bridges, thomas. -- tunnels. it may abate. fixed asset investment may drop to 12% from 20%. that could have a more prophetic phd.t on the middle of a 1843. how is all of this transferring into the risk radar? metals are down. you have seen the msci asia-pacific come lower this morning, down by 1.18%. so good never seen it in markets. why would you not think some profit, you said yourself? the culprits are from the copper story into the mining index at the bottom of your screen. we are down .7%. that is down for the eighth day in a row. the longest losing streak since 2015. down goes the msci asia-pacific. aussie, robust, synchronized growth or gdp climbed by 2.8%.

it is far ahead of the u.k.. not hit target. hence the reason why we see the aussie dollar go down. traders are pushing further laterial rate hikes into next year. household spending slows amid lofty levels and stagnant wage growth. global issues, said his growth. cable, it is a real tossup for the headline, isn't it? lodging brexit. internal strife. whatever way you want to look at it, this is not a homogenous showing from the front benches of this government in regards to brexit. down sterling goes. the mutiny could be happening in terms of a softer brexit. issue forhe key theresa may. people in the cabinet are not having it. mr. boris johnson and another, twins.

like a salon in the side of theresa may. your show today is set up with guest aplenty. he is with our colleagues. he is talking about emerging markets for this year. stocks would surpass 2007. 7:00 a.m. u.k. time, the u.s. ambassador to china. he joined the team. let's get your first word news p or juliette saly is standing by. juliette. donalde: u.s. president trump will today formally declare jerusalem to be israel's p right he will start the process of moving the american embassy there from tel aviv, and historic shift of policy that could inflame key allies. the announcement could be more symbolic than substandard. the white house warned any actual move could take years. are still subject to peace

talks that have been deviled u.s. presidents for decades. the u.k. prominence are was reportedly the target of islamic militants. according to sky news, police believe the plot plans to detonate a device at downing street to kill theresa may in the chaos. the broadcaster reported andrew parker, director general of mi5, brief cabinet members of the plot. is facing a revolt from inside her over a plan to keep u.k. -- efforts to rescue negotiations faced fresh divisions. leading brexit backers challenge the pie minister days before a key deadline in talks, a split that threatens to undermine hopes of breaking the deadlock. lebanese prime minister will .ttend the meeting

french president emmanuel macron said he noted yesterday cost remain in office after lebanon's governing partner is pledged to stay out of neighboring complex. rex tillerson is also expected to attend the meeting which will include the five permanent members of the security council as well as germany and italy. the u.s. will reportedly to thed lancer bombers korean peninsula today as part of a joint exercise with south a newsccording to company. they will fly the farthest north of any american federer bomber in the 21st century. that prompted pyongyang to warn it had the right to shoot down u.s. strategic warplanes in international airspace. russian athletes will be invited to compete at the 2018 winter olympics, but their anthem will not play. therefore i will not fly. any metals they win will not count towards the country metal

total. the punishment from the international olympic committee follows a three-year investigation into state -sponsored doping leading up to the salty games in 2014. -- sochi games in 2014. the kremlin has threatened to boycott the event. bitcoin has passed $12,000 for the first time amid speculation that the widespread use of futures will help lead to digital currencies being viewed as a legitimate asset class for mainstream investors. the largest cryptocurrency by market value has soared from us than $1000 at the start of the year as optimism climbs for the blockchain technology that is at the heart of bitcoin. the surge has been accompanied by a growing chorus of warnings that it is an asset bubble poised to burst. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top . what a lovely day for asian investors. we are seeing the japan and

nikkei index close lower by 2%. the regional index lower for an eighth consecutive session, the longest losing streak we have seen since august, 2015. stop holding at october 27 lows. the hang seng off by 1.8%. h-shares chairs -- the also tumbled. every stock on the index red. missed theer gdp mark down under today. in terms of stocks we are watching, have a look at samsung, heavy in seoul. down 28%. it has forecast a loss and announced selling shares in order to raise some cash. also falling quite significantly in hong kong on concerns of sales growth, but don't forget, this is a stock that soared more than 200% of our this year. interesting story in regards to what is happening with that potential joint venture in germany. the union saying they have until december 22 to secure the jobs of the workers before it

approves that. manus. juliette, thank you very much. take a look at that corn. let's talk about politics. a little bit like bitcoin, isn't it? theresa may is facing a revolt from inside her cabinet over the land to potentially keep the u.k. regulations aligned with the european union after britain leave the block. efforts to rescue brexit talks from a breakdown earlier this week have promoted fresh divisions in the u.k. cabinet noted brexit secretary david davis has told parliament this move could help unblock talks that broke down over the issue of the irish border. as a guarantee for me, we will not be treating any part of the united kingdom different from any other part. manus: joining us now, the head of asset allocation. welcome to the show. >> thank you very much. it depends who you read, but where we are right now it as

i see it, this cloak and dagger, the smoke and mirrors, regulatory alignment to align the u.k.'s red here to e.u. standards is not regulatory harmonization. this is the point that david davis is trying to get across. debacle, andt this i cannot caveat this enough, a european view written in amsterdam, they show -- christophe: they do not expect a soft way to exit from the u.k., unfortunately for the your community, so we expect something hard at the end or nothing. it will be very difficult to manage in a soft way because if you manage it in a software for u.k., it means we need a decade if not more. we don't have it because as you

know, the u.k. as pressure from the rest of europe to make an agreement in the next two years. it is too complicated. functionally, too costly for the u.k. to get out in two years, so we expect something tough at the end or nothing in terms of brexit. planning for, as you say, a harder tough brexit or nothing. how higher risk is nothing? christophe: it is a possibility, after all. if you consider that the brexit is very costly, economically costly, and socially and politically costly because of a troubled country, you cannot shift away the possibility of a save the order to situation in terms of economic growth and in terms of financial perspective for the u.k. over the long run. manus: the way we try to distill these political headlines into

short sterling and the pound, this is volatility for the pound, short-term volatility. i grant you that. thoughto speculate your -- to extrapolate your thoughts come a hard a tough brexit with a long transition. he was saying this is a trashy currency, spending a lot of time in the spotlight, and you could get a binary outcome and it could improve. as you look at the currency, short the currency, what are you doing to position for those potential outcomes? christophe: unfortunately, for the time being, we are staying away from the u.k. assets. synchronization between the have, in a way, we continental europe. for the u.k., we have a certain deterioration. the boe is tightening its

monetary policy. but also, to try to manage the situation in terms of inflation, so the two zones are decentralized, and things could become worse in the years to come if we are continuing the way we manage this for the brexit. this is why we are not very -- unfortunately, optimistic regarding the trend for the u.k. assets. are muchu obviously more bullish on your perspective. that, as it were, divergence. two roads divergence in a snowy woods. how much more europe are you taking, and where are you looking? 45 billion euros worth of tax cuts from hollande coming to bear on france. christophe: we have a bullishness approach, especially

for the eurozone. everywhere,ing is in every country, in the eurozone. the second thing, european countries are now in thing. things are improving so quickly, but you cannot compare the currency issue and what we had 10 years ago or 20 years ago. so the situation is changing dramatically, and especially in terms of the corporate investment cycle. compared to the rest of the planet, and things are now improving. and france is a good example of that. italy as well. we have thee -- presidential action in the pipeline. anyway, things are improving even in italy. manus: let me just take one closing thought on this european trade.

quantitative easing will continue according to the european central bank. if things run on the trajectory you for me, is there a risk in your model that the european central bank becomes a little bit more hawkish more quickly than we anticipated, and the consequence of that for market? christophe: more hawkish? no. more hawkish in communication? yes, potentially. the exithase for strategy of the qe by the getting of 2019, but what could happen is things are going to improve at the current pace. communication from the ecb, somewhere by next year. communication could change. communication is a tool, a monetary policy tool. it could change something regarding how the ecb is looking

at the economic situation for the eurozone. manus: now i know what janet yellen could do post, go on the communication course and give it to mario. stay with me. we have a lot more to get through for markets. head of asset allocation at what management. a down day for copper. a combination of factors. we will take a look at what is happening in the commodities space. a controversial move. formally trump set to formerl declare to loosen them as israel's capital. will the shift the policy and employment key allies? this is bloomberg. ♪

manus: it's a live shot of singapore. it's just gone to: 19 -- in the afternoon 2:19 in the afternoon

-- 2:19 in the afternoon. ung's what done it? you are seeing the mining and metals companies also come lower. that is taking your msci asia-pacific little bit lower. speaking of copper, it had its worst day in more than two years. this prospect of slower demand in china, dollar gains, and a rise pushed the metals down by three dollars a pound threshold. mark reynolds yield -- mark gran cranfield joins us. the phd of metals. and it isicked off, spreading. it is a little bit like a malware. mark: indeed. what we saw yesterday was people started worrying about the inventories building up in china. that is usually a negative sign. there was a survey about people

talking about infrastructure spending that will be reduced quite a bit to what we have seen this year. that would affect the traditional industries that we see that he is copper, and now also, there is a very good gadfly which highlights a technical point about processing fees. there has been a lack of agreement on those pure that is undermining copper as well. all those things come together. copper has turned very negative, starting to affect other metals and other parts of the commodity complex. markets. manus: just how big a re-rating could be? we talked about the fixed assets investment in china at the start of the show. our survey suggest that will come from 20% to around 12%. this is part of the linchpin of the metals and minors sustaining this year. how big a shift is that possible spending? mark: that is huge if you're talking about an economy the size of china.

you are really talking about very large numbers indeed. the example that have been quoted is that network alliance, they have stopped doing work on those. you can imagine how will network would be. if you're not working on those, talking about thousands of people employed, talking about very big infrastructure projects indeed. they take that out of the equation, that not only has an impact on china, but on the rest of the world as well. demand for copper and related metals could really fall substantially next year. manus: thank you very much, mark cranfield in hong kong. dornay is with me this morning. it is fascinating, isn't it? bc copper, and suddenly it is the most read story on the bloomberg. it is shifting dramatically. if i relate this to global growth, it has been a story that has moved markets this year. view onthe oecd's

global growth. is that what is going to drive the commodity complex? is that what is going to give succor to markets? christophe: it is quite traumatic way. because we have, for the first time since probably 15 years, a synchronization between all the economy is on the planet. u.k.,, the u.s., the really well. just a few minutes ago, and asia as well. and then we have a visibility better than ever since a decade at least for the global economic growth. and in that way, i would say that we have an improvement in the visibility of growth for next year, which is of course a stimulus for the oil price evil lucian we expect next year. manus: talk about the oil price. quarteraveraged in this

$54 on wti. you said that there is not pricedgeopolitical risk into oil. what do you mean by that? christophe: if you look at how we haveprice in whole, the addition of two components. the first is supply and demand. physicals supply versus physical demand. and from this equilibrium in you have the geopolitical risk premium. the geopolitical risk premium today is probably close to zero, meaning that the whole price is just the physicals demand versus fromhysicals apply, and this perspective, because we have a good visibility of the global economic growth, in a way, we have manus: visibility on the whole price. and obviously, they are trying to align the supply side and take the drawdown. one thing that caught my eye

thing this morning, and let's have a look at this. this is the number of u.s. equity issues from energy companies. we are hitting an eight year low. that, to me, says there is a of suspicion about the sustainability of this oil price, because if i look at the s&p 500 energy index, it is down 7.5% this year. the equity market is not reflecting the optimism of the oil market, is it? christophe: it is a divorce because we have a certain volatility in the supply, the pointsyou know, for the oil price, especially for the shareholder industry is around $40 to $45 per barrel. at this level, usually, the oil increasedhale the supply, and then you have a downward pressure on oil prices.

you reach $45 per barrel, and they stop. and then you have an increase in the prices. that is why we are in the trading range. the price is sideways. we should continue to be in this sideways behavior of the oil price during the next year. manus: can i just finish with this on oil? i am looking down here at the dividend yields, 6.3%. 4.85%. they are all moving off script. is there any temptation from a dividend point of view? christophe: dividends is a good approach to investing in equities. but over the very long run. correcte regarding the acceleration in the european economies, we have probably a better approach to generate the portfolios by viewing growth, but playing

growth stocks as well. manus: hold that thought. of asset head allocation over at macro. we have mark mobius in just under 15 minutes. ♪

manus: it has gone 6:30 a.m. in london. it is 3:30 p.m. in tokyo. we have seen a move of risk off equities. equities are offered. day -- eighth day of losses. if you take a look your across the region with the pictures looking like, more than 1% in china and hong kong and the nikkei closing down all most 2%. austria not losing quite as much but down .41%. speaking of australia, the

aussie dollar coming under pressure in the session, the worst performer g10 currencies currencies.10 we saw copper drop by the most in a most three years yesterday. putting pressure on the aussie dollar. here, 530e curve hitting a fresh decade low dropping for the first time in a decade. withverall trend continues the flattening even while the treasury yield is steady in today's session. just want to show you this because we are seeing a second day of declines were sterling. theresa may has her work cut out working against the clock to come to some agreement that she could take back to brussels by the end of the week. this is pound dollar two weeks butterfly showing that options traders increasing their bets where it captures the summit at

the and of next week. rising to the highest since august and continuing to rise today. manus: there is a new edition of daybreak available on your bloomberg and on your mobile. you know how to get it. that is your function. a number of stories making the headlines this morning on daybreak. the front cover story is theresa jeffrey gun lock is a well-known investor. and otherock markets economic indicators are chugging along giving janet yellen a pretty good legacy. the u.s. president donald trump jerusalemy declaring to be israel's capital. sacred to the three main monotheistic religions. the timeline is uncertain and the process, that could take years.

the historic shift of the u.s. policy may trigger new tensions in the middle east. it may up and the delicate peace talks, that is the risk for the region. joining us now from dubai is our government editor. good to see you this morning. how significant is this announcement because it is bucking back against decades of policy in the u.s. how is the region going to react? andrew: it is obviously very significant. we are seeing a little bit of the reaction, it is already coming out from some of the government. i would say the devil is in the details on this one. planneduncement of the move to jerusalem has been on u.s. books since 1995. they passed a law that said they would eventually moves the embassy to jerusalem and they have been waiting the decision ever since. we think trump will waive it

today. it may be the case that that decision does not have much of an application for now. road.g that one down the the other one, the recognition is more tricky and people will be looking at it closely. the big question we have is why now? what is the foreign policy objective here, what is the goal? it is not clear why you are doing this. this is a region white -- where we had talked of metal detectors at the dome of the rock and that kicked off protests or takes near temple mount. very small things like that can have severe consequences and here you are going all in on a very big decision area it is probably not a surprise that a lot of governments worried and cautioning about the potential reaction. is this truender to form of donald trump which is unseating the norm, interrupting the policies that have been

before with knowledge or without. your own region. the gcc, it is early in the summit but the problem is nobody showed up. i suppose what we are trying to understand here is what does this say about the qatari situation? is it more isolationist perhaps that i has been in the past number of months? be a move not seem to on this intractable problem. andrew: nothing is going on on the qatari situation. whether it seems unlikely that went there arer expecting them to show. it was a snub for no other foreign head of state to show up. a snub at the same time they announced a bike out -- bilateral committee undermining

the gcc. the gcc is a political end city -- as a political entity is no more. they have gone off on their own. the bid to end the standoff with qatar is going nowhere. there are no formal talks and know behind the scenes talks and the two-day summit which ended up being one day and very short and then do was a statement that did not reference the standoff -- there was a statement that did not reference the standoff tells you where the conflict is going. guest is still with us. butou look at the comments also i want to get a sense from you where we are with the u.s. good fortune to have a look at this, markets, there cuts since. rear

at $12,000.is bmg -- boj and ecb bought $2 trillion of assets this year. are we there yet, are we at the last gasp of this particular rally in equities? carsten: that is for next year. christophe: things are going better at the global level. markets,for the equity it is a good sign. do not forget that the earnings growth is expected to be double-digit for the u.s. and 10% for the european equity as

well. we have to price in in the credit markets which has not been done yet. just to come back on the u.s. more specifically, what we could have in a few weeks from now is a huge [inaudible] could be implemented in 2019. it is a good sign for next year because she -- you improved confidence, corporate -- confidence for the corporate sector. manus: is that already in the price? christophe: not yet. , they look at the ratio are expended this year. this is that by earnings growth.

this is exactly what we expect because of the situation. manus: tax cuts to come, 11% double-digit growth, let's have a look at this, this is the current conundrum. five years versus 30. the flattening and flattening, infinity flattening. you would suggest that the tax cuts could unseat the flattening. christophe: if we have tax-cut, a very strong impact on the u.s. economic growth from next year. and for following years. what we could expect is a steepening curve in the u.s. not necessarily for next year but for the following years in 2019. and inflation for the time being is under control in the sense that the phillips curve is

sleeping and should continue to sleep for one year. manus: the phillips curve is asleep. christophe: exactly. if you look at the situation, the phillips curve is steepening we are in aecause fantastic [indiscernible] and you have a disruption in markets. inflationary pressures are low. including in the u.s. ,f you look at the global label the phillips curve is active at the global level. take into consideration if you expect the continuation of the global growth us we were discussing a few minutes ago, [indiscernible] is declining according to our

models. we should expect to percent growth at the global level which is not that much. the consequence on inflation trend would be limited. if we have a steepening curve may be in six months or 12 because of now inflation for the time being, just because of improvements regarding economic growth. manus: it is not inflation. do you fear that under powell, this federal reserve hikes, we have penciled in another four through next year. is that correct or do you think it is too much? we expect the fed to remain very friendly toward the economy and

toward markets. perspective, the it is not possible for the fed just to respect and to follow the standard rule. anduggests interest-rate 3.5% which is not possible for the time being. inflation is subdued. the target is to achieve inflation at 2%, slightly above 2% and today we are 1.5%. forave in our table 1.5% next year. tois difficult for the fed [indiscernible] this policy. what we expect is short-term by thet rates -- risk end of next year. coming up, a reminder.

if you do have to, you can always watch the show again and watch the various bits, on tv . all the charts you might want to reflect on and you get to ask christophe a question. coming up, we have a special one for you. franklin templeton's mark mobius. and a down day for copper. the metal slides. the take a look at what is happening in the commodities space. this is bloomberg. ♪

manus: it is new york on wednesday night. rather bright in new york, a hanging over mist

the rooftops and skyscrapers. we are down by one 10th of 1%. asian stocks are coming a little bit lower. u.s. equities are coming off down by .1 of 1%. what happens the dollar? that is the conundrum. there is one great mind in singapore, here's juliette saly and she has your business flash. the nestle ceo has made his biggest acquisition yet atrium and. buy the world's biggest food company it.company is acquiring afterg has launched forecasting surprise losses and announcing a share sale plan. it plans to raise $4.4 billion by sharing cells -- selling

shares. missing analyst estimates. and expecting to read store -- restore at least credit rating opening up a cheaper source of financing. he plans to demonstrate progress next year on the company's goal of lowering debt to 2.7 times its earnings before interest, taxes, and i marches asian. amortization. no deal is nnd at. -- imminent. a team of traders who left earlier this year have raised

more than $200 million for their own hedge fund. last fridayreating led by james chen who had been at bluecrist. the rally in developing countries is likely to continue. he would put money into china, india, and it not. he spoke to haslinda amin in jakarta. >> it is sustainable because we had three years of bad performance against the u.s. market. now with the u.s. markets leveling off, still doing well but leveling off, emergency markets are back. i expect we're going to see a percent more growth in emerging markets going forward.

have not passed the 2017 so that is going to happen. haslinda: not too late to get in sit up, would make you what risk do you see? mark: two big risks we see from a macro global point of view. north korea, i believe the u.s. is going to take some action, maybe shooting down a missile, whatever. that is a big risk area the other risk is the internet. the interruption of the internet. global internet community. you have these hackers who are going into systems and with more and more cloud services being whole bitcoin thing, and with these therlinking systems, possibility of hackers disrupting the system on a global basis is there. this is something we have to look at very carefully. markets, in terms of

that you would bet on, if i were to get you to name three markets what would they be? mark: china of course. india would be next. the two big liquid possibilities going forward. among the smaller market i would say vietnam. that is where there is big change. it is a small market and it is exciting. haslinda: china has managed to rein in risks without compromising growth. consolidating xi his power do you expect the fallout to be greater? mark: he is making very big changes in china and having a beneficial effect create one of the reasons why growth is continuing and china is because of the crackdown on corruption. all the money that has been and enabling people to do

the business they want to do, it will have a big impact. one of the reasons why china continues to grow. manus: that was mark mobius, the executive chairman of franklin templeton speaking to haslinda amen in jakarta. the biggest risk is the internet disrupting the world. china, andy into vietnam. he said there is more to run. so mark was saying there is 20% more upside to come in emerging markets. msci, $15 billion has come into it, the biggest spike since 2012. is there a potential 20% upside in em? christophe: i totally agree with

his positive approach. valuation is attractive. emerging markets [indiscernible] one and a half years ago. and starting from a low point in terms of valuation. [indiscernible] growth, we were discussing about markets. brazil, russia, and china and india. [indiscernible] earnings growth, same story my expecting to be at double-digit something like 12%.

that the emerging markets, maybe we have t driverswo. --two drivers. my coast touched on this. cohost touched on this. and the rebalancing theme seems to have worked effectively with now great upset to the world thus far. eurobond team would maintain that you should be value picky, there are opportunities in the bond market when we see these yields go above 4%. is there a big risk associated with that? christophe: we have always big risks and the risks we mention, maybe three kinds of risk to the first is political. inwe have turmoil in italy

the presidential election, we have a coalition between berlusconi and the movement, we could have some trouble and europe. the second source of risk is geopolitical tension between north korea and china and japan and the u.s. and north korea and so forth. it is a source of all till the inequity markets. what we could have is volatility geopoliticale of tensions. and the other, global equity markets isn't -- is an economic policy mistake. very friendly governments and banks through tax cuts in the u.s. we expect. mistake.a

manus: where does that come from? christophe: the fed. we tried to strongly too early. as auld consider it mistake. or another mistake is to medication mistake. too tough ands communication by saying inflation is now surging and we will have to act. it will be stronger than expected. we could be wrong. the market is not prepared for that. market does not factor in this kind of a tougher attitude. a risk. that we have to look at. manus: thank you for being with us this morning. christophe donet.

ambassadorl to china. putting markets are set for a lower open. futures flutter at 7:00 a.m. in london.

manus: good morning from bloomberg's new european headquarters in the city of london. i am as cranny. this is bloomberg daybreak europe. brexit backlash. theresa may this is a revolt from her ministers over plans to keep the u.k. route aligned with the eu. ers sending asian stocks toward their longest losing streak in two years. talk and no action. u.s. president trump will declare jerusalem as israel's capital. the white house warns any actual move could take years. ♪

tous: a warm welcome daybreak europe. i am manus cranny. it has gone 7 a.m. in london, 8:00 a.m. in germany. factory orders are rising, the bulwark of russia -- europe maintains its momentum. freudian slip. up .1 of 1%. the market penciled in a decline of .2 of 1%. one of the top calls was that the virgins between the u.k. and in europe. t decoupling will continue and this is another manifestation of that german factory orders, unexpectedly rising amid unabated momentum is the language that bloomberg is using. the estimate was for a decline of .2 of 1%. orders driven by gains in export

demands for investment goods. this takes us back to the debate in china. capital investment is expected to decline from 20% to around 12%. you are seeing german factory orders rising adjusted for seasonal swings in inflation by .5 1%. the german companies are tapping into improving mobile trend. good news coming through from germany. order growth is brisk. the economy ministry says. business confidence hitting a new record in november. that is the german story. the global story is unseated ever so slightly. that is where the risk radar is telling you. look at the dax, down by 135 points, it is copper, it is the miners that i really punching the markets. asia had its longest losing streak in two years and we are talking about record losing

streak. is copper telling you something different? it is taking a bashing. asian stocks are lower, european stocks are lower, the paris market is down by 30 pips, exit bashing or botching seems to be the headline. theresa may has more strikes not just from the dup but from boris johnson along with [indiscernible] going for theresa may. this is what you want to keep an eye on as well. you are seeing a view from the markets that there could be a policy mistake. the fed could tighten too tightly. let's roll it across and have a look at the bond board and we is a complexion of what going on in bonds. 10 year yields could range from 10 point two to 10.9%. there is a chance they could break either of those levels. keep an eye on the bond markets,

money coming out of equities going into the funds, going into o.a.t.'s and treasuries. that is your market setup. we have a special interview for you now, we are talking about china rejecting protectionism global trading systems, that toldat a top official has visiting executed's at the economic development forum in china. for more, let's get to tom mackenzie standing by with a special guest, the u.s. ambassador to china. tom: i am joined by the u.s. ambassador to china. thank you for your time today. relationshiprsonal with president xi dating back more than two decades. relationship starting to pay dividends?

investor: i have met with him four times and when i resented make potential's, i was there with our secretary of state tillerson. jointthere with the chiefs of staff general dunford -- the president and we had when we had the state visit in november. the chemistry between our two leaders is very good. they had their first meeting in florida. they had a meeting in hamburg been 10 one, there has telephone calls and a direct and frank discussion because there are a gift use like the threat from north korea, the trade imbalance, and the issue of fentanyl and other dangerous drugs. thathopeful and optimistic building these kinds of relationships, i have had one for a long time with the leader here in china. building a relationship with -- of trust and respect hopefully can go a long ways toward these

two big countries, the biggest economies in the world working together. that tensions have resurfaced between the u.s. and china, the investigation into alleged -- intellectual property and probing into aluminum exports from china. the market access or the market status that china is looking for. is that the strategy to press china am a what are the measures can we expect to see from washington? ambassador: there are a good issues between our two countries and it is important to have these open and frank discussions . there are areas we feel china has not been fair. there market is not open. you can use we chat in america but in you cannot use facebook here. these are examples of where we have -- do not have a level playing field or reciprocity. china has not lived up to its

obligations to be a market economy. they need to make a just and changes to do that. -- adjustments and changes to do that. i come from the agriculture heartland of america, we are proud to have american beef back here for the first time in 14 years but we want to see more opportunity for things like pharmaceuticals and medical devices. the chinese have announced their going to open up -- they are going to open up more for insurance services. there is a lot the needs to be done. we need to continue to work together. tom cole and the under secretary of state and treasury of international affairs, china is said.backwards, he do you share that concern? ambassador: in some areas that is true. in other areas, we're making progress but we need to have those frank discussions about the area that we feel china is going in the wreck -- wrong

direction. where concerned about human rights and the fact that there has been a crackdown and less freedom in china for many people and that is a great concern to us in the west. is northand there korea. are you hearing anything from your chinese counterparts, are off getting closer to cut oil exports? we know that is the focus for washington. ambassador: i want to complement the chinese for their support two un security council resolutions and the enforcement. we believe we need to go further. we think oil and also the north korean workers working in china and other countries that needs to stop. and we are hopeful that more progress can be made. and we are continuing to press on only china but other countries around the world to take the threat seriously. it is the biggest threat to

humankind what is going on with nuclear weapons and with these ballistic missiles. china shares our view that we want to see a nuclear free korean peninsula. they closer to start a dialogue? ambassador: we need to get their attention and continuing to tighten the restrictions could help do that. we made it clear our goal is not regime change but to denuclearize the korean peninsula. we want safety and security for all people here. not only in asia but throughout the world. : under what conditions with the u.s. consider talking to pyongyang? ambassador: they are not launching anymore missiles or doing any tests. if they announce that in do that, there is an opportunity for us to get back to the bargaining table. tom: do you think sanctions are

working? ambassador: they are having an impact. evident thatg more they are having an impact in north korea. i have been to the border. thate been there and seen there is significant reduction in the activity in that area. the trade figures are out for the last month dramatically reduced. tom: do you think there is a debate going on and that government as to whether or not that could be the next approach, it seems the has been a red line for beijing. investor: they have reduced somewhat. in the last yuan resolution they -- theto cap the number amount of oil and the real question is can it be reduced even much more dramatically than it has to date.

is there other things that can be done as well. tom: thank you for your time. the ambassador to china talking about issues around trade and north korea. manus: great interview. a level playing field and he believes sanctions are beginning to impact in the north korean clinical discussion. let's get you some breaking news, this comes through on steinhoff, the south african country. that's company. -- company. we did drop more this morning. the ceo resigns over global retail accounting failures. the retailer is appointing pwc to investigate irregularities. the stock dropped 18% over two days. the brands that it owns in south conformist.owns

the trust has broken down, that is why it is out according to an independent retail analyst in johannesburg. this is an you have a breakdown in the relationship between the ceo.the chairman and the the stock is down 30%. you can see this if we take the quick read on stocks i have here on my left hand side. relative to its peers, one day change, you can see quite a dramatic selloff in that stock. that to you as we get more. joining us to talk about global markets is the chief investment .fficer we are going to talk about theresa may and brexit and about someone say an unfolding mess not in europe but in london and

belfast. your read of the situation thus far, this is a prime minister who is embattled at the moment. what we are trying to understand is what does regulatory alignment mean versus regulatory harmonization and this is what david davis was at pains to point out yesterday. are you any the wiser? guest: i was in belfast yesterday and it was interesting advisorso some of our out there about the uncertainty their clients in northern island are feeling in this difficult time. for me, the key is the way in which companies throughout the u k are reacting to this, they have their finger poised over the contingency button waiting for clear signals from the government and from the eu as weather should -- whether they

should press contingency plans or continue on. talks are moving forward. donat was herehe saying there is no way to get a in thetransition deal next 10 years. i had ing yesterday talking about a trashy currency and that in thespending too long spotlight but a good transition deal could take us forward and reset the growth agenda. reset the sterling agenda. agenda.e sterling how important is transition? guest: you have such diversion opinions as you have been describing. if you listen to neil woodford -- neil whitford, he is positive about the brexit situation. he thinks it will be good for

the u.k. economy and people are massively underplaying the potential outcome, the positive outcome that would ensue from that. he is positioning his portfolio and other fund managers are saying i am nervous about the uncertainty it is creating, i am not looking to buy u.k. stocks in the global portfolio. with them that you do not want to own u.k. until you get greater clarity? guest: a lot of our fund managers are saying they worry about the u.k. in a global context because of -- there are lots of companies that will benefit from a lower rate of sterling if it were to fall without a deal. the uncertainty in terms of longer-term investment, uncertainty in terms of the consumer behavior could be damaging for the u.k. economy. according to ing the flip side is that the transition

could change our optimism, it could change the capital investment story. currencyng a fresher for you? -- a trashy currency for you? guest: i could see sterling recovering. we started to see over the weekend and the beginning of monday morning before the talks collapsed that sterling was recovering. we could see some substantial moves. does it make it a trashy currency? i do not know. am always drawn to the lower bar. the other theme that came through from the last conversation is political uncertainty. we have had the ambassador there china -- from the u.s. to with tom. he talked about the lack of a level playing field and he has been greeted and seen quite well

xi. as you look at market risk and you reflect on that conversation with the ambassador to china, underestimating geopolitical risk as we go into 2018? are we a little bit too sanguine? thef you look at all volatility measures they are trading at long time lows. the number of days that dekes has traded above 12 in 2017 is 43 days. which is materially less than in previous years. if you look at geopolitical risks, north korea or what is going on in the middle east, the rendition -- relationship between saudi and iran, there has to be political concerns.

geopolitical risks are bigger than they have been for some time. manus: we have policy, what i have got for you is policy uncertainty. yesterday's conversation was framed around uncertainty. you had some idiosyncratic peaks. we are trending lower on this chart. global policy uncertainty. if you have a look at that fix, would you buy volatility based on that? many people said it is a waste of money to buy swiss and euro and gold. it is a waste. how do you position for political risk if you are thinking it is underpriced in 2018? chris: we have more broadly diversified portfolios and they would have in a normal situation. the problem with trying to buy it is impossible

to forecast when these events will happen. it is hard to forecast when the geopolitical event is going to kick off which may mean we get a sharp reversal in markets. what we say to clients is during these times, if you think the world is going to be more uncertain, make sure you have that diversification in your portfolio across equities, fixed income, and the alternative space. manus: we will talk more about fixed income. st. james's place wealth management. lower side.e this is the state of play of europe in the moment. it will be than metals and miners that transfer from this trillion session. copper taking a battering. concerns about the growth levels in china. 10-year government bond yields, flattening will continue. flattening will continue but

there is a risk and the risk is that you have a policy misstep from the fed rather than some dramatic wage inflation. local wage inflation will average to .5%, equities will have a double-digit rise, a love and percent in terms of earnings and s&p futures down. you have oil lower by .4 1%. some of the commodity complexes as well a little bit lower. copper is trying to find its seat on the lma. equity futures a touch lower. the mining index, msci mining the eighth straight day in a row and that is knocking the confidence in the markets and the pound is lower as well. juliette saly is standing by. mark scheider has made his biggest acquisition yet, uy aetriumo b

innovations for $2.4 billion. acquiring from an investor group . in a bid for growth among stagnating mainstream brands. and forecasting surprise losses and announcing a share sale plan. the world's third-largest shipbuilder says it plans to raise $1.4 billion by selling new shares in a rights offering. they sold with $3 billion of short-term debt. expecting demand for vessels to shrink area push into losses compared with analysts estimates for profit. tell you ceo plans to restore the credit rating to investment grade next year opening up a cheaper source of financing and a wider pool of investors. to demonstrate progress next year on the company's goal of lowering debt. your bloomberg business

flash. manus: thank you. we are debating what happens next in 2018. where do you want to place your risk. how do you see inflation? what is the possibility of a policy misstep? those are some of the thoughts that have been put on the daybreak show in the next -- last 45 minutes. were listening to kristof dunay. i like a little bit of a difference. let's take it straight to the chart which is the curve flattening chart. was global wage inflation will run 2.5%. the risk is a policy misstep and that could cause a tightening or steepening in the u-curve. a policy misstep wilt cause a

change in the you curve. chris: inflation is potentially picking up. we have talked about higher than inflationary pay increases in inflation does pick up, that is going to have an impact on bond markets. if the fed increases by three or four times next year as well as the december increase this year we are getting back to a point where the 10 years are getting to what i think we would consider to be a normalized level. 2.4 normalized? is talking about the bond markets. what is the propensity of the markets to shoot up? andare set for four hikes

set for a spike higher in this curve. we see four short-term interest rate raises through 2018 and the curve does not completely flattened, we could see 10-year rates suffer as 3.5%. 1% -- trace itn between 1% at 3%. we will be moving into -- out of the recent step of 10 year yields. that is what people will be watching and the key for me is if you look at the impact on 's are markets, where pe described as being elevated and you do the inverse and look at the earnings yield, some of the earnings yield relative to government bonds does not look so attractive. and asset allocator may say i am happy to be earning 10 year bonds in the u.s.

fall, if u.s. treasuries yields rise, let's call it 3%. 3.5%. what does that do to my bunds? they are out there on borrowed time. that is the view. the safest securities are overvalued and they will move higher. are we in the twilight of low yields in europe as well? chris: what you will be saying -- seeing is a massive difference between u.s. 10 year yields and bund yields. people are looking at that in buyingif the bond program is coming to an end, what does that mean for bond yields? that may mean that they cap

should narrow -- the cap should narrow. if the 10-year does expand up to 3.2%. the way in which the ecb talks about what is going to happen to the bond buying program and potential interest rates will be critical. it comes back to the comment you made about geopolitics. we need to be focused on these, on the comedic-ish and coming out of the central banks and government. we are in a position where the bigger risks may have an impact on markets. dollar go bid in 2018? chris: the dollar could go either way depending on the political uncertainty in the u.s. manus: thank you very much. chris ralph is the chief investment officer at st.

james's place. that is it for daybreak europe. the market open is next. you can always watch this and listen. thank you. that was great. ♪

guy: good morning and welcome. this is the european open. i am guy johnson in our new london headquarters alongside matt miller in berlin. we are about to start cash trading in europe. the open 30 minutes away. ♪ guy: asian markets sliding, european markets poised to follow. downsideoint to the but will selling accelerate? we have a fairly decent sized downside in place. will it become bigger? teresa may faces revolt