>> good morning from bloomberg's european headquarters. this is bloomberg daybreak: europe and these are today's top stories. theresa may the five demands to quit after losing four ministers. will she face a no-confidence vote in parliament? we are live in westminster and brussels. chip stock carnage. sellingtarts a bout of wiping out $8.4 billion in market value from asian chipmakers. u.s. commerce secretary wilbur ross says trade talks will take time. a deal by january? impossible.

good morning, everyone. welcome to "daybreak europe." brexit and the pound plunging on the news of resignations within theresa may's cabinet and a possible leadership challenge. the prime minister has vowed to carry on. annmarie hordern is in westminster. let's come to you first. is theresa may's time finally out? >> she certainly does not think so. thought she was giving a resignation speech, but she pivoted and said she wants to stay on and see this through. she is waking up to massive hurdles. will she face a no-confidence vote? the brexiteers are lining up. the former leader has sent his letter.

they have the numbers to mount a challenge. do they have the numbers to oust her? secondly, her cabinet is getting smaller by the moment. she lost to cabinet ministers yesterday. a massive blow to the prime minister. the other three names being spoken about today are michael go, his office declined to comment on reports he was next. other names being talked about, penny and andrea. quite a busy morning for the prime minister. she will be speaking to the public at 8:00 a.m. local time answering questions. nejra: there was so much drama yesterday afternoon a third question fell into the background. that is whether this plan is going to get the votes it needs in parliament.

>> that is exactly right. if she can get through all of this, this deal may not even make it to parliament. really the chances this could be a yes vote in parliament has bottomed out. maria, let's turn to you in brussels. the eu waiting, watching. is the summit going to go ahead? >> good morning. that's right. the european union is keeping quiet. we have not heard anything over the past 24 hours. they do not want to say or do anything. hearing it, we are will not go on. there european union is working on the basis of two cases.

one, she gets to keep her job and that meeting can go on. , as a way toot keep pressure on the u.k., they will plan a no deal brexit. what are we hearing from the eu in terms of preparing for that note so brexit? >> they have always said this is one of the possibilities. it has always been concerned about this idea you get to a deal, and we have one now, a technical one approved by the cabinet. we are speculation maybe there is still time to get a new and improved deal. from a european perspective, they think this is the deal. it has taken a year to get to this point. it is difficult to see how you can get to a new deal in a matter of weeks. what we here at this point from the european union is that this is what it is. theresa may needs to get her political career in order.

then bring it back to brussels for about. for the european union, that is a terrifying scenario. whole process would take on its aggression. -- a digression. nejra: thank you for joining us. we will be hearing more from you later this morning as well. let's get to the markets. i put cable up first. we are still below that 128 handle. yesterday we saw the biggest drop of 1.7% since the october 2016 flash crash. it was a move of more than two standard deviations to the downside for cable. volatility spiking to a two-year high. we heard about the resignations, so this is in focus. meanwhile, money moves into the safe haven. that is the yen. we are seeing the yen strengthened against the dollar.

.rude on a third day of gains still heading for a weekly loss. have we seen the bottom for oil? even though we saw gains at the end of the session, the s&p 500 yesterday, we are seeing u.s. futures lower. that disappointing forecast for nvidia pushing futures down 0.8%. we can is coming through as well because of the comments of wilbur ross around trade. asking the question on mliv, what level of treasury yields will reignite foreign demand? reach out to us, iv plus tv on your bloomberg. that 10 year yield pretty steady . let's check on the markets in asia. juliette saly has more. we are seeing the impact from nvidia and concern around chipmakers. good day. juliette: we certainly are. the nikkei down by 0.6%.

a lot of the chipmakers under pressure, closing at the session weaker. taiex down by 0.3%. elsewhere it is a tug-of-war. we have those comments from wilbur ross, essentially putting a hold on those u.s.-china trade talks. you have support for chinese real stocks in the csi 300 is up by 0.9%. a loss on the msci asia-pacific index, not that bad dude to this strength in chinese markets. we are on track for a second weekly loss of 0.5% on the regional index. with have a look at these chipmakers. softbank very much in focus because it's parent company owns a stake in nvidia. it is down by 3.4%. the biggest drag on the msci asia-pacific index today. we are also seeing a big slump coming through in chinese

education stocks. this is after a regulatory clampdown. that follows clampdown is on the property and also pharmaceutical sectors. really just dimming prospects. china may believe down by 18%. down by 18%. nejra: more broadly, equities in china holding up. now let's get the bloomberg first word news in hong kong. >> theresa may is defying demands to quit as she battles to keep control of her government. facing a result -- a revolt over her eu deal, may said she would stay in office because the public expects heard -- expects her to see brexit through. seven members of the government resigned including two cabinet members.

the telegraph newspaper reports northern ireland says the deal to prop up the government is over unless may is replaced. >> i'm going to do my job getting the best deal for britain. i'm going to do my job getting a deal in the international interest. mps will be doing their job. they will need to look at that deal, they will need to consider the vote of the british people to leave the european union and our duty to deliver on that for. >> wilbur ross says the u.s. plans to raise tariffs on chinese imports in january despite planned talks between presidents trump and she at the end of this month. the meeting at the g20 will only be about big picture items and produce a framework for further talks about trade tensions. january,rmal deal by he says, is impossible.

states is imposing sanctions on 17 saudi arabia and officials over the murder of jamal khashoggi. the kingdom charged 11 people with the killing, giving the death penalty for five. turkey's of the order to execute khashoggi came from the highest level. riyadh says it was a rogue operation that went wrong. --anuel macron phages will faces what could be the largest protest. a grassroots movement is threatening to block traffic over higher petrol prices. 700 blockages are planned in all 95 mainland departments. results in a florida senate race after be tallied by hand a recount expanded rick scott to lead but not by enough. locals say the republican is ahead by 12.5 thousand votes out

of a .2 million ballots cast. -- 8.2 million ballots cast. spacex has had a launch record this year. a falcon nine rocket blasted off from the kennedy space center. it will connect amateur radio users across the world. 18 launches this year and raise its valuation $28 billion. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you so much. let's bring in this morning's guest. cibc's head of fx strategy. fridayo have you on this after what we saw yesterday in the u.k.. let's talk about brexit and

let's start with sterling. i said two standard deviations, it was actually more than three. we are back above 128 but this chart shows the extremity of the move yesterday. is the pound untradable? >> it is in the sense that any view you have is at risk of going off course. the next resignation. it does make it difficult to trade on anything other than a long-term basis. you have to have a strong stomach and wide parameters in terms of losses. it is very difficult to trade that in this atmosphere. nejra: we saw this resignation yesterday, simon. how likely is theresa may to face this no-confidence vote? we have seen the letters coming in. >> everybody believes the no-confidence vote is coming. of course, the numbers are key. 48 letters from conservative mps.

but 156 is the number they would need in order to replace her. even if they do that, they need votes torobably 100 get their candidate. i am talking about the people who believe in the conservative party, what is a hard brexit. two candidates go to membership in the final round. i do not think they have the numbers. the degree to which there is discipline, they want to make sure they have those numbers. that may be why all the predictions yesterday, it may take a while yet. nejra: given how fast sterling has fallen over the past couple of days, is it likely to bounce? we are seeing a recovery on the absence of any terrible news. >> i guess you have a worst-case scenario priced in nejra:. nejra:that is priced in?

>> you have a lot of negativity. at least some across the short-term. -- at least all macron the short term. term.the short there is a degree of uncertainty whether this leadership challenge will come through. with a hard brexiteers have to remember is if they do not get enough votes to unseat theresa may, she is safe for a year. case, whilebe the the newspaper circulation about her future is -- an elevated , unless something changes between now and sunday, it is the case there is a delicate calculation for the hard brexiteers to put in place. nejra: what would you advise

clients to do? do they sit on the sidelines? do they sell aggressively on any rallies? ?o they look at volatility >> what i advised after the initial announcement of the deal on wednesday was the fact that the rally was a good opportunity to sell. 150,rally into the 130, was what i was recommending to sell. now it is a case of trading the ranges. if we see positive news and more rally, i would sell into that. until we see clarity in terms of the political future of theresa may, it is difficult to be looking at anything other than 130.ng that sort of markets already looking at the boe. shows no more priced in for the boe. is a move like this premature given everything you said about

how difficult it actually is going to be to get a no-confidence vote through? >> it would be to break an assumption to say the bank of england is not going to be active in 2019. the inflationary pressure, such as they are, above 2% target, the bank of england will want to move if a deal gets done. and continued their normalization process. i do not think brexit derails that process unless it is disorderly. i just pick up on a point around the short-term versus the long-term. on the long-term you have to see sterling strengthen given the nature of how extremely out of favor and short the market is. --liamentarians already either take the deal or no deal. we have mps who believe in unicorns. they believe in a third way. there is a deal or there is no

deal. nejra: no brexit, according to theresa may. >> you unleash political forces you cannot control if you do a no brexit scenario. if you think there are only 70 mps who will vote for no deal, you have to conclude the others will eventually, even though they have to do a lot of virtue signaling, they will vote for that deal. sterling should rally on that news. nejra: thank you. timeg up, at 8:40 london we will bring you mario draghi's keynote speech at the european banking congress, part of euro finance week in frankfurt. don't miss bloomberg's panel featuring b.n.p. paribas chairman, deutsche bank ceo, and the commerzbank ceo. posted by bloomberg surveillance banker francine lacqua. that is live at 9:00 a.m. london time. when you are traveling to work,

if you have to step away from the tv, tune in to bloomberg radio live on your mobile device. 8:00l be on the radio at a.m. ♪

nejra: let's check on the markets. the msci asia-pacific index showing weakness at the end of the week. some weakness coming through in japan. chipmakers being hit. china outperforming. the csi 300 up. emerging-market equities also on a third day of gains. cable recovering slightly. yesterday we saw a drop of 1.7%. three standard deviations to the downside.

volatility spiking. we are seeing a touch of a recovery. meanwhile, crude higher for a third day. poised for a six weekly loss. supply and demand causing concerns. nasdaq futures down 0.8%. the u.s. market close higher yesterday. we had a disappointing sales forecast causing concern among chipmakers. let's get the bloomberg business flash. >> pg&e rallied in extended trading after the head of the california public utilities commission said he cannot imagine allowing the state's largest utility to go into bankruptcy. pg&e shares have plummeted 64% in less than 10 days amid fears it would be held liable for the catastrophic wildfire that has killed more than 50 people in the u.s.

facebook's ceo mark zuckerberg says the company is taking more drastic measures to reduce the threat of content on its site by tweaking its news feed algorithm. the site is also to make major changes to content moderation including allowing decisions to be appealed to an independent body. wei have come to believe should not be making so many important decisions about free expression and safety on our own. we have been talking to people for some time now. i have spoken to many experts. we are announcing we are creating a new independent body that people will be able to appeal to that will have the authority to determine whether content should come up or stay down. >> that is your bloomberg business flash. nejra: thank you so much. the u.s. still plans to raise

tariffs on chinese imports to 25% in january. whatever the outcome of the upcoming meeting between president trump and xi jinping. that is according to wilbur ross, who said the world leaders are likely to agree to a framework at best. let's bring back our guests, the head of cbiz fx strategy and the chief economist. we were always talking about that as a line in the sand where we might see president trump start to soften the rhetoric. it has not happened, has it? >> not yet. the i quickly shifts to reelection. also there is a much longer term challenge. you look at gdp share growth projections over the next 20, 30 years, the rest of the world and china are on different trajectories. that tells you agnostic of the political side in the u.s., the pressure to challenge what is now economic hegemony

challenging to the u.s. will continue. the question is i you trade within that. the pattern over the next couple quarters as for the negotiations at this meeting of the g20 is one that is key in terms of the short-term dynamics. a loss of part of the equity market or escalation of trade war into 2020. nejra: that is heading u.s. futures a little bit. if we look at dollar-yen, the yen actually poised for a weekly gain against the dollar. a lot of external risk dynamics. >> indeed. when you are looking at the yen, it is a risk barometer. domestic fundamentals are sidelined. the bank of japan is still on the sidelines and will remain so for a considerable period. investors are using that yen as a proxy for global risk dynamics. ,hen we are seeing it

uncertainty, that comes back to favor the yen. classicse, it is the case of keeping political pressure on the chinese in order to facilitate some kind of agreement. there is going to be an ongoing degree of uncertainty and that underlines the fact that the and is going to perform well over the median even without what's going to be happening domestically in japan. nejra: thank you jeremy sterch and simon french. they stay with us. much more on trade coming up. after 7:30w just a.m. london time. some think look forward to. when you're traveling to work, tune in to bloomberg radio live on your mobile device or on dab digital radio in the london area. next we will talk more about the

u.s. in the fed as well. this is bloomberg. ♪

nejra: let's take a look at the world map. asian equities on a headline level struggling for direction this morning. we are seeing a push and pull. $8.4 billion of market value went out of asia. chipmakers have pushed the japanese and taiwanese equities into the red. china and hong kong rising for a second day. let's get the bloomberg first word news. >> british prime minister theresa may is defying demands to quit as she battles to keep control of for government. euing a revolt over her deal, may said she would stay in office because of public -- the

public expects her to see her see brexit through in an orderly way. the informal leader of the conservative party's pre-brexit submitted a letter of no-confidence in may. northernraph reports ireland says the deal to prop up the government is over unless may is replaced. >> free movement and did. stopped.yments the jurisdiction of the ecj over. out of the cfp. this is a brexit that delivers on the priorities the british people -- of the british people. >> the united states has imposed -- on 17 saudi arabia and officials over the murder of jamal khashoggi. the kingdom charged 11 people with the killing. turkey says the order to execute khashoggi came from the highest

levels. riyadh says it was a rogue operation that went wrong. . ballots in florida's tight u.s. senate race are to be tallied by hand after a machine recount expanded rick scott's lead, but not by enough to end the fight for the incumbent to retain his seat. the republican is ahead by 12 and a half thousand votes out of 8.2 million ballots cast. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you so much. let's check on the markets around the world. joining us from our bloomberg partner in mumbai. here in bloomberg is dani burger. a second the of gains for the nifty 50. >> you are right. it is looking solid for the indian market.

it is not something we anticipated and trade yesterday with crude doing what it is doing, staying low. i think the indian markets are happy. some gains on the 50 and the benchmark indices. the currency is gaining even more. 71.81. it is a strong showing for the rupee. macros -- information technologies stocks had a big slump. i do not think a lot of people are complaining. reports modi'se administration has approached a group to rescue jet airways. is this story dominating the markets at all today? completely.

in yesterday's session, stock was up 27%. that is not usually what you see. chairman is going to be making a pitch for the group to buy stake. 30% in thely, up last couple trading sessions. we do not have clarity on what the motive investment would be. lots of permutations and combinations. if you look at the stock price of jet airways, it is dominating news. nejra: thank you. dani, you are looking at markets in europe and the hedges around brexit. tell us more. >> this brexit process unraveling is heading markets,

specifically real rates. sterling,ade weighted but the effect we are seeing is in five-year inflation. 25 bits yesterday. now about -230. this is where you want to go if you want to have an inflation hedge. because we see rates declined so much, it shows the degree to which investors are pricing in a no deal brexit. should that spur currency weakness in a cyclical slowdown. i want to take us back across to asia where we are seeing the hang seng outperforming today. i want to give you a picture of the sentiment. hang seng in the blue. right now is about 1.1. pretty low for the index. because sentiment is so skewed one side, it means if we have

any turnaround, which we are seeing a slight bit today, we might get a big rally fueled by the options market helping us take us past this level of 25 600 on the index. much. thank you so now let's turn to chipmakers. the sector has seen about of selling in asia wiping $8.4 billion in market value as weak forecasts from nvidia and applied materials in the u.s. added to the latest signals that's computers and mobile are falling. bloomberg opinions tech columnist joins us now. yet more bad news for the chip sector. some of what we have heard what we havesum up heard overnight. >> it is another reason to be wary of the tech industry.

nvidia, they have too much inventory in. the supply chain they need to wait until that is digested before they start shipping out more chips. a year ago bitcoin was big. it was a reason for chip companies to be optimistic. it has been struggling. miners are not going as strong as they were. nvidia is one of the companies caught up in that. everybody else is getting a little bit excited, little worried about that. the whole chip industry is on tenterhooks. any news go or bad will throw the markets. nejra: we have seen that in the asian session. are we likely to see apple thrown by this? >> apple has already had a bit of a rough week in one of their suppliers basically said they had orders cut by apple. everybody got shocked after that.

i don't think apple and nvidia are directly linked, but there are a lot of people looking at the latest news on the apple supply chain and elsewhere. this story has still got a few weeks to run. nejra: let's turn to another faang. facebook took a lot of attention section.s. ascension -- yesterday after an investigation caused internal consternation. a big hit to morale for the company. >> the stock is in trouble. these are real issues with mark zuckerberg and sheryl sandberg. she and mark are getting a lot of pressure. not only from their employees. lawmakers will jump on that bandwagon as well. there is a believe they knew more than they let on. they did not tell anyone, they tried to cover up, and so forth. that new york times story is explosive.

a lot of people want to have another look at what is going on. that gives a lot of weight to those who want to rein in facebook, talk about breaking it up, or any regulation that will hold the power of facebook. it is so powerful globally. this is more ammunition for those who want to go down that path. nejra: thank you so much for joining us from hong kong. sticking with the u.s., we are slowing global growth. getting the federal reserve's attention. two regional fed bank presidents have cited -- as they raise caution. a voting member of the moc said it's a recipe for a policy mistake. he did appear to back policy tightening. the minneapolis fed president has advocated against raising rates said it was hard to know if slower growth abroad was a

temporary trend. echoedre marks yesterday jay powell's comments. guest,ring back our jeremy sterch and simon french. after what we heard this week, you have retail sales yesterday as well. we have seen the market reprice around the prospect of said movement in 2019. -- said movement infed 2019. >> members are right to get ahead of this. the federal reserve over recent years has started to include more international commentary and its minutes and speeches. it never used to. it goes to show the u.s. economy

cannot decouple from forces when trying to assess how the demand picture looks in 2019. against the backdrop of a scenario where the rest of the world is slowing, potentially get more strength in the dollar, which starts to become deflationary, the federal reserve will want to signal to the marketplace they cannot just rely on one quarter rate increase every quarter as they become able to rely on in 2018. nejra: what can we expect at this point? context of the next two quarters we are on course for the fed to continue to act on that quarter basis -- a hike per period. i think the prospect of his lower price -- a slower pace of tightening becomes more real. fiscal sugar rush we saw through the course of the middle

part of this year will start to dissipate and we will start to see fiscal position move from virtuous to vicious as we move towards 2020. probably for the middle part of next year the federal reserve will be on hold. our base case is we only see two hikes in 2019. we start to see the fed considering a reversal of that course in 2020 as we see growth continuing to moderate, getting below 1.5% of gdp. nejra: reversal meeting cuts. >> indeed. thea: a 10 year yield on 3.11 handle, we have not seen it move this week, we did not see a big reaction to jay powell. i want to bring the mliv question in. what level of treasury yields will reignite foreign demand? joined the debate by reaching out to us and the mliv team, iv plus tv on your bloomberg. what level of treasury yield is going to re-ignite foreign demand?

>> at the long end of the curve i do not think you are far away. you have to factor in the nominal yield and the cost of buying dollars and the hedging costs here. the has been a difficult environment for foreign investors to get into. i think it's not a position. you have to look at eurozone government debt positions. japanese government debt. look at that spread. we talk about the spread all the time. it keeps setting new records. that does act as a nominal anchor on yields. we are not yet seeing options even though a lot is coming through, a big ratio down to .evels that were worrying the long end of the curve needs to move much higher from here. nejra: the context of this question is the comments from jeff gundlach saying overseas holdings have been tricking because the cost of hedging is making the trade of attractive. >> i would agree entirely.

it is in the context of the spread story and the cost of hedging. we are not expecting u.s. yields to move up at the long end exponentially. 34350 not anticipating anytime soon. i think is going to be the case overseas investors are starting to see or will see more attractive yields domestically. that's going to make money flows remain onshore. there will be less international for the dollar, which is going to be part of the dollar story from our perspective. >> foreign investors may be looking to sell dollars at the moment to support institutional holders, to support their own domestic. that is part of the technical selling that factors into this picture. next, we will talk about the brexit stocks you need to be watching.

we talked about the pound, let's talk about equities next combined with u.k. retail data. don't miss our conversation with the hugo boss ceo after it: 30 a.m. london time. -- 8:30 a.m. london time. tune in to bloomberg radio on your mobile device or dab digital radio. ♪

nejra: let's get the bloomberg business flash. chinese education stocks listed in hong kong have slumped after a big fall in new york on changes to kindergarten policy. inan listed companies for-profit kindergartens listed

separately or part of an asset package. the government says it is increasing physical education -- and wants participation by 2020. mark zuckerberg says the company is taking more drastic measures to reduce the spread of sensational content on its site by tweaking its news feed algorithm. the social media site is also to make other changes to content moderation including allowing decisions to be appealed to an independent body. >> i have come to believe we should not be making so many decisions about free expression on our own. we have been talking to people for some time now. i have spoken to many experts. today we are announcing we are creating a new independent body that people will be able to appeal to that will have the authority to determine whether content should come up or stay down.

>> that's your bloomberg business flash. nejra: thank you so much. let's get back to brexit. the pound plunged on the news of resignation within theresa may's cabinet. challenge.leadership that was not the only asset to see the pressure. we saw bank stocks tumble. .omebuilders listed in london the ftse 100 ended the session flat where other european equity indices declined. where does brexit turmoil lead stocks? joining me now is the senior european strategist for bloomberg intelligence. with theresa may's brexit plan being so robust, what is the outlook for the ftse 100? it entered the day flat. >> indeed. since thef you look referendum in 2016 has been a relationship when there has been big swings in the pound that the

ftse goes in the opposite direction. it makes sense. something on the order of 50% of ftse 100 revenue is generated abroad. there is a clear opposite effect from the standpoint of translation of revenue and earnings for the ftse. that said, you have to be careful when there are shock moves. if you go back to the referendum specifically in 2016, for the two days after the event happened, and the pound tumbled somewhere between 8% and 10% against the euro or the dollar, the ftse also tumbled. it was not until that initial shock was relieved that the ftse took off for the rest of the autumn. the same think that happened here. if things fall apart, let's say pound and the town -- the tumbles further, you could have the shock value impact negatively the ftse.

if that were to transpire, our view would be over the next couple weeks and months, ironically, even if things are tough for the u.k., the market would take up. nejra: you could have a lag effect on the relationship with the currency. when we look at the three groups, what is the outlook from here? >> it is interesting. our natural reaction would be to look at sectors. clearly you can think of the retail sectors being domestically oriented or you can think of the staples as being nondomestic. you start getting confusion because in banks you have hsbc that is global and you have lloyd's and rbs that our local. we think about it in three different buckets. domestic companies, international companies, and those companies that do not report in pounds. if you look here, the

performance has been drastically different at different points in time since mid-2016. it happened again yesterday. domestics got crushed, internationals did better, and the non-pounders did ok. nejra: thank you so much. tim craighead for bloomberg intelligence. thank you so much for joining me on set. let's bring back our guests and talk about europe. jeremy stretch and simon french. jeremy,o come to you, because we have an iv question from a viewer. we were talking about what level of yields in the u.s. is going to bring back foreign demand. the question is, isn't the issue the level of the dollar rather than the issue of yields? week the euro has had four days of gains, but there is the question for you. >> whenever you are looking at

euros and spreads, there is an inherent concept in terms of the valuation of the currencies. we have seen this other than the short-term perception. that does have an impact on the dynamics. ultimately is going to be a case spreads, we look at the dynamics of the currency valuations, but over time we are going to find some of those international investors will still be looking more into concepts of the messed markets rather than looking at the headline yields in the u.s.. data fromen the germany, what is the outlook for the euro given how far it has fallen? we had a rebound, but does it have far to fall? >> you have to understand the dynamics. some of those were particularly transitory. i would not extrapolate that german gdp number. i think it is interesting we

and seen the hawks come out talk about the impact or the need for the reversal of monetary policy stimulus. from the context of our perspective, unless the growth trajectory is reside -- is revised down substantially, there is an inconsistency between the language and in terms of their expectation of beholding rates until the end of the summer. that is going to resolve itself by seeing the ecb acting sooner. does the oil price actually complicate things? i ask because we had comments from the ecb's chief economist sing the drop in the oil price, the for consumers, but complicated the outlook for the ecb. >> it complicated to the degree you are focusing on headline inflation. i think the keener watchers of the ecb will focus on core inflation, which remains stubbornly low in this 1.1%

range, well below the 2% target. i disagree with jeremy. on this occasion i think the ecb is bullish. the expectation there's going to something in 23 next year, we're going to be well and 2020 before the core inflationary conditions are going to be anywhere near justifying the normalization of monetary policy. if they start to, with the new sooner, thathten effectively says they have given up on core 2% inflation. nejra: thank you for joining us this hour. jeremy stretch and simon french. great to have you both. coming up, we speak with the e&p para but chairman after 10:00 a.m. london time -- bnp paribas

chairman after 10:00 a.m. london time. this is bloomberg. ♪

>> good morning from bloomberg's european headquarters in london. i'm nejra cehic. this is bloomberg daybreak: europe. theresa may defies demands to quit after losing four ministers. will she face a no-confidence vote in parliament? the eu weights and watches. we are losing westminster and brussels -- live in westminster and brussels. a bout of selling in the sector, wiping out $8.4 billion in market value from asian chipmakers. wilbur ross says trade talks will take time. a deal by january, impossible.

good morning, everyone. 7:00 a.m. in london and under an hour from the european equity market open. brexit and the pound plunging yesterday on the news of resignations from theresa may's cabinet. also, a possible leadership challenge. the prime minister vowed to carry on. for more, we will hear from maria terry -- maria tadeo and annmarie hordern. is theresa may's time finally up? annemarie: good morning. think so.nly doesn't that is reflected in the u.k. papers. the daily express, saying a defiant may come out -- may, i'll fight to the end. wicket means a difficult situation. the daily mail, have they lost

the plot? it goes to a possibly dramatic 24 hours at westminster. three big hurdles ahead of her. the first, this no-confidence vote she could face. are liningexiters up, the formal leader has sent his letter. 43 is the key number to watch. -- doesn't look like they have the numbers to oust her, but a leadership challenge. she lost to members of her cabinet yesterday. three names are being floated today. his office declined to comment on suggestions he was to quit. others are unhappy this morning and the other big hurdle is she needs to maintain her leadership. can this deal get through parliament? the chance of getting to the commons has bottomed out. taylor: -- nejra: let's turn to brussels.

the eu watching this political drama in the u.k. you spoke to the eu's chief brexit negotiator michel barnier. what are his thoughts on if theresa may will survive? maria: michel barnier literally walked around here seconds ago. he is making his way to the european commission because there will be a meeting today in just 10 minutes. barnier,t from michel who has also been very critical of theresa may. and he has gone very quiet that is the general sense in the european capital. no one wants to say or do anything that could make theresa may even weaker. they just want to see if she can weather the storm. no comment from michelle barnier and november 25, the special brexit summit to seal the deal is still on the european union's schedule.

if theresa may is not legal -- able to stay in office, it will be a possibility to talk about the no deal brexit, instead. taylor: -- nejra: great work, alan bloomberg reporters. europeank at how the equity markets might open in under an hour's time. yesterday, european stocks generally dropped, but the ftse 100 ended the session. dax, and cac futures all pointing higher. we see u.s. futures point a little lower after gains yesterday on concerns around chipmakers. the disappointing forecast from nvidia overnight and pushing nasdaq futures lower. also noise around trade, comments from wilbur ross weighing on u.s. futures. europe looks like it could end the week in the green.

looking at the bond market, the 10 year treasury yield is steady on a 3.11 handle. fairly quiet looking at btp's and bunds. the big move yesterday was in gilts. the 10 year gilt yield dropped 13 basis points. nothing to look at their get, yet, but could be a quiet session when it comes to european bonds. we saw the 10-year bund yield drop yesterday but we will perhaps edge higher. btp's, steady for the moment. today, we are asking the question on mliv, what level of treasury yield will reignite foreign demand? reach out to us and the mliv team, plus tv on bloomberg. let's check on the action in asia. juliette saly in hong kong has a lot to go through today. a lot to discuss in terms of the chipmakers and some movement around education stocks in china. yes, you can see the

csi 300 is actually up to half of 1%, but we have seen a lot of selling in those kindergarten makers on a regulatory clampdown. what you need to pay attention to is these ready pieces, japan's nikkei off .6%. the weakness you have seen in u.s. chip stocks, flowing through into the japan and taiwan market and taking off the other gains you have seen across the region, sending the regional index into the red by about .1% despite positivity in china, india, some p.m.'s today -- em's today. em's lookinghe solid carried a number of rate decisions, including from bank of indonesia and thailand. let's look at some of the factors in play. you have a stronger yen. the best-performing j 10 currency. the dollar weaker by about one

third of 1%. water ross, pouring cold on the likelihood we could see a u.s.-china trade deal by january. that has sent investors into safe havens. indonesianthe rupiah, extending its advance against the dollar after we saw bank indonesia surprised the market with the .25% rate increase. they have become the most in asiave central bank this year. 175-basis point hike since may. you have seen a solid rally in chinese government bonds, heading for their best week since april. yield, falling by as much as 10 basis points over the past 10 days in the bond market. nejra: juliette saly in hong kong, thank you so much. get the first word news with mao. debra: theresa may is defying demands to quit, facing a revolt

over her proposed eu deal. she said she would stay in office and the public expects her to see brexit through in an orderly way. embers of the government resigned yesterday, including two cabinet ministers. the leader of the pre-brexit wing officially submitted a letter of no-confidence in may. the newspaper reports northern ireland's dup says the deal to prop up the government is over unless may is replaced. >> i'm going to do my job of getting the best deal for britain. i'm going to do my job of hitting a deal in the national interest. when the vote comes before the house of commons, mp's will be doing their job. they need to look at a deal, of the britishsh people to leave the european union and our city -- duty to deliver on that road. ross plans to raise tariffs in january on

chinese imports, despite the planned talks at the end of this month. he said at the g20 will only look at the big picture items and we framework for further talks to resolve trade tensions. he said a formal deal by january is impossible. the united states is imposing sanctions on seven teen saudi arabia and officials over the murder of jamal khashoggi. came hours after 11 people are charged with the killing, seeking the death penalty for five of them. turkey says they ordered -- the order to kill jamal khashoggi came from the highest levels. president faces what could be the largest protest in his 18-months in office this weekend. parties have threatened to block traffic across france over a higher petrol price. 700 blockages are planned for

apartments. mexico central bank has raised its key interest rate. policymakers decided president decision to cancel a $13 billion airport and broader policy uncertainties that had worsened the inflation outlook. policymakers lifted borrowing costs at the highest level in a decade by .25 to 8%. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more .han 120 countries this is bloomberg. mao in hong kong, thank you. joining us for the rest of the show, the multi-strategy -- multi-asset strategist. let's start with talking about brexit. the updated everyone at the top of the hour. more than three standard deviation moves in sterling yesterday following the resignations and concerns around

theresa may's position, whether it is tenable or not. ended the session flat, but you saw a big selloff in banks, in homebuilders. i know you have got a small overweight in the ftse 100, but are you standing ready to take opportunity with certain sectors? >> that is very difficult. when you look at assets, we can't ignore the brexit risk. extent, there were signs mid-cap, which are more domestic oriented, could do better in the medium-term but if you look at brexit, you would rather have exposure in large caps, the ftse 100 with a lot of revenue generated abroad. that.day, you saw just international companies making money abroad were quite resilient. mining companies, oil companies and you saw domestic ones during the session.

nejra: in that sense, would you be looking to take exposure in specific companies and being very careful with your stockpicking or would you gain exposure through an index? how are you playing this in the equity space? now, we save our lab -- large cap. it acts as a protection against brexit. we would look through a broad index for if we were to see a larger dislocation. if we were to see a sharp selloff in domestic stocks, we would look to buy some. nejra: you don't see banks as an exact -- opportunity or even the homebuilders? >> you saw it yesterday, it is a macro move. risk, borrowing -- barring idiosyncratic risk, it would give us potential in the long-term. nejra: let me show you a chart of sterling volatility.

you've got more than three standard deviation move in terms of the drop yesterday but this is volatility surging, hitting its highest since the brexit vote because of the brexit mess. or are you playing sterling, are you just trying to get protection by the gilt market instead? lilian: there are many ways to protect yourself in this brexit period. one way is, it is quite obviously adjustment in case of no deal brexit. the currency and gilt market. foreign equity markets would appreciate. that is one way to play, diversified intentionally. buying more japanese, u.s. emerging-market equities. the other way is for gilt for us. s aren't think gilt attracted after those levels, but they have been proving defensive when those headlines

appear. nejra: looking ahead, i know it is impossible to protect -- predict what will happen here, as toe you looking next whether this will get through parliament for keeping a close eye on theresa may's position? we heard that to get the no confidence vote through will be really difficult. do you potentially see upside to sterling from here? lilian: we try to look at the upside versus downside scenario. long-term, we believe sterling is more upside than downside. we have been -- it is impossible to say. it is hard to see that deal go to parliament and get voted. , large-cap, equity stocks and see what happens. ,ejra: lilian chovin

multi-asset strategist at coutts & company staying with us. a headline on the bloomberg, the dup, saying it could review the confidence and supply deal with the tories. these headlines will be coming throughthick and fast the morning. we are keeping and i on them with brexit. at 8:40 london time, we will bring you the ecb's president keynote speech. after that, bloomberg's panel , deutschebnp paribas bank, and commerzbank's ceos, hosted by bloomberg surveillance and faxing -- francine lacqua. when traveling to work and you have to step away from the tv, don't, but if you have to, tune on youromberg radio mobile device or dab digital radio in the london area. this is bloomberg. ♪

nejra: 7:18 in london. just 40 minutes to the european equity market open, but let's check on the broader market. a mixed session in asia. japanese and taiwanese equities of chipmakers. that has pushed u.s. futures down. chinese stocks outperforming to the upside, csi 300 up .5 -- .5%. wtie for a third day, but heading for a sixth weekly loss. the trend is downward, even though we have seen a bounce. 128.e back below a bit of recovery after the

three standard deviation drop. resignations, four ministers resigning in the u.k.. how tenable is theresa may's position from here? looking how the european equity market might open, we have seen a mixed session in asia. euro stoxx 50 futures pointing higher. we are seeing futures point higher. yesterday, we saw european stocks close lower but the ftse 100 was flat. 10 year yield down a basis point on a three 10 handle and u.s. futures lower after strong gains yesterday. coming throughn after comments from wilbur ross on trade. let's get the bloomberg business flash with debra mao in hong kong. pg and he 49% in extended trading after the head of the california public utilities commission said he can't imagine allowing it to go into

bankruptcy. shares have plummeted 54% in less than 10 days. the catastrophic wildfire has killed more than 50 people in the u.s.. chipmaking has seen another bout of selling in asia, erasing at least $8 billion of market value. nvidia added to the latest signals. in the u.s., computer graphics chipmaker and video tumbled after the bell following a weak sales forecast for the current quarter. a disappointing outlook for the materials suggests the industry is holding off on expansion in the face of a murky outlook for electronics demand. facebook's ceo says the company is taking more drastic measures to reduce the spread of sensational content on its site by tweaking its news feed algorithm. the social media site is also to make other changes to content

moderation including for first-time -- for the first time, allowing decisions to be appealed to an independent body. >> i have come to believe we should not be making so many decisions about free expression and safety on our own. we have been talking to people for some time now. i have spoken to many experts. myself, starting in the summer. today, we are announcing we are creating a new independent body that people will be able to appeal to that will have the authority to determine whether content should come up or stay down. debra: chinese education stocks listed in hong kong have slumped after a big fall in new york on changes to kindergarten policy. beijing is to ban companies from investing in for-profit kid brands. it is also banning companies from listing companies separately or part of an asset passage. the government says it is increasing physical education

and wants 85% participation by 2020. spacex set a new mark. blasted offe rocket and the kennedy space center carrying a satellite for qatar that will include broadband connectivity in the gulf and contact -- connect radio users across the world. the 18 successful launches this year have lifted the value to $28 billion. nejra: now, today we are asking the question on mliv, what level of treasury yields will reignite foreign demand? you can join the debate. reach out to us and the mliv team on your bloomberg. to discuss this, let's bring back lilian chovin, multi-asset strategist at coutts & company. 10 year treasury yield, we are down not even a basis point.

asking this question, jack goodlatte said overseas have been shrinking because the cost had made trade unattractive. what level of yield will entice more for inviting? -- for inviting -- foreign buying? lilian: foreign buyers look at bonds on a -- basis. now, that level, 3.10, if we were to see gilt yields fall to saw, thats like we would make it attractive to a lot of u.k. investors, as included. -- us included. it really depends on your domestic market. nejra: you are itching to talk brexit, again? we had fed speakers, we heard

from jerome powell earlier and yesterday from neel kashkari and raphael bostic. the market is not convinced the fed will pull off two rate hikes next year. lilian: is reassuring to see we have had as investors about headwinds the united states economy might face in 2020 and next year, this communication is quite helpful. it means they are looking at a lot of different measures and indicators. it gives us reassurance they wouldn't hike until the recession has started. nejra: and i have asked people in the house -- past how much fed should be paying attention outside the u.s., they are focused on more the u.s. economy. what are signals in the u.s. economy saying about the outlook? we had the cpi and retail sales this week. lilian: it is conflicting because you get high customer service, high strong wage growth

which contributes to consumer demand but on the other hand, credit card spending at its lowest since 2016 and you have the housing market, which is facing a lot of headwinds because of mortgage rates and interest rates rising. it is hard to read what the outlook might be on the consumer side and consumer demand is 70% of the gdp. consumer demand is where the focus should be. skepticism on the future interest rate hikes means you are expecting lower bond yields from here. lilian chovin, multi-asset strategist at coutts & company with us this morning. "bloomberg markets: the european open" is up next. anna edwards is doing the show from westminster. we will be focusing on brexit through the day. tune in to bloomberg radio live on your mobile device and dab digital in the london area. i'll be heading to radio. i'll be there in half an hour's

time with the market open. this is bloomberg. ♪

anna: welcome to "bloomberg markets: the european open." i am anna edwards in westminster alongside matt miller in berlin. following a dramatic day in u.k. politics yesterday and looking to what happens to the pound today. matt: absolutely. the castrated, starting in 30 minutes. -- the cashropean trade starting in 30 minutes. on tories are holding gains.