good morning. i am major a -- nejra. selloff gains momentum in asia. >> in credit continue. all eyes on brussels. eu may move closer to sanctioning italy over its budget. on ad renault. thethe maker survived downfall of its architect?

good morning. 6:00 in london. welcome to daybreak europe. a check on how things are looking right now. we did see u.s. equities dipped into correction territory. apple in a bear market. futures looking a little firmer today. s&p futures, the dow and nasdaq futures a little higher. difficult day because we have been seeing selloffs across a lot of markets. credit has been hit hard. becomingean 2018 is one of the hardest years for investing since the early 1970's. the 10 year yield has been steady. up a basis point. oil hit hard

yesterday, dropping 6%. jumping today, up 1.3%. investors weighing the u.s. production, the supply side, outpute prospect of opec cuts. these are the dynamics of the market. breaking news, corporate's to think of, too. are standing by with the breaking news. >> they reported earnings in line with lower profit forecasts. this is the embattled german industrial giant plans to split itself into bank and read they said the full-year fiscal income dropped. companyd say the today's report, shares dropped 35% this year. they have been dealing with a

lot of executives and leadership people leaving. they recently put new people on the board. splitting iting at into two. earnings in line with what people were expecting. they do have a lot of challenges ahead. for an icon, really, of the german industrial. in on the's check markets in asia. juliette has more. continuing in the asian session. we are off the lows of the day. the asia-pacific index down 0.5%. it was down 1.3%. japan, weaker, 1.4%. we have not seen much money going into the end. chinese stocks, a bit of a

rebound, real estate stocks. a selloff in the industry space. not doing well despite pickups in the refiners. in detail.at stocks energy stocks, the most pain. weaker,out the session 5%. nissan very much in focus. was 1% in the open in tokyo, but giving back some of those gains. carlos ghosn's future in the company in doubt. the department store in japan since 1987.st they have announced plans to sell convertible bonds. that has investors running for the hills. juliette saly in

singapore. we have seen investors running for the hills and a number of areas. we are asking the western, when will the buyers emerged to halt this? you can reach out to us. we will be putting that question to our guest host. let's get the first word news with debra mao. >> the u.s. has accused china of continuing a state backed campaign of intellectual property theft. this comes in a detailed 53 page the u.s.leased by trade representative's office, just 10 days before trump is due to visit xi. be a move byto some of the more hawkish members of the trump administration ahead of the summit.

the u.k. prime minister heads to brussels for more talks on the draft exit deal. she has been told there can be no more negotiations, but critics are demanding she secure a better arrangement. she may meet with jean-claude juncker. the european commission report 2019 budget is's in breach of eu fiscal rules, raising the risk of fines on the country. yesterday saw pressure on the bond market. today, the eu report could be the start of proceedings leading to a fine of 0.2% of the annual economic output for italy. president trump said he will not jamale murder of

khasshogi heard the relationship with saudi arabia. president's comments drew a republicans and democrats in congress. president trump: it is all about america first. we are not going to give up hundreds of billions of dollars china,rs and let russia, and everybody else have them. it is america first. xi's visit to the philippines has already deals. it reflects warmer ties between manila and beijing which began took office.

include joint oil and gas exploration. day,l news, 24 hours a this is bloomberg. thank you so much. it was one of the worst single session losses since 25 team. virtualinvestors with -- since 2015. stocks buckled for a second day. asian stocks following with markets resuming declines. oil plunged 6%. freefall. in not to forget of course credit >> seem to be widening. seem to be widening every great to have you. a stomach churning day in

markets. i have a great chart that shows it up, showing there is nowhere to hide. nothing has worked in 2018 for investors according to this chart. yearows how over the past it has been bad, not just the most recent months. there seems to be known hannah though, though. i am referring to the arms index, which compares the advance, decline, and volume. it suggests's complacency in the markets. are we yet to see true catharsis? the don't think we are at point of capitulation. the memories of the summer, gdp growth, 4%. the numbers are still there. investors are reluctant to shrug them off. there is further

selling to go. thequestion is, when will dip the buyers emerge? the bloodague thought was in the water and the sharks are circling. as if thatl to me has gone away. there is an inclination to start selling instead. a complete reversal for everything we have seen for the last several years. nejra: a lot of the pain has been happening across market. we have not seen gold rising. treasury yield a drop as much as you would expect. the strains we have been seeing in the credit market. is there anywhere to hide? >> the treasury market has moved but not by as much as you would expect. we have seen carnage in the commodities markets.

it is difficult to know where to go. you have to go back to 1990 six when cash beats both equities and bonds. >> this year is turning out to difficult formost investing since the 1970's. i'm not saying you are investing then. does it feel like that now? you have been in this line of work for a long time? quite call the 1970's. it was not long after that. we have been in these situations seen strong we have declines. i am not going to say history repeats, but we know it rains. it rhymes, does not necessarily repeat. low correlation bear market. is there a market class you

look for signals? >> it is going to be the credit market. they have the tendency for the vulnerabilities to become apparent. will be talking more about credit markets later. how do you approach asset allocation when there are happening at the same time? a perfect storm? >> with difficulty. the longer answer, if you have the patients, have a long-term capital behind you, opportunities will,. it would be disingenuous for me to suggest knee-jerk reactions, telling markets where do you go? too much risk around it, too

much noise. i am looking for more information. nejra: what part of the information is it crucial for you to get? looks relatively strong. what we are looking for, what is the direction of convergence going to be? is the rest of the world going to find stimulus from somewhere? question yous the need to get right. and you have an answer? let's talk about tech. my head.en scratching it doesn't seem like there is any specific new news. it left me scratching my head. what is behind the most recent selloff? what has been going on has

finally caught up with the tech sector. market leaders. they are catching up on the way down. nejra: do they have further to fall? >> potentially yes. nejra: hedge funds turned net sellers. hovering at the lowest number relative to the markets. if the selloff is not down to something specific, and you are a long-term goal, does it make it more difficult to have that view? >> makes it more difficult to hold on to that. as you said, the apple store has

been a curious one. does it signal we are at peak smartphone? buye is no one else to phones out there? that is a tough call. manus: -- nejra: a lot of tough calls. will ask where the pain will fall. this is bloomberg. ♪

nejra: 6:18 in london. u.s. futures bouncing a little higher. let's check in on the broader markets. we are seeing the asia-pacific index lower.

they have bounced off their lows a little bit. crude bouncing back, the lowest in a year, dropping 6%. the 10 year yield has not moved rout.through this ftse futures, pointing higher. nasdaq futures bouncing back. when will the dip buyers emerge to halt this rout? business flash. debra mao has this for us. the alphabet -- saying he is -- google pulled

out of mainland china in 2010. companydilemma for any wanting to operate in china. >> anybody who does business compromises some of their core values. the laws in china are different than in our own country. i strugglen that with is are we better giving a decent search engine even if it is restricted and censored, then a search engine that is not very good? that is the struggle we have to our way through. >> mark zuckerberg says he is standing by sheryl sandberg as the face criticism over social networks handling of recent scandals. facebook stock has plunged

july. 40% since zuckerberg told cnn he has no plans to step down as chairman and indicated her position is secure. part ofs an important this company and is leading a lot of the efforts to address the biggest issues we have. is an important partner for me for 10 years and i am proud of the work we have done together. i hope we work together for decades more to come. >> the washington post is reporting that set has ordered a safety review into the company's it has hired to fly astronauts to the international's to base station. was prompted by the recent behavior of elon musk. that is said to have ranked some at the highest level. that is your bloomberg business

flash. nejra: thank you so much. creditcks in the market -- pressure began building last month, things blew up. high-grade bonds spreads widened the most in two years. premiums rose. investment grade bonds are on track for their worst year in terms of total returns and eight decades. deeper, he has been following the story all year. -- dig deeper. great to have you come a big fan of your work. let's start with why things have gotten so bad now for corporate debt. >> there was a risk we knew we had to deal with, the end of quantitative easing.

people were looking at life after qe. risks have mounted since then. jitters in the emerging markets. the last two months, we have what we havern of not seen in several years, idiosyncratic risk. related to specific sectors. terms of the different areas the bond market, you mentioned investment grade. junk bonds.k what has done better and what has done worse? selloff acrossa the board. have been differences between markets for several different reasons. one reason is the difference on the default risk. cratering, the most

over there. in the u.s., the extra weight of rising treasury yields. we did on total return. that is not something we have seen in europe. that minimizes the risk. spreads have widened across the board, that is not something we can dispute. much: is there a difference between what is happening in the u.s. and europe? is mostly about the underlying rates market. we seem to be dealing with the same risk at the end of the day. especially in europe, a european central bank ending asset purchases. billionalking about 175 euros worth of purchases. if you look at the chart, we are

at a level we were at in 2016. this is when the program was first announced. startedd claim we have pricing this out. we are going into next year on our own. that is going to be difficult. said: when quincy crosby it acts as a signal, the market could be taking a cue from the equity market. my expectation is the credit markets usually are the lead. there were signals, not entirely priced in. have known markets have grown immeasurably. the average quality, in the investment grade space, has dropped. of problems we have known about for a while. is there anywhere you

would be taking opportunity? high-yield spreads reaching the highest level since december 2016. i have seen a couple people say they are getting attract to. the leverage loan market has not performed as badly as the rest. are there opportunities you would look at? >> some returns will come from there. the leverage loan market is one of the riskier markets. the covenants are some of the weakest i have seen. many of them are getting packaged and sold off. a bit of a warning signal. nejra: thank you so much. discuss thewill latest on the scandal and how arrest is impacting the

relationship. can the alliance survive? tune in to bloomberg radio. stay with us wherever you are. ♪ [ phone rings ] what?!

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nejra: let's take a look at the world map. a lot of red. the s&p continuing in asian markets. in the markets around the world. good to see you. openedequity markets had unscathed. how is it looking now? well butrted off very

we have come off to the lowest part of the day. this is despite the crude markets doing well. not providing the long-term respite. the lowest spot of the day. you, the crude price fall has brought about some gastion in the oil and index, up about 0.5%. it would naturally reactivate. companies are doing really well. the former company on your case, that has led to the stock doing well. a lot of pressure on indian markets. you mentioned oil, you

saw that plunge 6%. oil is rebounding. i'm guessing that tells us something about volatility? of falling, the risk for the first time in a year -- the highest in almost two years. a lot of factors at play here. the global selloff, trade tensions escalating. on top of that, a debate on agree topec could production cuts. adding to the latest risk and pressure on the market is the u.s. president. saudi arabia has been responsive for any but west for lower oil dices. a tripon, i want to take down memory lane. where were you in 1998?

looking at the dot-com bubble. pressure,s have put selloff events have put pressure on the index. that is what we have. in blue, the index from 1998 to 2001. don't they look remarkably parallel? nejra: yes, they do. , in mumbai, for the roundup of the markets. we are asking the question, given the selloff and the pain we saw yesterday, when will the dip buyers emerge to halt this rout? let's get the first word news in dubai. the u.s. has accused to china of continuing a state backed

technology theft. a 53llegations come and page report, just 10 days before trump is due to meet xi. this appears to be a move of more hawkish members of the trump to bolster their case. to brusselsheads later for more talks on the draft brexit deal. she has been told there can be no more negotiations. critics back home are mending a better arrangement. she will meet with jean-claude juncker. reportopean commission could sayis morning that italian 2019 budget is in breach of eu fiscal rules. yesterday saw the bond market

under pressure as domestic investors got a lukewarm response to inflation linked to that. -- debt. euros annual economic output. president trump says he will not let the murder of u.s. based khasshoggi hurt relationships with saudi arabia. drew asident's comments backlash from republicans and democrats in congress. day.l news, 24 hours a powered by more than 2700 journalists and analysts. so much.ank you now to a bloomberg exclusive.

james gorman says he is not concerned about the recent selloff or his bank's ability to handle volatility. who shared his thoughts on the market correction and feedback. the bubble burst of 2000. i was coming out of graduate school. this is a market correction we are going through. this is within the wheelhouse of what we can handle. >> is it a healthy shakeout? >> we are in a tightening process around the world. three, probably four rate increases this year. that has consequences. of clinicalt

turmoil. it is not surprising the markets have been anxious. hundreds ofcks billions of dollars created, it is not surprising some of that is being taken off the table. >> there is some debate. it is reflected in the volatility we have seen. this sustainability of u.s. growth. magnitude of rate increases. the magnitude of the standoff the administration is undertaking with china. arounde any consistency that debate as far as what you hear from clients? important thing to take away is there is a lot going on. every morning you get up.

there is a strong news flow from overnight. brexit, tariffs. , protectionism, anti-immigration. >> a much longer list. >> before you get to what is going on in the middle east, the war in syria, north korea, a lot for investors to absorb. when they are confronted with with the backdrop of economic fundamentals, the corporate credit boat has fallen, you have this combination. ares not surprising markets anxious. is not -- this is what they do when they deal with uncertainty. was the morgan

stanley ceo speaking exclusively to bloomberg. sn the wake of carlos ghosn' arrest, but tensions have exploded. both companies have differed in their reactions. has stoppednault short of dismissing him, keeping him as chairman and ceo. custody in japan 5ter failing to declare billion in yen or $44 million. tell us more about where carlos ghosn is now. he is in a detention center here in total will. and tokyo. we are learning from media, the courts have approved a

prosecutor's request to hold him for another 10 days as the evidence is compiled. we are not sure whether he is legald or not allowed representation during this time. the japanese legal system is opaque in that regard. we have a further report from i thatve it is the nikkei is he could be held as late as december 10. point, they'll could be could be- bail offered. there is a lot of uncertainty about what is going to be the as well as his fellow

board member being detained. the question going forward, what is the fate of the alliance? renault, mitsubishi companies on. -- mitsubishi, nissan. nejra: what is expected that the nissan board meeting? >> it is almost sunday like a foregone conclusion. the ceo of nissan saying their conclusion from their month-long ghosn istion is carlos guilty of financial crimes including understating $44 .illion renumeration he will push for the board to dismiss carlos ghosn tomorrow. it will be an interesting board meeting tomorrow in yokohama. >> thank you so much. on the nissan part of

the story. let's look at the other stocks you should be watching. we are joined in paris, looking at renault. and in frankfurt, watching the dots deutsche's -- watching another story. they are obviously shocked but they were taken blind-sided rea. they have not outright fired him. the allegations have not been shared with the french side. they are only going on what has been said in japan. felt they could not legally fire him but he is not in the job right now. the numbers at the

top of the hour. full-year earnings in line, tell us the details. >> they had a rough road. a year marked by executive resignations. activist investors calling for a breakup. us --he ernie's toll asnings told us, this is they plan to split into bank. income dropped. november 8, .1 euros. the job could be made harder if german growth slows. shares fell 35%. a rough line for the company. >> let's turn to you.

concerns over donald still bank -- testify in brussels. recorde bank hit a new low. there is nothing proven. the bank is still troubled. investors taking a conscious stance. stance.ous it will be interesting to see if he is adding anything new. thank you all for joining us with stocks to watch. you can get all the latest stories from our equities team.

the head of investment is still with us. we talked through some of the examples of idiosyncratic risks. particular,urope in are there sectors where you see sectors that are suffering? >> you have to look at some of the worst performing and find names where you have quality of earnings. >> any in particular you are thinking about? how much does the issue of debt feed into this? all the concerns around credit. >> i don't have any names i have been looking at. the leverage and balance sheet, trying to term and if there is a rally, will they be stocks that will benefit? is it a sign of underlying week this -- weakness?

coming up, south africa releases inflation dates. cpi expected to fall to 5.1%. what does it mean? we will talk all things special rank -- central bank. that conversation at 11:30 a.m. u.k. time. if you have to step away from your tv, go to bloomberg radio. in the london area. i will be joining you there from 8:00 a.m. london time. ♪

this is bloomberg daybreak: europe. 6:49 a.m. in london. it looks like it could be a nice day in london, judging by that

skyline. let's check in on what is trending. almost every major coin is falling. bitcoin, following 13%. theresa may heads to brussels to fix a post-brexit plan. our most read stories, and heard place, the rivalry in the open. second, the u.s. accuses china of continuing i.p theft. --th africa relation releasing inflation data. the reserve bank aiming for to 4.5%.oser the bank will announce their next rate decision tomorrow. the south now, african reporter for bloomberg.

what are expectations you have for inflation today? >> as you mentioned, the economists,about 18 inflation will have accelerated 4.9% in the previous month. the central bank target, keeping it in the three point -- 3%-six points and range. having it close to the 6% market may mean the central bank may raise rates for the first time this year. the rand has recovered a little bit from the lows in september. pricee seen the oil decline. could we see the central banks say any uptick is only temporary? bank governor has

consistently said in the moves the central bank moves whether to hike rates or keep them stable will be dated dependent. the rand has recovered over the past month and we have seen oil prices reduced. south africa's growth is not looking very good. the central bank does not say they consider themselves a growth targeting institution, we growth it giving it consideration. the international monetary fund has warned if the central bank does not increase rates now, it may fall behind the curve. is between aank rock and a hard place. nejra: that is a challenge a

number of emerging markets are facing. thank you for joining us today. the corruptions we had seen in global markets -- you would now be the time to come back to emerging markets if you're not in there already? flex yes, you are right. been in a bit of a cause. there are some strong fundamentals. there are three things i'm going to watch in particular. one is the dollar. what happens with the dollar, particularly when it is driven by the said. second trade tensions. i take the threat

of 25% off the table? that would he a significant move. we have seen the ante upped. who knows which way that will go. lastly, watching chinese growth. well it continue to deteriorate? if it does, that will weigh heavily on markets. there are fewer expectations in the market of rate hikes in 2019. if everything happening in the global economy does cause the haas, is that good for emerging markets? is it bad because they catch the cold of concerns about global markets? i would be inclined to go with the former. the view if the fed does posit the dollare hints --

does not strengthen as it has been and we take a break. there is room for emerging markets to catch up with u.s. growth and u.s. growth remains strong. how concerned are you trade tensions are going to escalate? >> quite concerned. where -- were they simply a threat to make sure the chinese come to the table? possibly. or is this a genuine move from a trade war escalating into a tech war? nejra: on oil, i get differing views when i asked how important oil markets are to emerging markets. are we over the worst of the rout? >> i think we probably are.

we have seen such a dramatic all in such a short space of time. sort ofs to be some opec and friends response that will ease the pressure. nejra: thank you so much. great to have you with us. another top story we are watching is italy. let me bring you news that has broken. the deputy prime minister may be open to budget revisions according to stamper. spread closed at 326 basis points. that is another thing to be watching among all the other dislocations we have seen among markets over the past 24 hours or so. we will be watching closely. we are asking the question, when dip the debt buyer --

buyers emerge? this is bloomberg. ♪

nejra: good morning from bloomberg's european headquarters in the city of london. i am nejra cehic. this is "bloomberg daybreak: are today's these top stories. a brutal session in the u.s. kicks asia off deep in the red. green shoots emerge in u.s. and european futures. do the crops in credit -- cracks in credit tell a different story? travelsme minister may to the city to sell her brexit deal. nissan to vote on ousting the executive on thursday. can the car alliance survive the downfall of its architect?

good morning, everyone, and welcome to "bloomberg daybreak: europe." we are under an hour away from the european equity market open. yesterday, we saw equities more thaner by 1%. the s&p 500 briefly flirting with a correction. apple in a bear market. it was a punishing session for u.s. stocks. we have seen asia in the red but it looks like we could see a little bit of a rebound today. u.s. futures are moving higher. ftse futures up by .25%. cac 40 futures moving higher by .5%. buyersis mean the dip are starting to come into the equity market or will this be a short-lived relief rally after the pain we saw yesterday? credit still a big question with

both described widening out to two-year highs. another part of the bond market is fixed income. the 10 year treasury yield has not moved up all amount throughout all of this. .3 07 handleoughly today. we could see a bit of tightening in the btv bund spread. we have had some comments in ated in less tampa -- paper that markets might be calming. thes concerned about spread. this is how we are going to see the open in european bond markets, moving into italian bonds. not a lot of movement in the 10 year. we have seen it move higher by about a basis point. a move in the futures market seems to reflect that as well. let's check in on the markets in asia and juliette saly in singapore has more. not looking quite so bad as we were at the beginning of the session, but we are still in the

red. the msci we are on asia-pacific index, but you can see this rebound coming three in chinese and hong kong equities. the cfi 300 closing. garfield saying is this a bounce? you put it in a more interesting term. the india market coming under ofssure despite you saw some the oil refiners rally. we have seen a lot of the energy sox being hit hard by the fall in crude prices in the u.s. session. a lot of the em's also hit hard by that fall in crude such as malaysia's market, off by iran 1%. japan's index closed off the session weaker. having a look at some of the other market movers, you have seen not only major risk off in terms of equities and commodities, but also in terms of asian dollar bonds,

particularly the commodity dollar bonds. was a little bit mixed against asian currencies, but the asian currencies are a much hit hard. the malaysian ringgit down .25% against the dollar. he saw the u.s. dollar hold some strength against the japanese yen today. ae yen is being vulnerable to short squeeze in terms of some of the crosses like the kiwi, the aussie, ahead of the things giving -- thanksgiving holiday. today, we are asking the question on mliv, appropriate of course with the stomach churning day we saw in markets yesterday, emerge?l the dip buyers you can reach out to us on the mliv team. tv on your bloomberg. but get the bloomberg first word news with jeffrey humphrey -- deadly humphrey in dubai. the u.s. has accused china of

continuing a state backed campaign of intellectual property and technology theft. the new accusations come in a detailed report released by robert lighthizer. he offered 10 days before trump is due to meet xi on the sidelines of the g20 summit. the timing of the report seems to be a move by more hawkish members to bolster their case ahead of the summit has other cabinet members push for resumption of trade negotiations. u.k. prime minister theresa may over -- brussels on the brexit deal. she has been told there can be no more negotiations, but her critics back home are demanding she secure a better arrangement. she will meet with the european commission president, jean-claude juncker, this evening, ahead of the summit in brussels on sunday. president donald trump says he will not let the murder of jamal khashoggi jeopardize

relationships with saudi arabia. in a statement headlined "america first!" trump said he would stand by saudi arabia regardless of whether mohammad bin salman ordered jamal khashoggi's death. it drew quick criticism. pres. trump: because it is america first to to me. it is all about america first. we are not going to give up hundreds of billions of dollars in orders and let russia, china, and everybody else have them. it's very simple. it's america first. juliette: global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. back to you. nejra: thank you so much. desley humphrey -- humphrey in dubai. airbus is naming their next cfo, assam is to move

to airbus in 2019. airbus naming michael as ceo there were -- as coo. there were some reports that he was going to name operational posts. now, it was one of the worst single session losses since 2015, with simmering weakness across assets, boiling over yesterday, to leave investors with nowhere to hide. u.s. stocks uphold, sending -- buckled. asian stocks followed earlier in the session but we are seeing a slight rebound in chinese equities while credit markets recently impervious have shown signs of shaking apart. joining us now is eric. great to have you with us. the mlivart with

question after the day we saw yesterday, which is when will the dip buyers emerge? eric: it's a bit of a more nuanced reality because it mean.s on which dip you when we spoke a month ago or so, everyone was terrified about what's happening in emerging markets. we spoke at the time about chinese equities, emerging market bonds, and actually, what is interesting is how well those have been performing this month, so you have been making money in and koreanities equities, so i think it is a much more differentiated world than it looks like on a half quincy snapshot in one afternoon yesterday, so i think those have been dips or phases of trauma. the important point is to stand back and say how much are you getting paid, where is their value? do you think it is emotional behavioral, driven by underlying

fundamentals? they have been trading on a rest ofrelative to the the world. if you look at credit markets, they have been having an extraordinary party. they have been a very pleasant place to be with fabulous ratios. we have not had much volatility, steady returns. to be honest, and markets have absolutely been right for a -- ripe for an aggressive repricing. the interesting question is whether u.s. equities are starting to get attractive now. nejra: and to that point, if you're looking at u.s. and european futures, the answer could be today if you see european and u.s. equities rise, but the question becomes do we see a retesting of the lows again rather than any kind of sustained buying? you are talking about differentiated market. jpmorgan talked about an uncorrelated bear market. is that where we are? eric: bear market does not mean very much.

i think we are in an uncorrelated world, absolutely. there has been one unifying aeme which has been rising fed funds rate which has been dominating markets for the last 12 months to varying degrees of significance and that came to the fore in emerging markets when we see all the dollar leverage to emerging markets getting hit the most aggressively. it finally infected the credit market. it is having greater impact in the u.s.. call here,important and it is plausibly the case, is whether the fed pauses. more than pauses. we are pretty much says entering neutral territory here. we are going to start -- there is a lot of discussion behind-the-scenes that the fed might move to an average inflation target which would be a sensible thing to do. it is classic trump. he has almost stumbled accidentally upon the truth. i think his criticisms, despite the fact that the language is

over the top, of the fed in many ways are apposite. a recession will be a disaster. to 2.5inflation went news, that would be good. it's not an inflation problem. it's a plausible scenario where markets can call him down in their beliefs about interest rates, which means an aggressive repricing of risk assets. nejra: in terms of risk assets, now could be an opportunity in u.s. equities. when will the dip buyers come in? perhaps the day -- today is the day. can you as equities meaningfully rebound while we still see credit suffering? if credit keeps behaving like this, values will reassert themselves. the reality is corporate profits are very strong. the fall rates are very low. the me explain why. i do not think the starting point was attractive.

i can find higher returns elsewhere. if you are a dedicated fixed income market, it depends what your opportunity cost is. personally, as a global multi-asset and macro investor, i can find much better value elsewhere. i am getting paid 9% and 10% real to own chinese equities. you can make 60 or 70% in european equities. those levels of return are not available in the u.s. credit market to me. what is happening in the credit market -- we know what the problem is. it has been flagged for over 18 months, which is gross corporate leverage is high even though interest coverage is pretty good within the corporate sector, so i do not think this is a fundamental problem, but it is a major repricing of asset markets, which has -- amplifies the effect of the fed. what the fed has done up until now has been trivial. it's a bit like tapering. it can have big consequences when it gets amplified to other parts of the market, and that is

what we are seeing currently. nejra: leveraged loans, that part of the credit market, have not been quite as badly as the rest so far year-to-date. if that becomes the next shoe to fall, is that the next capitulation where we could see recovery or this has gone so terrible now and people take flight? are: leveraged loans variable interest rates. they don't suffer as much. i don't think there is information there. the reality is the corporate sector has responded logically in many ways to where interest rates have been and what the fed has been doing with policy, but that is a material deterioration in the quality of their balance sheet. criteria the cheerier rating and easing. i have not liked credit for quite some time. we have not done any credit in any of our portfolios. there has been a big opportunity to go short credit relative to equity. and that is broadly panning out. i suspect at some point in the

not-too-distant future, this credit market will calm down. i do not think there is a major fundamental problem. endogenousis an repricing of risk in that market. it's going to get the fed to rethink what they are doing. with: we will carry on eric lonergan, fund management. releases -- e.u. releases its opinions. down eight basis points, 3.54%. we have seen tightening on that btv bund spread as well. we speak with the monetary commissioner,. moscovici -- --, pierre moscovici. if you have to step away from the tv, tune in to bloomberg radio on your mobile device or dab digital radio in the london area. this is bloomberg. ♪

nejra: 7:17 in london, which means we are 42 minutes away from the european equity market open. let's check in on the markets. we have seen quite a lot of red in the asian session following on from that punishing session in the u.s. yesterday, but the msci asia-pacific index has come off its lows. we are seeing japan weaker, but shares and hong kong have been gaining. crude had a bad day yesterday, down 6%, hitting its lowest in a year, but rebounding today. oil volatility is on the rise. the 10 year treasury yield is fairly steady. we have got to look at the yield down seven basis points. the btv bund spread closing up a little as well. we are at 3:17. a headline that mikael savini has said budget revisions might

be on the cards. european equities could open higher. we could see a rebound, up by 5%. u.s. futures also -- .5%. u.s. futures also. are the dip buyers coming back and today? when will the dip buyers emerged to halt this rout? on tv ons your bloomberg. let's get the bloomberg business flash. tensions between nissan and renault have exploded into the open as the downfall -- the two companies have drastically differed the reactions to the arrests in ofan on suspicion offenses. firingopped short of him. they intend to dismiss the chairman. it's board meets tomorrow.

the alphabet chairman says he is not confident google will be better off bringing a censored search engine to china. google pulled out of mainland thea in 2010 when founders decided censorship was unacceptable. john hennessy told bloomberg its dilemma for any company wanting to operate in china. >> anybody you does business -- -- whoa compromise -- does business in china compromises some of their core values. the laws are different. the question i think that comes to my mind and that i struggle with is are we better off giving chinese citizens a decent search engine, a capable search engine, even if it is restricted and censored in some cases, than a search engine that is not very good? does that improve the quality of their lives?

that is the struggle we have to work our way through. juliette: they have reported -- desley: they have reported earnings largely in line with their profit forecast. the embattled german industrial giant prepares to split itself in two. dropped to 60 million euros, down from its november 8 forecast for 100 million euros. they are facing lower profit due to a provision for antitrust risk and lower-than-expected elevatedat its divisions. mark zuckerberg says he is standing by facebook's coo, as they facerg, criticism over the social network's handling of a recent scandal. facebook's stock plunged 40% since july, amid claims that they compromised users privacy and helped undermine democracies. zuckerberg told cnn he has no plans to step down as chairman and also indicated sandberg's position is secure. >> cheryl is a really important

part of this company and leading a lot of the efforts to address some of the biggest issues that we have. and she has been an important partner for me for 10 years. i am really proud of the work we have done together, and i hope we work together for decades more to come. desley: and that is your bloomberg business flash. humphrey in dubai, thank you so much. here is a look at what you should be watching today. at 8:30 u.k. time, riksbank releases its 2018 financial stability report. watch out for new economic forecasts from the oecd. as we have been hearing, the european commission publishes the budget plans of euro area countries. watch for comments on italy's att reaching e.u. fiscal roz 11:00 a.m. u.k. time. for more insight on what the e.u.'s reports on italy's debt could mean, kevin costello joins us.

a headlining have seen just a few minutes ago, actually, in lastampa. saying he may be open to what it positions. we are seeing yields move lower presumably on that report. is this the hope that the markets can take from this? kevin: i think it probably is. he is said before that certain that the spread with german yields may come down, but this seems to be the first time there is a report he may be willing to we lacks a little bit of a stance on the budget itself. the two things that could be affected would be the so-called citizens income, and even the thing heirement age, a has been championing all along. ok, and of course, we are looking to see whether the e.u. could open its deficit procedure

against italy on wednesday. tell us more about how that could unfold. that could take quite a while. the first thing as you mentioned is the report today on italy's budget and on the budgets of the other euro area nations. now, the european commission has made it clear that the italian budget does not conform to you rules -- e.u. rules, and it wants that budget to come into the e.u. shelter of those rules, and that is what we will be seeing today. the next step could be that they open what is called the excessive deficit procedure. nejra: thank you so much, bloomberg's kevin costello. eric is still with us. if we do not get anything to concerning out of the report, those the problem of italy to some extent go away until 2019? the problem of italy, it

depends on what you perceive the problem of italy to be. i think the fundamental question as an investor is whether you start to see more rational behavior out of the italian government, and i think you have already started to see that. it is blindingly obvious to anyone in italy, it is a catastrophe. you have no fiscal room to maneuver even that you have got gross public sector debt in excess of gdp. you need to control your interest rates. i think we started to see the science after their initial formation of a government, they announced a whole lot of programs. they appear to be trying to stick to their guns. they have come out very quickly to say the euro -- their membership of the euro is not to be questioned. the are targeting it. it is pretty encouraging. i hope the commission are sensible.

i think we will see more sensible noises. nejra: with all the eruptions coming on in global markets, you like european equities. given that companies with the most leverage have fared even worse than the momentum shares, at particularly if you look at the u.s., either balance sheets looking particularly good? eric: if you look at how much you are getting paid, there is so much bad news priced into european equities. extrapolated what has been a slowdown in european growth. i would not be surprised if you see a pickup. people do not learn. everyone extrapolated to the beginning of the year. you get a slowdown. you could easily see growth accelerating. all that it would require is a change in perceptions of risk and you could get a significant move upward. nejra: we are looking at the change in perceptions of risk. thank you, eric. that is it for daybreak europe.

"bloomberg markets: european is up next. tune in to bloomberg radio on your mobile device and on dab digital in the london area. i will be hopping over there at 8:00 a.m. london time. this is bloomberg. ♪

bloomberg world markets. i am anna edwards here in the city of london. the eu set to report on italy's budget plan well theresa may european equities futures point to a positive open. holds o