♪ nejra: good morning from bloomberg's european headquarters in london. i'm nejra cehic. manus: and i manus cranny live from dubai. this is "bloomberg daybreak: europe." is today's top stories. nejra: the rally in risk assets comes to an abrupt halt in asia as larry kudlow dials back on trumps trade do with china. bond market moment. the u.s. 3-5 yield curve inverts for the first time in a decade. is a warning sign for the fed? theresa may's attempt to celebrate a deal gets torpedoed by mps before she even starts her pitch. mark carney also faces a grilling from parliament today. ♪

manus: a warm welcome to "bloomberg daybreak: europe." let's get straight into these markets. itsis rising and has had best to date gains since june. day gain since june. one thing to bear in mind, we are in mind, we are conduct cross mode on the bright market, which is where the moving averages cross over one another. there could be a lot of bullishness priced in to the cuts we already expect from the vienna. the equity markets are stepping back their overall belief, in terms of what was affected at the g20. that's by mnuchin, larry kudlow. the indian market stepping back

a little bit. let's have a look at the bond market. what you see is a huge amount of buying in futures at the moment in u.s. bond futures at the moment, breaking through the 200 and moving average. that is buying futures, taking the other down over the two days. we see the losses overall in the bond market. the bloomberg markets treasury indexed narrowing the losses to 1.1%. we will debate all of those things. nejra: good morning. well done to you too. yesterday we were asking how long the trade truce rally would last. yesterday we saw gains on the s&p 500 of more than 1%. futures pointing lower in today's session. in the european session we saw carmakers, technology stocks,

commodity producers leading the rally. what sort of rotation might we see with some risk coming off the table today? dollar-yen did not move a whole lot. bc this move it little bit more now, money moving into the yen -- you see this move a little bit more now, money moving into the yen. 5 yield curvehe 2- inverting for the first time since 2007. some saying that this perhaps signaling we could see a fed pull or cut in 2022, 20 33. you have to take into account -- 2023. you have to take into account that demand for risk. 2-10 has flattened it its flattest since 2007. we speak to the ac milan chairman.

do not miss that interview at 9:30 a.m. london time. let's check in on the markets in asia with juliette saly in singapore. what a different picture to yesterday. juliette: yes, and to quote bohemian rhapsody, half an hour ago manus alluded the fact that i did not know the words to it, which is both offensive, and incorrect. easy come, easy go. we are lower today on the msci asia-pacific index. the nikkei down by 2.4%. of the yen strength affecting japanese stocks. have been higher for seven sessions in a row. have a look at the hang seng and csi 300, both off by about 0.5%. australia's market finished lower by about 1%. in jakarta stocks are up by about 0.25%, but certainly it does seem like a lot of -- a little bit of investor fatigue,

with not a lot of detail coming through on what this trade truce entails. -- practice of offering inappropriate subsidies for its handsets needs to be more regulated. this is on it t beagle maker in hong kong up by 4% -- this is an electric vehicle maker in hong kong up by 4%. this company also getting a broker upgrade from hsbc. , theustralia, met cash supermarket chain falling by over 7%. net is a lot of competition issues at stake. that stock has followed by about 12% over the last couple of sessions. manus? for one never doubted moment that you secretly knew the words to that song, juliette saly. i want to give you a quick snapshot of our markets are

doing in the uae. are closed for two days. to do my market -- we were closed for two days. abu dhabi rising by more than 2%. we will keep an eye on those middle east markets. let's get your first word news now. debora: the bid on prime minister theresa may's brexit deal has been delayed after opposition parties were granted an emergency discussion on whether her government is in contempt of parliament for refusing to release its brexit -- device. and a late ruling yesterday the house of commons speaker said there was an arguable case that ministers were in contempt. france's finance minister says the yellowjacket protest are hurting the nation's economy. the protests have spiraled into

a push back against president macron's policies. the impact on the economy is serious and now has become ongoing. this is a cut of 15%-20% in sales for retail. for restaurants its of the same scope and hotels have come to be hit because it is the attractiveness of france hit with full force. order must be reestablished and we must get out of the situation as best possible. >> argentina's president says south america's second-biggest economy is on the right cap a strong rebound in 2019. the country was dragged into recession this year and forced to seek a record imf credit line. in an exclusive interview, mauricio macri told bloomberg that argentina's hard work on the economy is paying off. >> this argentina is in a much stronger situation than it was 12 months ago. we have cut significantly our

defici. , next year we are going to -- our deficit. next year we are going to balance the primary budget. we have already financed all of our needs of the imf program, so that makes it the difference -- makes a big, big difference. >> global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. nejra and manus? manus: thank you very much. debra mao with the latest global headlines. asian stocks are falling, along with you as futures, on uncertainty over the details of it u.s.-china trade negotiations. president trump's top advisers have failed to shed light on the deal he claimed he had struck with beijing to reduce tariffs on u.s. autos. >> i will say this, they cannot slow walk this, the end of this. their words, immediate.

i expect to see confirming results. nejra: joining us now from beijing is bloomberg's china economy editor. great to have you with us. do we know anymore about what the u.s. and china agreed to over the weekend? there was a distinct difference between the statements. >> that's right. some people are saying on twitter, it's like the two sides were in different meetings. i don't think the differences are that stark in the statements they put out, but the two sides are definitely claiming different things were agreed. the statement from the white house and now president trump has made some expensive claims on what the chinese have agreed to do. the has been no confirmation from china that they are going to immediately lower car tariffs and immediately stop buying more cultural products -- start by more cultural products -- purchasing more cultural

products. china is gradually looking to ease the tray bounces and gradually ease the u.s. concerns. said immediately something will happen but the official statement from the chinese government is that they are looking to gradually work towards what the u.s. is looking for, and to make a deal. that is no real clarity yet on what was agreed or what was said. even on the u.s. side, you are seeing some confusion with steven mnuchin, larry kudlow saying different things about who is in charge and about what was agreed, and even on what periode 90 day tariffs will start. , there isn the u.s. confusion about what was discussed in argentina. and the mediaets are also confused about what actually was decided. manus: ok, james. thank you very much.

james with the very latest on interpreting just exactly what did happen in the negotiating room. our guest host this morning is raj shant, portfolio manager at newton investment management. we have been writing about the yuan. the yuan had the best today run ay run since- 2-d 2005. isn't mission accomplished -- is that mission accomplished? raj: well, i think at the moment the politics at play in the currency markets is just immense. really with signs of softening growth in china, what the chinese authorities would have probably like to see a weaker y uan. from some perspective, this might be mission accomplished.

i think the fundamental imbalances and problems remain. it is going to take some time to work through this. nejra: let's take this to your world of equity markets. we saw a strong one-day rally yesterday after the trade truce. we see a bit of risk being taken off the table today, but there -- are there reasons for you to keep risk on the table and equity markets globally over the next 90 days? raj: i would say that over the next 90 days we are covering probably the most favorable time of year for equity returns. december and january is typically the time of year when you get the vast majority of the positive equity returns. is already a benign. -- it is already a benign p eriod. opec is coming up, easy be coming up, which could be -- ecb coming up, which could be positive.

into 2019 and 2020i think we will see the structural issues that have been warned the markets this autumn resurface. manus: what is the risk of returning to synchronized growth 2019, raj? raj: i think it's possible, but quite unlikely. if you think about the scenario we have had over the last few years,. it has been synchronized growth. it has been favorable, -- synchronize growth. it has been very favorable, but surrounded by rising debt, credit debt. in the u.s. we have record levels of credit creation. in europe debt levels are at all-time highs. that has kind of supported global growth. i think once it's possible we returned to synchronize global growth in 2019, the long-term issues remain. we are sending -- sitting here

at the end of 2018. this economic cycle began in about the second or third quarter of 2009. nejra: you have mentioned debt levels and you have more people coming out with concerns about corporate leverage. one of the latest being randy quarles. you are a long-term investor, so perhaps things like trade tensions, maybe you see that more as noise than anything else, but how concerned are you about corporate leverage? how is that affecting the way you allocate across that equity space? raj: the cycle that began in the second or third quarter of 2009, if you agree that we are quite late in the cycle, that it's a very mature cycle, you have to really worry about companies ,arling, -- borrowing leveraging up to buy back shares.

so that they greatly to lose money over the next several years -- that's a great weight to lose money -- way to lose money over the next several years. we are try to avoid that in our portfolios. manus: i'm looking at oil specifically brent. we are in-depth cross mode -- death cross mode. how do you look at this oil market at the moment as we get ready to pack our bags for vienna? 's oil something you have an exposure to vicariously the commodity or in any way to the equity -- through the equity? raj: we have a very modest exposure to the oil sector. there are a few different perspectives we can take on oil. firstly, it's a supply shortage and demand issue. we have russia versus opec

coming through. the are quite a few commentators and market participants who would say that this is really a demand issue. a is intel on weakening -- tell on weakening, softening economic growth. the flattening of the u.s. yield curve is often an indication of the same thing. nejra: will talk more about exactly that in a moment. raj shant stays with us. part of the treasury yield curve flipped to negative for the first time in a decade. our markets putting the fed on notice? later today we speak to the ac milan chairman. don't miss that interview at 9:30 a.m. london time. manus: if you are traveling to work, join the bloomberg team on radio, dab digital radio in the london area. this is bloomberg. ♪

♪ nejra: this is "bloomberg daybreak: europe." londonw much a hitch in -- nejra cehic and a european headquarters in london. manus: who do you believe, donald trump or mnuchin? doesa kite -- the nikkei not believe donald trump. the yuan, the fx market does believe that when the chinese officials step off the --, that's a good story. they believe in a cut. the fx market believes in the trade story. nejra: of course the treasuries markets is what we focus on as well today. we had that 10 floating around the 3% level. it dropped below its 200 day moving average. the two tens kurt flattening --

2s/10s curve flattening. did that bit of the curve 10's. before the 2 and is it to do with supply? let's get the bloomberg business flash with debra mao in hong kong. bra: morgan stanley says it $11 billion restructuring plan could cost 25,000 staff their jobs. before it is to detail -- an analyst expects much of the company's turnaround plan to focus on europe, an operation morgan stanley values at -$7 billion. and japanese newspaper says tokyo prosecutors plan to rearrest carlos ghosn and director greg kelly.

on arrest will happen december 10 on a new charge of understating his income, something carlos ghosn denies. prosecutors now think his pay was underreported by about $79 million. apple is said to be ready to miss the rabbit 5g launch next year and has opted to wait until at least 2020 before offering an iphone that can connect to the next generation of high-speed services. in the past, apple has been proven correct to say that new networks would bring problems, such as sporadic coverage. that is your bloomberg business flash. nejra: thank you. u.s. treasuryhe yield curve has inverted for the first time in more than a decade. the spread between 3-5 year yields turned negative for the first time since 2007. the move could be the first sign -- as the market is that and

of the fence tightening cycle. >> if i said to you i would be positive until we had clear sequence of inflation numbers about 2% at the minimum. i actually think 2% is too low a target, but you try to make that argument to the fed and the become crazy -- they become crazy. raj shant as our guest host and portfolio manager at newton investment management. if i think what he just set and i look at the data, it is rolling over -- said and i look at the data, it is rolling over. this gives the fed perhaps the possibility to justify a pause. you see core pce dropping and rolling over. does it give them the have that

they need -- heft that they need? raj: that risk was probably about six years ago. the policymakers mistake has already been committed. i should not disagree with mr. krugman. i think the fed it should have really been raising rates after two or three years of growth, and that would put it back in 2011 or 2012, not now. what we have now is this huge accumulation of debt around the world. the reason i think the yield curve is beginning to flat already and we maybe already seeing close to the top of the federal reserve rate hike cycle is that we let debt buildup too much. happens when you cut interest rates to zero and we kept them -- that's what happens when you cut interest rates to zero and we kept them at 02 long -- too long.

this chart basically shows that this has occurred before during times of stress. that are many bits of the curve we can look at. i want to bring in the mliv question. what does the u.s. yield curves march towards inversion mean? raj: we are getting towards the end of the cycle. it is very long cycle, one of the longest pace cycles we have had. we pretty much know what a flattening an inverted yield curve tells you. manus: what that in mind, is this the death knell of the dollar? some people would say this is mission accomplished. is this a double punch to the dollar? ,aj: very much harder to say because what tends to happen in times of stress, if ended we are looking at times of stress coming up, is that the dollar is seen as safe haven.

it's very hard to tell the pull and push of the impact, the net impact of the forces on the u.s. dollar in the medium-term. nejra: what about how this translates to the equity market? the concern for you when the long and moves more in either direction than what it is doing now rather than what we are seeing now in the shorter end of the? -- curve? raj: i would say the overall shape of the curve is the most important thing. low and flattening guild curve, and potential inversion -- yield curve, and potential inversion should that being more defensive, moving towards quality companies, leveraging up to make acquisitions to the top of the cycle, go for safety, go for quality. manus: ok. what not to buy between 19. raj shant, portfolio manager at

newton investment management stays with us. bitcoin suffers the biggest monthly decline in more than seven years. we was me to the ceo of bitcoin.com on bloomberg -- we will speak to the ceo of bitcoin.com writer on bloomberg. ♪

♪ let's check in on the markets around the world. joining us from our bloomberg singapore team is juliette saly. take us through how the markets are doing this morning. juliette: we have seen a little bit of risk off move today. we had that very solid gain on the msci asia-pacific index yesterday when it gained almost 2%. when you look at the world map function today there is a lot more read on the screen. japan's index down by 2.4%, actually really losing -- its first loss in about eight sessions. that is after we saw yen strength coming through but also broad-based weakness across,

just as we have concern about what actually is going to happen between china and the u.s. those details very scant. you can see india's market off by about 0.4%. currencies,ok at specifically the yuan. bestnshore yuan having its two-day gain since july 22, 2005. this chart is the offshore renminbi, which is trading strongly as well. it smashed through its 50 day moving average and has now gone through its 100 day moving average as well, which is the green line. mark cranfield send you could continuing to strengthen after the pboc said that its monetary policy would be flexible today. rising by moren than 1% alone during yesterday

session. manus: thank you. mumbai.our partner in certainly a little bit of rough and tumble in the air in the fx side. >> yes. you summed it up correctly. the last two or three days while the world markets have been ok, during today's session they are not, but the emerging markets have been a bit soft. we had a conversation about how this is a very narrow market. down in today's session and the currency is not as weak as it was during trade yesterday. the key part to notice in today's session are the last two traits for india -- trades for india. the broader markets have bounceback, so friday's session, monday session.

that is a bit of a catch-up that that mid-cap and small-cap indices are playing on the indian markets. the state election verdict results coming up in the next seven days, so i think you should not expect to much of a runaway move for the benchmark indices, but the mid-caps and small caps, and the graph shows you, they are playing a bit of a catch-up to the larger indices. nejra: thank you so much to both of you. let's get the bloomberg first word news. advisersent trump's have been left scrambling to explain a trade deal he claims he has struck with china to lower tariffs on u.s. auto imports. the president announced the breakthrough in a tweet, but the white house has offered no details. in the first official response from beijing, the state-run securities daily says only that the government is discussing the

possibility of lowering tariffs. >> they cannot slow walk this, stall this. their words, immediate, so i expect to see confirming results. france's finance minister says the so-called yellowjackets protest are hurting the nation's economy. the demonstrations started out against fuel taxes, but have spiraled into a push back against president macron's policies. bruno le maire says government spending could be -- faster to allow tax cuts for businesses. >> the impact on the economy is serious and now has become ongoing. this is a couple of 50%-20% in 15%-20% inetail -- sales for retail, and restaurants as well. it is france's attractiveness that are hit with full force, so order must be reestablished and

we must get out of this situation as soon as possible. >> australia's governing liberal party has changed its internal rules to avoid a coup. ministers approved a mechanism requiring a two thirds vote of party lawmakers to trigger a leadership challenge. the opposition labor party adopted a similar role after its own series of leadership changes. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. name and manus -- nejra and manus? manus: italy's budget fight with the eu is not over yet. premier has deputy hit out again at the eu, saying that he wants to save the bloc from the verge of destruction. area finance ministers called on italy to take the necessary steps to be compliant with eu rules.

joining us from brussels is our reporter, maria tadeo, on the ground. talk me through the italian .udgets that, -- spat are we anywhere close to cuts of told billion euros -- 12 billion euros? >> i think it is interesting the lvinints we got from sa yesterday night. he did say the european union could be on the verge of destroying itself and he wants to make a contribution to save it. he has said for many years the european union has treated italy like a carpet salesman. he does not want to get into a confrontation. when asked about the deficit he went quite. we hear the negotiations are really being let -- quite -- quiet. we hear the negotiations

are being left to -- it is crystal clear to them that they need to avoid sanctions. that is something they find it difficult. is that going to be 12 billion euros? what we understand is that it of the current approach a compromise, but anything below 2% would be very difficult for them to sell back home. also turn to of course another political hot potato in europe, and that's brexit. could the european court of justice opinion on article 50 have any big impact on brexit? >> that is something everyone in --ssels is keeping an ion eye on. the european union will tell you this is a job that will not be changed. if it does not go through, it's too bad because they will not go

back to the negotiating table. this ruling we are expecting today is more of an opinion by the european court justice -- court of justice. the union it could unilaterally decide it does not want to trigger article 50 anymore. perspective, we understand theresa may says there will be no extension of article 50. that is something the people in europe are a little bit more skeptical of. they think maybe they might need and that brexit will take place march 2019. i think the ruling we get today will create debate here and in london. nejra: thank you so much, maria tadeo in brussels. raj shant, portfolio manager at newton investment management is still with us. european equities are trading at their lowest valuation relative to the world since 2010. are you a tract into u.k. areties -- u.k. equities

trading at their lowest by which relative to the world since 2010. are you attracted to u.k. equities? raj: they have been doing pretty well anyway. domestic u.k. equities, a lot in the short-term will hinge on what the political outcomes are. political mathematics are very convoluted. the legal issues surrounding brexit are very convoluted, but from a long-term perspective, does one really expect the entire economy to disappear or the domestic economy to be gone for a long time? i don't necessarily think so. i think asian be an interesting point in time to look at them. manus: next thing, there is every possibility that this a vote ofe fails and confidence gets called, and perhaps even an election. i want you to look at the gilt market. we have seen almost like a buyers strike. you see the yield curve spike. you see the yield curve spike by 35 basis points, let's have a look at the chart.

is essentially is the market beginning to get concerned about corbyn risk. it is one of our brexit stories this morning. the market is underpricing corbyn labour party risk. would you agree? raj: i would never want to be involved in a direct political comment, as you can imagine. i think it is fair to say that while i have traveled over the world over the last month i have had investors asking questions about budget and saying, i am nervous about it. fundamentally when you look to the gilt market you did not see much of that. i think what you are seeing in terms of price action on the gilt market could be just simply be ae -- that there could different kind of government -- expecting that there could be a different kind of government. is very hard to say whether we election.have an that are a lot of people in

theresa may's own party who would be very keen to avoid an election right now. the mathematics, the total mathematics is very convoluted. you need an advanced mathematics degree to work that through. nejra: how nimble the you have to be in the equity market in terms of stockpicking? raj: i think if you are trying to trade this kind of political news flow, unless you are incredibly good and lucky, there a good chance of losing a lot of money in the back and forth of this. you are far better off trying to fight attractive business is that you think regardless of the brexit outcome you get, this will be a good business, this will be a successful market that -- goscale up, goal broad abroad, go international. way --ey much better that's a much better way of investing. manus: it's amazing what kind of amendments we may well end up with next week. thank you very much, raj shant,

portfolio manager at newton investment management. he stays with us. cryptocurrencies have tanked in 2018. with the current slide selling -- sending bloomberg's galaxy crypto index to the lowest point in nearly 15 months. bitcoin cash, the world's fifth-largest digital currency, by market cap is facing the threat of splitting into two. let's get to tokyo. we have roger ver, the ceo of bitcoin.com. his advocacy has earned him the nickname bitcoin jesus. >> bitcoin jesus. he is smiling right now when i mention it. our guest is roger ver. he joins me on the streets of tokyo. thanks for bringing that december weather in tokyo. it has been quite chilly on the bitcoin markets. november was the worst

, backmance in seven years when bitcoin was about eight dollars per going. now it is under -- coin. now it is under 4000. have we reached a floor? roger: nobody knows. >> what is your feeling? roger: i have a fundamentals investors so i am investing on fundamentals. long-term, the future is brighter than ever. of course i am incredibly bullish on the entire crypto point ecosystem and crypto cash -- bitcoin cash, specifically. a there was a ponzi scheme couple of months ago in japan that was undercover -- uncovered. has that undermine the legitimacy of cryptocurrencies? roger: the fact that hackers are time to hack it shows it's worth something.

if it was not worth anything hackers would not waste their time. it's a more bullish signal that cryptocurrency is here for the long-term. >> what does it tell you when the regulator turns over basic regulation of industry to the industry participants rather than the bureaucrats? is it going to be more safe or are there more has it's possible -- hazards possible? roger: the industry group has the most incentive to make sure they do a good job of not letting customers funds be hacked, not letting bad things happen to your customers, because then they will not be your customers anymore. to think that some politician in some government office knows more about how cryptocurrencies work and how to keep them safe from hackers is naive. they are the right ones to be handling this. >> is a reason you are based in tokyo, because japan is what when it comes to cryptocurrencies? >> japan is definitely -- roger: japan is definitely one

of the leaders in the world when it comes to cryptocurrency options. just mentioned the split within the bitcoin catch community between bitcoin cash backed. which you protest survived. it -- both have survived. there was some selloff in bitcoin cash along with the bitcoin. the whole ecosystem got hit. where do you go from here with bitcoin cash? roger: i think we need to build actuallyy built on using cryptocurrencies. cash. the go with bitcoin contest.ith the i wish -- bitcoin cash. i wish all cryptocurrencies good luck. these hard forks would be

good for all differing opinions, right? forkse had two major hard which you have lived through. where do we go in the future when there has been so much undermining from these and wiping out billions, millions of not billions of value, market value? i think we need to build the tools to make it easy for people to use cryptocurrencies as money, to buy and sell things , pay their bills, direct, even pay their taxes -- pay their rent, even pay their taxes. that's about as mainstream as it gets, when governments are accepting cryptocurrencies for taxes. >> how will you get merchant use up? roger: i'm not sure that's the case. in tokyo there is a bunch of restaurants where you can pay in bitcoin cash.

if you have time that's an actual offer this evening. >> we appreciate that offer. roger ver, a pleasure to talk to you. back to you in london. nejra: coming up, we will bring you our exclusive interview with mauricio macri as he reflects on trade tensions at the g20 meeting in argentina. later we speak to the eccentric ceo at 1:30 p.m. london time. manus: if you are traveling to work, bloomberg radio is on your mobile device, on dab digital radio in the london area. this is bloomberg. ♪

♪ nejra: this is "bloomberg daybreak: europe." i am nejra cehic and a european headquarters monday. manus: i'm in our middle east headquarters in dubai. welcome to the show. ♪

the argentinian president, mauricio macri, has declared the after itt as a success saw the u.s.-china trade truce exclusively to bloomberg about the outcome of the summit and the state of the .ountry's economy >> it was a very good meeting. found -- we found a different open attitude to work together. it is in favor of the world. but understanding that you cannot accuse the united states of being a closed country, no? open economy in the world. i think we should keep finding

through the dialogue, the concerns. that's what i tried to build during this g20, being an honest broker. i am very glad it, very satisfied that we achieved to create an environment in which everybody was really comfortable . we created that environment and especially saturday night, friday night at the theater, i think of it but he was surprised of you and what is argentina and what is our code -- viewing what is argentina and what is our culture. and have improved for your country since we last saw each other in september in new york. ,he peso has stabilized inflation is coming down and it looks like the economy is good to start growing again in the new year. we talked about the pace of before. is it at the right level -- the peso before. is it at the right level right now? >> yes, it's the best moment of

argentina. you can see in the trade balance, it's really improving. our exports are growing and imports are less. reducedabroad have been , especially those in miami. --need them to take their that will help our economy. you do not believe me when i told you we are going to balance again our economy, and so far we have been successful. it will be a slow come back, a slow comeback, but with the they have understood that we have to work hard to solve all the problems we have created through the decades. nejra: that was argentina's president, mauricio macri, speaking exclusively to bloomberg. emerging-market stocks have

failed at least six times this year to rebound from a $5 trillion selloff. now they are making another attempt with the best chance of success yet. the msci emerging markets index is started the final month of the year on an upbeat note after the u.s. and china agreed on not to escalate the trade war. a closed above 2% yesterday for only the fifth time this year. cap emerging markets stage a rebound? -- can emerging markets stage a rebound? raj shant is still with us. let me show you a chart. your underweight -- you are underweight emf the moment -- emerging markets at the moment. for that to be overweight what do you need to see? raj: it is a lot to do with the fed's policies, the dollar strength, but fundamentally over the last 10 years it is the growth in em debt that is most concerning. we have looked and found some

really interesting stocks, specific opportunities in emerging markets. you cannot brandish all of these companies with the same brush, but fundamentally a lot of debt has been built up in this very low rating environment over the last decade. in the long-term newton has generally been positive on the market. need to be working on some of these issues that we forcing -- debt issues that we foresee. manus: the dollar drives emerging markets and oil just the emerging markets. the mliv -- drive emerging markets. it is oil that is going to drive markets. how important is oil to the emerging-market trade? raj: it is hugely important. obviously there are some countries who are heavy dependence on imported oil. countries like india, china, but then the sharp drop in a couple of months in the oil price is a

real boon, a tax cut for the energy consumers throughout those countries. is helpful. to levels of debt that have been built up in some of the emerging markets still act as an overhang on activity as ago 22019, and an issue that needs -- as we go through 2019, and an issue that needs to be worked through. nejra: what sectors would you be most positive on in general in em? raj: in general, some of the technology companies in em have leapfrogged the western technology players. you see this in parts of it india and china, where the technology companies are not just copying, they are leaping ahead. i think some of the structural opportunities with some of the internet companies are immense. nejra: thank you so much, raj shant, portfolio manager at newton investment management.

he will be continuing our conversation on bloomberg radio. president trump claims he struck a deal with china to lower tariffs on u.s. auto imports, but is that exactly the case? this is bloomberg. ♪

manus: good morning from dubai. i am manus cranny, and this is "bloomberg daybreak: europe." nejra: and i am nejra cehic. these are today's top stories. manus: trade trip up. the rally in risk assets seems to stall in asia as larry kudlow dials back on trump's trade deal with china. the chinese markets, well, they could turn the tide. bond market moments. the u.s. yield curve, 3-5, inverts for the first time in over a decade. is it a warning sign for the fed? a government in contempt. theresa may's attempt to sell a brexit deal gets torpedoed by

her pitch. mark carney faces a grilling from parliament today. ♪ nejra: good morning, everyone. a.m. in london. we saw global equity rally yesterday on a positive bounce following the trade truce after the g20. we are seeing u.s. futures point lower. nasdaq futures leading the losses. weakness coming through the asian session. europe could open lower as well. futures pointing lower across the board. futures downac 40 lower. you saw the carmakers, tech stocks, commodity producers leading the rally in europe, so it would be interesting to see what kind of sector rotation we get today, if any, in terms of

the european equity market open. but manus, big things happening in the bond market in terms of the yield curve. absolutely. in version. the first casualties have been delivered. you were talking about the 3-5's, the 2-10's. the yield curve, what does it really mean? u.s. treasury bonds, six days in a row, the longest winning streak in the bond market since the middle of june. you have broken through the 3% level in terms of the yield, and bcp's, there's going to be this ongoing juxtaposition. 2% is the target. that is the debate. this is your bond board for you. government bonds beginning to trade. you have the reports saying a budget deficit of 2% is still not enough. that is a big debate. your u.s. bonds at the bottom. you have broken through.

heavy buying in the asian session has broken the moving average. abouta is more concerned the fed missing their inflation target. by the way, we have had the longest winning streak on bond futures since the 21st of june this year. those are your markets. we will talk about what an inversion really means for the market. that is our question of the day. juliette saly has your market check in asia. juliette. juliette: we have seen a little bit of a turnaround coming through in the csi in late trade. quite interesting to see that move. also watching the very strong move coming through in the chinese. -day move. two we have seen that following the trump-xi meeting over the weekend, although price action suggests they are thinking the details of this meeting has been very scant. elsewhere, asian markets fall coming off that very solid moves you had yesterday where the msci

asia-pacific index was up almost 2%. their firstcks had drop in eight sessions today. the nikkei 225 was down by about 2.4% on the close. its weakest level since october. by .1% against the dollar -- .5% against the dollar. philippine stocks were one of the only or one of the few markets that actually rose today along with moves in the jakarta composite. we do have philippine inflation data coming through. it was risk off across the region. just really a chair market closing down around 1%. no change as expected from the rateith its interest decision keeping rates on hold at 1.5%. daya: what a difference a makes in terms of risk sentiment. juliette saly, thank you so much. today, we are asking the question on mliv, what does the

u.s. will curve march towards inversion mean? anything?an you can join the debate. reach out to us and the mliv team on your bloomberg. let's get the bloomberg first word news. leydly humphrey -- des humphrey in dubai has that for us. desley: the debate on theresa may's brexit deal has been delayed after opposition parties were granted an emergency discussion on whether the government is in contempt of parliament for refusing to release its brexit advice. yesterday, john burke house said there was an arguable case that ministers were in contempt. sayse's finance minister the so-called yellowjackets protest are hurting the nation's economy. the demonstration started out against feel taxes but have spiraled into a push back against mcreynolds policies.

bruno le maire says france could reduce spending faster to enable tax cuts for households and businesses. impact on the economy is serious and has become ongoing. 15% to 20% inof sales for retail. for restaurants, it is of the same scope. hotels have come to be hit because of paris's attractiveness. order must be reestablished and we must get out of this situation as soon as possible. desley: australia's governing liberal party has changed its internal rules to avoid a repeat of leadership coups that have seen the country turned 35 prime ministers and 11 years. they approved a mechanism allowing a vote for lawmakers to trigger a leadership challenge. the opposition labor party adopted similar roles after its own series of leadership changes. 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.

manus: thank you. i will pick it up from here. asian stocks are falling along .ith u.s. equity futures uncertainty remained over the details of the u.s.-china trade negotiations. president trump advisors have failed to shed light on the deal he claimed he struck in beijing. >> i will say this. they cannot slow walk this, stall this, meander this. immediate. so i expect to see, let's say, confirming results. joining us now is chris turner, ing head of foreign-exchange strategy. great to have you with us. good morning. let's start with the yuan. from trade. i have the chart showing it's been the best two days since 2005. more than three standard

deviations. you are targeting a weaker yuan, why? chris: it's a combination of both in terms of trade. we think it is a temporary truce. we think there will be an escalation in terms of trade into 2019. on the dollar rates story as well, we think we will talk about that later with the inversion. we think they will go higher into early next year. that combination has driven dollar-renminbi here and it will extend into the early part of 2019. manus: just how severe a blow has the dollar than dealt, really -- been dealt, really? if we get some kind of positron the fed -- pause from the fed? chris: it's a temporary correction, particularly against the low yield. dollar-yen is slightly lower today and euro-dollar slightly higher. we can talk about emerging markets. currencies are kind of very isap, and so the dollar

already quite expensive against the emerging-market currencies at the moment, but i think it's too early to say. theworst is over regarding dollar rates story, regarding the trade story, so we will probably view this as a temporary correction for the time being. nejra: dollar-yen, you pointed out that there has been a sideshow for 2018. how are you targeting this trade? are you looking to buy volatility rather than to buy anything on the spot price? chris: that's exactly it. realized volatility in dollar-yen is about 6.5%, the lowest since 2014 or so. historically, at the lower end of the range we have seen in the last two decades or so. as i forecast, with the dollar going further into 2019, perhaps 117 inpush to 115 or dollar-yen. as the year progresses, dollar-yen turns lower. it's probably to be expected to see a pickup in volatility,

particularly as the business cycle matures. there is a reasonable relationship between the withdrawal of liquidity that we have seen with the fed turning lag,, and then with the volatility will pick up. that should be the story for the second half of 2019. the aussieerms of dollar, yesterday, i refer to it as being the ground zero trade. deal, you a trade get the aussie dollar. what you want to do is sell the aussie dollar up here, and that would probably tied back with what you're saying about the one. they are targeting 70 because they doubt the ability to get beside thelish ticks aussie dollar. do you share that potential risk? would you be a seller of aussie dollar on the kicker it has just had? chris: yes, we would be. one thing in terms of technical analysis, it looks quite positive, which goes against our medium-term view. i am a little bit concerned there might be some window to

push above 74. but i think we are still doing this as correction. if we are right with the trade story, we have got further escalation next year. if we are right with our dollars story, the fed has got three more hikes next year, i think we probably will be seeing 70 in the aussie dollar. nejra: and you're targeting right on the one? -- the yuan? chris: through the year, 730. we have been speaking a lot about whether it will go through 7. i think we are looking more for an orderly move. we imagine the people's bank of china would like to see an orderly decent. the dollaright with story and trade story, chinese growth, we have got slowing through 2019 to a low point of 6.3% year on year, so it all kind of ads up, that story. manus: so we like a little bit

of a contrarian attitude on the show. chris turner. qatar up on the show, world bye oil wil announcing its withdrawal from opec just days before they meet. what is behind the move? we discussed. this is bloomberg. ♪

nejra: 7:15 a.m. in london. 45 minutes away from the start of cash equity trading. that check in on these markets. a rally in equities yesterday. a big difference a day makes. we have seen a big difference. us futures point lower across the spectrum. u.s. futures lower, too. winner, heading

for its biggest two-day gain since 2005. crude heading higher as well, heading for its big two-day gain since june. 53.57, manus. manus: can that indoor? all -- endure? heavy buying, breaking through the 200 a moving average for tenure futures. getourse, people want to that before markets closed. you are seeing a break at 3%. where we go to next -- that really is the key focus for the market. cable is actually up .8% as it is held by parliamentary law that maybe theresa may is potentially in contempt. moment up byor the .8 percent. this is our mliv question that

takes us back to the question. what does the u.s. yield curve's march towards inversion actually mean? time?different this the mliv team are standing by, tv , and you can have a go on the ib. let's go to desley humphrey in dubai. manus. thanks, france and germany have agreed to a compromise proposal on how to tax large tech companies. according to a joint statement, digital companies could face a three percent levy on the european advertising revenue in a scaling back of the broad pan initially envisioned by paris. it does not guarantee the tax would become law, with several countries previously indicating they could block the measure. newspapers is tokyo prosecutors plan to rearrest carlos ghosn and greg kelly. the paper says it would happen on december 10 on a new charge

of understating his income, something charles gunn denies. they now think his pay was underreported by $79 million. -- carlos ghosn denies. they now think his pay was underreported by 79 million dollars. they would buy back a portion of debt. debtepurchase of its suggests a more market friendly approach from presiden --the pr. he did not comment on the plan when asked repeatedly about it at a news conference, and that is your bloomberg business flash. manus: thank you very much. oil headed for its biggest month since june. concerns over the supply let eased. -- glut east. -- glut eased. agreement raised the

possibility of an output of cord when opec and its partners meet later this week. the gathering will happen just days after qatar sent a shockwave through the oil world. they intend to quit opec next month. anthony t joins me now. qatar pulling the ripcord and saying we are right. does it matter that much from a production point of view? probably not. anthony: i think you said it. it is russia and saudi arabia coming together to make those decisions, so this is an indication about how qatar was feeling. qatar is one of the smallest members of opec, and their production is declining. but they are not a major decision maker. we see how the power has shifted to the top producers, saudi and , buta, who is not in opec

cooperating, and they are in competition with the u.s. your point,ny, bloomberg has been writing about the fact that this is kind of rihyadghting a moscow-th axis. they differ in how to share these oil cuts? anthony: that's right. saudi arabia has ramped up production to a record. in november, they were over 11 million barrels per day because they expected more oil would be coming off the market due to the iran sanctions. the u.s. issued a number of waivers that would allow iranian exports to stay roughly where they are now, so that left too much oil on the market. people are looking at saudi arabia to be the one to pull back and clawback some of those arrows. they want to share the heavy

lifting equally with the russians, so that will be subject for discussion there. manus: i have got a special job for you. technicality.e a let's have our viewers take a look at this. to a certain extent, the market has rallied. it has rallied by 5%, no doubt about it, just trying to find its own legs. my question to you is -- opec has got to do some sort of a substantial deal, somewhere between one million to 1.4 million, probably. our politics going to hold us back from hitting the number? anthony: when you talk about politics -- manus: politics in the u.s. or here. they are both going to affect it, aren't they? anthony: the u.s., at the risk of a tweet. tweeted that he hopes saudi arabia does not decrease production, which they said they will do. do you alienate your main benefactor?

oilo you go with those price decisions that would help the economy? there is the idea that russia needs a lower oil price than the saudis need. they would become trouble with it in the 60's where it is now, wanthe saudis potentially 70 to 80. differing needs among those members as well. manus: there's only three big means, and you are only ever one tweet away from the whole big market move. that is anthony dipaola, our bloomberg middle east energy reporter, joining us here in dubai. pack your bags. i am going to the era. let's talk about a section of the u.s. treasury market that has inverted. it is one of the first victims, and it has not happened in a decade. the yield turned negative for the first time since 2007. it was followed swiftly by 2-5's, and the move could be the first time that the market sees the end of the fed tightening cycle. meanwhile, one renowned

says het, paul krugman, would pause hikes if he was in charge of the central bank. paul: i would be pausing until with a sequence of inflation numbers above 2% at the minimum. i actually think 2% is too low a target, but that is -- try to make that argument with the fed, and they go crazy. nejra: chris turner, ing head, is still with us. i have a very simple chart showing the flattening your seeing across the curve. 3-5's, --5's, you are calling a peek for the dollar. do you think the market is underpricing the amount of fed hikes that we could get in 2019? chris: exactly. ing -- we have a hike in december and three more next year. nejra: you are with goldman? chris: the topside. the markets over the last month 2019.has taken out

only looking for one in december and one in 2019, so if we are right -- and listening to paul issue wehere -- the would have is core inflation is going to move from two to 2.5, so that will give the fed the cover. i mean you just look at core, and that is drifting down. if that is your base case an article, what does that do to the relief rally we have seen and a lot of the emerging markets space? the mexican peso, the australasian currencies. is this a splendid opportunity to sell into this rally? chris: that is our view, particularly into the next six months or so, so we have seen this correction in dollar rates weekshe last four to five

or so. two-year swap rates have come off 25 basis points. we had a similar correction in may this year. maybe that is 80% done. that correction comes off slightly more. but it's hard to see having another 20 or 30 basis point decline in dollar swap rates from this point. if we are right and the fed -- we see the fed. in december. , theonly raised those dots expectation for dots, in september. it would be too early for them to revise that lower. we are on course to take rates higher. we think that correction would run its course. the dollar would strengthen some of the risk assets. nejra: when we talk about e.m., we always talk about dollar, dollar, dollar. you talk about em currencies that are sensitive to euro weakness, and that leads you to pick certain em currencies over others. tell us a bit about that, your preferred em currencies for getting the most alpha, bearing

that in mind? on themy colleague ethics strategy side, we looked at the g10 currencies. and you can block them in terms of characteristics. some trade for the risk environment, some that trade oil. obviously, some that trade for your dollar. those currencies in the european space, generally, when you have got declining euro-dollar, they tend to underperform in the em world. currencies like that. back to view, linking what your same with regard to euro-dollar, we have got euro-dollar going to a new low in q1 next year. they will not be the place to play the emerging-market recovery, but there might be some places in latin america, for example. manus: thank you, very much, chris turner, sharing your thoughts with us, head of ethics strategy -- fx strategy at ing.

all ofmp-xi trade lasted 24 hours. the european market open is coming up next. ♪

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simple. easy. awesome. click or visit a retail store today. ♪ anna: good morning and welcome to "bloomberg markets: european open." we are live from our european headquarters in london. i am alongside matt miller in berlin. matt: good morning. stocks drop with treasury yields amid a hazy outlook for u.s.-china trade, while the yen advances. support, advancing for a second day in the wake of moves by producers to address the supply glut. cash trade is less than 30 minutes away. ♪