♪ francine: pressing on. theresa may survives a coup attempt. but does she still better way to get a brexit deal through? and comer trade talks show signs of headway. as china resumes imports of soybeans. plus, mario draghi is set to have the bond buying program. good morning to you. i am francine lacqua here in westminster, and nejra cehic in london. >> friends in let us get to some

breaking news from nor does bank , it is a big central bank today. five central banks have decisions. its keyk is maintaining rate at zero point 75%, not really a surprise, considering it is leaving that policy rates unchanged. it was 0.78% in the first quarter, and .72% earlier than that. for a ratea guidance hike in march 2018. weaker oil prices are impacting the norwegian currency, it had a jumping inflation earlier. so in the rate increase is most likely in the march 2019. that is all we got from nor does dis bank.rom nor price is fairly steady,

is has recovered ever so steadily. crude took a hit in yesterday's session. the stoxx 600 is also not treading water. fading a little bit, all we are seeing in futures, cable holding gains yesterday. that besty has warned has won the no-confidence vote, but there is still so much uncertainty ahead. the 10-year btp yield stays seems to italy has have given concessions to the eu regarding the budget deficit target. now let's get the bloomberg first word news. says it will consider plans to delay its strategy to tech company. beijing says he may postpone

some of its china 2025 program --a decade or we had a a decade. a final decision has not been made. to nose was resumed imports of soybeans. has purchased 1.5 to 2 million metric tons of soybeans over the last 24 hours. vote on aenate is to measure the six to withdraw support for saudi arabia's military campaign in yemen. it. is meant as punishment for the killing of dissident columnist, jamal khashoggi. the white house has threatened to veto the move. an historic rebuke of what saudi arabia is doing in , and historic rebuke of what saudi arabia did in killing the dissident, jamal khashoggi. they are on a notice. if they keep behaving the way they are and bumping civilian centers in yemen, come january, this will come back up and they

think we will get to a veto-proof majority on this and say, no more arms to saudi arabia. >> the italian prime minister has proposed cutting the country's deficit targets to 2.0% in 2019, a significant concession to the eu, this after the initial target of 2.4% was .ejected for breaching eu rules the eu had insisted that their landmark pledges should not be deleted or delayed. trump'scohen, president former lawyer will need to reveal publicly what he knows about his former client once robert mueller's investigation is complete. in an interview with bloomberg radio, his lawyer says his client expects to testify about what he knows in front of congress at some point. michael cohen was sentenced to three years in federal present. global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries.

i am vivienne our tanto. this is bloomberg. ♪ francine: louisiana, thank you so much. theresa may remains of the u.k. prime minister after surviving a no-confidence vote, winning by 200-117, which means she cannot be challenged again for another year. the votes still leaves theresa may with a daunting task of trying to force her much criticized brexit will your parliament. >> whilst i am grateful for the support, a significant number of colleagues did cast a vote against me and i have listened to what they said. following this ballot come that we have to get on with a delivering brexit for the british people and building a better future for this country. aancine: i am joined by labour party member of the u.k. house of lords, and also the

former secretary of transport. thank you for joining us. you still think the second referendum is nearly through. what if we get a 51-49 on the other side? who is right? lord adonis: the challenges is resolving a deep crisis. at the moment, theresa may is it negotiating a brexit deal best the fact that she had 117 members of her own parliaments vote against her, most of them will also vote against the brexit deal, means that there will be a big majority against her. that is why she pulled the vote of this week. our european partners have said they will not renegotiate. so she will probably have to have the vote earlier next week, or in january. there is no for the renegotiation. her deal is dead. nobody believes that any new negotiations could take place.

elimination,ss of was have eliminated all the possible, the improbable is left , and i think that will be a referendum. francine: people voted once come i was not so long ago. again, the split is still very close. so it would be unfair to remain, if people voted to leave just two years ago. >> when they voted two years ago, there was no preposition on the table. britisht time the people saw a full deal was two weeks ago. it is now very likely to happen, so we need to start preparing for it. francine: but it is a very narrow majority. 50.5%. >> but the decision has to be taken. at the moment, we argue to be leaving the united -- the european union in march next year, which will throw

businesses up and down the country and around the world intro more, unless there is a deal which stabilizes a situation and ensures continuity of trade and so on. the sensible question to ask, the prime minister's deal that she negotiated, could it be implemented august remaining in the eu? that would encompass the views of many members of parliament, of about 550 of the 650 members of parliament. so you are not giving the people a choice of a harder brexit? lord adonis: the first thing that would be required is that the people who what the brexit have to say what will happen to our trade, to the customs union, to the irish border. how much money are we going to give a you as part of brexit? they haven't answered some of these questions. they have not said what is going to happen to the irish border, wto rules mean a hard border,

which is a breach of the peace deal stabilizing of ireland. these are big and critical issues. people like me who have responsibilities to the people have to take account of that. francine: if theresa may gets concession from the eu, would it be fair to say that the remainers and the pre-brexit need concessions? lord adonis: but she is not getting these confessions, let us be clear. the eu said they will not reopen the deal. they said they might give some kind of explanatory memorandum. that will not please anybody. what is important for contention in her own party for those to her right who will vote against it is that any arrangement that ,equires there to be a backstop to maintain the customs union in the single market -- that will not change. she will still have 100 conservative mps voting against her. where is people like me think we should not leave because this

deal in fact jeopardizes our jobs and our trade. francine: do you think people would rather go to fresh elections in parliament and set of a new referendum? lord adonis: no. the problem is an election. at the moment there are three conservative parties, there is mrs. may's conservative party that once her deal, a conservative party that was to stay in the eu and was a referendum, and then the other consecutive it best conservative party that does not want a referendum. if you were to have it election, you would have three different manifest does come as they would not solve anything. that. people cannot betray the people. i governed on the country doing meetings and they object to not having affairs a are the biggest issue that will affect them, their families and their communities. that people who are opposed to , theycond referendum basically don't want to see a stay in the european union? lord adonis: thank you very much

for joining us. francine: thank you. coming up, we speak to the chairman of the swiss national bank at 11 a.m. london time. this is bloomberg. ♪

♪ francine: economics, finance, politics. this is ""bloomberg surveillance." now let's get to the business flash. shoe phase shares have slumped for this company after the asset manager said it will suffer a loss this year.

a 900 25forecasting million franc loss for this year, struggling to maintain the scandal from a hedge fund manager. . they say they will eliminate 10% of jobs. asset management has declined by. a further 7 billion francs of anderson number. bloomberg has learned. that nissan plants to re-patriot nearly $1 billion in cash from the chinese subsidiary. a sign that the japanese automaker is building up on its power. with has been making cars the company since 2003. it typically reinvest profits to taxes. >> amazon has come under attack from the new york city council over plans to offer its $3 billion of public money to headquarters.lite >> the subway system is crumbling, there is record homelessness, and maim people do

not have access to health insurance. >> but. >> one of the world's biggest companies is still being offered a healthy incentive. >> however, the town has few legal powers to block the deal. >> and that is your bloomberg business flash. francine: thank you periodic now let us get back to brexit. the pound is back above 1.26 against the dollar, after theresa may survived a no-confidence vote. >> now to keep the conversation on brexit, joining us from westminster is trevor greetham, held of multi-asset at royal london asset management. thank you for braving the cold to be with us here in westminster. how do i position myself in the market? the remainers want a second referendum. the brexiteers are unhappy. people want fresh elections, if it is going to deliver them a harder brexit. what would you do for pound? trevor: if you look at the sterling-euro, it has been at 1.10-1.15.range,

we are almost at the bottom of moment.ge at the it is hard to break the pound out of that range because as you say, you still have these quite plausible outcomes. either the no-deal exit, where the pound plunges again, or a people's votes, and no brexit outcome, in which case the pond was up. if it goes up by 10%, in it those scenarios, or down, what do you do? it is a tight range. francine: is theresa may weaker or stronger than a couple of days ago? she will not have a contest for her leadership in the next 12 months? trevor: she is personally stronger, because she cannot face and leadership challenge for a year. whether or not that actually means she is longer in getting the deal through, i don't know. . her strategy seems to be to just let time pass. i don't think she's expecting any concessions from europe. perhaps she is expecting sympathy from europe, but the

center jermaine is to let time pass, so you get closer to the cliff edge, so the bloomfield more panicked into voting for her deal. which is not really good -- so that people feel more panicked into voting for her deal. morale. for i think it is 50-50 at the moment between remaining in the eu and going out in some form. the other 50% would include going out with no deal, which i think would be very bad news. francine: could parliament really invoke article 50 on march 28, if things are not settled yet? trevor: i suppose they can. the wording for that ecj on this was that there had to be some -- iof democratically forget the exact wording, but it was along the lines that it had people.stamped by the are parliamentary vote would be ecj.h for the

but you would have to be revoking article 50 because you truly wanted to stay in the eu, rather than do it as a panicked gesture. but i think the fact that the u.k. now is able either with a parliamentary vote as john major has him calling for, or a people's vote, to revoke article it means that remaining on current terms with the bailout, all those things, are not a stable option. francine: what is a second referendum mean for the market? the holes are similar to what they were free first referendum? trevor: they are quite similar. they seem to be creeping up for theresa may. they were in that ballpark for the first referendum. i think you will see a short-term selling volatility measures. we saw the sterling volatility 15% after thebout first referendum. so people have no idea which way selling is going on a short-term

basis if the referendum is approaching. but at the moment i think we have the situation where there is no majority in parliament, and in that sense, theresa may is weaker, because it has been revealed how many do not support her. there is no majority for no deal, there has to be an on blockage. -- it has to be unblocked. francine: is a second referendum already at the margins pricing? trevor: the markets cannot price anything in. the sterling-euro exchange rate is really flat. at the moment, the market are not factoring in the price, they are sitting on the fence, waiting to see what happens. when it happens, there will be a big break one way or the other. francine: thank you so much, trevor greetham. he stays with us. stocks are rising as renewed trade optimism buoys the market.

china is seen making a move to ease tensions with washington. more on that next. this is bloomberg. ♪

♪ francine: this is ""bloomberg surveillance." i am from lacqua, in westminster. we need to check about china, their plan to dominate high and tech will be a victim in the

trade war. sources say that aging me postpone some of their 2025 in china- there made 22 program for more than a decade. resumede, china has buying u.s. soybeans in the first significant purchase since the countries began posing to protect tariffs periodic joining me is our chief asia economics correspondent for bloomberg, enda curran. what are you hearing from the latest made in china 2025 pl an? enda: good morning. it does sound like a significant correspondent, it is being reported that china is willing to slow down its face of the made internet 25 strategy to become a world leader in high tech areas, pushing that by a decade. it sounds like a significant concession, seeing that the u.s.

is concerned about the role of the state. they ultimately will post the petition for america's economy. is in the details. that has already been skepticism on this, people pushing back or sick of other us see what is being offered in specifics.ncrete is there an intangible way in which this offer can be measured? on the headline basis, it certainly sounds like something of a concession by china, but as always, much remains to be seen as to whether or not the u.s. thinks it will be sufficient, as of the trade talks go on. francine: and if you put it through with what is going on with huawei's chief financial officer, we are hearing that a canadian executive is also being investigated in china. how does that play out? enda: it is certainly confusing the whole picture and muddy the

outlook a little bit. u.s.e other hand, we have officials trying to keep the trade talks separate from what they have prescribed, and then you have president trump himself saying that the whole issue is part of the mix. that has confused the outlook of how the trade talks will. francine: proceed in the coming weeks thank you so much, enda curran. our chief asia economics correspondent with some great insight. lives to fighteave another day. we bring you more. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." nara church is looking at --

nejra is looking at the front pages. nejra: let's take a look. in the guardian, tori coup fails. mail, let her get on with the job. let's get the bloomberg first word news. theresa may is heading back to brussels today after winning the confidence vote among fellow conservative members. with may now safe from challenge for a year, she returns getting her brexit deal approved by

parliament. china is said to be considering plans to delay some of its made in china 2025 program by a decade. dominate.gy aims to china has resumed buying u.s. soybeans. the u.s. soybean expert counsel says china had purchased 1.5 million-2 million metric tons of soybeans in the last day. the white house has threatened to veto the move. historic review of what saudi arabia is doing in yemen and what they did in

killing khashoggi. as they keep behaving the way they are and bombing civilian centers in yemen, come january, this comes back up and i think we will get to a vetoproof majority on this saying, no more arms to saudi arabia. >> the italian prime minister has proposed to cut the country's target of 2.4% by 2019. deputy premiers have insisted their elections should not be deluded or delayed. ohen willing to really publicly what he knows about his former kyl it. his lawyer -- client. plans tor says he

testify what he knows in front of congress at some point. germany is set to these talks between deutsche bank and commerzbank. the talks include potentially tweaking potential loss to make a merger less costly. 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. francine: thank you so much. the u.k. conservative party has voted to keep theresa may has later even though a third of her lawmakers voted to determine. she is facing pressure from all sides on her brexit deal, particularly over the irish backstop. theresa may will be in brussels today to meet with eu leaders. she is expected to plead for a lifeline. eu has been

steadfast that the deal is final and there will be no changes to it. is theresa may a little bit stronger in the eyes of eu leaders? what i hear this morning is that for the european union, things have not changed. the best case scenario is that the u.k. will leave in 2019 and with a deal. nobody wants the u.k. to crash out, but there is a general sense in brussels that the u.k. sibley cannot afford to go no deal. in terms of tonight, we do here that european leaders want to help theresa may get to the finish line, but they're only willing to make very limited concessions. the problem here is that she once legally binding language, and the european union at this point does not want to go that far. vote, some to the speculation is that there is a

sense that anything we get will be a softer brexit. love their challenge. the sands of what we can get is heading towards a softer brexit. much.ne: thank you so let's keep the conversation on brexit. joining us now from brussels is the chief executive of the european party center. how do you think -- is there anything eu leaders could give theresa may to make this deal a little more palatable in parliament? fabian: eu leaders will try their best to give her something. answer something will be on the table. the question is how far they can go, how far they are willing to go. i think it will have to be limited what is in the withdrawal agreement, which is the legally binding part, will not change.

francine: this is kind of what we were saying as well, what does that mean, what theresa may can actually do in brussels today? : i think she will come back with some kind of assurances, but we are at the stage where there is little trust in parliament. attheir interest is looking legal advice, words and assurances will make much difference. what we were discussing early on is that theresa may may be buying time. are the eu ok with us or do they worry there could be a crashing out the more this vote is delayed in parliament? fabian: the eu is certainly concerned about the delay. in the end, they want to have an orderly brexit. they want to have enough time to

ratify what comes. it is difficult to extend the article 50 negotiations. for the moment, i think there will be pressure to get this done as quickly as possible. not at the risk of having the deal rejected. : donald tusk saying he will meet theresa may for last-minute talks. do you think there's anything they can give theresa may in those talks? fabian: i think what we will have is assurances. i think there is a very clear willingness of the eu to reemphasize that the backstop really is only there for the emergency, that nothing else is a great. in the end, what is legally binding is what is within the withdrawal agreement. and a declaration or assurances will not change that.

trevor: if we get to the stage where there is another referendum, do you think that the eu will be in a position to sweeten the deal for remaining in the eu or at least reaffirm the concessions that were negotiated before the last referendum? fabian: if there is a new referendum, and for that we would first have to have a vote in the house of commons, which very clearly sets out what this referendum is and will be about remain or the deal, but if there is such a referendum, it would be about staying in the european union with the current conditions. there would not be any sweetener. the cameron deal is not on the table anymore. this is purely about deciding not to leave, too withdraw the article 50 negotiation. francine: what does this all

mean for the french of this world? is it a distraction for eu leaders where they could try and talk a little bit more and be a little bit myself set up a budget deficits or things like that? do you see it as actually hurting the commission? trevor: it is an important distraction. i think the cameron concessions will be back on the table. i think there would be to be something additional from the european side. italy is a big issue at the moment. i think it is kind of funny that the budget deficit target is now 2.04. it is very italian to say that we are reaching. francine: .04. who actually wants theresa may to get this deal through parliament? is everyone on her side

amongst eu leaders or is emmanuel macron distracted? leaders, brexit is not the top of the agenda. there are many other issues which they have to deal with. more important issues on the table, before the moment, this is about getting this through. it is about getting the deal agreed. eu leaders are happy with the withdrawal agreement as it stands. if the u.k. decided not to leave, that would be a different discussion. withdrawalnt, this deal is the best and eu leaders want to get it over and done with. much.ne: thank you so us.or stays with we will be talking ecb and bonds. it is the final ecb decision of the year and likely to be the

end of the road for the bond buying era. we will discuss that next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." we must talk about the ecb and italy. the italian prime minister has proposed that to cut the deficit target to 2.04% for 2019. a significant concession to the european concession after the initial target was rejected for being in breach. detailed how the lower target will be achieved. the deputy premier's have

insisted that their landmark election pledges should not be deluded or delayed. this could lead to an increase in tensions. today is also the ecb's last meeting of the year. the ecb president is expected to stick to his plan and end bond purchases. that moves comes after a sharply weakening in economic data. the central bank's updated projections are expected to show slower momentum. backdrop, draghi is unlikely to drop hints as to when rates will start rising. first of all, we did touch on the italy question. 2.04 is reaching the target, but by .04.

how are they going to find it? trevor -- fund it? trevor: i don't know. yield have stayed relatively low for the time being. it may be that something like this clears the situation for the time being. francine: you have france, popularity of the president of the protests, italy, brexit. even if bond purchases are being -- draghi is going through what he promised, when can he agreed to raise rates? trevor: europe is so far behind the u.s. raising rates cycle, that by the time they are planning on raising interest rates, it will be in the next session and rates probably won't go up. it seems we are in the last couple of years of the u.s. expansion. if the world economy is coming down in 2020, it will be hard. francine: are we spending enough

time focusing on who will replace draghi? it will become more important as the are progresses. i think today is quite important for draghi. w draghiants -- draghi wants to say that he stopped qe before he left office. i think it is a general feeling of wanting closure around the qe part of the program. francine: what does it mean for euro? is the euro story really a dollar story? trevor: at the moment, it is a

euro story. euro and sterling are part of that fiscal noise and i both quite depressed. any kind of certainty, whether it is remain, would result in strengthening the euro as well as sterling. francine: do you worry about fundamentals of the european economy, and is up because of politics and lack of structure? china accelerated loss in 2016 in 2017 and that helps euro grow. there's a close linkage there. the chinese government has a stimulus program in the pipeline and should see stronger european activity as well. what is quite troubling is that you have these tensions between germany and italy, and tensions in france during an economic expansion. one of the longest economic

expansions europe has seen since the second world war. what will the politics be like in the next recession? francine: when you look at 2019, where is the money likely to be. europe, japan, what is undervalued right now? trevor: at the moment, i am under waiting stocks. there has been a panic and the panic is triggering responses from policymakers. you have the chinese stimulus, the fed saying rates are near neutral now. you see the oil price collapse as well. i think people are being too pessimistic about the next 6-9 months. up,'m right, china picks growth recovers, u.s. rates go higher. the housing market is starting to fray already. i think the risk of recession in 21 d starts rising -- 2020 starts rising. you are actually

thinking that the market is underestimating fed hikes next year. trevor: it's difficult because i think the market is probably going to realize the fed is going to pause for the time being. that helps the stock market to recover. six months out, rates go higher again. butink the fed is in done, they may become more data dependent with the height next week, and that may see a reprieve for the markets. later on, you have to price the rate hikes back in again. i think what is happened with the trade war is classic trump, you go in really hard, give in, and then claim victory. tariffs, doing 25% things are progressing. china is adding stimulus for the economy because the economy is weak now. i think they're worried about future tariff increases, and that helps you get a stronger economy.if they are adding stimulus for tariff increases that never happens,

that will mean stronger growth. other fund managers like me are really pessimistic and saying don't invest anywhere in 2019. that is why itw, is like to have a world of must excited. plenty more to come. we talk a little bit more about markets and we speak to the chairman of the swisse bank. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." nejra: it's interesting if you look at european equities because we started the session in europe on a positive note following gains in asia that were coming through because of positive trade. the stoxx 600 is lower by a must .3%. may wonnister theresa

the no-confidence vote. we are also seeing sterling higher against the euro. the ecb down six basis points. we are hitting the lowest since the end of september on that bcp yield after italy offered that deficit target, and perhaps a concession to the eu, u.s. futures pointing higher. we may see a strong session there. ecb is said to lower its 2019 inflation forecast in an updated outlook. we have been asking ourselves how the outlook might change given some of the softer eurozone data we have had, whether it makes any difference to the prospect of the ecb hiking rates at the end of 2019, and whether that prospect gets pushed even further out. today is the day we expect them to end net asset purchases. the euro erasing its gains.

now, let's get a look under the surface at some of the stock movers. gam, a big mover to the downside, down nearly 28%. if it holds up this level, it will be the biggest drop on the record for this money manager. they are reporting a very disappointing full-year earnings . profits dropping by $900 million. there also completely removing their dividends. they're going to cut their workforce. return to suffer amid volatility in the star manager scandal has put assets under pressure. some of the bright spots in the market, we have elliott management stepping into the market in moving shares. to approachare said telefonica.

giving up a little of those gains as we saw the ecb headlines across the wire. the new italian budget cuts, certainly helping. much.ne: thank you so dani burger there with some of the main stocks you need to watch today. we continue in the next hour. tom keene in brussels and he will bring us the european side of the equation. coming up also on bloomberg tv, we speak to the chairman of this was -- the swiss national bank. that is at 11:00 a.m. london time. this is bloomberg. ♪

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the tory coup attempt but that she still have the clout to see her brexit deal through as she has two brussels -- heads to brussels? the end of an era. is ecb decision day and mario draghi is set to hold the bond buying program. welcome to "bloomberg surveillance." i'm francine lacqua in westminster, tom keene in brussels. we are covering the brexit talks from all sides as theresa may is showing up in brussels. that is are the leaders are meeting. we will see whether they can get for any concessions after she survived the two yesterday. -- coup yesterday. that arebackdrop to all the different stories of populism across europe. we have the ecb headline that just came out of the set lower in inflation. mr. draghi is way to speak about that today, but to me in my

travels in london and now in brussels, what i think more than anything is subdued economic growth, which speaks volumes about the tensions in the united kingdom. for that matters, other tensions in italy and france and eastern europe. how about the united states as well? right now in new york city with our first word news, here is viviana. >> some relief for u.s. farmers from china. soybeans or the poster child for the trade dispute between the two countries. soybeans. buying the tensions are getting worse between china and canada. chinese officials are now questioning a second canadian national for what are called suspected state activities harming journey. all of this coming after canada arrested the cfo of china's huawei at the request of the

trump administration. she could be extradited to the u.s. michael cohen will reveal publicly what he knows about his former client. his lawyer says that will not happen until after special counsel robert mueller's investigation is complete. a federal judge's sentencing him to three years in prison on a number of charges. pelosi,se speaker nancy or soon to be u.s. house speaker is a short she will have the votes to become speaker in january. results like promising to stay in the position no more than four years. 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. bloomberg. francine: thank you so much. this is what i am looking at in the markets.

stocks are on the rise in europe. now a little bit lower. they did surrender some of the earlier gains. investors are trying to figure out where we go next in the u.s.-american trade negotiation's. i'm here at westminster trying to figure out when the vote gets the parliament or gets put to parliament, whether it gets through parliament. the british pound adding to some of its advance from yesterday after the u.k. prime minister survived this attempt to oust her. looking at pound, the at a conservative party has voted to keep her as leader. she is expected to plead for revisions in her brexit deal, particularly over the irish backstop. joining us now is the global head of research and managing director of global political

research, and our bloomberg executive research director. does it make it more or less likely that against the parliament. 117 of her own mps voting against her. the numbers still don't add up. theresa may may have fought the battle, but the war goes on. one third of her lawmakers voted against her last night. she is in brussels today trying to get something fresh out of the european leaders who have no a place nation -- inclination to give a concession. she will be back with where she started. she will have to bring it to a vote by the end of january. the chance at this point is that it gets voted down. francine: what can they give theresa may? londonrhetoric here in from the prime minister yesterday and some of her supporters is that the amendment will have legal force. that is smoke and mirrors.

there will be some interpretive documents which may be given a legal label. this will give it some illegal status, but it will simply be aspirational rhetoric which will be attached in some way. that is designed to convince people to change. where do you see markets going on the back of the last 48 hours we had? steve: it certainly looks cold over there where you are. i think in the markets, it's the same way. the risky assets have been adjusting for some time now. if you look at the u.k., the market you are talking about right there, gilt yields have been close to 1.2. on the old benchmark for the tenure, that is about 1%. they have only been going down through all of this uncertainty. the vote last night doesn't really change very much in terms of the outlook. as you can see from sterling,

it's not good news. sterling is still very weak. i want to congratulate you on the call of the year. i give you and gary shilling high marks. there was a period were steve major was wrong, wrong, wrong and now you are right, right, right. -- do can se to use you see a continuing in the next year? can you reaffirm a low rate regime? steve: yes is the short answer. nothing much of the explanation for the u.s. treasury yields the lower is the fact that we have low gilt yields, jgb's, china is easing. the international backdrop is quite clear. it is completely supporting the hypothesis of low for longer. 2019.s still intact for police in that worries me is

that the probably start 2019 with yields a bit on the low side. i would prefer them to be a bit higher. the risk is that the yields will fall during the year, but it could be a bit choppy in the first half. i'm waiting for validation from the fed that they have somehow changed the direction. at the moment, it's not clear. please a than what we heard from mr. major about a slowing down, a tempering of interest rates with what you see for economic growth across a fractured europe. the european predicament is extremely difficult. you mentioned the politics being so fraught across the continent from the u.k. to italy. the ecb has zero room for

maneuver as the european economy slows. negative, butady also, asset purchase program, were they in theory to want to post on the end of the program or even revive it, they simply haven't got enough bonds to buy, according to their existing rules. the problem is all with politics. europe needs to relax fiscal policies. that is politically fraught as well. they are in a very serious bind across the continent. francine: when you look at all of the implications of the vote, maybe january 15, do you think theresa may is trying to buy for time? if she pushes parliamentarians on the brink in saying it is this or we crash out, that she will focus her mind of parliament and how dangerous is this game she is trying to play?

rosalind: there are two schools of thought, one is she is trying to ring the vote so close to the date that the fear factor will her.lawmakers towards the other theory is that perhaps by having the vote that late and unsuccessful, she has been able to walk back and even call a second referendum at that point. the alternative is that the pay crashes out of the eu with no deal at all -- u.k. crashes out of the eu with no deal at all. chris: i would agree. let's say it will get even hotter. if you thought yesterday was hot, you ain't seen nothing yet. flopping out of the eu is not going to be an option without dramatic directions -- eruptions. the next firm prediction i make is that there will be a serious

push of the political class referendum.r a whether they will succeed in getting it is a big question. ncine: breaking news. 'bloombergs international government executive editor, rosalind, thank you for joining us. steve and chris are staying with us. coming up, plenty more from westminster. we also speak to the s&p president later on. this is bloomberg. ♪

>> let's get a bloomberg business flash. according to the nikkei newspaper, japan post will require a 7%-8% stake in the company. it is looking for ways to boost long-term profits. .hares of gam plunging today the firm will scrap its dividend as predicted. and i'm hundred $31 million loss for the year. the under management tumbling. the crisis leading to a restructuring program to cut cost by more than $40 million. morgan stanley has become the latest foreign bank to reduce its presence in moscow. stanley's remaining

presents and russia will be focused on corporate finance capital markets and mergers and acquisitions. that is the bloomberg business flash. francine: thank you so much. sources say beijing may postpone some of the made in china 2025 program by a decade. china has resumed buying u.s. soybeans in the first a significant purchase since the two countries began imposing tit-for-tat tariffs. joining us now from hong kong is enda. there is this china 2025, the soybean story, but also a story that the chinese are looking into canadian chief executives or executives as a kind of retaliation with what happened with huawei. enda: there is certainly a lot going on. on a headline basis at least, on the trade side of things it looks as though china is making

concessions or some kind of concessions towards the u.s. in 2025 strategy, their plan to become a world leading high-tech economy, is now possibly going to be put on the back burner, possibly up to a decade or so. that is a clear concession to the u.s. essentially, china's state is .laying a role on the flipside, china is starting to buy soybeans again. that indicates that tensions are easing somewhat. the backdrop being adored, which is a big complicated factor over huawei, and out of the detentions of two canadians in it is complicated in the mix and trade talks are being kept from the national security side of things.

will it all become bargaining tips in the same process? that is the big question. trade talks is seem to be making some progress. the real question is whether or not it all gets jumbled up with these other issues as well. francine: do we understand that from the trump administration, it was more scaremongering then the will to really go through with these trade tensions or trade wars? enda: i think the indications are that certainly both sides seem to be serious about looking for a trade deal, whether or not they can deliver on it is a different story. we'll heard consistently from the u.s. side but they won a deal that is on their terms. china has been somewhat consistent in terms of saying they are willing to at least buy more goods and do more to protect ip and open up parts of the economy.

now, getting this news that they may even broaden their industrial strategy. as always, trade talks have a long way to go, especially on the china side of things. are talkinganies about opening a markets and allowing greater access and allowing private competition to rome more freely, several times before, only for promises to fall short. francine: thank you so much. enda stays with us. we will be back and talk more about brexit. the center for european studies -- that will enable us to look at the european side. that is why tom keene is in brussels, to try to figure out what eu leaders bank. this is bloomberg. ♪

tom: good morning, everyone. it is a constitutional crisis in the united kingdom. francine on the green in westminster and i am on the grounds in brussels. extraordinary set of meetings here. what i would say to our two chris --teve and

chris, let me go to you with what i find extraordinary, what does that the eu has many other issues to talk about. brexit is important but it is not front and center for the eu leadership. there are other things going on. chris: i would say not front and center, it is kind of risk management. if the u.k. were to crash out of the european union next march, that would be a very serious shock for the u.k., but it would be extremely uncomfortable economically for the european union, especially neighboring member states. there's a lot of sake in risk management. the european union must have thought they were shot of this.

as someone might have advised them, the u.k. parliament and political class was not behind the project which the british government had cooked up. tom: that has got to be a number of opportunities here. i think of the team and your work in fixed income and economics. where is the hsbc opportunity and continental europe for 2019? steve: that is a good question. it seems to me the market has already priced in around italy. it is difficult to see things getting worse. the italian market seems to be responding quite positively to the news overnight. whether or not italy ever hits its deficit target is another question, but they are showing willingness to do so. i think any kind of investment process also has to incorporate

this idea that rates aren't going anywhere. at the center of all of this is what the ecb does. the ecb has to be responding to the incoming economic data. as a function of all of the above, the data is not that good, and inflation is surprising more on the downside and the upside. if you have got low for longer, it favors a certain kinds of equities, it favors carry trades. it says that yields and bonds stay low in general. a nice bloomberg scoop on the ecb, said to lower its 2019 inflation forecast as we are expecting this qe era to end. what does that mean for when the ecb is able to raise rates next year? steve: i wonder what it means in terms of the questions mr. draghi might get, given he just mentioned the figure in the labor market and data going the other way for inflation. optimisma clear over

in the economic forecast for the ecb as there have been in other central banks for a long time now. it is not just the ecb. it seems to me it is very difficult for them to start a normal tightening cycle. 2019, i think and they might've missed the chance completely. tom: if we can possibly get away from brexit 422 seconds -- for 22 seconds, one of the great themes of this european summit is the federalism of europe. the effort to get to a combined physical exercise. do you have any optimism that this can become a more federal brussels in federal europe? chris: we don't, not because we don't think they will ever make progress, but because we think that the only way they will make progress is through crisis. it is that cathartic process of

shock which draws interaction. for now, we just see discussions. a euro finance minister agreement, but we are still way ofore that rubicon crossing ensuring retail deposits across the euro area. the viability of the single currency is in question. francine: thank you so much. we will talk about treasuries next. coming up in the next hour, we talk brexit, italian deficit. this is bloomberg. ♪

tom: "bloomberg surveillance good morning, everyone. " from the european summit in brussels -- good morning, everyone. "bloomberg surveillance" from the european summit in brussels.

focus on political may in this -- theresa may in this political fight of her life. china and trade as well. offer theresa may is where tom keene is, brussels. the british primary -- prime minister will ask for a lifeline after her plans triggered a revolt from her own party. she survived a confidence vote after she promised she would not leave the party until the next election. she will be seeking confessions from the e.u. on the northern ireland backstop. national inquirer american media reportedly killed damaging stories about mr. trump especially during the 2015 presidential campaign. authorities have reached an

agreement with the publisher. designed to punish the saudi's for the killing of jamal khashoggi. many placing the blame on mohammad bin salman. the white house is threatening a veto. attack. navy has three submarines out of operation because of delayed maintenance. a top admiral telling a senate committee backlogs are keeping the subs from being fixed. global news 24 hours a day, on air and tictoc at twitter, powered by more 2700 journalists and analysts in more than 120 countries. francine: thank you so much. the u.k. labour party is triggering a formal vote of no-confidence in the government. joining us is a labour member of

parliament for the department of business, energy, and industrial strategy. support this deal? is the prime minister playing with time? >> the prime minister is definitely playing with time for the benefit of her internal party politics. away fromy 14 weeks crashing out of the european union and a no deal brexit is not acceptable. labor has been quite clear about our tech stocks. she said it was the only deal on the table and now she thinks she can renegotiate. if we can renegotiate, then we will support it. francine: you really think she

is playing within her party? she has placated that q and she is in charge of the -- for the next 12 months. >> 117 -- most of the back benches -- those who aren't paid -- some of those who voted for theresa may vote against a deal as well. there is a fundamental fracture in the conservative party between those who want no kind -- a hard union brexit as we call it and many who want continued economic that is whereause many of us are supported by. the fundamental rake in the party cannot be papered over in a couple weeks. tom: is the -- francine: is the prime minister stronger now than she was a few days ago? >> whoever was leading the party would not make that much of a

difference for it i don't think she is any stronger than she was. 117 of her own members voted against her. francine: they cannot challenge her again. >> but she has to get a deal through parliament. r whether it is labou you want to vote or not. >> we support it. this is definitely the prime minister's deal with fundamental flaws. it doesn't say we have a permanent customs union which means northern ireland would be in a distant position to the rest of the united kingdom and that is unacceptable in so many ways. it does not guaranteed continued workers rights -- guarantee continued workers rights. we love our countryside and we .ant to mitigate climate change these are fundamental problems with what she is proposing and

that not -- will not change in the next two weeks. francine: is there appetite in the house of commons for a second referendum? for fresh elections? >> there is certainly appetite for fresh elections. i am sitting here as a spokesperson for her majesty's official opposition. francine: enough to push it through parliament? now in we gauge right keeping with the government in power, they have said they won't vote for a vote of no-confidence . they will not vote against the prime minister, which means -- there is huge discontent not just in the labour party. we are talking about brexit. in my constituency, people are talking about they haven't had a wage rise in 10 years.

we're having a winter health crisis already. crime is rising. that is all people are talking about. it is a general election that can change that. -- we want toan push for that when they have a maximum chance of success. francine: is in a general election another distraction? you can get back to fixing the country and dealing with the real things important to the common people? >> you make a really good point that we don't want to spend the next five years talking about brexit. the deal on the table now will make my constituents worse off. the government's own analysis says gdp will be the kind of deal we want. how can we fix the other challenges when we have a deal making us poorer?

in the northeast, we have nissan making fantastic cars with an integrated supply chain. build a: should labour platform saying we want to go back to what it was and stay in the e.u. full-time? chi: it's a really complex situation, you cannot have simple responses, it takes time. day by day, everything is changing. to you nowing to say what our manifesto would be when we have a general election. what is clear is what we want out of a brexit deal, continued strong integration with the european union and a protection for workers and that result would be seeking -- we have

60,000 members and we will reflect what they want. francine: thank you so much for joining us. tom, back to you in brussels for now. and there you so much is some of the debate. i like of the various manifestoes in the united kingdom. we are thrilled to have at queen victoria street, steven major up a set -- hsbc. you talk about stop, breathe, and sink. what do you mean by that? the cacophony of politics. what does that mean? >> i was trying to find a different way to say pause. i guess everyone is focusing on the possibility that the fed could be pausing soon. to me, i was bringing it all

together because markets have a fewast and furious for months now. i think maybe through the whole of this year and maybe it is time to pause and think about the next steps. many people are forecasting the fed will continue to hike through 2019 and those same people are often forecasting rate cuts. if it is so obvious, presumably the fed would do a lot less and maybe they have only got one or two ago. to me, it is about the forwards and the forward look through the noise. i think it is time to think carefully about this. tom: all of this noise, steve major, without question limits the degree of freedom any central bank has. what other choices mark mark carney has into the first half of next year? and itdealt with brexit

really limits his options, doesn't it? >> totally. the february meeting is a nonstarter for any kind of action because of the deadline in march. that is how it looks to me. afterwards, we would need some clarity about the impact on the economy. when you overlay what is happening in the rest of europe and the u.s. and china, it seems difficult to imagine why the u.k. would go in a different direction hiking rates. there is one plausible scenario whereby sterling had fallen too much and there was imported inflation. you are quite right, there is not much he can do apart from sit and wait. tom: steve major, thank you so much for being with us today. .teve major with hsbc

the headlines continue to come. an important headline we see right now out of the house of commons on this scheduled voting . this is a real debate before and after christmas and the headline coming up. we look at remain and the many shades of leave. it mills has been forceful over the last year and a half and he : 30 in new york, 11:30 in london. it from london and parliament and brussels, this is "bloomberg surveillance." ♪

tom: it is "bloomberg surveillance" from brussels and london. so much going on on the european

continent. we welcome all of you worldwide. francine and i will look -- a digression to mario draghi. he has been a little off the radar. it is a deserved discussion with the ecb announcement. joining us is steven major. and wilfred martin center joins us from brussels. what should we expect from mr. draghi? does he have to adjust as we see mark carney adjust? think esther i draghi is concerned about the situation in europe. i think we will see a continuation of his policy, which is a shift away from direct support. there is a lot of issues confronting europe at the moment . there is the italian budget and

the situation in france, russia, migration and he has to factor in brexit. i wouldn't say a continuation of this study, but safe policy we have seen over the last 18 months to two years. tom: steve major, let's get to the united states and john williams had an exceptionally important statement 10 maybe 14 days ago where he talked about .he animal spirits nominal gdp i would says there are challenges out there. challengese the mario draghi has year? >> they have been systematically overoptimistic. if that is any use in the you -- you would try to incorporate the bias from the past. it says to me it will be lower than the ecb is projecting.

i wonder about where the equilibrium policy rate is. the market implies the money market rate well below 1% in five-year's time. that is saying there is little chance of us having a normal tightening cycle. willys to me the ecb struggle to get above zero in this cycle. what do you think the markets are getting wrong about the fed? steven: the normal thing the market gets wrong is listening too closely to the fed's guidance. having just said that, in 2018, the fed pretty much said they were going to do and hiked one quarter of a percent each quarter. we are running out of time nine and -- now and it is unlikely

they will follow through with the 2018 tightening. markets should be looking more toward the equilibrium rate rather than what they do next week in terms of the policy rate. t is coming-term do down and the question is how gracefully the market will do that. the market is pricing the equilibrium rate 15 basis points less than the fed already and the fed needs to move toward the market, i think. francine: what is your take? how gracefully will they move toward that? steven: one way in the official fashion is to update the long-term dots. these come through a number of forecast from the regional feds and the collection on the aggregate number is likely to fall at some point if not at this meeting, one of the next once. that will only reflect market

realities that put the rate well below where the fed project it. -- projected. we have already seen a kind of handbrake turn from mr. powell himself. 6 weeks or so ago, we were a long way from -- and now it seems we are walking -- knocking on the door. that is quite a swing. francine: what i find remarkable -- tom: what i find remarkable and mr. major has been so right about a subdued interest-rate environment. eoin drea, when you hear mr. major talk about a subdued nominal gdp, where the terminal value is, it comes back to this word of another time and place, -- is that off the mark? eoin: i personally think it is off the mark.

what we are seeing in europe at the moment is how europe has always done business. it will take a crisis, a second crisis and a third crisis for fundamental structural reforms to take lays out a european level. what i would highlight and would not discount are the quite with bankingeforms union. incomplete or in the mixer. euro sclerosis. i see a different type of e.u. without written. i see a e.u. where i think the franco german engine could become the dominant team. i don't view it as a type of euro sclerosis. tom: right. much.rea, thank you so we will continue with mr. major

of hsbc. we will look at pound sterling and the relationship to euro and dollar. please stay with us. from london and westminster and russells, this is bloomberg. ♪

tom: good morning, everyone. "bloomberg surveillance" from westminster and brussels. with us, steven major of hsbc and eoin drea. of the cacophony of issues across europe and the united states as well, france -- we haven't spent an us -- enough time on france. the overlay of terror in stras bourg. this is far from over. the terrorhow does attack in strasbourg affect the french debate over the future of

mr. micron -- macron. eoin: i think it brings it into focus more clearly and put even more pressure on mr. macron. what we have seen over the last three to 6 months is president macron misjudged the mood of the french public and his view of their priority. what we have seen now in the aftermath of the attack is a refocus on basic security. france is one of the core countries affected by returning isis fighters affected by the surge of migrants into europe over the last couple of years. i think it came at the worst possible time for resident macron.- president tom: steven major, i look forward to speaking to you again in london when i return and thank you for being with us

through the hour. we have so much more coming up, not only the immediate dynamics for prime minister may. she travels once again to europe with all we have seen in the last 24 hours in westminster. at the european summit in brussels for it in our next hour, julian emanuel l will join us and we look at the resiliency of the market. please stay with us. with the wealth this morning. good news for prime minister may. this is bloomberg. ♪

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assures the trump administration of debtor trade and tariff discussions. think soybeans. beijing detains a second canadian. in washington, holiday drama. that wall must be built. as eyes are on brussels london, belfast, and brussels see different relations. again, it is like international falls, minnesota. francine lacqua is at westminster. it has been a cold couple of days for prime minister may. needine: this is what mp's to focus their minds.

.heresa may survive that coup as she is going to get a better deal. it is unlikely she will get a better deal. back to getting the deal through parliament. it should be done by january 21, and it is about political posh train to now and then. tom: i can barely keep up with it. the impact on economic growth and lower expectations goes right back to the central banks, including chairman powell in washington. here is first word news. is concernedtrump about the prospect he will be in peach. the president has called friends outside the white house to vent and get their input. nbc says the president was not at the oval office yesterday

until noon. president trump's former michael cohen will let prosecutors know after the investigation is complete. campaignnvicted on finance laws and lying to congress. in other news, some relief for u.s. farmers from china. it has resumed buying american soybeans. this is a victory for president trump. the crop was the poster child of the trade dispute between the two countries. buying soybeans from those states that voted for the president in 2016. chinese officials are questioning a second canadian national. earlier, a former canadian

diplomat was arrested. all this coming after canada arrested the cfo of huawei. she could be extradited to the u.s. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. francine: thank you. let's look at the markets. i haven't seen that much impact with what we saw theresa may survive yesterday. there is a little movement on pound. early on more buoyancy in europe, now flat. 2.91 onup, pound 1.26, the italian 10 year yield. it is so very italian. they changed it so they still break the eu rules, but it is

quite hard for brussels to tell them they can't do it. tom: very good. .et us begin this hour why don't you bring in our guests? francine: we have team coverage across the oceans, brussels, and also london, trying to figure out the next brexit move. thank you all for joining us in what will be an hour of fun discussion, maybe heated at times. what is theresa may's next move? >> she is heading off to

brussels. she said she would go back to the eu and seek the legal reassurances she needs to sell the deal to her party who support her in government. she's going to brussels and will try to get those assurances. francine: i can't figure out whether she is weakened or strengthened. ,or 12 months, she is immune but 117 of her own mp's voting against her. >> exactly. she is inday she said office, but not in power. more than one in three say they don't want her as prime minister. she is there now. she is the leader. she has to negotiate a deal she can get through parliament. francine: what is your take on this? what can the eu do to help out theresa may a little bit?

eu has said in the it does not want to do much. it wants to get some reassurances, but not open the treaty itself. the eu has experience giving reassurances two countries on treaties they sign. for example, the ukraine deal. there was big reassurance given to the netherlands this would not mean automatic membership, so on and so forth. it allowed the netherlands to one it in domestic law, so could have site agreements that would allow theresa may to say optionmp's this backstop which is legally binding is really not our intention to end some, -- there, and i have

reassurances that are less strong than the withdrawal agreement, but still some reassurances. tom: she needs reassurances. that is the word of the day. i need assurances in new york city. julian, with all this international relations, including washington, do i need to change my asset allocation given the way yields have come in? >> no, just have more patience. iss political instability worldwide. it is not just a u.k. thing. it is something causing more volatility at the margin, but our point of view is the fundamental and depending's going into 2019 are strong enough that the stock market looks good to us, but yet you

will have to withstand these moves much more drastic on a day to day basis. tom: i want to go back to our conversation a few days ago with a giant of economic history. he said the entire discussion on the backstop, devlin, and belfast.- dublin, and give us the distinction between ireland, northern ireland as they moved to brussels. said, theresa may's biggest problem is solving this northern ireland border problem. part of the belfast peace agreement is they must keep the border open. the eu is worried it can become , sock channel for smuggling theresa may is seeking these reassurances. dup wantem is the

legal reassurances. the eu has made it clear they will not do that. she may come back with a piece of paper, but the dup don't sound like they will write it. francine: is there a danger theresa may is playing with time , the further she delays the vote, the more chance there is parliament will vote for it because they are concerned about the u.k. crashing out, and how with the eu see this? >> i think of this as a game of chicken. you have these two cars running into each other and who blinks first? if nobody blinks and we have the u.k. leaving without any deal, we will have a hard border in ireland, and that is in nobody's interest, including all the parties in ireland, so the strategic question becomes at

what stage would the eu be ready to water down its backstop, or would it be ready to take the hit and put all the blame on the u.k.? withrsely, at what stage the u.k. parliament give into this game of chicken and except the backstop? so what we are trying to do at this summit is basically cosmetics and giving some assurances, but certainly it is not the end of this game of chicken. tom: thank you so much for that. francine, and julian continue with us in new york. much more coming up, including these nuances of remain and the many nuances we see in leave thrilled to bring you john mills, conversation on

the future of his united kingdom. we will do that next. from brussels and from london, this is bloomberg. ♪

>> this is "bloomberg surveillance." let's get the bloomberg business flash. spent $1 billion to expand in austin, texas, building a new campus big enough to house 15,000 workers. apple will build facilities in the northwest u.s., seattle, san diego and near los angeles. pittsburgh, pennsylvania and boulder, colorado will he

expanded. buying a stake for $2.6 billion in affleck's, the japan post will acquire a 7% to 8% stake in the company. it is looking for ways to boost long-term profits. shares of the swiss asset manager plunging. it will scrap its dividend and predicted a $931 million loss for the year. following the suspension of manager tim heywood, the crisis leading to a restructuring and cutting costs of more than $40 million. that is the bloomberg business flash. tom: thank you so much. today,ndon and brussels we cannot forget washington and all of america. the photo from yesterday was from the ap of mr. and mrs. cohe n and their children heading into a courtroom. kevin, that was a brutal image

looking at three years away from his children. from that standpoint and more broadly speaking, it comes down to president donald trump. i spoke with lenny davis, the spokesperson and attorney, one of the attorneys on the legal team advising michael cohen. i asked if we would get more information out of him. waitingmichael cohen is for the conclusion of the mueller investigation. some of the charges that michael cohen pleaded, found guilty and convicted of, including lying to congress. they believe that the white house new about the testimony that he was going to be providing to congress.

i was talking with staffers last night in the democratic party, and they have a lot of questions about that. they fully expect michael cohen to be called to testify again on capitol hill, especially in congress. francine: talk to me about huawei. it started a week ago. the arrest and extradition of the cfo of huawei. china is now retaliating. yes, china is questioning the second canadian citizen. he is believed to be a fixer and connector of sorts for folks looking to get into north korea, including dennis rodman. meanwhile, this follows the disappearance of a former canadian diplomat, so this is raising a lot of questions,

these two meetings wrapped up in this issue. the president said publicly earlier this week that he would intervene if he thought it would be in the best interests of the u.s. pertaining to u.s.-china trade policies. he said he would intervene on that front. , we justn cirilli heard from fox that mr. trump will cancel the press christmas party. , well laid out in the east room and all that, but there is a real significance inside the beltway. cancel the deal to party. this is not the white house correspondents dinner. it is the christmas party in the white house. kevin cirilli look, -- i am: look, i will say disappointed. there was always a treat to take

my mom and show her the white house. ♪

francine: this is "bloomberg surveillance." from brussels and westminster today. we have full team coverage trying to figure out what brexit

means and whether it can get passed through parliament. julian emanuel here and alex are still here. julian, a question we don't often ask. if there was some kind of crashing out or brexit were to turn ugly, does the rest of the world care or is it only isolated and would hurt only the u.k.? the world cares. gdp could suffer a percent in the u.k.. perhaps that is over estimated, but that kind of number has global repercussions. you said that in the context of the fact that the economy globally is slowing more and you have all these frictional inefficiencies because of trade skirmishes worldwide. it is an unsettling backdrop. , how does the

prime minister gets the steal through parliament? >> if i could answer that question, the best minds in brussels in westminster can't answer that question. it looks like she will come back , get some sort of reassurance the scaleu, but given of opposition within her party and the language from the dup, i can't see that they will give her enough to vote it through, so that leads to the option of seeking votes from the opposition labor party, so she needs to be softening her brexit stance. tom: julian, for a u.s. audience, and i listen to alex with his expertise in all things brexit, what we're sing in washington and china as well -- what we are seeing in washington

in china as well. have you remodeled your equity conviction because revenues will not be there? >> we have. there is no question about the fact that with this trade dynamic and this political instability worldwide, what it amounts to is the multiple that you will apply to stock prices and the expectation of revenue, both have to come in. have modeled a pre-cold war and post-cold war , 29 years of multiples in and around 1400 trailing basis, versus the last 29 years of multiples closer to 19, and you will get convergence of these political situation's persist. julian, what are you doing with cash? right is just to the

the acclaimed tower. they had cash in the tower. what do we do with cash right now? >> hold onto it. in a world where volatility is likely to be persistently high, whether as a function of a slowing global economy, and aging bull market, or political instability, cash is absolutely an asset. there is no question about the fact that looking at next year that cash should be on one's balance sheet to take advantage of these potential dislocations, which we expect to happen throughout the year. , how violentian could these dislocations be for markets? >> if you look at the last couple of months, you have gone

down from the highest to the intraday lows earlier several days ago of around 12%. -10%uld see swings plus or as much as twice a quarter over the next year. there are so many things on the table that need to get resolved. julian, we have to leave it there. julian emmanuelle with bt oig with us -- btig with us. much more from london. the oil discussion of the day, a trader of legendary portions -- proportions, andy haldane this is bloomberg. ♪ is bloomberg. ♪

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vote of confidence challenge from the tory party, quite a few of her own mp's voted against her. that will have repercussions when she puts the vote to parliament. let's get straight to first word news. >> a tabloid publishing company is telling prosecutors of the plan hatched with the trump campaign team. it is telling damaging stories about mr. trump, especially during the 2016 presidential campaign. reached a nonprosecution agreement with the publisher and the company is cooperating. the senate votes on it resolution aimed at withdrawing support for saudi arabia's military campaign in yemen, designed to punish the saudis for the killing of jamal khashoggi, many placing the blame on mohammad bin salman. the white house threatening a veto. the u.s. navy has three attack submarines out of operation

because of the late maintenance. one of the top admirals telling a u.s. senate committee that backlogs are keeping them from being fixed. it could hurt the navy's plan to grow from 287 to 355 ships. in switzerland, the central bank cutting its inflation forecast, shown no inclination to move from its crisis-era settings. it cited the strength of the frank and increasing global risks. >> if you look at the exchange rate the last couple of days, you see some movement, so some appreciation of the swiss franc. that was the first sign the swiss franc served as a safe haven in that context. it was not too big am a but visible, so there are risks when we see at an uncontrolled situation with brexit and its impacts. >> global news 24 hours a day on air and on tictoc on twitter

powered by more than 2700 journalists and analysts in more than 120 countries. tom: thanks so much. so glad you mentioned the swiss national bank. it is timely. the surprise away from international relations and brexit talk, the dis-inflation over the last eight weeks and it has been extraordinary. let's continue the discussion with julian emmanuelle of btig in new york, and from frankfurt, david cole. david, wonderful to have you with us this morning. explain the affect of this disinflation and the immediacy of it for the heads of our central bank. is that something they need to confront now, or they have time? >> in terms of disinflation,

despite what we have seen right now, a new threat coming from brexit, the overall picture is robust. we are moving away from disinflation. we have seen the economy showing some capacity constraints, and that might be the major reason the economy is slowing. deflationary concerns to take a backseat, so the outlook is probably they will scale back their purchases and monitor the developments coming from the economics and seecy side to fine tune or if they can do something on the interest rate front. tom: david, the shift in dialogue over the last eight or 10 weeks, we have moved away

from a study of the balance sheet dynamics of the different major central banks. how will that move in 2019 and particularly for the ecb, what would they do to manipulate the balance sheet. >> details will be released today after the meeting. the intention is actually to stop expanding the balance sheet, but reinvesting any maturing assets, so keep the balance sheets stable, and only when there is the need to either manipulate the balance sheet, as you outlined, or really supply the market with additional facilities come as of this has always been in the toolbox of the ecb, to supply markets with longer-term facilities, also running out in 2019, so we don't expect much from manipulating

the balance sheets. we think the ecb will refer to more unconventional facilities to supply the market with additional liquidity, if needed. francine: david, why is inflation such a's upper and thing to find? might have we not seen inflation so far and why 2019 is the year where they are lowering inflation forecasts? , mostterms of inflation of the preconditions for rising inflation are there, so capacity constraints in some countries coming from the labor market, the equipment side. the question is why it is not showing up in inflation. these capacity constraints are basically counteracted by lower oil prices, so the headline inflation cannot rise. this is a factor that masks the underlying development, but then we have inflation expectations,

very slow moving, some not reacting quickly on the tightness of the labor market and higher wage demand and higher wage settlements, so this is a slow-moving process. we have to be prepared that it is overlaid by volatile components like google prices. francine: david, who do you think will replace mario draghi, and will it matter to monetary policy? change at of the ecb did matter in the past, so we have to be repaired that the angle will change a bit. the challenge for the ecb is to normalize policy again, so probably the challenge for the next ecb after mario draghi leaves at the end of this year, next year, so there will be a change purely due to the fact there was a change, and the economic backdrop has changed as well.

david, i must ask you, you are clearly removed from the major banks of germany. bloomberg with an important article yesterday, reporting on the future of large german banking as well. like if it bank be is deutsche bank and commerzbank combined? >> the german banking market is challenging for every bank, and even when deutsche bank or commerce banker confined, why -- combined -- commerzbank combined, why? this would not change much when they would join forces. they would also need to find the right business model for this which supplies lots of banking services already and is highly competitive. david, thank you for

answering that delicate final question. right now in brussels, a different part of this european modernty, on architecture in brussels. taken, maria, but the idea of the eu giving prime minister may all of 10 minutes at dinner tonight. they have some other things to worry about, don't they? >> they have many things to worry about, the european but it is a 2019, big thing because it will be the ultimate fight tween the establishment and populous. today she will get to talk for 10 minutes, very unusual, but given the political commotion yesterday, not much has changed. they think the u.k. will leave

the european union with the deal for a number of reasons. nobody wants the u.k. to crash out, but they think they cannot afford to go no deal at this point. do you think eu leaders will congratulate her today because she won the leadership challenge? herhey probably don't see as being in a stronger position, although she would not be challenged now for a year. here froms we do officials in brussels, but they have respect for prime minister may because she has been able to weather the storm. the prime minister once a legally binding concession tonight. eu leaders don't want to do that today. they don't think it is a good idea to open a negotiation and think december will be a no go for brexit and anything will

have to wait until january to get something. maria, you have a true expertise on spain. are they part of this discussion or is this just the larger powers of europe? >> they are part of the discussion. the eu knows this very well. in order to work and a favor, they have to stick together. one of the things that gets lost in translation is the eu do think this is the greatest test they have had ever come and they have to send a group political message and make it very clear the position. prime minister may in their eyes cannot claim victory. francine: thank you so much. schulman, paypal

chief executive, an interesting conversation, a lot of it will revolve around cybersecurity, 5:00 p.m. new york, 10:00 p.m. london. this is bloomberg. ♪

francine: this is "bloomberg surveillance." team coverage in westminster. u.k. labour party is

deciding whether to push for a general election by triggering a formal vote of no-confidence in the government. joining us now is john mills, julian emmanuelle is still with us. thank you for joining us. your labour party, you were for brexit? where are we now? does theresa may come out stronger? do we have a second referendum or crash out? >> i don't think theresa may is stronger. she is still there. she won't be challenge for another year. francine: that is something. >> she has some measure of authority left. she will try to get some concessions from brussels. i am not sure she will be successful. it will come back to the house of commons and get voted down again, and then we are into all these various options. francine: you think there is a 50% chance the u.k. crashes out. >> there is a 50% chance we will

finish with no formal deal, but that doesn't mean there won't be individual deals in other areas where it is in everybody's interest to cooperate. even if there is no deal, i think there will be some disruption, but it should be manageable. francine: january, february, march, do you think we will get the deal? how ready are we for a no-deal brexit? >> we are partly ready, but not fully ready. for example, at the border in calais, will we have a lot of inspections holding up the trucks. it will be these decisions that will be crucial. francine: julian, when you look at pound, are we expecting more volatility? as we try to wait through brexit, how much volatility does to currency markets overall?

question this underpins currency market volatility. in general, our view is the dollar may be weaker next year, pound certainly part of that. , if we are would be heading towards a new deal ,rexit, how -- no-deal brexit how does that influence the probability of a second referendum in the first half of next year? that could be something that ultimately underpins the pound. right, but the second referendum means more uncertainty, right? how would the markets be positioned on the second referendum scenario? from our point of view, again, if you look at the chart of the pound, you have been trending lower towards the bottom for the last several months. in a world where, in fact, you have had the position and the

potential for a second referendum to really call into question what the outcome of brexit itself might be, perhaps remain in seven winning a second referendum are something becomes constructed so the outcome is radically different from what is on the table, that could underpin the pound in our view. francine: john mills, do you want a second referendum if it delivers the brexit you want? >> the problem is not with the outcome will be. it depends on the questions and all this kind of thing, but if there is a choice between leave and remain, i am not sure the result would be remain, so i think there is a huge area of uncertainty that would not be welcome at all from a second referendum. francine: thank you very much.

thank you for joining us with a spirited conversation regarding brexit. later today, under armour founder and chief executive, and under armour president and ceo oh, a conversation about -- coo, a conversation about what happens to the company next in the regions where they see opportunity. this is bloomberg. ♪

francine: this is "bloomberg surveillance." mr. francine lacqua in less -- in westminster. we were talking about the labour party and the fact john had voted for brexit and what the vote of confidence means for the future of brexit. john, thank you for staying with us.

we were talking about the merits and non-merits of a second referendum. would it be saddled with the second referendum? aret of all, the polls similar to what we had before the first referendum. even if it was on the remain side, would we settled the question? >> i don't think it would. it would leave the country as divided as it is. , itpurposes of a referendum would open these divisions more. that will be a factor that weighs heavily with mp's. francine: do you see any appetite for a second record -- referendum apart from the people who want to remain in the eu? >> know, the people in favor of the second referendum feel confident the result would be to remain, but i am not sure that would be the outcome. if you look at the polls now, they are showing 48 for leave and 50 24 remain, but that is

for remain, but that is what it was in 2016. it swung the other way, and that could happen again. francine: are we confused by your own party's stance, whether jeremy corbyn likes it or doesn't like it? are inof labor mp's of thef remain, 80% membership is, but 50% of conditional voters are in favor of leave, so the labour party is pulled in different directions, as well as trying to work out what is best for the national interest. it is not clear. francine: when does it become clear? are we going to be talking about brexit for the next three years? >> possibly. i don't think that will happen. if there will be any extension

of article 50, that will be for a short time and there will be conditions from the european union. i think we will have to reach some finality soon. francine: our business is ready for a no-deal brexit? >> businesses don't like uncertainty. that is what we have got. some businesses are better prepared than others. how bad will it be if there is no deal? i don't think it will be that different from what it is now. a lot of businesses don't trade with europe at all. francine: what about the small businesses that are not ready for disruption to their supply chain? >> i'm not sure there will be that much disruption to supply chains, trucks waiting to get to the ports. as long as we can keep trucks moving, even if the paperwork system changes a little bit, which it would, i don't think this would hold things up.

with the systems now in place for clearance through customs, we ought to be able to avoid that happening. much,ne: thank you so john mills joining us to talk about his labour party and brexit. tom is in brussels bringing you the latest from the eu leaders summit. sessionx 600 hitting a low. u.s. futures falling. we won't have a full market roundup next right here on bloomberg surveillance. don't miss exclusive interviews throughout the day. this is bloomberg. ♪

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mario draghi must address weaker growth. survives, returning to her brexit battle after surviving a vote of no-confidence. trumps tradewinds, china buys soybeans, a one off or a thaw in the trade war? david: i am david westin with alix steel. day. more than ecb it is only one of five central banks. banks,f you look at two it does not look good in terms of their outlook. s&p cut its forecast and said the currency remains fragile. one bank said it adjusted its rate have lower. to comet is too soon off the crisis management monetary policy.