francine: theresa may lee's brussels empty-handed. the pound slips. chinese equities fallen disappointing retail. european auto sales fall for a third straight month. and recession rates. flashing orange signals for the year ahead. the odds of a downturn in the u.s. have increased. look under surveillance. i'm nejra cehic in london. let's check in on the markets. it's a risk off day in today's session.

the stoxx 600 down significantly. we've got some breaking news across the euro area. december pmi falling to 51.4. the forecast was 53.4. manufacturing pmi coming in a little soft as well. germany's number coming in a low but soft. some pain in this french pmi's. both in the manufacturing and services. china, could some concern as well. pimco flashing those recession symbols at amber. if you're not the missed, it say they only see a one third chance of the best the highest in nine years. equities are down, the euro is weaker. -- 1.1296.12 90's

some contradictory messages. the euro weaker today. we are seeing a stronger dollar in today's session. also saw the kiwi and new zealand dollar fall after china data in the asian session. the 10 year yield dropping for the first time this week. there's a very clear picture of risk off. 2.87. inflation and the fed as well this hour. goldman and city taken on the markets with a little bit of a different view on inflation. we will get into that. equityk to the cheek officer at blackrock. here's the first word news. private sector growth in

france tracking for the first time in two years after protests and violence across the country. plunging since -- to the lowest since february 2016. december services pmi coming in at 49.6. this is well below economists forecast of 54.8. china's economy slowing again in november. retail sales and industrial production both weakening. retail sales posted their weakest performance in more than 15 years. the data creating a challenging backdrop for policymakers gathering next week at their annual economic conference in beijing. french prosecutors say the man who murdered three people in strasbourg has been shot dead.

he was confronted by police and turned and opened fire. a fifth person has been arrested in connection with the attacks. people detained are two of his parents and his brothers. the publisher of the national admitting to killing negative stories about president trump. at a meeting with them and michael cohen and this was being called illegal. leader wascratic rejected by the majority and the blocked the swedish prime minister vote. the country has struggled to find a way out of an impasse following an inclusive election area global news 24 hours a day

and at tictoc on twitter. under the on or tanto. -- i am the the anna boards auto. iviana ortado. hoping toresa may secure additional assurances on the irish backstop. eu leaders harden their approach. stepping a plane for a no deal brexit. i am still of the opinion that mrs. may is fighting hard and bravely and we have not seen the result which is desired to have an agreement in the withdrawal do we have analyzed will not be put up for debate again. we have the negotiations, and this is it. >> this is it.

this is a response as 27 countries to the great concerns raised in the u.k.. theyritish are free to say want to continue talking and we are always open to that but this is our answer to the concerns and the british parliament. let's get to our bloomberg team. we have anna edwards and maria tadeo. what went wrong? it seemed like leaders at one point were considering concession. it was a bad night for prime minister may, no question. she want to get's concession and she did not. european leaders did want to give her concession but they were disappointed by her presentation. she did not offer enough clarity area and european leaders actually pulled back a statement where there were concessions and decided they didn't have enough detail.

what she got was a very public dressing ground. -- dressing down. what i hear on the ground is that she will be meeting macron today this morning. deal inll be no brexit december, we will have to wait until january to get something. nejra: i was on the green earlier and was dead quiet at 6:00 a.m.. witnesses leave theresa may? it doesn't leave her all that far from where she started. she still has all the problems that she tried to solve. david livingstone saying it's a good start or at least a welcome first step. you're hitting parties calling for that meaningful vote. the s&p this morning, the labour party, both saying they want

this vote on theresa may's deal to take place. she doesn't want to take it to the house of commons was she is sure she is going to win. rate -- roadsll remain open from here. receive the brussels machinery can into action in early january? then the mps can vote on that. so many other paths seem open from here. key questions of whether the labour party and friends will table some kind of no-confidence motion. many options still remain on the table from the westminster perspective. nejra: thank you so much. joining us now is jeremy stretch . don't know a whole lot more about the process of brexit as he did the start of the week. jeremy: you're right.

the problems the prime minister was facing at the start of the week are almost exactly the same -- almost executive the same. you can argue the reaction the primus are got is actually made her position a little bit worse. to havehoped perhaps that when the leadership vote and energize the renegotiation process. in the sense it seems the goodwill she went into that meeting with has dissipated quickly. the language that has been used by number of people was remarkably disappointing. it still since you the case of the topside and serling -- in sterling is to the downside. as you mentioned, we are coming back to parliament on monday where the prime minister will make a statement. the question is will that be seen as an opportunity for the opposition party to continue to place pressure on the prime minister. nejra: the downside in focus, how much lower could we go?

i'm always confused when people talk about binary risk in sterling. you are as it stands now talking about downside risk that far outweighs the topside risk. does not look like we will suddenly have a resolution that will cause sterling to rally higher. in the short term, if we break down, i think the obvious level which we started 123.5. that's the level we see trading into the early part of next week if we are seeing markets think the risk of a no deal has become amplified. continued political inertia. we are also seeing the european union stepping up operations of no deal. case of thebe the realization that the european union's contingency planning is

better than the uk's. meanwhile eurosterling not really moving. read and 89 handle. that is one reason it has exploded. nejra: jeremy stretch staying with us. the world's second-largest economy is slowing. china production weekend along with sales. how will impact the global economy? this is bloomberg. ♪

nejra: economics, finance, "bloomberghis is

surveillance." equity markets seen selloff in europe. the dax down 1.4%. biggest decrease in more than a week for the ftse 100. s&p futures also getting momentum to the downside. a fairly lackluster session. falling to the lowest in more than eight months. something is urging these markets. we will get into what shortly. let's get to the bloomberg business flash. belmont has been purchased. the company a $2.6 billion. it's a surprise winner for belmont. marks a significant move into the hotel market.

there's another sexual harassment case involving cbs. the network paid actress eliza do skewed $9.5 million to settle harassment claims. she was guest starring on the cbs program bowl when the show's star allegedly set number of things that made her uncomfortable. she sayscomplained, she was written out of the show. apple says it will push a software update to chinese soft brush iphone users after local court found it had infringed on a patent. they have threatened sales injunctions at some of their older devices. it evolves and justine photographs and managing apps via touchscreen. that's the bloomberg business flash. nejra: u.s. growth will slow in the risks of a recession are climbing according to pimco. they see a 30% chance of a downturn in america

months area and chinese stocks in the u.s. sell after the second largest economy fell in november. it was his weakest performance in more than 15 years signaling a deeper slowdown. the data shows a challenging backdrop. join us now from hong kong, bloomberg's chief asia economics correspondent. what are you seeing below the surface of these numbers? i think by all accounts it indicates the policymakers have more work to do to get the world's second-largest economy back on track. is takingwn we seen longer than anticipated to turn a corner because policymakers have been taking more targeted stimulus message -- measures. they were offering exporters direct rebates. they been taking these micro-steps to keep growth going

again. it illustrates just how much is at stake with the broader trade war. if they do manage to cut a deal liftrch, that would china's economies indignantly. but if they don't come in a put more pressure on policymakers. nejra: think is so much. bloomberg's chief asia economics correspondent in hong kong. jeremy stretch is still with us. taking today is a snapshot, it's not looking great for global growth. we are seeing the dollar strengthening. but it seems it's more to do with the weakness in other g10. that's true. they have proven to benefit on the weakness of the europe. -- of the euro.

think the context of a global environment, we're seeing it is celebration. think the question is the magnitude of that deceleration. the overall issues is the trade negotiations and tensions. is if mr.s can do trump was to try to take credit for this deceleration, it will put more pressure on the chinese authorities. it would risk amplifying the risk off and ask. the stakes have been raised very significantly because of the deceleration of the data. looking very closely in terms of trade dynamics. nejra: i want to look at this chart bringing of china's yield split that spread to treasuries widening. it still beyond the comfortable gap. we seeing you on weakness in the session.

we were asking whether you want strength would continue. looking at this chart and the spread difference, what's your take? range trading in the shorter term but as we go to the context of 2019, if we work on the resolution in terms of those trade tensions, which can be a managed resolution which will allow both sides to claim some degree of victory. this is the template we would look at. if we can see a resolution in terms of the trade side and if we are going to see slower pace in terms of economic entity in the u.s., i think that can and will allow the chinese currency to see some modest gains. we can see dollar yuan moving lower. threshold is really going to remain a threshold with we will likely see tested anytime soon. nejra: you keep hinting at slowing momentum in the u.s..

i want to talk about pimco's flashing orange recession signal. you could be an optimist and say 30% chance of a downturn, that's not so bad but it is a nine-year high in terms of the outlook. you generally see dollar weakness next year even if you don't see recession coming next -- year?emy: decelerationll see even if there is not a risk of a recession. will probably be at half the pacers seen in 2018 atomic it to 2020. the economic expansion is a long immature one. nevertheless, we are in a very mature cycle. were seeing the fiscal boost starting to run out. position will start to become a little more vicious and 2020. at the same time, markets being mindful.

i think it is can be the case that investors will be looking elsewhere in the g -- elsewhere and not necessarily holding dollars. nejra: up next, pessimists guide to 2019. the biggest risks in the new year and the worst-case scenarios. this is bloomberg. ♪

nejra: economics, finance, politics. i'm nejra cehic in london. with just 2019 have in store for us?

bloomberg puts out its pessimist guide to the new year. it's a walk through what could go wrong. is our senior government reporter. the great to see you. take us to look at the wrong. i decide to anchor it in a reality of what really could happen. were based it on things that happen in the past. extreme climate change of the moment. what if we had another el niño with droughts in australia swiping across? sending happening in bill? the impact on rice. imagine if you have a situation for you have a whole lot of hungry people. is there any good news for next year? -- >> if people who had

surpluses decide given to themselves like for example donald trump, might decide to keep agriculture for americans, and this prognosis maybe justin trudeau would give away excess production for free and get a nobel prize for it. nejra: our government reporter in hong kong, great have you with us. ecbext to talk about the calling time on the bond by program. was a contradiction? this is bloomberg. ♪

nejra: economics, finance, poliltics. this is "bloomberg surveillance." is this the impact of a day of bad data? we have had signs of china's economy slowing in november. europe has followed lower as well. the dax lower by 1.6%. european pmi's coming in. u.s. futures also falling lower. you can to the breakdown of what's happening in the stoxx 600. we are an hour and a half into the equity trading session in europe. carmakers and tech stocks doing particularly badly. banks suffering as well. viviana: european leaders have

rebuffed theresa may's pleas for help. u.k. prime minister traveling to brussels hoping to secure additional assurances on the irish border backstop. eu leaders hardening their approach, stepping up planning for a no deal brexit and offering limited reassurance. sector growth in france contracting for the first time in more than two years after protests and violence distracted businesses across the country. december service emi coming in at 49.6, this well below economists forecast. china's economy slowing again in november, retail sales and industrial production both weakening.

retail sales posted their weakest performance and more than 15 years. they rose 8.1% from 12 months earlier. the data creating a challenging backdrop. french prosecutors say the man who murdered three people this week has been shot dead. police were attempting to arrest him on the street, that is when he turned and opened fire. a fifth person has been arrested in connection with the attack. the others obtained are the killer's parents and two of his brothers. storyr twist in that about the tabloid publisher who -- federal say prosecutors call this plot illegal.

stefan has lost a second crucial vote in the swedish parliament. the nationalist sweden democrats blocked him in a prime minister vote. the country has been struggling to find a way out of an impasse following september's inconclusive election. 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. this is bloomberg. back to you. much. thank you so the european central bank is ending its historic stimulus program while warning that risks to the euro economy are getting worse. bond buying will end this month after almost four years of easing. mario draghi has cut growth forecasts. the underlying strength of domestic demand continues to underpin the euro area expansion, and gradually rise

inflation pressures. the outlook for inflation has been a revised slightly up for 2018 and down for 2019. the risks surrounding the euro area outlook can still be assessed as broadly balanced. the balance of risk is moving to the downside. owing to the persistence of uncertainties related to geopolitical factors, the threat of protectionist, vulnerabilities in emerging markets, and financial market volatility. stretch is still with us. somewhat call this a bit of a dovish statement. overall, i got the impression that a lot of people saw contradictions. how do you trade around a news conference like that? jeremy: you are right. in a sense, when you look or listen to some of those comments, clearly, there was

something in terms of risk being tilted to the downside. geopolitics has been added to the list of downside risks. course, when you look at the economic forecasts, those in seem to have been written by somebody else because the downgrades we saw for next year were very small. we're still talking about trend growth or above trend growth over the course of the medium run. i think it was interesting that whilst he is talking about the external risks, he is also accentuating the strength and risk of domestic volatility. i think that is where there is an interesting subtext. i think that comes back to the in aadiction revolving slightly firmer ecb backdrop then perhaps the market is anticipating. nejra: said you do you see the

prospect that we could get a rate hike and 2019, or is that not really a prospect now before 2020? jeremy: you have to remember that there is another variable and play. play. l i think mr. draghi will be mindful of not wishing to leave the problem to his successor in terms of turning the rate cycle. i think the data is more consistent with that economic forecast. growth running above trend and reducing spec capacity. i think we can and should anticipate the risks of turning rate cycles, and maybe we start to see the deposit rate start to move higher. i think there is still a case to be made that the ecb can move back to this. nejra: and becomes a big question over whether they really want to go to the next downturn with rates still in negative territory. jeremy: if he leaves the doctor's successor, we're

-- job about well into to his successor, we are talking well into 2019. nejra: what about the fed in terms of a slowing in rate hikes? jeremy: i think we need to consider next week. we are seeing additional pressure being placed -- nejra: is it in play for you or just a dovish hike? jeremy: i think a dovish hike. i think of the fed were to resist, it would leave them susceptible, which we have seen in a number of global banks, and it would also imply that markets would say, what does the fed know that the market doesn't? in the context, i think it would create even more uncertainty. the question is, therefore going

to be much slower in the course of tightening. i think that is consistent with economic data. i think am 2020, we will see the fed the starting to reverse course. us.a: jeremy stays with we have a lot more to talk about. plenty coming up including the outlook for oil. brent is floundering. hall says it is time to get bullish on crude. we will bring you that interview next. this is bloomberg. ♪

>> i hope central prevail.

the ideal thing would be a new referendum or for the house of commons to get together and stamp out a hard brexit. in an ideal world, put us back to be part of the european union where great britain was doing extremely well. was richard branson talking brexit and his hopes for a second referendum. more from him throughout the day on bloomberg tv. let's talk about commodities. i'll investor andy hall expects demand to rebounds after a sharp fall this year and says traders investing.tter off >> on the negative side, there are headwinds it regarding demand, worries with the threat of trade wars, how robust is emerging-market country demand, stronger dollar is generally not

constructive for oil demand, commodity demand, in general. on the other hand. not only have you had opec cut treated -- production, there is no question lower prices will have an impact on production growth in the u.s. i think when you look at 2018 as a year, the biggest surprise has been a rapid growth in u.s. oil production. everyone knew it was going to grow, but i don't think many people expected to grow by as much as it has. right now, year-over-year growth in crude production in the u.s. is about 2 million barrels a day. back in january, the u.s. government was forecasting growth of half a million barrels a day. that is a staggering difference. $25-$30ave now dropped a barrel. that will presumably have an impact on production growth in the u.s.. >> we're going to dig down deep into that.

are you more bullish or bearish right now? around arices hovering little over $50 a barrel, i think you would have to have a pretty negative outlook on the global economy to believe that prices will continue their downward trajectory. we are on the verge of a global recession or anything like that. price cures price. downdraft,rection or not only is it going to impact the supply side of the equation, demand also will respond to that kind of price move. if you wantalance, to place a bet on oil right now, you're probably better off betting on it going up and going down. nejra: that was andy hall speaking exclusively to bloomberg. bond traders see the specter of quicker inflation is all but dead. we talking about a rollover in

those breakevens, a view that clashes with strategists who see more upside ahead. falling oil prices will weigh on headline inflation, but are unlikely to pass through the core reading. they also see the possibility that trade tensions will cause inflation to accelerate. jeremy stretch is still with us. let me take you to this chart. at theually looking five-year five-year forward breakeven versus the 10 year yield. down for basis points in the session. are you on the side of the market on inflation or the side of goldman and citi? : if you arejeremy to take those trade tensions to the nth degree, you have a potential upside risk and labor markets remaining relatively tight. also, it would suggest that there may well be inflationary consequences coming through.

the pull that we have seen in the oil price will have an overall reduction effect in terms of headline inflation. i think there is a real the station between the headline and the core dynamics going forward. i think we are going to see core inflation remaining relatively sticky. we are going to see those wage dynamics starting to come through. i think that is what to be the factor that is going to cause central banks to be a little more wary going forward in certain instances. that: goldman's, was although they continue to be under pressure, the fundamental case for amin them appears to be intact. the reasoning is the only scenario they are unattractive to own is a situation where growth is accelerating much more sharply than expected and fed policy is already respected -- restricted. is it already restricted? jeremy: i think we are already close to that. there's a lot of debate in terms of the equilibrium rate.

we are getting relatively close to that in that particular context. if you think about broad monetary dynamics in terms of valuation of the dollar, in the context of broader monetary conditions, and that would imply that monetary conditions are relatively tightening in the context of the u.s. you wouldr picture, have to have a far more pessimistic scenario in terms of the global growth dynamics to really change the picture or perception in terms of the breakeven story. nejra: china liquidity is one of the factors people have been saying, we have been seeing the selloff in liquidities. takenliv has done is review from analysts. our question is asking what risks might mliv readers be underestimating with their bullish s&p forecast? what is your view? jeremy: i think mr. draghi

highlighted potential risks, and i think that is an has to be one of the factors we consider. the political site in the u.s. is going to start to wrap up in the u.s. i think that is something that is what to be relevant, particularly if there is an increased degree of pressure between the white house and the fed. think some political dynamics and geopolitical risk is something to consider. nejra: the dollar has tended to win, but earlier, were talking about the fact that you see downside for the dollar in 2019. if risk rise, which currencies when in that situation? despite the uncertainties we are seeing in the eurozone, i think you have to come back to the fact that the current account surplus status of the eurozone has a benefit. you go back to those traditional risk off currencies, and we're back towards the japanese yen. we haven't talked about the and today, but i think it's interesting looking at some of

the components, you can actually argue there is a fundamental case, which is better than many in the market are receiving, as well as a potentially risk off scenario, which will help to precipitate a much stronger yen for the course of 2019 as well. stronger yen by us. i'm going to give it and take it to asia. i want your thoughts on the indian rupee. we have a new r.b.i. governor in place. with all of that in mind, is there any reason to be positive on the rupee from here? oil prices might be one. jeremy: you took that word right out of my mouth. that is one of the obvious factors in terms of the impact of the oil price. in a sense, 28 he has been a year when central bankers have been under extreme or increasing pressure from their political masters. in a sense, the r.b.i. has been one of the assets in the center

of that. markets need to have some degree of confidence, and it will take time in the new regime to see if it can have a degree of de facto independence away from the government. if it does not, even in the context of a more benign oil ince, it's going to be tough the short-term to see investors starting to rebuild confidence. nejra: the local concerns concern you more than the sort of global backdrop's impact on the rupee. jeremy: indeed. i think that is one of the issues in terms of em in general. i think we need to be much more idiosyncratic in terms of looking at the specific factors and a number of those em nations. that maybe what is the opportunity in terms of the relative value trade in em space. nejra: final question, your top calls for 2019? jeremy: talking a little bit

within the g3, it's dollar lower in benefiting in terms of the euro. that, i think they're still can be some significant outperformance in terms of some of those satellites. we're looking at scandinavian central banks or there is action and impetus. the oil discussion in norway looks relatively set. i think that is another place to look at. if we are not going to see a massive global deceleration, i think some of the currencies in asia, but in the developed space in terms of the us billion dollar look oversold. -- australian dollar look oversold. nejra: think you for being with us. louis vuitton has agreed to acquire a hotels high and operator. this is bloomberg. ♪

nejra: let's get a bloomberg business flash. lvmh has agreed to buy

orient express owner belmond. lvmh owns the louis vuitton brand and don perrion. another sexual harassment case involving the u.s. television network, cbs. according to the new york times, the network paid an actor $9.5 million it to settle harassment claims. she was guest starring on the cbs program "bull" when the show's star set a number of things that made her feel uncomfortable. when she complained, she says as she was written out of the show. virgin galactic has marched a made -- marked a major milestone. the spacecraft taking off from desert.it's mojave climbed more than 51 miles above the earth, and for the first time, bridge to the atmosphere.

this marked the first time to commercial operator. >> it is a very exciting time for investors investing in commercial spaceship companies. the market we believe is enormous. something like 80% of people we researched, if they could afford it and if they get offered a return ticket, would love to go to space. it's up to us to do both. viviana: that is a bloomberg business flash. nejra: let's check in on the markets and sebastian salek has were stock movers. let me take you off with something a bit more positive. an online germans listing company. they could go private and there are a number of private equity firms looking at bidding for this. this movie are of 11% is the most since november 2016.

, at one point it was the biggest move ever. another good performer is balfour beatt, the u.k. construction company. they see they are coming in above estimates. they banked 65 million pounds this year. the some 17% down year to date from yesterday's close. the u.k. construction sector suffering after the collapse of carillion earlier in the year. omnium,plastic professional car parts maker. down some 8.2%. this isn't even the biggest drop this week, which gives you a sense of the scale of the declines. nejra: thank you so much. we continue in the next hour. tom keene is in brussels and anna edwards in westminster. mo -- kateto take moore. this is bloomberg.

♪

tom: this morning, all that remains is for the prime minister to move on, to leave and return to her fractured britain. nation's say, please mrs. may, construct a new plan. a terrorist in strasburg is killed. migration in europe is the unspoken topic. christopher christie is the chief of staff. good morning, everyone. this is "bloomberg surveillance." i'm tom keene other european summit in brussels. de-bree needed to be xited today.

anna edwards is at westminster with her considerable authority on all things brexit. the attention must be on prime minister may. she is still here in meetings. you know how difficult last might was for her. anna: absolutely. good morning to you from westminster. the pay government trying to put a brave face on it. have had cap ministers out this morning saying it is a good first sign from brussels. really, it is anything but. they are playing hardball. what exactly is he asking for? that is the message. we will get further into the details of brexit this morning. let's get to the bloomberg first word update. viviana: in news outside of westminster and brussels, another sign that china is trying to resolve the trade dispute. bloomberg learning the chinese will resume buying u.s. corn as

soon as january. beijing also figuring out ways to get around the 25% tariffs on american corn and imposed last july. the u.s. senate issuing a symbolic rebuke to the saudi crown prince and president trump. lawmakers voted to withdraw u.s. support for the saudi's war in yemen as punishment for the killing of jamal khashoggi. the senate also declaring it believes the prince is responsible for the death. another twist in that story about the tabloid publisher, the federal prosecutors say schemed with donald trump's presidential campaign to kill unflattering stories about him during the campaign. mr. trump was present at a meeting with his personal lawyer, michael cohen and the national enquirer publisher. prosecutors calling the plot illegal. fed officials are expected to raise interest rates again next week according to a new bloomberg survey of economists. there is a expect the central

bank to slow the pace of rate hikes next year. 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. this is bloomberg. tom: thank you so much. unlike yesterday, markets truly on the move today. we need to be a little more careful for our dated -- with our data checks. right now, let's go through it. the equity markets showing features that -26, not down through the range, but nearing the support we have seen for a good number of weeks. 11295.notice euro at let's go on to the next screen with curve steepening. it's shows a vix that is clearly more elevated this morning. 22.14. sterling, 1.26.

weaker sterling off the late-night disappointments as well. the dollar spot, 97.54. to me, that is really critical to see that move out. just for you, i threw in bitcoin, down through 3300. it's really struggling right now. bitcoin, struggling. celebrate,as we those highs of the coin, breaking news. china to lift retaliatory tariffs on u.s. cars for three months. some of these were put in place in retaliation against u.s. actions. president trump has been arguing for a long time that these terrorists are too high -- tariffs are too high.

we have been reporting that the chinese would lift these tariffs and now we see that they are going to do that. let's get back to the story of brexit the design here in westminster. we are still tracking u.k. politics. all of this with brexit flavor. james is here with me on the green as is nina. both braving the cold here with us up bloombergtv. let's come to you first, after a week of intense activity, you wonder what has changed. theresa may survives a leadership challenge. that might be the most material thing we have learned this week because the actual conversation around the backstop doesn't seem to have moved on very much. nina: i think you get to the crux of the question. nothing has changed. the entire domestic fallout you have seen in the past we care has been a massive exercise in

displacement. all parts of the conservative party don't want to swallow the bitter pill that is on the table. what i mean by that is that brexit actually means that things are not going to be better than what they were before. it's a series of compromises. fundamentally, when it comes to what is on the table, nothing has changed and nothing will change. there will be no changes in the backstop to the likes of what boris johnson at all are asking for. the question is, will theresa may a will to get her deal through parliament. it looks like no. anna: that is the big question. could we get changes in early january that would get us any closer to getting this through? she doesn't think so. etsm a u.k. stocks and ass perspective, the clock is really taking. u.k. stocks have been a very different story because they are very international,.

in some senses this is all going to start to look very close as we turn the year into january. how are you positioned? james: it's getting closer. by the time you get to january, we will be sub three months until we get to march 29. sterling has been pulled from one direction to the other. i think the perception and markets is that this is a difficult one to get your head around. we know a no deal is the default option, but we also know there is a large majority inside parliament that doesn't want to do no deal. may's deal does it look like it can get through. how do we get to some sort of solution? sterling is getting pulled in one direction and the other depending on whether the probability of no deal goes up or down. when theresa may was challenged earlier this week, we saw sterling come under pressure. would rathere ig have had that vote today than a

few days ago after what happened yesterday in brussels. it's clear to me that theresa may is not going to get the adjustment to the backstop she needs to get to get this deal through. they will bring it back in january, and will probably fail. in the markets wonder, where do we go from that? we going to a second referendum, norway plus? there are members of the cabinet that would like to start planning for no deal. anna: what role of parliament plan all of this? now, we want to go to some images we are just received. there are many different images here. one of them has to be of prime minister may and mr. juncker. this video was caught in a point of real discussion. maria tadeo has really been on top of this back and forth, these little conversations we see throughout this european council building and the european summit as well. this goes back to mr. juncker with an idea of saying, wait a

minute, you come to us with the assurances and adjustments you need. decidedly, mrs. may looking to that you for guidance. -- the eu for guidance. i want to go back to what i see as the unspoken, which is the irish question. this is old news, this irish question has been a huge issue for hundreds of years. when prime minister may comes home, how does she deal with the backstop and the irish question? reallyhat is the issue that has dogged the negotiations from the very beginning. i think it's fair to say that in westminster, there wasn't an understanding of just how much of a spider in today's negotiations the iris question would throw. fundamentally, nothing has changed. if the uk's red lines are as they are, that they will leave

the eu single market and customs union, this is red lines drawn by the conservative party, there has to be some kind of external check on the eu's border. we all know that can be on the island of ireland. hence, it either has to be in the irish sea or the backstop being that the entire u.k. is in the customs union. -- i are just the dynamics don't foresee how anything in the next few weeks will change that. it is simply that. i think the only thing you can say for the saving grace, lisa be a no deal, is that if there is a no deal brexit, the question doesn't get solved either. the question really is simply, will theresa may's deal get through or not because all the other options mean there would be a hard border in ireland, unless it's to remain. tom: the back-and-forth in auto stocks doing better than good this morning off the chinese announcement on tariffs. you have to be opportunistic here at the margin.

where is the opportunity right now, given these political and international relations? i think the issue for markets at the moment is that we discounted quite a lot of bad news, global equity markets at the beginning of the year were 16.5 times earning. we discount the bad news. the problem is, there is an absence of good news. we saw a little bit of good news yesterday where the italian b2b started to come back. we were getting optimistic because theresa may got herself at least through a confidence vote. you take today, brexit looks like it's in trouble. ported out of china, very poor data out of france. are seeing and being bounced around by these events and by this data. what the markets actually need is some progress that tells them that actually growth is way to improve next year. the one thing i would point to

there is that there has been some progress. that is the positive. but at the moment it is getting drowned out by everything else. tom: james and nina with us. much more to talk about from brussels at these european summit meetings. anna edwards in front of westminster. prime minister may must return and discuss what she is doing in brussels. in our next hour, on the equity markets in 2019, kate moore from blackrock. this is bloomberg. ♪

isy be on a -- viviana: this "bloomberg surveillance." beijing has agreed to lift a what how it tory tariffs on imported cars -- a retaliatory tariff on imported cars made in the u.s. vuitton willlouis pay $2.6 billion in cash for belmond. there is another harassment case involving the u.s. television network, cbs. according to the new york times, the network paid an actress $9.5 million to settle harassment claims. she was guest starring on a program when she says this shows the stars set a number of things that made her uncomfortable. when she complained, she says as

she was written out of the show. that is the bloomberg business flash. tom: thank you so much. anna edwards i westminster. i'm tom keene in brussels at the european summit. it is a europe that is fractured. for all of our european audience, it is understanood to be disinflation. nina and james in westminster. what is the permanence of this tension of low inflation across europe, combined with populism? what is the permanence of that? that, i think we can certainly say that there are both troubled economic times for europe as well as political times. i think that from the result of the eurozone crisis, to the political backlash we see, we don't see any of that subsiding. we think that in 2017,

especially in the eurozone, people getting confident that the crisis was over. that is not going to be the case. i think that is going to play out as a major theme in the forthcoming year, and years to come because. of the structural flaws in the eurozone they haven't been resolved yet. the experiment with qb is also coming to an end. -- qe is coming to an end. tom: all of these discussions back-and-forth have to come down to being opportunistic. the new thing that we here in every conversation is go back into emerging markets after how they have been been that this year. where is the investment opportunity in europe, and can i daresay that it is eastern europe? that thee problem is international investors at the moment, when it comes to europe, there are too many reasons not to buy europe. .ou have brexit, italy

the european data itself has been pretty soft. we have been saying since march and april, don't be in europe. there's not have european exposure in our global portfolio. you need some of these uncertainties to lift to get people to come back in. if you want to play global equities at the moment, you do what we do, which is you have a barbell in the u.s., because that is what you have the best earnings growth. we have some exposure in ema shut because that is where we are discounting a lot of bad news. we are starting to get some progress in u.s. and china. to one sideurope because it is too hard to answer the question. anna: or may look at the weakness in the french data this morning, we have a constant pmi number. you are mentioning earlier, james pointed to the fact that the protests have maybe taken

some of the wind out of the data. it also goes to just underlining the extent of the protest activity, the extent of the feeling against president macron. if we have seen that kind of hit the french economy, this is not going away in a hurry. nina; it isn't. i think 2017 again in the eurozone and europe was seen as europe's optimism. all these expectations were exalted of the new prince of europe. that certainly is not true. there is huge political uncertainty in france, huge economic difficulties. that macron thought he would be able to strike with berlin to do comprehensive eurozone structural reform was never on the table. he was always facing an impossible task and that is now playing out in the political and economic sphere. anna: thank you so much. coming up in the next hour, we

will talk more about the political european space. this is bloomberg. ♪

tom: good morning, everyone. this is "bloomberg surveillance."

prime minister may is still here in brussels with the great focus on brexit. a great focus after draghi has disinflation. a distraction every time the president speaks in the u.s. stephanie baker is in london on queen victoria street and joins us this morning. it is the operative word was nasty. i used it in my opening. china's nasty, speaker pelosi is nasty, the senator from new york is nasty, but particularly general motors is nasty. what i was fascinated by is that the president alluded to the fact that he could replace those jobs in ohio right away. stephanie: he is pursuing this very bizarre strategy whereby he gm for its efforts to respond, in many respects to his trade war with china. it has increased costs for carmakers like gm.

he has responded by attacking their decision about how they run their business, how they manage those costs for their investors. wantingy, his line is to have his cake and eat it. i think that is why to be a hard one to maintain. there is not much that he can do to prevent gm from taking this course. besides targeting them in the press and making them the object of his campaigning. tom: as you know within the expertise that you have on financial transactions, many people are saying the president has to lawyer up for lawsuits, litigation to come. does he need to trade up right now? new trade advisors as they get further along in a china-u.s. trade war?

stephanie: i think the question many people are asking is, what does he really want from this? what is good enough? china has made an offer to reduce tariffs to 50% where does he really see a deal that can be done? what is the trade-off? how far is he willing to push it, at a time when you see signs that the global economy is weakening, that the chinese economy is weakening. here?s his end goal for many people, i think it is unclear that beyond a war of words, we have seen weakening of the u.s. stock market. what is his end goal, where does he want to stop? tom: we're going to have to go. from brussels and from london, please stay with us. this is bloomberg. ♪

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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. unstopand it's strengthenedting place, the by xfi pods,gateway. which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. tom: good morning. tom keene brussels at the european summit. so much going on. prime minister may still here talking to the europeans.

showed those images earlier, prime minister may and jean-claude juncker in a heated discussion. right now, in new york city with first word news, here is viviana her to auto. china is taking steps to bring down trade tensions with the u.s.. for three months, the chinese will remove the punitive tariffs that helps made cars american made cars like tesla and foreign-made automakers that ship cars there. resume buying corn as soon as january and has agreed to start repurchasing soybeans. the european union rebuffing theresa may's please for help in selling her agreement to the u.k. parliament. the e.u. hardened its approach. it toughened its language, telling made to come up with new

ideas. the biggest problem remains the irish border backstop. slash u.s.a plans to -- oil exports. bloomberg has learned exports to america could fall to a 30 year low. the saudi's hope to show the market they are making good on their promise. sendingpublican leaders their members home on a break without revealing any plan to prevent a shutdown. president trump said he will not approve a budget for government agencies scheduled to run out of money next week if congress does not approve money for a wall at the border. the senate has not announced plans to fund the government. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is "bloomberg." thanks.

breaking news. it comes from russia. today, we hear the russian central bank has raised its key 75%. to 7. let us turn to china. the chinese yuan fell. that had contagion effect to other asian markets and european markets. weakenedl production as long as retail sales. in the last 20 minutes, the yuan regained on the dollar as beijing agreed to lift retaliatory tariffs on imported cars made in america for three months. is james barty.

the sense of this chinese story, the latest twists and turns, we followed them with interest. the slowdown in china, how much does it worry you? >> we are seeing some response. they have taken the heat off the deleveraging campaign. you are beginning to see investments turnaround. we have got the central economic conference just starting. that is an indication that maybe they are not just going to pump up growth at any cost. maybe the gdp growth target rate could slow down to 6%. that is saying we are going to stabilize the economy and offset any pressure from tariffs and any problems on the electronic side of the economy. we are going to keep things stable. james, on the china story,

to what extent do you assume we are in the worst of it now on trade? thedo not know after argentina meeting where things were better, where things turn next. i do take comfort from the fact we are seeing progress, the fact the chinese have lifted auto tariffs and are buying corn and soybean. there were proposals on ip protection. the markets got concerned about the huawei situation. on balance, progress is happening. the chinese leaders do not want stimulate the economy which is what they would have to do if they end up in eight trade war. they can have moderate stimulus and stabilize growth. anna: do we expect to see cut from the pboc?

cuts in q1 expect rr and throughout the year. are going to be other units with local bonds coming in. the interesting thing, next week, we are going to have the 40th anniversary. see whateresting to measures they announced because that is not just adding leverage to the economy, it is changing the structure and answering concerns. if we saw a real measures coming out of that, real targets, you could get another growth channel from that alone and you would not have to do this thing of pumping up the leverage and loosing pol -- and loosening monetary policy. anna: have we seen the weakest in the chinese currency?

where do see it heading? are in ai think we testing scenario because january -- you got the spring festival -- it is early this year -- you have got a lot of money going overseas. every january, the pboc has to work hard to stabilize the currency. they are so close to 7%. it seems they are at a risk of crossing the. -- crossing that. the pressure is on. without a turnaround in the u.s. dollar, you are expecting to see further weakness in the currency. james, is the cny a story?

there is trump's around trade but on the chinese data side, we have seen the effect of week chinese data. has caughtdollar-cny a lot of people by surprise. it has strengthened. we had a rally in the dollar. we have also had concerns about the chinese economy. the fed has tightened more than people expected. that is why we have had the movement in the currency. the hope is going into next year, the fed may take their foot off the break in terms of rate hikes and if you have progress in trade, it is a crucial currency. it thatw significant is we've seen from the chinese this announcement around car tariffs, one of the tariffs they put in place, at least for three months?

is this adding to the more positive music around trade? i think, we could, next week, if they do announce a , the reform opening up auto side, the industrial structure and you tie that in reform whichsme has been stalled. if you some movement on that, it is a case of china gets to do its own reform but also it matches u.s. demands for the economy. it is not going to do all the demands because some of them are extreme. if they can do enough to satisfy , youof the china hawks could see a package next week where those concerns are addressed and that leads into negotiations next year and the

trade tensions we have seen start to be offset. we get to some common ground, james? this started being about trade to twohas broadened economies, about intellectual property, ambitions and technology. that is a lot for these big nations to come to agreement on, isn't it? that is why the negotiations broke down because the americans want a lower deficit. and rossore so navarro have argued we must take the chinese on. that penny has dropped. he isent trump has said focusing on his reelection. he does not want this to continue. i do think the chinese made steps forward. can they narrowed the gap of enough? that is the uncertainty.

navarro is talking about negotiations, trade deals, it suggests both sides are trying hard to get somewhere. anna: it will take a lot of soybeans to move the dialogue on that deficit number. what we see in a progress, as defined by president trump -- will we see any progress, as defined by president trump? miranda: you have got does coat different arguments. they can massage the trade deficit or they can tidy up the numbers. this trade war becomes less of an issue. the issue is what happens longer-term. there is all this stuff on the threat that china poses to u.s. technology dominance. that is not going to go away. you could see a shift in u.s.

policy where they settle on the trade war side but you shift to national security concerns and a lot so keep policies which target technology and stop china's technology development. we going to 2019 where it is not tariffs, it is about sanctions and other national security measures. seem as if you make progress on one and another pops on. thank you for your analysis. barty, carr and james staying with us here on the program. coming up here, on surveillance the head of u.s. economics will be joining the team at 1:30 p.m. london. we are live from brussels and westminster. this is "bloomberg." ♪

tom: good morning. bloomberg surveillance from bugs -- brussels. here,minister may still ready to go back with this on decisions made here and not made here with the european union. anna edwards and westminster with a fractured conservative party and a great britain trying to move forward to the next step of brexit. we want to turn to that discussion yesterday of mario draghi in frankfurt. how it rebounds onto the federal reserve and chairman powell. james barty with us.

it was good to see your colleague who joined us the next -- the other day quoted in the and they were talking about the overlay of higher debt , a need for a debt workout, and slower economic growth is disappointing mr. draghi. how dovish was he? he was mixed. they said they are going to reinvest proceeds from maturing debt sales. that was positive. there was the wake-up framed in terms of readjusting towards the capital, less buying of countries like italy. the market is struggling to deal with that. the message was qe has finished. that is behind us. wille now focused on when the ecb be able to raise rates, will they be able?

at the earliest, the end of next year. the deterioration in the european economy could not come at a worse time as they start to unwind measures. there is a delicate balancing act for mr. draghi. tom: i will agree it is delicate. of thea great chart balance sheet of the united states rolling over, the federal reserve and that of the ecb cannot roll over as well. eventsdraghi a slave to or can he control some of the monetary details of europe? james: he can control them to a certain degree. he can d for rate hikes -- he can defer rate hikes. he could not buy any more german bund's.

there is political pressure to get out of qe nt is hostage to how the economy develops. if we have a weak economy next year, we have a weak european economy. one of the concerns over the last year's cannes the ecb start to raise rates before the fed forecast the it is fed will raise rates next year and the ecb will be able to raise rates. how confident are we? less than a few months ago. anna: there was a lot of focus on reinvestment, wasn't there? , whatularly around italy the announcement means, some people suggesting it is not good for btps. what was your take away? james: they need to go back.

italy's economy is growing more slowly. anna: it is linked to growth? james: you end up with the ecb buying less btps. that has beenn qe dominated. it has been politics in italy. can solve the politics and there is a step between the italians and the e.u. to find a solution on deficit and we saw yields drop below 3% yesterday. you need confidence coming in. james barty, thank you so much. for you fromore of westminster and brussels, looking at american politics and the view forward. we are joined by jpmorgan. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. russia, the central bank has raised interest rates for the

second time this year. boosted to 7.75 percent, concerned about a spike in inflation from a tax hike and u.s. sanctions. virginia galactic spacecraft of flu to an altitude of 51 miles after taking off from california, breaching the atmosphere for the first time. richard branson plans to take passengers into space. tickets could cost up to $500,000. branson speaking about this to bloomberg. >> it is an exciting time for investors investing in commercial spaceship companies to do so. the market is enormous. something like 80% of people would, if they could afford it and get offered a return ticket, would love to go to space. it is up to us to do both. viviana: that is the business flash. anna: thanks.

india'srve bank of board is meeting today for the first time since the shock departure of the governor. for more, we're joined in mumbai . this is not a ratesetting meeting, this is another kind of gathering. what is expected from today? this has been the culmination of a dramatic week, one that saw the exit of patel after a shock that he is leaving as governor, sending a message that all is not well. the administration stepped in quickly and announced a former bureaucrat. theas the man behind demonetization as the new governor. the disappointment, friction between the government and central bank has come to an end.

the governor said he will uphold the autonomy of the r.b.i. and seek consensus with all stakeholders. today's board meeting was regular. modi said it will need time to deliberate some issues. he is not seen as a yes to the government and to restore confidence of the investor community that he is the head of an institution that is independent. off and hes cooling is seen as someone who is dovish on interest rates. that will a line with the prime minister because he needs to push growth ahead of elections. stand up and be counted as the head of an institution that is independent or will he choose to crawl when asked to bend?

tom: thank you so much. brexit.p, we look at i am here in brussels with the reaction of the quiet european union. there are the markets. kate moore will join us from blackrock about the opportunity to not lose money in 2019. stay with us. this is "bloomberg." ♪

tom: this morning, all that remains is for the prime minister to leave and return to her britain. theker and the gathered of 27 nation say please, suggest a new plan. conservatives see a trap over the irish question. a terrorist in strasburg is killed. migration in europe is the unspoken topic and christopher christie as chief of staff? maybe. trump is going after nancy pelosi, she is nasty. this is bloomberg surveillance. i'm tom keene in brussels. to drive the story forward, the telegraph leading with it, maria earlier, asized it bitter discussion that appeared to go on between mr. juncker and prime minister may. anna: indeed.

theresa may is where you are. shelooks to try to do what has been trying to do, make progress on the backstop. that has intensified. she is trying to make progress. can she make enough to stop it looking like a trap and to convince her party? it is a struggle and one that will roll on into january. let us get an update. taking stepsa is to bring down the trade tensions with the u.s.. -- beijingnths, the will remove the punitive tariff on cars that helps american automakers like tesla and foreign-made cars that ship -- automakers that ship cars there.

the chinese will resume buying u.s. corn as soon as january. they had just agreed to restart purchases of soybeans. the senate issuing a symbolic repute to the saudi crown prince and president trump. lawmakers voting to withdraw support for the saudi's war in yemen as punishment for killing jamaal khashoggi. the senate declared it believes the prince is responsible for khashoggi's death. another twist in the story about the tabloid publisher whose scheme with donald trump's presidential campaign to kill unflattering stories during the campaign. mr. trump was present at a meeting with his personal lawyer, michael cohen, and national enquirer publisher, david packer, prosecutors calling this plot illegal. in russia comedy central bank has raised interest rates for the second time this year. the key rate was boosted to 7.75 percent, concerned about a spike in inflation from a tax hike and possible u.s. sanctions. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists

and analysts in more than 120 countries. this is "bloomberg." thank you. bonds,ook at equities, markets moving today with s&p futures south, dow futures up. and the newsown 23 is the dollar strength, we see that in the index. euro under 113. level, off the 22 falling on support. a vix of 21.88. i would notice of the bitcoin down on those december 7 lows. we want to go to our conversation on the markets and linking it in, kate moore is on

our desk in new york. she is with blackrock. , carstenin westminster nicholas is with us. take, let me go to you all of this international relations, and the stories distractions in china and washington, how has that amended the view for 2019? talking abouted geopolitical risk in trade being the number one thing that could affect assets and that seems to be a good prediction in december. i think it is going to be a big we on assets and markets. there is so much uncertainty. elections, policy moves, there is uncertainty around trade, uncertainty around

brexit. it is playing out in the behavior of corporate's as well as investors. i cannot see that dissipating in the near term. to hsbc and talking they have a strong dollar view. you are on the buy side. does blackrock have a dollar view? kate: forecasting the dollar is tricky. we do not have a strong view at this point. i mean that in both ways that can be interpreted. the dollar is going to be more range bound as the fed pauses and considers the data as they move forward with monetary policy. we expect global growth to be solid but not accelerate in 2019.

against that of more stability in the data and policy, our expectation would be the dollar would be range bound. anna: good morning. conversation here, we were talking about the political risk in 2018 and it looks set to be a theme in 2019. we are acutely aware of that. open still onem brexit, don't they? do have any crystal ball? , thisn: there is a theme alignment across rich democracies. that is the way to look at briggs it into 2019. one iteration. once we have that withdrawal agreement done, become her station is going to start again because we are in the transition

-- that conversation is going to start again because we are in the transition. this volatility is the new normal. age when we see traditional political groupings , is this ann investable theme at all? we think about political uncertainty or gridlock in the u.s., it has been a good environment for corporate's if there is no change in regulation or legislation and we do not have to worry about policy moves. companies do business as usual. this is different. talking about persistent uncertainty and the inability to even if our leaders who are in place today remain in place, if there is a turnover and leadership changes, it is possible that the legislative

backdrop changes as well. i'm not talking specifically about the u.s. companies are using this as an excuse to not invest for the not a lot ofhough companies were seeing direct impact of the tariffs. many companies talked about tariffs and trade and geopolitics as a concern. inwe see that pullback capital expenditure in investment as a result, it has an impact in both earnings and economic growth. anna: what kind of visibility do you think corporate's expect compared to what they used to have? but we about uncertainty have to get on with the job, don't we? has visibility decreased? companies are supposed to be focusing on their day jobs and running businesses and have

to be keeping close track of changes in sentiment and trade and tariffs. it is a lot and can be distracting. i do not think they have insight in the way they are reacting -- and the way they are reacting is to become more conservative. the risk and uncertainty we are discussing is that we are almost 10 years into the cycle and this -- ision -- expansion weighing on willingness to spend and invest in think about the future. there are a multitude of things putting pressure on companies and investors that is leading to a more conservative environment. i like how you bring up the length of the cycle and that is an american question as well. i want to go to westminster. the cycle, i am

wondering if the united kingdom has participated in the recovered from 2009. what is the outlook in the united kingdom for economic growth ex-brexit? is he european or can they do better? -- is it european or can they do better? that we areould add looking at economic indicators. what we're seeing in briggs it exit, how about the border? we are looking at questions of sovereignty and national belonging and that straight-line fromuld draw in the past the economic indicators two outcomes has broken down and that makes it more difficult to predict outcomes. tom: the straight lines are

jagged in brussels to say the least. we have got anna edwards in westminster. coming up, on equitycoming up, a good visit with goldman sachs. look for that in the and clock hour. -- in the 8:00 hour. this is "bloomberg."

viviana: this is bloomberg surveillance. let's get they business flash. buy the agreed to

operator of high-end hotels of new york's famed 21 club. the owner of louis vuitton will pay $2.6 billion. that is a 42 premium over the close yesterday in new york. onle said a chinese ban sales of the iphone will force it to settle a licensing battle with qualcomm, an outcome that may end up harming the smartphone industry, underscoring the importance of the chinese market. it points out qualcomm's crucial role as a technology provider to companies such as huawei. there's another harassment claim involving cbs. times,ng to the new york the network paid a eliza dushku $9.5 million to settle harassment claims. she was starring on the guest program "bull" when the star, michael weatherly, said things that made her uncomfortable. when she complained, she was written out of the show. that is the business flash. thank you.

in brussels, everyone focused on the challenges of europe. we need to go somewhere with a calm her news flow -- calmer news flow. kevin cirilli joins us. chief of staff right now, all of a sudden the governor of new jersey is front and center. >> there is no timing when -- in terms of when the president will announce his selection. chris christie was talking about this. , from north carolina, withdrawing himself. it is a horse race. the president likes to do this, whether it is with the chief of

staff pick, he likes to have this apprentice style pick for the job. help us with huawei, the story develops, the story has a change to it. seriousnesss, the of this, incarcerated. what is the next thing you are looking for with this company? impact what iss going on with the treasury department in china? they feel they are able to operate on separate tracks. the president's comments reverberating across capitol hill. i interviewed senator ron wyden yesterday. he said he had concerns about the prospect of the president intervening in this case.

this is such an interesting dynamic now where you have the two canadianning diplomats, one is a former diplomat, one of whom is a fixer for the likes of dennis rodman to enter north korea. this is a response to what is going on with huawei and it comes at a time in which trade talks are ongoing. mnuchin got a big win that was underrated was when the chinese government forecasted they agree with mr. mnuchin in the sense they will be able to separate what has been going on with huawei from the u.s.-china trade talks. that is a big deal. tom: i agree with that. it will be interesting to see if that can occur. kevin cirilli, thank you. we are going to drive forward

this conversation at 12:00 noon, what a good time with the president's focus on general motors, to speak with the former governor of the state of ohio. i believe last night, the president said he runs ohio. i think mr. kasich will disagree. stay with us. this is "bloomberg." ♪

anna: welcome back. i am a anna edwards in westminster with tom keene in brussels. tracking politics, getting headlines coming through. the spokeswoman for the prime minister speaking, saying that the brussels talks are the start of a process. they said no to demands yesterday. theresa may is still there. progress has been in short supply. we get headlines surrounding no deal preparations. this is the spokeswoman for theresa may, saying that the u.k. cabinet will discuss no deal planning next week, stepping up the planning for no deal. conversationinto -- the conversation kate moore. this is something that we have couple ofthe past

days, the 19th, preparations will be stepped up. this is getting closer to the deadline. carsten: absolutely. there is one important variable we do not speak enough about and that is time. the clock is ticking, getting closer to the edge and investments are -- and investors are wrapping up the pressure. whatever she gets out of game is takingig part in the building behind us, that realignment we need to see across party divisions. to get there, we need to be closer to the edge. to seet is interesting what the labour party does next, whether parliament takes a bigger role. from an international investor perspective, watching briggs it and the pound -- watching briggs

pound, the pound is uninvestable at the moment and they stay way from assets. what is the blackrock view? kate: that is a fair observation. the inability to predict and forecast fluctuations in the , for and to see through people that are close to it, what the outcome will be of this and it makes it difficult to buy u.k. oriented equities. when people look at investing in the market, they have shown a preference for international companies listed in the u.k., those with geographically diverse sales that are not as tied to the outcome and may not have the same slowdown in growth

as domestically oriented companies. in general, international investors are hesitant to invest in the future. i am fascinated by the headline we are starting to process on backstop. irefused to use that phrase, am going to call it the irish question. onhought we had been working the irish question for something like 500 years. what are they going to start when prime minister may gets back? carsten: i think you are right. in substance, not much is going to change and even when she goes back to brussels in january, this is not going to make a difference. see next in the u.k. is going to be a focus on getting a majority that cuts across these party lines. as the focusrge

over the coming days because if anything, what we learned is that in terms of substance on that backstop, the e.u. is not going to move. tom: thank you so much. greatly appreciate your attendance at westminster. kate moore is in new york and we will continue and look towards equity investment into 2019. to talk about on the markets on bloomberg radio later , a conversation on volatility. stay with us. this is "bloomberg." ♪ ♪ there's no place like home ♪

argh! i'm trying... ♪ yippiekiyay. ♪ mom.

♪ unstopand it's strengthenedting place, the by xfi pods,gateway. which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. anna: this is bloomberg surveillance. i am anna edwards. let's get an update. viviana: china has moved to

ratchet down trade tensions with the u.s. dutyng will remove the 25% on american-made cars for three months. the next move may come from the white house. the trump administration expected to announce today if delayed tariffs. the chinese will resume buying u.s. corn and they agreed to restart purchases of american soybeans. the european union rebuffing theresa may's plea to help sell the agreement to the u.k. parliament. the e.u. toughening the language of his statement. jean-claude juncker telling made to come up with new ideas. if there is no resolution, the u.k. could leave without a deal. we spoke to richard branson. xit is the worst thing that has happened to great britain since i was born. a hard brexit would be a

disaster for great britain. toiana: saudi arabia plans slash exports to the largest oil market after flooding u.s. markets in recent months, reversing course. bloomberg has learned exports to america could fall to a 30 year low. the saudi's hope to show the market they are making good on their promise to cut supplies. on capitol hill house republican , leaders sending their members home on a break without revealing any plan to prevent a government shutdown. president trump said he will not approve a budget for government agencies scheduled to run out of money next week if congress does not include money for a wall at the border. the senate has not announced plans to fund the government. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is "bloomberg." tom: thank you.

appreciate it. anna edwards at westminster, i'm tom keene in brussels at the summit. can we get away from brexit? you can only do that with someone with parchment from the university of chicago and political economy and that would be kate moore of blackrock. i want to go down to your 2019 view, do you prefer stocks over bonds? that does not sound of that controversial. arele think there opportunities for earnings to be ok even if the pace decelerates. what i will say is our conviction level in our asset allocation recommendations has come down where it was more of a slamdunk thing where equity prospects looked better than bond prospects. we have seen a change in violations across asset classes.

that was one of the biggest prizes was the magnitude of the derating. we were expecting multiples to stay at the levels we started this year. in addition to the cycle adjustments, there was this uncertainty play in multiples that led to do risking. once we think about where we start today and the fact that growth is likely to be slower, that policy uncertainty is , all of our returns for the equity market are going to have to come from earnings and that depends on the activity in the first part of the year. you know what that means multiple expansion which is a ratio. you are looking -- are you looking at price changes as being germane? kate: i think the earnings side is the most important over the year ahead.

we saw solid earnings growth in 2018 andegions it was the numerator taking down valuations. next year, we expect if there is a relief and uncertainty and we get through some of the trade resolution, weve can move forward and focus on and focus on whether or not the global economy and activity and business investment remains robust enough to generate the kind of earnings that we are expecting? i was looking at numbers and it is clustered. the u.s., consensus is looking for between a .5% and 9% earnings growth for all of these regions. the sector composition for each of these is different. i think this is reflecting

unwillingness to think of that. they have new information that will come in and they are going untilt to make revisions we get through some big policy decisions. find where do you go to that movement in the d almond a to -- in the denominator? is this going to look like a classic late cycle? kate: i think the u.s. is in pretty good shape despite being later cycle. i would say this even though the comps are harder in 2019. in general, i have been surprised by the strength of topline growth throughout this year. it exceeded expectations. third quarter we saw good activity.

that is representative of the type of growth we can get into 2019, mid to high single digits. companies are doing a good job of controlling costs. it is possible that we have a solid year. what i'm watching is emerging markets. we are recommending a barbell quality andween the stability in the u.s. and emerging markets which have suffered this year, more on the p than the e. we are seeing positive movement on policy and regulatory in places like china that should lead to a solid year. do we need to see a weak dollar for that to be the case? a weaker dollar would be a boost to sentiment and it would , or it has been, to

equity prices. is a stability in currency is the sweet spot. when you do not have to factor in changes in the currency and you can focus on fundamentals, earnings, cash flows, that is when we have the best pickup in risk appetite and the most to take that in emerging markets. investorpoke to one who was suggesting it may be time to get into cash. butprefer stocks over bonds your conviction is tempered. how much do you put into cash? kate: we do not have an allocation into cash. it is across liquid investable markets. within fixed income, we have favored the short end of the.

it has worked well -- and of the curve. it has worked well. we are trying to have a more orbital approach to investing -- rbell approach to investing. you own a solid representation of quality stocks across all regions but also to own the u.s. which has the ability to generate solid earnings growth next year. also, to look at emerging solids where we do see earnings prospect and policy fed is and the fact the likely to pause and the dollar may not appreciate the same way it had, will lend support. 2019, the year of the barbell. kate moore of blackrock stays with us.

i am not sure if you can hear the helicopter above me. -- somethinggone going on down here. radio, gabriela santos from jpmorgan. that is from 9:00 a.m. new york time. this is "bloomberg." ♪

viviana: this is bloomberg surveillance. let's get the business flash. new car registrations in europe down more than 8% in november,

throw 2018 into negative territory. the downturn began when regulators introduce new test. shares of costco are lower. lower marginsrted in an increasingly competitive market. sam's club has speeded up sales growth by introducing fresh foods, bj's offering three months of free membership or virgin galactic spacecraft flew to an altitude of 51 miles after taking off from california, reaching earth's atmosphere for the first time. to takebranson plans passengers into space. tickets could cost up to $500,000. ranson speaking to bloomberg. >> it is an exciting time for investors investing in commercial spaceship companies to do so. the market is enormous.

something like 80% of people would, if they could afford it and get offered a return ticket, would love to go to space. it is up to us to do both. viviana: that is the business flash. thank you so much. at the keene in brussels european summit, anna edwards in westminster. kate moore up blackrock is in new york. , withg us now, rob hutton the passing knowledge of the trail of this debate. are about headlines the backstop, the irish question. what would be the response of a conservative party if we are going to start the process of the backstop? help me. well, i did not quite hear it.

the conservatives cannot accept the backstop. they cannot vote for it. if she comes back with the psckstop, there are tory m voting against it. she has to find those flows somewhere else. last half hourhe the headline tom is referring to , a spokesperson saying was this is the start of a process on the backstop and tom found this interesting because this was supposed to have been happening. we are trying to put some positive spin on what has been it has not gone the way it was supposed to. rob: the days when we thought that number 10 could challenge what brussels would agree to ended some time ago.

it does not look like they are going to give us what we want. they cannot. the irish government wants a guarantee about what will happen if they cannot get to an agreement and the conservative party does not want to give a promise. it is an immovable object. in a sense, we have known this for months. known the tories cannot agree. anna: i know you follow the conversation closely. see this immovable object and unstoppable force coming together and we look for a way forward. do you have a base case for what happens in the u.k.? i would say our conviction on the base case was higher a few weeks ago or even last week

than it might be at the moment. arell be honest, there people following this more closely than i am. i am more concerned about the impact the discussions have on risk appetite, how that affects asset allocation and equity markets and the longer this goes , the less productive the conversations are, the more it weighs on willingness to take europe ands all of the implications for global companies and european companies, u.k. companies could be significant. so we see both sides ratcheting up the tension, talking about no deal. at what point do we see either the labour party or parliament trying to take control of what is going on? deadline in this

long series of deadlines is january 21. that is when may has said she will have her meaningful vote by. that may sound a long time away but it is close. in parliamentary terms, if it is next week, we go away for recess .nd there are two weeks people reckon you only have votes on tuesday. 15th to becil in the sitting here in the snow. anna: what a prospect. rob: that is a guess. anna: if that goes badly -- an argument inside the cabinet that says we have to have these votes because no one is going to move into we have the vote. at the moment, the argument going on in parliament is everybody wants to be the last

option on the table because they think the last option will win. the second referendum people do not want to talk about second referendum. they want that to be the last option. get, --e closer we thanks so much for joining us. kate moore up blackrock investment institute with us over there in new york. ancora managing director will be joining us at 7:00 a.m. i am here in london. thomas in brussels. this is "bloomberg." ♪

anna: this is bloomberg surveillance. i am anna edwards live in westminster. a live shot for you from washington, d.c.

federal reserve officials are expected to pull the trigger on a rate increase next week before slowing hikes in 2019 as risks to the economy amount. that is according to a new survey of economists. kate moore with us. would you go along with that? we get a hike next week and then we get signals for 2019? kate: that is in line with what we have been talking about. there are always a variety of different views. the expectation that almost all of us are share is that the fed is going to policy sooner rather than -- going to pause sooner rather than later. this, whatnk about is happening to the data and markets against that backdrop of a pause?

if it is as they are deuterium rating, asset markets will be concerned. comes against more stable data, they take an opportunity to think through and assess the data and watch the impact of higher interest rates on the economy and on companies and consumers, that is a good environment. willeaction to a fed pause matter against the data backdrop. anna: so watch the data dependency. what about the prospect of a partial shutdown at the u.s. government, what kind of difference this makes to the economy and markets? i think a government shutdown would be another weight upon investor minds. a government shutdown may not have a huge impact in markets

because we have seen a lot of de-risking and investors on the aboutnes waiting to think their asset allocation in the beginning of next year. in the past, government shutdowns have not had any significant impact on data or activity but it has been another signal of government dysfunction. we are living with government intonction, that is baked expectations. from one central bank to another, would you expect the pboc to be taking renewed action ? is we areexpectation going to see lots of different policy stimulus from china throughout 2019. hasnow that the growth slowed in china just says it has in the rest of the world.

some of that has to do it trade, some of it to do with regular movement. we have seen small movements on different policies around china and i expect we are going to have more in the early part of next year. the one thing more difficult to address is the impact of sentiment from this trade. anna: i need to jump in. thank you. kate moore up blackrock. she joins bloomberg radio next. this is "bloomberg." ♪

place, the xfinity xfi gateway. and it's strengthened by xfi pods, which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything.

leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. ♪ alix: eu rejects pleas for help

from theresa may. they say it is up to the prime minister. yellow vests drag on growth. france exacerbates slowdown, reinforcing mario draghi's's dovish press conference. pboc says monetary policy will be supportive. investors offer caution. welcome to "bloomberg daybreak," i'm alix steel, alongside carol massar. david westin hopefully still sleeping. what is interesting is we have the data, then we get the headline that china will be cutting tariffs to 15% on u.s. autos. carol: six of the top 10 vehicles that go from u.s. to china are from yemen automakers, bmw and daimer. we will see. alix: