good morning from bloomberg's european headquarters in the city of london. manus: this is "bloomberg daybreak: europe." nejra: asian stocks extend the route of u.s.. the s&p closes at its lowest in 14 months. president chinese omits any mention of new reforms to support the economy. nejra: no deal brexit preparation. theresa may continues talks with the eu as she set the deadline for the parliament vote. ♪

manus: warm welcome to "bloomberg daybreak: europe." we are looking at these markets. s&p 500 index, you are looking at the bulls getting crushed really in this market. these are the euro stoxx 50. we don't have the stoxx 50 open at the moment. we can certainly talk about crude. s&p futures. you are looking at this index been the worst in the world globally. you're looking at a drop of nearly 8% this month, the worst december since 1931. what the fed continue to build on that and raise rates -- will the fed continue to build on that and raise rates? global stocks are under pressure, global growth is under pressure. 1%,x is down by over

closing below $50. near is a lack of belief that this market has got its act together in terms of supply. good morning. nejra: we are here on a day which is a down day for equities. msci all country world index heading for its first loss since 2015. the s&p 500 has fallen to percent or more six times this quarter -- 2% or more six times this quarter. times,has done that 10 dropped 2% or more. retailers underperforming in europe, in particular. it looks like we could see another down day in europe. meanwhile, got to show the curve ahead of the fed. we have had four days of steepening on the two stents -- /10s.

you are seeing the 10 year yield below the 285 handle. meanwhile, with the risk off that we see in equity markets generally, you see the yen bid, some dollar weakness. remember the bloomberg dollar index hit a mate 2017 high on friday -- may of 2017 high on friday. let's check in on the markets in asia with the juliette saly in singapore. these equity markets not looking pretty after we heard from xi jinping. juliette: yes. we did not hear any new reforms and that's what the market was looking for. we also had that weekly coming through from wall street. asian equities taking that me and falling. we have the fed in focus after the boj meeting this week as well. japanese stocks leading the decline across the region today. the nikkei at an 18 month low today. we have had some weakness coming through from a lot of the

emerging markets. the australian share market closing up the session lower by over 1%, so giving back a lot of those solid gains from yesterday. let's have a look at some of the company specific stories we see across the region today. korean stocks have been leading the gains in the region. we have seen a little bit of upside coming through, even though the kospi close lower. -- closed lower. cacao pharmaceutical is interesting. --dy's downgraded the stock takeda pharmaceuticals is interesting. odys downgraded the stock. adding to the disappointment that we did not hear new reforms x thei weeklies, from wall street, and disappointing corporate news leading to a pretty bleak day. manus: it looks as if the bulls

are getting crushed at the moment. thank you, juliette saly in singapore. mliv question of the day. this is what we have got for you. what assets will move the most on china reforms? you can debate that with the team, reach up to us and the mliv team. what will the economic stimulus be? that may be the question that moves markets rather than the speech today. first word news to be had. >> we are going to stick with those reforms. president xi jinping says china will stick to with policy agenda, despite pressure from the u.s. and others to about more. competition in its economic system. . in an 18 minute address at a ceremony to mark 40 years since the economy opening up, president xi jinping said 1978 was a turning point for the nation. he says his government will

continue on effort against pollution, poverty, while underlining commitment to the multilateral global trading system. >> reform in opening up is a great reawakening of our party. one that nurtured great creativity in both theory and practice for our party. u.k. prime minister theresa may has given herself another full week -- four weeks to save her brexit deal. after delaying a vote in the u.k. parliament, she announced the deal will be put to a vote in the week of january 14. has proposed a motion of no-confidence against theresa may as prime minister, saying she has evaded accountability or too long. >> the prime minister has cynically run down the clock, trying to maneuver parliament into a choice between two unacceptable outcomes, heard you

or no deal -- her deal or no deal. the countries, workers, and businesses are increasingly inches. >> the federal reserve opens its final meeting of the year later tuesday, with the white house turning up the heat on the widely anticipated rate rise. president trump tweeted his opposition to a hike and peter navarro says it arrived just to prove the fed's independence would be unjustified. a bloomberg -- suggests the fed will slowest pace of hikes next year. the nissan board decided to delay naming a successor to split ghosn, choosing to his duties between executives, and have a committee examined corporate governance. the committee will report by march. carlos ghosn denies charges of breaking financial laws and misstating his compensation. >> we will listen to what renault wants, but at the end of

the day we are responsible for. governing nissan. . we need to make a decision that is convincing for use on -- nissan while listening to other decisions. we should take enough time to decide. tuesday is shaping up to be a day when the stars align for space exploration. assuming the weather holds and there are no last-minute technical difficulties, 4 separate companies will go into orbit, including elon musk and spacex, jeff bezos blue origins, and united launch alliance. plant the launch is go to it will be the first time so many rockets have flown on the same day. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. nejra: thank you so much. stocks have slid in the u.s..

the s&p 500 dropped to a 14 month low in yesterday's session. the benchmark is on track to post its worst december since 1931, at the height of the great depression. all eyes are on jerome powell for the fed decision due tomorrow. warnings against tightening has been mounting from higher profile investors. markets and economists are still expecting a hike tomorrow. joining us now is chris ralph, chief investment officer at st. james's place wealth management. thank you for joining us. dovish height is pretty much what everyone is expecting from tomorrow. i read -- hike is pretty much what everyone is expecting from tomorrow. reassess, and keep paung -- cause, --

reassesss,e, and keep hiking. does the fed me to take a pause? chris: it's looking more likely that we may be going into a situation in 2019 where it could be one and done rather than the two or three rate rises that we were looking at earlier on. we were talking about three rate rises going to 2019. i think the situation in december is more finely balanced. the fed is not going to want to be seen to be pushed around by the views from the white house, but at the same time it will be looking at markets and saying, does it really need to raise rates today. manus: we have a chart in the library for our clients, and s&p is down six months, 12 months. it would be the first time since 1994 worried saw that -- where you saw that type of battery in the markets and that hike -- they hiked. i get the sense that they want to assert their independence really. chris: it depends on the

language in the statement afterward. if this a they have to be responsive to what's happening in the markets, that still would be independent of the white house. it's a fine balance. we move up from a near 100% certainty of a rate rise in december, if you look at the way in which the futures expectations have come up, beginning to come down. it's not looking like a slamdunk. nejra: are market is sending a message that the data has yet to reflect? our markets getting this right -- are markets getting this right? chris: i think markets may well be getting this right. we saw all the benefits come through in the first three quarters of 2018 from the tax cuts, the stimulus, the great growth from 2017. it is now running out of steam.

we talked about president xi jinping's speech in china. that's coming through to the rest of the world. manus: let's see what comes through in terms of stimulus. nejra cehic is never far from an inverted yield curve, everybody. 10s and also 2s/5s. 2s/5s has inverted for the first time since 2008. ?hat you want, a small pause nejra: i am not calling the fed. manus: we take that as the base case. does that save the inversion from happening? can the fed avoid a policy mistake? chris: i think it potentially does. we have seen some weakening in 10 years. if the market feels that the fed

rather thansmall p, a capitalp, it may think again about what that means for 10 year yields. nejra: we have been going big on little p. i want to get back to the equity markets real quick. even goldman has various calls and probabilities of whether we go up or down from here. the s&p 500 has fallen to percent or more six times this quarter -- 2% or more six times this quarter. goldman is saying it's time for stock investors to get defensive. rather than trying to call this market up or down, should you be staying invested or just getting defensive? chris: i think you should state ay invested.st

a lot of these defensive shares are not looking attractive because there has been a lot of money already flowing intimate -- into them. manus: chris stays with us. he is the chief investment officer at st. james's place wealth management. don't miss bloomberg's exclusive interview with multibillionaire. we will bring you that in full. yesterday he warned of this double barrel risk being brought by the fed. that is a conversation you certainly don't want to miss. nejra: theresa says brexit talks will keep going into 2019, despite lawmakers saying she has evaded accountability for too long. when you are traveling to work and you have to step away, tune into bloomberg radio live on a mobile device or dab digital radio in the london area. this is bloomberg. ♪

♪ manus: this is "bloomberg daybreak: europe." i am manus cranny in the studio in london. nejra: great to have you with us. let's check in on the markets and we are seeing a lot of red in the asian session. the asian markets not taking to positively what we got from xi jinping, not giving any concrete words on reforms. you can see the msci asia-pacific index and the csi 300 down. wti dropping below $50 per barrel, closing below it for the first time since october of 2017. it continues its slide today. we are heading for three months of losses on w-ti. the markets concerned about oversupply. manus: look at the s&p 500, the tiniest of gains. we are having the worst december since 1931.

we debate whether the fed should raise rates later on. motion of no-confidence in the u.k. prime minister, not the government. we have various factions of saying they will support that. , it is fedr yields over the next two days. are we reaching the low point on those interest rates? today we are asking the what -- willliv, move most with the china reforms? you can join the debate. reach out to us. now let's get the bloomberg business flash. the board of cbs has denied a one hundred $20 million severance payment to former chief executive officer les moonves.

this is because of acquisitions of sexual harassment. les moonves flouted company policy and failed to comply with an internal probe, according to cbs. he step down in december and dies any knocking -- denies any nonconsensual sexual relations. t-mobile has won national security approval for its takeover of. sprint. . the committee on foreign investment in the u.s. has approved the proposed transactions, moving the companies closer to the $26 billion tie up. the focus now shifts to the federal communications commission and the justice department's antitrust division. manus: thank you very muchmanus: for the roundup. theresa may have set the week of january 14 for a parliamentary vote on her brexit deal. in the meantime, she is set to continue to seek assurances from the eu over the irish backstop.

joining us now is maria tadeo and chris ralph is our guest host, chief investment officer at st. james's place what management. we now have -- wealth management. we now have a deadline. parliament will get to vote on her version of the deal. the labour party has called a vote of no-confidence in her, not the government. the dates come the timeline, what's the significance -- the dates, the timeline, what's the significance here? >> when it comes to the labour party, it's not against the government, it's all about may. this idea that you can pile pressure on a very weak prime minister. ultimately, this seems like they want to delay a big decision for the labour party, which is, do you back the deal or not? the bigger question is, will you want to call a second referendum

publicly or not? corbyn continues to tiptoe around it. that is fundamentally the big question. do you back the deal or walking vote -- want a new vote? >> theresa may has said she does not think it's right to it article 50. the ruling that came out from the european court of justice which said the u.k. could undo this if they wanted to has really shown that brexit is not the binary choice the prime minister has made it seem. it is not her deal or no deal. there are many other scenarios. eu leaders do not think the u.k. can afford to go no deal. they think this is really an empty threat. manus: today's cabinet meeting will put through points to the cabinet, either step up nor deal

preparedness, leave it to the individual ministers, or switch up no deal preparedness. i was listening to lb see. -- lbc. presenter, labour party showing -- by calling a vote on theresa may. what they need to do is show leg and call a vote of no-confidence. is there merit in those comments? chris: no. if labour party calls a vote of no-confidence, they will lose that. it would force labour party's hand in terms of giving his position on whether he wants to go for a second referendum. the thing to me which i think is really interesting is whether the vote of no-confidence in the conservative party was actually 117e close than the 201-

margin that we saw last week. the labour party is trying to get parliamentary momentum behind no-confidence in theresa may as a leader. it would be the first time it has happened. if parliament votes a low of no-confidence in the prime minister -- vote of no-confidence in the prime minister, it makes it very hard for her to go into the new year as a leader of the government. nejra: what are your fund managers actually doing about this concretely when it comes to investing in u.k. assets? if you are on, overseas fund managers you are really look at the u.k. and thinking that is exceptional value in u.k. assets at the time. what is more interesting is we have seen in the past couple of months and i have been hearing it from fund managers is that they have been saying that corporate in the united states are looking at u.s. companies and thank, these assets are

wonderfully cheap at the current time. manus: let's see what happens with that. sterling drops, you get a rise in the market. let's have a look at the currency, because this is the three-month volatilities we have for you on sterling. deviate -- socgen bva say a deal will happen. they are dropping on sterling. at any level is sterling tradable for the market? is it only for the day traders? chris: i think it's really difficult for anybody to invest in sterling at this point in time. i think the temporary dip in volatility will only be temporary and we will see it spike up back in the new year. nejra: i spoke to someone yesterday who still expects the bank to potentially hike in 2019.

is that a prospect at all given where we are going with the politics? chris: it happens -- depends on what happens in january through march. if we get an extension on article 50, it would just increase the uncertainty. quickly, we saw a pretty tragic performance on the retail sector here yesterday. is there more pain to come in that retail trade? have you got any retail names on the book? chris: if you look at the retail picture as we go through the christmas season, i have been hearing big stores that the retail has been really weak through the christmas trading season. ,s a government to the new year the world's want to be looking closely at those trading statements. nejra: maria tadeo from bloomberg, thank you so much, and chris ralph stays with us. manus: up next, we are going to talk about china. they are marking 40 years and

since the opening of its economy to the world. president xi jinping hailed it as a turning point in the nation's history. we are on bloomberg radio, live on your mobile device, on dab digital radio in the london area. this is bloomberg. ♪

♪ manus: quick check on the world map, and it is not looking pretty. oil has taken a battering. gigi king did very little. it was -- gigi pink did very the jinping did very little. this asianare seeing reaction largely to the fact of the absence of speaking about reforms in xi's speech, but also what happened in the u.s. session. futures are not edging higher that much.

in the day session in the u.s. we get those losses, but futures are not even edging higher about. -- right now. manus: new fax from dividing -- facts from dubai. maybe these valuations offer a proposition about. dividends. we have the first word news from hong kong. >> president xi jinping says china will stick to its policy agenda, despite pressure from the u.s. and others to about -- allow more competition in its economic system. in an 18 minute address at a ceremony to mark 40 years since its reform and opening up, president xi jinping said 1978 was a turning point for the nation. he says his government will continue an effort against pollution, poverty, while underlining commitment to the multilateral global trading system. >> reform in opening up is a

great reawakening of our party, one that nurtured great creativity in both theory and practice for our party. >> the federal reserve opens its final meeting of the year later today, with the white house turning up the heat on the widely anticipated rate rise. president trump tweeted his opposition to a hike and, peter navarro says a rate rise just to prove the fed's independence would be unjustified. a bloomberg survey suggests the fed will slow the pace of hikes next year as threats to the economy mount. the many government is on the brink of agreeing to a post-brexit economy. include likely to australia, canada, japan, new zealand, and the u.s. the home office reposes were expected to be published back in

september, but there have been frequent delays and reworkings. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. nejra? nejra: thank you so much. let's check in on the markets around the world. joining us is -- and here in london is bloomberg's annmarie hordern. five days of gains for indian equities. finally we have capitulated. what is behind the move? rest ofin tune with the the asian markets. there is some profit taking for the indian market equities. and nudgewe did try that crucial psychological -- on the nifty 50. the banks did well. today's session, though, all

that has come to an end. the bigger blow has been taken by the technology stocks. are seeingnames heavy drops in today's session. is that theing currency this time around has seen some strength coming in. you have indian rupee up versus the dollar -- indian rupiah versus the dollar. manus: that was the very latest on the indian markets. let's get into the asian market session with annmarie hordern. good to see this morning? >> welcome back to london. it's interesting we have asian markets seven this morning. when you look at the turnover at the hang seng index, it looks

like they are on early holidays. investors seem to be in a bit of wait and see mode ahead of two ligaments -- big events, gigi and pings keynote speech -- president xi jinping's keynote speech, which only happened. wti -- already happened. wti yesterday falling below $50 per barrel and today it's trading at below $49 per barrel. what then he moans at global medley partners -- what ben isglobal melody partners pointing out is that markets have begun to price in this deflationary. .- deflationary period clearly that production cut not listing prices. manus: clearly not. there is something afoot in this

market. annmarie hordern never far from a barrel of i'll. to china and president xi jinping says he will push ahead with china's reform and opening up the economic strategy. he warns that any reform will come from within the country. position to in a dictate to the chinese people what should or should not be done. manus: that was president xi jinping undressing the nation to mark the 40th year anniversary of the communist party's reform and opening up policy. for more on this story we are joined by our chief agent act anomic -- our chief agent correspondent. did xi break any new ground or give us any signals regarding trade talk? it lacked that detail. >> good morning.

i think that's fair. it was very much a speech focused on the role of party, full of sleeping rhetoric, -- sweeping rhetoric. there was not much in terms of forward-looking guidance on where the next wave of reforms will head. there was not much in terms of a signal to the rest of the world how manage -- china will manage its new place on the world stage, or how it plans to tackle the u.s. in the forthcoming trade talks. xi could argue that they are keeping their cards close to the chest, while these negotiations with the u.s. going on. china also has a very important policy planning meeting happening this week. though, given the speech was marking 40 years since the great reform and

opening up the has led such a revolution in china's economy, there was a market expectation that there might be some giveaways included in the speech, but there was not. that's why it feels like a speech very much aimed at a domestic audience. nejra: any international investors hoping for any announcements would have been disappointed, no doubt, as the markets show. he pointed to the issue of trade wars as well. when it comes to next year, what are the top issues occupying both bulls and bears with regard to trade wars? >> there is no doubt that china is at the very center of that. when you look at the list of concerns next year, whether it's the volatile price of oil, shaky markets and politics in europe and the like, the trade war is very much at the top of the list. there is the negative view that

essentially the feud is much more than about the goods, deficit, much more than about tariffs. it will linger on for years to come and will not be resolved in the near-term. that will continue to hurt both countries. bulls willts, or the say that there is a deal to be done. you can see that by virtue of the fact that both sides come to the table. president trump has spoken publicly about a deal and we have seen tentative steps by china to deliver on some promises it has made to the u.s., such as resuming its purchase of soybeans, for example. bulls will tell you that these tensions can be defused. larry's no shortage of -- worries. i think the china-u.s. trade war has been number one. nejra: today we are asking the

question, what assets will move most on china reforms? you can join the debate, reach out to us and the mliv team on your bloomberg. chris ralph is still with us. if we do get more announcements or details later this week or later this year, what assets will most -- move most? chris: if we see some recovery in the chinese market, it's the domestic chinese market. the asian market will likely see some recovery. it has been shunned by investors through 2018. i think it's ripe for a bit of a bounce. manus: i am going to go for stocks. we are looking at levels that we have seen back in 2006, 2008 in china. if we get the stimulus, ing aying that will get half

trillion the stimulus. what portion of china do you want to take on? chris: we are hearing this from the fund managers we talked to. there is more and more opportunity in the asian market, the kids is beginning to open up -- because it's beginning to open up more so. at companies that have decent quality, decent corporate governance, and can grow rather than saying the index is the way to go. nejra: is china going to be able to escape the middle income trap? chris: that's a very big challenge. from an export focused economy to a service led economy. it has to bring the middle income group with that. it seems likely that the way in which he is handling policy, seems to be getting the balance right between not overstimulating the economy and creating too much debt, and at the same time keeping the middle incomers happy.

manus: let's see what comes out of the policy response over the next couple of days. chris ralph stays with us. coming up, we have been talking about it, wti falls further below $50 per barrel. surging u.s. output overshadows the opec cuts. how low oil prices factor into the saudi budget set to be unveiled later? nejra: if you are traveling to work, tune in to bloomberg radio live on your mobile device or dab digital radio in london. this is bloomberg. ♪

♪ our bloomberg special coverage for the federal reserve meeting and jerome powell's remarks with a special guest line up for you, including the

former federal reserve chairman, alan greenspan. nejra: and punishing day for u.s. equities yesterday. we saw the s&p 500 close at its lowest since october 2017. retailers particularly hit following the numbers from apple. we might see another down day for europe. we could see a fourth day of losses. manus: certainly those retailers got battered yesterday. let's check in on what's trending across the bloomberg universe. we have our new feed built for twitter, as more vehicles connect to the web cars are becoming a prime target for hackers. nejra: big warning signs lighting up for the u.k. economy. retailers are complaining about a disastrous holiday season. house prices are falling and businesses holding back investment. manus: third phase goes to oil prices, diving below $50 per

barrel for the first time since october of 2017. in second place, nothing seems to work in the frantic efforts to stop the stock selloff from getting worse. jinping,tory goes to xi- as he says no one can dictate the pace of china's reform. nejra: he looked back rather than forwards, equities take a hit. wti closing below $50 per barrel for the first time since october of last year, down again this morning. the 48 handle comes amid fresh concerns the production cuts announced by opec and its allies will not be sufficient to prevent a new supply glut while u.s. output continues growing. let's discuss this with anthony dipaola. is this a sign that opec and allies are losing control of the market? >> good morning.

yeah. the saudi energy minister when opec announced the cuts come and said a lot of people in the shale patch would be taking him. that is not filtered -- thanking him. that is not filtering through to the market right now. wti for a lot of shale producers is lower. some of those crude grades will have lower prices. withcers are dealing transportation costs and other expenses before getting to that market price. this is shown that the market is not really believing opec quite yet. opec is really relighting on russia to decide -- relighting on russia to decide on these -- reliant on russia to decide on these cuts. doing aboutlly only one third of the market. wath hasc production s

stayed pretty much the same as the overall market has grown. their overall influence on the market has declined. they need to rely more on russia as they battled this wave of shale. coming on. that's what we are dealing with right now in the markets. manus: you have touched on russia's proclivity to be behind the curve when it comes to cuts in the past. another big issue that opec has yet to tackle, i don't that monitoring and compliance is a perennial issue for opec. what else is at play? >> interestingly, you do bring , because opecnce have been increasing production an sanctions the ir put in place in november. even when they were increasing production there compliance was over 100%.

venezuela production is way down. is having issues on bringing production and exports to the market. countries like libya and nigeria are having continuous problems. opec is dealing with these supply constraints. we see too much of supply on the market. that comes down to the shale oil. the u.s. shale patch is really pumping get out, producing more. that is really coming down the line next year. we are seeing the production come in at the time of the economy is weakening. nejra: yesterday the slide accelerated after everyone predicted higher american supplies. anthony dipaola, thank you so much. it is a look at what you should be watching today. update fromr an europe's biggest economy at 9:00 a.m. yucatan. we will get the service -- u.k. time. we will get survey data from

germany. manus: the fomc's final today rate meeting for 2018 gets underway. markets are expecting a rate hike. let's get a little bit more on the middle east story now. after the murder of saudi critic jamal khashoggi, the government may seek to rally domestic support by stimulating the economy. the recent tumble in oil prices is eating into the revenue available for that potential. riyadh is the destination, my cohost yousef gamal el-din is on the ground. what are the key factors we should look at in today's budget announcement? oil is incredibly important. you need to spend more to hunker down on this company, don't they? yousef: absolutely. the saudi budget decision is one of the most important decisions of the year, what implications far beyond saudi borders.

howill also tell us much progress saudi arabia is making. here are some of the key factors in play. 2018 budget deficit, will that come in a little bit lighter? an assumption of $63 per barrel initially from the saudi government may mean that an average of $72 per barrel currently that you have a little bit of savings on that front, or not as deep a budget deficit as initially estimated. as you point out, the fallout from the murder of the journalist may lead to additional stimulus measures to sustain nonoil growth above 3% or 2% to be more specific. you have other variables, like the phasing out of subsidies. will that come out in the agenda. on 2017 there was a drag economic growth that made a lot of policymakers nervous. you look at the totality of it

all and the question becomes, how do you finance this, in terms of the mix between domestic borrowing and external issuances? nejra: good to see you. we were just talking to happening to paulo about the drop in crude prices. themuch of a challenge is recent slump in oil prices going to be for any stimulus plans and 2019? yousef: for a government that generates in excess of 90% of its revenues from oil sales, it will be a major challenge. saudi arabia is not new to volatility in oil prices. the oil price is down 30% since the murder of jamal khashoggi, but perhaps more importantly, it's only when oil stays at lower levels for a prolonged time that it becomes an issue. the kingdom can handle oil prices a little bit lower for a little while, but once it drags beyond,six months and that's when you can see serious disruption, even far beyond what

the government wants or does not want to do in terms of priorities for 2019. they are watching this very closely. arguably, anything we hear today cut in form as well what we might hear from opec plus next year. guys? manus: it's going to be incredibly important for the kingdom. we will hear from you over the next 24 hours on that budget. quick coming through, breaking news. telecom italia. it could be that italian investors are interested -- elliott could be ready to raise a stake in telecom italia, according to one of the newspaper sources. our guest host this morning is chris ralph. he is the chief investment officer at st. james's place wealth management. you have been listening to the oil conversation. we are looking at -- psychological breakpoints, below $50. a lack of belief at what is going on in the oil market.

is this about growth or a lack of belief in opec? chris: i think it was about a lack of belief in opec. i think it's now about growth. everybody thinks that demand will lessen. we will see it in the other commodity markets as well. that is proving to be a will weight on the oil price and keeping it in the downward trajectory. see changing projections as we go into 2019, i don't see an recent why that should change. nejra: a lot of people tell me that helps growth and consumers. so it's one of these self-fulfilling cycles. do you see this as a reason to take on more risk, because we are not seeing a risk to global growth from a spike in oil prices? or do you see something more sinister from the drop? chris: i think at the moment it

is something more sinister, saying that we should be worried about global growth. for americans it's essentially a tax cut come because they drive up -- tax cut, because they drive a lot. it is a fine balance. there will always be a delay on the affect coming through in terms of the gasoline prices. manus: oftentimes he talk about the dividend yield -- we talk about the dividend yield. oil majors are churning cash. do you look at oil as an exposure that way? chris: yes. so we do own some of the oil majors. we have to be looking at cash flow productions as we go into 2019, and if cash flow is going to start to become much tighter, it makes the proportion that their free cash flow in terms of ability to pay dividends more tenuous. nejra: chris ralph, great to catch up with you. thanks for joining us.

chris will be continuing the conversation on bloomberg radio. do not miss bloomberg television's exclusive interview with billion investor stanley druckenmiller. we will bring you the best of that.

2 good morning, i am manus cranny. the chinese president omits mention of any reforms to support the economy.

theresarime minister may continue stocks with the eu as she put a deadline for the parliamentary vote. nejra: s&p 500 closing at its lowest since 2016. the s&p 500 has fallen to percent or more six times this quarter. that is something to bear in mind. we sell european equities punished, it was a retailer that was hard hit after we got the number. ftse 100 futures down .7 of 1%, dax futures lower and cac 40 futures tracking lower by .3 of

1%. we will get a fourth day of losses for european equities. as we look to the fed the will it hike and carry on hiking in an ?nvironment manus: the money is going to safety. becausened mr. gundlach he is getting the message to the market when it comes to u.s. treasuries, he is saying you should not hike because of where we are in terms of the bond market. the bond market is flashing about growth. the bond market is suggesting you may need to cut rates in 2020. as of the capital or a small fee? the eu remains unconvinced about the 2 billion cut in the italian budget, this is the -- the

european commission is divided. this when you see you're seeing the prices higher on the burned and the bond markets. those are your markets. let's get to juliette saly standing by with the asian market rep. wrap.ket juliette: the csi closing of the xision weaker, and president -- those hoping president xi would give a boost to markets were disappointed. a number of central bank decisions in the region including the bank of japan, the nikkei was the worst performer, andnese stocks falling india is up .41% in late trade.

when we look at the currency market, that is -- the focus was on the yuan. steady.lly giving backs moderates earlier gains. we did see a spike as president xi was speaking in beijing. the kiwi leading gains in the g10 currencies, we had a pretty good rate coming through from is this confidence in new zealand. having a look at the indonesian their up .7 of 1% against dollar. some currency -- calls and that currency which has been hit hard. bank of indonesia stepping in and intervening in the fx market. you.: thank willingpresident xi is to push ahead with china's reform and opening up economic strategy but warms -- warns that

the path to reform will be coming within the country. in position to dictate to the chinese people what should or should not be done. president xias addressing the nation to celebrate the communist party's reform. good to see you. did he break any new ground in terms of signaling on the trade talks, that is what the market had hoped for. what do you reckon? tom: i would agree, the short answer is no, there were business executives here and investors leading up to the speech who were hoping, a slim hope that he would use this as to outlineity different structural changes to the economy, lowering trade barriers around some of the

market sectors. what he did was spend his speech recapping some of the historical achievements from 1978, the start of this reform and also emphasizing the role of the party. talks about socialism, marxism, the role of the state, very few mentions of the private sector or the market forces that have come into play in the last four decades in china. that speaks to the disappointment we have seen from equity investors in china. there was nothing that address the concerns in washington and the trade tensions little-known the economic pressures china is under. we switch to focusing on the annual economic meeting. china's top policymakers laying out there rarities. there is a view that you are getting additional stimulus measures. we are waiting for those to be outlined by policymakers and any signs that the pboc would be doing any additional policy to

support the economy. faced with slower sales. and of course the trade tensions with washington. that is where the focus is now. reporting as ever. tom mackenzie in beijing. we get to our mliv question, what assets will move the most on china reforms, it depends where they reform whether it is tech or manufacturing our intellectual property. our mliv team is standing by. go on yourus bloomberg. let's get your first word news. annabelle: the federal reserve has its final meeting with the white house turning up the heat on the rate rise. president trump tweeted his opposition to a hike.

a survey suggests the fed will tose the hikes as threats the economy amount. if prime minister theresa may herself another four weeks to save her brexit deal. after delaying the vote following overwhelming opposition, may announce the deal was put to a vote in the week of january 14. jeremy corbyn has proposed a vote of no-confidence saying she evaded accountability for too long. >> the prime minister has cynically run down the clock trying to maneuver parliament two a choice between unacceptable outcomes, her deal or no deal. the country, workers, and businesses are increasingly anxious. annabelle: the nascent board the successoray

to carlos ghosn. the committee will report by march almost four months after the arrest of carlos ghosn and his sacking as chairman. >> we will listen to what we know but we are responsible for governing nissan. we need to make a decision that is convincing for nissan while listening to other opinions. in that sense, we should not hurry. we should take enough time to decide. annabelle: tuesday is shaping up starsa day when the aligned for space exploration. there are no less technical -- last-minute technical hitches. united launchd fourthe and spacex and a

company will launch. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. back to. -- back to you. nejra: thank you. equities slid and the s&p 500 dropped to a low. the benchmark is on track to post its worst december since 1931 at the height of the great depression. manus: u.s. markets in turmoil. a chorus of warnings against tightening, they have been mounting from high-profile investors including jeff gundlach. economists are anticipating a hike tomorrow. let's welcome our guest. have you with us. the superlatives are flashing around the newsroom, we put it in a chart, a little perspective

for you, the s&p breaking its lowest level. this is the worst index on target globally this year. likeve not seen a deck this since 1931. healthy croissant -- healthy catharsis or are we adjusting to a new paradigm of volatility? guest: we are going back to traded forw markets 2 or 15 years prior to 2007, thousand eight. that is how i am looking at the markets. it is a good environment to be long risk assets. though --entals even it will come into the 3.5 or 3.6 level. it is still a good environment given that inflation is benign to be long risk assets. this is a healthy correction. everyone was concerned with their having not been a correction last year.

now that we have had when people do not like it. , think this is if i look at something was interesting over the weekend. barons came out and forecast s&p up 10%, goldman sachs came out over the weekend, their number is close to 15. there is some, a view in the market that this has a further run. nejra: goldman has bearish probabilities as to whether we can go up or down and they are saying put your money in defenses but i wonder why you're choosing to take that risk in equities and not incorporate and high-yield particularly if you believe in growth. are you concerned about balance sheets or is it it -- that you think we will see better earnings and 2019? guest: i am negative on the bond market. whole worldat, the is looking at the tip of the iceberg which is the 10 year u.s. treasury yield. the damage that is being done will be done under the water and in the corporate bond market and

the high-yield market. it is higher than it has been in history. and given the -- we are expecting a slight slowdown, that will have real implications on the refinancing of this debt. sparks the crashing and to that? i had a guest who said let's ge, you have this potential cascade effect in that area. is it like a one event that could tip us in terms of high-yield? guest: i do not think it would be one event but it would be gradual, it will build quarter to quarter. manus: you do not expect an explosion like 2008 like it was -- where was hard to get out of funds. guest: banks do not have the same ability to use balance sheets the way they did 10 or 15

years ago. they cannot warehouse the debt. the bond market will he ok until it is not ok. it will be a series of events that tip it over. that is one of my biggest concerns for 2019. nejra: how should the fed manage this? christopher: the fed has been hiking rates for two years, the ecb would love to be in their position. the fed has ammunition to fight if there is a need to cut interest rates. ecb has nowhere to cut from. inflations with benign, they will hike tomorrow and a couple of times next year. manus: so you're going for a couple of times, that is in line with what we think. gundlach is saying the markets are turning and drunken meyer is talking about two huge issues. do you see there is any merit in either of those comments, we

will talk to him later on in the morning. any merit in those warning shots? christopher: i think certainly. they are seasoned investors, they have been here for a long time, they are making comparisons between the fed, the rate of fed hikes back then to now. you do not want to go too far too fast. i don't think the fed has done that. they are close to the end of this cycle. our guest is staying with us. do not miss the special coverage on television and radar as radio, will hear from guests including alan greenspan and guggenheim partners cios got miners -- scott minor. we're bringing the latest on that interview at 9:00 a.m. coming up. nejra: theresa may pushes the

parliamentary vote on her controversial deal to the middle of january. the opposition labor party cables a no-confidence motion. manus: we have had a headline across the bloomberg. it is about italy reporting the government is set to cut its road estimates from the previous figure of 1.5%. if you are traveling to work, what do you do? -- tuneou have to turn in to bloomberg radio. i will be joining you there in 45 minutes. this is bloomberg. ♪

-- 7:1919 and london a.m. in london. this is bloomberg daybreak: europe. manus: i am manus cranny.

you how tough it is in these markets this morning. not that you need us to remind you. the worst quarter since 2015. failing to impress the market. below $50.own shale is a big risk in 2019 and the market does not believe that opec has done a big enough job. nejra: talking about technical breakpoints and oil, the s&p closed at a 14 month low and futures are not looking too positive, pretty much struggling for direction. the10 year yields down and curve has been steepening. will it flatten if we get anything other than a dovish hike? the 10 year btp futures, money moving out of btv -- btp.

still below 3%. manus: let's talk about the question of the day with the mliv team. it comes back to the china discussion. whatu are a believer, assets will move the most on china reform? to ourut that question guest. of tavistock investments. we understand that half $1 whation of stimulus -- assets would you want to be long -- in 2019? christopher: going back to trade, china and the u.s. will come to some type of agreement in the first half of next year. it works for both parties. there is a willingness, both sides need to walk away with

having saved face. there will be a positive outcome to hang your hat on. what does that mean for china? it is more of the same. nejra: which assets will move most on reforms? christopher: the evolution and that modernization of china is in its infancy. it is a long journey. their appetite for commodities across the board will continue and will continue at pace. manus: why do you want to be long gold, is that your asked up? christopher: that is my insurance trade. it has lagged badly. when you look at it i do not think inflation will run away but investors need a safe haven. and it is a cheap asset currently. and looking at out into 2019, the volatility is here to stay. interest rates are rising. the baton will be passed away from the fed into europe and potentially asia. higher volatility good for gold.

nejra: our guest stays with us. let's get the bloomberg business flash. china's huawei has defended its record on security going to step up engagement with world government. the company is -- the company's rotating chairman said while the .ecord is clean the company says it plans to invest $2 billion in cybersecurity. instagram played a much bigger role in russian manipulation of u.s. voters than the company had previously discussed. according to a report commissioned by the senate intelligence committee the russian troll farm staged 187 million and's -- reactions with instagram content. more than any other platform including facebook.

that is your bloomberg business flash. you.: thank -- in the news. theresa may is front and center. jerry 14 is when her vote will come into force. she says she will continue to seek assurance from the eu over the irish backstop. to discussing us this. how would a labor no-confidence vote in theresa may work? >> this is confusing. this is a vote against may so it is not the government and i would say from an investor point of view this does not signal anything new. the we know the prime minister's 14,end this vote january clear unless you get concessions on the backstop. going back to labor what they

need to focus on is the big question. will you vote it through or let and are you back a second referendum. what are you doing about the currency? christopher: the currency for our non-u.k. assets, we run global money but we have a full currency hedge in place. sterling is in the middle of a point point range on a deal, no deal, it can break it away. it has 10% to the downside. 15% to the upside. the bigger risk is to the upside. they will hash something through . it is hard to envision it today but they have to get something through. and ultimately someone will stand up and say we cannot just let this thing fail and run into the ground.

on the 28th of march. asos was the canary in the coal mine. it almost seems as if things are closing in on us as consumers. are you concerned about the u.s. -- about the u.k. consumer? >> i am not concerned about recession risk. people buying things differently today than they have been in terms of the london property market. , one wayrnight but 25% or the other. i not concerned about that. thank you both for joining us on set. it is a two day special. the team have got an exclusive for you, it is with a billionaire in her master --

investor. no concern about recession risk. ♪

anna: good morning and welcome to bloomberg markets, the european open. we are live from our european headquarters in the city of london. matt miller is in berlin. matt: the stock selloff rolls on from the u.s. their asia and oil falls below, well below $50 a barrel. safe havens our bid. will the sea of red spillover to europe? the cash trade is less than 30 minutes away.