neighbor: good morning. manus: this is bloomberg daybreak: europe. these are today's top stories. >> investors brace for the last polity decision of 2018. the worst year for global equities since 2008. can a dovish hike save the market. italy reaches an informal deal with the eu. the u.k. prepares for a no deal divorce. tanks on itsnk trading debut. we are live outside of the tokyo talk exchange -- stock exchange. ♪

manus: warm welcome. we are preparing for what some would say is an incredibly dovish fed reliefs tonight. will they move the language? looking at the market. to 60 basisould go points going through to next year. it will not be an easy road. whether you think it is all we are bouncing off this 2.80. we bounced in july and august. we have not inverted yet. what are the bond markets telling the fed? they aren't listening to capital hill. or are they? the dollar is down for the third

day in a row. city would say that you have almost all the dovish news priced into the dollar. the positioning as such is that it will be very hard for this meeting to out dove the market expectation. back to levels we haven't seen since 2017. nejra: exactly. you could say the only thing they could do is not hike today. the market heavily expects that hike to come today. what would be worse for the out hawks orfed out dubs them. it's a tough balancing act. if the worst years for global equities since 2008. we saw that swoon in late afternoon trading. we ended flat on the s&p 500. futures pointing higher now. it was in a terrible fission -- session.

byo stoxx 50 futures down 2/10 of 1%. at the moment, we are seeing underperformance in europe in terms of the equities pointed -- equities. oil was one of the big reasons we saw underperformance in the s&p 500 yesterday. it is struggling to recover from its biggest three-day strong -- slump since 2016. the market is worried about growth and demand. we had that api data, not helping. let's check in on the markets. juliette: a mixed session here as we await that expected dovish tilt from the fed. in love of bit of weakness japanese equities today. the nikkei falling below 21,000 points for the first time since march. hong kong stocks higher in late

trade. china under pressure today. not much movement in the yuan. indian stocks are higher. picture asery mixed we await that decision from the fmo c. let's take a look at stocks. softbank at the top of the show. disappointing with its debut today. retailinvestors were investors, there is an interesting piece on the bloomberg saying they have to be disappointed. they were chasing the dividend yield. now down 14.5%. we've seen that drop in wti crude. that has affected a lot of the energy players. upside, there is a very interesting story about one of the large chinese cities. you probably never heard of it. are reportedly going to list a ban on people selling their homes, which would lift a

lot of property stocks. manus: thank you very much. the very latest on the asian market. it takes very nicely tour mliv question of the day. how many 2019 hikes can the stock market withstand? in an overall view, what you reckon? how many hikes are priced in? we will react if you pop anything to us. it is on your bloomberg. let's get the first word news. china and the u.s. have held talks today to discuss the ongoing trade dispute. steven mnuchin and told takenerg says they have talks through the weeks. they are trying to document an

agreement. the u.k. government has agreed to implement plans for a no deal brexit, that includes putting 3.5 thousand troops on standby into billion towns of -- pounds of contingency funding. the prime minister's cabinet also agreed to issue further warnings to voters and businesses in the coming weeks. may has said parliament will vote on her deal in mid-january. >> we are sending a clear message that these -- this needs to be much more of a priority for businesses. the government priority remains to secure the deal. we need to recognize that a responsible government is preparing for the eventuality that we leave without a deal. softbank'sks -- telecom ipo dropped today. corporation, 90% of

investors were individuals. stuck to its ¥1500 offer price instead of a range amid a japan wide outage and a continuing global equities selloff. italy's populist government is betting the european commission will ratify its budget deal today. spokeswoman for the rome treasury speaking anonymously to the government has a technical agreement with eu officials. italy cut its deficit target to just over 2% of gdp. saudi arabia spending will hit an all-time high in the coming year as a government extends handouts to cushion the impact of rising costs and to keep the vision 2030 program on track. the budget includes the cost of living allowance that will tote us -- total almost $11 billion.

>> this is the largest budget in the history of saudi arabia. supporting economic growth in the kingdom and raising the efficiency of spending. as per the goals of vision 2030. >> global news 24 hours a day on air. powered by more than 2700 journalists in more than 120 countries. manus: thank you very much. the markets are trading mixed today. you have investors bracing themselves for this nights federal reserve policy decision. this months meeting is set to against a backdrop of recent turmoil in global markets. it's the worst year since 2008. our guest host this morning is the head of fixed income research at his company. welcome to the show. we talked about bonds.

i really do like what city said this morning. it's very difficult for this meeting to out dove the market expectations. how dovish do think tonight to be? >> it will be much more nuanced. the real key is probably not on whether they hike interest rates. everybody thinks they well. the key is how the dots change. in the commentary that they actually make. two things could shift. relatively small changes will change the path of median forecasts for next year to only two hikes. that will be the case. is it possible for them to out of the markets -- out dove the markets? sure. that would be taken as a much more dovish sign. they will nuanced language more. they will stress the fact that

we will have to be much more data dependent, which is like saying we don't know. nejra: some are saying, forget about it. there's a very tough balancing act. what would be more of a risk for the markets, that they out hawk or out dove? >> it would be more risky if they out hocked the market. if they don't change the language or the dot plot, people would say, they are focused on inflation. they don't get it in terms of the political situation. for me, there's no question. i don't see how they could out dove the markets. they have loved it whenever central banks come in with a much more liquidity. we would have the same reaction once again here. manus: i want to take this to your world. we created this chart. it is high-yield. high-yield spread to treasuries. the number of companies hitting

a 52-week low. we popped it into the library. the sort of drama cleese -- donna klees -- damacles brings pain. let's just start here. what you reckon on high yields? >> if we are talking about the u.s. high-yield market, it has been a teflon market over 2018. we had europe selling off from february. we had the u.s. investment grade market selling off her february. the u.s. high-yield market didn't move until november. there's two reasons for that. one is oil. oil was relatively strong for much of this year. story in 2015 oil treated people were quite comfortable with the market. in november, oil prices declined. that was a big problem for u.s. high-yield.

it's more generalized concerns over economic weakness. if there's any credit market which still has a lot of pain to take, it's the u.s. high-yield market. pain, when we talk about some people say don't worry about recession risk. you say we do need to worry about 2020. credit spread will determine credit spreads for 2019. what is your thinking for 2020? >> you are absolutely right. credit markets anticipate growth by year. inhave to think about 2020 2019. 2020 is important to us because we think that will be the slowdown. we are looking for u.s. growth of 0.5%. in 2020.growth of 0.7% that is below the consensus. one of the things that has to happen is that consensus has to

be taken down. manus: we started talking about treasuries. i came in and re-watched the interview again. i found it fascinating. he's long 2, 5, 10. he says that to's could drop to 50 or 60 basis points. i think that's a huge call. said,everything he has you think the rest of the market is positioning to be long the underlying treasuries going into 2019? >> the market is much more balanced than it was. we've had a big pullback. we are at the bottom of the range we have been trading at all year. we are back at those levels. we've been between 28 and 325 for the last 12 months. i think we will struggle to get through 280 between now and christmas. context,all in that our assumption is that they will do something marginally dovish.

not enough to change people's minds. that 280 level will stick. it's difficult to be bullish on treasuries when we still have growth forecasts blurred on the consensus. nejra: our guest is with us. lots more to discuss this hour. coming up, saudi arabia makes a rare bullish call on oil. with crude prices collapsing, are the forecasts overoptimistic? when you're going to work, tune in to bloomberg radio. will be there. our guest will be there. stay with us. this is bloomberg. ♪

nejra: this is bloomberg daybreak: europe. let's take a quick check on the markets. we are seeing a mix session in asia. weakness in japan and asia.

the 10 year jgb yield is up a basis point. atwas heading toward zero one point. you are seeing strength in the eaton asian -- indonesian currency. there's been intervention in that market. slamdunk, 9% in two sessions. nobody seems to believe the opec deal. the dollar is down. is it all doubled up -- dubbed up -- doved up. 100 day countdown to brexit. today, we are asking the question on mliv. while we are talking about brexit, the fed is in focus. how many 2019 hikes can stocks withstand? join the debate on your

bloomberg. let's get to bloomberg business flash. debra: deutsche bank has seen a surge in turnover among investment bankers and asia since may as cost-cutting and sinking row prompt dealmakers to leave. 50 bankers have left in the last six months. that's 30% of the investment banking workforce. sources say eight managing directors are among them. slumped in extended trading in u.s. after it lowered its full-year economic outlook. earningscast adjusted for the full year, missing the lowest analyst estimate. it says it's china business has low due to trade tensions and it sees lower global trade growth in the near term. citigroup is that -- set to face losses on loans made to an asian hedge fund whose

foreign-exchange wagers went wrong. andtwo sides are talking board level discussions are considering an internal shakeup. the sector has been under pressure this year with the $3 trillion industry on track for its worst annual performance since 2011. big space day became a damp squid as the stars ultimately failed to align for yesterday's record number of record launches. spacex scrubbed its missions. blue origin did the same on an infrastructure issue. launch alliance became the last of for potential missions to postpone its left off. that's your bloomberg business flash. manus: thank you very much. saudi arabia's spending is set to hit an all-time high. the kingdom is making a bullish call on oil, estimating that crude will average $80 per barrel in 2019. that optimism defies most of the

price forecast. they have a history of making conservative assumptions. with our chief middle east economist. what you make of the budget figures? the top line in your story is, it doesn't add up. >> yeah. there's an issue with revenues. the government expects revenues to increase. driven by higher oil income. this is challenging in an environment where oil prices are declining, saudi oil protection is declining -- production is declining. how can you get an increase in revenue in this environment? that's the optimistic part, the part that is puzzling. think it won't fit in the budget. nejra: what does this mean for the economy as a whole? >> it means one of two things.

the government can either stick to its deficit forecast, it would have to cut spending. stick to its plan to stimulate the economy, increased spending. that will come at the expense of higher deficit unless oil prices recover to the optimistic level that the government is projecting. around $80 per barrel. nobody is expecting that to happen. manus: it is somewhat fanciful. can you explain to us your estimates for oil prices? the government doesn't actually published the oil price assumption that they have in the budget. we have to back it out using the numbers they have. we think that the government is basing the budget on an oil price in the high 70's.

that's optimistic. that's run against the government's previous budgets. they usually have done it based on conservative assumptions. they have always opted for that. in order to be happily surprised at the end of the year. even if oil prices surprised on the upside for the saudi government, because of the , theased spending breakeven price for the saudi barrel.s around $95 per even if oil prices increase , it would have to rise to over $95 per barrel for them in order for that. nejra: thank you so much for joining us. our guest is still with us. is there a bullish case to be made for oil from here?

it started out with concerns over opec plus and growth. we have api data and a drop of a percent. >> there's a slightly bullish case to be made for oil at these kinds of levels. i don't know if that case get you anywhere near 80. there's a couple of things that could go right. the first is that the speed of the decline is maybe precipitous , the market looks oversold. you will have a small term bounce. the bigger issue is what happens to supply in much more expensive areas of producing oil when we have oil below $50 per barrel. could we see shale production? i wass something discussing with one of my commodity colleagues last night. he said a lot of the shale production is done by the bigger oil per -- companies nowadays. they are more price sensitive because they have deep enough pockets to survive.

if they say, we don't need to pump to generate cash, let's shelve the productions. issues is of the big on emerging markets. i'm interested to hear what you have to say about credit. s&p says asia faces more downgrades. we have this palpable sense of release if oil stays lower for longer through 2019. what you think on a.m. credit at the moment? >> dm corporate bonds is an asset class were a lot more pain could be taken. the reason is because it has been the fastest growing corporate bond market of the past five years. that's due to one country, china. chinese corporate's have done almost all of the net corporate bond issuance in the em space over the past five years. is the fact that china is slowing down. the consensus estimates are

coming down. our estimates for 2020 are below the consensus. a lot of asia is extremely sensitive to trade. korea, not a corporate bond story, but sensitive to slowing trade as well. asia in general is sensitive to slowing trade. this is an area where problems appear. nejra: globally, you say valuations are better. where is most appealing globally? >> europe. when we were writing are outlook, it was not -- mid-november. things are cheaper than they were. they are a lot more appealing. weeks of 2019 in the credit markets will see spreads grow wider still. european spreads will probably peek on valentine's day in 2019. we will see a rally over the rest of the year. i'm quite bullish about european credit now for 2019. manus: you can definitely come

back again. thank you so much. of course, i will buy you a valentines card. what if we got next? nejra: the downbeat day for something.

>> i'd love to say here and tell you i made it shorting stocks. it's very difficult in a bear market. the don't trade with rhythm. you get vicious rallies. people play all sorts of games. i always made it in treasuries. treasury yields go down genetically. not so easily this time. one of my biggest hits was in two years, in the fall of 2000. they with down to 1.5. now i'm starting with them at 268. i'm long treasuries.

two years, five years, 10 years. i have been for a bit. i don't like to level. because of everything we have been talking about, i like the risk rewards. if the fed makes a policy mistake, it is not inconceivable to me at all that the two years backed 50 basis points in a couple of years. they are doing all this crazy nonsense again. qe. the whole gambit. rates at zero. loblaw block. bla, bla. manus: i hope you got the message there. he likes treasuries. i we watched some of that. i think it's interesting. rates were at 6% in 2000. could you imagine can -- mortgage at 9%? he likes them. we haven't inverted.

he doesn't call recession. nejra: he says, even at these levels. you are pointing they were at 6%. if you look on a global scale, you have 10 year bund yields a 24 basis points. we have the japanese headed toward zero. what he is saying does make sense. manus: what happens tonight? is oil price 10? -- priced in? if you had cash throughout the year, do you protect yourself? it is interesting that he liked it all the way along the curve. a lot of people say they prefer the front-end. let's check in on the markets around the world. let's come to you first. asia trading mixed today as investors wait for the federal

reserve meeting later this afternoon. indian markets in a bit of a holding pattern as well? surprisingly, we have been charting a course of our own. benchmark was retreating in the red. towards the end of trade, you suck a complete turnaround. we finally managed to get in the green. today's session started off on a stronger now. not in terms of the move. we are in the green which makes this the seventh straight day of gains. there is a stamp in terms of what comes up in the fomc decision. aside, injecting further liquidity through increased oil.

that has really helped the sentiment here. the rupee saw a big bump up in the session this morning as it opened up for trade. it was sub 70 when we started off trading. it was definitely a big comeback from the currency markets and bond markets. the equity market still looking more subdued. thank you very much. jgb's i canave the see in front of me. you have a great big line at the top of margins. sometimes that can be hard to get in. what's going on? >> i want to look at the volatility in the japanese bond market. you saw some crazy swings this morning in the volatility. the 10 day is in the white spiking. this is after we saw a rally of the futures market. there was an emergency margin call. you saw them take back those gains. mliv saying this may be a

warning as traders look to see if the fed scales back. insibly what's going on japan could be a warning of what to expect later today. cannot talk about markets today without looking at the oil markets. yesterday, 7% drop on wdi's. trading below $47. it dipped into oversold territory. haven't seen this in november. this is when the market is saying that the price actually isn't fair. the big question is, how long will this last? will it stay in oversold territory? will it get a boost? nejra: we will see what the market does with that. here's another question of the day for you. how many hikes can the stock market stand in 2019?

we are on the blog there. nejra: here's a look at what you should be watching today. the eu is due to publish its contingency plan for britain crashing out of the block. updatewatch out for an on the u.k. economy later on. we get the cpi and ppi at 9:30 u.k. time. data, factual stuff. final the fomc's releasing of 2019. that's at 7:00 u.k. time. the dots and messaging will be the most important for the markets. italy has reached an informal agreement with the elon its budget plans for next year. there's no word on the final deficit target. with 100 days until brexit, theresa may has put the u.k. on high alert over the dangers of a no deal. to put inreed contingency plans on full. -- is thisnow

finally the end of the italian budget standoff? >> good morning. we understand there is an informal agreement. it's unclear. we don't know whether the italian government will set for that 2.04 deficit. they were very specific and -- about that number. today, perhaps we get those announcements. that's what we are hearing from rome and brussels. they are keeping quiet about this. it would be good news for investors. italy is a prominent member of your. everyone was prepping for a long fight. to see some of that tension ease off today between the institutions and the government would be good for italian stocks in btp's.

we are moving away from that fight. now it does look like there will be some kind of deal. manus: there's a deal potentially in play. what are the pieces that will get asked? -- axed? that has consequences in terms of what you can spend. >> it really is a big question. akis is a very unruly we coalition. we understand that it is ,ctually the prime minister doesn't really have a political ideology. he has been the person to reeling directly with the european commission. if you have less money to spend, you have to cut measures. this is what everyone will be paying attention to. was at the five-star movement? keep an eye on polls. keep a very close eye on what is

taken off of this budget. manus: thank you, maria. i guess toast this morning is still here. -- our guest host is still here this morning. we have this in the library. italian credit and atps. how much of this relief is probable in the btp and in the credit story? are you tempted to step in? >> we've already had quite a rally in terms of the btp's. we are very close to 250 basis points. which we consider to be fair value. the big problem with the italian story is not whether the deal will be massaged into place today, it probably will be. the big is, how much will italian growth slow? how much are these forecasts to too optimistic?

deficitere where the numbers are probably going to go back up again. having more structural improvement over the past couple of years. you mentioned credit. credit markets are very closely correlated with btp bund spreads. the only thing is, you never get paid as much in credit as you do in the government bond market. if you really like italy, you should be buying btp's against wounds rather than buying italian credit. nejra: you have a great are chart in your outlook showing how much btp's offer a bigger pickup then wounds. bunds. how are you factoring political risk into your strategy? >> it will be very important.

in 2018, i thought that the trade risk was going to be much bigger than european political risk. some people looking back on that might say, that didn't work out as well as you thought. political risk has appealed everywhere -- appeared everywhere. you have to think about political risk versus valuations. the markets discount a lot of bad news. there's probably more political risk in the price then we may end up seeing. manus: let's laud it in here. brexit. is sterling price for political risk? it is the question we ask everybody. tell me what you think. >> i have to give you a personal bias here. i'm a u.k. passport holder and i live in france. i have a lot of skin in the game here. we are still hopeful that a deal will be made. we still believe that the most

likely scenario is theresa may steel. that doesn't mean it has a 50% probability. this at least three choices we could have here. trying to figure out the most likely scenario is difficult. byld more pain be felt sterling? it is already quite cheap. more pain can always be felt. that's probably not the thing i would be most concerned about. i would say, there will need to be some kind of monetary response. you will still see pressure on u.k. banks in the near term. probably more pressure in the equity markets than in the credit markets. both will come under pressure. when it comes outside of the sector, theyer -- tend to benefit from appreciation as the pound gets weaker. it is not easy in terms of knowing how to trade these things in the u.k.. the pain will be felt in the banking sector.

nejra: what about the retail sector? >> they are an importer of goods and they seldom domestically. we are talking about weaker growth domestically. yes, the u.k. retail sector could come under pressure. particularly high-yield. that's one of the more developed areas. that could certainly be an area of pain as well. manus: there's an awful lot of a tough time ahead. stay with us. we have more to do. stays with us. i want to show you some pictures of the softbank ceo. he's speaking at a media event in tokyo. the stock was down by 12%. billion a tragic $23 ipo. this was a brave man that brought this to market. fool or brave man? nejra: down almost 15% this

morning. joining us is our guest. why such a bad debut? >> good to see you guys as well. imagine it takes a little bit more guts for them to actually raise the medium. look at the optics of this one. $23 billion. 90% retail. bankers walk away with half a billion in fees. a lot of these retail investors really feel shortchanged seeing how their investment is down almost for -- 15% on the first day. hardly the best conditions to be coming into the market. especially with the deal this big. it's the second biggest in history. out the greenke shoe option, it is number two behind alibaba. there's also the operational risk. when you talk to foreign investors, institutional money

wasn't sold on this deal. they thought the price was too high. they basically see that the dividend plate that appeals to a lot of local investors was perhaps not set in stone. it wasn't sustainable given the profit outlook. manus: your kicking the investment bankers there. everybody has to earn their crest. it's coming up to christmas. what role have the dividend plate? -- dividends play? is that the tempting part for retail? >> it was. it's 5% of the ipo price. this price right now, 14% down. that yield goes up much further. you compare that to what you would get if you had bought into the rivals of stock bank -- softbank, that's a very good deal here in japan where yields

are at zero. it went a long way in selling the ipo. , $23 billion. nejra: thank you so much. don't miss bloomberg's special coverage on television and radio. the federal reserve meeting and jay powell's remark. we get a dovish hike? we will hear from guests including a former fed chair and guggenheim partner cio. work,ou're traveling to tune in to bloomberg radio. we will be with you wherever you go. this is bloomberg. ♪

manus: this is the global equity map.

do you think you will see a more constructive trade dynamic? mnuchin says they are planning for trade talks in january. fisa minister level talks to place this morning. you have australia down there. austria and asia there. aussie is in the red. you are seeing the relief and emerging markets. nejra: asian stocks have not had a painful december as u.s. stocks. the pacific index down 3.7%. manus: absolutely. i have the memory of a flea at the moment. let's check in on what's trending across the bloomberg universe. general sayseon urgent action is needed to stop the epidemic use of seat -- e-cigarettes among teenagers. nejra: france's yellow vests may have peaked as a protest movement but they could find a

new life as a political party. that's our top story this morning. the most read stories on the terminal. elon musk unveiling the prototype of a new hyperloop tunnel. senate republicans are preparing a measure that could extend the current spending until february. top story, investment bankers are set to be fleeing deutsche bank as cost-cutting has lowered morale. let's go to debra for a business flash. debra: general electric is said to have filed confidentially for an ipo of its health care unit. sources, the conglomerate is working with advisers on the listing with the public filing likely next spring. their health care business would follow a similar move by siemens . executive of merchant

bank galaxy digital says he doesn't expect bitcoins price to climb much more. says that despite a dismal run for virtual currency investors in 2018, he sees bitcoin up to 6000 in the near term. >> a lot of people say, this is to looks. it was a medium built on something that's real. most models are built around things that are real. the internet changed our world. because we are dealing with companies all the time, progress is being made in technology. made on thess being institutional infrastructure side. when i look ahead, i'm constructive. blue apron has seen 90% of its market value disappear since summer 2017. the share plunge by the new york-based delivery service gives it the dubious honor of

being the third worst u.s. ipo this decade. beenther four spots have energy companies. that's your bloomberg business flash. nejra: thank you. tells bloomberg the u.s. and china are planning to hold meetings in january to negotiate a truce for the trade war. this follows talks over the phone today. with uncertainty surrounding the relationship between the world's two biggest economies, how are investors positioning for 2019? our guest is still with us. you talk about the fact that investors should be focusing on operating margins in the u.s.. what is that telling you about how companies are doing so far with the threat we have had? >> companies are doing quite well. however they going to be doing over the course of 2019? we are only just beginning to see the cost of tariffs.

the revenueat generated by the commerce department of tariffs, it doubled in the last quarter because we are only now seeing the effects. there are two problems in terms of the u.s. operating margins. one is tariffs. the second is labor costs. given where we are in terms of the employment cycle, we are beginning to see hourly earnings increases feeding through. at the same time, the ability of u.s. companies to pause costs -- pass costs on to the consumers is limited. we will see operating margins being squeezed over the course of 2019. that will be the issue. in europe, it is more of a revenue story rather than an operating margin story. manus: we've touched on italian credits. you have some interesting takes on the banks. i was looking through your notes. you have good fives about ebs.

-- you seemfocusing to split into two camps. ebm and rife eisen. the others are in the eye of the european storm. >> the particular value in terms of the banking sector is, it is cheap. banks have been under pressure. we talked about cost-cutting and banks. -- it's part of my argument about the credit markets. it spread will peak on valentine's day. the market is cheap. the sector which is really cheap is the financial sector. insurance in particular. very cheap. banking sector, very cheap. 2019 will be a valuation story. banks are the place where the most attractive valuations are at the moment. nejra: you are saying we need to be more concerned about revenue in europe. what does that mean in terms of which sectors are named in particular? >> in terms of sectors, it is

very clear. it is the sectors under pressure in 2015 as well. german auto sectors. manufacturers, french and italian companies. they are very dependent on the richerg of the chinese middle-class. that's part of the story which will unfold over 2019 as well. that, there are industrial companies that are sensitive to world growth. things like commodity chemical manufacturers. where we have seen the volatility in commodity prices. you really need to be focused on the banks and the insurance companies. they are cheap. you need to be focused on the utilities and telecoms companies. manus: we will take those thoughts into 2019. we will book you specifically for valentine's day.

that's when you have called a turn in these markets. we welcome you back then. it is fed day, don't you know? we will discuss what it means for markets, right here. ♪

manus: good morning, we are live from the european headquarters in london. i am manus cranny. nejra: i am nejra cehic. manus: investors brace for the last policy decision of 2018 and what is set to be the worst year for global equities. a budget accord, a formal the eu, while the u.k. prepares for a no deal divorce. manus: telecom units of softbank and the largest offering since 2014 tanks on its trading debut. we are live to tokyo.

nejra: heading for the worst since 2008, here are how futures are looking one hour away from cash trading in europe. yesterday, the stoxx 600 dropped 8%. ftse 100 futures off. dax looking for direction. on a headline level, if you look at euro stoxx 50 teachers, they are dead flat, going nowhere. gain.utures, a the u.s. session was interesting yesterday. the past few weeks you have seen a swoon in trading. the s&p 500 closed flat.

we could be playing a waiting game ahead of the fed. question asks how many hikes will the equity market be able to withstand? remove gradualy hikes? in the price. let's look at the bond markets. the headline is to italy, there is a deal on the table which is italy sees a peace deal with the eu as the commission meets on the budget. is the standoff over? this spread, italy-germany could be 250 basis points. to 200 on aome in retail wind for italy.

dp over a time credit, that was the message there. u.s. treasuries is where you will perhaps see the most market moves, because we have tested 2. 80 in terms of yield, we have done that on a number of occasions. plaxo and pfizer to set up a health care joint venture. headlines,gh the they will have a majority controlling equity interest of based set up two new u.k. global companies. this is a new joint venture that glaxo and pfizer are to set up. it is to generate an annual cost pounds by 0.5 billion 2020. manus: glaxo, if you go into the body of the press release, 68%

holding. gsk will have a controlling majority of 68%. pfizer will have an equity interest of 32%. it is an all equity transaction. the deals we have seen being done the last couple of days, the luxury side, this is about new relationships. it really builds on the recent buyout. nejra: they also say it is expected to realize cost energies. they are expected to generate cost savings of 0.5 billion pounds by 2020 four a total cash cost 0.9 billion pounds. let's check in on the markets in asia. juliette saly in singapore has

more. it has been a mixed session, what can you tell us? juliette: very mixed session. key markets sold off today, china, japan, australia. msci asia pacific index is higher because of the oil price has pushed emerging markets higher. india is up 0.3%. we are getting breaking news that the bank of thailand has raised its rate to 1.75% from 1.5%. that was widely expected. you have seen the yield on the 10 year japanese note get close to zero. weakness, a dollar lot of asian currencies have moved. the india rupee rallying on the weaker oil price. throughindonesia coming with its own decision tomorrow, though no change expected.

one currency bucking the upward trend is malaysia. deutsche bank saying it is switching out for 2019, it is more constructive on the rupee and the japanese yen. manus: thank you very much. bank of thailand raising rates, 1.75% from 1.5%. this is all about what is going on in the emerging markets space . let's see what happens today, which takes us to the question of the day. ,he fed is set to raise rates and this takes us to the question of the day, how many hikes in 2019 can the stock market withstand? that is the debate. it is the worst december in 31 years for stocks.

debra mao is standing by in hong kong. heldina and the u.s. have vice ministerial level talks to discuss the ongoing trade dispute. steven mnuchin told bloomberg they held several rounds of talks in recent weeks and are focused on trying to document an agreement for a march 1 deadline. populist government is betting the european commission will ratify its budget deal today ahead of the commissioners meeting in brussels later today. a spokeswoman said the government has a technical agreement with eu officials. target toits deficit persuade the eu not to start its sanctions procedure. the u.k. government has agreed to implement plans for a no deal brexit that includes putting 3.5 thousand troops on standby and

two billion pounds. prime minister theresa may's agreed to issue further warnings to voters and businesses in the coming weeks. may says parliament will vote on the deal in mid-january. >> we are sending a clear message that this is a priority for businesses up and down the country. the government's priority remains to secure a deal, but with 14 weeks to go, we are preparing for the eventuality that we leave without a deal. softbank ipo dropped at the start of trading in tokyo today. shares, 90%o bought were individuals, and the rest were on and money managers. price, and a

continuing equity selloff. spending will hit an all-time high in the coming year as the government extends handouts to cushion the impact of rising costs, and keep the vision 2030 program on track. it includes a living allowance will total $11 billion. the kingdom is struggling with falling oil prices and anger over the murder of journalist jamal khashoggi. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. thank you. markets are trading mixed in asia. investors are bracing themselves for tonight's policy decision. a hike is widely expected. it is set against a backdrop of global turmoil in markets. since 2008.ars joining us now is shaun port, cio, nutmeg saving and

investment. i asked our guest in the last hour if it was more risky, and she was firmly of the view it will be worse. put feard, will that into the markets about global growth? or are markets so negatives that the views would be confirmed? shaun: it depends on dovish, on the details. what are the fed projections? dropped the language on gradual increases. the good thing is inflation is softening in the u.s. medical care costs and helping costs are starting to peak. flexibility fed around inflation. they are not in a rush, they are close to neutral and can take their time, which is the dovish message they should be giving. manus: why are we whipping around guessing?

why are we having the worst december in 31 years? would you buy the dips? shaun: absolutely. the global economy is doing ok. growth is down to 2.5%. we think growth in the u.s. will redouble next year. there will not be stimulus that we had this year, the monetary policy is not that restrictive. yields in the u.s. have actually risen. nominal yields are about lower oil prices. this chart shows that point well about the uncertainty in 2019. the fed hike outlook is falling with the s&p 500. butwould be buying the dip, looking to 2019, how many hikes can equity markets withstand?

shaun: i think it is interesting about the yield curve. can a0 year bond yield market withstand? i think it can withstand 3.5%. cannot copearket with higher bond yields. marketshese equity cannot cope with the height two -- with two hikes. shaun: out of tech and momentum stories, the market sentiment is on the floor. if you look at the fundamentals in the next few months, equities look good. manus: can i ask about financials? this is money flowing out of financials. we take a softer fed as a base case. of oillion dropped out

last week. by the dip, do you want to buy financials or big tech? , or leavebuy growth financials alone? shaun: it is difficult with a flat yield curve and it will stay flat for some time, about three years. the banks will be under pressure because of a flat yield curve. if you look at small caps globally, germany outperformed by 5%. in u.s. there has been a massive drawdown in small caps. small caps are more interesting than financials. nejra: you are overweighting the u.s., but i know you want to buy the dip. would you buy it now? shaun: it will be interesting if you see positive headlines on trade talks which are concrete

that are not reversed, market sentiment will improve rapidly. trying to time that in the market will be incredibly difficult. is thei suppose that brave and carry on. let's give you a quick recap on the headline about glaxo and pfizer creating the consumer health joint venture. it will be 10 billion pounds worth of sales. have 68%.oing to pfizer will have 32%. laxo,: g 's coming through confirming 80 pence per share in 2018. it remains committed to the current dividend policy. manus: what does the market get back in return? what pfizer and glaxo are saying

is it is about synergies. a billion pounds, and cash costs of 9 billion. 2022.ope to save 0.5 by and non-cash charges of 0.3 billion. coming up, with 100 days until brexit, the u.k. troops.puts 3500 when you're traveling to work, tune into bloomberg radio live on your mobile device or digital radio in the london area. this is bloomberg. ♪

manus: 41 minutes until the start of cash trading today. nejra: this is "bloomberg daybreak: europe." i am nejra cehic. manus: i am manus cranny. let's look at the markets, asian stocks are in the green. talks will happen in january, that is what we are hearing from the mnuchin. asia, 16% of the global market less than the u.s. u.s. futures are back to flat. crude wiped out over two sessions, down 9%. people are questioning global growth and the cuts from opec. absolutely pasting the oil market. look at thea two-year, the five-year, and the

10 year, all of them down by 10 basis point. down twospreads is hundred 59 basis points. we have an informal deal with the eu, waiting to get ratified in brussels. we are also looking at treasuries ahead of the fed. speaking of italy, it has reached an informal agreement with the eu on budget plans for next year, but no word yet on the final deficit target. with 100 days to brexit. manus: theresa may has put the u.k. on high alert over the dangers of they no deal brexit. her cabinet agreed to implement contingency plans including 3500 troops on standby.

joining us from brussels, maria, good to see you. finally on the italian budget. does look that way. we know there is an informal agreement. today ine announced brussels. the european commissioner for economic affairs will speak close to mid day. perhaps that is when the announcement becomes ratified by the european commission. .he big question is the deficit the italians have put on the table, the commission wanted it below 2%. enough to avoid sanctions. this is the way the market has seen this. we are saying reaction in italian stocks.

this would be a standoff that would go into the european elections. today it will be ratified, it is still a big if. do we know which measures will stay, and which got asked? -- which got axed? is another big question because if you have less money to spend, some of these promises which are expensive, early retirement, universal basic income, it will cost a lot of money. this is the reason why the european union said it underperformed and was a breach of european fiscal rules. that was a big sign of alert for the european union, also keeping key.e -- this will be

there is a lot of tension in this coalition. the political parties have never really worked together before and have a different political agenda. who got the new budget approved today is the big question. war.: who will win the pr shaun port is our cio guest from the night. moving by 10 basis points. do you join that rally? guest said the spread could move to 250 basis points and back to 200. what do you reckon? shaun: it is a big move to 200. you are taking out fiscal risk

entirely at 200. you could have an election in the first half of next year. through two 50, that is too far. the european commission is a long way from where the italian government were. it will be interesting to see what the details are. politicians will win the pr war. i have to credit myself, -- do youtioning why think we will see it bounce back and is there value in italian equities? shaun: i see a reasonable game, but not a big rally in italian stocks. we need to see an improvement in italian banks and we are not seeing that. manus: what does it take to see the dial move with the banks? stagnating, we are

talking about recession. i suppose germany to a certain extent is under pressure. what does it take to shift the dial to take more european risk? shaun: we need to see improvement in the broader european economy. we are not things strong lending growth. the economy has flatlined. we have been airs on european growth this year -- we have been bears on european growth this year. potentially more stimulus measures coming, but maybe into the new year to meet that 6.5% growth target. that is really important for europe. nejra: you also underweight the u.k. short. is the politics too complicated and risky? do not see any positive outcomes for brexit? people see value in equities and sterling. shaun: we are bullish on a soft brexit.

hard brexit less than 5%. we can cancel brexit at any point and renegotiate. manus: you do not think she would cancel brexit? shaun: why not? if there is a choice of hard brexit, parliament will not let the government go through a hard brexit. u.k. becauseht the of a soft brexit, the pound will recover. you.: thank shaun port, cio, nutmeg saving and investment. do not miss the federal reserve meeting and jay powell's remarks. manus: could it be a double punch and a double dovish hike? our guest will be the former fed chair. that is it for this edition of daybreak europe. the european market open is up

next. nejra: tune in to bloomberg radio as always. this is bloomberg. ♪

anna: good morning, welcome to "bloomberg markets: european open." alongside mattds miller in berlin. matt: markets are on hold. european futures mixed. crude hold steady after tumbling below $47 a barrel. cash trade is less than 30 minutes away. anna: mnuchin the treasury secretary hits