simple. easy. awesome. >> good morning from bloomberg's european headquarters in the city of london. i am nejra cehic. this is "bloomberg daybreak: europe." top stories.ay's the nasdaq slips into a bear market. asian equities drift lower with japan markets shut. the longest bull run in history is on life support. mnuchin to the rescue. he attempts to quash concerns that jay powell will be ousted, but in doing so raises fresh liquidityut a squeeze. and washington deadlock, the u.s. government shutdown could last into january as the debate continues over trump's demand for a wall.

good morning, everyone. welcome to "bloomberg daybreak: europe." the worst week since 2011 for the s&p 500 last week and heading for its worst quarter since 2008. we close lower on the spx. the nasdaq in a bear market but it looks like we could get -- into today's session. we are seeing weakness come through on the bloomberg dollar index this session, all 5.2%. a number of concerns weighing on this session, .2%. a number of concerns weighing on the dollar. and of course, steven mnuchin talking to banks about liquidity, perhaps causing general concern in these markets as well. futures holding up.

a mixed session in asia and oil up .6%, 45 .87, a positive reaction to some reporting that 45.87, a positive reaction to some reporting. yvonne man in hong kong has more. yvonne, good to see you. a bit of a mixed session in asia this morning. yvonne: japan is closed. half-day trading and hong kong, australia, and new zealand today. we are well up a session lows we did see in the region. we have been watching some of these lines. steven mnuchin trying to calm markets down on reports the president is considering firing jay powell. it has been interesting watching the china session here. we did get a policy response or at least more specific plans on easing. that helped for chinese stocks a little bit here today. you have the likes of shenzhen stocks higher today. pretty flat when it comes to the

csi 300. hong kong lower by 100 points here. alice say it comes down -- analysts say it comes down to the implementation of reform measures. comes to the property market as well. take a look at stocks we are watching. is stock we are watching this, the online food and delivery platform. here we go. take a look at that. the stock is follmann close to 6% in hong kong today after the founder of a bike sharing app decided to leave as ceo. keep in mind he acquired mobike earlier this year. the stock took a beating. company isanic milk not flying. they are going to buy a majority stake in the organic milk unit. ec both the stocks higher today. take a look at shanghai biosciences, a biofarma company

here in hong kong, surging more than 22% here today, the second-largest ipo we have seen in hong kong this year. nejra: yvonne man in hong kong, thank you so much. skip the bloomberg first word news with debra mao, also in hong kong. the white house has moved to try and calm the markets after the loss of steven mnuchin, who largest banksix and was told they have apple liquidity for lending to consumers, business, and other operations. mnuchin also assured financial safets that jay powell is at the fed after reports president trump had discussed firing him. >> i think you put out a tweet last night specifically saying he realizes he does not have the ability -- >> we heard from treasury secretary mnuchin --

>> we have not heard directly from the president. i did speak with of the treasury secretary last night about a bunch of things including the labs of appropriations and shutdowns, and he did mention that to me. the shutdown is expected to drag into the new year with republicans and democrats at odds over president trump boardwalk. mick -- boardwalk. mick mulvaney is awaiting a counter offer -- border wall. mick mulvaney is awaiting a counter offer. top democrats say they have no intention of paying up. >> $5 billion is a lot of money. that is 650,000 children attending headstart. 2 million meals per day for a year for seniors. a fourthend it on century strategy rather than on stuff that actually improves border security is something we're just not going to be. debra: jim mattis will now leave the job two months early with president trump promoting his top deputy from january 1.

he moved to cut short his denier in a tweet -- tenure, announced in a tweet. had a sudden change of course on syria and afghanistan. patrick shanahan joined the administration last year. the number of people now known killed in the indonesia tsunami has risen to 200 81 with more than 1000 injured and thousands more unaccounted for. most of those killed were tourists, killed by two giant triggered by the nearby volcano. it may put further pressure on the rupee a. spacex has capped a record year with the deployment of a new gps satellite for the u.s. airport. the mission was the 21st of the year, breaking the previous high of 18 set in 2017. it was delayed several times because of technical issues and bad weather.

spacex's valuation has risen along with its launch record. it is now rated the third most valuable venture start up after uber and airbnb. 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. i am debra mao. -- neijra. nejra: debra mao and hong kong, think you so much. 7.1% over thed week and the nasdaq slipped into a bear market, and equally troubling was the sheer volume descendent on exchanges. thursday and friday saw the most traded for any today period in years. period in years. they went to reassure financial markets that jay powell's job is safe. this follows a report that president trump had discussed firing the fed chairman. joining us now is simon french, chief economist. with us here.you

so much news flow over the weekend concerning the u.s.. let's start first with the bloomberg report that trump had been having discussions about potentially firing jerome powell. we have not heard from the president himself. steven mnuchin has reacted on twitter. we have heard from other officials. let's ask this question first. if we were to hear the worst, and i know there are many legal steps before we could get to the firing of jerome powell, would it immediately mean a bear market for u.s. stocks? simon: i think it would be perceived very negatively because jay powell is a known quantity to markets. he represented a succession from janet yellen m the markets are very confident with it. the question would arise, what kind of fed chair would replace jay powell, and it is quite clear that the president wants to run the u.s. economy very hot and wants to go further in the run into 2020 on financial sector deregulation, and i think both of those resent both

economic and financial stability risks. the type of thing independent central banks were supposed to depoliticize, and you would price and the fact that that is going to be heavily politicized in the second half of president trump's first term. nejra: we have already been seeing financial conditions tightening. in terms of different asset classes, would this be a blanket money moving out of u.s. assets? the dollar treasuries and equities? could you see bond yields fall with a bid for the safe haven just because of the chaos? we actually expect the long end of the treasury curve to be very well bid in any case and that will just add towards the incentive to go into the safe assets. while the characteristic of the fed leadership starts to emerge, you need to make assets election based on -- selection not based on speculation.

need to then be colored with further inflation on what type of federal reserve the president and the treasury want to have and what policy path it is going to pursue before you think which asset classes are going to benefit and be penalized by that. nejra: it is still a big "if." not the fact of that, helping at all. speaking of not helping at all, i wanted to ask about elimination. we heard over the weekend that he basically got in contact with banks to rest about liquidity. do you view this as actually the government, the administration, acting as a backstop and you see that as reassuring for markets? or is it more concerning he is asking those questions? simon: relatively be assured. it is not new information we had -- we had the stress tests. banks arethat those prepared to run into crises.

an intensive stress test scenario which reduced capital down to 7.9%. still, sufficient to allow decent lending in the u.s. economy, so in that regard, steven mnuchin put no new information into the market. no one has anticipated the change and economic circumstances have impaired the balance sheets of the major lenders, so you know, look, no new information, but the fact that he is doing it, clearly he is concerned. the market is concerned the turbulence will spill into the real economy. nejra: i have a chart showing that friday saw the highest equity volume since president trump's election. i got the vix on there as well. we all know about the vix hitting 30 last week. said, i do want to point out that since president got elected, the s&p 500 has gained double digits. we have seen the recent market from oil -- turmoil. is it posing a risk to the u.s. economy? simon: not right now.

i think real economic conditions are up against some really tough comps. it is coordinated global expansion. everyone went into the lead start of 2018 off the back of very decent growth figures, almost around the world. industrial comps, economic comps, were always going to be difficult, but there is a smart's board of economic news, general mattis's the parts are, jerome powell -- departure, jerome powell. positioning ahead of trading in the holiday period is the type of thing that will be driving matt chart that you have got showing the amount of trading people take -- driving that chart that you have got, showing the amount of trading. nejra: you mentioned there, and of course, we hear it will go past christmas. a lot of the stuff i have been hearing over the weekend suggests it is not the shutdown itself that is concerning

investors, but all the implications. we know what happened in 2011. could we see a repeat of that scenario? simon: absolutely. there's a lot of brings mentioned here. there is saying economic -- sane economic response and difficult politics on capitol hill. it is starting to impinge on markets on the real economy and both sides step back. or do they take a purely political standpoint to shift to 2020? you start to see collateral damage in markets across the economy from a protracted, you know, standoff, which does not do anybody any favors. nejra: simon french will stay with us. and coming up, crude climbed as opec hints it could restrict output even further. the cartel is in a whatever it takes moment to prop up prices. when you're traveling to work, toan into bloomberg --

an into bloomberg radio on your digitalevice or the be -- radio in the dab digital radio in the london area. this is bloomberg. ♪

take a look at your markets today. we saw the s&p 500 have its worst week since 2011, last week closing down more than 2% on friday. the nasdaq falling into a bear market. you can see the future is actually pointing higher so we might get a bounceback. on vix closed above 30 friday. that is notable. we are seeing bloomberg dollar weakness. a lot of news flow coming out of the white house. news that perhaps bloomberg broke this. of course, president trump be talking about discussing firing jerome powell. steven mnuchin talking to banks and of course the shutdown continues to weigh on markets. weakness in asia. japan is closed which means treasuries are not trading either, but the 10 year yield

closed below 280. ftse futures lower, too. let's get a business flash in hong kong with debra mao. jd.com has avoided the biggest crisis in its history as u.s. prosecutors decided not to charge the founder over an alleged rape. authorities in minneapolis say there is not enough evidence to prove a crime. this and the month-long probe that made global headlines and cast doubts over the leadership of the number two online retailer. bmw is facing a criminal probe and south korea after investigators concluded the company concealed fire hazards and delayed recall. german carmaker is being fined almost $10 million for an allegedly -- response to engine

fires and south korea. the carmaker deliberately tried to cover up technical issues and moved too slowly after 40 fires, they say. the korean branch has apologized and said it will cooperate with ongoing investigations. bt is to remove huawei gear out of the core communications network of the police force and other emergencies services. had inherited equipment made by the chinese company after the 2016 acquisition of a mobile carrier, ee, which used huawei gear throughout its systems. and that's your bloomberg business flash. mao in hong kong. thank you so much. opec has not even started implementing it new six-month agreement -- its new six-month agreement. members responsible have pledged to extend or even deepen it.

oil is gaining after declining 11%, the most since january 2016. let's get more with mohammed 30 in dubai, -- mohammed in dubai. on itss delivered previous promise to trim supply, so tell me why hasn't the latest cut agreement boosted prices? good to see you. >> yes, good morning. it seems to me the trading community does not really think will,he opec reductions supply, it just will not be enough. if the outlook changes in 2019 and there is more u.s. shale coming online, opec has to do more, and that is why yesterday, the ministers from the uae, from s, have allther committed to both extending the cuts in 2019 and even hinting that they would go a little bit deeper. whatever it takes to balance

supply and demand and prop up prices. mohammed, yes, so tell me how likely it is that the deeper reduction is on the cards and whether perpetual market intervention risks fracturing the group? mohammed: see, this is the key question may have because from now, opec is on the record saying russia wanted to have the cuts last for six months only and that is why the agreement for next year will last until the end of june, whereas the opec members wanted to continue it. the russians have a different outlook for oil prices, and they may be perhaps don't want to keep trimming their output and allowing u.s. shale to come back into the market. they are kind of in a bind, and it will be difficult for them to balance,to come in and cut it back a little bit to allow the u.s. shale pack to expand.

nejra: thank you so much, mohammed sergie, joining us from dubai on the latest from opec and the prospect of deepening cuts. that is bloomberg's middle east editor. still with us. simon, i would like to put the first question i asked to mohammed to you in terms of why the latest cut agreement has not boosted prices. what are the dynamics in the oil market? we know it is largely to do with shale, but what is your take on this? is.n: i am not sure it shale is a constant backdrop on the supply side, but what strikes me, i think, as different, this time, from the last time we saw this scale in production, is more uncertainty of the state of the demand side on the global economy, and the kind of drought we will get from opec and non-opec supply. and i think there is an a lot of uncertainty we were talking about before the break around the number of uncertainties both political and economic heading into 20.

therefore, how do you price that? what will be the demand side impact? therefore, for me, that is the thing that drove oil prices materially lower last week. until we get clarity over that, i think they will remain in depression because of uncertainty over global demand. nejra: you make a good point. i said this myself that some of it is the risk off sentiment, concerns about global growth and demand, that are weighing on the oil price thus far. going to weigh on prices from here, what more can opec actually due to help lift prices, if anything? it ised: to some extent, always the combination of supply and demand, so it is not like they are impotent to influence it from the supply side, but i don't think investors are particularly noticing what is going on, and therefore, you have the opec agreement. yes, there are continued noises around further cuts, but you also have to think of the geopolitical headlines we have had on the supply side, particularly the jamal khashoggi

affair and saudi arabia. president trump has been vocal that he wants lower oil prices. he is taking a more active role in trying to influence, you know, markets, you know, fundamentals, of which the oil price is one of them. and therefore, will the saudi's, given the pressure from donald supply?ant to cut i think it is right the market participants are skeptical. nejra: i am looking at a chart here that is not going to be shown on tv but just of the u.s. count steadily rising, since the start of this year. that shale element is playing into this. with where oil prices are at the moment, is this a positive for global growth, u.s. growth, simon? i ask a lot of people this and there is a certain circularity to the argument. where do you stand right now? mohammed: this is the crucial element, -- simon: this is the crucial element, with a lag.

-- from lower energy prices and therefore to expect an instantaneous response, what you get much quicker is the capex pare back muting economic demand, but then you see the pickup as matt passes through into energy costs so it is -- that passes through into energy costs. expect it towards the end of 2019 if these prices are sustained. nejra: what about the fact that we are seeing central banks pulling away the liquidity no is?andhow gradual it we have got lower oil prices at the same time. it does not really help their case, does it? itammed: with the honor roll -- honorable exception of the federal reserve, most are not hitting their inflation targets. you have to start asking about the credibility, particularly the ecb and bank of japan. it is paring back quantitative

easing, signaling there may be some normalization in the second half, although we don't think it will be until the second half of 2020. are those inflation target of credible? i would argue they are not. nejra: simon french stays with us. here is a look at what you should be watching this week. u.s. and european markets are closed for holiday. on 16, north and south korea hold a joint groundbreaking ceremony for the restoration of railings severed 65 years ago. an update on the u.s. economy. it is projected to have narrowed to $75 billion in november. that follows october deficits with a second straight monthly record. up next, the political storm routing in europe from the volatile brexit negotiations to the yellow vest protests. how are these spots impacting the region's growth? we will answer these and other questions, next. to into bloomberg radio -- tune

into bloomberg radio, dab digital radio in the london area. this is bloomberg. ♪

how lowunlikely that would get fired. that would be unprecedented. nothing is off the table with bemp, but it would unprecedented and it would have severely negative implications because one would always question the fed. the -- may take over the house, we had a glimpse of what that relationship would be like. they would not want to look at him and the eye in the oval office. fromgoing to get uglier now on and that leads us to some extent into uncharted territory. on a fundamental basis, markets are looking at value. on a political risk basis, i don't know. >> we have risk for meeting

every corner of the globe. this malaise in washington and to the negativity. are all about perception versus reality, and i think perception is so negative that it is hard to shift investor sentiment into a positive bias. >> there is a disconnect between the market and the fed, and i worryingt has been the point. not so much to do with president trump and steven mnuchin calling the bank to assure and ask them whether everything is ok. obviously, not everything is ok. nejra: those were some of our guests today on how the uncertainty in the u.s. political system will affect markets. let's get the bloomberg first word news with desley humphrey in dubai. >> the white house has moved to try and calm the markets after the recent streak of losses. steven mnuchin spoke to the six largest your spain's over the weekend and was told they --

largest banks over the weekend. safe at the fed after reports president trump has discussed firing him. the shutdown in washington is now expected to drag into the new year with republicans and democrats at odds over president trump's order wall -- border wall. mick milani said they are awaiting a counter offer to the president's demand for $5 billion with no vote expected before the end of the week. top democrats say they have no intention of paying up. >> $5 billion is a lot of money. -- of people nower known killed is 281 with more than 1000 injured and dozens more unaccounted for. most of the victims were tourist killed by two giant waves late on saturday, thought to have been triggered by an election of the nearby anak krakatau volcano. the disaster comes ahead of the peak holiday season and may hurt the tourism industry and put further pressure on the repeal.

hasy's populist government pushed its revised budget bill through the senate. the government held a confidence vote, which is almost used to ensure swift approval. it now needs the measure to pass the lower house to meet an end of year deadline. politicians accused the government of rummy through the legislation with last-minute changes. through -- ramming through the legislation with last-minute changes. the times newspaper says sussex police is leaving open the possibility that sightings may have been mistaken. a couple who were arrested after the incident have been released without charge. 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. i am desley humphrey. this is bloomberg. in dubai,ley humphrey

thank you so much. let's check in on the markets around the world. joining us from our bloomberg harder in mumbai is -- and here is dani burger. asian trading a little bit mixed today. japan is closed. a beardaq slipping into market. what is the picture looking like an indian markets? -- in indian markets? >> we were fearing the worst would be true for india. we did not start off all that poorly. we started off very flat. we are in the red. thisnk india is handling situation very well. the currency and bond markets have not gyrated too much. 70.19 or 70.18 or thereabouts. their markets are taking it very well. we are a bit decoupled from the markets on the last few days. that is not that bad. almost everything else looks reasonably blessed right now.

seasons greetings to all of you. nejra: thank you, the raw shot -- niraj. what is risk appetite showing? dani: risk appetite is on the decline. this is a holiday shortened week, but we are seeing the ratio in greece. it had the largest increase over here since 2016. the reason that this is closely looked at is the haven asset. oil tells us something about industrial output, so over here, this is the fed. supply come up little -- supply, political angst. we cannot talk about deteriorating sentiment without talking about what happened in u.s. stocks. here we have the monthly change for the s&p 500. this month headed to a more than 12% decline. if you put october in there, this is 5 trillion wiped from the us stocks. a lot of concern building today that we might get closer to the

bear market. we are at 24.16 on the s&p 500. 23.44 is what we need. today.lume look for a lot of volatility, narrow. jra.k you -- neij nejra: thank you so much. the fed hikes for times and the ecb ended its flagship bond buying program. storms swirling, what is the outlook for normalization in 2019? manager told us what he thought needed to happen in monetary policy moving forward. >> we need the new model. we don't want to forget what we learned and what worked in the past. i think that that is the issue

in terms of the monetary policy implementation. on the to keep an eye final objective for monetary policy. also financial stability. there are traditional objectives on a monetary policy and financial stability. it needs to be rebalance out. all, it is aof really great pleasure to speak to you. almost 10 years since central banks started flashing interest rates -- slashing interest rates and buying bonds. are you worried that central banks will not have the firepower ? well -- firepower next time? agustin: it is something many's to be taken into account, in particular some countries will need to be careful about that. now, central banks will be able to use that.

as a matter of fact, in the last 10 years, they have been increased. we have instruments that we did not have before or we thought we did not have. i think what right now what would be important is to move forward on normalization so if push comes to shove in the , monetary policy action would be necessary in case of a recession. central banks will have space to act. >> i understand, but how will they be able to fight the next recession if they do not have the bazooka? do they need to normalize quicker than the market is expecting them to? well, again, i do not see why central banks would not be able to do whatever they need to do. for example, it is very easy to implement, and there is no restriction on how these could be used in case it's necessary.

of course, right now, we are in the position where it would be adequate to contain what has been done in the past, to bring it back to more normal circumstances so that if we have really a recession in the future and there needs to be action by the central banks, there would be enough space to do so. nejra: that was agustin carstens , speaking to francine lacqua. we have recently seen a mixed picture for economic growth. the u.k. posted positive growth in line with expectations. france sides final reading revised downwards. what germany shrank for the first time since 2015 on weak exports and a tanking auto sector. is europe still on the right track? or could we see further weakness next year? for more, we are by a jamie murray and simon french is still with us. jamie, good to have you with us. let me put the question to you

this way. is the eurozone economy weaker than the ecb things? jamie: i think so. i think the forecast is hopelessly optimistic. it is researching backup 2.5%. i think those hopes can be dashed. does that mean they are not going to lift rates? obviously not. the fact is that which growth is picking up substantially and even the growth is going to slow , they have come a long way. a lot of slack has been absorbed. unemployment is that the precrisis levels. focusing purely on wages, which they have of course, there is a case for listing rates later in 2019. nejra: is 2019 going to be a year that they start to fade away? risk here,ink the if you take france for example, the risk here is that macron has

done some giveaways and there are household incomes in france. the risk is he has not done enough. once that wears off the thinking, then actually, you see disquiet returning. nejra: simon? simon: one of the things we have not mentioned yet this morning as the trade war and the materiality of the trade war to the eurozone outlook, because you look at the composition of gdp, the eurozone is amongst the developed world the most exposed to a slowdown in global trade volume. jamie,utely agree with there is light on the horizon in terms of the ability of wages to coremit through to inflation, which has been set for four years to five years in the eurozone. you have to way that against the that against the fact that heightened risks may take the significant edge off and pare back some of the more

bullish indicators in the labor market. nejra: i want to talk about the b word. brexit. 2019ave written a great outlook all about the u.k., and i really enjoyed reading it. i have a chart which is sort of a version for the chart showing the ftse 100 at its cheapest in five years. some say it could be poised for a re-rating. what is what you make? simon: it is very cheap. earnings2019 comparisons were a boy if you conclude that the political risk, we get more clarity on that as we had to 2019. we see some mean reversion in terms of the long-term valuation, but also the spread to other markets, so andss both longitudinally horizontally, you go this looks like a cheap market, and within that, particularly in a global equity market, where

opportunities are fairly rare, the u.k. looks like a special situation. nejra: perhaps they are cheap for a reason. let me put the question to you this way. the risks that are keeping investors away from u.k. equities, do you see them dissipating in 2019? simon: we focus on two sets of political risk. we could have a disorderly brexit as early as the 29th of march and you could have a change of political leadership in the u.k. and the advent of a labor led government. we think that those outcomes, while possible, are fairly unlikely, and we believe the risk. being applied is too much. if you agree with us that we inl get a withdrawal deal some thought possibly dissimilar from those said to be voted on, and if you think that the barriers to the government are quite formidable, then some of the risk premium should start to remove if we get the opportunity. nejra: what sort of forecast are you putting for u.k. growth at bloomberg economics? thing i think the big

this year has been parliament demonstrating there is no appetite for the deal, and that is crucial because we think that without thee.u. deal would cost 11% of gdp per year by 2030, so that would mark really the changes in u.k. prospects, so the deal was on the table and that is a pretty big loss. it does not make up for much of the benefits of the e.u. we are looking at 4% lower. nejra: the point to balance sheets in the u k, household balance sheets, as the big issue in looking ahead to the u.k. outlook. is that something likely to be fixed? talking about the savings ratio in the u.k. being down at the lowest level. when you get a rebounded economic activity driving up real wage growth, we see a lot of that being saved rather than spend. bounceback see a big

and growth. one of the things, however, just to caution on the new deal ofect of brexit is a lot what is publicly being stated from the u.k. government and european union is not consistent. they may warrant about a lack of cooperation. there will be risks. monetary policy stimulus. the type of things won't be spoken about now but will have buffer and a really disorderly brexit. nejra: great conversation. thank you so much. jamie murray, simon french. he stays with us. coming up, china pledges more stimulus and 2019 as the world's second-largest economy grapples with a slowdown that is yet to show signs of ending. this is bloomberg. ♪

nejra: let's get a check on the markets. s&p 500 heading for its worst quarter since 2008. if we take a look at ftse futures, they are lower but could see a bounceback in the u.s. session, and that is where the s&p 500 closed on friday. let's check in on what is trending across the bloomberg universe. an attempt to reduce carbon emissions. to make allnt wants its public transport free of charge. a new legal filing appears to ask the supreme court to intervene for the first time in robert mueller's investigation into the 2016 election. our most read stories. opec members are in whatever it takes mode to prop up oil prices. president trump and jim mattis is termed two months earlier than planned. mnuchin caught executives following last week's heavy losses in the stock market. let's turn to m&a and

dealmaker's are bracing for a slower 2019, predicting that dormy equity markets intensifying political uncertainty and weakening economic conditions could call a in transactions. the fourth quarter traditionally the strongest of the year is on track to become the worst since 2013. joining us now is bloomberg's m&a reporter. great to have you with us. thanks for joining us so early on christmas eve. how bad could it get in 2019? >> the thing to keep in mind is the last quarter was really bad but this is the third busiest year for m&a ever behind 2007 and 2013, and we have seen some of the things slow down, but if you look at the factors driving m&a, whether that is technological a disruption, they were up 80% compared with -- i mean you're looking at smaller numbers.

that is still going to continue, right? conglomeratebig structures that are looking at breaking themselves up, where activists are pushing for change. you have private equity's with a lot of money. it looks like there will be these, too. maybe just not the very big deals. because the amount of times this year we have had people say oh to do a-- we don't want deal because we are scared the regulatory approvals will take a lot longer for us, so the megadeals might slow down. nejra: how is the equity market performance playing into the m&a volumes? ruth: i have come on the show so many times and talked about some of the ipo's that failed so badly. the s&p is down 15%. if you feel like a high-yield market and the corporate leverage loan markets are not there for you to finance the transaction, and you want to do a stock deal and one company stock is up 15% and the other is

down 15%, how do you negotiate those transactions? you are just saying we don't want to get that uncertainty onto our balance sheets now. if we think a deal is not going to get done and we don't know how the stock is going to perform over the next six months, we have no idea. we would rather wait and doing it. nejra: the second-biggest m&a market in the world. how could brexit impact that? ruth: we are already seeing some of that. we had earlier this year field had made a bit for the u.k. property interior and they had to get out of that. one of the issues. if you are a global acquirer now and you are looking at a u.k. company and you are thinking i do not know how to price in this risk, you think why not hold out? we have another situation of the u.k. company, private equity interested, and they are just going to wait. they are holding off into 2019.

we are told the first quarter is going to be very quiet. and maybe, if there is some certainty, and who knows how that is going to play out? nejra: maybe not so quiet. reese david, reporter for markers -- ruth david. news breaking right now. cash tendernning a offer for oslo vps. they trade stocks, bonds, options, mutual funds. euronext is seeking to launch this all caps offer at -- cash offer at 145 the region krona per ship -- norwegian krone per share. is planning a 625 million euro offer for oslo vps.s they have approached the board of directors to seek the outstanding shares. bloomberg intelligence analysis

gives us their take on the biggest themes that will dominate the asian markets in 2019. today, china's slowing economy. i think that is the story of 2019. the chinese slowdown getting entrenched would be very negative for shipping, whether it is crude oil -- there is that naming chinese consumption slowdown. you know, how much of a slowdown? we have seen things turn a bit with the truth going on and potentially, as we see and look into macau's business in the future, there should be some growth in the fact that there is that mass-market segment really growing up and ramping up. will be impacted by the

economic slowdown of china as more than 50% of metal demand is coming from infrastructure. speaking of metals, we think the demand slowdown is coming from the early metals such as steel, iron ore, and moving on to the late cycle commodity. we did believe that luxury profit gains will slow and 2019. we expect competition to actually increase in china. especially as luxury good brands cut prices after china lowered import taxes for merchandise into 2019. nejra: simon french, chief economist, is still with us. i want to bring you some news we had this morning. china announcing another round of tariff cuts. more than 700 goods from january 1 as part of its effort to open up the economy, lower costs for domestic consumers.

you have seen trade risks as one of the biggest risks in 2019. do you see any signs of hope that the risks might be mitigated by china's actions in the past couple of weeks? simon: there are a couple of signals out that china are responsive to the pressure being put on them by the u.s.. that this iseen much bigger than the two characters meeting this. this is an economic cold war that has developed and it is the battle effectively to design regulatory systems, political systems, and the economic language for the next few decades. nejra: thank you so much for joining us, simon french. we will have lots more to talk about in 2019. chief economist at panmure gordon. he will continue the conversation at 7:30 a.m. u.k. time. mnuchin and the market. we will talk about all the u.s.

political news flow over the weekend and its potential impact across u.s. markets. this is bloomberg. ♪ berg. ♪

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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. nejra: good morning from bloomberg's european headquarters in the city of london. top stories.ay's nightmare before christmas. stocks tumble as the slip into a bear market. the longest bull run in history is on life support. the u.s. treasury secretary attempt to quash concerns that jay powell be ousted but also fresh doubts about liquidity squeeze. the u.s. government shutdown could last into january as the debate continues over trump's demand for a wall.

europe."o "daybreak some markets are closed because it is christmas eve. we have futures pointing lower. 600 close ofoxx flats are not showing any direction in terms of ending the week. lower by moreosed than 2% and had its worst week since 2011 in the u.s. benchmark is heading for the worst quarter since 2008. the vix closing above 30 on friday. the nasdaq fallen into a bear market but these futures pointing a little higher. of reliefet a touch in today's session but the trend has been down for the past couple of months. futures aree you as

getting going in the bond market now. we haven't seen the trading in treasuries with japan markets closed. perhaps like he could edge lower or perhaps not go anywhere too fast to what is happening in terms of bond futures. we did see yields move higher by friday and points on judging by these futures, things are actually moving right now. a trend, atseen least at the start of trading today in the european bond market which is opening up right now. let's check on the markets in asia. our reporter in hong kong has more. a little lack>> of direction today. not a whole lot of conviction in these markets. we are well below the session for asian stocks. of the reform

measures we got on friday. we are seeing reports that china is drafting plans to end these force technology transfers here. as you mentioned, more than 100 goods would be having lowered import taxes starting on january 1. and removing the export tariffs as well. this caught -- this stock is down close to 6%. the founder is quitting as ceo. the second cofounder to leave. gmu surges 23% on news. bioscience company surging 22%, the second-best major ipo in hong kong this year. they do so much.

let's get the first word news with deadly. -- desley. desley: the white house is moved to try to calm the markets. steve mnuchin spoke to the six largest u.s. banks over the weekend and was told they have additional liquidity for lending to consumers. financialsured markets that palace safe at the fed after reports that present trumpa consider firing him. shutdown in washington is now expected to drag into the new year with republicans and democrats at odds over president trump's border wall. acting white house chief of staff says administration is weighing a counter offer. the presence demand is for $5 billion. no vote is expected before the end of the week. top democrat senate have no intention of paying up. >> $5 billion is a lot of money. children0,000 attending head start.

it's 200 million meals a day for seniors. if something were just not going to do. desley: jim mattis when i leave the job two months earlier with president trump and his top deputy from january 1. tweet andounced in a followed bipartisan criticism of the president's sudden change of course on syria and afghanistan. patrick shanahan joined administration last year. a number of people now known to be killed in the nation's 281 withas risen to more than a thousand entered and dozens more unaccounted for. most were tourists killed by giant waves thought to be triggered by a nearby russian. -- nearby eruption. it puts further pressure on repairs.

allies of theresa may are reported to be making plans that would keep her in office for more than two years after brexit. ,ccording to the sunday times before being replaced as conservative leader, may survived an attempt by colleagues ouster earlier this month. hibor than 2700 journalists and analysts in more than 120 countries, this is bloomberg. nejra: thank you. shutdown is expected to drag into the new year with republicans and democrats at odds over the border wall. officials trying to calm the market by saying jay powell's job is safe. join us now is bloomberg's capping hunter. shutdownk what the first.

is the biggest question and concern here what the wrangling could mean for the debt ceiling debate in march? i think absolutely, it calls into question. reallyseeing democrats flexing their muscles year. that theyy indicating are going to be college and other new power in washington and that they're going to do it they can to make trump try to play ball with them. i think republicans have missed opportunity here because they have allowed the government to and i think it's possible it would reopen until on thets come into power third in the house and likely pass legislation without the funding. nejra: i want to talk about his story about president potentially having conversations to fire jerome powell.

there would be a lot of bearish that happening. >> there would indeed and there's actually some question if he would have the power to do that. the broader concern is what the effect is going to be potentially on markets if the story continues to be out there that folks are concerned that term could take that action. i think the feeling would be that the market impacts would be very significant. i think we are seeing another danger that steven mnuchin said yesterday that he had attempted to reassure markets not just that trump wasn't going to fire powell but that there was no problem with liquidity in the market. in doing that, he raised this whole other systemic problem that no one was talking about. inhink against icy there terms of every little thing that is said can have a market impact and we saw example of that over the weekend. i think would have seen a significant impact, for sure.

thank you so much. it's been a year of big reversals for equities. stocks went from hitting all-time highs to closing out their worst week in over seven years on friday. bear market. in a look at 2019 have in store for investors? so great to have you with us. you could join us here on set. talk about a couple of things we brought up there. futures are reaching higher. something ofgests shrugging off the idea being ousted. i think it's hard to

summing today because they lack of liquidity on christmas eve. it's possible that mnuchin came out and reassure the markets and it would be incredibly bad if trump when this direction. an emerging market everyone be up and arms about it. healthily it was a flash in the pan and we will hear no more about it. nejra: steve mnuchin came out to and talked about liquidity and market stability. would you as an investor show reassurance to markets and yes we seen a big drawdown in u.s. equities but it's not as bad as some other moments in the past. katherine: it was quite a

surprising move. i was asking myself what is going on here. seen a lot of volatility. where this and changes in market structure, whether the environment is different, whether that could cause volatility. this shows the vix which closed above 30 on friday. it's also showing the trading of volumes. sinceghest equity volume president trump's election. in one of your outlook to talk about the fact that there is plenty of complacency. this is the danger of

looking at an outlook of more than a week ago. a week is a long time and markets. it's been a very unusual december. i think we talk about complacency, it's a broader conversation of balance sheets, about power heading into 2019. we have a lot of investors that are not seen a drawdown like this throughout their careers. on the dayy career that fannie and freddie went under in 2008. i had a very steep learning curve. a lot of people have not seen this kind of volatility or howdown in the markets and to position for the environment and how to start thinking about things like balance sheets again is going to be new territory for some people. you think it has a lot further to go then before buyers are back in the market. i would you be positioning? katherine: we think is going to

be another year of high volatility and probably a very choppy but broadly low return environment for equities. heading into year-end are seeing some deeper portfolios and people taking positions off the table. maybe fewer take a breather of the christmas. and have clear heads and 2019. we are seeing an attractive acted -- opportunity in some pockets. undervalued, oversold stocks. what sort of areas would you see those stocks in? we are looking for ebenezer we have conviction in the long-term durability and the resilience. and particularly companies that can contest well with rising rates, rising inflation environments. looking for rocksolid balance sheets. of there i think areas market where there has been indiscriminate selling.

we've seen some very attractive valuations. aboutust very clear choosing your battles in a falling to value traps. nejra: on the flipside, you say you're generally cautious with companies that have high debt levels and can't raise prices from higher costs. you say telecoms is the best example. telecoms is all is osborne a challenging part of the market. bit of agh it seemed a bid at the moment because it's more defensive, it is historically an area where it's very hard to get consumers to pay. every year were expecting more and more in our bills and we are expecting more and more data. it's also environment with is quite a lot of competition. it's hard to get that kind of pricing through. nejra: we will talk more in a moment. catherine davis stays with us.

sectors of the stoxx 600 have phone is here for the first time in a decade. is there anywhere left in europe to find refuge? bloomberg radio live on your mobile device or dab digital radio the london area. this is bloomberg. ♪

nejra: 7:18 in london. we are 42 minutes away from the start of cash equity trading. a number of markets will be closed, it is christmas eve. quite a bad week for u.s. markets last week. let's take a look at the picture today. he s&p 500 its worst week since 2011. it's worse quarter since 2008. could get a little bit of a lift in the u.s. session. nasdaq entering a bear market.

seemed a little bit of a missed session in asia. japan is closed. the index looking a little weaker. little political flow out of the u.s. maybe weighing on the dollar. perhaps a little bit more commitment on opec thinking about those cuts. ftse futures looking a little bit lower. let's get the bloomberg business flash. u.k. telecoms company bt will remove equipment from the core communications network having already pulled hear from its own structure. it had inherited commitment -- nick woodman made a chinese company after the acquisition of ee which used chinese technology threat system. bmw's facing a criminal probe and south korea after investigators concluded the company concealed fire hazards.

the german carmakers been fined almost $10 million for an allegedly botched response. the transport ministry says the carmaker deliberately tried to issues andchnical move slowly after about 40 fires earlier this year. branch has apologized and said it will cooperate with an investigation. jd.com has avoided the biggest crisis in its history as u.s. prosecutors decided not to found court charged the founder with rate. and costocal headlines -- cast doubt over the retailer. nejra: does the humphrey in dubai, thank you so much. with a few trading days left, it looks to be the bleakest year in a decade for european equities.

all 19 industry groups in the fallen, thedex has first time it's happened since the financial crisis. what can we expect in 2019? katherine davidson from david duffy -- from schroder investment management is with us. lovel investors have and european equities. is the picture likely to change in 2019? i think the interesting thing is just how attractive valuations have gotten in the european market. them at five-year lows. unlike the u.s. for the earning investment is ill relatively seeing low you are expectations with very little earnings growth. we are fishing for opportunities. there's a lot of potential. you mentioned the u.k. as well.

domestics, we are seeing pockets of opportunity there. it's going to be good business models in the long-term. we talked about u.s. equities in global equities in the things you're looking at our pricing power, strong balance sheets, you keep emphasizing how much balance sheets are important. things in at similar europe and u.k. are there are other dynamics? even though europe has less of an inflationary issued in the u.s. the moment, we are still seeing tightness emerging in some of the markets. and a little bit more wage pressure coming through. balance sheets are always our bread-and-butter when for strong companies. increasinglyng is sustainably managed companies. europe, we aren

seeing this incredibly populist and anticapitalist in some places rhetoric, the importance of businesses that a run for a wider group of stakeholders with a wider sense of responsibility reduces the vulnerability of companies getting caught up in the headlines. what you getting in terms of clients in terms of the sg investing? is it something they want in the dna of the portfolio? katherine: it's becoming a much more sophisticated conversation with investors. a three -- if you using a clients are consultants asking if you are doing est. conversation is how are you doing it. what are you doing different? we have the opposite problem where everyone wants to say they are doing it for what people are actually doing differs significantly.

this is the biggest thing, differentiating between who is doing it properly. nejra: any particular sectors you look at in terms of the sg? sg -- of esg? lends itself naturally to some sectors more easily than others but i think you can have exceptionally run companies in every sector and every market. i want to talk a little bit about high-yield as well and what has been happening in the credit its. you been talking about balance sheets and the importance of that area what have the credit markets been telling you in terms of how you approach equities? katherine: the environment and credit markets is something we are watching closely and we are always looking to learn from our colleagues in the credit markets because you seen this environment in the last few years where earnings have been lowerupported by

refinancing rates, buybacks and if you have less the cognitive -- less accommodative credit markets, it's going to be less of a support for earnings. the tightness in credit markets is something i'm watching very closely. i'm quite concerned about it. companies where we been too complacent about their investment grade. the fallen angels. i've got a chart here showing the high-yield's rants widening the fastest since 2016. it's interesting that you say you are starting to get concerned about some of the investment grade space as well. are you more nervous about the credit markets and equity in the u.s. or europe? u.s. is where we are seeing the greatest tightening to work corporate

seven more reliant on this debt funded buyback activity. around the world, 2019 will be the year of the balance sheet. we have to be much more aware of the risk. maybe some investors have gotten complacent or it's not there will house. but i think is very real possibility that we could see more dividend cuts and into this year, more profit warnings and less support from that refinancing rate. this as we keep having concerns about global liquidity. so much more to discuss with you in 2019. thank you for joining us. the four manager of global international equities at schroders. open" is up next. to bloomberg radio on your mobile device and dab digital in the london area.

it's a busy day in the news flow on christmas eve. this is bloomberg.

matt: this is the european open. i'm matt miller in london. euro points lower after a mixed trading asia following friday's deep losses in the u.s.. germany, the nordics, and switzerland are all close today for the christmas holiday along with much of eastern europe. cash trade less than 30 minutes away.