nejra: good morning from bloomberg's european headquarters. this is bloomberg daybreak: europe and these are today's top stories. wall street whiplash. wall street stocks see their biggest reversal. the s&p's today gains are the largest in three years. america's late session her alex failed to captivate asia -- late session heroics failed to captivate asia. funding for president trump's border wall remains a key impasse. the partial u.s. government shutdown is likely to last until the new year.

welcome to daybreak europe. what a day it was on wall street yesterday. the s&p 500 falling almost 3%. it then reversed to end just slightly in the green. the biggest upward reversal since 2010 for the u.s. equity benchmark. futures not giving a lot of direction. up by 0.1%. nasdaq futures up 0.25%. context, sincee 1990, every comparable reversal came. that is something to think about. we went into a bear market for the euro stoxx 50 yesterday, but stoxx 600 averting that bear market. seems like we could see a bounceback with european equities in two hours time. euro stoxx 50 futures big

overnight in the asian session. upward momentum in the 10 year yield. yesterday we did drop as low as a 275 handle. we are 277 for that 10 year yield. dollar-yen on the back foot, the yen heading for its biggest two-week gain since february. when a bit of yen strength toward this equity market turmoil. weakness in wti yesterday becomes a strength today. the bouncing back of 2.4%. let's check on the markets in asia. good to see you. -- equitiesribed it in asia as limping onward. what does the picture look like? >> limping is the correct word. toward the close for many markets, we do not have any trading in japan on monday. it is a public holiday. the window dressing taking place the last day of the month. down 0.3%.

volumes are ok. we have that year-end in prospect. hang seng, topsy-turvy session. looking at chinese equities, 0.6% up on the csi 300. getting that tailwind out of wall street, that dramatic session we did witness thursday. let's get to some of these companies moving the markets. let's take a look at these equities. losing a very important client, it's online retailer in tokyo. down as much as 12%. retailing, a huge miss on the retail side of things for this company. investors not particularly liking the forward guidance. here we go sinopec. two traders have been suspended. their unit tech division which

traits oil. we are likely to be seeing severe losses. it, result, sinopec feeling 4.9% down. bank of china got the green light to go ahead and fund business in china, getting that clearance as a result. up 0.8%. volumes are sepulchral. back to you in london. nejra: they do so much. -- thank you so much. in today's session we have seen the jgb yield dropped below zero for the first time since 2017. you can see it in negative territory for japan's 10 year yield. those have been moving lower. we have had data out of japan today. not painting a great picture. the factory output dropped again. bloomberg reported unease is

growing at the bank of japan as the oil price has been casting a shadow on prices. let's get the first word news with debra mao. >> the partial u.s. government shutdown that started a week ago looks set to continue into 2019 after house republicans said they did not plan any votes this week. president trump who is demanding $5 billion for a border wall with mexico tweeted that most of the government employees losing pay because of the closure are democrats. hastrump administration granted its first exclusion from tariffs imposed on china for intellectual property violations. the office of the u.s. trade representative approved almost 1000 requests for exclusion covering $34 billion of chinese goods. the 25% import tariffs took effect in july with exclusions retroactive to that date. italy's populist government is racing to push its budget bill

through parliament by the year-end deadline. a controversial tax increase for charities is the latest hurdle to be cleared. hold a newser conte conference today ahead of a lower house vote on the bill tomorrow. if italy misses that deadline, it must use a special procedure to revert back to this year's budget. the $3.2 trillion hedge fund industry is headed for its worst performance since 2011. thefunds closed during first nine months of the year, including those of high-profile managers. facing the challenge industry, the number of closures as well below 2008 record of 1500 liquidations. an explosion at a power plant in queens sent a wave of bright blue light across the skyline last night. the light could be seen from manhattan after 9:00 after a brief electrical fire in astoria.

the unusual sky prompted a wave of commentary on social media. a spokesman for mayor told bloss you tweeting to reassure -- bill de blasio tweeting to reassure people it was not caused by aliens. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. thank you so much. it looked like it was going to ,e a bad day for u.s. stocks but equities rebounded late yesterday, finishing the day in the green. it was the biggest upward reversal for the s&p since 2010. stocks have still had a punishing december. the biggest monthly fall in nearly a decade. joining us now, the senior economist at berenberg and a ioss management editing -- want to start by asking, how much weight you should actually put in these intraday moves in markets during thin liquidity over the holiday. some of the out

superlatives of the moves we have seen, not just overnight in the u.s., but this week. it has been a very volatile time. thine have been describing trading as one reason. some ofd, keep in mind these sessions on wall street have seen a blowout volumes. people we have been talking with today are saying there is one thing everybody can agree on, that this volatility is unusual and is unlikely to continue at this magnitude into the coming year. that said, there's a lot of skittishness about what is behind the declines in the recoveries. obviously there are leadership questions with regard to policy makers in washington that are at play. there are concerns about whether the federal reserve might have

gone too far. there continue to be concerns with a slowing economic growth. volatilityeason for to continue. probably not this magnitude. nejra: the reversal we saw yesterday, the biggest reversal since 2010, i was pointing out that since 1990 every comparable reversal like that came during the 2008 to nine bear market. you have had some calling this a bear market bounce. is there a sense that the bulls are waiting for the true bottom in this equity market before >> that seems in? to be the conventional wisdom. one of the guests on the asia programming earlier today confesses that he is a long-term bull on the u.s. stock market and does think 2019 will be a constructive year. even he, the standard chartered

fellow was saying he is stocked up on cash. staying in very liquid fixed income investments for now. as for the volatility settles down a little bit into next year , he will be looking for opportunities. that kind of represents the view of many, that it would take a brave investor to jump in at this point. nejra: chris, stay with you are -- where you are. i'm going to bring callum pi ckering into it. we got the consumer confidence data. that has been a drop. me don't you will tell focus too much on one data point, but have we got to a point where we should be concerned about how the u.s. consumers going to react? >> we should be looking at u.s. confidence data in general aside from the fiscal stimulus. this whole upswing has been built on confidence.

confidence is in the top 10%. any reason confidence falls, we should start to worry. risksthat is finally the starting to catch up with u.s. consumers after a good 18 months where we have seen european , but u.s.express risk consumers simply enjoy fiscal stimulus. now we may be turning around. the fed begetting concerned? the question i want to post to you is next year we are going to get more frequent news conferences. is this going to allow the fed to assuage the markets more than with less regular press conferences because they will comment on equity markets if that is indeed what we get? >> the guidance will be more important next year sibley for the reason that we are probably only going to get one, possibly two, may be no rate hikes. the market will want to know how the market -- how the fed is reading data.

next year things will start to slow, the fed will have to decide based on that slowdown in the context of where prices are going where it moves interest rates next. they will largely get a hike out of the way, stay in neutral, and go by the data. thea: you are thinking market is underpricing where the fed goes because we do not have even one rate hike and markets are pricing a cut for 2020. >> we will get one hike in the market will pause. we will start to see price pressure in the u.s. economy as growth slows because the u.s. erodes more faster. that is a difficult context for central banks. you have rising wages and big question marks asked when the next downturn comes. nejra: chris, i want your cross asset perspective. we have seen some of this malaise in the equity markets feedthrough to other assets. what correlations have you been seeing?

treasuries have benefited this quarter. belowe come way down from low 3% yield on the 10 year. we have seen the dollar come off a little bit as well. to be honest, most of the volatility has been in stocks. investment grade bonds spreads have widened out. there are still only the widest since 2016. we are not seeing the stress we are seeing in equities. going back to your earlier point pressthe opportunity for conferences to assuage markets, one ingredient in the volatility this quarter has been ascribed to chairman powell's communication challenges, to be honest. it is not necessarily clear that having him in front of the cameras more often will be a good thing.

keep in mind that in early october when he said we are a long way from neutral, that kind of coincided with the initial selloff this quarter in stocks. obviously after the press briefing following the fomc meeting the other day, investors did not take well to his comment is that the balance sheet is on autopilot. press conference is coming more often, not necessarily a constructive development for markets depending upon how chairman powell handles this. nejra: that is a fair point in a good one. kallum, final question to you. have been thes best place to hide in 2018 for talking about that outperforming bonds backed by loans like auto and credit card debt. we have talked a lot about corporate credit on this show. from an economist perspective,

are you more confident in the ability of u.s. consumers or corporate to service their debt right now? >> it is true consumer debt has fallen, whereas corporate debt has increased. you are not going to see any risks vis-a-vis interest rates. i would expect more pressure on the corporate side than the consumer side, but i don't think we are there yet. nejra: kallum pickering from berenberg stays with us. our cross asset managing editor in tokyo, think you so much. sliding into 2019, the u.s. shutdown is largely to continue as little progress is made. when you are traveling to work, tune in to bloomberg radio. this is bloomberg. ♪

nejra: yesterday was the best upward reversal since 2010 for

the s&p. at one point it was down almost 3% but ended in the green. futures point to a lower open today.the msci asia-pacific index higher overall , but a little bit of a music rally in asia -- muted rally. dollar-yen on the back foot again. it has been like that for several sessions. the yen headed for its best month since january. backigher today bouncing up 2.4% but set for its worst year since 2015. the 10 year yield moves higher. the euro stoxx 50 went into a bear market in yesterday's session. it looks like we could bounce back at today's european equity market open. let's get the bloomberg business flash. a rough year been for blackrock shareholders as asset managers had for their worst decline in a decade. the company's shares have fallen almost 25% this year with investors cashing out or staying on the sidelines.

blackrock is still better off than many of its peers. fund companies and custodian banks has plunged as stock market volatility climbs to the highest in three years. u.s. cannabis retailer is planning to launch a hostile takeover bid for a producer. groweradian marijuana would be valued at $2.1 billion. earlier this month the canadian company saw its share price in twohouse in -- halve days. aphria denies wrongdoing. plan for horizontal viewing goes sideways. -- it sparked a brush of complaints and the app reverted to its original feature

saying a small test went wide by accident. the partial u.s. government shutdown will most likely continue into 2019. that is after house republicans said they did not plan to schedule any votes today. there was no sign of progress toward a plan to fund the nine government departments that close after funding ran out a week ago. our senior international editor joins us from hong kong. good to see you as always. is there any likelihood of a revolution -- a resolution in the coming days? >> it is not looking hopeful. there have not been any votes scheduled for the rest of this week or early next week. president trump has continued to stand by his demand for $5 billion for that wall on the u.s. border with mexico. there does not really seem to be a path at this point for there to be a resolution anytime soon.

it looks like this will go into 2019. 2019, if it does go into is it going to be even more difficult to actually reach a compromise as we go into next year with the democrats in the house? >> democrats at this point are saying they do not want compromise, they do not see there being any number they want to have -- and the amount for that wall. however, the democrats will take over the house of representatives on january 3 and they may be in more of a position to bargain given that they will likely want to move on with their priorities. the senate has not at this point said they will vote until the house democrats and democrats in general can reach a deal with

president trump. vice president pence had put forward a proposal to the senate democrats, but they have rejected it. perhaps there will be some movement once the new year begins and the house republicans -- the house democrats want to move forward with their agenda. at this point there does not seem to be anything on the table as a copper must solution. -- compromise solution. onra: there is a hash tag twitter. have there been other visible concrete effects of the shutdown? >> it does not appear to have affected the markets. economic effects would take longer to show up, but we have locations of the shutdown. up home sales are being held because there has not been flood insurance issued by fema, part

of the department of homeland security. -- obviously national parks are either shuttered or have limited availability, which can affect tourism at the holiday season. several workers will not get there january paycheck if this continues much longer. that could have economic impact. nejra: thank you so much. jodi schneider in hong kong. kallum pickering is still with us. do you see this having any meaningful impact on the economy given the context of everything happening in markets? >> you can live with this in the u.s. and europe but it adds to the climate of risk. we are creeping back into the age of caution, which was the period from the financial crisis right through 2015 where we had to deal with lots of worry.

there was not much energy in the economy. that is where we are going now. it is another risk which will sap energy and things will end up being quite flat into next year as a result. nejra: what impact does that have on the dollar? often when we have seen risk off the dollar has gained. today the dollar is weaker. does this have power to weaken the dollar? >> that is a good question. everything is on a relative basis. if the risks fade and the risks build in the u.s., you will probably find investors come out of perceived safe u.s. assets on the back of fiscal stimulus into europe, into asia. that will lead to a weakening of the dollar. generally speaking, you are right. when we are in risk on mode, the dollar weakens. when we are in risk off mode, money flows into the u.s.. probably a little weakening of the dollar heading into next year. nejra: what about in terms of treasury yields?

we keep talking about them falling. i was looking at a chart yesterday and saw where we were before president trump came to office. we are still materially higher from their. we are on a 2.78 handle right now. is the directionality high for you? >> we should see yields creep up. we should see rising prices. central banks will still have to add a few more interest rate hikes. long-term bond yields do not price enough nominal gdp growth. if we go into a little risk off mode, money flows into government bonds. yields could come down in the near-term. nejra: kallum pickering stays with us. carmakers have been the second worst performing sector thanks to a barrage of headwinds. we will bring you that next. tune in to bloomberg radio live on your mobile devices or dab

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that's how xfinity makes tv... simple. easy. awesome. nejra: let's get a look at the world map. in theending the week green on the msci asia-pacific index. a muted gain compared to yesterday and a mixed picture. weakness in japan, strength in china. in s&p 500 yesterday ended the green after it dropped almost 3%. let's check on the markets around the world. joining us from our bloomberg partner in mumbai, and here in london. the effect of the markets rally rubbing off a little on asian markets. how has it rubbed off on the

indian markets tend the week? -- to end the week? >> pretty good. we are a percent higher despite the corrections the happened on tuesday when markets looked set to end the game with a 1% uptick . that is not bad considering the week. despite the turmoil in the the currencys, strengthen the bid as well above 70 to the dollar. the bond has been stable. options.es and if you just scan the nifty 50 for the gains and the losers, all the others are in the green. a good start.

i think markets are doing reasonably ok. danny, what are you looking at? >> i wanted to concentrate on the more volatile of china and japan, and that is japan. we are seeing losses today. 60 day volatility on the index has now reached its highest level since 2016. look how the end of the year has shot up. the blue line is atf protection, demand. that is not keeping up with volatility. we have seen a bit of a downtick in that. this might be less traders saying there might be more volatility in the new year. protection has paid off. they have seen rallies wrapped up for japan's index in the bear market. they are taking money off the table. we have to talk about the whipsaw session in the u.s.. part of what that has done is move around fed funds futures rates.

2020 it isat january almost in line with the effective fund rate. just three bits above. not only are traders no longer seeing a rate hike in 2020, the idea of a cut is now more of a 50% chance the fed actually cuts in 2020. stocks playing into that as well as concerns about global growth. nejra: thank you so much. great to have you with us as always. now let's get the bloomberg first word news with debra mao in hong kong. the partial u.s. government shutdown that started a week ago looks set to continue into 2019. house republicans said they did not plan any votes this week. president trump, who is demanding $5 billion for a border wall with mexico tweeted that most government employees losing pay because of the closure are democrat.

the trump administration has granted its first exclusion from tariffs imposed on china for intellectual property violations. the office of the u.s. trade representative approved 1000 requests for exclusions covering $34 billion of chinese goods. the import tariffs took effect in july with exclusions retroactive to that date. isly's populist government racing to push its budget through parliament by the year-end deadline. a tax increase for charities is the latest hurdle. prime minister conte holds a news conference later ahead of a lower house vote on the bill tomorrow. if italy misses the deadline it must use a special procedure to revert back to this year's budget. the 3.2 trillion dollar hedge fund industry is headed for its worst performance since 2011. 440 funds closed, including those of high-profile managers. despite the challenges facing the industry, the number of closures is well below its 2008

record of almost 1500 liquidations. an explosion at a power plant in queens cents blight -- bright blue light across the sky line last night. the light could be seen from manhattan after 9:00 p.m. local time after an electrical fire in a story of. -- astoria. a spokesman from mayor bill de blasio tweeted to reassure residents the light was not caused by aliens. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. nejra: thank you so much. here is a look at what you should be watching for. two updates on the spanish economy. a final reading of third-quarter gdp and cpi data for december. italy's prime minister holds an end of the year press conference in room.

that is due to start at 90 5 a.m. u.k. time. finally we will get data from germany. that is 1:00 p.m. u.k. time. the european auto industry has had a top -- a tough 2018 with an uncertain landscape and inexpensive move toward electric vehicles. sector has been the second worst performing in the stoxx 600, losing 29% over the course of the year only ahead of the banking industry. to discuss this, we have kallum pickering, our guest host for the hour. let's also bring in bloomberg intelligence's senior autos analyst. let me start with you, michael. first, the fact that the sector has been flagging since the trade war began, what is the valuation outlook for 2018? >> the valuation outlook is very difficult. the multitude of headwinds which caused the profit warnings this year are likely to push and 2019. on top of that, we have weaker

european and chinese markets. >> there have been a lot of headwinds for the auto industry. what are going to be the key trends for 2019? any relief as long as the trade war continues? >> it is not just the trade war. this is for the transition to electric vehicles. issues are impacting the germans in particular. we have currency headwinds. the combination makes it difficult for these car companies, 2019. >> this is something we have talked about a lot on the show. the difficulty for carmakers in europe. i want to ask you about the trade war and whether you see light at the end of the tunnel for that. are still the biggest downside risk the global growth. in europe we worry about the readmission of the u.s.-european conflict. the trump-juncker truce holds.

mr. trump seems to be distracted by the china issue. if mr. trump gets frustrated with a lack of progress between the u.s. and europe heading into the middle of this year, i would expect a few more tweaks to the to thethat -- tweets effect that all those in europe could come under pressure. probably in europe we will get away with it. china we have seen actually cut tariffs on certain goods. we have had quite a bit of news flow show china relenting a little bit in this standoff with the u.s.. in terms of how executives are planning for 2019, what can they do to offset the impact of something like the trade war given the other challenges you have talked about? >> it is difficult in the short-term. bmw were cities made the u.s.

manufacturing base. productionlked about of suvs into china, having more local production. they are also going to raise their stake in the joint uptures and maybe take that to 75% for 2022 when the rules are relaxed in terms of ownership in china. how is uber's ipo going to affect the landscape? >> 2018 was the year of extremes. you have investment into autonomous driving and traditional automakers had their crisis continue. that's going to be the same theme 2019. investment in uber and lift. the traditional automakers are going to stop -- struggle. nejra: is there anything positive we can draw so that we might see a recovery in the stock prices? are they doomed to lag?

>> you mentioned the trade war's. we have an and to the china tariffs on u.s. made vehicles. that's going to be beneficial to daimler. there is corporate restructuring that can be done. the traditional european auto companies have functions within their businesses but they need to monetize these in the way gm has done it with their autonomous driving unit where they have outside investment from softbank at honda. corporate restructuring could be a positive in 2019. nejra: let me ask you about share buybacks. we have been seeing the u.s. equity market falling. share buybacks have been increasing. we have not seen quite undaunted increase in europe. -- quite an increase in europe. corporate'st

executives see that share buybacks necessarily lift share prices generally, is there more incentive to actually invest in spending -- capex spending? getting to the cycle now where supply is very scarce. unless firms decide to raise prices, their only option to increase production is through extra r&d. situation where there are lots of risks -- did -- odd situation where there are lots of risks. nejra: kallum pickering stays with us. many thanks to the senior analyst at bloomberg intelligence. coming up, oil's roller coaster ride continues with crude climbing again. with wti heading for its worst quarters as 2014, what can we

expect in 2019? tune in to bloomberg radio. this is bloomberg. ♪

nejra: let's check on what's trending across the bloomberg universe. in an attempt to tap into the marijuana market, the government in thailand has decided to legalize the use of medical cannabis. as the italian government tries to push its budget bill through parliament, the populist coalition has introduced a controversial tax on charities. our most read stories. citigroup's tobias gives himself a c grade on stock predictions. as the year comes to a close, the hedge fund industry since first -- its worst performance since 2011.

aeaking of stocks, has been rough end to the year. entered a bear50 market after it failed to sustain the optimism from one days -- wednesday's rally on wall street. benchmark. eurozone it is heading for the worst year since 2011. other european indices have entered bear market territory this year. the broaderx 600, benchmark, not in that bear market yet. kallum pickering, senior economist with berenberg is still with us. we were talking about u.s. markets. looking at europe in a bear market, is this fairly reflecting the growth picture in the eurozone? >> the growth picture looks pretty rough for the next quarter. we saw a buildup of risks. exports to turkey. weird stuff in the auto sector. trade wars.

the higher oil price hit europe in away it does not affect other places. these have had the effect of slowing european growth. that will continue its early next year. into mid next year, these risks fade. the week market simply reflects the weak economy. the weakness will progress. into next year things will improve. nejra: what does this mean for ecb policy? do they need to get there skates on? >> the ecb will now be looking at the wage outlook, inflation expectations, of course, because the data is weak and growth is below trend it is hard to see how the ecb can justify a rate hike. we will expect growth at least that trend, inflation expectations to rise. in q4 you can get a small increase simply to reestablish

the symmetry around this corridor. in 2020, a couple of rate hikes. nejra: do you foresee that -- what has been your assumptions for those hikes? does it include any assumptions around the fed as well? basissimply works on the that growth will get back to trend by the second half of next year. inflation expectations and wages will continue to edge up. markets at the moment looking for a global recession or correction in 2020. i don't see anything so sinister in the underlying global economy. we are now 10 years into an economic cycle, but the distance is more important than the journey time. that leadno excessive me to believe that an unsustainable process is developing to such an extent that a corrective recession is

around the corner. i do not see anything to worry about from a macro point of view to 2020. nejra: does that include the u.k. as well? you have written a lot about brexit recently. have you shifted your base case given everything we have seen since november? >> i still see on.ca percent chance you come to a deal. what that deal is remains to be seen. my probability for a second referendum is edging up a little. in parliament that is the way the logic is going. the u.k. outlook depends on brexit. if you get a deal, fundamentals are ok. valuations for the u.k. look cheap. i would expect the u.k. to surprise on the upside on the back of a deal to look for growth around 1.9%. that will be close to the top of the european growth. the bank of england will have to raise interest rates probably twice next year and twice in 2020. nejra: kallum pickering stays with us.

he is senior economist at berenberg. britain's exit from the european union may be one of the biggest threats facing europe. with the future of brexit uncertain, how are business getting ready? brian moynihan spoke with bloomberg about his bank's brexit preparations and the situation in europe. >> i know we have spent more money and we have done a lot of work. we have positions that were to operate with the u.k. business and a europe business. that is all terrific work by our team. we are no closer to understanding the rules of operation. we have to prepare for the worse. -- the worst. for -- thereing will be a lot of guidance. we hope it is better than that, but hope is not a strategy. how we are managing the

strategies is working with clients to see how do we make that date not a disruption? but it will be because the rules are not clear. it is a very tough social, political debate. business has been handed the outcome. we will make it work. it is just not a lot of -- no one is going to get a new product, a new service, a new activity for anything going on in brexit. at worst they will lose some stuff. that's the problem. >> we have seen some of the effect on the british economy. what about europe? how much of a headwind is brexit? some of the things happening with italy, france for that matter, and you mentioned exports to china. what are the real headwinds for european growth? >> i do not think brexit is as big a headwind as some of the other.

is it is still a positive number. issues and things. energy pricesis being down helps the european economy. the economy growing faster than the rest of the world or something. as long as it stays within a range of -- it is affected by all those factors and more. they are continuing to work on issues. we saw some progress on the budget. things will fall into place. it is hard work when you really have this environment. political processes tend to get the lownding around growth. it is easier if you have faster

growth. because of the size of the economies and the structure of the growth it's going to be ok. nejra: that was the bank of america ceo earlier this month. now let's get the bloomberg business flash with debra mao. debra: it has been a rough year for blackrock shareholders as asset managers had for their. worst decline in a decade the company's shares have fallen almost 25% with investors cashing out for staying on the sidelines. blackrock is better off than many of its peers. a gauge of companies and custody 29% as stockmbed market volatility climbs to the highest in three years. u.s.-canada's -- u.s. cannabis retailer is planning to launch a at $2.1 of aphria million, a 46% premium. the canadian company sites share

in two days halve when short-sellers alleged it -- wrongdoing.s nejra: think you so much. oil has continued on its roller coaster ride with volatility soaring on uncertainty output cuts by opec and its allies will be enough to counter u.s. production. crude is set for its biggest quarterly loss since 2014 after reaching a four-year high in early october. kallum pickering, senior economist at berenberg, is still with us. is oil oversold and due for a bounce? >> i am an economist. the cheap oil price is best for consumers. for markets we tend to focus on concentrated costs the oil producers, which i minority -- a minority. but the low oil price is a boon for real incomes, for consumers.

remember the story in 2015 when the oil price came down, it brought the market with it. but it was the cheap oil which give consumers the boost in 2016 which really started the global upswing we enjoyed in 2017 and 2018. earlier this year i thought the oil price was higher than i wanted for consumers. consumers make up two thirds of economies in the western world. now at $55 a barrel, this is pretty good for me. nejra: it is interesting you make a parallel with what happened in 2015. a lot of people have attributed what is happening in oil to what is happening in the equity markets. the equity market selloff on recession fears and oil is dragged down because of fears about global growth it concerns about demand. bloomberg has done a survey that has said brent will gain as supply curves start to work. barrel with70 a recession fears fading.

is oil another example of markets incorrectly pricing recession fears? >> exactly. recession fears are overplayed. what i find most staggering is that compared to last year, this time last year we were very bullish. this year we are very pessimistic about global. the underlying fundamentals have not changed. we are not far enough into the economic cycle to expect the correction. you can get a slowdown. political accidents can cause that. what we are likely to see is a reestablishment of a convergence between european and u.s. growth rates. 2018 we had very strong growth in the u.s.. weakness in europe. heading into next year the fiscal stimulus will fade. the u.s. will experience the risks we have experienced this year. we will be no closer to the recession. nejra: think you so much. will beickering

continuing the conversation with us on bloomberg radio at 7:30 a.m. u.k. time. coming up, we look at the markets after the whipsaw session in the u.s.. ♪

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"activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. nejra: good morning. this is bloomberg daybreak. these are today's top stories. wall street whiplash. u.s. stocks stage their biggest reversal since 2010. the gains are the largest in three years. last say in -- waits a certain -- late says her and her heroics -- session heroics failed to carry to asia. and the partial shutdown expected to last through the new year.

good morning, welcome to "daybreak europe." we are near the start of cash equities trading in europe. like we could get a bounce today. ftse futures up 0.9%. the phrase bear market balance is starting to come in to some of this commentary could we talking about the u.s. session, what a whiplash we saw. 3% and thenost ending in the green. the biggest upward reversal since 2010. question over whether this is a start of a turnaround or whether we fall deeper into a bear market. 500 has stopped shy of that for now. lots to talk about in the equity

market and bond market with the treasury, dropping. not moving much on the 10 year treasury yield. 23 basisyield dropped points. we could see yields move higher across the spectrum. treasuries, bcp's and also runs. -- bunds. it has happened in the asian session for the first time since 2017. let's check in on the markets in asia. good to see you again. how is the picture looking now? we have in seeing some muted gains. >> there are muted gains at the moments. largely a mix. limping along today, rather than volumes. zero point 3% come the japanese market. loss to 12%.yearly

they are not working monday so that is what happened for the full year. down 12.8% for the nikkei 225. pakistan having a tough time of it. gains modest in china. the hang seng, a slight rise here. we have this. even though we are just ending the day. losthanghai composite has $2.3 trillion over the course of this year. 25% of the market cap. monday.l be back on it would take a lot for them to raise that. let's look at some of the chief movers and stocks that did move in japan. losing a major client, pulling fashionable

gear out of its stores. a big miss in terms of earnings. , two top officials the suspended. after some huge losses. china construction bank, along with the bank of china, the license and the green light to set up a mutual fund business. that is what we have. rolling onto monday. a lot of markets closed including japan, philippines, thailand. one eye on the trade war, one eye on the politics and the global -- on what is happening geopolitically and the global slowdown. nejra: roll-on, 2019, let's get the first word news with debra mao. the partial u.s. government

shutdown that started a week ago looks set to continue into 2019. that is after house republicans said they did not plan votes this week. donald trump said most employees losing pay our democrats -- are democrats. the office of the u.s. trade oversentative approved 1000 requests covering $34 billion of chinese goods. the tariffs took effect in july. populist government racing to push its budget bill through parliament by the deadline. a tax increase for charities is the latest hurdle. there is a news conference ahead of a lower house vote on the bill tomorrow. if italy -- they must use a

special procedure to revert back to this year's budget. japan factory output dropped again in november. it suggested limited strength as businesses navigate the u.s. china trade war and slowing growth overseas. tokyo showeda for price gains slowed. while the unemployment rate rose fractionally. $3.2 trillion hedge fund industry headed for the worst performance since 2011. 400 funds closed during the nine months of the year. despite the challenges, the number of closures is below the 2008 record of 1500 liquidations. an explosion at a power plant in flashingnt to light across the new york city skyline. the like could be seen from manhattan after a brief

electrical fire. prompted a wave of commentary on social media, --h a spokesperson saying tweeting to reassure residents it was not caused by aliens. by more than 2700 journalists and analysts in 120 countries. nejra: thank you so much. it looks like it was going to be a bad day for u.s. stocks yesterday after a blockbuster session west's they -- wednesday. but they finished in the green. the biggest upward reversal for the s&p since 2010. joining us is an fx strategist. great to have you with us. good morning. let me start with you with what we have been seeing an equity

markets. say, we shouldn't be too much into daily moves. i read a stat saying since 1990, every comparable reversal came -2009 bear 2008 market. people are calling this a bear market balance. is that -- balance. -- bounce. is that a fair says meant? >> -- fair assessment? onehe story is going to be -- if you look at data, forecast the data, there are signs of economic slowdown here and there. we are gravitating toward growth, rather than a recession. there are signs of growth still there. rates may have gone up in the u.s., but they are still low by

historical standards. we have enough momentum in the economy to support stocks. recently, we have done some surveying. our readers forecast the s&p 500 2800.nd next year around 10% from now. i think that is pretty sensible. >> end of next year, a long way away. are we going to have to wait for that meaningful rebound? is the s&p 500 going to fall into a bear market before get there? >> i would not rule out that scenario. 2019 could be a year of two half's. we have a spectacular first half of the year. more spectacular in the second half. a lot of uncertainty about trade disputes. a lot of uncertainty about wrecks it.

is eu pollard mentor parliamentary election. we might have clarity later in the year to support it. >> makes sense. before we get onto your fx calls, i want to pick up on the point about equity markets being too negative. >> i am quite a pessimist on the growth outlook. if we take a step back into next year as a whole, if you want to know if this is a bear market, we have a framework called the three cherries. imagine you have a slot machine. threell down on the levers. we see one cherry correcting, not three. lower, you are going to see the s&p struggle. the next one is financial leverage.

lehman brothers and so forth. if you see financial leverage start to go, that is what triggers your bear market. all the forward-looking indicators, small business optimism, even lose in share prices, you're going to have a slowdown. your third cherry, you have to growth and the finance leverage, it is inflation. this is making me think it is not going to be a horrific bear market. productivity in the u.s. is picking up. it might need there. free cherries do ok if you get productivity picking up. for q1pessimist because i do not think the growth story is going to be good. leverage,f financial

if growth is heading lower and you see firms under pressure, maybe you see some of these start to say, someone has faulted. that is what we look for. going to happen. maybe we do end of the year higher. it is interesting you say we are not going to see a terrible bear market. they have been something like a 24% drop. this brings me on to the point in terms of we can't have bear markets without a recession, can't we? >> i agree. i think the market is too pessimistic. the first half of the year could the struggle for the stock market. there could be some repricing later in the year. let's face it. you cannot have a global

recession when he two biggest economies are doing ok. not brilliantly but ok. look at the u.s. and china. indicatorsicating might not be billion but they are solid. toward a trend rather than a recession. you see soft patches on chinese economy, but the government is on the case. they can really influence the outcome. even though the slowdown in the inevitable, one positive thing that might come out of it is it will pressure the leaders of the country to resolve the trade dispute. those two factors could help to

generate a soft landing. that is good for stocks. the soft landing is a far better scenario than what the december market is pricing at the moment. then we can have a good rebound. mean in thedoes it fx markets, dollar and yen for example? that makes theng story, we have many parts nearing inversion crea. it rarely has inverted and not lead to recession. we are a little bit above positive. we are going to do talking about the pricing. we are in a slowdown. we have the growth phase this is a slowdown phase. next stop, recession.

we are on the precipice of expansion. late cycle, people think there are other opportunities elsewhere. liquidity is what matters. low, with heading euro dollar, it is difficult to say. -- you can play for high euro-dollar. in the recession phase, it heads lower as well. great conversation going. great to have you on set. gloomy interview european investors. the euro stoxx 50 goes into a bear market. while the euro gains against the dollar but remains down.

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7:19 in london. 40 minutes away from the start of cash equity trading. let's talk about the u.s. session. we saw the biggest upward reversal cents 2010. the s&p down 3%. futures pointing to a lower open. dollar-yen on the back. we have seen it weaker against the yen. yield, dropping into negative territory for the

first time since 2017. oil, bouncing back, 2.5%. 10 year yield, edging higher. hit -- on theelds good to watch. euro stock futures, pointing to a higher open for europe. let's get the bloomberg business flash with debra mao. >> it has been a rough year for blackrock shareholders as asset editors had for their worst decline in a decade. investors cashing out or staying on the sideline. they are better off than many of their peers. stock market volatility climbs

to the highest in three years. up for thegearing biggest push yet into the vegan market. -- nestlé is gearing up for the biggest push yet into the vegan market. rivalre racing against unilever and new entrants like beyond meet. thatng alternatives resonate with consumers. the u.s. cannabis company takeover ofhostile the canadian company. earlier this month, the canadian company saw the share price half in two days when share holders aphria denies wrongdoing.

instagram redesigned its platform for horizontals rolling and it went sideways. sparked a barrage of complaints. they quickly reverted to original features. they said it was a small test of that went wide by accident. end of thes a gloomy year for european investors. your stoxx 50-- bear territory. the euro has risen against the dollar on the back of a stock in -- slump in stock and oil prices. the fx strategy us.

futures going into a bear market, is that unfairly pricing the growth picture? >> if you look at where the problems are in the world, the u.s. has had a great year. place,started in a goldilocks. it was synchronized with what the u.s. was doing. suddenly, we had a problem in china. a crackdown on shadow banking. quality standards in europe. blocks, one of the largest trading partners slowing down. big impact when you have chinese exports or imports slow down. infrastructure spending, from 15% to zero.

meanwhile, domestic growth efforts have materialized. was stinging european markets is fair. does it continue next year? i think it does. u.s. data slowing down. the only thing that saves the euro is dollar weakness. actalso, if china gets its problems started in .hina, you can fix it in china >> we are bullish on anything against the dollar. q1, no. get its actee china together. and then maybe the ecb signals they want to raise interest rates. i am short euro.

i think brexit is going to work out ok. in terms of mia long euro, no. euro, no. long euro-dollar. reason. a cable it has support from the dollar leg. dollar weakness, cable does ok. it comes down to the vote. there are the three scenarios of brexit. referendum, does theresa may survive, general election? sterling heads higher. slimal brexit, a possibility. only happens if the government once it -- wants it. there are people who talk about legal certainty. i think it is unlikely.

what about general elections? i don't think the tories will want that. no conference vote will probably fail. ory vote this deal through you get a second referendum. right now, we are all treating everything with the same probability. nejra: cable ends the year where? euro-dollar going higher, we are talking about 140-150. nejra: bullish on cable. great to have you with me this morning. that is it for "daybreak europe." , tunee traveling to work in to bloomberg radio. live on your mobile device. inill be joining you there just over 30 minutes. this is bloomberg. ♪

good morning. we are live from our europe in headquarters here in the city of london. i am anna edwards. stocks putting in a mixed performance after an incredible rebounding u.s. stocks. the cash trade is less than 30 minutes away. ♪ wall street with flash. u.s.