>> good morning.this is "bloomb: europe." apple woes. stocks swooning in japan. giver of hope. an american traded team will visit beijing next week. and the new democrat house passes a spending bill. chinese shares rally. more to digest from washington. u.s. jobs data later today, plus the fed chief powell speaks for the first time since december 19.

a very good morning. this is "bloomberg daybreak: europe." let's look at what markets are telling us. two stories in asia. one including japan and one excluding japan get rid down t -- excluding japan. markets down 2.3%. also, things don't look so bad, the chinese composite of. -- up. better news around trade, meetings set to take place. plus news around capitol hill around the spending bills controlled -- passed by the democrat house. s&p futures reflect although those. -- both of those.

two stories, one backward looking and one forward-looking coming through in the asian equities. we will be focused on what jerome powell has to say. coverage of jerome powell speaking at the annual meeting of the american economic association. london time. let's check in on the markets. juliette saly has that. it certainly is that story of japan. index,look at that msci it is higher at 0.6%. the gain from chinese equities. service index coming through. li visit aen premier number of banks. oil stocks rally.

catch-up tolaying four days of holidays. down by about 3.5% on the open. australian market closing lower. weakness in taipei. let's have a look at some of those stocks in detail. the tech sector getting hit. japan has had a chance to react. down 2.8% on the close. 2.4%.ple supplier, down the worst performer, beijing capital. we are hearing news of a separate airport coming through. there are concerns this could lead traffic to the new airport and take it away from beijing capital international.

overall, it is looking like a brighter sentiment as we look to trade talks on monday and tuesday. anna: at least they are set to talk. thank you. the house of representatives has approved legislation an attempt to end of the partial government shutdown, but have ignored demands for extra dollars for the border wall. democratsn the day took control of the house. >> we are diligent. persistent in trying to open up government. as i said today on the floor, we will take good ideas from wherever they come, including the idea of the appropriations bills passed by republicans. the international editor

are we anyder, closer to resolving anything around the shutdown? just because the house has passed these bills? not really. the house has passed legislation, but both sides have dug in. president trump continuing to demand $5 billion in funding for the wall with texaco. -- mexico. the house is not giving it to them. shortly after nancy pelosi was they passedspeaker, two pieces of legislation. one that would fund departments that are now shuttered through the rest of the fiscal year. another that would fund the homeland security department. debate more time to

border security. it does not include the money for the wall. in the senate side, the republican leader, the majority leader who is a republican, mitch mcconnell, has called the vote political theater and says they will not take the money. president trump threatened a veto of any legislation that did not include money for the wall. it looks like this will go on for some time. president trump has left leverage -- less leverage with the democrat house. he would risk alienating his base if he tries to given. it goes on, the more potential for economic effects and further disrupting the little markets. there are no good choices at this point. the president and the democrats are far apart.

we are starting to see visible effects of the shutdown. trash piling up national parks -- outside national parks. fewer government workers, many staying home, they do not have things like people to answer the phones at the internal revenue service. there is no one there to answer questions of taxpayers. anna: they are predicting the shutdown could last for many months. thank you very much. senior international editor giving us important context around that story. let's get first word news from debra mao. >> china has confirmed the u.s. delegation will visit monday and tuesday for trade talks. it is the first negotiation

since they agreed to a 90 day truce. economicte house adviser says the trade war will force many companies to join apple. downgrades will keep coming until there is a deal with beijing. gatwick is reported to have onnt around 5 million pounds anti-drone equipment. 140,000 people had their flights disrupted. alreadyest airport has bought technology to combat unmanned aircraft. -- after the worst year in a decade. in the list of surprises, he says the fed will refrain from raising rates and the u.s. economy will expand between

2.25% and 2.5%. he also says a traded deal will be reached in the first quarter with china. >> the fed doesn't raise rates. appreciates 15% from its opening. i would say those are the two major points. nikkei news has reported new allegations against carlos ghosn. it says he used a special nissan fund to pay $40 million to businesses run by acquaintances in the middle east. ,lobal news 24 hours a day powered by more than 2700 journalists and analysts. anna: thank you.

let's talk about technology. worst dayered the since january, 213, after the iphone maker cut revenue forecast on struggling sales in china. some say the tech giant has priced itself out of the against u.s. market. the white house adviser says more companies will be forced to downgrade out looks there is a trade deal. good morning to you.we have had 24 hours to think about what has been going on . how much do you see this connected with the trade war and how much do you see it as idiosyncratic? deployed a lot of measures which made things difficult if there was a trade war. the pricing of their iphones is really high. they felt they needed to do it because unit sales were

flattening. they were getting more money out of each iphone. those top level iphones are not going to be purchased, given there are cheaper phones which are pretty much as good. you put those factors together and you have what we saw. communitylyst readjusting their perspective on apple. its recommendations. takes the apple recommendations from analysts. white creamlor, color is hold. percentage ofe the view that is by, it is the minority view since the iphone era began which is amazing. >> we haven't seen that many changes in the rating.

that was enough to dip it under the 50% mark. interesting, the timing at any rate. it was all most exactly five months ago we saw the share toce, waiting for it to go the level for a trillion dollar valuation. apple is the fourth or fifth biggest company by market cap in the u.s.. it has been the biggest. in terms of the technology sector, by into the i supposeion story, it was always going to be vulnerable. >> it is vulnerable. the second dinner -- sector hasn't performed since september. has been inance line with that. under performed initially.

it has performed better for the middle of november. what we have seen is an equity selloff. so far, tech has played a role in that. went to allow for the naturally high data. anna: are you expect in to continue? that it performs in line with the market? is there a reason for the tech sector to underperform? >> there was a lot of positivity. in november, it made back some of the relative losses. as the u.s. tax breaks come to an end. earnings revert to clean earnings growth. it is one of the sectors that comes at the top of that, 20% higher. we think it will make more attractive again. earnings, yes, there are high profile misses. the earnings easton -- earnings

season looked pretty decent. >> are you still long technology? >> we do it at the sector level. november, if you look at it and say it is a big shock and that is the tech sector, all of those sectors need to be theyious of the impact will have on them in due course, it is a defensive move against what we see as risks and other sectors. a tricky time for technology. there was a lot of focus on social media and the throat -- threat around that regulation. now it is a hardware story. there seem to be many areas under attack at the moment. >> in the relative valuations,

google trades 19 times forward earnings. apple is that it about 11. despite trying to push the services story, they remain a company, they have to sell an iphone every two years. google, selling and add every day or two days. it wasn't enough. 2 billion services revenue growth was not enough to offset as 9 billion revenue decline. in a sort very much of shift. stock.s more of a value that is why perhaps the reaction was maybe a little stronger. havenseen more as a safe

than these growth equities. clearly underscoring the problems it does have. anna: jordan us on set in london. the head of multi-asset funds. how scared are you buy this ugly new year in markets? you can join the debate. using the tv function on your bloomberg. have your say on that question. bloomberg radio is live on your mobile device. this is bloomberg. ♪

anna: welcome back.

let's check in on the markets. interesting session in the asian markets. whether you include or exclude japan. the japanese yen, the biggest one-day rally and more than a year. the nikkei 225, four or five days worth of ketchup. contrast that with the csi in china, 1.9%. the expectations of trade progress next week as tentative as they are. gold, up 0.1%. guests- don't miss our reacting to u.s. jobs data. allianzinterview the chief economic advisor.

all of those voices to be heard on bloomberg tv. let's get the business flash. debra mao has that. a thirddes-benz has straight u.s. luxury crown. with fewer than 5000 vehicles separating it from bmw. the lexus division finished third. theping further behind german front runners. and the broader market, gm saw a 2.7% decline in sales. ford posted a bigger than expected drop in december. stopped selling his facebook stock in the last quarter of 2018. to unload up to 75 million shares over 18 months as part of a pledge to give away almost all of his fortune during his lifetime.

thansold shares worth more $5 billion. that is your bloomberg business flash. firstit is japan's trading day of the year and the bears are in full control. we are asking, how scared are you by the ugly new year in markets? have your say. contact the markets life team. how scared are you buy what you see in the new year? >> the fundamentals are pretty positive. that was off of a high level. nothing really has changed. u.s. growth for the first half of the year. if you said, the fed is going to hike less, that supported the market. the risk is some kind of

technical market correction. market falls which cause sales. to the point where it starts to impinge the economy. the fundamentals are actually pretty good. sayings reading a story the fundamentals are strong. the shoulder -- you'll market participants are holding up. investors saying don't get carried away. one piece, wondering whether they really are that strong. you think any negativity we are seeing in u.s. data is going to be short-lived or the not the whole story. >> u.s. manufacturing never rose that much anyway. attacks related bubble. now that that is coming down, it is closing the gap. most economists accepted the isn more elevated than

relativity. when you look at the size, that is the size of the fault in 2000, 2001. it is fair to say this is one indicator, when you get these big falls, it can indicate a problem. we have a low u.s. unemployment rate. imagine how much worse the situation would be if we were seeing price increases and the compelled to continue to hike to control inflation? we are getting good real wage growth in the u.s.. you are look at that, getting good additions to consumer pockets. unemployment and monetary policy. we aren terms of where on equity valuations, we had a question about where we are going to be. stocks, i about u.s.

was looking at valuations. forward p/e ratio suggesting we lows the haveear not seen since 2013. is that the kind of level that makes you want to load up on more stocks? but were not there yet are long equities. we are looking at when we might add. we want to see more panic. there was this potentially of the rhythmic event a couple of days ago. these big withdrawals from u.s. equity funds. half a percent removed. anse have demonstrated element of panic which has made it a better time to buy. if we are going to buy or sell, it would be by moore. more.buy anna: what role does trump play in this? this happened, he had a

lot of control over trade. he is losing control over the trade discussion because he is worried he could have a serious side. on the economic that could encourage a real deal with china which up until now we have not been that enthusiastic about. need it right now. now he is worrying if he gets a slowdown, he could be looking at getting reelected against the backdrop of a recession would it would be -- which would be unacceptable. >> thank you very much. staying with us on the program. we will return to that conversation around the head. the dallas fed president has told bloomberg central banks should put rates on hold every this comes ahead -- on hold.

this comes ahead of jay powell remarks later today. he will be appearing alongside others including bernanke. don't miss live coverage of for's remarks at 3:00 p.m.. this is bloomberg. ♪

welcome back. 6:30 in london. this is a picture in asia. the japanese story is a week but playing catch-up. the chinese story is stronger. let's have a look at the markets around the world. mumbai, asia is diverging. fromdia taking its lead either of those? is it tracking japan or china or falling on its own? sure. japan for

we are marginally in the green. we are coming off from the kind of lows over the last couple of days. not a bad start to trading today. the currency is trending after two days of weakness. strength coming into the indian rupee. we expected weakness in technology and trade. the venture keeping mark indices -- benchmark indices down. degree --th a fair all of them have a fair degree of red. the index itself, close to key levels. fundamentally, a lot of people are talking about weakness in i.t. stocks. thank you very much.

certainly catching the imagination for anyone looking for reasons to sell. >> another piece of evidence of what is going on in china taking effect. cut guidance. u.s. manufacturing index, you can see on the top, plunged the most since 2008. 11 of 18 industries seeing growth. you can see the economic measures data relative to what the market was expecting. these data points combined with aednesday, chin manufacturing contracting, the told a trade war is ticking. advisers caution -- lower

earnings forecast. we are starting to see a a lot of money movement to havens. gold is the standout of the days in 2008 team. it burst above $1300, a little bit softer now. have seen inst we years. we are seeing people moving into the safe havens. gold isls guru says the new black. anna: thank you very much. the update on the markets globally. let's get the first word news update. debra mao has that. china has confirmed a u.s. delegation will visit monday and tuesday of next week for trade talks. the first face-to-face negotiations since the sides

agreed to a 90 day truce. theite house adviser says trade war will force many companies to join apple announcing lower-than-expected earnings. downgrades will keep coming up until there is a deal with beijing. chronicleuston majority has voted to end the partial government shut down, but the plan brings washington no closer to resolving the impasse over demands to pay for a border wall. >> does anybody have any doubt we are not doing a wall? >> china's population could shrinking as soon as 2027. that is according to a forecast from a top chinese research institution. the population would start to

decline within eight years if at birth rate held steady 1.6 children per women. they couldersist, lose 209 people by 2065. powered by more than 2400 journalists. >> here's a look at what you should be watching out for. your day ahead includes the latest pmi data. at 8:15. of those do they come through the morning. investors will get the first major piece of data for the year. the jobs report due out later this year. jobs.sting 180,000 jerome powell will make his first public appearance since december 19, i think it was. he speaks in atlanta after 3:00

p.m. u.k. time. he appears alongside former fed chairs as well. investors will be watching to see what tone is taken. powell has said he is sticking to his data dependent approach. even the dallas fed president is saying rates should be put on hold. he said it is important to pay attention to what markets are saying about the wider economy. three big issues. global growth to celebrating. -- decelerating. sensitive industries it showing weakness. financial conditions have tightened. credit spreads have widened. those issues are affecting the markets. they are also affecting my thinking about monetary policy.

time toing to take some see the depth and breadth. >> do you think the fed should go on hold? >> my view is we should not take any further action on interest ares until these issues resolved. i would be an advocate of taking no action in the couple quarters of this year. my base case would be take no action. that could change if things improve. my own view is we should be patient and give some time for theeconomy to watch how situation unfolds. >> do think markets know something the fed has not seen? >> i don't know about that. i think we have been watching this very carefully. i think we have been balancing a

tight labor market. trying to meet our dual mandate. that you payl close attention to what markets are saying. also, some of these market forces including financial conditions can spill over and tighten the economy and cause growth to slow. >> do you see that happening now? >> it may be happening, yes. widenedpreads have substantially. very little issuance. it suggests a lack of access. history is showing when you see that kind of action, it can lead to a slowing of the economy. we have an estimate for judy

growth 2019. you have heard me say while 18 would be strong, fiscal stimulus will weighing. into 2019. the rate increases will take hold. we expected some slowing. i am watching this very carefully. >> have you changed your forecast? are gdp forecast for next year has come down a little bit. 2020, been our view, by we would be trending to about one and three quarters. it has been affected by some of these issues i just talked about. what we see going on with credit spreads. the yield curve is another thing i watch carefully. suckeday powell has been

into a one-sided communications fight with president trump who blames the fed chair for losses in the market. here are some of the most critical comments. the u.s. should not be penalized because we should be doing so well. we haveng hurts all done. after a massive route, he cautioned the market. that was just one day before the central bank raised rates. the recent date came the day before christmas after a bloomberg report he had discussed firing powell. they do not have a feel for the market. you do not understand trade dollars. a chart of the s&p 500 over the last year overlaid with tweets. on to these are available tv .

our guest is still with us. talk about the fed, the political pressure. one of my colleagues likes to say, this is not that new. i suppose they did not have twitter. does it seem different to you? >> it hasn't happened for a while because of the benefit of a central bank. it is yet another second guessing. even if he lands it right, you have somebody the important getting airtime. it is not really helping things. robertust heard from

kaplan. i have this chart i know you look at. forwardthe near-term spread. , this are still waiting is something that has inverted. the forward rate implied by six quarters from what are now treasury bills. the three-month yield. explain why this is important. >> the reason this is important is they mentioned it in june. we don't think it is very appropriate. look at the money market curve. look at the 18 month rate. when you look at that, you are left going, this is a bit of a problem. toy have asked the market look at this. they have said this is a better predictor of concerns about the economy. it remained stable. the fed felt quite satisfied

because they were able to point to this and say this is the important one. they are put in a difficult position. the metric they have said is most important turns negative. anna: what about other metrics? he was referencing credit spreads widening. been nothere has high-yield issuance. balanceay, you have to that with what is going well and that is jobs. had yields fall. that helps offset the impact. the more concerning is when you look at the future for this 2020, that ishen pricing half a rate cut. , markets arehe fed saying, a cut is more likely.

that is pretty concerning. it shows how big the divergence is. it is not that different than when the fed said they will hike four times. markets went south. off.ended up holding that could be a good playbook. anna: is a positive enough or do we need to see them rethink the balance sheet? negativeas part of the market reaction. the idea we will do this regardless. the u.s. has been shrinking its sheet for four years. they stopped buying bonds. gdp carried on growing. this has been shrinking for four years.

we dean need -- do need to accept it has put some pressure in. much fornk you very joining us. the head of multi-asset funds at legal investment management. ofing up, the annual list surprises. the black rock vice chairman has had mixed success. what about his predictions with regard to the fed? we won't see how that is playing out. this is bloomberg. ♪

welcome back. 6:48 in london. get involved. how scared are you by the ugly

new year in markets? yes, the nikkei is down. u.s. futures are up. a different take on that story. putting outas been a list of predictions since 1986. he forecast the s&p 500 would have a correction. it did plunge as low as -- we asked what he saw as the top surprises for 2019. >> the fed does not raise rates at all. 15% fromt appreciates its opening. i would say those of the two major ones are red >> the fed

not hiking has been built into the market at this point. does it stay in this direction or do we see a shift in expectations? >> the fed not hiking at the , doing noof the year increases all through the year, i don't think that is in the market. surprise, from your point of view, no recession f before 2021. no recession this year, no recession next year. the first one in 2021. go ahead. aboutas going to ask you tech. talk to me about where you see tech earnings going. >> i think apple is a little different than tech. apple is a hardware producer.

ch is mostly software. i think the apple story is a sad story. i don't know what is going to turn it around. to have goodg earnings. google will have good earnings. >> is brexit a coin toss? surprises, there will not be any deal as of march 29. parliament will ultimately decide to have another referendum. when they do, the british voters will select remain. oftain will remain a part the european union. corbynmentioned jeremy

will be the next prime minister. >> i have a more favorable view of brexit right now. with bloomberg. what will be the big investment trend of 2019? how is the industry evolving? will there be a boom in sustainable investing? good to have you with us. that was the investment strategy views we got. in terms of the big themes you are talking to clients about, where the trends we need to keep in mind? >> 2019 will be the year of sustainable investing can read environment, social, and governance. this is a huge same. on the back of market volatility, a lot of uncertainty. people want to make sure there

personal values, corporate values, match their investments. we will see a lot of this throughout europe. >> you have the sense everyone ?as the same understanding does everybody know what it stands for? i read an interesting piece about how it is difficult if you want to make investments that comply with environmental goals. getting them all to chime can be tricky. ofthere is a broad spectrum definitions. we spend a lot of time in front of investors. is addedsting aspect tatian and utilization. it is disparate. you look at an area like their pensionrope

schemes for have anything from , fossilg weapons fuel's. they have evolved to put things like recycling into their strategies. you look at the u.k., specifically ireland, there is an increase in fossil fuel free. , theially in the endowment younger generation is driving more impact overall. this is important for the next year. the other interesting trend is the middle east. what was once a fossil fuel at how to looking incorporate investments with things like climate change in there. hell means stream -- how mainstream is he is he? peopleseen as something like to talk about, but not the bedrock of portfolios.

of inhas been thought different ways. asset managers are getting clearer definitions. we have been managing 85 billion. we have an integrated process. the majority of our mandates and funds we have, all of our new .roducts, have an est process factor investing is high. >> we are learning there is no proxy for experienced. when you say you have the interest doing them in your portfolio, this has been of particular interest since 2008 when we have learned correlations have been high. the return patterns are different. exposure andctor

knowing how to combine factors is just as his port and as having any factor exposure itself. it is about managing the strategy for a long time. hell was that changing how investors do investing? incorporating factor specific exposure. the investors generally, no matter if you are sovereign wealth or pension, they want to know what factor exposure they have. we have seen examples were week that they had one factor but it has been mitigated by another. anna: thank you very much. northern trust asset management. china shares rally. investors balance easing trade tensions and renewed

anxiety over global growth. what will that hold for europe? u.s. futures pointing higher. this is bloomberg. ♪

anna: good morning from bloomberg's european headquarters in london. i'm anna edwards. market angst. stocks swooning in japan, where investors play catch up after a long holiday. an american trade seem. andeam will visit beijing the new house passes a spending bill in a bid to end the shutdown. chinese shares rally along u.s. equity futures. later today, u.s. jobs data and the fed chief speech in atlanta. the first time since december 19.

good morning, everybody. this is "bloomberg daybreak: europe." 7:00 in london. european futures, we are expecting a move higher. seeing int we are japan because they are playing catch-up, factoring in what they missed aftermarket closure. care concerned about apple, trade. investors might too, but we have had a day to factor that in and this is what we expect that the start of the trading day. u.s. futures have been pointing higher and s&p 500 futures have extended gains to rise by 1%. we are expecting to go higher at the start of the european trading day and into the u.s.. that is the picture across the futures right now. let's look at where we are on the bond markets.

we have the bond futures for you. fromll be hearing a lot the united states later on and will hear from jay powell. she will appear alongside a number of x fed chiefs -- ex-fed chiefs. will there be a need for a pause? that will be a big question. that will have a bearing on where we go on this trade of late. update on the markets in asia with juliette saly from singapore. juliette: we are seeing china close out the session. talk concernsrade from monday and tuesday at a vice ministerial level between the u.s. and beijing. it has been a tale of two stories today because the nikkei play catch up after being closed since december 28, down 2.3%. apple suppliers being hit hard today. japan displayed -- falling. weakness in australia, but

overall, when you strip out japan, the regional benchmark index is up .6%. when you had to japan, it is down by .5%. yesterday was about currencies. today, a little more stability money going back into the dollar versus the yen, which had this huge surge on the crash and the aussie and turkish lira against the yen yesterday. the aussie dollar getting a boost, aussie bonds are falling. and is the safe haven move trade sentiment boosting commodity currencies like the aussie. look at asian currency, you are seeing the indonesian rupiah, the best-performing currency on the trade talk confirmations, up against the u.s. dollar. 14,269. we were talking about the 15,000 level it had been weakening too. certainly a good game from the rupiah today. anna: juliette saly with the

details to be aware of and singapore. the u.s. house of representatives passed legislation in an attempt to end the partial shutdown in the u.s., but the house has ignored president trump's demand for billions for his border wall. theomes on the day democrats took control of the house after november's midterm elections. nancy pelosi has called for bipartisan solutions. diligent, diligent and persistent in trying to open up government. wei said today on the floor, will take ideas, good ideas from wherever they come, including the idea of the appropriations bills passed by the republicans in the united states senate. anna: for the latest, bloomberg's senior international editor jodi schneider. give insight into the house vote, some bills that it suspects the senate is not going to adopt. where does this take us? the situation is far from

resolved. president trump is continuing to demand $5 billion for a wall at the mexican border, and as you noted, democrats have passed legislation that doesn't include that border funding. with the start of the 116th congress, nancy pelosi becomes the house speaker and the democrats take control of the house. among the first things they did was passed legislation, two pieces of pending legislation. departmentsnd eight that have been closed for the fiscal year through september. would find the department of homeland security, where the border dispute lies, temporarily for a few weeks to give time to try to settle this border dispute. however, the senate is unlikely to take up the legislation. there, mitchleader mcconnell, called the house vote political theater and president

trump has said he will clearly veto any spending legislation that does not include wall funding. the two sides are far apart. president trump clearly has a tougher path now, less leverage than he did before democrats took in troll of the house. -- control of the house. he could negotiate and come to some agreement on border funding, but the fact is, he would risk alienating his base and giving up on campaign promise to build that wall. the longer a government shutdown goes on, the tougher it could be with hundreds of thousands of federal workers set to miss their first paycheck january 11. we may see economic effects. markets really haven't been reacting much to this but with volatility in the markets, back to change. the visible signs have been museums, the

smithsonian is closed, trash piling up at national parks, and things like the irs not being able to give advice at the start of the tax filing season. thanks for the update. jodi schneider with important insight into the news overnight. a first word news update with debra mao. china has confirmed the u.s. delegation will visit monday and tuesday of next week for trade talks. it is the first face-to-face negotiations since the sides agreed to a 90 day truce in their trade war last month. top economic adviser in the white house says many u.s. companies will be forced to join apple in lower than expected earnings forecasts. the downgrades will keep coming until there is a deal with beijing. gatwick is reported to have spent around 5 billion pounds on anti-drone equipment after the airport was thrown into chaos

before christmas. people have flights disrupted after drones were spotted around the airfield. the you k's busiest airport heathrow has bought technology to combat the unmanned craft. china's population could start shrinking as soon as 2027. three years earlier than expected according to a forecast from the top chinese resurgence tuition. the chinese academy of social sciences says the country's population would decline within eight years if the birth rate held steady at 1.6 children per woman. as trends persist, the world's most populous country could lose over 200 million people by 2065. japan's nikkei news has reported allegations against carlos ghosn. the paper said he used the special nissan fund to pay 48 million dollars to business is run by two acquaintances in the middle east. carlos ghosn, who denies wrongdoing, has been accused of understating pay and breach of

trust. 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. anna: thanks very much, debra mao. withs in asia diverge japanese equities slumping on their first trading day of the year as investors caught up with the negative news from weak economic data to apples sales outlook cut. shares in china rallied with u.s. futures after beijing confirmed trade talks between vice ministers next week. the yen slipped after yesterday's flash crash. things look different this time versus this time yesterday. credit at of eva investors joins us now. good to have you with us. give us your global view as you head into 2019. haveems the markets oscillated a lot already this year. colin: i think to kick off what we have seen a period of low

liquidity. moves have been exaggerated up and down, as we saw over the christmas period. when we look at markets, we saw 2019 in a relatively cautious place. we have concerns in the u.s. around potential policy errors, the economy slowing down, be it from a strong position. on the back of that, concerns the federal reserve will be raising interest rates potentially into that slowing economy. that has given people concerns over whether it will lead to a recession in 2019? we don't think so at this point, but that concern is in the market at equities and credit. anna: this is the first time jay powell speaks since december 19. a lot has happened in the market since that period. has enough happened in the fundamental data, though? this chart talks about the ism

data yesterday which disappointed many in the markets. those who are looking for negative signs, it is another piece of negative news flow but there are also plenty of positives. colin: absolutely, and the u.s. economy is doing above trend growth this year. 2018 will have been 3%. employment is strong. we have an employment number later on today. that should probably re-in -- reaffirm that. inflation is in line with where the fed thought it would be. all things considered, growth is moderating but it is from a strong growth. from the ism numbers, it was soft. is that a surprise? not so much, when you think about the respondents to the survey. a lot in the energy market and we know what has happened to oil in the last few months. we have people who look at the equity market, which has been heading fairly dramatically south. discussionnd tariff

and dispute is still ongoing so all of these compound into the respondents. we expect that to be relatively temporary in number. anna: interesting you reference the falling oil prices because i'm listening to robert kaplan of the fed talking about no high-yield issuance in the united dates recently. these were areas that concerned him. that lack of high-yield could also be to do with oil prices coming down, could it? there are many who operate in that space who are considered to be the least safe credit? colin: when you get into the that get into high yield, it was the triple c part of that market that was performing well driven primarily by those energy related credits in the market. when you see the oil price come off, the price to -- cost to get increases for these. point will beg

whether these issuers try to come back in the market in january when liquidity should be a bit better. the price to pay for that is an interesting concept. anna: i will put this chart that shows u.s. credit ending 2018 lower. this is investment grade in the light. where is your universe heading in 2019? colin: it is not all doom and gloom. the fundamentals r.o.k.. when you -- are ok. credit spreads have widened in the u.s. and europe so the starting position is better than it has been in a number of years. there are other concerns we have, primarily around demand. flows that for funds showed significant outflow in u.s. investment-grade, the highest in a number of years and of years and the question is who is the marginal fire of credit? when you look at potential -- buyer of credit? when you look at potential relative to equities and

expectations there, they may look underwhelming. there is a question around demand and other issues out there, which have taken a lot of headlines. for example, the downgrade cycle, the size of the triple b market, how that may impact high-yield. these are issues that get into investors' mind. you have to pick your spots. there are opportunities on the long side, but pre-2018, most things went up in price. passed,ld is definitely we are past that inflection point. you need to be careful what you buy. anna: thank you very much. colin purdie of aviva investors stays on the program. as brexit approaches, the outlook for the u.k. housing market may hinge on the outcome. more to come on that next. this is bloomberg. ♪

anna: 7:17 in london. we are 22 -- 42 minutes away

from the start of the trading day. don't pay too much attention to japan today. a lot of catch-up. down by 2.3% this morning. s&p and euro stocks future telling more positive story around trade expectation for next week and the progress made in the house around the shutdown. not the end of that story. don't miss our lineup of guests reacting to the u.s. jobs report later today. 2:00 p.m. london time, we will speak to larry kudlow. allianz' chief economic advisor. and the blackrock global cio of fixed-income. let's get the business flash with debra mao in hong kong. mercedes-benz has each a luxuryeked out vehicle crown.

for the second straight year, toyotas division finished third with a 2.2 percent decline over the year, seeing it dropped behind the german front runners. in the u.s. market, gm saw a 2.7% decline in the fourth quarter of sales. for posted a bigger than expected drop in december. after a stint tests -- as white communications director, anthony scaramucci's fund is doing better. managed toapital, make money. in an interview with bloomberg, he said each of his funds made a not a big returns for 23.5% after fees. that is your bloomberg business flash. anna: thank you very much. annual u.k. house price growth slows to have to percent in december. that is according to nationwide building society. alow economists forecast for

growth rate. with uncertainty surrounding brexit, what is the future? our london bureau chief from bloomberg joins us now with a look at the numbers. good morning to you. what are these numbers telling you? neil: they are showing the deceleration -- acceleration in prices is lowering. performer,he worst down 1.4%. we are seeing brexit uncertainty, economic uncertainty will affect sentiment around housing and housing is very much an emotional issue. sales are falling, prices are beginning to fall and there is more uncertainty around brexit. anna: supply is falling. what factors of brexit? neil: brexit is the main factor,

but the interest rate cycle out of the u.s. has a broad impact on global property markets. -- fromn a synchronized london to australia when it comes to house prices. it will be interesting to see what the downturn in tech share prices does for the london market this year. people in east london, who work in that sector, have been using their share options to get the deposit to buy a home. you saw apple shares down. facebook continues to struggle. people will have less money to spend on housing than expected. anna: i've got this chart that shows expectations around housing plummeting with house prices. that doesn't bode well for the future, but i know we have been writing a lot about this. the link between the tech sector in london and house prices. that is fascinating. the tech sector is significant enough to show up in the house pricing.

priceinteresting that the -- continues to be a deprived area of london but the best-performing in the housing sector in 20 years. maine -- most people would have thought about. an example recently a house in mayfair that was sold at a 10 million pounds discount. one fund said values would be 17.5% below the march valuations. anna: neil callanan, bloomberg's london bureau chief, joining us with the latest on the brexit story. colin purdie of aviva investors is still on the program. let's talk about where you stand on u.k. assets at the moment. your world is credit. clearly a housing market with the brexit story, how consumed with brexit are you? colin: to some degree, yes.

we are relatively cautious on credit generally. we don't think this is a great time to be allocating a lot of risk capital. when we think about the u.k., it is difficult to make any forward projections until we know exactly how brexit is going to play out. this,icipation of anticipation of the uncertainty we are seeing, some of the economic data coming through has been underwhelming. that is not surprising. when we think about how to play it from an investment perspective, there are opportunities within the credit of our, around 50% universe is non-u.k. domiciled companies. you don't necessarily need to take on brexit when investing in those corporate center that gives opportunity to take exposure to the market in a more indirect fashion. we are looking for more defensive names in that space. the: in the euro universe, fact that the ecb is not the

player it once was or has been recently in the credit market. is that having a bearing on the markets you are investing in? colin: it has in the past and in the future, as well. has stopped net archases now and the ecb was technical in the primary and secondary market. in anticipation of this, 2018 saw the europeans credit -- credit spread wide and out and outperforming high-yield but also in investment grade. has beending of qe undertaken by the market to some degree, but we think when it in the, the lack of that market will have an impact. it is impacting where we are looking at this point. anna: what about supply to the market? we talked about high yields, no new supply on the market and december is typically a time of

year where you might not see such great supply. year turn into the new comedy you anticipate more supply or the fact we are in this post qe environment and increasingly adjusting to that and the oscillations in market putting companies off from raising new debt? colin: supply was lower last year for a couple of reasons. the first one in the u.s. revolves around cash repatriation. we saw a lot of money coming back from offshore john sure that resulted -- to onshore and that -- we look at the top beneficiaries of the repatriation and outflows by the end of october, only 14 had issued. that was a decline. was onerevious year, it third of the volume we had seen from the 50 issuers. we think that has almost reset the wrist -- supply tone. it is a bit of a wildcard. we don't know what will happen there. the other facet is around high-yield. normally coming toward the end of a bill cycle, you expect

high-yield companies to have extended a maturity of their debt. that hasn't really happened this time. that is probably due to the length of the cycle and investor caution. they will need to refinance on that debt in the next couple of years. anna: we talked about what a volatile start to the year it has been. our mliv question of the day puts it this way. how scared are you of the ugly new year? you expect this ugly. bank to be short-lived as we get more volume comfort? colin: pedigree of the volatility -- the degree of the volatility was exaggerated. as an active manager, volatility provides opportunities. is exacerbated by liquidity, that is something to take advantage of, as well. anna: thank you for joining us this friday morning. colin purdie, cio of credit at aviva investors. remarksss jay powell's

from the american economic association meeting 3:00 p.m. london time. that is it for "bloomberg daybreak: europe." the european open is next. this is bloomberg. ♪

anna: welcome to "bloomberg markets: the european open." we are live from our european headquarters in london. i'm anna edwards alongside matt miller in berlin. matt: japan plays catch-up to global market turmoil as tokyo returns from the holidays. china posts its first day of gains in the new year. futures in the u.s. and europe are looking positive, as well, after the destruction we saw yesterday. the cash trade is less than 30 minutes away.