simple. easy. awesome. click or visit a retail store today. ♪ bloomberg'sing from european headquarters in the city of london, i am nejra cehic. >> and i am manus cranny live in dubai. -- ais "daybreak we europe daybreak: europe." and these are the top stories president trump is either to cut a deal to boost the stock market. >> asian equities from japan, korea and hong kong gain more 1%. the president took to prime time tv to make a case for his border wall, but his yielded no new plans. to resume a restarts her stalled bid. she has five working days to

overcome opposition on parliament. manus: welcome to daybreak europe. there is a thaw in the area. the yuan tells the story, as china goes for potentially a bit more fiscal easing. we understand from our sources that you will see a little more stimulus. 10 year government bond yields are moving. one analyst says that the run could be done. at 10 year yield will hit bump, and a jp morgan weekly index went from being bullish on treasuries to a bearish move, the biggest reversal in sentiment since june of last year. you are seeing the 10 year yields beginning to trade this

morning. the aussie dollar as i have often said is the trade currency. allanalyst says we are optimistic on the china trade deal, too optimistic. time will tell in terms of that. . let us see what the dater delivers and whether they do a deal. manus.yes, one of the big things is a fact that we have seen a lot of wall street, including goldman sachs and jp morgan slashing their calls on the 10 year yield. at the same time, look at what is happening in futures. s&p 500 futures are up by .4%. euro stoxx 50 futures up .9%. equity markets are trading on the headlines around trade, some optimism. or are we seeing the repricing of the pessimism? we have seen in & rally since christmas. when we got the selloff, jp morgan showed that equities were reflecting a 9% decline in

earnings in 2019, but also pricing it the odds of the session. so the market may be starting to pull back on those ideas right now. we are seeing a weaker dollar across the board, but a gain against the yen. it tells us about a risk appetite this morning. it is showing in the commodities space as well. copper gaining strongly, but also crude back above $50 a barrel. it's strongest rally in one in five years. juliette saly in singapore has more. good to see you. are we seeing asian equity markets trading on trade optimism, too. juliette: we certainly are. about half an hour or so ago, we heard from one of the people at the talks between china and the u.s.. according to reuters, ted mckinney saying that they went fine. we are seeing some good buying coming through on the asian markets.

led by what we are seeing in hong kong and also china today. but the nikkei closing at over 1% today. the australian markets had a pretty solid showing. new zealand was also a front runner. we have pretty interesting data coming through on the jobs front in new zealand, suggesting that the labor market is starting to look better than expected. over all, a very positive session. where you are seeing gains is coming through from chinese carmakers today. they heard from beijing about potential boost consumption. that has lifted a lot of consumer stocks. one motor company in hong kong up over 11%. in shanghai, the a-shares hitting the daily 10% limit their. a call from goldman interestingly, to sell out of those stocks. infosysre, you're seeing up by 1.5 percent, also coming through with the news that it

could consider buying up shares and issuing a special dividend this weekend. back to you. manus: thank you, juliette. certainly a very strong session today. we are asking the question on mliv today, how many 2019 fed hikes would follow a trade deal? you can join the debate, which the team and nejra and myself on tv . debra mao has the first word news. debra in: congress give him billions of dollars to combat illegal migration. trump said funding for a border wall was the only way to stop shutdown.l government

democrats rejected the president's description of a crisis on the mexican border and said trump must stop holding the american people hostage. president trump: the wall would quickly pay for itself. the cost of illegal drugs exceeds $500 billion a year, vastly more than the $5.7 billion would have requested from congress. the wall will also be paid for indirectly by the great new trade deal we have made with mexico. >> sadly, much of what we heard from president trump throughout this shutdown has been full of misinformation and even malice. the president has chosen fear. manus: may fish suffered a defeat in parliament last night with rebels from her party voting to restrict her room for maneuver in the event of a no-deal brexit. 20 conservative lawmakers voted against may, sending a signal to

her opposition to crashing out of the eu without a deal. she has a few more days to convince lawmakers to support the agreement she has negotiated with the eu. the vote in parliament takes place on january 15. this airport has reopened after being shut down for more than one hour by a reported drone citing. departures at europe's biggest aftert, were halted soon 5 p.m. u.k. time but resumed following a police operation. this comes after suspected drone raids on gatwick airport cause ko's just before christmas. global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. nejra fish deborah, thank you so much. the rallying amid optimism on the potential progress in trade talks between washington and beijing, as negotiations extend.

president trump is increasingly eager to boost slumping markets with a deal with china. that is according to people with news on the deliberations. manus:? but it is not all optimism, is it there is a crack in the report. one forecast for the global economy is slowing growth of investment. investments -- rising inflation stomping momentum. >> the title of the report is a darkening skies. we see the skies a darkening. global growth is slowing. risks are rising. manus: joining us now from hong kong is bloomberg's china government editor, karen, good to see you this morning. let us start with the trade talks. we had the lovely headline -- trump is. keen for a deal how keen other chinese for a deal. are we going up the hill

swiftly? >> where they stand right now is in a state of, cautious optimism. >> it has been extended for a third day. that fueled optimism. at the same time, we have been through this before. we know that hopes can rise and war.doing a trade china wants to come to is quick of a deal as possible and get their economy back on track. it has been a rough year for them, they have seen an economic slowdown and trillions come off the stock market. and trump is also eager to come to a deal to try to even out some of this market volatility, because both sides have seen it as the trade goes on. everybody wants to make a deal, it is just getting everyone to the table and getting on terms that everybody likes. nejra: how have the outcomes so far fed to the expectations going into the talks? karen:

i think they are doing pretty well, we are expected to get a full readout from the chinese government wants the talks have concluded, unless they get even further. we haven't had many details other than people have expressed optimism among the u.s. side, including trump, who was tweeting that it is going well. nobody expected it. deal.ld the hopingink people were for a breakthrough, and if not a real breakthrough, at least steps that would pave the way toward their breakthrough, so that we can come to a deal. especially the truce between trump and president xi jinping which is set to run out in march. manus: thank you very much, l our guest is megan greeneigh. -- good to us from see you this morning, megan.

and thet a trade deal, signs are that everybody is moving toward that, how quickly what we moved back to synchronize growth from darkening clouds? what is the lead time to turning the mood music? >> i don't think that a trade deal with china alone would cause synchronized growth, i think we are actually seeing synchronize growth, just not in the right direction. everybody is slowing down. the trade deal with china would certainly help, it could provided demand globally, but i don't think it would turn around growth everywhere. china was slowing down before the tariffs were exposed. the government has announced that its budget deficit might be bigger this year than last year. i'm not particularly impressed by the fiscal stimulus from china am a but i think china will have to provide a lot of stimulus in order to turn this

around. it is not just trade-based. but, of course, the trecor: is on that help -- the tariffs have not really help. nejra: our guest talking yesterday said of the trade issue will be overhanging on markets for multiple years. does that mean for the global economy? are we talking about secular stagnation, dare i say? megan: yes, i don't think we ever left stagnation. i think we can expect that going forward and i agree that this will probably last for years. what we have seen in the u.s., is that trend has an impact on sentiment and uncertainty can we have it has caused a lot of firms to do for their investment plans. we need a productivity jumped figured if he had an agreement on trade and we saw companies starting to invest, it could boost trade growth of it, but it will not do it immediately, it will require a change in sentiment. manus: the potential of

synchronized levels of growth is all about sentiment. you said that you are not impressed by the stimulus thus far with the chinese. i want to show you a piece our team has written. asg aggregate-- social financing, asf. our team says china needs to get asf back up. would you agree with that? what else would you like to see from the? megan: i would agree with that. we are already seeing monetary stimulus. that is official fiscal stimulus, and then there is unofficial fiscal stimulus, which is the government leaning on banks to lend out to the economy. it is harder to qualify and would want to see more than what we have seen, which is more like regional and local initiatives.

i would want to see a massive initiative from the government. one of the goals of the president is to reduce the deficit. i think china will have to climb down on that and will have to increase their deficit more than they are currently targeting. nejra: we are seeing a little bit of risk-on in and quitting markets today. some could they do it is the equity markets moving on the headlines. we have talked about how equity markets in 2018 started to price in slower growth is not a for 2019 and beyond. if you believe, and i don't know that you do, that kiwi meant got decoupled from economic reality, surely, markets are now pricing the reality? megan: i think there are just pricing on the downside. there has been a slight correction, but i think it has far.too markets are not reflecting the macro economic fundamentals at this point, they overcorrected. the correction we have seen in

december and the beginning of this year is actually based on macro fundamentals. i think the markets will have to come back. manus: ok, let us see what the year holds for us. asset economist at manu management stays with us. coming up later, we speak with the boston fed president, and you can catch the exclusive time.iew at 6:30 u.k. ♪ tune into bloomberg june into bloomberg radio as well in the london area. this is bloomberg. ♪

♪ nejra: this is bloomberg daybreak, am nejra cehic in

london. manus: and i am manus cranny in a dubai. let's get a snapshot on how the markets are trading. stocks are rising. ground zero on trade is also bid. initially on the map. uae oil minister saying they don't want on oil price that rocks global growth. asian stocks are rallying. we're waiting for china auto data. aussie data is also here, the highest in the past three weeks. nejra: we are seeing dollar weakness across the board, but the yen is also a little weaker. that perhaps says something about risk. the yuan is a bit higher against the dollar. that weaker dollar is a despite a huge move in 10 year treasuries. the u.s. stoxx 50 up .7%, the highest level in three weeks. optimism in the equity markets, manus. manus:. . manus -- here is a mliv question

of the day. what would it mean for the fed if there was a trade deal? how many hikes would there be from the fed if there was a trade deal? you can reach an era, myself or the team on gtv go. let's get the business flash headlines with debra mao in hong kong. >> hsbc has revealed that the gender pay gap for u.k. employees widened last year. female staff earned on average 51% less than their male colleagues. the difference was already the biggest in banking. across all industries, the u.k. danger -- the u.k. gender pay gap is high. authorities said they will make the appropriate adjustments where necessary. deutsche bank may cut its bonus will as it juggles rising costs with retaining key staff. we are told that bonuses will be paid more selectively to keep top earners on board.

the final figures could change depending on the banks fourth-quarter results. deutsche bank paid about $2.5 billion in bonuses in 2017. complaints are rising that users of sums him songs smartphones -- some samsung mark phones are not allowed to delete facebook. owners are finding it impossible to remove the app, which comes already installed. consumers have become concerned about their digital rights of privacy following allegations of facebook sharing personal information. that is your bloomberg business flash. nejra: debra mao in hong kong. thank you so much. risk assets hit session highs after president trump's televised address last night. he demanded billions more for border security but stopped short of declaring a national emergency. markets are now turning their attention to the next concern on the horizon, the fed, with the latest minutes do later today.

we continue with our guest, making green. theus start with dollar. we are seeing weakness in the session. is the dollar -- does it weaken next year? megan: it depends on trade, and does.he pboc if we were to get a deal, also monetary policy differentials should kick in. i think markets have overdone it on the fed, though. they have overcorrected. last time we lived, they were pricing new rate hikes this year. i don't think the fundamentals suggest that. i think the data will justify at least one rate hike this year. manus: it is interesting when we look at some -- the backdrop on the whole fed it debate. have a look at this and tell me what you would do. , and to to the eurozone japan, is this something the fed will note? absolutely.

the fed is looking at financial conditions and the have tightened. but relative to history, they are not incredibly tight. one of the big reasons for tightening was the market corrections edges is built into the financial conditions index. in so far as the equity markets fed by whatt molli powell said last friday, the markets will use their tools. i think that should stave off any further significant tightening of financial conditions. nejra: in terms of financial conditions, what more can the fed do given how low expectations are in the markets for pricing? does that mean they will cut in 2019? not.people say absolutely in terms of where yields go from here, we have seen some wall street banks/their yield forecast for 2019 -- j.p. morgan , but still high.

3% in 2019. we will see trends go higher? so.n: no, i don't think partly because of the long end of the yield curve, and also partly because of inflation. inflation should be softer this year, particularly if house prices continue to soft and in the u.s.. housing and drugs are the two biggest weights in our inflation basket. on top of that, term premiums remain negative. it may increase a little bit, but not significantly. so i don't expect the yield to go higher. manus: we are sort of in a permanent angst mode, art we? day, you areof the a global chief economist. lines upy everything nicely. what could the fed do with the data, with unemployment, with

wages, what could they do if there is a trade deal? megan: i would want to know what the trade deal looks like. if we got a trade deal just kicking things down the road and china agreed to buy more stuff from the u.s., which they have artie agreed to eddie howe, i think we could get 2 more rate hikes up. so it will be really hard for them to get what the trade war -- neither side wants to back down. it is not neither the u.s.'s or china's best interest to back down. the fedit could allow to hikes twice this year. manus: one analyst was saying to us early this week that in signaling the fed might be open to a pause, which is what markets read from powell on friday, would that what pressure on president trump? he said, over to you trump, to

get the trade deal done, to lift the equity markets -- is that the kind of thinking you could see from powell and the fed, unconsciously? megan: i think it is crazy that everyone is looking at the equity markets as a measure of how we should be running policy. i think u.s. equity markets were pretty overvalued to begin with. so this correction should be tolerated. i think it is normal and healthy. it is not in anybody's best interest to have their goal be to prop up the equity markets. think that powell is thinking -- i will hand it over to trump, i don't think he is actually thinking about trump much at all. course, trumpf tweeted yesterday about zero rates under the last administration, and was he can achieve. he has not given up on fed-bashing. up next, 79 days until brexit.

theresa may restarts her stalled bid to win support for her deal. can she overcome opposition before her vote on parliament next week? this is bloomberg. ♪

nejra: let's get a look on the world map. it is risk on in equity markets. optimism around trade talks between the u.s. and china. you can see green across the screen. risk, let's talk about gundlach. we heard from him overnight. lots of new calls coming through. he is saying the government shutdown, something to think about, it is adding to rising worries on top of the equity market and concerns about trade. if you looksting back at 2018 and see what he got right and what he got wrong. is thing he said overnight

that when it comes to the bond market, there is a long time yield uptrend. i am reminded of him saying if the 10 year gets beyond 3%, it is game over. that did not play out well. some of the calls, like emerging markets, did. manus: it was almost as if fools rush in. he said any rally is an opportunity for you to sell. -- isbate about recession quite pressing as well. yellow flashing signs in the junk bond spread. as megan just said, she wants to see the scope, the complexion of any trade deal before she is going to think the fed can be more aggressive. he actually cites 2.6%, the rally could be over at the longer end of the curve. 10 year yield ran into a barrier, 2.6%. the national debt is something he flags as well.

nejra: absolutely. gotalk about europe, we that data on industrial production out of germany yesterday. he called europe a value trap and he is calling it a value trap again for 2019. manus: still a lot of risks to play in europe. let's get a little bit of a collection. in mumbai and in london. is looking atrn the equity session in asia. lots of trade rhetoric. let's get to the indian markets. goldman says the rupee is going to be the winner in the high-yield search. >> i'm going to start off with what we have seen, chronic markets at this point in time. the benchmark indices are advancing even though they have given up a lot of their gains. over a thirdlittle

of a percent. the bank index is doing slightly better because of expectations of earnings coming through. i want to mention two stocks in particular. one is advancing in trade on news that the board may consider a buyback as well as dividend. it is advancing by as much as 1%. one of india's largest private sector banks is declining in trade on expectations we are likely to see a drop in profit going to hire provisioning for bad loans. --trade for indian equities uptrade on indian equities. nejra: let's look at the broader picture. >> it is risk on across asia. we also have u.s. and european futures pointing to a higher open. all the major indices up more than 1%. hang seng up more than two percentage points. s&p 500 futures higher.

the rally for the fourth day in a row. that is the longest streak since september. it is about the trade discussions. washington and beijing extending these talks. blackrock says if we get some strife, we could see stabilization in the market. we know people familiar with the matter, president trump is eager for this deal to prop up the stock market. of course stimulus out of china, the government trying to revive. they are looking at auto demands and consumer consumption. across assets we are seeing the yen weaker today. really moving out of that haven. down against all its major peers. in the oil sector we have the wti at $50 a barrel. that is the most we have seen for wti in three weeks. the longest winning streak in a year-and-a-half. brent nearly closing in on 16. yields, 2.72.

the rise in oil price could also help those yields. much. thank you very now, that state of play on your markets, emerging markets, and developed markets. let's get to debra mao in hong kong. toldoomberg is being president trump is increasingly eager to strike a deal with china to boost slumping financial markets. key white house advisers are campaigning for a swift resolution with beijing as trade talks are being extended into wednesday. wilbur ross says there is a good chance of an agreement that both sides can live with. i havepicture on trade, spent a lot of time and we all really do believe trade ought to be fair, responsible, and what is out there. we would always prefer people to engage in a dialogue. trade is good for all of us. it creates job.

history shows it creates jobs for all of us. >> the world bank has cut its view of the global economy. rising interest rates safed momentum.- sap disorderly market movements as well as the trade dispute. it sees global growth at 2.9%, down 0.1% from last year. gettingnk things are more relative to last year. we see the skies are darkening over the global economy. global growth is slowing. risks are rising. >> global news 24 hours a day on air and on twitter powered by more than 2700 journalists and analysts in more than 120 countries. thank you.

here is a look at what you should be watching. robert lighthizer and cecilia months from meet to talk trade in washington. manus: is a parliament resumes the debate on theresa may's exit withdrawal bill -- brexit withdrawal bill. the fed releases the minutes of its december policy meeting. indications at 7:00 p.m.. nejra: could 2019 be a pivotal year for europe? -- butly budget crisis the risk remains. maria tadeo digs into the numbers. >> let's kick off with germany. a real export powerhouse. the most recent data does not look good. if you look at the white line, that is industrial production. the yellow line is manufacturing.

a multi-year low. to get this kind of weakness you would have to go back to the financial crisis. don't just focus on the headline number. look into the report and you would see the data shows this is not a one-off. it is a trend we have been seeing for three months. it is not just german carmakers. there was weakness all over. one caveat is the german economy is export oriented. if the global trade story is not going well, the german story is not going to go well. that takes me to my next chart, which looks at european economic confidence. germany is the biggest economy. fears of a recession by the end of the year. down to levels we have not seen in two years. the economic sentiment surprise index sows -- shows economists have been surprised.

weakness in spain, italy, france. we have seen a synchronized slowdown. the bigger question is, does this change anything for the european central bank? manus: that is the question. perhaps the question for our guest. the very latest on the day of. -- data. data for europe, which face of the specter of populism. megan greene is our guest host. bad as we have just seen in those charts? >> it probably is. europe has been slowing down since the third quarter of 2017. this is not a brand-new story with news there is data showing there could be contraction. a second quarter of contraction in germany. germany is meant to be the growth engine.

well germany is demanding structural reform, germany has not implemented a single structural reform. it has been a long time. policymakers have been worried about that. maybe this will light a fire under their feet. maybe germany will have to finally invest domestically to boost their own economy, which would help the rest of europe as well. anra: you get the likes of eu governing council member saying every bit of bad news you get a bit of better news. guidance on rates may turn out to be precise. deluding itself when it comes to being able to raise rates? >> i think the ecb will be able to raise rates, but rates are not their only tool. a more powerful tool is these targeted long-term refinancing operations. there are a bunch coming due. the eu will offer another in the

second half of this year. in the crisis, europe's economy in aggregate really turned around. the ecb says we will lend to you. i think they might be able to get rates up and offer some tell tro's in tandem. , major federal banks cut rates by 500 basis points in the face of a recession. nobody has room to do that. europe certainly does not. when you look at the data and say, this is bad, put together the outlook. this comes through from one of our guests. thank you to martin. is a starting to roll over quite dramatically. u.s. andlook at the

that you, the eu is in yellow. is that as good as it gets in terms of the output gap now? >> i do think that could be as good as it gets. i do not know why anybody is expecting europe to continue growing at the level it has been growing. the potential growth for europe in general in aggregate is around 1.5%. feeling any fiscal stimulus, which we are not seeing coming out of europe, any monetary , failing any massive boost in capex spending, or any ,ajor jump in labor supply europe is not going to have a higher potential growth rate. we should expect europe to be converging with 1.5% growth. nejra: i would like to continue talking about europe, but as we are gearing up for this brexit vote, i want to put a question to you on sterling.

i have a chart showing the forecast has been revised upward for cable. strategists predicting the pound will be one of the best-performing major currencies this year. delusional? >> it all depends on choreography. brexit is truly a choose euro and venture story. it is quite possible if there is some kind of deal or brexit does not happen, certainly. if there is a no deal brexit, it is probably delusional. a lot of u.k. assets are cheap right now. investors are not willing to jump in because there is so much uncertainty about the outcome. manus: we have just got to see the details in terms of what happens next. megan greene stays with me. coming up, crude climbs to three-week highs driven by optimism about a potential trade deal and opec's production cuts. wti breaks through the $50 a barrel sign.

if you are traveling to work, tune in to bloomberg radio live on your mobile device and dab digital radio. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." let's give you a quick complexion of our trade exports. dollar breaks trend. it is on the move. let's have a look at the offshore yuan and aussie dollar. the dollar breaks trend, it just slips off. if you do get a trade deal, what does that mean for the dollar? you've got the yuan going for that fiscal road rather than

weaponizing the yuan. there could be more fiscal easing to come. fxra: when you look at that board, you look at equity markets, you get a clear sense of risk on, particularly if you look at dollar-yen. you are showing dollar weakness across the board. the only g10 currencies stronger against today's session. the ten-year treasury yield is actually down a basis point in this session. we talk about how a number of wall street houses have cut their 10 year yield forecast for 2019. let's check on what's trending across the bloomberg universe. two overlooked sources of co2. residential buildings and industrial manufacturing. board cuttsche bank's the bonus pool by 10%. that is according to people familiar with the matter.

nejra: our most read stories on the bloomberg terminal, china is set to propose a wider 2019 fiscal deficit as officials seek to boost economic stimulus. jeff gundlach calls the growth of u.s. national debt a horrific situation. president trump demands congress provide billions more to combat illegal migration but offers no plan to end a political impasse. manus: let's talk about wti. crude finally back above $50 a barrel. risk appetite picking up. leading gains in industrial metals is copper. global growth expectations are finally back on track. what is about to happen in terms of today? big guns. in the our executive editor for commodities and energies. good to see you.

we have all these hopes pinned on a trade deal. in the uae, talking about growth. he is not that pessimistic. in fairness, i do not think i have ever known him to be pessimistic about the outlook for oil. he is doing his job. good for him. , itver, in terms of trading is to a degree some relief there seems to be progress on the trade talks. hand, they took back from the hotel, maybe that is assigned they are not expecting too much longer. i do not think we can interpret that as a fast deal before lunchtime. on the other hand, if you think about q4 and how bearish it was, oil i think we were down 40%, it is not surprising that coming into a new year people are

willing to take positions. this is an say overwhelming endorsement of opportunism for the resolution of a trade war, however, it is a step in the right direction. nejra: if it is not an overwhelming cheer of optimism, how much of a risk to the downside is there for oil and copper if we don't get a trade resolution? that then copper in positioning in oil was so bearish it is hard to see how much more bearish they could get without the entire market being on the short side. in terms of copper, it is much more susceptible. it has ups and downs. it is not the best indicator. however, it is closely tied to sentiment. it has been rather wobbly. monday,an was saying expect stimulus in the second half of the year. china is not going to let their economy collapse. nejra: thank you so much.

bloomberg's executive editor for energy and commodities. megan greene, global chief economist is still with us. this segues to a chat we can start on risk. there is adding risk aversion -- ebbing risk aversion. we start to ask the question, is it safe to go back? you were saying risk assets had priced a little bit too much to the downside. is one of the things that could feed into a risk rally as well the fact we have benign inflation? >> that could certainly help. the fed will not have to worry about hiking. it was only six months ago i was having this narrative shoved down my throat that the economy was overheating. we are going to get a late cycle surge. nobody is talking about that now. it was a recent concern. i do not think there's any way that is happening. the markets have finally realized that.

we have seen such a repricing in the fed funds. the fed can go ahead if we have softer inflation and continue to pause and be data dependent. manus: the breakevens do not give them any cause. can we touch on the oil and the commodities space? brent back nearly at $60. ,ow critical is it that we hold let's say, a new ceiling at $60 for growth the echo does it matter -- for growth? does it matter? the u.s. consumer has shown they are responding differently to oil prices than what we have come to expect. a couple years ago when we had falling oil prices, everyone thought that would be a stimulus for the u.s. economy. it actually was not. consumers ended up repairing their balance sheets rather than spending it. looking at oil prices, if prices were to drift higher, would that

be a real drag on the u.s. consumer? similarly, consumers might just leverage up a little more. we look at the u.s. as well and we look at the outlook for equity markets, i was saying at the top of the show the selloff we had in the fourth quarter of 2018, by some models, showing we are going to get a 9% drop in earnings in 2019. 7.7% earnings growth. how should the picture be refocused when it comes to earnings expectations? >> this is the biggest risk to the u.s. economy. earnings fall. i'm not expecting that. that would be dramatic. even 7% growth is a huge deceleration from last year. as people are starting to understand corporate earnings are repricing much lower, they're going to come in lower this year, i think that has fed market volatility we have seen

going into the new year. you think the apple story we covered last week is going to be pervasive across this quarterly reporting season? do you think the markets have priced in that kind of language that may come from other corporate? apple are not going to be alone in telling us life is tough in china, are they? >> they probably will not. even without these headlines, if you look at who is lobbying the government on trade, all the big tech companies are saying to the administration, this does not help us at all. i think we can expect more announcements like that to hit the point home. ironically, those companies that are supposed to be benefiting from all these tariffs, that the u.s. can be the world leader in high-tech areas, and actually because global supply chains are

so integrated, it is hurting all of them. i think we will see more announcements as companies try to put more pressure on the administration to come to some kind of real resolution on trade. nejra: peter oppenheimer at goldman said what mattered is not so much deterioration in the earnings data, but how far it would deteriorate relative to current negative expectations. if we look at the macro picture, dataar can economic deteriorate in the u.s. relative to current negative expectation? >> if you are looking at the data right now, including new orders data, we are seeing a slowdown, but it is not the kind of slow down that requires cuts this year, which up until last friday were priced into the markets. we will see a slowdown, but it probably will not get worse than that. calls for a recession are long overdone. nejra: they do so much. megan greene. sharing your thoughts.

continue this conversation at 7:30 on bloomberg radio. next, markets are bid. trump is said to be eager to do a deal. ♪

good morning from dubai. this is bloomberg daybreak: europe." nejra: these are today's top stories. manus: still talking. trade negotiations extended-stay three. investors like what they are hearing from president trump, who is eager to cut a deal. asian equities, from japan, korea, and hong kong gain more than 1%. sounding the alarm bells. , a horrifich situation with the growth of u.s. debt. bid to may restarts her

win support for her brexit deal. she has five working days to overcome opposition before the vote in parliament on january 15. nejra: it is just on 7:00 a.m. in london. let's get you to some german data crossing the terminal. germany has been very much in focus. we got that industrial production data really coming into the downside of expectations. word whenht up the r it comes to europe's biggest economy. for november the survey was 18.6 billion. we come in at 20.5 billion. the current account billion -- balance. exports, we were expecting a

drop of 0.5%. we did get a drop, not quite as much as expected. 0.4% for the export month on month. one points dropping 6% versus an estimate of it being unchanged. it looks like we have risk on in equity markets. we have seen that in asia. when we look at ftse, dax, cac 40 futures, all pointing higher. u.s. futures pointing higher as well. are these equity markets repricing of it on the pessimism we saw in the fourth quarter of 2019, or are we trading on headlines in terms of optimism around trade talks? earnings a big question as well. the selloff we saw in the fourth quarter of 2019, that is pricing in drop in earnings. manus: yes.

let's get to some of the breaking news. this is going to write been the trading session -- ripen the trading session. retail sales drop 1.1%. the estimate was for a contraction of 0.3%. discounters led the charge over the holidays. lidl, total grocery sales, 50% of the estimate. they grow by 0.4%, but that is 50% below the bloomberg estimate. total merchandising collapses. down by 2.3%. the estimate was for a reduction of 0.6%. yesterday we saw cautiousness because of the political situation. veryinsbury's, these are tough numbers. the market is going to be curious to see how we price this stock at the opening. retail markets remain highly

competitive. highly promotional. they are counterbalancing moves up 200 pounds worth of cost savings. to, will theyown get regulatory approval for their bid for walmart in the u.k.? bank of america say buy sainsbury's brexit or no brexit. they remain cautious. that is going to be an interesting call. 2.6% wasundlach says the line for him in terms of the bond market and their ability to break bad. consensus calls are coming in. coagulating around 3%. we are there with a number of different houses. up and italian btp's up. jpmorgan weekly survey went from being bullish on treasury to bearish. it is the biggest reversal in sentiment.

since june of last year. sainsbury's will be the stock in focus. bond markets. juliette saly has the latest on the asian market from singapore. >> it has been a good day here. handing the baton over. up by 1.3%ia-pacific for a fifth session of gains on optimism between the talks -- of the talks between the u.s. and china. beijing also announcing moves to boost consumption, which has given a good boost to a lot of car stocks in hong kong and china. the csi 300 closing higher by 1%. a solid rally in hong kong. the nikkei closed higher by more than 1%. those major gauges up. australia almost hit that level. we are seeing a good rebound in e.m. markets as well. in terms of currency moves, the yuan in focus and the aussie dollar always a proxy for these talks.

the aussie dollar hitting its highest level since december 18. mark cudmore saying despite the disappointing approval number today, you should look at the aussie starting to emerge is more of a bullish signal. 71 is where you might see. weakest performing asian currency today. we see oil prices at three-week highs. nejra: thank you. juliette saly in singapore. let's get the bloomberg first word news with debra mao. >> in a primetime television address, donald trump has demanded congress provide billions of dollars to combat illegal migration. speaking from the oval office in toormat typically used explain military actions or times of crisis, trump said funding for a border wall was the only way to stop a partial

government shutdown. them across rejected the u.s. president's description of a crisis on the mexican border and said trump must stop holding the american people hostage. wall trump: the border would very quickly pay for itself. the cost of illegal drugs exceeds $500 billion a year. vastly more than the $5.7 billion we have requested from congress. the wall will also be paid for indirectly by the great new trade deal would have made with mexico -- we have made with mexico. >> no president should pound the table and demand he gets his way or else the government shuts down, hurting millions of americans treated as leverage. tonight and throughout this debate and throughout his presidency, president trump has appealed to fear, not facts. >> theresa may suffered a defeat in parliament with rebels from

the u.k. prime minister's party voting to restrict her room for maneuver in the event of a no deal brexit. conservative lawmakers voted against may, sending a signal of their opposition to crashing out of the eu without a deal. the eu prime minister has five working days to support the exit agreement she has negotiated. the vote takes place january 15. london's heathrow airport has reopened after being shut down for more than an hour by a reported drone citing. afterures were halted 5:00 p.m. u.k. time, but operations resumed following a police evaluation. the incident comes after suspected drones caused chaos the week before christmas. 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. manus: i will pick it up from

here. we are risk on. asian equities, u.s. futures, albeit this morning. -- all bid this morning. president trump eager to strike a trade deal. it is not all optimism. you have the world bank pitching in. >> i think things are getting worse the last year. the title of the report is darkening skies. we see those guys are targeting over the global economy. global growth is slowing. risks are rising. joining us now from hong kong is bloomberg. -- bloomberg's china government

editor. >> we are not sure if we are going to get our details about how this went. we do know the chinese government has promised to release the readout. we have not heard of the u.s. is going to do that. there is cautious optimism as to how much the talks achieved. we did not expect them to be where we would get big overall trade breakthrough. we did not think this would lead to the deal we have been waiting for. i think people were optimistic it would lead to steps in that direction. now we are waiting to see. nejra: relative to expectations, how well have these talks gone? markets would suggest, pretty well. >> the markets are happy with them. there was a lot of optimism when they had been extended into a

third day. we were not expecting to see that. we are waiting to see what was in the details. what actually happened and whether concrete steps were taken in the direction of further talks. china bloomberg's government editor in hong kong. thanks so much. petra, great to have you on set. i want to ask you about one of your top calls. japanese yen volatility. i found a dollar-yen very interesting last week. why is that one of your top calls given the end did not do what many people expected? >> you are completely right. we viewed volatility as underpriced. we chose to buy because we thought is of the global

environment, lower support from the central banks globally, all this means big breakout in the yen. we are not sure what it is going to happen. the middle of this year. early this year, we were wrong. . something similar holds true. there is big potential for volatility. mainly because it is heavily driven by politics. the fungible from central banks is being taken away. manus: just to let everybody know, lu gang is a speaking in china at the moment. we will get a statement very soon. as we get those, they will come

through. good morning. welcome to the show. the yuanrested in given what we are seeing from the chinese. it seems to be more down the road of fiscal stimulus and perhaps tax incentives. do you expect a further strengthening in the yuan if this is the road they go? >> we are not sure. weeks, it has shown they have reached the bar in terms of a tolerance for further weakness. the rmbars back when was depreciating, it sparked concerns about capital outflow from china. this is why we think the chinese theorities want to treat

dollar you want price action carefully. dollar-yuan price action carefully. downsidefrom here, the should be much more limited than previously. nejra: i wonder whether some of that has to do with your view around the dollar. you don't think the dollar has peaked. why not? one byproduct of , the fedent market gave markets breathing room, , oneassets are stabilizing -- ituct of this will be will be eventually allowed to hike.

we see the markets as they are right now, markets will be no longer concerned. equity markets will rebound or stabilize. the fed will move. inyou look at what is priced , markets priced in cuts, now the curve is flat. another bigthere is response coming versus nothing priced in, we think this will prevent dollar weakness against the euro or swiss franc over the coming months. we think the dollar cycle has not peaked, but very close. we think the dollar will peak around the middle of the year. we are reluctant to call a peek if right now the fed is going to hike another two times versus the outlook -- does that mean for

emerging markets? we have seen a significant flow back into the em. i am looking at the rand, the ruble, and the rupee. in this reach for yields you're going to see the repeat. -- the rupee. we -- where does that leave us with these high-yield are's? high-yielders? >> we think this is constructive. the fed is allowing markets to stabilize. as the markets will stabilize and the concerns about growth outlook will disappear, only then the fed will start hiking again. the first step here is risk rally or suppose risk assets. when we publish our 2019 fx outlook come along indonesian

rupee versus the taiwanese dollar was one of our top traits. we would rather keep it in the value space. it is a high-yielder. it is one of the cheapest currencies in the asian space. , chief fx andpata rates strategist at ing. deutsche bank is said to be flashing its bonus called by 10% after losing half its value in a troubled year. we will bring you that story next. lines coming out of these trade talks. the chinese foreign ministry spokesperson speaking in hong kong. china says the talks have concluded. this is bloomberg. ♪

manus: 7:20 in london. the numbers are in for sainsbury's. they do not look good. the competition is heating up. discounters took a huge proportion of the christmas back. -- bag. third-quarter sales down. this is nearly three times worse than what the market had expected. the total grocery sales were expected to grow by 0.4% -- i nearly 1%. absolutely burnt. 0.4%. you are seeing this key set of numbers. ?ill they get there deal done you are seeing a real push. general merchandise sales collapsed.

the chief executive says retail markets are competitive. the consumer continues to be uncertain. nejra: that is a stock we will be watching. here is the picture of the broader markets. asian equities, u.s. futures rallying. commodities rallying. wti above $50. currencies on the front foot. dollar weakness along with yen weakness. meanwhile, the yuan is moving higher. is this all to do with risk assets having a bit of a rally on the optimism around trade talks? or is this a repricing of the negativity we saw a micron the fourth quarter of 2018? a question we will keep talking about. manus: absolutely. , petr currency front krpata is our guests saying they expect to hikes at the back end

of the year. the dollar near the october lows. is that a dollar story or are they going for fiscal ease? up 0.75%. 50 sainsbury's will play into that. china trade talks could have a material impact. that's the state of play on the markets. 79 days before britain leaves the eu. theresa may has her work cut out for her to get a deal through parliament. last night she was handed a defeat. the biggest impact could be to galvanize lawmakers when the biggest brexit vote happens next tuesday. petr krpata is chief fx and rates strategist at ing. it looks as if parliament is doing everything it can to stop

a crashing out with no deal. if we look in the amendment put to the house and passed in terms of constricting theresa may and her ability to maneuver on tax going forward. >> you are right. trend of u.k. politics over the past few months and the quarter. whatever theresa may came up with, it was not good enough. thes it looks very like deal will be watered down. it is very important to know at this point, even the parliament is what it did yesterday, the default option is a hard brexit. from that perspective and in terms of sterling implications, things will get worse before getting better.

we estimate not enough short-term risk premium is priced into sterling. , that deal is voted down will come through sterling. 50, youven with article talk about the fact there are various ways this could play out , what is your highest conviction in terms of the final outcome? >> the final outcome will be no hard brexit. theery much depends on route we will get there. we are cautious about playing sterling. structuresit via with very defined downside. in terms of our base case, it looks like articles could be extended. the reasons behind the extension of article 50, say if it is early election, if it is another referendum, you can see eurosterling going to 85 at

least at the beginning. of a is a high chance deal, sterling rallies. it is hard to trade. much forank you so being our guest host this morning. and so simply wrapping up the market permutations for sterling. 12740 on cable. saying parliament is going to do -- they're going to go the full monty in terms of trying to make sure there is no dropping out and hard brexit. eurosterling, 8998. nejra: they see limited upside to euro-dollar from here. expect the cost to move toward 110 over the coming months. we were talking about data coming out of germany. industrial production data missing to the downside. that is it for bloomberg

daybreak: europe. we will do it all again tomorrow. "the european open" is next. ♪

anna: welcome to "bloomberg markets: european open." i'm anna edwards alongside matt miller in berlin. matt: the markets say it is all about trade. stocks rallied in asia and u.s. and european futures are up as a deal seems more likely. the cash trade is less than 30 minutes away. anna: serious business. china's foreign ministry spokesman delivers a statement.