>> good morning from london, i'm nejra cehic. manus: and on manus cranny, live from abu dhabi. this is bloomberg "daybreak: europe." nejra: market suggests patients but not pessimism. we chinese data overshadow straight talk progress in the dovish fed. theresa may second defeat in two days. opposition leader jeremy corbyn says he will call for a general election if your deal flounders.

♪ manus: a warm welcome to "daybreak: europe." i manus cranny in abu dhabi. notthing that is perhaps sustainable, the rally in the dollar. is it the king is dead, long live the king? that is the mood of the market, the dollar is falling over. dollar,picture for the and hsbc says this is the least ugly contest and have a look at the yuan, it is strengthening. a five-month high, what else is going to come? you will see that debate in the dollar you one. and then oil, it is taking a

little bit of a breather. it's going to be an interesting weekend. add to the momentum in the oil market, opec plus will not let stockpiles exceed normal levels. give a little bit act and then rally 23%. good morning, how are you? nejra: great to see you in abu dhabi. you talk about oil rowling -- rallying after giving a little bit back. we've seen for years of gains for u.s. equities. some softness across some of the space that juliette saly will tell us about in just a second. it's interesting, the reasoning behind us. yesterday we were talking about the fact that the trade talks have given optimism to markets and suddenly that seems to have switched. is it to do with the china data? you have signs of softening inflation, but on the other hand if more room to the pboc to ease

to support growth. so there are two ways of looking at that story. so you're seeing the havens , and thellar-yen background to all this is the fed minutes. you might've expected the market would rally a little bit more or continue, considering that some read those minutes as dovish. pauseould be open to a and if they were listening to markets, so is the problem here just the fed chair's communications? numbers bruising set of , this is what it is operating from, ¥104 billion. absolutely busting on the downside. the talk about global brands collapsing by nearly 10% on the year. overseasoutside japan,

operating profit is stronger, up 12.6%. but you are just seeing the december numbers, but operating profit is a big miss, 104.7. the market had penciled in 107.5. guidance is iter profit will be down by nearly 5%. so it is a bruising set of numbers. i need to do more shopping and get down there. juliette saly is in singapore. maybe because you're not buying thermals anymore, being in that part of the world, but we are seeing japanese stock closing out the session down by 1.3%. goldman trimming their target for japanese stocks on the strengthening in. a lot of what you're seen across asia it is to do as the dollar boosting asian currency.

japan closing out the session lower but you have seen some gains coming through in china despite the sluggish inflation figure. australia closed higher as well with weakness coming through in india. overall the image ci asia-pacific index is fairly flat. let's look at stocks, smartphones never far from the .ews at the moment xiaomi shares getting hit very high. the ipo where they had the lockout for people who bought into the ipo has now been lifted. a lot of investors selling out of the stock. remember they bought some of the shares for as low as two cents hong kong. ony has downgraded the stock a week outlook for iphone shipments. then the carmakers still very way in focus, leading the hong kong today, up by 6.5% in the afternoon session. citigroup upgrading the stock, yesterday we had a call coming through for a downgrade to general motors but we are seeing

some good signs coming through. nejra: thank you so much. we're asking question, what message does china's trade talks send to the market? join the debate, reach out to us and our team on your bloomberg. a little more of a risk off caution in the markets today. let's get the first word news with debra mao in hong kong. >> theresa may has suffered her second defeat in two days. to return with a revised brexit plan within three days. if as expected the withdrawal deal is rejected next week, the government had originally expected to have three weeks to come back to parliament. later, opposition labor party leader jeremy corbyn will call on may to hold a

general election if her brexit deal is defeated next week. president trump stormed out of a white house meeting with congressional leaders yesterday as talks collapsed over his continued insistence on border while funding. tweeted thatident he asked nancy pelosi of she would approve funds for his border wall if he reopened federal agencies for a month. she said no, so the president walked out. democratic leaders say the government is restart before wall talks can begin. slowed factory inflation sharply in december, continuing the slowdown for a six straight month. year earlier,from the weakest level since late 2016 on softening demand and lower commodity prices. consumer prices in china also slowed from november, rising at an annual rate of 1.9%. both inflation measures were below expectations. meanwhile a bloomberg survey of bond traders and analysts found

expected the pboc to continue to cut further the amount of cash that banks must hold as reserve in 2019. the democratic republic of congo felix oneition leader last month election. if the constitutional court validates the results, it will be the first transfer of power by the ballot box since congo gained its independence from belgium nearly 60 years ago. 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: thank you very much for that. debra mao in hong kong. december's meeting reveal that policymakers took a more cautious approach to further rate increases.

the statement has indicated, the vote to hike -- to hike was unanimous. but some officials favored no change. meanwhile you have boston fed president telling bloomberg thinks the economy is looking healthy but he says he could be wrong. he is listening to markets. we are trying to get to the point where we are very time when, and at a forecasts are telling us that more than likely we are not going to have a bad outcome, that will have a reasonably good outcome with the employment rate but the same time the financial data is coming much weaker. implying a bigger slowdown in the economy. i think we need to get a little more understanding of why they are so different. my guess is that over time we will see that in 2019, the

economy will be reasonably strong but the -- the rate will continue to drift down and that financial markets will recover. i realize that my forecast can be quite wrong and the financial markets have such a different view, at least the last couple of days, it has been quite negative and quite volatile, so i have to take those financial market considerations into account. >> assuming we don't get some sort of where outlier, strength or weakness in the numbers when they come in about his forecast, how long do you wait to get enough data? a quarter, half a year? brexit will be data dependent. i would expect as we get into the second quarter will have a lot more information about the concerns embedded in the financial market, if they show through two real data. my best guess is we won't see that much of an impact. as we get into the second quarter will be clear that we continue to grow a little above 2%.

hopefully stock market and the bond market and other financial markets will reflect the fact that some of the tail risks priced as it high probability turn out to be much lower probability. he was just one of four fed regional chiefs who said the central bank can take its time to assess market turbulence and risk to the u.s. economy before adjusting monetary policy. chicago fed president trump seven said it looks stable around the 2% target. carefully take stock of the incoming data and other developments. the atlanta fed president saying a patient approach to policy is warranted. one of the most of his officials warned that rate hike could

cause a recession. stephen, good to see you this morning. did this host of heavenly bed voices stopped the yield curve from inverting? steven: think the most immediate effect, the economy was not only ok, but bullion. employment went up, wages went up, and incomes for really strong. far from indicating a problem, it indicated the opposite. when the stock market rally, the bond market decided there wasn't an immediate crisis, and of course this focus on the yield curve is hugely important. the fed have met their mandate, they have low inflation, the consumer price measures and

unemployment is very low. innocence a sense, they have the luxury to be patient. they don't have anything on the agenda. i think they will tighten more in a bit of patience is fine after such weakness in the stock market, but the key thing is, it looks as if finally wages are picking up. the end of this month, the employment cost index, a much better measure then we had on them in a tricky position. they were hawkish in the summer and they came back strongly last week. if they want to go hawkish again, they will look a little bit like they are zigzagging, so they want to be patient. the the next move is more hawkish data. eric was just saying he needs to understand why the market can forecast so differently. in your understanding, why is there such a gap there? >> is between about this. the markets went up a long way last year.

ton we look in detail begin was very much focused on the market that had gone up the most and down the most. there was a lot of selling going on. of course does that mean the recession probability was much closer? no, it meant people were taking profits on a pretty tough here in it was a liquidation trade where there were many buys because it was close to the end of the year, and the markets have rebounded. the markets move more than the fundamentals would have justified. the fed or right to take stock because they don't want to keep pushing the hawkish button if the markets are saying they are worried. they don't have an immediate inflation trade. the actual data has been benign for months, and that's a big factor in their dovish tilt. , you read my: mind. is that what gives the fed the

button to hit this path on patients? they said they might path but they haven't yet. the breakeven inflation is something they would pay attention to. and know financial markets the tumbling oil price has been a big influence on the breakeven inflation numbers. they also pay a lot of attention to surveys of household inflation expectations, which are much more stable. of peopleo sign giving up the idea of any inflation and going into deflation territory. that specter has really gone. so the fed should be thinking we've done a pretty good job. donald trump has been heavily criticizing the fed.

it happened years ago under , but he has raise the stakes by effectively claiming in advance the fed for what is going to be a slowdown in the u.s. economy. you hinted that what we got from the minutes was pretty much what the market wanted, the downside risk globally, they talked about the fact that there would be a relatively limited amount of additional tightening. we got that sense that they would be open to a downside risk. there was more discussion around the balance sheet than was suggested by jerome powell in his news conference. they are ino say tune with financial market worries. 2019 is a bigger concern for the markets, not so much what the fed does but jerome powell's communication. we will hear from him more often. joben: it is a tough

communicating a steady, clear course when financial markets are going all of the place. and what was the market worried about, and economic slowdown from the fed? what we had was stunningly good data and a dovish fed that was wonderful. this month also it is reporting season, for the s&p 500. we have had three low out reporting seasons with tremendously strong earnings growth. i think it will be positive, but everyone will be looking at guidance of the ceos. things look a bit wobbly. i think they will probably be ok, worries about tariffs would be great excuses for companies that have underperformed, but generally speaking we had a positive earnings round and the data continues to be firm and the consumers have plenty of money to spend. data isthe survey

starting to pick up a -- again. i'm positive about the u.s. economy. manus: let's see what the reporting season brings us. stephen bell stays with us. coming up, china hails this week's trade talks as extensive, index, and detailed. the u.s. wants to ensure beijing delivers on its commitment in the event of a deal. bloomberg radio is live on your mobile device in the london area. this is bloomberg. ♪

manus: >> they may get it back up, but that's not something of which we could be certain, and there may be consequences to the things they do to try to get

yes, i wouldp, but be concerned looking at the chinese economy. nejra: that was larry summers speaking to our bloomberg's david westin. let's get a check on the markets. another day of you won strength, near the strongest since july following the trade talks. we also have data out of china but the yuan has been on a bit of a tear to the upside. a little bit of a breather in wti after oil is back in a bull market. a bit of a stunning rally for oil yesterday. manus: s&p futures nothing four days of the winning streak, the longest streak in 10 years. your 50 day versus your 200 day, it's good night irene for the

bond market. after closing at near the highest in a month. there is no need to be overly dramatic, the markets are not in a wait-and-see mode with the developments of the latest u.s.-china trade talks, investors are grappling with weaker growth. factory inflation cooled sharply in december but seeing the slowest pace in more than two years. nejra: today we're asking the question, what message does china's trade talks comments sent to the market? join to the debate, reach out to us on your bloomberg. bell is still with us. let's get your first taken answer to that question. steven: the chinese are desperate for a deal. they are in the weaker position. i want to hear what the u.s.

administration says about the talks. mattersion poll that for donald trump is the stock market, and stock market weakness for the end of last year rattled him. a lot of people has said, he's become a little more accommodating. we are expecting they will have some sort of deal, it's not the into the problem, and this is way beyond trade. it is a strategic rattled struggle for power. important announcement out of china that we are waiting for is a significant stimulus package which we expect in a week or two, and if that is significant stimulus, we've had cut in taxes, which is not something you normally hear about in china. realer tax cuts would be a positive an advantage in spending. the chinese economy gets more domestic stimulus, the drive from the reorientation i don't

think what changed enormously whatever the outcome of the talks are. if that is what you are what is it due to the yuan? a great deal has been make this morning on the strengthening of the yuan. passed the worst of the crisis for yuan? steven: i think the chinese economy weakening, the problem of wealthy people in china wanting to have some money outside of the country is there is onee, really big positive there, which is china is going to get into these bond indices during the course of this year, and that is a massive inflow. if you put china into the big passive all of those

investors, anyone with a benchmark is going to be buying those bonds. that is a source of demand that was not there a year ago. as well as the fact that got terrific control over the financial markets in china. they are not are free and open market, so they can control it. the big risk of a real dramatic weakening of the yen, up the wind, excuse me, we are past that. nejra: should we be concerned about growth because if this? is it to do with weak domestic demand, or does it give them more room to ease? steven: it was serious but not anymore. the issue of policies relate to the credit problem. they relate to the fact that you can't keep easing monetary policy if your currencies under pressure. that is the dilemma that many countries face. thoughts, timese

has run out. china, we will dig a little bit deeper. on theresa may. ♪ amazon prime video is now on xfinity x1.

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manus: it's a reality check for markets. breath withsing for lower inflation out of china. we have a lot to grapple with, despite the detailed discussions that are ongoing. i want to focus on the yuan because those trade talks are but one facet. the wine is at a five-month high we have a couple of notes here. america merrill lynch saying we have passed the danger zone, they say you can get a longer run is location. you get the rally on the back of , ifbig deal, they reckon

you listen to what stephen is just said, more easing to calm, could open the deal to potentially negative implications for the currency. stop talkingn about weaponizing the yuan. nejra: it does seem to be the barometer for what the market is take away from the trade talks. if you look at the equity markets, it's not that risk on tone that we had yesterday. you question if this is a reaction to that factory inflation data. the bloomberg economics take is a fact that it under shot means it does put the pboc, it takes away the pressure. that's one way of looking at it. and what implications does it have for the federal reserve benefit china and global markets and the low inflation we are seeing globally and the impact for what it does in 2019. manus: let's dig a little bit

deeper into this. there is not much movement in the equity story this morning but in terms of the tech sweat -- tech sector, what are you watching? agam: markets are snapping a four-day gaining streak, but around a quarter percent. it's falling in tandem with the .enchmarks, trending flat the technology sector will be in focus because one of india's largest information technology companies will announce earnings. we expect earnings to come through, but the real is thating thing here

is precariously poised at its 200 daily moving average. it's a heavy stone that index and that could tip the balance. so the earnings will be very important as you indicated. manus: let's get to you, and marie. the bears have been banished. ingood morning, we are back the bull market for wti. you can see perfect on this chart here, we are out of the doldrums we had in december, up more than 21% on wti. yesterday, confident the deal would work and at one point, 2 million barrels a day is enough. on top of that, potentially what the market is doing is

encouraging talks to beijing and all of that helping the price recovery. the you onerise, trading at 6.8, the highest we have seen in months. forecast, youf might want to look at how all the ranges are so varied. see 7.4%.ere's ee 7.4%.op bears s manus: thank you very much, team. now to brexit, and there are a growing number signs the u.k. parliament will reject theresa may's brexit deal. the prime minister suffered her second defeat in two days. this time losing control of the timetable. if the vote next tuesday doesn't go her way, with only 78 days

until leaving the e.u., the u.k. is in uncharted territory. david.ring in good to see you this morning. if this is the case, where are we then? david: what happens next? that's what everyone is scratching their heads about. it seems impossible for her to win this race. if you see what is have the last couple of days, she is unable to really control any of the legislation this moment. it does seem likely that will be lost. the question now becomes how much will she lose by and what is she do next? downing street admitting for the , saying the prime minister will come back quickly with some sort of plan b. everyone is wondering, what is

plan b? part of that will be decided around the margin of the loss. this is what the europeans are looking at as well. if she loses by 10 votes, maybe she comes back and has another crack at it. if she loses by 100, what is she going to do? will she call another vote or dissolve parliament? labor will table notion of confidence immediately after that. corbyn calling again for a general election. is he likely to get what he wants? that the rebels are happy to vote against the deal, but voting for a general election is a different matter. we know the party that keeps her in power, they said when it comes to a confidence vote in the government, they would rally behind the prime minister.

mr. corbyn will have a go at it, but it seems unlikely that he can win at the moment. manus: david, thank you very much. our director of news. steven bell is our guest this morning. there are any number of permutations that can happen over the next 10 days, but how does it look on defeat for the prime minister? does it build a case against no hard brexit? yes, i think, is the short answer to that. what friendly, i don't like trading on politics. the new scenarios coming out by the bucket load at of the u.k., is beyond my ability to trade. what is clear is that the european court of justice's

decision that the u.k. can unilaterally revoke article 50 is a game changer because it pushes that scenario of brexit being overturned on the one hand and also makes it unlikely that the e.u. 27 want to make concessions to help theresa may. all they want is for the u.k. to stay in. they want our money and they want to see us humiliated for trying to leave. the politicians in europe want that. from my point of view, the prospect of another referendum is strong, if labor prasm that motion of no confidence in the government eight you talked about, and they lose it, the policy is to seek a second referendum. that is the guaranteed strategy of labor. that's why corbyn doesn't want to do that. he will do it, that increases the chance of the second referendum and similar unrest in the country. invoking article 50, second

referendum, and reduced risk of a crushing act. nejra: is there any chance at all, everyone expect the deal to be voted down next week, then there's the prospect of more votes. is there any chance the deal theresa may has as stance could get voted through just because we are getting so close to the timeline and they will feel under pressure to avoid that no deal scenario? if we: they could say don't get the deal through, we will have to resend. and it will be ripped from your grasp just as you think you have one. i'm not sure that strategy is is going to work. no brexit or no deal, that is the risk. some people don't want brexit and someone a much more firm brexit. it's going to get very exciting in that sense and the

opportunities are quite wide-ranging, from resending article 50, a second referendum, the actual chances of theresa may still going through i think are very low indeed. manus: we wrote a piece the other day about billions leaving the city of london. an exodus ofee capital? is it a generational shift from an economic point of view about destruction of economic wealth? steven: i think you have to make a clear distinction here. dominantdon is the financial center of europe. that is not going to change. but it has gained enormous market share. the french foreign exchange market doesn't exist, it is all in london. what we will do is lose market iod.e in a slow-growing per

we have a significant operation in the netherlands, we are already there. if we didn't have that, we would have to establish it. we will have maybe a half-dozen more jobs in the netherlands as result of brexit or whatever happens than we would have had. that is not a huge number. the expansion would have been greater if it had not been for brexit and all the u.s. folks love being in london. gain ins, they will fringe laborose, leastthere are at fundamental structures that have to be addressed before we lose our market share here in the city. steven bell stays with

us. coming up, saudi arabia's cell 7.5 billion dollars international bonds in the first test of how much damage the khashoggi killing has inflicted on investor appetite. tune in on your mobile device are digital radio in the london area. we will stay with you wherever you go. this is bloomberg. ♪

broken,he numbers have taiwan semiconductor, 289 point $8 billion. you see the destruction in terms of sales for december. line, a little bit of a drift up in terms of sales from january to december.

let's look at the broader markets and the global equity rally taking a bit of a stalled today. a stronger yen weighing on japanese equities in the china factory inflation data coming in soft. rallythe post fed minutes , trade talks seem to have given some positive upward momentum to the markets but that is getting a little bit of relief to the downside today the futures lower as well. thes turn to politics and opposition leader of the democratic republic of congo has been declared the surprise winner of the recent election. first transfere of power by the ballot box in congo gained independence from belgium nearly 60 years ago. editorica government joins us. good to speak to you. how much of a surprise was this?

surprise,fairly big because the general assumption was because of the way the elections had been run and because it took so long for the results to come out, that the protége would actually win. has beenition leader declared the winner and it has been a huge surprise. manus: the question everyone will ask is the veracity of the results. were they fair results? >> it is hard to save this point. it took a long time for the electoral commission to count the votes and that caused widespread suspicion about the outcome. there was a general assumption that maybe the commission would try to cook the books, if you will. and the catholic church, which is a very important and influential organization in the country had earlier said last

week that they knew that the winner was in diplomats had heard that the winner was actually a different opposition candidate. so there were two opposition candidates, the one everybody had believed had one, had not won, and the person who had been declared the winner is a surprise candidate. it all depends on what the catholic church will say today when they will hold a press conference and say with their result has been, what they think are the results, based on their accounting of the ballot papers. nejra: we've had some breaking lines coming through from congo, disputing the election results in calling the victory electoral fraud. what does this mean for the mining industry? >> the mining industry surely will not want to see much

violence in the country so it really depends on how the congolese respond to this electoral dispute in the making on the official results, depending on what the catholic church is going to say. generally, the mining industry is used to working in congo for decades now. just to remind you, congo is one of the world's biggest producers of cobalt, which is used for electric vehicles. i think they will wait to see what the outcome will be. the general assumption is that there will be less by than expected. so that might be a good thing -- there will be less violence than expected. that will be a good thing. manus: there's a lovely article about who is involved, with a figure of $9 billion. the mining industry has a lot at stake. has sold $7.5

billion of international bonds. it was a litmus test of how much damage the killing of washington post columnist jamal khashoggi had on investor appetite. a move that would force the oil its accountslose for the first time in four decades. joining us is our middle east africa reporter. good to see you this morning. the reaction on the bond sale, how much appetite was there? what we understand, there was a huge amount of appetite. ,18 billion worth of business and as you said, saudi arabia did have to offer a premium to

investors because of what happened, concerns over the killing last year, you may remember the huge outcry internationally about what happened to the journalist. ,audi arabia may have thought let's sweeten the deal a bit for investors, just to make sure the deal gets done. you,: good to speak to what was most interesting to you about the saudi bond sales? said, it was really a litmus test for saudi arabia. it did not hold a roadshow which was also interesting. it just came out with a deal. it's a price many of us here, certainly in the newsroom. it really seems as they just wanted to get the deal done. they did start the pricing earlier in the day, it was quite high and did tighten a little bit so they didn't have to take quite as much as was first expected. but it was still slightly higher

than it paid last year. you so much to our middle east and africa finance team leader. ,il trading lower this morning having burst into bull market territory yesterday. wti up around 22%. growing optimism over production cuts by opec plus and progress in the u.s.-china trade talks have driven the rebound. bell is still with us. suddenly we are back in a bull market. is this to do with the fundamentals? i don't understand why investors are suddenly more positive. steven: the front end of the inket is much more volatile the forward futures which are where a lot of the consumers are buying.

that is a much more stable market. falls mainly at the front in and when he speculated moves a reverse come you can get quite a shot. the oil prices where supply has been the main driver, that has meant fluctuations in demand. the price has fallen to low level. it was much higher a few months ago. a little bit of news on inventories and suddenly people scrambled to cover their shorts and it pops up a long way. from my point of view, i think it is in the trading range. i would see it going a little higher. don't listen to my forecast, but i would say little bit higher, the permian basin means more infrastructure spending. some of that infrastructure will wear out so they need a somewhat higher bond price. it is the u.s. industry that has been the swing mover of the supply side.

the naked high enough, it gets expanded. that is the reason for expecting a somewhat firmer oil price during 2019. manus: what's was made last year the crisis from shale and from itself. it had its foot to the floor, it had cuts and now we are back to cuts, all within one year. does it lacked the robustness that maybe it once had? steven: it had a market share double where it is now payment it was much more important when they had strong leadership from saudi and its allies. but of course it had much more influence. as its market share has dwindled who were operating on simple commercial criteria, where is opec is led by its political leaders, and therefore had much more political influence on prices, therefore

the market. we are looking at simple supply and demand. iny are not interested making political gestures, they just want to make money. that is the radical, permanent change. ajra: i think you do yourself disservice when you point out you have a track record of getting the oil market wrong. one thing you pointed to was that the only thing we had to fear was the absence of fear. is that going to change in 2019? steven: i like it when markets are nervous and frightened. it's like a sunny day in london, it is a positive surprise. i think it is an effect of the nervousness. i actually got equities on new year's eve, and it has gone very well so far. when earnings expectations are high, clearly the only change is going to be a bit of market nervousness. markets are nervous,

unnecessarily so, in my opinion. vixs: i was looking at the versus the cash market versus realized volatility. that needs toing happen in the first quarter to reestablish growth momentum to the upside, and acceleration? steven: first of all, i think it has already happened. payroll figures show that u.s. consumers are getting terrific income growth. which worried people the day before payroll, that was too high. that stabilize, and i would index of consumer sentiment to improve because they were all watching their televisions. those fears are going to receive. i think we will see a pickup in those data.

nejra: thanks for being our guest host this hour. we will continue the conversation on bloomberg radio at 7:30 a.m. u.k. time. this is bloomberg. ♪

>> good morning from abu dhabi. this is bloomberg "daybreak: europe." bloomberg, top stories. more fed officials pile on the bandwagon. markets suggest patients but not pessimism. overshadows data trade talk progress. asian markets mixed with futures in the red. and theresa may's second defeat in two days.

jeremy corbyn-- says he will call a general election of her deal flounders. nejra: just under an hour away from the start of equity trading. let's get to the numbers from tesco. tesco confident in its outlook for the year. it said it is on track to deliver the outlines -- ambitions outlined in 2016. for like for sales -- sales up 2.2%. double what the estimate was. third quarter like for like sales up 0.5%. it looks like a bit of a positive spin on these numbers from tesco after we got that

downbeat report yesterday. a lot of focus on these u.k. retailers. it has looked like the worst christmas since 2008 for some u.k. real tellers -- retailers. but for now, an update tone from tesco in the numbers and commentary. solid growthad a over the christmas time. fromwas a critical thing marks & spencer's. what they are saying, third comparable -- third quarter, food comparable sales. like to like sales in the u.k. declined by 2.2%. on the food comparable sales, for the third quarter, it looks like that is a beat on the estimates. food, 2.1%. side, iting and home

is getting tougher for them. 2.4% contraction. the market had estimated of the klein of 1.7% -- a decline of 1.7%. your headline went red on test goes. -- test goes. -- tesco. six-week have group comparable sales down 3.4%. growth declined 5.6% they are on track to detail th views.its with yo manus: this is the john lewis partnership. they said their sales grew by 1.4%. they seem significantly positive cash flow for this year.

these two companies i am covering, marks & spencer and john lewis, going through challenges. closing of stores. john lewis partners say seven-week comparable sales grew by 1%. there is a red headline. we should touch on this since we are on the consumer, the u.k.. consumer confidence may remain weak into next year, that is the red headline. it is building up layer after layer in terms of what we know about the economy. johnive cash flow from lewis partnership. how are the futures looking at? what are you looking at? nejra: seems like we are looking at a pause. yesterday, we got a lift in u.s. equity markets. in gains in the s&p 500. you appear in futures --

european futures pointing lower across the board. perhaps there is a reality check about how much more work there is to do with the trade discussions despite the mid-level meetings. and we have chinese factory inflation coming in little softer . money moving into the yen and into bonds. manus: look at the treasury. much has been made about the ratio being lower. i did it on the three years. you mentioned the 10 year. the ratio on u.s. treasury markets the weakest since the financial crisis. you have bigger auctions. -- is the key issue for the markets when it comes to u.s. treasury contract. you see a little bit of a movement into the buns. ds.

good demand yesterday for the 10 year auction for them. let's talk about the markets. we have juliette saly. mixed to lower session in asia. the csi down 0.2%. we had some weaker losses earlier in the session, and then a little bit of a rebound. chinese stocks finishing lower. stock market the laggard. suggesting you should minimize your japanese equity portfolio due to the strengthening yen. a lot of the movement was to do with currency fluctuations. the australian share market closing higher by 0.3%. remember the msci asia-pacific higher for five sessions in a row.

when we talk about some of the currency moves, we so the bloomberg index fall below the 200 day moving ag average. yuan pushing has the dollar. aussie dollar reversing. good data on iron ore exports less month. -- last month. the indonesian rupiah, it is stronger. nejra. nejra: we are asking the question on mliv. trades china' china's comment talks send? trump stormed out of a white house meeting with congressional leaders as

shutdown talks collapsed over her's continuous insistence on border wall funding. he said -- she said no and the president walked out. if i open up the government, you will not do what i want. that is callous. that is using millions of innocent people as sort of ponds and it was wrong. -- pawns and it was wrong. later, he slammed the table. when leader pelosi said he did not agree with the wall, he walked out and said we have nothing to discuss. >> theresa may has suffered her second defeat in two days. if the eu sale is

rejected next week. the government expected to have three weeks to come back to parliament. in a speech, jeremy corbyn will call on may to hold a general election of her brexit deal is defeated next week. new finance minister says the peso may strengthen by 19 per dollar under the right conditions. rally is likely to continue in the short term. mexico's new government has been mending fences with investors after sending the peso into a tailspin in late october after canceling a $13 billion airport already under construction. bei believe that it could further down, 19 pesos per dollar. when i say 19, i am saying it in the short-term.

i would be very optimistic. hopefully i am wrong. that is different. >> global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. nejra: thank you so much. showatest fed minutes lawmakers are taking a more cautious approach to rate rises. fed president said he thinks the economy is looking healthy but says he could be wrong. thee are trying to get to point where we are consistent with our dual mandate. forecasts are telling us more than likely we're not going to have a bad outcome, we are probably going to have a reasonably good outcome, at the same time the

financial data has come in much weaker. a biggerflying may be slowdown in the economy. when we have these two differences, i think we need to get more understanding why they are different. in 2019 is over time, the economy is going to be reasonably strong and the unemployment rate is going to continue to drift down. i realized my forecasts can be quite wrong and the financial markets have such different view, at least until the last couple of days it has been quite negative and volatile. i have to take those considerations into account. that was the boston fed president speaking to bloomberg, giving his latest views. four fed regional chiefs who jumped on the ause bandwagon.ve\

a fed chief said because stable, we have the ability to wait and take stock. meanwhile, you have the atlanta fed chief -- saying a patient approach to policy was warranted. one of the most dudley's officials -- dovish official id more rate hikes could cause inflation. us thisu for joining morning. your case is a trade deal happens and hikes are back on the table later this year. is policy going to be predicated more on what happens with the trade deal than the u.s. thomistic economy? >> -- domestic economy? >> > the fed pivot signals to us

and opening. if the trade wars do happen, we are going to see a risk off environment. safe havens will rally. the case.te also was if we see a situation where all of the sudden the trade wars sorry, the trade wars subside and we see equity be in aally, we could situation where u.s. equities could go to 15% and the fed is saying, we need to slow things down. in french -- interest rate differentials whiten. manus: i read through one of the stories this morning. people talked about policy errors from the fed. what i am worried about is a communication error, communication gap. you look at what powell said, balance sheet on autopilot, versus the minutes.

muted inflation. assessing factors talking about volatility. is there a communication error being built at the fed and the moment? i would respond to that with actually perhaps it could be the opposite. ll hasas in -- powe introduced the possibility of additional press conferences. that is because he understands the risk of a misstep. so they want to increase communication. with the trump administration. nejra: when we had the minutes, they showed a lot of things to reassure the markets manus was just pointing to. a clear discussion around the balance sheet. across.n't come was there a danger the more we hear from him, the more we get market volatility and risks of

the market misinterpreting what the fed is doing? there will always be that risk of miscommunication. i would side on the position that they are trying to best telegraph their intentions. the fed has changed very much. relatively can be well-positioned and avoid excess volatility. manus: when you leave the children alone with toys, like fonts traders, they tend to break things. the bonded just save curve from inverting? curve,erms of the yield we may have a different view. the fed itself in mitts -- admits qe has essentially pushed down the 10 year by about 100 bits. view we are almost at

inversion i would question slightly. the next bit to that argument in terms of inversion, i would point to the fact it takes a long time for us to go into recession before an inversion takes place. the final point that make about inversion in the u.s. curve, the s&p again tends to keep on rallying after the inversion for on average 14-15 months. i'm not saying it is all clear but if we look to history, there is a lot of support we are just not there yet. nejra: a reason to be optimistic if you follow that view. no festive cheer for u.k. retailers. christmas numbers suggest 2018 was their worst christmas since the financial crisis. we discuss u.k. retail next. this is bloomberg. ♪

just almost 40 minutes to

go before the start of your trading day in europe. i am manus cranny. good to see you. in london.ch we are seeing strength for a second day. perhaps a reality check over how much there still is to do with the trade talks. factory inflation data from china as well. the yen, safe havens are big. a little bit of a risk off tone. the bti, taking a breather after bursting into a bull market. perhaps markets a little bit pute optimistic on opec out cuts. by the way, not a huge

number of companies -- 10 year yields. as to whether the auctions are going to be tougher to get away. when it comes to the euro stocks , we are just seeing reflected what is going on in u.s. equity markets. bond sales are also important. aboutd i are talking china's trade talks with the usa. they saidthe comment yesterday, the detail level of discussions, what does that do to markets? team.n join the mliv the guest host this morning, still with us. it seems as if we have lit a torch on a relief rally for sino u.s. relations. .his could be a kicker

they do a had worked deal but it is not going to be the end all of trade issues. what do you make of that proposition? wax -- >> our view is the chinese need a trade deal more than the trump administration. that has already been signaled. if you look at the policy decisions and initiatives all the way back since last summer, we have seen monetary easing, fiscal stimulus. one of the main themes and in london we are not as aware of this as we should be. the xi administration is concerned with domestic stability, unlike the trump administration. the trump administration shrugs anything off. thexi -- shrugs anything off. administration is highly

motivated to see a lessening of the conflict between u.s. and china. besides .2, and we are likely to see more stimulus from the pboc, and the factory inflation data says haps they could not go ahead with that. yuan, is that going to be a problem if it does not strengthen? is thenterpretation government saying to the domestic population saying, don't worry it will not go down further. there is a prospect of capital flight. ae of the reasons we saw domestic equity selloff was because domestic investors did not believe in the story. let's see what 2019

brings. thank you for sharing your thoughts. someo-cio -- we have had dark retailers come out. sales fell. dropped less than the market expected. they say they have had solid volume over christmas spirit when it comes to john lewis, admit -- theymay see lower profits. short interest is pretty high on marks & spencer's. light perhapsf from tesco. let's talk more about this from the credit perspective. joining us is bloomberg's credit market reporter. good to see you. manus summed it up nicely. bad foreen pretty

the retailers. but tesco, saying they remain on track for the year. what signals is the credit market sending regarding john lewis? >> when you have the worst decade --riod for a nd prices have been declining. the price for insurance against a folders has been increasing. there have been some green shoots. tesco beating estimates. tesco is what we call a rising ratingoing from a junk to investment grade rating three the other is mark and spencer's. declined but not as much as the market expected. they pointed out this is due to

negative like to like sales especially in the food segment. if we have something positive, at least we did not drop as much is expected before. manus: it is fascinating. we have reports saying retailers had the worst christmas since the financial crisis. that is a factual statement? >> it is indeed. something to be very wary. the biggest risk for the u.k. high street is the bond market. a number of companies, particularly clothing retailers who had been distressed for a number of years. when you have the worst period in a decade, those companies are going to be in big trouble keeping up their fundamentals. nejra: thank you so much to bloomberg's credit market reporters. watch the stocks when

the equity market opens in 30 minutes. the european open is up next. great the with manus and abu dhabi for today -- great to be with manus and abu dhabi for today. this is bloomberg. ♪

,> welcome to bloomberg markets the european open. i am anna edwards. the cash trade is less than 30 minutes away. stocks stall. global markets take a breather from the rally. the shutdown in the u.s. shows no signs of ending. caution over the central bank's tightening cycle. the markets