nejra: good morning from bloomberg's european headquarters. live in upper darby, welcome to daybreak europe. stocks in hong kong take a hit from ugly chinese trade data. are the bulls still in charge? cutting output to shrink the crude glut. minister isl convinced opec is on the right track. theresa may makes the last asempt at a brexit deal tensions emerge in greece and france.

manus: welcome to daybreak europe. welcome to abu dhabi sustainability week. let's talk about trade and how it's impacting the yuan. the yuan is just off a six-month high. we have seen pretty awful trade --a, but still the one goldman sachs believes the bar is high for failure on trade talks. minister, the own money, saying we are doing our best. minister, what more does he have to say? consumer leverage takes most of this market. the turkish lira also in focus.

they will devastate the turkish economy if they take the curve. is it too soon to be optimistic in e.m.? good morning. risk assets have had a good run whether you are looking at equities, at e.m., at credit. we are seeing that in e.m. fx. you pointed to the lira, but also emerging-market equities. not to speak of what is going in the asian equity markets. s&p futures point lower, same for euro stoxx 50 futures. the yen's bid. aboutells you something risk off happening today. you're seeing dollar weakness, but the end is what i want to focus on. treasury markets not trading right now. japan is closed, but the futures indicating that 10 year yield 270d drop further from the handle it hit after he dropped four basis points.

let's check on the markets in asia. juliette saly has more. in the tug between the bulls and the bears, it looks like the bears are winning. juliette: japan closed for a public holiday, so ignore that green we are seeing on the nikkei. the msci asia-pacific index down around 1% last week. asian stocks are up by 4%. it is this week chinese trade data weighing on sentiment. hong kong and china leading the decline, although the australian share market closed flat. let's have a look at stocks we have been watching in the region. we have that big move in abm them shares -- bev shares. asia. are its rivals in thai beverage which is listed in singapore up 3.7%. jpmorgan says you should be looking at the macau casinos despite broker downgrades on

that sector. when macau off 4% today. south korean tourism stocks getting a boost on reports we are seeing an influx of chinese tourists. manus: thank you very much. .uliette saly in singapore the partial u.s. shutdown in the united states, president trump says he is demands for a border wall funding is said to be the longest in the modern era with no end in sight. republican senator lindsey graham says he floats a proposal to president trump that negotiations remain at a standstill. >> i tried to see if we could open the government for a limited period of time to negotiate a deal. the president says, let's make a deal, then open the government.

nancy pelosi says even if he opened the government, she would not fund a wall. that is why i'm depressed. manus: jodi schneider, good to see you. what is the latest on the shutdown? is there any move to try to this impasse? not think lindsey graham is the only person depressed over this. there is no movement. neither side has scheduled a negotiation. president trump says it will be a last resort for him to declare the national emergency. open the government that way, get his $5 billion he is demanding. democrats say they are not going to give in. the have leverage now that they control the house of representatives, that they will wait for him, that he is the key to reopening the government.

meanwhile, eight hundred thousand federal workers across the country went without a paycheck on friday. the pain from the shutdown is beginning to spread. it is now the longest in government history. basically, at this point, we are starting to see effects of this including this petition security administration security workers -- transportation security administration security workers not showing up at work because they are going without pay. some airports have had to shut down security counters as a result. no talks scheduled between the sides. nejra: jodi schneider in hong kong, thinks for joining us. data being delayed, including that see ftp data on treasuries. positioning that could matter for the markets. political risk is a key concern on the side of the atlantic from brexit to greece to france. political divides across europe are deepening as weak data in germany raises the prospect of a recession. a may seem the ecb choosing

curious time to unwind its flagship stimulus policy. stephen engle is at the financial forum in hong kong joined by the first deputy governor of the bonds of fronts read -- france. >> that's right. there are so many headwinds we are addressing, whether it is the ongoing trade dispute between china and the united states, whether it is the vote being held tomorrow and you are right when you say the first deputy governor of the bank of france to talk about the headwinds we are facing in the french economy. thank you so much for joining us on bloomberg television. we know about the different headwinds we are seeing in the global economy. we just had an introduction about the ecb and whether they are exiting their stimulus program at the wrong time with storm clouds of a possible recession looming. i know you do not comment on

central-bank policy, but what is your view on the weakening french economy right now, which the bankratcheted up? expects 0.2% growth instead of 0.4% growth in the first quarter. >> i think the global picture as well as the european or french level is the deceleration in expansion. we are really very far away. i think that is important to keep in mind, to really understand what is underway. we are seeing an expansion. down.recasts are revised , the lastst for 2019 forecast is 1.7. still significant growth.

you look at financial stability, what is your main concern? deceleration this of growth and the uncertainty you were mentioning. the downside risk create challenge for the financial -- and a number of factors. .he escalation of trade tension brexit.europe with >> does greece concern you? that is not particular -- >> brexit the vote tomorrow. >> it is important to keep things into perspective.

the financial sector as a whole over the last 10 years actually made a lot of effort to increase the capacity to absorb shock. the financial system is a lot more able to withstand shocks than 10 years ago. there are possible shocks to come. globally, the financial system is more well-equipped to absorb them. >> was the yellow vests protest a shock? >> the only thing from that i can make is from an economic -- aective, the french package which is going to support -- >> disposable income. of of your key areas expertise is cryptocurrencies. there was a survey that said most of the banks of the 63

central-bank they surveyed are not looking at pursuing their own cryptocurrencies. we had very interesting comments from the ecb executive board member who said bitcoin was the evil spawn of the financial crisis. what is the bank of france's view on issuing its own cryptocurrency? thats it a speculative fad is now seeing its rightful implosion? far as issuing our own cryptocurrencies, we are really in the mainstream. the most important topic is we see that they are really important technology -- technological innovations. that can change or make the financial system function going forward. to focus and the priority support innovation, for instance crypto assets. at the same time, make sure the risks they bring to financial

systems at the same time are kept in check. and do not contribute to weaken the financial system as a whole. france has to be proper supervisory or regulatory framework to .upport ico's at the same time, to ensure ofnificant risk in terms money laundering, financing of -- have been issues. -- thisto create innovation. domains in which cryptocurrencies can be applied for payments. where we seenot be

a revolution. cryptocurrencies really are pushing away official money. >> you do not want to see the volatility in the virtual world spillover into the real economy. >> that is one thing. >> think you so much for your time on bloomberg television. sending it back to you on london. nejra: thanks so much to bloomberg's stephen engle at the asian financial forum in hong kong. today we are asking the question on mliv. how will markets reflect europe's problems? reach out to us and the team, i.b. plus tv on your bloomberg. reach out to myself and manus. manus: and those problems are mounting, aren't they? any ceop next, the

speaks to bloomberg. win a stake in the abu dhabi refinery business. that conversation up next. ♪

nejra: this is "bloomberg daybreak: europe." covering the world's future energy summit. let's get your business flash. >> thanks, manus. -- the ceo of pg&e has quit as the company faces possible bankruptcy.

williams became ceo in 2017 and believes the company with two thirds of its market value wiped out. pg&e's debt has been downgraded to junk. investors are continuing to pull money from bill gross's bond fund. the fund suffered about $16 million redemptions in december. outflows saw the funds value drop. four -- the ford ceo says he is -- with the way things are going at the automaker who took charge with. he is not happy with performance after months of talks on developing battery-powered vehicles. is on the verge of alliance with volkswagen. itthe economy has signaled

will create uneasiness. say not think the markers we are going into that kind of recession right now. >> that is your bloomberg business flash. let's give you a quick flash of the markets. trade trouble causes thanks. asian stocks falling on the back of the china trade debt. you have the yen bid up four weeks in a row. goldman raising their forecast on asian currency. nejra: the risk rally across asset seems to be taking a spot today. we could see a lower open for european and u.s. equities after strong weeks for both entities last week.

oil prices have surged more than 20%. big producers are calling a bottom for the crude market. how are oil companies offsetting the volatility? anpoke with the ceo of italian energy producer, eni. we started by discussing his plans. .> to reduce are -- our capex. let's talk about oil price volatility. from fair market back to full market. -- bull market. how hard does that make it this year? >> it is not good for the

industry in general. from our side, we have our low.egy very growth, somenic restoration. respond also with a very low price. we want to look at the price, we want to be eight very cheap and to be able to grow. is there a bottom price you would need to review the echo >> no -- review? >> and no.

no. company, other activities, at this price, we without.dent we can go what does it take to keep that $50 level this year? >> i think from that point of demand, maybend it can be also higher than $60. ,ur scenario for our investment we consider about $60. seeing --t are you

-- for some time, and it would be lower. looking at the country where we are, i do not see lower demand. still growing.d 1.2, 1.4 billion -- 1.4 million barrels a day, that is still there. manus: caludio descalzi is the ceo of eni speaking exclusively to bloomberg. nejra: joining us now is the chief investment officer from putin co -- coots adco. co.coutts and has oil found a bottom?

>> we think so. it got caught up in risk-off trade and caused a fall and got hit very hard indeed. talking about oil demand, if you look at china, oil demand is still trading up about 6% year over year. there is strong demand for emerging markets. provided we don't go into recession. no global recessions. the global economy is on track this year, then oil can remain well supported. manus: good morning to you. tell me this. is shale the cap on the oil rally? is shale a natural cap to the run-up in oil? >> to a certain extent.

less than before because of the increased capital discipline. you heard from one of the majors earlier with you, but especially the shale industry after their , that was experience either junk already or downgraded to junk and difficult to refinance after their near-death experience. we are seeing a lot more capital discipline. a bit more biased to the upside now. nejra: how much of that is dependent on the u.s.-china trade talks going well? >> that is important. , that isobal economy going to affect oil. it is a pro-cyclical commodity. this favorable started some kind start is some kind of deal. you see that with chinese yuan strengthening.

we need a deal. manus: we do need a deal. i have a yields europe nearly 5%. question.erennial do you buy the majors on cash return basis? corrects share was over 6% and we know that shale tremendous history of dividends. in an environment of lower equity returns, these 6% returns are very attractive from the dividend. capital discipline is the key. we are seeing this capital discipline, so definitely attractive investments in shall for example. nejra: next, the unshakable bulls. risk assets are posting major gains after nine trading days in the new year. how much life is left of the dramatic repricing?

tune in to bloomberg radio live on your mobile device or on d bit -- dab digital radio. ♪

risk are seeing a bit of off coming through in the asian equity session. futures pointing lower in europe and the u.s. as well. we are seeking a pause in the risk rally. so far, we have had a correction of a correction. safe havens are also bidding. that is the debate. details risk. he goes for cash. >> what are -- one of the key things that he points to are the reasons why we have seen the

disconnect between market pricing and what the fed is saying. the reason for the disconnect changes how you invest. i love the piece this morning. can you dare to dream to get back to em? absolutely. the pause in risk assets is across the assets and not just equities. that us check in on markets around the world. great to see you both. let us start with you with asian stocks trading lower. japan is closed for a holiday. what are we seeing in india? >> not too good. it is not turning out to be a good morning for india. during the course of the day, maybe because of what is happening across the world,

markets are trading lower. for all of the benchmark indices. sharp pullback in the rupee. crude falls, brent indian markets do better but today is an exception. results have the not been that great. unfortunately, not charging out a good course. we don't see anything in the next few days that could pull the market higher. a very good morning to you. how are your risks looking? lasteresa may makes her ditch effort today before the crucial vote tomorrow. i am looking at three and nine

months tenors. if you look at this chart, investors are going to be pricing in prolonged brexit turmoil. this is the chart to watch. the spread shows they are looking at a weakness in pound for the second half of this year. tomorrow's vote does not look like it is going to be done and dusted for brexit. i am also looking at germany and greece. you can see that this is widening but nothing like what we saw in 2015. greece is going to be one to watch as the government is unraveling. a vote of confidence could trigger an early election. watch ifhe chart to things in greece begin to heat up. does not look like we will see a systemic risk in europe as we once did. hank you both.

-- howstion of the day will markets reflect the problem? you can reach out to us on your bloomberg. theresa may is warning eurosceptics in her party that they risk killing brexit. later today, the u.k. prime minister will claim no brexit is likely. thatunday times reported some lawmakers are planning to seize control of the legislative agenda which could allow parliament to extend the brexit deadline. lindsey graham says he would like president trump to reopen the federal government on a temporary basis to see if a deal can be reached on border wall

funding. government as the shutdown becomes the longest in u.s. history. the negotiations are at a standstill. >> i have tried to see if we could open up the government for a limited period of time to negotiate a deal. let us make asays deal and then reopen the government. saudi arabia says it is ready to adjust output as necessary to balance the market and on the expectation that demand will pick up in the first half of the year. saudi arabia's energy minister cuts has created -- have created a lifeline. president trump has warned turkey not to attack kurdish

forces in syria after the planned u.s. pullout. the president said it would be economically devastated if it did so. said there is little left of the islamic state. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in over 120 countries. >> thank you very much. the markets are pausing today. the bulls are firmly back in control. best&p 500 is posting its performance since 2016 and oil has broken out. the speed of the recovery has investors questioning how much further can the markets run from here?

thisnt to take a look at which is short interest. as we have rallied on the has shortso too interest risen. do you trust the s&p 500 rally? >> big picture, yes. expecthave a selloff, we it to continue if there is going to be a u.s. recession. there has been big declines in the markets. associated with a u.s. recession. we see a low probability of that. the right strategy is to buy into it. offe is a slight risk period right now with futures down. we have had a strike -- we have had a strong start to the year.

yes, we would stick with the market because we simply do not see a u.s. recession insight. ok, i understand that we had a correction at the end of 2018 that may have gone too far and so now is the reason to buy. you have tightening liquidity. and less fiscal stimulus. what are the drivers of a bull market? run, simple supply and demand. we will see buybacks come in. and that will help generally pessimistic markets. huge outflows. me, it is similar to 2015 and 2016. we saw a fed pause. looks like we will see another one. and going back a bit, a long time when i was a bond manager,

1994, when the fed raised rates at 3%. what happened? they swords. the market likes a fed pause. in 1994, it was a more tragic moment. margin calls with the bond market. in terms of this morning's op-ed, do you see a risk in cash? do you think there is merit in that suggestion? issue is you have to buy an awful lot of government bonds at low yields. there isin the u.s., some kind of yield you can buy into. for us, we hold a fair bit of cash but it is bond money rather than equity money.

cash is probably a big component of that going forward because if you assume this is a fed laws, , it will comeuse back to the table. agreesmberg economics that the pause is just a pause and then the cycle will continue. instead of being data dependent, we are market dependent. but is that because, other than through tightening conditions, the market is impacting the data? >> financial conditions are very important especially as they affect the credit market. started byonditions goldman sachs, the former

, thedent of new york fed fed by is for looking at financial conditions remains strong. when we say market dependent we mean financial conditions but a big component is the stock market but really the credit market because they can cause stresses in the corporate sector. the collapse in high-yield spreads -- the crush we saw on friday was amazing. the biggest drop since the financial crisis. opportunitybiggest we have seen to sell into a rally? >> in the short run, you are probably right but long run, you are fighting. short high yields, you are giving up 6%.

and 50% of the u.s. high-yield market is oil related. if we start with the assumption that oil will hold in come up will do reasonably well. being short is a tough call. we are in financial credit. some of that is high-yield. the debt is contractual. that is a good place to be to earn yields. worry, i am doing all of my reading on a sunday. was just i was reading talking about the equity market that will be week early this year and stronger later. the opposite of what we saw last year. would you not hold off from buying? or do you think now is the time to be buying? there is no doubt that equities are fantastic long

terms savings as a tool. youe short equities means miss out on long-term savings. we dohave clients and believe now is a good time. right this week? probably not. generally come you should be looking to why any debt unless you believe there will be a u.s. recession. is faras you say, that in chances. don't worry, we will bring you back to benchmark. allen higgins will stay with us. equity revenue is likely to be lower. according to the cfo. .pmorgan reports

we have wells fargo results coming in. ondman sachs hits the street wednesday. and bank of america. and if you are not breathless, morgan stanley hits the tape and it has been a rare upgrade in a season of pessimism. pauseonmanus for a breath. good morning. a lot has happened since the banks last reported. you had interest rates rising. but the market volatility in december was the largest event. the highest since february. much like earlier last year, it spooked investors and it exposed

those trading mark -- trading actively in the markets. the effect is a 15% drop in u.s. bank stock valuations in the fourth quarter alone. if you drill down more specifically into the results, you had crucial trading revenues which i think is what investors will be watching the most closely this week because that is where any nasty surprises could be hiding. and citigroup -- it is typically jp morgan that opens the gates. you have had citigroup in particular suffering from what people are expecting to be a tough trading quarter. the trading income could drop 5%. the biggest drop along wall street firms.

jp morgan is expecting to see its trading income rise. back to the economy, you will see further evidence of whether low growth is strengthening and the type of trade and political tensions we have seen more broadly on the banks and whether a recession will be near. let us see what the numbers delivered. will it be good or bad volatility? uk'sg up on the show, the parliament's crucial brexit vote is tomorrow. theresa may wilborn later that mps risk killing brexit entirely if her deal is voted down as expected. and if you are traveling to work, tune into bloomberg live on your mobile device. this is bloomberg. ♪

>> if we look beyond the noise, the weekly data, and the vibrations in the market, and likespeculators' herd behavior, i am convinced that we are on the right track and the oil market will quickly returned to balance. if we find that more needs to be done, we will do so. the 1.2 wase that well studied and it will take care the market. for sixon we made it months is that we did not want to overdo it. we think six months will be enough. enough to correct the market. and then we will see what

happens and asked accordingly. -- and act accordingly. be if weestion will can act correctly in this next time frame. [indiscernible] manus: this is bloomberg daybreak: europe. abu is manus cranny at dhabi sustainability week. nejra: let us check it european assets. futures are pointing lower. we had a weaker gain for european equities last week. we are looking like we could see the 10 year yield lower again. what is going to happen next in those bond markets?

the question of the day. join the debate. on your bloomberg. on one of us pick up those europe the and talk about brexit. theresa may has warned lawmakers . it is the latest in a series of moves to win support for her deal that is considered all but dead by many. whatever happens tomorrow, it could set that tone for british politics for the next several months. is your base case that brexit will not happen? n --ow, breaking it down no dealking it down -- seems impossible. a new referendum seems impossible. and theresa may's deal seems to be impossible but one of these

three things is going to happen. it is very tough. i would not say that no deal is favored. nejra: no brexit. >> no brexit? the probability of that has increased. but you think it is impossible, why? because they have voted against it. they do not want to go back against the referendum. that would be a surprise. it is very hard but the bias would be some version of theresa may's deal. there is not much time. one of these impossible things is going to happen. dice: we could roll the and say any of those combinations. or something that we have not thought of.

with that in mind, are we suffering from groupthink with regard to a second referendum? there is a presumption that if we went to second referendum that the country would vote to remain. but that is the group think that we had over donald trump and the brexit vote -- are we overly groupthink? >> the polls indicate on a second referendum that remain would win but we have been here before. that is what they said last time. i think you are right about this groupthink. it would be a lot closer than we think. is ane case for action easier case to make then stay as we are. it will be at -- it would be a a lot closer. but i think it seems impossible to have a second referendum but as i said before, all of these

routes seem impossible but when of them will happen. nejra: a lot of analysts wargaming the pound. manus is asking about the second referendum. see as ahat people fairly high probability. and it is what they see as the best outcome for sterling. would that be the best for sterling? >> i think with any of those scenarios, the sterling rise will be slow. people want to see if the yuki economy will. strengthen. deal or a may's version of it goes through would be the most positive from a business point of view. we are done. we are settled's. it is clear. but it would take time. in contrast, so-called no deal

, no deal,d brexit would mean an immediate fall in sterling. , in 30very briefly seconds, the valuation of the that enough of a worst-case scenario? u.k. market is unloved. outflows from european equities as well. big outflows from u.k. equities. unloved. albeit there being a focus on oil. nejra: allen higgins, thank you so much for joining us. up next, a 24 of the u.s. shutdown is now the longest in the modern era. the nation is of

at risk. this is bloomberg. ♪

manus: good morning from the world future energy summit in upper darby. -- abu dhabi. this is "bloomberg daybreak: europe." nejra: these are today's top stories. stocks take a pause from hong kong across the globe. japan remains closed for a holiday. are the bulls still in charge? oil retreats. cuttings persist over output. the saudi energy minister says he is convinced opec is on the right track. 11th hour repeal.

theresa may makes a last-ditch attempt to save her brexit deal as faultlines emerge in greece and france. a very good day. i am here at the future energy summit in abu dhabi sustainability week. it has been a long weekend of discussions from hydrocarbons to renewables. the banks are game on to put money into renewable's. you got the oh moneys calling the bottom of the market. .ou have the uae oil minister still in do whatever it takes mode. >> that have been great interviews, especially when range talking about the and actually talking to you

about quite a narrow range between 60 and 70. it is interesting what we are seeing because we are seeing a second day of declines. i want to caution that risk assets in general seem to be taking a pause. last week we saw gains in equity benchmarks around the world. looks like we could get a lower open for europe looking at the ftse 100 and cac 40 futures. friday.y lost steam on u.s. futures are pointing to a lower open today. i have been asking myself how much further the risk rally has to go. we talked to alan higgins of coutts. he said you should be buying every dip unless you believe a u.s. recession is coming. on the other hand, there will be weakness in u.s. equities, further declines at the start of 2019. we are going to get market pickup. the reverse of 2018.

have been seeing risk assets doing well and the safe havens in 2019 looking at treasuries and goals. a little bit of a better bid. treasuries are higher. we are going to see this raft of fed speakers. sir george kaplan. they are all going to speak this week. the possibility of the longest shutdown ever in the united states of america. higgins voice at coutts says we are not going to see a recession. that is different from the street. rallying. the risk reward scenario the next 30 minutes. juliette saly is in singapore with your asia wrap. we had japan closed

today, but disappointing chinese data weighing on sentiment. after a 4% rally, asian stocks down by 1% led by the weakness you are seeing in china and hong kong markets. india under pressure. a couple big names coming through. despite that we chinese trade close nearlytralia flat. a negative start to the trading week. safetors moving into havens. let's have a look at the japanese yen. it has been the front runner in terms of g10 currencies. moving substantially higher against the dollar. we have seen we can is coming .hrough in the aussie and kiwis they're the worst-performing g10 currencies on that disappointing data. we are seeing the u.s. dollar stronger against the chinese yuan, which has been higher four sessions in a row. it has been holding at levels we have not seen since july, but giving back today it is now

holding at its weakest level since december 21. you.: thank today we are asking on mliv, how will markets reflect europe problems from brexit to italy now to greece? a number of things the markets have to take into account. reach out to us and the mliv team on your bloomberg. now let's get the first word news. >> thank you. theresa may is warning eurosceptics they risk killing brexit if they vote down her deal in parliament tomorrow. will.k. prime minister claim no brexit is more likely than the no deal outcome. reportrning comes as the that some lawmakers are planning to seize control of the legislative agenda, a move that could allow parliament to extend the deadline. graham said lindsey

he would like president trump to reopen the federal government on a temporary basis to see whether a deal can be reached on border wall funding and declare a national emergency is not. that is as the u.s. shutdown become the longest in the modern era. standstills are at a and no more talks are scheduled for this week. tried to see if we could open the government for a limited period of time to negotiate a deal. the president says, let's make a deal, then open the government. nancy says even if you open the government, i would not fund the wall. that's why i'm depressed. slumped intrade december with an unexpected fall in exports and imports underlining the impact of the trade war and economic slowdown. fell 7.6%. the worst result since 2016 and oft trade -- a trade surplus

$57.1 million. president trump has warned turkey not to attack kurdish forces in syria. the u.s. president says the nato ally would be economically devastated if it did so. left says there is little of the islamic state, but what is left will be hit by attacks from an existing american base if it tries to reform. the government of greece is unraveling. a confidence vote could trigger an early election. lawmakers in athens are expected to hold a confidence vote on wednesday. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. nejra: thank you so much. just got a red headline. continental seeing 2019 sales at

about 45 to 57 billion euros. they are giving a range for 2019 sales. the estimate was 46.6 billion. the range is pretty much in line with estimates. continental also saying parts of expected adjusted ebit margin were below. just an update. we have the sales numbers coming in at 44.4 billion euros. those numbers are going to be important. the bulls are back in control. that is the debate. its best00 has posted form since 2016. high-yield credit has rallied and oil has broken out from its trap. the speed of the recovery has left investors. how much farther candies markets go?

--d to see you this morning can these markets go? good to see you this morning. are you surprised by the speed of the recovery you have seen? has that played into the bond markets thinking in terms of rates? >> i'm not really surprised. we had a pretty bad december. a pretty bad fourth-quarter for all assets. cash will be building up on the sidelines. there may have been a panic selloff. we are seeing a panic by going on as we go into the new year. wanting to extend horizons as you go into the new year looking into the next 12 months. they are looking at the possibility of better news. i'm not surprised. concerned it's not going to be long-lasting. >> you increased exposure to high-yield and emerging markets.

the riskier parts of fixed income. you believe a number of actors -- factors will push more companies to default in 2019. how will that turning point come? >> there is a difference between different kinds of fixed income. they could be on hold. that's ok. high-yield debt leverage loans are going to be more driven by the potential for the false down the road. as we move through the second half of the year, that buildup of extra cuts from the increased leverage will start to hurt through the year. one of the debates we are having is the risk of recession. recession is said not on his base case scenario. bank of america are saying treasuries are indicating recession risk. goldman sachs gives a 50% chance.

what do you reckon in terms of recession probability? >> i think the treasury market is indicating a growth slowdown. not necessarily a recession yet. we do not have that in version of the curve. that signal tends to be fairly slow. possible.s it is perhaps about global growth rather than u.s. growth. u.s. growth is fairly buoyant. interest rate part we have had for many years in the u.s.. a slowdown is coming. whether it pushes us into a technical recession or not we will have to see. i want to show you this chart which shows the fed real rates. there is a gap between that and real gdp. bloomberg economists have been talking about the fact you really need this gap to be closed before we start worrying about any recession. you supported that point as

well. the argument from bloomberg economics is even if we get a pause from the fed, they are going to continue with their hiking cycle this year. if you agree, how should investors be rotating between assets in a fixed income portfolio? >> we agree with that. that gap can" going. quickly.ose what investors need to do is consider where they have -- where they're going to take the most risk. i think that is in government bond investing, there is less risk than corporate bond investment because of that cycle coming. manus: i was looking at your synopsis of 2018. emerging-market bonds, a emerging-market sovereigns crushed by 6%. we wrote a story this morning talking about deer to believe in emerging markets. if there is a fed pause with no recession, a softer dollar, do i

reach for yield in e.m. or take more risk? >> reaching for yield in e.m. is not a bad idea. that's what we're doing. the fed rate cycle is one of the key determinants of performance in emerging markets. on hold at a fairly low rate, interest rates are not that high in the u.s.. if we are looking at an economic growth slowdown or wealth growth slowdown, emerging markets are more vulnerable to that cycle as well. you have to be selective. it is not blanket exposure. nejra: it is all about selection. paul brain stays with us. oil prices up 20% since their december low. we are still down from that october high. the saudi energy minister says he is convinced opec plus is on the right track. tune in to bloomberg radio live

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manus: this is "bloomberg daybreak: europe." nejra: let's get a check of the markets. we are getting risk off tone in markets. there is a risk rally across assets. it is taking a pause. we are seeing weakness in asian equities. the yen is bid. that 10 year treasury yields below to 70. it dropped friday by four basis points. we are down again today. manus: cable slightly better off. political risk is rampant in the u.k. euro stoxx 50 a little bit lighter as we see the chinese data come under pressure. the devil in the euro dance.

that is a lovely article. we are seeing crude weakness for a second day. the rally we have seen prior to that starting to sweep away the pessimists. prices are up 20% since hitting an almost two-year low in december. we are down 30% from that october high. meanwhile, saudi energy minister says he will remain vigilant amidst positive signs. >> i think early signs are positive. the fundamentals lead the markets into a positive territory. time will tell. we will remain vigilant and do what we have to do. manus: the uae energy minister told bloomberg he is willing to do whatever it takes to balance the market. i started by asking him, what has been the driving force of the swing in his confidence?

meet for an extraordinary meeting? we will only do that during emergencies. there is no emergency. manus: you would reassert that to the markets. you are still going to do whatever it takes? >> i think what we did is do what it takes. will take the 1.2 care of the market cap. the reason we made it for six months as we do not want to overdo it. we think six months is enough. in the first quarter we can correct the market and see what happens and act accordingly. manus: you would still be open to extending if you need to? >> if we need to to balance the market, we will do whatever is the right decision to balance the market. manus: what has the uae done so far?

how much has production dropped? >> uae production even in december, even though we met before december in november in abu dhabi, since then we decided we need to reduce the production a little bit because of the waivers. if you look at uae production in december, it was lower than november. when we took the decision on january production, it is million 72 be 3 thousand. 1,080,000 below december, which was already reduced from november. uae and saudi arabia have started before the deal reducing

their production. manus: that was the uae energy minister speaking with me right here in abu dhabi. let's get a business flash headlines. >> the boss of the californian utility pg&e has quite as the company faces massive penalties and possible bankruptcy in response to devastating wildfires. 2017 andbecame ceo in leaves the company with two thirds of its market value wiped out. pg&e's debt has been downgraded to junk and regulators have diminished a manage -- have demanded a management shakeup. drivers have recovered the corporate voice recorder for the plane that crashed. to shed light on the disaster. the boeing 737 max came down 15 minutes after leaving jakarta, killing all 189 people on board.

the ford ceo us told bloomberg he is not happy how things are going at the carmaker. after months of talks with vw on it sharing costs on self driving technology, ford is on the verge of broadening its alliance with the german company. >> auto business is going to be solid. the economy itself has signaled it will create uneasiness. i do not think markers say we are going into any kind of recession right now. >> that's your bloomberg business flash. nejra: thank you so much. here is a look at what you should be watching this week. tomorrow, the u.k. house of commons will try for a second time to vote on theresa may's exit withdrawal agreement.

wednesday, we will get an update on u.s. retail sales. economists expect a 0.3% monthly increase in december. the u.s. government shutdown could prevent the release. thursday, a rate decision from south africa. the forecast is for a hold at 6.75%. friday, we get the ratings -- the latest retail sales for the u.k. with a crucial month of december. with the u.k., let's turn to brexit. theresa may has warned lawmakers the u.k. might not leave the eu if her deal is voted down. this comes as rt reports the eu will offer for the reassurances over the controversial irish backstop. paul, how high a probability are you citing for the fact brexit might not happen at all? >> quite a high probability.

tomorrowng to see whether that works out or not. we are going to see what is plane be, what his plan seat -- c.t is plan b, what is plan how it pans out i don't think anyone knows. manus: i don't think anybody really does know. the most optimistic scenario would be a bit up to 135. casee downside, a worst scenario floor. theou really think wargaming scenarios have got it right in terms of the downside potential? >> i am not sure. we have been living with uncertainty for a number of years now. they don't seem to get any better. the pound against some currencies does look pretty cheap to us. the downside may not be as

great. we have to think what will happen, what will be the response from the authorities. nejra: i'm going to ask you the mliv question. as well as brexit and the political risk, we are talking about a confidence vote in the greek government. a fresh political campaign for marine le pen. in terms of assets, whether you are looking at fixed income, whether you are looking at currency, which asset is likely to best reflect europe's problems? >> the asset that stands out to me is the 10 year bund. an historic low level in yield. the banking sector will be a barometer on the economy and a barometer on the political news as it comes through. manus: thank you very much. fixedrain, the head of

income at new investment management. -- newton investment management. the economy in italy and greece. what happens in 2019? is it going to be a push for additional -- we have seen it in france. it is going to be a fascinating year for the ecb and that bund market. paul brain does believe this year is going to be more about fiscal's than monetary policy. that's going to be an interesting dynamic in the bond markets when it comes to bunds, we have talked about how you should be short the 10 year. manus: yes, the op-ed is a cracking one. put a little bit into cash. we had coutts on the show saying they are not on recession watch. i have got to say, renewables ground zero. a few more interviews.

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anna: welcome to "bloomberg markets: european open." i'm anna edwards alongside matt miller in berlin. , are today the markets ask the bulls still in charge? adesty's, asian equities chinese trade data disappoints. intothe red stain seep europe? cash trade is less than 30 minutes away. anna: an ugly set of