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tv   Bloomberg Daybreak Europe  Bloomberg  January 15, 2019 1:00am-2:30am EST

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anchor 1: good morning from wes smith there -- from westminster. parliament votes on brexit today. anchor 2: im manus cranny live cranny, livemanus from abu dhabi. here are today's top stories. -- 73 days3 today until the u.k. exits brexit. how badly will theresa may be defeated. markets bracing for bedlam. optimism winning out?
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citigroup promises the environment will improve and investors cheered. anchor 1: a very good morning to you. this is abu dhabi sustainability week and you are covering the brexit drama from the heart of westminster. and it all comes today. anchor 2: yes, it does. tomorrow, -- today is the day you will want to focus on this. it is not a matter of whether the deal will get voted down but what the margin will be. looks like it will be the worst defeat for her. she is hearing up for battle.
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if her deal does get voted down with a wide margin of defeat, then many questions over what will happen next. will there be an extension of article 50? brexit really gets put into question. and the permutations in terms of risk and reward. let us take a global perspective. it is about central banks -- are they the only game back in town? we have a risk on proclivity. the fed says they can wait very patiently. tax cuts from china coming through. we have a golden cross. in the south korean won. the risk reversals are the least bearish since 2014 and then the turkish lira.
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what will happen from the turkish central bank this week? as you have pointed out, there is a proclivity towards risk in today's session. we saw the risk appetite yesterday abasing but it is back. yen on the back foot against the dollar but i am focusing on cable. we are seeing a little bit of strength in today's session of cable. you can see the chart over two days that we are up 0.5%. is positioning a little positively. 60.key number to watch is if we get less than that, there will be questions of whether we could see some moves by the eu to placate theresa may's opponents but we are reporting that the margin to be closer to something like 150 and that will
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not look good for the prime minister. let us check in on the markets in asia. juliette saly has more from us from singapore. stocksre seeing asian near a six week high. the risk on momentum is back in play. pushing the nikkei higher. cuts on aowing tax larger scale to support the overall economy. the hang seng is up by 1.7%. in the chineses market. and strength coming through in most of the e.m.'s as well. but does have a look at some of the stocks we are -- at some of the stocks. we are getting some earnings outcomes. olympus jumping the most since 2015. up by almost 18% for a four-month high. there is a little bit of pressure.
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sales are coming through on a week note and citigroup is downgrading the stock to neutral. and there is the australian educational services provider agreeing to a sweetened takeover deal. offering at $1.5 billion. 6% higher than the bid was made last year. novartis is up by almost 13%. anchor 1: thank you, juliette. today's question is very simple -- would a brexit delay be good or bad for u.k. assets? whether it is affects equities or the bond market. we do respond. let us get you your first word news. we are going to stay on
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brexit because the u.k. lawmakers will vote today on theresa may's eu withdraw deal. 70 of the prime minister's colleagues have publicly stated they would vote against the agreement. both sides have announced they are working on the assumption that brexit will be delayed. is promising to cut taxes on a larger scale to help economy.he slowing a joint statement from the pboc and the finance ministry says the measures will be targeted at small businesses and manufacturing. the pboc shows new loans increased from the previous year. that things in december were ahead of most estimates. astin trudeau has announced
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death sentence on a chinese citizen. he was given a death sentence after a one-day retrial. reported that his lawyer has decided to appeal the sentence. of extreme concern to us as a government and as it should be to all of our international friends and allies that china has chosen to begin to arbitrarily apply death penalties in cases -- as in this case facing a canadian. iowa republican representative steve king has been stripped from his committee assignments over rhetoric. history ofs a controversial statements on race and immigration will lose his positions on the traditional -- on the judicial and small business commissions. he says his quotes have been mischaracterized.
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and the fallout from the u.s. government shutdown has seen airports close because of lack of staff. but security in atlanta and has been working to grapple with tsa absenteeism. president trump has indicated he will not sign a stop cap measure without the funding for his border wall. 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. anchor 2: thank you. today is the moment of truth for theresa may's brexit deal. in over 12 hours, the house of commons will begin voting on the legislation that could set the course for a u.k. change for years to come. for the prime minister is
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seemingly baked in. the margin of the loss is in question. joining us is steven major from hsbc. we are delighted have you with us on such a big day. good morning. in december, you were saying that beyond brexit you are bullish on gilt. has that changed? steven: we were trying to look through the noise and we were making out a forecast based on what we think policy rates will be in the future. brexit is a big factor. riskll also affect sentiment. but the big issue is what the bank of england will do on the back of all of this. in our considered view, it is that yields will stay low. you have seen them move up and down quite a bit recently. through november and december,
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you had a global rally in government bonds which kind of mirrored the risk off behavior you could see in credit and equities. price action we find ourselves talking about today is a response to some of those big moves you saw late last year. anchor 2: a very good morning to you. stop, brief, and think. i find it hard to do three things at once. reading some reports this morning they say fixed income pricing is a mess. is there a capacity for breakevens to trade higher? steven: they are very interesting right now. we can look at the u.k. and the u.s. as well as an example. it could be that the breakevens compressed, meaning they fell
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quite a lot in the back end of last year because of the global move towards risk. timewent down at the same that the credit spreads went wider. i think they were tarnished with the same brush. over the longer term, the diversification properties should be considered to. especially when the breakeven inflation that you mentioned is towards the bottom end of the range. we are not pricing in very much inflation right now. someone me, i am not that thinks there is a big inflation problem. it is about value. relative value. how the bonds fit into the portfolio. i think you are quite right to point out that the inflation linked markets will have a rough time and that pricing is all over the place. but this well could be an opportunity.
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these big shakeups of markets leave a few key plums out there. anchor 2: does that mean that you have a guilt curve flattening bias for the u.k.? gilt curve is somewhat counterintuitive so we do have a flattening bias. on the inflationary curve, it is different. of the opposite on the longer end of the curve. to go through the rationale for the flattening -- the possibility is that fiscal hollis could be looser in the future. it depends on who is in charge. you could have a changing government or a changing party in power. the risk would the towards fiscal policy being looser. the intuition would say more bonds, more supply and therefore the yield rose up.
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i have argued in the past that that is basically wrong. i think what would happen is if you have extra issuance, extra with a looser fiscal policy, the bank of england would raise a short rates more quickly. and that is the most important factor in the valuation. it would push the shorter yield up faster than the longer yield. and that is why we have a flatter curve profiled in our forecasts. something really catastrophic has got to happen to play a steeper u.k. curve. you have to think the bank of forand's independence is up grabs or there is some kind of inflation coming through that we have not seen and is out of control. our forecast is much more considered. what really matters is what is happening to short rates in response to future fiscal policy
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which is a function of whatever government we get. course the risk is that we could have a second referendum. we could have a general election. there are any number of things that could happen. note thist their morning. we have it for our viewers to say. i would like to get a sense from you. the downside and the upside in sterling -- we are fairly in the middle at the moment. what a referendum as ing has suggested give a palpable sense of relief? and give the bank of england that opportunity? steven: if you look at the movement in sterling versus the euro or against the dollar, indeed, look at gilt yields and breakevens compared to other markets, it is quite subdued. intuitionagainst the that there is a huge amount of
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stuff going on. of course there is a lot going on and it is fiendishly complicated but in fact, the relatively has been stable. look back at the last six months. that market has been well behaved. sterling has also not done that much. the point i want to make is that yes, it is complicated, and there are a bunch of different steps we might take. and as you have correctly mentioned, there are all kinds of possibilities. who knows what policy steps might the involved in the future. that complication, people just do not know. it strikes me that the best thing to do in that case is to be very careful and to be considered in what you do. binarye is looking for a solution. every week we get these big events and today, we have another big vote but it is not like a cliff edge we are going over.
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people want to describe it as a cliff but it is not a simple two-way choice. it is much more complicated. one decision could lead to two more decisions. it is reasonable in my mind to be much more calm and were considered about how the gilt market is performing. anchor 2: indeed, it is not binary anymore. we are delighted to have your thoughts this morning. steven major from hsbc stays with us. cuts promises larger tax and other measures to help its slowing economy. can that turnaround the sentiment in the real economy? this is bloomberg. ♪
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>> it will be one of the most significant votes parliament
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will hold in years. >> many questions. nejra: stay with bloomberg for coverage all day of the crucial brexit vote live from westminster. daybreak:oomberg europe. i am in westminster. manus: and i am manus cranny in abu dhabi. let us take a snapshot of the markets. strengtheninguan again as the authorities turn on the fiscal taps and dollar-yen is doing slightly better. slow loser against the dollar and the g10 currencies. foot, cable on the front
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leading the g10 currencies ahead of the crucial vote for theresa may. the margin of defeat is what we are watching. bit of a, we saw a wobble in the risk rally. pointingks futures higher. today, we are asking the question -- looking at global markets, and looking at brexit and whether a brexit delay would be good or bad or u.k. assets. you can reach out to the team on your bloomberg. let us get the bloomberg business flash from hong kong. citigroup has offered some hope that the worst is over for its bond trading business after the tough as quarter for that unit in seven years. shares jumped the most in the s&p 500. the cfos said the trading environment was starting to improve this month. earlier, citigroup reported a
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21% plunge. the mp para bought is said to be planning to shut a few u.s. commodities. the latest fallout on wall street is blamed. according to bloomberg sources, retainedhas some stuff with some traders offered the opportunity to move overseas. bnp paribas will continue to have desks in london and singapore. carlos ghosnsays should be removed. there is an investigation into alleged wrongdoing. ghosn who denies wrongdoing was arrested on november 19 and has been held in jail since then. and that is your bloomberg business flash. manus: thank you very much.
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stocks are across asia are on the move this morning. we are in a rally mode after china said it would cut taxes on a large scale to help support its slowing economy. senior economic officials say that policy will remain flexible. and the challenges facing the country will become more complicated. this follows a series of week data regarding trading. hsbc and he is with is our global guest. good morning. when you see the day debt and the sentiment -- when you see the data in the sentiment regarding china, inflationary or impulse fromionary china 2019 --how does it look to you? steven: it is still disinflationary.
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much of the explanation for the move in g10 markets led by the u.s. is what is happening in china. i know that is not what people probably tell you but have a look at the charts of five-year chinese yields over the last year. they have gone from four to below three quickly. 4% to below 3% very quickly. that is the market pricing in the monetary easing that you salty the back end of last year and the anticipation of more easing through liquidity measures coming through now. what you just mentioned -- there was a possibility of fiscal loosening coming through as well. to help boost the economy. authorities, the government and the central bank, have been recognizing that they economy is slowing and they are leaning against that trend with policy. tend to bet people
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quite parochial the way they look at markets and they are looking for a exclamation of what is happening in the u.s. by looking at u.s. only factors. to me, it is a more global story and in this way china is a leader. it is leading many of these big trends as it has done in the past. take a look at chinese yields and chinese bpi. you can see it all there. nejra: that is a really crucial point you're making about chinese yields leading the u.s. and it leads me to ask you -- do you see some of the troubling signs in the chinese economy leave global could growth lower, below 3% in 2019? i think that is what is happening though i am not sure of the exact number. it has been happening and markets have been preempting the move in the data. the big question -- what i am thinking is that the day debt at
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dataoment is really -- the at the moment is really only following the markets. moved in advance through q4 another data is softer. you can look at things that are supposed to be lead indicators like pmi. they are all pointing the same way. you are getting a policy response from china to what has already happened and what they fear might be happening next. i cannot give you a precise forecast, a precise growth forecast. but lower than previously expected. stephen, -- steven, you joined that choir of warning. steven major from hsbc, you stay with us. citigroup says the worst is over.
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banks rallied on hopes for better trading to come. if you are traveling to work, tune in to radio. ♪
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-- brexit means brexit and we are going to make a success of it. we are leaving the european union but not your. we want the best possible deal. the best possible deal for britain. every vote for me is a vote for strong and stable leadership. no deal is better than a bad deal. what we're working for is to get deal for the united kingdom. i have reached a deal. there is not a better deal available. risk no brexit at all.
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the british people want us to get on with it. get on with it. face the risk of leaving without risk ofr the bigger not leaving at all. some would wish to delay brexit. lines will of those be written into history when we come to this day in the future. keeping an eye on parliament. for me, i want to talk about global market and global risk. i know it is brexit drama day. the chinese are on the move fiscally. know, i also every day have been watching these global themes. the question is whether we will get a pod's. -- a pause.
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we have steven major from hsbc in the studio in london. blackrock has a neutral position on the bond market. they say bond markets are a defensive place. ballast for the future. a lovely line from blackrock. nejra: those correlations are crucial. steven major told us earlier that they are watching chinese equity market and how the credit market fits into that. the fast and furious in the high-yield. let us see what steven major makes of that. more of that in a moment. let us get our market check from around the world. first of all, looking across
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asia, is it all to do with china? how is it shaping up in india? >> yesterday session was not that good at it seems that we have recovered in tandem with the rest of asia. it is a strong day of trade for the equity markets particularly led higher by the technology stocks. gain in the to a 1% benchmark indices. providing an additional tailwind to the technology stocks. that is what is happening for the benchmark indices. the dollar markets are pitching and as well. the banks are definitely supporting the way the indices are moving. you're looking at china
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-- chinese foreign investment. how does that fit in? ofiette: another picture china announcing it will double the amount that foreign institutions are allowed to invest in the capital market even though the current allocation has not been reached. as you say, it is certainly risk on today. the yen is lower than the dollar. japanese stocks finishing higher. and the announcement of larger tax cuts coming through from china. the hang seng is up i nearly 2% in late trade. they want is holding its gains against the dollar also. is holding its gains against the dollar also. authorities have lifted the quota. this has been in place since
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2013. the yellow line was the previous limit. the red line is the new limit. china is wanting to show goodwill to the u.s. and honoring its promise to keep the markets open. nejra: thank you so much. thank you for those market updates. fed number two has floated the possibility that policymakers will raise rates fewer than two times this year. speaking to foxbusiness he said global growth data has softened and the fed can afford to be patient. he grows -- he joins a growing list of officials. steven major from hsbc is still with us. i was mentioning earlier that you think the next move in the u.s. curve is going to be steepening. is that because you believe the fed is going to be on pause from here?
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steven: yes and i am even looking beyond that because to believe in a steepening curve, you have to be preparing for the next cuts. as it stands, the market has priced out in a tightening. i know fed officials are still possibly talking about one or two more but i will believe it when i see it frankly. the market will now price out any chance of a march hike which means we are looking at the summer. and the summer is a long way away. especially from where i am sitting. there could easily be a change that leads the direction of the curve. framework forward analysis. , itthe curve to go flatter has been flattening for five years, you have to believe that rates are going to go up by more than what the market currently expects.
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you have to believe there is going to be more disinflation or even deflation and i do not think that is likely. on balance, i think rates are on hold for quite some time and we orl be looking into 2020 2021 and the possibility of cuts. and if we have hit the low point for breakevens, breakeven inflation, i think it is consistent to be looking for a steepening curve. we have made some recommendations for the yield curve to go steeper and i think if you look at how far the curve has moved already, it makes sense. is to part of your call play 5% by the end of this year. can we bring it back to the inflation discussion? how do you see the inflation story -- taking it back to the breakeven benchmark? story is partges
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of the process. it is not the only thing that matters. don't forget that you could have and havening up 3.5% it still be consistent with a cpi rate of two. productivityd on levels. for me, i don't think that the fear over wages has been put in the correct context. our forecast is to play 5% for 10 year treasuries for the end of may 19 but we had that forecast last summer. what i am seeing is a scramble to reduce their forecast for the end of 2019. on theund themselves wrong side of the market move and therefore they are adjusting their forecast. 5% does not to play
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sound very exciting when the number today is 2.7%. which is why i am shifting the callaway from the duration toward the yield curve where i think there is a greater opportunity. nejra: when we talk about the recent move lower in the 10 year treasury yield, many reasons have been put forward for it but you said we need to be looking at china. some people are talking about the fact that the 10 year yield has acted as a reaction function to the equity market. rather than that, should we be looking at what is happening in credit to see where the 10 year yields may react from here? think that is about right. credit spreads have come from extraordinarily tight levels. and they are widening. they caught many people out to the end of last year. janetfficials including
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yellen talking about debt, particularly corporate debt. global economy has at the moment is excess leverage at a time when the quantitative easing is being reversed or at least ended in some parts of the world. that is a real challenge when there is no growth. no qa, low growth, and too much debt -- put those together and there is no surprise that markets are getting ready for a long period of low rates. credit is correctly adjusting. and that is knocking on equities. if the investment grade credit, the spectrum we are most concerned about in the u.s. and europe. on high-yieldout and? -- end? -- don'that telling me worry about defaults or is that
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telling me something else? steven: it is telling you that the market was oversold. one customer i met last wednesday said to me, do you think this credit rally can continue? and i asked if he meant the credit rally of the last three days. we had two months of selloff. spreads widening. and people talking about the previous three days. it is a correction after a fierce selloff. my more considered view is that high yield is not so risky as investment grade. i know that sounds bizarre. the problem with investment grade is that half of the index is trouble be in the u.s. -- u.s. be in the going into the high-yield sector. ago, it was maybe
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20% or 30% of the index was in trouble b. the amount of debt has gone fiercely up. the duration of the debt is also high. combine all of that and it says corporate late cycle behavior and weak economic growth. these factors are not good for credit. it is more of an investment grade challenge then high-yield. nejra: taking all of that into account and everything we have discussed about the u.s. fixed income universe, where are you best compensated for taking risk in u.s. fixed income? steven: the front-end of the curve and tips in particular. theyook at the short tips, give you a decent yield and the breakevens come down quite a bit. you do get some diversification
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away from credit and other stuff as well. but i cannot get any more bearish on treasuries the neutral which is where we are now. for us to be neutral on treasuries is a bit like everyone else being bearish. view isy longer-term that we are low for longer and yields stay low. to me, the market has made the move that we have been expecting for most of the time in 2018 and the valuation is not there to chase the yield much lower just yet. i will be patient. in the meantime, i quite like the front end. manus: steven major, you will never be priced out of an opinion in this market. a discerning view on the nuances in the market. stay there, we have more to glean from you this morning.
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banks going to talk about in the u.s. are earnings. they kicked off yesterday. citigroup lifted the veil. fixed income revenue missed expectations. rallied still after the ceo said that the worst is over. those words are setting the tone for today. jp morgan lifts up its numbers. we also hear from wells fargo. a big day. nejra: it is. and on wednesday, bank of america reports. thursday, we get morgan stanley which has seen rare upgrades in a session of pessimism. to discuss all of this, joining us for more is elisa. great to have you with us. what were the highlights from
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citigroup yesterday and talk a sue the share price reaction as well. >> on the trading side it was a nasty surprise. trading was coming down. fixed income in particular. saw was some asian fund losses. market conditions are normalizing. more broadly, the comments were reassuring. the cfo said there is strong growth. and even in asian markets, the slightly lower numbers were due not to the lack of the van but to them being more prudent on where they are lending. the economy looking stronger than perhaps people were fearing. manus: how do we read this across into jp morgan? isa: looking closely at the
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trading figures. and whether fixed income held up . the guidance was to expect more or less a flat quarter. whiche equity business has been growing, there will be a focus on that to see how much further that market share has been gaining. away from the trading business, the focus will be on cards where they have already signaled that there is some concern about consumer credit in particular. certain pockets of credit. investors will be looking at how much that has filtered through to prudent lending. well, theefly as other story we have seen about bnp paribas shuttering its u.s. commodity desk. what does that tell us? broad you have seen a
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pullback from the commodity business of across wall street. this is a further example of that. is also being more selective about where they are putting their capital. reviewing operations and putting their capital where it can be the most efficient. manus: it is all about capital return and capital utilization. elisa, great breaking down of the numbers. brace for the brexit vote. theresa may is set to see her deal rejected in what could be the biggest parliamentary debate for a -- parliamentary defeat for a british government. the question is, what will come next? ♪
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nejra: this is bloomberg daybreak: europe. i am outside westminster in london. manus: and i am manus cranny in abu dhabi. we have a question from one of our guests. , you can take this question. bondsould you expect u.s. to possibly trade at 1.5% again? and what would it take to get to 1.5%? a quick response on that. steven: 100 basis points below our forecast. at the moment, the top end of
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the range for the policy rate, 2.5%e u.s. is 2.25% or which provides a soft draw for the yield. as a direct answer to the question, we are a few years off that but do not be surprised in a few years time if we are back with a one handle. our forecast still has a two handle. the fed has to be easing again to get back to 1.5%. we went below that around the brexit vote which seems quite a long time ago. to an a half years ago. it is possible, that not in our current forecast. get bettercannot than that. i am sure our viewers will be satisfied. thank you, steven major from hsbc.
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let us first get the bloomberg business flash from hong kong. california governor avenue some has demanded changes to pg&e after the company said bankruptcy was the only viable option in the face of worsening finances and potential fines listed -- related to last year's wildfires. says allce department online gambling is illegal in the united states. the ruling reverses his position from 2011. by casinon backed executives showed that addison lobbied the justice department to clear the states to allow for online gambling. that is your bloomberg business flash. manus: thank you very much.
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that is a run down. will make his first appearance of the year today after sitting through a month of over the durability of the european expansion. germany has slowed? in 18 is the year in theory we 2018 is the year in theory that we will get normalization of the ecb. would you think there is a risk of policy error if the ecb raises rates? we have a pretty tough economic outlook. was the year that the ecb missed the opportunity to normalize. forward guidance shut them
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out from that opportunity. there may have been an open window early last year but it is now firmly shut. in our opinion, they cannot hike, they will not hike, the data will not allow them to. that is something for the distant future. that the ecb, as with the bank of japan, they all contribute to the longer view on rates. apart from the outside possibility of a technical hike, it is not going to be a normal tightening cycle. the market is correct in pricing out the chance of the ecb hiking rates. nejra: does the ecb have a more difficult job than the fed in communicating to markets? , because steven: yes they are beholden to a range of different states that all have different agendas. germany would've worn ted higher rates in the last -- germany
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would have warranted higher rates. it seems to me that it is a complicated job because how do you set one single interest rate for all of these diverse countries? what is going on in italy does not need a rate hike right now. much of europe is struggling. brexit throws another challenge to the ecb because europe is a major trading partner with the u.k. rates are not going up. markets have adjusted to realize that. major, global head of fixed research at hsbc. goingto have you with us around the world in global markets and even answering a viewer question. is set tontil voting
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begin to determine the future of brexit. theresa may could face the worst defeat for a british government in nearly a century. live coverage from westminster continues. this is bloomberg. ♪
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manus: good morning from abu dhabimanus:. this is "bloomberg daybreak: europe." nejra: live from westminster, i'm nejra cehic. these are today's top stories. 73 days until the u.k. exits the eu. could that deadline be extended? parliament will have its say on theresa may's brexit deal. how badly will be sheet -- will she be defeated? resurgence. stocks rise in asia.
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optimism. chinese support winning out over concerns about global growth. banks whipsawed. the bank promises the trading environment will improve. para bought will shutter its commodities desk in the usa. nejra: good morning, everyone. a big day for brexit. we are about 12 hours away from this key vote on theresa may's withdrawal deal. the question is less about whether the deal is going to get but what the margin of defeat is going to be. the numbers we are going to be
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watching, if it is less than 50 votes, it could mean the eu comes back with moves to placate theresa may's opponents. bloomberg news is talking about a defeat of 150 votes. the worst in 95 years for a british government. becomes, what happens with brexit? there were so many different options on the table. permutations. i want to look at the bond market. for me, it is about the pboc. words from teresa saying the fed can be very patient. fixed income, hsbc, just finished our conversation. sees the disinflation impulse coming from china. the ecb will find it difficult to normalize.
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hsbc neutral. for stephen, that is almost as if it is a bearish quarter. -- blackrock are neutral. perhaps we have all got too far ahead on the weakness assumptions. is it cold where you are? nejra: it is absolutely freezing. it is not all about brexit. there is more of a bias toward risk appetite today. yesterday we saw paul's in the risk rally in europe, but also the u.s.. . futures on firm footing. you mention cable as well. sterling traders are buying cable ahead of today's vote. expecting welly could see an extension of article 50. a lot of dynamics, which we will discussed with our -- discuss with our guests.
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first let's check on the markets. juliette saly has more. what's behind risk on in today's session? juliette: china opening stimulus, bowing tax cuts on a larger scale. the csi 300 closing higher by 2%. you've got hong kong up by almost 2% in late trade. boosted byn's market that weaker yen ahead of the brexit vote, up 1%. certainly risk on in asia. the msci asia-pacific index hitting a six-week high gaining around 1%. you can see every major market we track is higher. let's have a look at the currency move. there's a lot of focus around the brexit vote. the yen being dumped today. the u.s. dollar against the yen higher by half of 1%.
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on offshorend cnh rhythm near six-month highs. take a look at the cn why -- the cny. saying itring bbba won't support this rally. currency today up by 0.3%. we have seen funds buying stocks in that market for an 11 day and role -- day in a row. today's question on the mliv, we have already had some responses from bond managers out there. what a brexit delay be good or bad for u.k. assets? join us on the mliv team blood -- team blog. let's get your first word news. >> u.k. lawmakers will vote
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today on theresa may's eu withdrawal deal. least 70 of the prime minister's conservative party colleagues are publicly pledged to join up a missed -- opposition members in voting against the agreement. it could be the biggest defeat for a british government in years. both sides are working under the assumption brexit will be delayed. china is promising to cut taxes on a larger scale to help support the slowing economy. a joint statement from the pboc in the national development and reform commission says the measures will be targeted at small businesses a manufacturing. separate data from the pboc shows -- increased by 2.6 4 2.6 4 trillion-- yuan. justin trudeau has denounced as arbitrary a death sentence on one of his citizens.
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he was given a death sentence on drug trafficking under a one-day retrial. it is reported his lawyer says he has decided to appeal the sentence. two thirds of french voters think emmanuel macron's national debate will not resolve the yellow vests protest. the french president's three-month national debate on hopes it will -- anger. he says it will not reverse tax cuts already enacted. global news 24 hours a day on air and on twitter powered by more than 2700 journalists and analysts in more than 120 countries. manus: thank you very much. quick flashy number from china. warning china to ask state firms to avoid traveling to the united
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states and its allies because when the order comes up at huawei, the cfo encountered a u.s. crackdown on ip theft. the request includes the u.k., canada, australia, and new zealand. as investors turned their focus to corporate earnings season, whole host of concerns are simmering in the foreground. growth threatens the risk rally brought on by the new. great to have you with us. thanks for braving the cold with me here. we will talk about brexit in a second. we are seeing futures of further today after a pause in the risk rally yesterday. if you are not already invested in equities, is now a tactical or long-term entry points? 2018 finished on a very weak
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notes for the global market. every equity index ended in the red. most equity markets are at a 15% to 20% discount. as long-term investors, it is a good opportunity to buy companies at very interesting valuations. manus: where are the biggest opportunities for you? we have seen hefty revaluations going on. where do you want to be positioned geographically? >> the u.s. still looks the most interesting. the economy is in a good place. earnings are resilient. slow growth, but moderating to higher levels. earnings should continue to be resilient, although we are seeing downgrades. in the u.s. market we are able to see fantastic companies. the s&p 500 erases last year. there are opportunities in financials and cyclical parts of the market. emerging markets still look very
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compelling. fundamentals are still very good and we are seeing double-digit earnings growth in many significant companies. nejra: let's talk about earnings. what sort of earnings growth are you expecting for 20 for the u.s. and europe? >> i do not think we are seeing earnings slowing down. recent analysts have been downgrading estimates, particularly in the u.s. where that tax cut starts to fade. concerns round growth and trade tariffs continue in terms of the cost of doing business. we need to see some sort of truce between the u.s. and china. ultimately, the more that carries on, the more that impacts margins. broadly, we will have to see were the oil price goes. that might have an impact for energy companies. the fed is now talking around pausing hikes depending on economic growth. also softer inflation. that could impact financials.
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what happens in global central banks is going to be important. what we talked this morning was fiscal's latitude. is chinese equities down by 30%. you might say, do they offer value? pretty much at the average. the hang seng, the csi. are you tempted at all if there is a trade deal and a strong china, how do you trade china? direct or vicariously? >> china has been looking very interesting from an emerging market perspective. china was the worst falling index. we are seeing structural reforms area growth is slowing, but that's partly because the government is trying to move the economy onto a sustainable path of growth, which is a good sign in the long-term. there are opportunities in china
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, particularly in areas such as financials, which we have never liked. companies like china construction are looking very compelling. really good balance sheet. there are opportunities, but you need to be selective. anda: opportunities selective's are words i hear about the u.k. equity market area -- equity market. valuations are so low historically, but also compared to other areas like europe. are you brave enough to step in? >> today is going to be a very telling day in terms of where brexit is going to go. ultimately, we are moved by what sterling does. they are at a cheap discount, but you need to look across the market in terms of the large caps, which are impacted more around currency versus the domestic market. they are cheap relative to
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history. they are at 30% discount to grovel markets -- global markets. you can combine quality companies that bergen valuations. the importance is finding companies with a robust balance sheet you think are going to be here the next 5, 10 years regardless of brexit. what do you make of the proposition that the u.k. is underinvested? hence the reason we are seeing volatility lower rather than -- relative to other markets. there is that lack of ownership. the think if we look at latest merrill lynch survey, the u.k. was the most unloved market. if you are a contrarian investor, that provides opportunities. you have to be very selective of where you find opportunities. depending what happens with of the vote today, looks like it's going to be a no-confidence vote. ultimately, if we see that
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pushing through and it fails, we could see a fall down in sterling. we don't see an election risk, that faces uncertainty in the system. that could be good for uncertainty in the u.k.. talking about what could happen if theresa may is defeated, which is the expectation, it seems that the risk reversals in the sterling market, the pricing is geared -- it is biased toward an extension of article 50 and a delay of brexit. we started talking more about frexit not happening now rather than a no deal occurring. the mliv question is, what a brexit delay be good or bad for u.k. assets? >> i would love to give you a simple answer. the are multiple scenarios. it is very unpredictable. any rational financial analysis
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is difficult. what you have to look at is what is priced into equities today. what are the valuations telling us? what are the earnings of those potential companies? a no brexit scenario would be not so good for the markets, but ultimately if we see any uncertainty come down, that can be seen as positive for u.k. assets. of course, we are always try to work out with going to happen to the pound. today. out a note i find it interesting, the scenarios they're going for, 25% probability of another referendum. 25% probability parliament gets to vote on a series of allah cars brexit. brexit.carte there be that audible a sense of relief to get us up to 140 on the pound if we get a second referendum?
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>> it is difficult to predict sterling. it is very much impacted by brexit rather than underlying rates or economic data. it's going to be volatile depending on what's going to come through it. if we got to a point where we had a no vote of confidence that ultimately failed, sterling could potentially go up because it takes that election risk uncertainty out. it potentially could go higher from here. scenario, that would be bad for sterling and we could see it plummet significant. nejra: let's look globally at 2019. you have said now is a good long-term opportunity to buying equities. for the coming through of global growth and signals other parts of the market are sending on that, like a treasury yields for example and what's happening in credit. how are you offsetting your positive view with concerns
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around global growth? where would you be getting protection in the equity space? , it islobal growth slowing, but we are not ending the expansion today. growth is ok, but it is slowing. in terms of what the key risks be around going to what the fed does in terms of the rate hikes through this year , what happens on trade. that is going to impact equities. valuations look very compelling. you need some kind of positions given the volatility. areas like gold, or you might want to's are japanese yen. as buffers to ask when we see selloff from the market. overall, equities look compelling. it is important to stay invested , but to diversify your risks across regions and individual sectors and stocks as well. see yennteresting to
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did not behave in that correlation as you suggested. equities investment director at gag investments -- m& investments. coming up on the show, 12 hours before voting is set to begin on the deal to determine the future brexit. -- of from: our live coverage westminster continues. ♪
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nejra: today is the moment of truth for brexit. the house of commons is set to begin voting on the legislature -- the legislation that could set the course of britain's economic landscape for years to come. joining me now is someone who
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will have his say in tonight's vote. a u.k. competitive -- conservative member of parliament. thank you for braving the cold with me. >> it is a warm spring morning. [laughter] nejra: i understand that you are going to be voting in favor of theresa may's deal. expectation is not just that she is going to get a defeat, but that it could be crashing. why vote for it? is some pennies dropping at the moment. these results will get up to the wire. there are number of colleagues waking up to the fact that is this deal was to go down, and if we were to pivot out of the european union without a deal, that puts in serious jeopardy the unity of the united kingdom. you can see real pressure for an independence poll coming from scotland. you could see real pressure toing from northern ireland
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be reunified with the republic to retain access to the single market. it is also the best way of toivering on the referendum leave the european union, but doing so in a way that does not affect the economy, jobs, and business. minister is very clear. a good deal is better than a bad deal. this is a good deal. colleagues should be considering voting for it. i'm hearing people saying we must end the uncertainty. and declaring the are going to vote to continue the uncertainty. you cannot have it both ways. nejra: would you say momentum is building among mps to delay article 50 and the not have brexit happen at all? it seems like that is what we are talking about more than no deal. >> i do not think there is a link between extending article 50 and stopping brexit. but by extend article 50
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extra time and still deliver brexit. those who have been advocating to leave the european union for all their adult life -- i'm not one of them. i was a remain voter. i was slightly surprised that here they have this great prize they have been campaigning for within their grasp and they are saying, we don't want that price. we want something with a few emeralds and diamonds. i would take what is on offer because i think it is the best way of delivering on that result. my friend and colleague who was going to vote against has declared he will be voting in favor. it is the best way of banking the brexit decision. manus: good morning. i dropped out of the conversation for a moment. -- if as we expected this is voted down considerably tonight for theresa may, the
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decision will be done. , which theferendum prime minister is not in favor of, or the possibility of another general election. when you vote for another referendum if that is what we could -- we put to the house? therew, and i don't think is a majority even in the labour party for a second referendum. we said in 2016 this was not a never-ending. this is a once in a generation, we will abide by the results. i would question why, let's say you have a second referendum and the country voted to remain. why should anybody take the decision of that second referendum with any greater weight than they did the 2016? best-of-three? best-of-five? are we going soon a wrestling to work out which side wins -- sumo
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wrestling to work out which side wins? we have to deliver it. simon, doy briefly, you think if this falls tonight parliament should have its -- a series of options to vote? do you think that will be a good solution? dependink a lot will upon the scale of the defeat. if it is an enormous defeat and the deal looks to be dead in the water, and i hope that is not the case, there would be little or no point of the prime minister trying to appease a group. what i think we should be able to do if there is no majority and certainly not in the house of lords to leave the european union without a deal, therefore i think we should have a number of options. i would hope we would then see a free vote.
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thank you so much for joining us outside westminster. we continue coverage. ♪
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matt: welcome to "bloomberg markets: european open." we are live from our european headquarters in london. i am at matt miller alongside anna edwards in westminster. anna: good morning to you. futures in the u.k. point to a positive open as parliament prepares to vote on theresa may's exit deal. -- brexit deal. european cash trading starts in less than 30 minutes.

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