nejra: good morning from bloomberg's european headquartersnejra:. this is "bloomberg daybreak: europe." in asia jump amid reports mnuchin proposed rolling back chinese tariffs. is a deal in the works? european and u.s. futures point higher. chicago fed president charles evans says the fed can be patient as vice chair plays up the strength of the u.s. economy. netflix reports slowing sales inwth despite seeing a surge subscribers. shares declined in late trading.

good morning and welcome to "daybreak europe." yesterday in the u.s. we saw equities pushed around by trade headlines. the s&p 500 gaining as much as might wantts mnuchin to ease the tensions on china. we then saw the reports denied, but we still did and higher. we could see another high session. nasdaq futures pointing higher after we got slowing side -- sales growth from netflix. futures look like we could see -- in europe as well. charles evans from the fed talking about patients, feeding into the narrative pushing markets higher.

bump foren quite a equities overall. the 10 year treasury yield has been gaining for two weeks. today's session you see a different story. the trend has been upwards. dollar-yen fills up the risk picture. we are not seeing a huge demand for that safe haven. 10936. we have a lot allowed -- around japanese inflation. oil prices up today. we are seeing a weekly gain of 1.25%. we hold firmly above $52. lots of dynamics to discuss. juliette saly in singapore has more. juliette: tell us how the risk appetite is looking over their. juliette: it's looking pretty good. we are on track for a second week of gains in asia. the msci asia-pacific up by more than 1% today, looking very

solid as we see trade optimism you are mentioning. have seen a rebound in chinese and hong kong stocks that crashed yesterday afternoon. the hang seng index up by 1%. credit suisse upgrading its forecast for the hang seng index and shanghai composite, expecting the shanghai to rise by 30% this year and the hang seng to rise 16%. let's have a look at stock movers. i mentioned that crash, which was very surprising for market yesterday. this is one company in hong kong which fell as much as 81% yesterday. up by as much as 90% today. it is a property developer and has no understanding of the price swings we are seeing. we also had tsmc saying it's to $11ill remain at 10 billion. nymec hasnside,

warned of the chinese trade forecast asting its much as 8% today in the tokyo session. thank you so much. we are asking the question on mliv. could moveavos markets? we know president trump will not be there, nor will theresa may. what from that gathering could move markets? tune in for our coverage in switzerland january 21 to 25th right here on bloomberg. now let's get the first word news. >> theresa may is said to have promised probe brexit conservatives she will not agree to keep britain in a customs union with the eu. the u.k. prime minister told lawmakers there will not be an extension.

continuing,as been although with little sign of progress. may road to jeremy corbyn saying it would be impossible for her to rule out a note feel brexit as he has demanded. chicago fed president charles evans is the u.s. central bank can easily take a patient stance toward rate increases. evans, who is a voting member, says the fed is in a good place as the u.s. central bank assesses the economic outlook amid turmoil in financial markets and muted inflation. >> we are at a good point for pausing. let's look at the lay of the land. i'm not worried about inflation getting out of hand. the inflation data is softer than i was expecting. andgoing to be cautious take care to make sure inflation is going to continue up and perhaps about 2%.

>> audi officials have been indicted for their role am a chronic to defraud customers and regulators by rigging engines with illegal software to pass emissions tests. the indictment comes weeks after the company posted its first annual u.s. sales drop since 2009. vw says it is cooperating with u.s. authorities. a top north korean official is likely to meet president trump in washington later this week. overrt of negotiations north korea's nuclear program and amid speculation a trump-cam meeting could happen in hanoi. know if they don't two will decide to have the meeting in vietnam.

however, if it happens here, we will do our best to facilitate the meeting. andnot has cooperated well we are traditional friends with north korea. >> 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: it is shaping up to be a bullish day as reports about falling trade tensions and fueled the rally. according to a wall street journal report, the u.s. is considering rolling back tariffs on china. support from central banks is helping lift chairs and asian equities are chasing the u.s. higher as commodities joined the rally. fxning us now is the head of strategy at a bank and the senior multi-asset strategist at state street. great to have you both onset. it has been a bullish month. several equities globally.

is this a melt up? people fearing missing out rather than the rally based on fundamentals? isour view has been market tiptoeing between extremes. -- attractivected valuations and the possibility of recession. in december sentiment was focused on the negatives. now they are saying, but how much is priced in? maybe the sky is not falling on us now. maybe recession is not coming. is already priced in and you get this positive sentiment. nejra: is that justified? >> i think so. we think the valuation is attractive. we think earnings growth is constructive. ank support gave us quite

strong -- on the economy. markets are not collapsing. this,y we think about quite a lot of bad news already priced in. repricing markets higher multiples. would you be wanting to position to buy safe havens with risk still out there and sentiment not that great even though we have been seeing a risk rally in january? >> i would be nervous. drivingets seem to be -- if you look at the chinese authorities, they are trying to put stimulus into the market concerned about the slowdown in growth. theave just seen today revising down the 217 gdp growth in china. that is probably to give the 2018 figure a year on year aspect.

they are concerned throwing liquidity of the market in the u.s., it seems equity markets have been driving policy area fed policy seems to be reacting to the poor turn in equities at the end of the year by stepping back and pausing. we still have a lot of clouds on the horizon. for compromises, but we still have that. we know the u.s. economy is slowing, china is slowing. i think there are lots of headwinds. what would be your safe haven of choice? >> i think the yen has become safe haven of choice in the currency market when things really turn sour. why?: >> historically that is where the flow has tended to go. if you look at the contrast between the swiss franc and the japanese yen, the national bank have a policy. the dollar behaved as

a safe haven for a lot of investors. that was an environment where you are -- the u.s. was getting stronger. remove that and the yen becomes the primary safe haven. nejra: your target for year-end is 105. you have one 03 over the next 12 months. in terms of japanese equity market, a stronger yen is not going to help low inflation in japan. we have yet more data today. oil prices as well. can you make a case for japanese equities beyond the low valuations? japan stocks have been very attractive for a long time. fundamentals are -- japan has been historically known as a low efficiency market. the has changed.

have lots of cash flow. they have met negative debt. the underlying fundamentals are increasing dividend payout. the bank of japan is always buying stocks. agree, the stronger yen would be a headwind. that is probably important to look at. on a day like today when we have a breakthrough on trade talks, japanese markets -- cyclical growth. nejra: i want to ask you one oil because the lower oil price, although we have seen a rebound, has played into that lower inflation in japan. how are you positioning on energy companies? >> energy is one of the most interesting sectors right now. last year we had oil price collapsing. that not only really hurt oil

companies. it hurt overall capex for industrial companies. it is very interesting what they are going to say about capex inflation in terms of longer-term prices. that could be one of a few sectors we are really looking at. valuation is very attractive is commodity prices stabilize, if we see chinese demand coming through. course, playing into these risks is the political risk, the continuing shutdown in the u.s., brexit. we will talk about brexit in a second. have seen the shutdown feeding into the davos discussion. i know you can handle the mliv question. what from davos could move market? forhe markets were hoping something on trade, but that was before trump said he wasn't going to go.

it seems a month or so ago trump could be positioning himself for some sort of an answer. i think the likely answer is far more limited. something on trade, perhaps from the treasury secretary, but i don't think quite such a big bang announcement is there anymore. stay with us. up next as promised we will talk brexit. big trendsw you breaking through the market. tune in to bloomberg radio live on your mobile device or dab digital radio. this is bloomberg. ♪

nejra: let's check in on the markets. it's been a strong start to the year for global equities. the nikkei has been leading the asian gains in a session set for its best month since september. gains in the u.s. session moderated after the government denied reports mnuchin was looking to ease tensions with china. futures point to another strong session after we see netflix decline in late trading. on the front foot above $52. the 10 year yield is heading for a weekly gain. cable steady struggling for direction. 1.2983. we are asking the question on mliv, what from davos could move markets. tune in for our coverage of the world economic forum january 21 to the 25th on bloomberg.

now let's get the bloomberg business flash. bird box and other new shows helps attract millions of new subscribers to netflix last quarter. disappointedgrowth investors writing high on a 50% stock gain in recent weeks. rose 27% through december but came in slightly shy of expectations. the forecast for current quarter sales missed estimates just a spending spree on new content may not pay off quickly. commentsix cfo report on the youtube page. will be self we funding over time with these contents investments. in the interim, i don't foresee any change to our approach. we talked about the fact we have accessed markets and we will continue to do so. we think that is the optimal cost of financing and funding.

we will continue to pursue that path. >> american express is pulling up the big-box to keep its stronghold on premium credit card users. company spent $2.25 billion on rewards in the fourth quarter as it revamped its gold card to include more travel and dining benefits and announced new locations for its airport lounges. customer spending rose 6% to $309 billion. less than analysts estimated. that is your business flash. with brexit uncertainty still swirling, commentators and analysts have concluded exit is an untradable events. investors still have to make decisions. dani burger did some digging. what did you find? >> one trader spent over $2 million on one single trade.

we cannot see who did the trade, but we can see some of the aspects of it. .hese are put options specifically put spread on a big u.k. stock. 500,000 contracts on monday right before the vote. that beats the single contracts we saw during the brexit vote. these contracts actually have not paid out yet. from what we have seen, this single trader is holding on to those bets. they expire in february. we need to see whether they give up on this trade or continue on hoping u.k. stocks will fall. the other trade i have, it's no secret the pound is what has .een affected a lot of sources are concerned about the recent gains they have seen. they mostly have a bearish bet. here is your more traditional currency forward. are inflows into

currency hedged funds. if you're in the u.k. and you want to invest globally, the strengthening is really going to hurt your investment. we have seen record inflows into currency hedges. this right here is an msci world sterling hedge product. it is 70 million pounds worth of inflows just in this week. if we see this turmoil continuing and pound uncertainty continuing to linger, don't be surprised if we see currency hedging products picking up. nejra: thank you so much. great charts. with the onset i have rabobank and state street. fx.nt to pick up on the to me at the moment unless we get a no deal, which a lot of people are telling me the likelihood of that is receding, it doesn't seem like all the roads point to higher sterling in terms of potentially getting a softer brexit, getting a second referendum. would you agree it?

>> that is that we have seen reflected in the pound. street, that can be more difficult understand. legally, in the u.k. right now does not have a deal and we are as it stands committed to leave the eu on march 29 without a deal in place. looking at sterling, why is sterling going up? actually we appear to be heading toward no deal. investors are looking at that's. they are thinking actually it pressure may be a second referendum. it is a betting game. we don't know that for certain. unless in this relatively near-term -- unless we get some sort of movement by p.m. may to indicate there would be a referendum, investors may get more nervous. to your point about

sterling, it's the longest run of weekly gain since 2018. i would not say it has been a huge trend higher. how much more upside actually is there if you look at the pound from purchasing power? , whened on our models sterling first came up after the referendum, we saw valuation upside of 16%. now two things happened. we have economy weakened somewhat. we are getting there. i have to say, speaking to investors, i think the mood music is the pound is about to get stronger. the probability of no deal may be somewhat lower. not many investors are prepared. it was very interesting to see

there are some bearish u.k. stocks, but they are far and few between. there are some people brave enough. that is generally not the consensus. the pound can get stronger. not many are prepared to take that bet. volatility is so high. not to call you out, but you are in that camp that has told me the u.k. is uninvestable. have you changed your mind? there is a think higher probability of an extension of the deal, but i cannot see volatility going away. in terms of hedging, i had a conversation earlier this week about the property trade

around sterling. referring to some of the standing currencies. is that the way you would approach this or would you be wanting to do this through eurosterling? >> it depends. certainly a lot of our customers probably would not be allowed by their board. potentially they would, but they may not be. they are looking at cable, they are looking at eurosterling. they are quite worried about this. the foreign exchange is a headache for them. hopefully there will be some resolution one way or the other. there are an awful lot of corporate customers, even if the outcome is not what they wanted, at least there is some certainty they can manage it. jane foley, head of fx strategy at rabobank, and as a

strategist at state street stay with us. now is a good time for the central bank to be patient. we will hear more from the chicago fed chair next. ♪

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nejra: optimism about progress in trade talks means asian equities are following a higher u.s. session. local equities set for a for a fourth weekly advance. let's check in on the markets around the world. here in london is bloomberg's annmarie hordern. great to have both of you. the risk rally gaining steam in asia amid optimism for progress in u.s.-china trade talks. is that what is moving the markets in india? like that for a better part of the morning, but there have been casualties in the indian markets on the large-cap index.

that global market picture could stop the indian market. a bit of red on the screen, nothing too alarming. the money markets are ok. nothing in the currency and bond markets. a mixed set of stocks up. that plus the telcos are the key reason. there are reports around governance issues around one of the largest pharma companies in india. dumping of the stock the last couple days. sun pharmaceutical industry was down about 6% in trade yesterday. and what is happening to telecom companies. the story will be on top of it of course. back to you. nejra: thank you. we look at if

chinese equities, are they moving on equities -- on optimism given that china revised down gdp growth? >> you see green over in asia. the treasury is denying these reports out of the wall street journal. i'm looking at calls out there. we could see double-digit gains in chinese hong kong stocks even on a partial trade deal. for the shanghai composite, they think we could see as high as 2900 points. a 13% gain. for the hang seng, as much as 31,000 points higher. idea weuisse has the could get this partial deal at 52%. there's lots of optimism within the market. the markets reading it as it is happening. i'm also looking at what's going on in a stronger correlation and linkage between the dollar-yen and the u.s.-japan yield differential.

this correlation is the highest it has been in a year. this bodes well for the strong yen call. standard chartered looking for short on the dollar. they found that with the darvish -- dovish fed. short dollar-yen is one of the biggest conviction calls in the g10 fx space. certainly it does not bode well for japanese exporters and even kuroda's inflation calls. december inflation gain is slowing in japan. well: it would not bode for japanese equities, but they are strong in this session. is this a broader risk rally? thank you. today we are asking the question on mliv. could move the markets? tune into our daily coverage from the world economic forum. it is always full of newsmakers, potentially market moving.

that is january 21 to 25th. now let's get the bloomberg first word news. has said tosa may have promised probe brexit keeprvatives she will not britain in a customs union with the eu. she told the lawmakers there will not be an extension to the march deadline. discussions with opposition politicians have been continuing with little sign of progress. , who is boycotting the talks, saying it would be impossible for her to rely a no deal brexit as he has demanded -- rule out a no deal brexit as he has demanded. economists are brushing off the risk to the u.s. expansion. if the closure lasts through march, the disruptions will cause economic growth to dip below 2% this quarter. as the standoff continues, donald canceled the u.s.

delegation's trip to the global economic summit in davos after denying nancy pelosi a plan to visit troops in afghanistan an hour before she was due to leave. there is confusion in washington about u.s. tariff strategy on china. the wall street journal reported treasury secretary steven mnuchin wants to lift some or all tariffs to move trade talks forward. the treasury department quickly denied that, but the report did move markets. the white house says trump admonition are said to meet -- trump and mnuchin are set to meet later today. four audi officials have been indicted for their roles in a conspiracy to defraud regulators rigging engines with software to pass emissions test. the company posted its first annual u.s. sales drop since 2009. vw says it is cooperating with u.s. authorities. global news 24 hours a day on air and on twitter powered by

more than 2700 journalists and analysts in more than 120 countries. nejra: thank you. the federal reserve has signaled it is ready to wait and see how big a macro uncertainties play from deceleration in the u.s. economy to the trade war and the slowdown in china. our global economics and policy editor spoke exclusively to the chicago fed president about his outlook for the economy and the central bank's rate path. >> markets may have been slower to truly assess the deceleration to growth toward trend. it may not give different an outlook then we would have. that is more benign interpretation. if i am comfortable with funds right now, i do not think there is any hurry. i also would not want to make a mistake. we can look at the data and because his. >> are you saying in all of this

you really see an economy that is fundamentally strong, that is going to warnings three more rate hikes as you saw before? factors thatese are worrisome dissipate or don't get worse? is this really not such a dovish stance from you or from the fed? is it just, we are going to put it off? evaluateot know how to the dovish stance. in the past i have not complained about that language. at the moment growth is good. employment is good. the consumer is strong. businesses have a lot of wherewithal from tax reform and good conditions going forward. my outlook is for continued growth above a trend decelerating. there is uncertainty. we are at a point where if there is a shock no one is expecting, maybe the global slowdown is more severe or something, that could take on more of an effect. we are at a good point for pausing.

i'm not worried about inflation getting out of hand. if anything, inflation data had been softer than i was expecting, and i would say, going to be cautious and take more care to make sure inflation is going to continue up and above 2%. that was charles evans speaking exclusively with bloomberg's kathleen hays. rabobank and state street are still with us. jane, you were saying the yen would be the safe haven of choice in terms of currencies. we keep hearing more voices coming out talking about caution in patients at the fed. does that mean the only direction for you is down? interesting.is is it has been easy to put together a bearish outlook for the u.s. dollar.

you can talk about u.s. growth. obviously when you are looking at currencies, you are looking at a currency pair. it is safe to say while the outlook for the dollar has soured, a lot of other currency outlooks have soured. this is for instance if we look at the euro. look at german growth. look at the market expectations for ecb policy. sterling obviously is driven by brexit. if you look at the oil related currencies, if you look at aussie, new zealand, these are interesting. both of those central banks could be cutting interest rates. they look more sour than they did. because the outlook of the dollar has soured for other currencies as well, the outlook of the dollar on balance does not look as bad. you bring this up. i have had people say to me we are going to see a convergence in monetary policy and i have

not been convinced by that in terms of other central banks being able to tighten while the fed is pausing given the outlook for global growth. i want to bring up a chart which you highlighted to do with the positioning around the dollar and around the euro. what does the positioning on this chart -- you call it a sparring contest. what direction is the contest going to take or is it going to cause a headlock? euro-dollar -- the dollar positioning on top and euro-dollar below. >> we have not had new data because of the government shutdown. what happenedink to euro-dollar at the start of the year, a little bit short of the euro, we have had a little bit of correction. it has been very difficult for euro-dollar to break higher. that is because the markets are taking on board the weakness in

german data. the german economy in the second half of last year and the clear implications of that for ecb policy. the ecb have indicated they could be hiking interest rates. interest rate could be going up in september. the market is worried that may not happen. worsenedoutlook has since the start of the year. let's talk about real rates. i've a chart that shows they are not in japan and europe. is this one of the reasons you are more positive on u.s. equities? there must be other reasons other than real rates. yes, slightly above zero, but in general, rates are very low. they are not going up in a hurry. that cannot be positive for stocks. equity market outlook should be supported by very low interest rate environment.

--are seeing central bankers rhetoric is we will be patient. -- that ist we are always kind of instructive. underlying the strength of the economy underlines profitability of companies. it is hard to find a market where earnings are as strong as in the u.s.. things like return on equities. there is no other market coming anywhere close. we talked about the japanese market catching up, but the gap is there. -- by shares, return of capital. the u.s. economy is growing. it is not just u.s. slowing. other markets are slowing. we are seeing global slowdown. foley at rabobank and maria at state street stay

with us. we will talk earnings. netflix underwhelm's. but box is a huge draw, combined that with apple challenges. we will also talk u.s. banks. ♪

nejra: today we are asking, what from davos could move markets? tune in for coverage january 21 to 25th on bloomberg. is content bilking? industry watchers might be having doubts despite 18 million subscribers watching bird box. guidance disappointed netflix investors. shares down as much as 5% in extended trading. alex webb is here now. good to have you with us.

what does this tell us about netflix? >> the concern is we have a few quarters where netflix has missed. we had a few quarters it beat. the reaction is quite extreme. they have missed more than they beat. it's going to be a big year coming up. massive competition. whether they can fight off competition and grow in the face of it. is this year going to be harder for netflix? >> absolutely. we have disney and warner media. they are going to be coming with their own video-on-demand platforms. that has increased competition. companies will not be selling their content any longer to netflix. big brands like star wars and pixar will no longer be available on netflix. that is a competitive threat. it is not going to be easy for

those companies to steal competition from netflix. how much resilient has netflix built up? nejra: we have seen the resilience of faang stocks. is it fair to lump netflix in? >> i don't think so. it is very different. those other companies draw huge amounts of cash. netflix still has negative cash flow. revenue, andn values at $150 billion. growth is slowing. i think it has to be a question of where that valuation is justified. nejra: great to have you with us. now let's get the bloomberg business flash in hong kong. american express is pulling out the big bucks to keep its stronghold on premium credit card users. the company spent a record $2.52 billion on rewards for customers in the fourth quarter.

that is as it revamped its gold card to include more travel and dining benefits and announce new locations for its century and airport lounges. customer spending rose 6% to $309 billion. it is less than analysts estimated. generaleas and societe are weighing bonus cuts after a downturn that hit some of the world's biggest initial firms. to pay lower or zero balances for many traders in is global markets unit after shutting some businesses. meanwhile, at socgen, bonus pools could be them to -- impacted for the second year in a row. nejra: thank you so much. let's stick with earnings. it has been a whirlwind week for u.s. banks. especially during december. less fixed income aberrations -- operations at goldman sachs.

morgan stanley's traders succumbed to the same downturn fall by wall street. shares fell as much as 6% after their worst result in three years. estimates.analyst french banks like bnp and societe generale warned about bad news hitting their bottom line. joining us on the phone is bloomberg's europe finance and investing editor. great to have you with us. morgan stanley was the worst of its peers, but is this the bottom of a bad cycle for u.s. banks? >> good morning from london. it looks like the tone improved in 2019 as the year got underway . morgan stanley indicated there was an improvement in the market. we have certainly seen the volatility that the markets in november and december seemed to 2019 has gotten on.

foray get better from here the global banks. there might be some idiosyncratic events that might royal the markets again. that is something we have to keep a close eye on. as the quarter gets underway. nejra: we are also hearing the french banks could be cutting bonuses on macro gloom. could the pain spread to the rest of european lenders? >> that seems to be the case. we already know deutsche bank has decided -- or has indicated it could cut the bonus pool by as much as 10%. we know from the french banks those conversations are ongoing. presse heard from local that ing is considering moves

this morning. all of the banks across europe will be having similar moves as 2018 and the full extent of the moves from 2018 become apparent and as earnings season starts in europe starting next week, we will see all of those decisions be more apparent as the banks report earnings. nejra: thank you so much. jane foley, head of fx strategy at rabobank and the senior asset manager at state street are still with us. i want to ask you, we talk about the risk of a u.s. recession in terms of economic fundamentals. are we at risk of an earnings recession? >> the market is very concerned , everybodyession

very concerned. we are worried that maybe we will slow down. it is really not peter earnings. maybe peaked growth earnings. nejra: you are looking at growth, what, single-digit? 20% growth last year, so everyone is expecting worse than that. how much worse? >> single-digit is probably where we are. -- i know does it certain people are focusing on the fed, but dollar-yen is going to be driven by u.s. returning season -- earnings season. at whatnt to look forecast earnings are to know where the economy is going or likely to be. wet is important as i think are looking at central banks, central banks are -- both of

them, the ecb and the fed, data-driven right now. the market has not got a firm view of how the ecb is, how the federal reserve is going to react going forward. and it is a data which has clarified that position is important whether that comes from earnings numbers or from economic data. all of these are going to be really digested in the next few months by markets. we talked about two sectors in particular. banks and tech. are you positive on u.s. banks despite wobbles in trading activity in the fourth quarter last year? >> i was less concerned about trading activity. what i was worried about was corporate earnings, that underlying economy and underlying corporate retail activities, m&a activity. economies -- that is very important. the economy is not going into recession based on that.

concerned isore interest rates. interest rates have increased somewhat. they are not going up on the right. are fairlyst rates positive. that is not ideal for markets. that is really not ideal. some in myave portfolio, but probably not banks. nejra: what aspect are you looking at? is at the faang or the i.t. infrastructure? >> this was a big story last year, that high growth companies , and with that idea, tested very much in the first quarter when we saw interest rates rising. now we are going back to the safe haven.

interest rates are still very low. that's a great thing for growth stocks. that gives you quite a big valuation premium. growth stocks, high-margin, high return of equities. it probably leads you into faang really. nejra: is the risk rally going to continue? >> i don't think we are going to see a risk rally. i think it's going to be somewhat tentative and more headwinds, but the market is going to be sensitive to any news on trade. anna: thank you very much. delighted to have you both. jane will be continuing the conversation with us at 7:30 a.m. u.k. time on bloomberg radio. do not miss a great exclusive interview we have today. cofoundereak to the of europe's biggest activist fund at 8:00 a.m. london time.

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morning, i'm nejra cehic. these are today's top stories. trade optimism. stocks in asia jump. the treasury denied the story, but there is a deal in the works. grows.rus of caution the chicago fed president says the fed could be patient, even as vice chair rendell coral played up the strength of the u.s. economy. netflix reports slowing sales growth despite a surge in subscribers.

good morning, everyone. we are under an hour away from cap equity trading in europe. the s&p 500 went above its 50 day moving average for the first time since december. seems to be some optimism in the market. even if the reports were denied by the u.s. government. see gains in could europe as well judging by ftse 100, dax, and tax futures. risk is on the table. if you take a look at what is happening in the bond markets, you see that play out. you see the dollar stronger against the yen. you see oil and other commodities on the front foot. the 10 year treasury yield, we have seen a move higher. the trend has been higher in the past couple years.

in today's weaker session, but the bond futures, we are really struggling for direction and little bit. same story looking at the tenure bund future's. perhaps a touch of spread tightening in the european bond session. let's check in on the market on asia. a bit of a broad-based risk rally is what we are seeing. >> yes, we are. we have the csi 300 closing even as investors are trading the headlines at the moment, but there have been good developments on that front. by 3.3%. up a look at the currency moves today.

the dollar stronger. also watching the offshore yuan, it is on track for its worst week. we have so much stimulus coming through from the pboc. a little bit of downward momentum in the rupee. starting to take some of the shine off that. nejra: thank you so much. let's get to the breaking news from ryanair. cutting 21.1 billion euros.

that is the range from a previous range. ryanair cutting it , citing lower winter fares. watchs a stock we will when the equity market opens. lots of threads to pull together in the markets. .e have yet more comments we have the earnings season underway. we are asking the weston, what from devils could move markets? dallas right here on bloomberg. let's get the bloomberg first word news. may is set to have pre-brexit conservatives, she will -- according to bloomberg

sources, the u.k. prime minister told the lawmakers there will not be an extension to the march brexit deadline. discussions with opposition politicians have been continuing with little sign of progress. she wrote to labor leader jeremy corbyn who is boycotting the talks, saying it would be impossible for her to rule out a no deal brexit as he has demanded. as the government shutdown continues, economists are brushing off the risk of the u.s. expansion. according to a bloomberg survey, if the closure lasts through march, it will cause economic growth to dip below 2% this quarter. the standoff continues, donald trump canceled the u.s. delegation trip to the summit in toos after denying a trip afghanistan. chicago fed president charles seven says they can take a

patient stance toward further rate increases. evans, who is a voting member this year said the fed is in a good face -- place for causing at the u.s. assesses the economic outlook during economic turmoil and muted inflation. >> we are at a good point for pausing. let's look at the lay of the land. anything, the inflation data had been softer than i was expecting. i would sam going to be cautious and take a little more care to make sure inflation is going to continue above 2%. debra: audi officials have been indicted for a conspiracy to rig engines with illegal software to pass emissions test. parent company vw says it is

cooperating with u.s. authorities. a top north korean official is likely to meet president trump in washington later this week. part of negotiations over the country's nuclear program. there amid speculation a trump-kim meeting could happen in hanoi. the prime minister vietnam said will be ready if called upon to house talks between the two leaders. i don't know say will decide to have the meeting in vietnam. we don't know the final decision. it happens here, we will do the best to facilitate the meeting. vietnam has cooperated well and we are traditional friends with north korea. debra: you can hear more of our exclusive interview on monday on bloomberg tv.

the world's most visited city is battling some of the world's most toxic smog. bangkok's air has turned gray during morning, as seasonal preventchanges pollutants from dissipating. the worst days have seen air-quality standards lower than new delhi and shanghai. global news on air and on twitter. thank you so much. global markets are poised to end the week on a high note. commodities also joining the rally is crude advances. drive riskhelping to assets. optimism is prevailing after a wall street journal report that the u.s. is considering rolling back tariffs on china, not to mention more comments on caution and patience from fed officials.

on this risk on friday. thank you for joining us. one thing i've been thinking about is whether what we are seeing is built on what people are being afraid to miss out and not based on fundamentals. i'm wondering whether what we saw in december and the rebound we have seen now, whether you are reassessing anything. >> we have become more cautious. i think that is because of a lot of contradictory signals. the valuations are still quite add area the reverse is true for equities. momentum is bad, but the like if are -- we still you select sectors and regions like health care, u.k. equities. we are waiting to see how things develop with trade tariffs come

the shutdown, brexit. how are you approaching 2019? is it a year where you have to be ready to put risk on the table, take it off, being humble? oure are publishing outlook. it is a year to be nimble. there could be get opportunities, we could have good equity rallies, but we are prepared to move things around a lot and that is a change from previous years where you could buy and own technology stocks. nejra: what areas would you highlight in terms of sectors are regions? i think emerging markets or something we reduced last year and we are open to increasing if we get positive signs because you can see china bottoming out at some point.

it could be now or later on. we continue to like russia which is a bit of a contrary and called. health care.o hold we have had that for years. that is one of our long-term remaining conviction calls. things like japan we are evaluating at the moment. on the one hand, the have a lot is tied to global exports or strength or weakness of the yen. i'm hearinge yen, that the rates are number one emerging markets. you are still sticking to long term convictions. thinks about protecting the portfolio. what are you doing? our corporateuced and high-yield bonds and have increased government bonds and cash. our approach is if we are going to have something that is safe, we want to be very safe. is your cash position

higher than usual? >> it is. we look at that cash as being something that maybe can go back aso equities at some point we see opportunities. nejra: on the government bonds, you were saying that valuations are not that attractive. where are you getting the protection and the bond space we getting some reward? >> like treasuries within government bonds because we have moved into a downward trend in terms of yields and even in terms of the economy in the u.s., we get one rate rise area treasuries won't rally too much from here. i think the u.k. gross is likely to stay low. england, the big deal risk you have come we have a resolution to brexit.

rates go up in the u.k., guilt falls. ,ejra: on brexit, big topic does it look to you that the prospect of a no deal is receding and a lot of the other options on the table, whether .2y be second referendum sterling upside and therefore to potential upside in gilt yields? >> i think the risk of no deal has gone down. we so that redound and rejection this week. . think that gave a bit of hope maybe that means there is a consensus that can be found. still think a second referendum is unlikely. about what side would theresa may campaign on or jeremy corbyn? it would cause a lot of difficult questions for them. we think a base case will be agreed to. but a lot of uncertainty still. i lot more to discuss.

coming up, netflix underwhelm's. hugesay bird box is a drawl. to see the rest knocked down? tune in to bloomberg radio live on your mobile device or on digital radio in the london area. ♪ area. ♪

nejra: 42 minutes away from the start of cash equity trading in europe. let's check in on the markets. some people are calling it a melt up for the start of the year. looks like it will continue in the session today.

we did see u.s. stocks gain. s&p futures point higher. oil joins the risk rally. the 10 year yield unchanged. the trend has been higher over the past couple of weeks. cable, second worst-performing currency. we are struggling for direction. beaten by the yen in terms of the yen being the worst performing currency out of the g10. today, we are asking the , what from davos could move markets? .une in for our daily coverage that is january 21 through 25 on bloomberg. let's get the bloomberg business flash. ryan are has cut its

full-year profit guidance for 2019. europe's biggest low-cost airline expects to be between one billion euros and 1.1 according to a company statement, they now forecast winter fares will fall 7% this year. bird box and other new shows helped attract millions of new subscribers to netflix last quarter, but slower sales growth disappointed investors. payment slightly shy of expectations. the forecast for current quarter sales adjusted estimates. the spending spree may not pay off quickly. >> ultimately, our respiration is to be self funding and we believe we will do that on time.

i don't foresee any change to our approach. we have talked about the fact that we have accessed the debt market and we will continue to do so. we think that is the optimal cost of financing and funding and we will continue to pursue that half. both weighing bonus cuts. to pay zerois said balances after posting trading losses and shutting some businesses. implementeduld be for the second straight year. that is your bloomberg business flash. nejra: thank you. here is a look at next week. we will see how much bite the trade war has had. we get the release of the four quarter gdp on monday.

in the u.s., markets will be closed for martin luther king day. tuesday seized the kickoff of the world economic forum in davos. president trump and prime minister theresa may will not attend as they do with political turmoil at home. speak.raghi will the earnings season is in full swing. with a trade war, investors have to contend with another risk factor. how should you be positioned going into the reporting season? details, get into the

you were expecting earnings growth in the u.s. and high single digits. what about how thou will compare and how that expects u.s. stocks ? >> europe is likely to be a weaker earnings season. the slowdown in autos come of the strikes in france, generally weaker conditions, i think the u.s. has a lot of pessimism about tax cuts coming out of earnings. i think it is probably more positive for the u.s.. nejra: looking at certain sectors, you were saying you are so positive on tech. even with the tech stocks slumped we have seen, banks no longer being the darling of the market, valuations still high.

we are still looking at 16 times estimated 12 month earnings. surely this works against being in tech stocks in a broadway. >> you have to look at what earnings growth is. the reason we have technology exposure is because that sector is growing a lot quicker than others. if you have companies that are growing at 20-25% or we saw netflix results last night, it thannts trading higher consumer staples or other sectors growing much lower. i think you have to take that into account. where specifically would you be more positive on? in tech? >> you can't really lump tech into one bucket. we see more opportunities in cloud computing.

there is more evidence that that is an early stages. i think content stuff we are seeing a lot of investment and it is becoming more and more competitive. there is a lot of opportunity. we reduced evidence of up.tphone, costs going and the sheer amount of capital you have to invest. drag area those areas we are less positive on. nejra: what about netflix? >> netflix we don't own on our portfolios. the valuations are pretty stratospheric. they are the leader at the moment. we do have a lot of of the companies trying to get into that space.

there is a danger that profits could be eroded. had the banko earnings this week. you talked about banks, does the valuation stand? >> i think that is still broadly true. we prefer u.s. to europe. overall, we prefer the debt because capital positions are very high. it is more difficult to make an equity return. nejra: on the yield curve, let's talk about the fed. there were many contradictory turtles --

when you look at equity markets now, is the fed pause more supportive than corporate earnings? >> i don't know. it depends on magnitude of corporate earnings. it has been decent, not amazing. the data could be good and then people could worry that the fed could raise rates. nejra: yeah. >> we will have to wait and see. our approaches we will watch the data and see. nejra: great to speak with you this morning. that is it for "daybreak europe." the european open is next. don't miss a great exclusive interview. we will speak to the cofounder of 70 and capital. that is at 8:00 a.m. london time. when you are traveling to work, tune into bloomberg radio.

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>> good morning. welcome to the european open. i'm and edwards alongside matt heller. what the markets a tariffs off, risk on. the cash trade is less than 30 minutes away. anna: trade optimism. stocks in futures jump amid