nejra: good morning. i'm nejra cehic. this is bloomberg daybreak: europe. these are the top stories. chinese equity shirt off trade concerns after markets play catch-up after the lunar new year. japan shut for a holiday. china trade negotiations ratio -- resume in beijing. can a deal be reached in u.s. -- before the u.s. doubles tariffs? theresa may except the offer of more talks with labors jeremy corbyn as she tries to buy time to renegotiate her brexit deal.

welcome to daybreak europe. two hours and the start of cash equities trading. pause a little bit of a in the rally and risk assets since we seen at the start of the year. global equities stopping last week after five weeks of gains. you're seeing u.s. futures struggling for direction. emerging-market rally, taking a bit of a pause for breath. dropping below the moving average. you will see how currencies are performing today. little bit of a pullback in the end. dollar-yen on the front foot. of ae seeing a little bit risk on today and it is at least showing up strongly in equities. meanwhile, oil extending declines after the worst week of we arest week area

seeing a little softness come through in iron ore after a big jump of more than 8% in the singapore contract last week. the chinese markets coming back with the contract. let's check on the markets with asia. our reporter in hong kong has more. is china coming back online with a bank or a whimper? with a bang. it's momentum we saw back in january that was lagging a little bit. they're all these concerns. we see a pullback when equities that would catch with china. we are up about 1.5% here across the board. in china as well, some decent gains. likeest is markets thailand, singapore, india as well. it's that dollar strength that

continues to play for asian markets as well. we did see his seventh straight game of day -- day of gains. rate really playing catch-up with the offshore fullback we saw last week area -- week. commodities, to shanghai is popping today on the back of iron ore futures in china also plane this catch-up rally along with the rest of the iron ore price and that is lifting so these producers. we are seeing a pop of 3.5% in's -- in sydney. tech stocks getting a bid in taiwan and china. argent others are jumping more than five to 6%. going to be added these stocks to their indices. that decision coming n.

the taipei stocks of up 3% after the gains we saw in u.s. chips last week. thank you. today we are asking the question on mliv, what is the biggest uncertainty for markets for the rest of the first quarter? you can join the debate in reach out to us of the mliv team. question any rally -- timely question for the risk assets. theresa may is trying to buy herself more time to renegotiate with brussels. the prime minister wrote a conciliar he the lead -- letter to jeremy corbyn after he proposed fairbury 26th of the new deadline for winning support for brexit deal. britain's exit from the eu will be difficult. >> whether this ends well it is

a smooth exit by custom unions is predicated by some or whether there is the result of a brutal exit on march 29, it's not going to be as good as it is now. the you can't reach a trade deal was switzerland. a court will allow the movement of goods to continue after the u.k. leaves the year. it will limited duties on most goods. the 8 million pounds a year and tariffs. the prime and us or says brexit and eu china trade are two key risks facing the economy. on the international stage, with the risk of a fed war. that with united states and china would have a direct impact on the international stage and especially in europe. talks to avoid a new u.s.

government shutdown have a snag. some lawmakers announced a skeptical deal by the friday -- announced they are skeptical of a friday deadline. without a deal, nine departments and is is will be shut down again only weeks after the record 35 day closure. president trump said the democrats are trying to create a distraction after a bad week of news. a nobel prize-winning economist says with increasing headwinds, would be a bad idea for the fed to raise rates. he discussed the u.s. economy of the world government summit in dubai. in much worse shape. we don't have a crisis of a stash of that magnitude but we are in much worse shape to deal with whatever shocks come along than 10 years ago. global news 24 hours a day on air and at tictoc on twitter. this is bloomberg. annabelle, thank you so

much. markets again hinge on the progress of trade talks this week as we speed towards a march 1 deadline. chinese fights premier join steven mnuchin and robert lighthouses are for high-level talks in beijing. this comes amidst reports that the u.s. president's advisers informally discussed holding up thought that summit with the chinese president and marijuana go next month. we will measure the follow-up to the data. chinese inflation figures on friday could offer further headwinds and signs of a global slowdown. there's always a potential for new tariffs. every 17 busy deadline for the u.s. commerce department to publish a report on the national security invocations of auto imports. one of auto imports. what a charts telling us? since the trade truce was stock best rock album u.s. stocks with high exposure to china have been doing better than chinese stocks with exposure to the u.s..

and us now is jon harrison simon french. good morning. when we kick off with that chart. does the chinese economy at this point stand lose more than the u.s. any negotiation? we think the risk of an escalation on the first of march is over fiscal year 19, around 59 basis points in chinese growth and 25 basis points in u.s. growth. as always. at this point in the economic cycle comes there is more risk even accounting for the different nominal growth discrepancies, there is more to use for china. seem: the stimulus would from china, is that enough to support growth? jon: it's not enough.

they have ramco said we do expect them to have an impact but may not be until next quarter or maybe even the second half of the year. at the moment, love the negative data majority baked in. they will see more negative data in the coming months. you think we need to see in terms of stimulus for to be enough? they are doing what they are doing in the demeaning to depreciate the currency as well just that these things have -- take time to have an effect. mention inflation in your introduction. a something we're watching very closely. chinese pbi has fallen sharply in the last few months back and have a negative impact on companies profits. race a prospect of defaults and so on. do you agree with john

the data is only going to get more negative from here? even if we get some sort of trade truce? simon: in the near term, yes but we need to look at the impact of the symbols measures. this is a repeated stimulus package attempted in 2015. if it's effectively think it'll appear in the start of quarter four. looking product he global economy, ever going to get a squid to bep, second half the year to wait because the dovish comments on the oil price in 2018 all feet through the with a lag. mighthat leg, investors have to keep the faith in q1 and q2. and look for the rewards are dividends with that. nejra: should we be concerned about the consumer? throughout this, the chinese consumer has been holding up. simon: i don't think there are

signs of real stress yet. what you're looking for is the behavioral shift which is the bearish sentiment in the economy also the fundamental shift. potentially job losses. global signs of the behavioral shift but not so much from the -- you think china should launch a stimulus cycle similar to the previous one? jon: the idea of deleveraging is still somewhat on the minds of the authorities and i don't think they want to ramp up leverage in the way they did in 2015 or 2016. at the same time they have to perhaps put on hold the deleveraging that they did last year. we said investors are underestimating deflation risks. why do investors are paying enough attention to this? jon: they are starting to.

starting to pick up. we've seen a sharp drop in ppi numbers in the most recent data. they said they could feed through two exported disinflation to other emerging market economies. nejra: chinese small caps stops -- stocks we bound in a little bit. this indicates maybe a little bit more risk on. intensity seen as little bit safer. it's only a tiny rebound. will it run further? a lot of this hinges on taking it away from domestic u.s. china and the outlook of the u.s. dollar. the the path of reflecting

micro pass of the chinese economy. does it hinge on the ability to which the weekend you are will push export orders? what strategies are you with china? what parts the chinese markets would you be investing in for staying away from. overall you have a negative view but there are parts or you might take the opportunity. we have quite a negative outlook for the fat national few months. i think one stimulus starts to take effect, we may see consumers come back. but we are not at that stage yet. we believe there's a policy tool still so if the authorities feel stimulus measures they done so far not acting quickly enough,

they will use the currency to enhance that. times "spoken a lot of over the less couple of years about that symbolic seven y uan/us dollar exchange rate. i think there's every chance if the policy we've seen of the fiscal side and in the monetary side does not hit quickly. nejra: what do you see by march 1 out of u.s. and china talks? somei think we can see agreement on a trade aspect of the talks addressing the deficit but i think the tech aspect require more talks. simon: i because got a long way to run. nejra: they stay with us. coming up, courting corban, the u.k. prime minister rise the

opposition labor leader as he seasonal -- seeks a way forward for brexit. the latest next. when you're traveling to work, tune in for -- tune in to bloomberg on dab digital radio.

nejra: this is bloomberg daybreak late -- europe, i'm nejra cehic in london. chinese equity markets coming back with a bit of a bang. the small caps outperforming. the hang seng higher by 0.3%. asia of a mixed picture in more broadly. the year rally taking a bit of a breather. oil extending losses after its worst week since 2009 last week. leg ofead into another trade talks, perhaps some concern on the demand side.

day -- on an a eighth day of gains. u.k. prime minister theresa may is asking for more time to renegotiate her withdrawal deal. we are asking the question on mliv, what is the biggest uncertainty for markets for the rest of the first quarter? you can join the debate, reach out to us at the mliv team on your bloomberg. let's get the bloomberg business flash. shaver is to be cutting it's for your forecast of profits by half. the target will come out a wednesday. it'll be lower it from around five and $50 million to between 180 million dollars in $270 million. the report blames higher costs for dragging down earnings. the vamped the bonus

system for 10,000 of their employees. a spokesman for the lenders is the payout would advance roughly half a month salary. employees can see their total compensation fall in would have their salaried cap down. sky news are part of the u.k. will hand out friend of 35 that -- 300 35 million pounds of bonuses for 2018. as 2% reduction from a year earlier. it will be disclosed and report on friday. that's the bloomberg business flash. nejra: becky so much. let's get the latest on brexit. theresa may seeking to buy yourself more time to renegotiate her deal with the eu. with just over six weeks until the u.k.'s departure day, she has written to opposition labor leader jeremy corbyn. that's after he proposed setting a new deadline of february 26 for winning lawmakers backing for a final exit deal.

the stock to maria tadeo. the prime minister's back in parliament this week but doesn't have much to bring to the table. where do we go? she has very little to put on the table. she has been told the backstop cannot bebotched, time-limited, and the eu simply want reopened the withdrawal agreement. the vote this week is about timing. she's made it clear she's willing to listen as long as she can so get control of the timeline of brexit. i would say, keep a close eye on brussels. they don't have the same impression of the labour party. they think the proposal last week could switch things. the europeanf union is no secret they would rather have prime minister may go for a cross party deal to end to have the primus are turn inwards to the more eurosceptic side of her conservative party. ofra: you mentioned the view

the eu. what is the view from brussels on extending article 50? that's a very good question. it's a very good point because everyone is speak to had already assumed of the prime minister would be forced to extend this deadline. they are actually quite confused and they really want to see what the plan is. it really do think and there is a growing sense that perhaps the prime minister has led in and let the clock run to march. it's a very risky strategy. they do say could potentially lead this idea of an accidental brexit in that something i hear quite a lot. this idea that perhaps you have taken so much to the cliff edge that you could get a no deal brexit almost by mistake, by accident. nejra: maria tadeo and brussels. -- in brussels.

with and john are still us. is it just as likely now we get no deal as a deal? simon: i still don't think no deal is very likely. for the reasons that you look at the numbers in the u.k. parliament, 650 lawmakers, of which probably only 50, a maximum of 70 would vote actively for a new deal. clock,nt to run down the you be without a deal, i think that's politically naive if think that's going to play out. can bring you back at the start of april tell me that i was naive but i do think there democratic checks and balances in parliament for legislation will be brought for to avert that happening because almost every independent forecaster, ourselves included, there will be significant disruption from leaving without some sort of transition or deal on the 29th of march. nejra: if no deal is averted, is

there potential of sterling to rally or is that price then? simon: i think is a little bit of a upside on sterling. we went bullish back in mid-december. i think you got some of that upside as we move towards 130 and just above. i think you get a little bit towards 135.l, there are some forecast more bullish than that. my concern is if you get a deal with a 20 month transition, you just start taking the clock again to another cliff edge. difficultstimate trade-off conditions about how converged or hide -- or how divergent will be. not going to want to earn sterling -- own sterling. nejra: should investors by u.k. equities? simon: that's a much more interesting picture. we seen valuations do you break

by 30%. de-rate by -- 30%. 1.2 standard deviations away from its average. if you think there'll be some sort of push through it and some of the discount is going to close. global effort the market, i figure represents a special opportunity. the research is interesting. i picked out some stuff here. financials and consumer staples the most undervalued but seven out of 10 u.k. sectors currently valued below the 20 or average compared to four out of 10 sectors for the rest of the world. between 2016 in 2018, investors were prepared to pay a mark premium for exposure to non-u.k. revenues. how about divergence? >> what happened straight after

invested inho were the u.k. salt sock the safe haven non-u.k. revenues. large parts of the ftse have companies were big as to noon -- big international revenues were more viable. that peter has now unwound. decide where sterling is going in and buyer basket accordingly. they stay with us for the hour as well. coming up, e.m. takes a pause, the six-week rally in emerging-market stocks ended last week. we will ask if and when the rebound could restart next. toveling to work, tune in bloomberg radio live on your mobile device or dab digital radio in london. this is bloomberg. ♪

nejra: this is bloomberg daybreak: europe, i'm nejra cehic in london. let's get a check of markets around the world. from -- we are joined by our colleagues. a little bit of weakness in the indian markets today. it's -- is that anticipation of u.s. china trade talks? i hope those talks to something to bring about some spark in the market. you are right,, there's a little bit of weakness. was much better than it because we are not really

understand it can pressure. but more portly, the market breadth is looking terrible. it was terrible for the last few days despite foreign institutions pumping and martin -- money. we hope some resolution or murmurs out there bring about some much-needed respite to the broader markets in india. the benchmark indexes are doing fine. it certainly matters. anne-marie, you're looking at the yuan. >> let's talk about the broader markets. i want to see was going on with csi. a bit of mixed trading across asia. a pivotal weeke in asia officials from america and china meet in beijing for trade talks. is following that futures. highest since 2017. china is the biggest user of iron ore.

they come back online and we see those prices in china. come take a look into my terminal. when you can see here is this range we have. 6.7 and 6.8etween would be a calming to the market and a calming sentiment to other asset classes. many strategists say it could be a sentiment for change. and a sentiment for a cause for alarm. thank you so much. today we're asking the question was the biggest uncertainty for markets for the rest of the first quarter? you can join the debate and reach out to us at the team on the bloomberg. let's get the first word news with an about. -- annabel.bout

>> the vice premier will meet with steve mnuchin. the u.s. and china are looking for a deal to avoid a ramping up of tariffs. president trump says the two sides are making progress and confirmed is ready to impose heavier duties of necessary. talks to avoid a new u.s. government shutdown have hit a snag. some lawmakers announced their skeptical they deal be released -- reached. without agreement, nine federal departments and agencies will be shut down again only weeks after the record closure. president trump says the democrats are trying to create a distraction after a bad week of news. the nationalr enquirer's owner says it didn't try to blackmail jeff bezos. photos and the other details came from a reliable source known to the amazon boss, not

from president trump area meanwhile, saudi arabia's nine any involvement. -- saudi arabia is denying any involvement. this.have nothing to do maybe some citizens read the national enquirer watch the soap opera unfold on television but that's it. >> theresa may is trying to buy yourself more time to renegotiate with brussels. she will meet with jeremy corbyn after he proposed february 26 of the new deadline for winning support for the brexit deal. the i'm as managing director says written's exit from the eu --l be difficult area difficult. it'sll there be -- whether custom unions or a brutal exit on march twinighter the next into the notice, it's not going to be as good as it is now. it -- global news 20 france today and at tictoc on

twitter. nejra? nejra: thank you so much. let's get to some breaking news. offerxt is raising its kroner arwegian share. the nasdaq made a formal offer for 152 and so you're now seeing euronext raising that offer. raise new from 145 two 158. adjusting that offer insane it is confident the transaction can be completed during the second quarter. has beentance period expended -- extended 12 weeks. -- four weeks. a six-week rally in emerging-market stocks in the next -- last week. a global economic slowdown weighed on sentiment.

john harrison says the risks have increased 40 m investors. that china's stimulus policy is not sufficiently strong to stabilize growth. simon french also with us. we were talking about china earlier. let me take you to a chart. emerging-market stocks have fallen back below the two it moving day average after recently going above it. this is just a pause? simon: i think the big recovery we have seen in emerging-market since the beginning of this year has been a part driven by recalibration of investors views of the u.s. outlooks. the fed has scaled back expectations of further rate hikes this year and even possibly setting stage for easing of the quantitative tightening measures and perhaps even a rate cut. but that recalibration has taken place in been priced in. so we are now seeing a pause.

positiveo see more news come perhaps on trade, perhaps something us out of china. something along those lines. has the fed's recalibration been priced in? think a has. what you seen of the last six orks is an assessment reassessment to the speed at which the dollar appreciation and tight financial conditions will spill over to emerging markets. think not to preempt the conversation, if the fed see stronger data and sorcery calibrate again, it's one of those potential whipsaw moments in markets when investors may feel they got cheated around the time i been to trusted -- too trusting. what you need to see -- nejra:

you say what you need to see is a more positive story out of china. the techmean by markets having an act that's having an impact? -- jon: a falling there's a falling demand for tech products which is inevitable when you have the synchronized global slowdown between u.s. and china. , is the slowing of the same time. nejra: i'm going to show a chart on brazil. the cvs spread on a downward trend since mid-september. amid these expectations for reforms. is one of the areas where positive on even though overall we are neutral in emerging markets. why positive on brazil? jon: is a lot of optimism and confidence among consumers but it's really opposite about the

prospects for reform. we seen that the new it missed ration to get its choice of lower house and upper house speakers it, that's positive. i think markets have been putting a lot of faith in the economy that the minister will be able to push through. importantdes the very pension reform -- reform and privatization. what distinctions are you making between different countries? it's time to get to the idiosyncratic stories of emerging markets and i was find talk aboutfficult to the messe group because of so many subtleties within it. would look at is the degree to which global common -- monday demands will drive different performance depending on exposure to that area the big delta will be the degree to which we get a coordinated global slowdown in the first half which will way of the demand side for commodity prices

in which economies can withstand that and see through to what i expect to be the upswing in the second half. i think that's really get different job performance. both the political resilience but also the balance sheet resilience to see through what might be a choppy few quarters. do you see the oil rally losing steam and feeding through in the way they are talking about to create that distinction? a lot of important emerging markets are oil importers rather than oil exporters. in india the oil price there has been quite negative. people worry about the deficit which could be widening and the fact that they have fuel prices which mean the fiscal situation deteriorates with the oil price rises. i think on balance, lower oil price could be good for emerging markets. benefit butuld not

there are many others apart from india, you see a lot of southeast asia oil importers. that's funding we should watch closely. your positive on brazil. how exactly are doing your asset allocation? across e.m. in terms of equities. we do across asset classes as well. it's not a good environment for equities because of everything we can saying about the global growth outlook. i think for currencies, we have had a positive run. that's due to the softer dollar we've seen which has been the recalibration of fed expectations. the fed is gone as far as a can of the moment. we are more positive on local debt markets because of falling inflation in many countries. this is something that really started last year from the middle of last year in the u.s..

andation started falling that's spread through to emerging markets. that should be very positive for local debt markets. and also for credit as well. credit will be affected by corporate profits which will particularly if chinese ppi drops into deflation as we have been speaking about, that could be quite negative. nejra: has a softer dollar in lower treasury yields gone as far as they can? simon: yes, i personally think the softer dollar is a pause rather than a reversal in trend. in terms of yield, it's slightly more subtle. athink there was still be downside bias across the board on the ust all caps. that this nation would partly through those financial conditions but also partly in a is quite key, what is going on behind the trade

wars is the u.s. trying to reestablish and in some ways with a the relationships lot of the emerging-market economies were china has come in and provide finance. provide soft power networks. whether that is emerging markets having an embarrassment of riches whether that disruption means they're going to please no one, i think it's one of the key developments in trade wars. we don't necessarily talk about tariffs. pushingut capital flows through to emerging markets. they stay with us. coming up, a big week ahead. we will discuss what investors should expect from earnings season this quarter. that is next. to bloomberg radio live in your mobile device or dab digital radio in the london area. at a clock you there

-- at 8:00. this is bloomberg.

nejra: this is bloomberg daybreak: europe, i'm nejra cehic in london. let's get the business flash now with annabel. thanks. apple smartphone shukman to china plummeted estimated 20% of the final quarter of last year. this underscores the scale of the apple that iphone makers retreat from the largest mobile market. huawei submitted -- cemented its number one position. said to be cutting its first year profit forecast. the reports earnings on wednesday.

it is between 180 interest 70 million. reports flames higher costs for dragging down earnings. the decision hasn't been made on proper revision. room -- a revamped bonuses for 10,000 of its employees. it will pay people does percentage of their annual salary. -- payout would amount amount to roughly half a month's salary. totalees who see their conversation fall will see their salary topped up. sky news reported that the u.k. to 35ender will hand out million pounds in bonuses for 2018. that's a 2% reduction from a year earlier. the payout will be disclosed in a report due on friday. that's your business flash. so much.ank you a big week ahead for european earnings.

here are some of the numbers to watch out for. tomorrow sees results out of germany. wednesday, we hear from dutch bank abn amro as well as a pain giant. thursday sees credit suisse and nestle. and friday look for an italian oil company. is our colleague. highlights of the fourth-quarter earnings season so far? to jpmorgan figures, we are about a third of the way into the season. we have seen more than half of the companies beating numbers but the details are little less optimistic. the kleins outside of the energy sector and cyclicals haven't had a good go as well. here in your declines on that sector as well so a bit of a mixed picture. we still have some time left but it's not exactly game bust --

gangbusters. we seem to see a little bit of a pause in the risk rally at the moment. you would expect that given the rally in january. loosing momentum indicators slowing down a little bit. we still have a 200 day moving average. seeing some volatility schemes nudging a little bit higher. that would make sense given the rally. those are edging little bit higher now from european indexes. a sign of a bit of a pause, bit of caution maybe. nejra: speaking of edging higher, i'm looking at euros stock futures and ftse 100 futures put a bit higher after he closed lower last week. is it likely to get tougher for the rest of the current quarter?

absolutely. bigger picture we are seeing a little bit of sentiment, european sentiment as a whole taking a bit of ahead. got thehat as we european commission forecast downgraded. i guess it didn't really sink in until he got the official forecast numbers from the commission. indicators, weon have surprise indexes turning lower. we have pmi's and multiyear lows. this is shaping up to be a little bit pessimistic. fit into the cactus of ecb? we won't know until the end of march. with thet's stay pessimism because we are asking the question, what is the biggest uncertainty for markets for the rest of the first quarter? you can join the debate is always, reach out to us on the mliv team. let's put that question to our guests. --jonfrench and jon:

harrison still with us. simon: the fed have done a 180 degree move in recent months and will they take another one and revert back to a hawkish bias later on in the quarter? i think it's possible. it's one of those things that is difficult to price. a lot of political intrigue and all of this but also whether data in q1 will be representative given the shutdown. .iven the normal volatility for me, that revisits the biggest risk. there are many things to choose from but i would highlight ppi in china. inflation see falling into deflation. markets will start to price in declining profits and the global economy. have you had any responses so far to this question?

one of the more interesting is from been he met. his point to the risk of a u.s. recession and when that will happen. i know the camp is quite divided in terms of that happening this year or next year. maybe even 2021. there are such a wide range of estimates. whether we will call the more appropriate the is one of the big questions. seems to me maybe a little premature talk about in q1 but to your point, simon, we could get a hawkish bias. does that bring forward a hawkishl forecast for a bias? that falls out of the dynamics on the u.s. yield curve and clearly set behavior will be clear. two things i caution against, interpreting a cusp of the yield

curve inversion in the u.s., anyone who says that is an argument has a stack of two things that are different in this occasion. $24 trillion over the last decade. has that fundamentally shifted to yield curve? that's an open question. real yields on the short-term are just north of .5 -- 0.5% positive. costs for debt corporate households, the set change the incentives to take a credit? if you're not answering those two questions, you just lazily looking the yield curve insane there will be a recession. we don't like it lazy analysis. you are talking about the fed earlier this -- earlier and the you think the next move will possibly be more likely to be a cut than a hike? decisions and delay , u.s. companies

concerned about the impact of tariffs, and concerned by the risks of more tariffs to come have delayed investments. data is still going to be negative in the coming months for the fed will react to that area whether it actually amounts or just forward guidance remains to be seen. the data will make a decision. the prospectaying for recession is next year and beyond rather than this year. >> i think i agree and it's really broadening about for other central banks as well. lastly, we're seeing a little bit of convergence. especially after some comments from the bank of england and the ecb and the bank of england.

this convergence of monetary policy not obscene markets pricing for a fed rate cap. it's possible we see similar -- i'm sorry, in the u.s. -- u.k. and your areas. the fact of the markets are heading uniformly towards the idea tells you where sentiment --and it's not going to be it's going to be an uphill battle for central banks to counter that. >> make it so much everyone. andn french, jon harrison kristine aquino. does the global trade back and forth look like in dubai? we will be live from the world's government summit. that is this -- that this is bloomberg. ♪

nejra: good morning from bloomberg's european headquarters in london. i'm nejra cehic. this is bloomberg daybreak: europe and these are today's top stories. equities charlotte rae concerns as markets play catch-up after lunar new year. rest of asian trading mixed with japan shut for a holiday. u.s. and china trade negotiations resume in beijing. can a deal be reached before the u.s. doubles tariffs? theresa may excepts the offer of more talks with jeremy corbyn as she tries to buy herself another two weeks to renegotiate her brexit deal.

good morning, everyone. we are just under an hour from the start of cash equity trading in europe. on a positive note, you're seeing ftse 100, dax, and cac futures higher. this is after two days of declines for the stoxx 600 was in the last week and a pause in the global equity rally last week after five weeks of gains. nokia a lot of directionality from your sutures. looking a little deposit at the moment in terms of the equity -- european equity market open. tradeweek for u.s. china talks. we are seeing a little bit of a pause in the emerging-market equity rally. we went above the tutor day moving average and went back below it now. how the picture shaping backup for bonds. we didn't have cash rating for the treasury and japanese session with japan markets closed for the holidays.

last week, we dropped around nine basis points. you can see futures not doing a whole lot right now but you can see that activity pick up as the session moves on in london. is happeninghat for bonds and btp's in the future, looking fairly quiet at the moment. not a lot of directionality from these futures. getting underway in europe. china is back online. let's check in on markets in asia. our reporter in hong kong has more. >> we are back with a bang in china but there's a mixed picture in the region. before this lunar holiday, it into a new tracking phase. we are seeing a move more towards is privately owned companies. we are up close to 2% in shanghai right now.

-- small-capks stops particularly. hong kong up about 0.1% -- year .5%. how to reach some time of bottom for chinese stocks back in october but dollar strength is still one of the things we're watching. we are seeing this catch-up decline when it comes to the onshore rates in the offshore weakness we saw last week. we are now seeing the weakest pboc today since july. perhaps more downward pressure for the currency. a surge limit appears today following the pricing we saw for iron ore last week. but show you what movers are watching. surgeon about 3.5%.

tech stocks definitely getting a bid. these have been quite follow towards the end of 2018. these stocks in hong kong, flying here. that is an anticipation these two stocks in a tick -- in particular will be included in the msci index as they are anticipating waiting for chinese stocks. and apple supplier that has been really dogged by these apple and iphones concerns of 3% here. some say perhaps the bottoming for earning could be reached in the first quarter. nejra: thank you. markets again hinging on the progress of trade talks this week as we speech was a much first deadline. the premier of china joins steven mnuchin for high-level talks in beijing. this comes amidst reports that

the u.s. presence advisors informally discussed cortisone xi int she -- president mar-a-lago next month. headwindsffer further in a global slowdown. china's pressure on condition persisted of the lunar holiday and there is always the possibility for new tariffs. u.s. commerce department will the u.s. report on security concerns around u.s. -- on imports. u.s. stocks with high am -- exposure to china have been doing better but chinese stocks with exposure -- they and chinese stocks with exposure to the u.s.. .oining us now is peter dixon this data showing holiday spending slowed of the lunar new year. some say that underlines a tough start to 2019. how much faith you have a chinese consumer? peter: not huge amount.

at the moment there are concerns. even a headwind space in the economy, the consumer may want to rein in a little bit. tiny a little bit of the edge of the economy. buts a cause for concern the consumer is not the be-all and end-all. what will be the be-all and end-all? peter: i think it's how well export industries continue to fair. they are not as export dependent as they once were but it's still the main driver. as you seen from the data, stocks in the united states are facing significant headwinds. that will determine the extent to which the chinese economy will grow this year. nejra: the missionary this chart. compositehe shanghai of breaking the 100 day moving average.

our chinese stocks about to slingshot higher? it would be very circumspect. out forese have been the new -- lunar new year so this catch-up going on there but i think we are indications that perhaps the u.s. markets are getting battered a little bit. china could continue to mend itself. be overweight on china. would you be looking at small caps over large caps are the opposite? in a chineseer: contexts, you have to save the large caps. having said that, i think they have enough weight behind them to act as a bulwark against some of the bigger problems.

what more do's chinese to do in terms of steamers to support growth for 2019? i was talking to john harrison he said the stimulus so far had not been enough. the total package is to the order of 2% of gdp. that kind of weight, you want to talking about a big boost. once being talked out is whether in the city implement it. if we get a resolution of the trade dispute, to some extent, the questions become a little bit less meaningful. what you expect in terms of a resolution to the trade dispute? it will beink

concluded relatively quickly. whether or not it's by march the first is a different matter. the u.s. wants to put more heat on the chinese economy. that appear see where we are going. under those circumstances, it's them same come we will make more concessions in the u.s.. it's his game of chicken, i think. the trouble is if we get to the and of the month, and the still hasn't been any resolution, the u.s. want to say, we need to give a little more time or will we just go ahead square -- ahead. my guess is they won't want to escalate too much. the longer goes on, the more the big u.s. companies like apple will a hit as well. they don't want to raise tariffs just yet. nejra: is the risk rally going

to struggle to gain traction if all we get is some sort of agreement on goods and nothing about the underlying structural issues or about tech? peter: i think that's right. you will get our rally after some kind of breakthrough, some kind of good news. but the underlying issues clearly would never gone away. is the problem here transfer of technology. basically stealing technology from western companies. as that remains in play, that could yet be one thing that the rails the u.s. chinese trade negotiations. it's not going to happen immediately. it will come again in the course of the year. are there reasons for the risk rally to resume? and also the positive seen the rally in emerging markets? bit morell be a little

concerned about the global equity rally cousin if you look at where we are in terms of valuations and the global growth picture, the impact upon earnings, it's quite surprising the extent of the last four weeks. we saw thee pause end of last week could be a harbinger some thing is to come. maybe this is as far as you want to go. equities could well flat line. that would be my suggestion. under those circumstances i would be cautious on global equities. in regards to em equities, the one saving grace is that the u.s. will stay on the sidelines for now. i do think is a little bit of the scope there. he stays with us. coming up, courting corban. u.k. prime minister rise to the opposition labor leader as she seeks a way for to brexit.

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nejra: we are 45 minutes away from the european equity market opening. this is bloomberg daybreak: europe. speaking of equity markets, let's take a check on chinese markets as china comes back online after the lunar new year holiday. up one .4%.posite small-cap stocks have been outperforming in particular. heading lower. your seen it weaken by the most since october.

also em currencies coming under a little bit of pressure. we've seen a pause in em assets and the them equities dropping below the 100 day moving average. crude extends losses and has had its week -- worst week since 2019. so seen the shorts come back in hedge funds. your stoxx 50 futures bump it a little higher after global equities took a pause last week. today, we are asking the question on mliv, what is the biggest uncertainty for markets for the rest of the first quarter? you can join the debate, reach out to us at the mliv team, plus tv going to bloomberg. let's get the latest on brexit. seeking to buy herself more time to renegotiate her deal with the eu. just over six weeks until he used the eu's departure day, may

has written to the opposition corbyn.eremy that's after he proposed setting a new deadline of february 26 for winning lawmakers back for a final deal. let's speak to maria tadeo is standing by in brussels. good to see you again. the prime minister due back in parliament this week the does not that much to bring to the table. gore do we bring -- where we from here? >> she has very little that's actually knew to look forward. the eu has her people he said the backstop cannot be removed, it cannot be time of ted and there's simply no appetite from the withdrawaln agreement. you can argue it's more about the process. the prime minister has made it clear she's willing to listen. control of stays in the timeframe and the timeline going forward. i would say there is a lot of expectation built in brussels about labor. they put a proposal on the table

better use as is quite promising but it's not a secret, the european union has always said they would rather have prime minister may go for a cross party deal that leads to a softer brexit than see the prime minister turn inwards into the euro skeptic side of her own party. once the view from brussels on extending article 50? by now, everything -- everyone i speak to had assumed the u.k. would need to extend the deadline and that brexit would have to be moved forward. residents are defined to last week she said i will deliver brexit and i will do it on time and it has a lot of people confuse in brussels who are wondering what the endgame is here. a lot of people think maybe the strategy is to just let the clock tick until we get to that deadline to keep the pressure going for that's a risky

strategy in the eyes of brussels. a no deal the idea of brexit by accident or mistake has risen. nejra: make it so much. here's a look at what she should be watching. a.m. u.k. time, a preliminary readout of u.k. gdp for the fourth quarter. watch for any data that could add to the boe's headache. and the brexit secretary makes the eu brexit negotiator in brussels for talks. your group finance are looking the ecbone to replace was -- to take on the ecb executive board. peter dixon is still with us. last to discuss. let's start with brexit. i asked and i will ask it again, is a new deal just as likely as a deal? peter: i don't think so. i think the no deal option is the risk, and it would happen by

accident. reallyon't think anybody is -- realistically wants no deal. the prime minister continues to play poker with her own party. she is putting party unity ahead of lasting interest. that certainly beats of the risk if the hardliners continue to hold their intransitive position, we could get a nasty outcome. nejra: mean what for the u.k. economy? economists predict in a 30% probability of recession in the u.k.. carney's outlook is predicated on the assumption of brexit which is a risk but all -- growthwing growing environment externally. the matter what happens, they're in for a slower year. much of the announcements we've done with the bank of england the treasury and premature every

house in the street, if you got a hard brexit, it's going to be a poor performance in the second quarter. then again, it might not be. we just don't know. it's likely they'll find some form of arrangement with the worst-case happening. you will extract quid pro quo for doing that. trade outcomes could be anywhere from flat to significantly negative. that 13 chance is in the next 12 months, according to a bloomberg survey of economists. u.k.,ms of equities the we come back to that point of them being under loved and undervalued but would you be dipping your toe into u.k. equities? peter: not until i have more clarity and after march 29. there is the possibility that you would want to buy equities on the expectation that you get a boost from the collapse in

sterling which are zero well. -- which serves you very well. in terms of european equities, how much of the risks around brexit factoring interior view on european equities? i think it's a tale risk. a lot of european analysts would say brexit is a problem but the exposure of the individual companies to the u.k. is limited therefore they don't see it as being such a major concern. be, we the problem would do get a hard brexit, a big collapse in confidence, the rest the world would take a little bit of a hit as well. it's by no means clear. so far,arnings season does it so you with confidence? been not has fantastic, i think it's fair to say. it would have liked to have seen

better particularly considering the momentum that the generally -- the economy has generally shown. a number of other shoes relative to expectation. as a consequence, it has not been great. the outlook for 2019 is not fantastic either. decent but not stellar. given the increasing headlands of growth. i think it's cold feet. nejra: he talked about china and trade wars and a bit about the fed and brexit and the slowdown in europe so the mliv question asks, what the biggest concern or unknown or risk is for markets for the rest of the first quarter. what is your response? peter: china. it china goes wrong, the rest of the world takes a major hit. brexit is a question for q2.

it's playing on investors minds as we go forward. the one thing that concerns me a bit is the extent to which the slowdown and policymakers appear to be taken by surprise. they were saying, hang on a minute, things aren't as bad as we thought they were so clearly the speed at which the slowdown has crept up on us is a concern and it poses risks that policymakers have to deal with. nejra: do they have ammunition to do with it? peter: that's a good question. the u.s. has given themselves a bit more's base. -- more space but europe they don't. backcb is likely to come with some long-term operations as early as next month to try to give some support to the european economy. boltly, they have shot the and it's difficult to see what

they can do under the circumstances. been too slow.ve you got a problem. think is so much. peter dixon joining us. no us get the first word news. >> thanks. will had his representative to trade talks with u.s.. the u.s. and china looking for a deal to avoid a ramp-up in tariffs on march 1. president trump says the two sides are making progress but says he's ready to impose heavier duties if necessary. to avoid a new u.s. government shutdown of his snack. some lawmakers are skeptical a deal can be agreed by friday.

without agreement, nine federal departments and agencies would shut down again only weeks after the 35 day closure. president trump says the democrats are trying to create a distraction after a bad week of news. the u.s. is seeking support on the un security council resolution condemning venezuela. it cites the authoritarian regimes blocking of humanitarian aid and calls on maduro to hold fresh elections. a resolution would likely face veto from russia and china but the u.s. may press ahead regardless to keep level attention focused on venezuela. the biggest winner of the grammys is he wasn't even there. childish gambino claimed the awards for record in song of the year, first-rate pop artist but he wasn't in attendance. other winners of the night included casey musgrave's. global news 24 hours a day on air at tictoc on twitter. they wreck? -- nejra?

nejra: the rally and risk assets in europeanch futures pointed to perhaps a strong start for the european equity market open. that's it for daybreak europe. this is bloomberg. ♪

anna: good morning. welcome to bloomberg markets: european open. i'm anna edwards alongside matt miller in berlin. matt: today, the markets say happy new year. chinese stocks rally after coming back from vacation. european futures are pointing to gains at the open after two days of losses. but bunds already yielding near zero -- are yielding near zero. the cash trade starts in just 30 minutes time. ♪