during xfinity mobile beyond black friday. plus, you can save up to $400 a year. click, call or visit a store today. >> good morning from beijing. this is bloomberg daybreak: europe. i'm manus cranny. nejra: i'm nejra cehic. beijing threatens retaliation as the u.s. senate passes a bill supporting protesters in hong kong. global markets dipped in the potential impact on the trade negotiations. u.k. leaders lock horns over brexit. gains ground in the prime minister in a snap poll. retail realities. alibaba could be poised to raise $88 billion hong kong dollars. big tech lists the nasdaq to a

record. manus: it is "daybreak: europe." the words of the vice president of the united states of america now open up a new salvo in the trade wars. those words are the president has made it clear it is going to be very hard for us to do a deal with china. geopolitics and human rights is the new escalation in trade wars. nejra: it is interesting, the timing of these two stories coming through both having an impact on the markets in terms of the hong kong bill and how that could have an impact on the negotiations. they are going to go back to that may template in terms of rolling back tariffs. we know how much hope there was ahead of that only to be thwarted later on. high-rises of the

beijing. we have come here specifically to host some pretty good interviews. the roster is pretty high quality. it is the bloomberg news economy forum. we will speak to the standard chartered ceo and the ubs group ceo. we are going to catch up with the goldman sachs chairman and ceo david solomon. the former white house chief advisor gary cohn. it is going to be a busy day. i'm going to show you something. it was not supposed to go this way. the fed was supposed to have saved the day. the yield curve is back in a flattening trajectory. they have narrowed for the fifth day in a row. dropping by nine basis points. we are back at 18 basis points. the phase one trade deal was so much in the price, but we reverse pretty much all of that

with the vice president's words this morning. to the oil market, let's have a look at the oil and the gold market. i call it the doubting thomas of the market. it is concerned about trade, resolution, a huge glut of oil and a lack of conviction from the russians. gold. giant risk event for 2020 according to td. one of the hedges is gold. good morning. nejra: good morning. what i've noticed is that a lot of the flattening was driven by the yield dropping more on the 10-year then on the front end. .1 10 year yield now below a 75 -- 1.75 handle. we are seeing the selloff in hong kong in particular. u.s. futures also on the back foot. yesterday, we saw the nasdaq.

we saw some concerns about some of the retail earnings. we had the debate between jeremy corbyn. afterward, the margin of error between the two was not as big as expected. have been saying, global stocks have taken a hit after the u.s. senate unanimously passed a bill aimed at supporting protesters in hong kong and warning china against a violent suppression of the demonstrations. beijing has warned of retaliation. let's get to hong kong and bloomberg's asia government managing editor. what is the reaction in hong kong to this latest news? reaction by hong kong's government has been to express extreme regret. telling the linux sensually from beijing -- towing the line he

sensually from beijing. essentiallyg -- from beijing. the hong kong government said this is the place where the u.s. has the largest surplus in any jurisdiction. beijing has summoned u.s. embassy officials in beijing to express their strong reservations. they have threatened unspecified retaliation. most people are concerned this would impact the ongoing trade talks between the u.s. and china trip -- change the special trading status for hong kong anytime soon. that is way down the road and quite unlikely. manus: ok. our thanks to our government editor in hong kong on the political side. -- it marks aed challenge to the government in beijing. just as the u.s. and china seek to close a preliminary agreement

in the trade war. joining me now in beijing, is our guest. we have our guest host for the moment in london. let me bring it to you, first of all. what impact will this have on the trade talks? the chinese have said be prepared, we are not going to roll over on this. >> [indiscernible] these are some of the absolutely key issues for chinese leadership. the risk is that the senate bill redline.crosses a it indicates that the u.s. is trying to interfere in chinese internal affairs. of course, china wants to get a trade deal done. the economic incentives are lined up behind a phase one deal for both sides. beijing,me time, for

some things are more important than economics. the one china policy is more important than economics. the risk here is that those political concerns now intrude on the economic logic and a phase one deal gets harder to do. nejra: speaking of whether it is hard to do or not, i do feel that what markets have been pricing in leaves a lot of room for disappointment. now we understand going back to the may agreement and looking back at that, should markets take that negatively because we know what happened six months after? >> if you could get back to the may agreement, you get it done. it would have been in the best place in terms of market sentiment. bond yields might be higher. things would have been more optimistic. i think the danger this morning 's they could not get that done because the two sides viewed things differently. proper sortrow some of bits and bobs of machinery

into that conversation and make it even harder. i think the markets are priced for most of the more recent tariff and being reversed. we have a certain amount of unwinding of tariffs priced into the price at the moment. i think people need to start thinking over the next few days of maybe there was a real danger that nothing gets unwired. manus: ok, hold that thought. if we take this as a bit of a spanner in the proverbial phase , they are talking about 5.7%. if there is no phase one deal and tariffs to get impacted in december, how much more real is

the sub 6% growth? tom: we think we are going below 6% with her without a trade deal. dealiew is that the trade affects the composition of growth not the level of growth. if we get a trade deal, we go below 6%, but it looks a bit healthier. we have more exports, more private sector investment. if we get the tariffs rolling in, we still go below 6%. it is more supported by unhealthy stimulus mix of state driven investment. nejra: what does this mean for the global picture? over the past few weeks, there has been a lot of talk about the bottoming of the global manufacturing cycle. how optimistic are you about a intoming and a bounce back 2020? the imf managing director was fairly optimistic yesterday.

a coupleink there is of things which have happened in the past few weeks. it has made global markets a bit more optimistic about the 2020 outlook. there is the hope of that phase one trade deal. secondly, fears of a hard brexit have receded a little bit. now, if we take the phase one trade deal out of the picture or even worse if we actually get those december tariffs rolling on, not air base case, but certainly a possibility of talks unravel, i think some of that optimism of stabilization is going to start coming out in the markets. manus: can i bring it back to you in terms of the currency exposures? we are seeing a little bit of -- yuan. in the one we have seen incremental policy responses, that you have been referring to. what about the yuan? if the u.s. is prepared to go

for the political jugular, what next for the pboc? in terms of policy overall, they have resumed easing. it is a change of direction. hadimpression that we have rate hashe dollar-yuan risen from the perspective of domestic exporters. back on the assumption of some of the tariffs being reversed, being taken off again. , we are full swing going to be back above 7.20 sooner than we have thought and we will be pity bearish. bearing in mind how important the yuan is to the entire planet as far as a currency, it is more

than 20% of lots of other people's trade-weighted bias, that is going to be a real nuisance for president trump. it strengthens the dollar. it strengthens the euro. it strengthens the yen in trade-weighted terms. it is not at all helpful for those people hoping for calm currencies and especially the one in washington who holds the softer currency. nejra: the importance of the yuan highlighted this week in terms of dollar offshore and the 10-year yield. to get the 10-year back above 2%, the yuan would have to strengthen. 7.20, how low could we see the treasury yield dropped? kit: i kind of think that that is a correlation rather than causation. nejra: ok. kit: in a world where i'm seeing yuan, i'm seeing

the bottom of this range, even before i start having the more meaningful conversations about there is a bigger risk than the markets pricing of a recession at some point in the next 18 months in the states. nejra: our thanks to tom. kit stays with us for the hour. let's have the bloomberg first word news in hong kong. >> thanks. a former u.s. envoy says he did not initially realize the white house was putting unacceptable pressure on ukraine. he only later saw the connection of investigating former vice president joe biden. of fourker was one witnesses yesterday. the key testimony today will be from u.s. envoy to the eu gordon sondland. fed minutes would likely reinforce the message that rates are on hold. chairman jerome powell was at congress twice last week, signaling policy is in a good place, saying there is not a

material reassessment of the outlook. the key thing from the minutes will be what that phrase really means. protests in iran have left at least 100 six people dead according to amnesty international. thousands took to the streets after authorities increased gasoline prices by as much as 300%. security forces launched a crackdown. , prime minister benjamin netanyahu is calling on his rival to form a unity government. he is hoping for a deal with his main opponent benny gantz. this comes on the news of a possible power-sharing structure between the two rivals. news powereds -- by more than 2700 journalists and analysts. this is bloomberg. manus: thank you for the rundown. we have a whole host of great interviews.

the bloomberg new economy forum. tomorrow, we speak to the standard charter ceo, the goldman sachs ceo, the former white house chief economic advisor gary cohn. there is a host of voices. good morning. nejra: good morning. coming up, no clear winners. the first debate between boris johnson and jeremy corbyn ends in a tide. we will discuss the u.k. election next. this is bloomberg. ♪

manus: it is bloomberg. "bloomberg daybreak: europe." nejra: let's check in on the markets in asia. more. has a lot of red on the screen today. >> absolutely. the u.s. senate passing the bill

in favor of the hong kong protesters saying -- china saying that it will retaliate. asian stocks down 0.5%. hong kong back in the red to the tune of 0.7%. moversrise with these out of risky assets. yuan leading declines today. there is a big story happening in australia and the banking sector today. the australian financial crime agency accusing the asx 200 index of the biggest financial crime in australian history, up to 23 million cases in terms of what they have been looking at in terms of money laundering including the fact that they said do diligence in transactions to the philippine that have nonfinancial indicators related to potential child exploitation risks. really weighing into the financial sector.

falling to may lows today. this is going to have huge ramifications for an industry that has already had a royal commission. manus: thank you very much latest. 23 million in money laundering. let's get your business flash now. saudi aramco is seeing sufficient early demand from its ipo just three days after launching the deal. the banks behind the offering are signaling that they have enough orders to cover the institutional portion of the sale. aramco has two weeks of marketing to go. it is declining to comment. westpac has been accused of breaching money laundering laws. it is the biggest breach of the laundering and terrorism financing laws in australian history and includes failing to detect payments that may have been used to facilitate child exploitation.

westpac says it recognizes the severity of the issue. investigating sanctions against russia. includegations transactions after the annexation of crimea. they said they have not found any signs they breached sanctions. that is your bloomberg business flash. thank you so much. the first u.k. election debate ended in almost a tie, good news for labor leader jeremy corbyn, who defied negative approval ratings to essentially draw level with boris johnson. 51% of people said the prime minister won the face-off. the latest went head-to-head on brexit, the nhs, and their spending plans. >> we have a deal that is oven ready. it is ready to go. by ourpproved not just

partners in the european union, but by everyone of the 600 35 conservative candidates. it delivers everything we wanted from brexit. a crediblenegotiate option with the european union and within six months put that to a referendum of the british people to decide between that option of leaving while protecting jobs and trade and the good friday agreement with europe, or remaining full members of the european union. that will be the choice put before the british people. >> i think it is very important to hear -- i've been very clear about the deal i've done. there it is, you can read it. we don't know what mr. corbin -- he won't come clean with the electorate about what he is proposing. nor will he allow to come clean about -- >> thank you, mr. johnson. >> what i would probably leave under the tree for him would be a christmas carol by charles dickens. [laughter] he can then understand how nasty

scrooge was. >> if you want a literary effort , a copy of the brexit deal. jukes ist juiced -- still with us. what would have to change in the polls for investors to really reassess the likelihood of a conservative majority? what kind of numbers would we need to see? in: i guess at the moment any other election before 2012, you would have assumed that this is a big enough lead for an outright majority. you need to start seeing that gap trending down again clearly to think actually they might not get any kind of deal across. know what would make anybody comfortable with the conservatives because we are too much and the unknown.

it reopens questions about what kind of coalition government we might end up with. it does not take very much to reignite that. manus: let's extrapolate that forward. ,f you look at the polling jeremy corbyn came in at 49%, boris johnson came in at 51%. in 1979, the dissatisfaction with jeremy corbyn before this event is what shocks me, we have gone from -60 two a 50/50 perception. maybe we are underpricing the strength and size of labour, which may come in the form of a coalition. isthat end, maybe sterling underpricing that risk. kit: may be. it is hard to know how to react to a pole. i listen to paul dobson on the radio driving home.

sterling potentially sees a lot of risk here because there was a lot of good news priced in. i thought that was the right call. johnsont that for boris from his position thinking everyone thinks he is a better debater, his lead in the polls, his personal standing being higher than jeremy corbyn, that this was just a potential that he was going to fall over on or miss. the 50/52 my mind is probably he missed the banana skin more than he fell over one. i don't know if it tells me issuesg about the wider in the next two or three poles about who we are going to vote for. i think it probably means that we pay more attention to the next two or three votes in the election as opposed to in the debate itself.

nejra: the next debate coming in december 6. between now and then, would you still be wanting to put in the starling long? how would you trade this? kit: relatively carefully. we havethink that once taken a no deal brexit off the table, there is not that much downside for sterling and the medium term. if you look at a chart of the really effective exchange rate back since britain was collapsed , we are bumping along the bottom of a lifetime's range for the currency for most people. i'm still tempted to think that we are either bumping around the bottom or something terrible or at some point in five years, there is going to be good news in the u.k. that i can't even dream of at the moment. manus: ok, that is a long way away.

euro-sterling seems to be moving a bit more than cable. paralyzed kit jukes. youave a raft of guests for in the next 48 hours. ♪

this is "bloomberg daybreak: europe." i'm nejra cehic in london. manus: i manus cranny in beijing. fears of a slowdown in consumer spending. scrutinizing the industry for signs of weakness. meanwhile, the new york fed president said he is watching for a downside risk despite reinforcing his confidence in a solid outlook. the latest fed minutes are expected to give us further insights into the conviction of a prolonged hold among the policymakers. morning in ouris

london hq. we get minutes tonight. do you expect a hawkish tone to these minutes? more neutral a tome than we had. there is more of a sense that there are risks, we need to be ready to go again, but we cannot just cut rates 25 basis points at every meeting when the economy was actually in a now cast kind of way has been doing better than expected. that thisve thought would be done until something changes. nejra: do you think they will be on pause through 2020? kit: no. i think things are already deteriorating at the margin relative to where they were when they did that. i think the first thing that we can say with the fed, they have

done better than their fears. they have given us a shopping list of dangers every time they speak. relative to that, i think the tricky bit is that there is .till not enough inflation castast atlanta fed now was down 0.3%. the now cast of growth and that is the fifth time we have been since 2013, we have not had a negative print. we should not get over excited. you said that is twice now that you said that that we are perhaps underestimating the potential for softening. i started the show with this. maybe you are more of a

flattener than a steepener. it was not supposed to go like this for the fed. we are seeing this return to flattening. does this continue and is this prescient? kit: i don't know if it is prescient, but it continues. is a normalng flattening in the terms of rates overall. i think that continues because i think we have the u.s. forecast of more rate cuts next year. that the thing that distorts markets a bit, there is a chronic shortage of safe assets in the world.

investors keep on going out hunting for say fields wherever they can get any, particularly if not negative. there is the potential for the long end of the market. i think we are going to get back to that. nejra: that was the point i made at the top end of the show. more0 year yields falling than two years. i can see what you are saying about that continuing into the first part of next year. do we then see the curve steepen? kit: i think that is where yield curves get. it is really hard to get the front end to keep on falling. we will get into a whole

different debate about whether the fed would ever go there because the experiment of negative rates in switzerland, in the euro zone, and japan, there is a lot of difficulty with sustained negative rate at the same time that there were difficulties with huge, bloated balance sheets. if it becomes part of that debate, the economic information inside the curve is going to follow a quite fast. in that environment, yields all the way along the curve from one day to 30 years will get lower. have you thought about the possibility of elizabeth warren becoming president of the united states and what that might do to markets? kit: i read an interesting piece yesterday suggesting that it is not as bad as people think because she would ease fiscal policy. i thought it was an interesting take on that. the first reaction of everybody

who sees some of her plan for the financial system is to kind of look back and then panic. argument that it would be bad for the equity market is hard to fight with immediately. but there is this piece now as monetary policy runs out of rope that anybody who comes in with more aggressive fiscal easing into an economic downturn justified for the sake of argument for the fact that we are raising yields so low, what is the problem? we would probably get a positive economic reaction. i think we would sit there and have to think that a fiscal policy is the big tool, who is ?ore likely to make it

more chance of elizabeth warren having an easy fiscal policy than most of the european governments i have ever looked at. sora: kit jukes, thank you much for joining us this morning. let's check in on the markets. and in us in mumbai london. heading for another record high. what is driving the gains bucking the trends in the rest of asia? yes, you can squarely put the credit to one stock. in today's session, as well. the bank is doing well. in the process of moving up, it

is market capitalization around the world and it is part one. it is the first company to do so. that is a telling statistic. if it rises a few points, it could eclipse. it could be the fourth company in indian history to hit that market cap. it is squarely because of this particular company that the indian markets are doing well. manus: thank you very much for that. hordern. to annmarie how is it playing out across the markets? >> that is exactly right, besides india, we are seeing risk off in asian equities. politics in d.c. that

are moving the markets in asia. futures are lower. crude also a bit lower this morning. it slid more than 3%. investors are gearing up on a tit-for-tat. trade has been one of the biggest geopolitical stories of 2019 on top of others like brexit and the middle east. we are not releasing the move, the fx volatility. course to be one of on record.olatile average hasmoving only been lower once before. the situation is just too hard to call for fx traders. it is more comfortable to avoid

it and sit on the sidelines. manus: it is certainly interesting to see the dollar again reaction -- dollar-yen reaction. thank you very much, team. those two are hot. alibaba may be set to raise $11 billion in a mega hong kong stock offering. price shares at around 176 hong kong dollars each. that is according to our bloomberg sources. i'm joined with a guest in beijing with the very latest. it is one of the most beautiful ringing noises to an investor's gear, the ipo of alibaba. what do you make of the numbers so far? >> we have only been waiting a few months. there has reportedly been strong investor demand. they reportedly closed the books early. actually 2.9% lower than it last close to new york.

it is poised to raise about $11 billion for the share. this isddition to this, a big deal for hong kong, for the exchange. it is really a vote of confidence that hong kong is the global financial sector despite the ongoing financial unrest. bigan still attract these tech giants. more: tell us a little bit about why alibaba is doing this now and why in hong kong? time dreameen a long of jack ma's to be closer to home. this makes it easier for mainland investors to buy shares and it carries favor with beijing. investoriversifies the base and hedges against the worst case scenario that u.s.-china trade tensions continued to worsen. lawmakers, they are hedging

against any of those possibilities. on top of that, this helps give alibaba added capital as it expands internationally into new business lines like cloud computing and entertainment. it also ensures that it can feel this costly and subsidies. portion,n the timing this timing obviously is not perfect with the ongoing protest , but the sentiment around alibaba has been improving. shares are trading near an all-time high. for itsa record shopping bonanza, singles' day. nejra just does not know my po box at home in dubai. what is the risk in this trade? we are seeing risks arise for the aramco trade. give me a sense of what is at

play for the alibaba trade. >> we are talking to analysts and there has been some concern if this could suck it at the from the markets. could this be bad for mainland consumer stocks? the one who has the most to lose perhaps is tencent given the fact that it is alibaba's biggest competitor. investors inives hong kong another option. we have yet to see what impact this will have on china's mainland consumer stocks since this is another big consumer play. it is interesting what you say in the liquidity. you see the hong kong dollar/. part of that was down to the unrest, but that was put down as one of the reasons. let's get the bloomberg first word news in hong kong. u.k., the first

election debate looks to be a draw. jeremy corbyn effectively level with boris johnson and that paul. they clashed on issues like brexit and what they would get each other for christmas. corban said he would give his rival the novel "a christmas johnson said he would give him a copy of his brexit deal. the u.s. senate unanimously supported the hong kong protesters. threatened to retaliate if the bill becomes law. a former u.s. envoy says he did not initially realize the white house was porting unacceptable pressure on ukraine. he only later saw the connection that investigating joe biden. volkerspecial envoy kurt was a key witness yesterday.

iran have left at least 100 six people dead according to amnesty international. thousands took to the streets after increased gasoline prices by as much as 300%. security forces launched a crackdown that's on the internet closed across much of the country. global news 24 hours per day powered by more than 2700 journalists in more than one hundred 20 countries. this is bloomberg. nejra: thank you so much. some breaking news. named theo has been head coach of tottenham hotspur. what is watching -- your reaction? kit: it was about the same time as i went to bed that it was rumored that this would happen. to hide news that you fired your manager and then replace him with someone who has

been around the block a few times. it will definitely liven things from where we are now. i would suspect the next north london will be an exciting affair. nejra: kit jukes, think you for joining us. our guest host for this hour. let's take a look at what you should be watching out for today. the fomc meeting minutes are released today. it will include more details around the fed decision to cut rates in october. is retail in trouble? after mixed earnings, we get more of a readout from lowe's and target. candidatesdemocratic meet in atlanta for the fifth primary debate. the european commission will release a formal opinion on budgets of the eu member states. manus: part of the reason why they have chipped in is that we are hosting the new economy forum in beijing. we get some cracking guests over

the next 40 at hours. -- 48 hours. plus, david solomon, the ceo and chairman of goldman sachs, will join us. that is tomorrow. this is bloomberg. ♪

nejra: i'm they rich a edge in london. -- chehiche encz it in london. manus: i'm manus cranny. rosalind: alibaba is saying it's mega stock offering will come at a discount. about $176y to price hong kong dollars apiece. the share sale marks one of the largest sales of the year and

the biggest of hong kong since 2010. westpac has been accused of breaching money laundering laws more than 23 million times, the biggest breach in australian history. it includes failing to detect payments that may have been used to facilitate child exploitation. this dwarfs the commonwealth bank of australia's infractions. westpac says they recognize the severity of the issue. the u.s. is investigating allegations referring to the baltic unit including transactions after the u.s. imposed sanctions following russia's annexation of crimea. it says it has not found any signs it breached sanctions. that is your bloomberg business flash. nejra: thank you. , those letters are taking on

an importance for investors. one of the latest additions comes from bnp paribas, which started a 140 million euro fund focusing on renewables. according to the french bank, .oney has outpaced growth joining us now is the senior portfolio manager at bnp paribas asset management. we are talking about the energy transition fund. it has quite a specific title. why the choice? >> we think there is a huge opportunity today in order to transition the global energy system from what is to fitfully a fossil fuel based system to one where the energy mix is going to change. we are going to go from a mix of inewables to as much as 60% 2050. we are going to have to address and increasing energy demand, so

you have two huge macroeconomic effects that are really going to boost the transition to a more renewable and sustainable energy system. also reduce the effects of climate change, what we need to do is align ourselves with the paris targets. what we need to do is go from a system today where we have funds of co2 emissions, which is going to put in $29 trillion into the global energy system, energy tech efficiency storage as well. one of the things that has come up in a number of panels is the carbon capture and the neutralization of elements. does that play into your thinking?

does that play into the renewable space for you? within public markets, it is a harder space to invest in from the fact that there is not a lot of publicly listed companies in that space. the way that we tackle this is in tying it back to the $29 trillion opportunity. we focus on three particular of the energy system. to renewablenect energy production, infrastructure, storage, efficiency as well. the carbon capture is one way of dealing. we are investing in companies that are not just trying to neutralize carbon, but frankly really be at the forefront of transitioning the global energy system.

energynk about how transitions have happened in the past, we have really only added energy fuels to the mix. and theed out with wood energy density went up and up. under special circumstances. we are really replacing existing fossil fuels. nejra: you've commented before that you are not investing in retail financials because they have a low carbon footprint. you say that fossil fuels are inflationary when you say renewables are deflationary. you have a long short fund and in this one, you buy stakes in companies favored by green investors, you short firms failing to make the shift to sustainability. is it ethically problematic to be profiting by shorting from firms that are damaging the planet? >> i think that is a great question. we thought that the

transitioning of not just the global energy system, but also investing in companies that are solving global environmental challenges is a long-term thematic theme. on the other hand, we also feel that in order to add a leg to the outflow is to be able to short companies that really are losing out to this transition, if you will. or inferiord assets technologies. it is a way of increasing the outflow. one is one where we are trying to extract. the short leg is really one that we don't think we have an ethical problem with, it is one where you are essentially increasing the cost of capital of companies that are not doing enough in order to transition. manus: we are going to have to leave it there. thank you so much for joining there. we wish you well with the fund. we will see much how much

scalability you get. we are in beijing. we have some cracking conversations coming up at the bloomberg new energy forum that kicks off. ♪

nejra: good morning from bloomberg's european headquarters in london. i'm nejra cehic. manus: i'm manus cranny from beijing. this is "bloomberg daybreak: europe." ashing threatens retaliation the u.s. senate passes a bill supporting protests in hong kong. global markets dip on the potential impact for trade negotiations. u.k. leaders lock horns over brexit weeks from a general election. it wasn't quite the nightmare before christmas for jeremy corbyn. he gained ground on the prime minister in a snap vote. alibaba could be poised to raise

$88 billion in hong kong and its stock offering in the city. in u.s., the big tech lift the nasdaq to a record with retail results weighing on the dow. nejra: welcome to daybreak: europe. with a risk off tone across assets, we could ask whether we are underpricing two things in the market. upset one, the risk of an for conservative majority on innovaro 12 but the trade deal between the u.s. and china doesn't go ahead. tohear they are going back the main agreement to think of the extent of all that and the u.s. senate hong kong bill causing complications in the u.s.-china trade story. manus: of course.

it was said nicely, banana skins. jeremy corbyn didn't slip on the banana skin everyone expected, but didn't trip over it, either. in the response mechanism from beijing, that will come up over the next 48 hours for the ceos we are talking to. phase one deal was assumed to be done. this is a new front raised by mike pence, the vice president. these are the gentleman having conversations with bloomberg the next 48 hours. the standard chartered ceo bill winters, sergio ermotti, and david solomon, plus, gary cohn on the potential outcomes to consider. juliette saly is in singapore with us. jules? factors you were talking about in the potential re-escalation between the u.s. and china after the senate passed the bill supporting

protesters has waiting to sentiment here, down .6% and hong kong stocks have shown resilience, down .7%. the offshore yuan at a session low and the pboc cut the lpr today. the move out of risky assets seeing asian emf leading the drop. in terms of what we had seen in hong kong, analysts saying the 3% gain we had seen over the first of this week was unsustainable. it was driven largely by liquidity and volatility had been sinking 11% in that time. analysts telling us hong kong had weak fundamentals. the discount between the all world index in the hunt on -- hong kong index, even with the 35 discount, it is not enough to take on risk amidst the political instability in hong kong according to a&p capital. much, thank you very

juliette saly in singapore. global stocks have taken a hit as the u.s. senate unanimously passed a bill aimed at supporting the protesters in hong kong. beijing has warned of a retaliation. let's bring in our chief asia economics correspondent enda curran. the latest, give us the update. obviously, this reinforces the idea hong kong is caught in the middle of a china and u.s. trade war and associated political attentions with that. this will bring heightened scrutiny on china's actions in hong kong. when i spoke to people today to gauge what it means, broadview was at the least it would make multinationals and business people and investors have a second think about where they want to park their money going forward in this part of the world. on the other hand, it must be said it is not quite clear just how real the threat is for the u.s. side because they have

significant interests here in money invested, u.s. companies operating here. the u.s.a view that can't execute on the threat they are making against china, so another upon in this game -- pawn in this game between china and the u.s. and with heightened scrutiny on hong kong, in the near term at least, he won't necessarily change the structures in the system of doing business here. a lot will depend on how the political impasse plays out in hong kong, protest, government locked into their positions. there is no sign of a negotiated breakthrough in either side. if that situation worsened in the months ahead, that might mean the u.s. would be compelled to take some steps against hong kong and against china. course, china has expressed they will retaliate against the u.s.. they have in detail how, but that they would. it is a game of chess and hong kong is in the middle of it. nejra: enda curran, thank you

for joining us. the senate vote we were talking about marks a challenge to the government in beijing as the u.s. and china seek to close a preliminary agreement and the trade war. from london, the senior interest rate senior analyst and in beijing, bloomberg's james zegar. let me start with james and pick up on what enda was talking about. we understand the u.s. and china will go back to the main agreement to talk about the extent of rollbacks. we know what happened to that agreement and what has happened in markets since, so are we setting ourselves up for disappointment? it is hard to say what will be the end result of the deal. obviously now, there will not be a deal in november, which everyone expected last month. the deadline keeps getting pushed out further and further. obviously at the moment, we are hearing from both sides, the two

trade negotiating sides are still talking about what they can, what is agreeable to both sides, which part of the deal was signed in may and can be signed again and which parts can't get done at the moment. outside the trade negotiations happening, there are other political issues that are kind of taking the focus off trade and ringing in other factors which are out of the hands of the trade talks as such. manus: can i ask about the political response? china reiterates, retaliation threat over the bill on hong kong. how will xi respond? it is a delicate balance, but what becomes of this? james: china has threatened a number of retaliations against u.s. actions the last 18 months and there hasn't been followthrough. this isry unclear what

going to mean, how it will play out. even if the bill is passed by donald trump, it means the u.s. seeing -- a congressional debate about whether the special status of hong kong can continue. you'll see a debate on whether china should have the most-favored-nation status. if that happens, they will reaffirm hong kong status and it would be silly for the chinese to retaliate against the status quo. if it becomes a way for congress to batter china annually, there may be some ways china could retaliate against u.s. companies in china, but that is a threat they have held over companies here long time. we just want to bring you in here. we have seen repricing on the 10 year yield and the two's tens curve with investors not so optimistic phase one will go through. how much further does the repricing have to go into here

and? -- year and? prettyet has been aggressive and chopping up the tail risk tariffs would go up in december. we've seen that in risk assets and the curve has steepened. we've seen that run into the ceiling with tens not able to reach the 2% level. between now and year end, we will be in no man's land in terms of the next 25 basis point move up or down. it is really a coin toss. it is difficult to get a sense of what is going on in the negotiating room. at the same time, the background data have not improved, and in the u.s., they continue to deteriorate. risk off sessions like today driven by hong kong will see pressure on safe even assets. dearth of safe even assets came up the last hour with our guest. in terms of no trade deal phase one being done, a little lyrical

dislocation in response mechanism, where do you look. 2020, they want to belong treasuries come along old. give me a sense of where or how you might protect yourself from this interim dislocation. well, look at the treasury curve, the front-end looks attractive to us. is the frontthere is anchored by what the fed is doing. a high threshold for continuing to ease, but an even higher threshold for raising rates. is front-end to us relatively good value. we only have a cut at the moment. duration, a little more risky and if we get to 2% and above on positive trade news, it will be a little more attractive but at the moment, long-duration. y call you had a punch where you expected dollar to

raise so much you could see euro-dollar parity. is it dollar as a safe haven because you don't see trade risk going away? ed: it is in the event that trade -- the trade resolution does not come through. the area that gets hit the most are credit accounts of countries like europe and germany. the downside pressure on the ecb to ease relative to the fed in that environment raises the possibility that the dollar strengthens further. theensus view going into end of the year is the dollar will weaken. on the flip side of that consensus view, looks a little attractive. december of last year was a little difficult for markets. -- we havealk about seen many rhetoric pieces before and no follow-through, but in terms of the levers we are seeing pulled here in china, is

china really under pressure? i've just arrived in the city -- is there a feeling politically there is pressure to do a deal? james: there is definitely pressure to do a deal from the business community in china, not only foreign but domestic exporters. businesses exporting to the u.s., their tariffs are really hurting them. there is also a feeling without certainty, chinese businesses are loath to invest. there is a lot of pressure from the business community to get something sorted out, to reduce the tariffs china is paying -- chinese companies are paying. the debate about who pays tariffs is moot. chinese companies, u.s. companies, u.s. consumers are paying but there is pain felt in china. the domestic economy is already weak, and the uncertainty of the trade war, a lot of people in china want this to go away or

reseed into the background. manus: that is interesting. take you very much, james meyger with me in beijing. our guest host in london stays with us, ed al-hussainy of columbia threadneedle. let's get your first word news from hong kong. envoy did not initialize -- initially realize unacceptable pressure on ukraine. volckerer special envoy was one of four witnesses today. the next will be gordon sondland. thepresident will like -- fed will likely reinforce the message rates are on hold. jerome powell said policy is in a good place provided there isn't a "material reassessment of the outlook."

the key will be what that phrase means. protests in iran have left at least 106 people dead according to amnesty international. thesands toook to streets after gas prices rose as much as 300%. thousands were arrested and the internet closed across much of the country. in israel, benjamin netanyahu is calling on rivals to form a unity government. he's hoping for a deal with his main opponent. this comes after reports of a passable power-sharing proposal between the two rivals. 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: rosalind chin in hong kong, thank you. coming up, the first debate between boris johnson and jeremy corbyn, no clear leader. pretty much a tie. we will discuss the u.k. election, next. manus: and there is a host of

interviews coming up. the response and reaction from. the latest salvo on trade wars. . it is the bloomberg new economy forum in beijing. tomorrow, we speak to bill winters, sergio ermotti, and goldman sachs chairman and ceo david solomon, plus the former white house chief economic advisor gary cohn joins the team. we will bring you the latest. this is bloomberg. ♪

manus: 7:18 a.m. in the city of london. i'm slightly discombobulated with the global clock. 41 minutes from the start of the trading day in europe. i'm manus cranny in beijing. nejra: i'm nejra cehic, firmly rooted in london. the equity market in the u.s., not hitting another record high in the s&p 500.

the nasdaq got there, the dow under pressure because of retail earnings. in europe, weakness yesterday and looking like a lower open in 40 minutes time. a host of risks, weighing on risk assets today. manus: that the bond markets, money flowing into bunds and treasuries. we have seen flattening on the treasury curve for five days in a row. we haven't seen that for a while. is that telling you more about the slowdown in the u.s. economy? long treasuries come along steepeners. -- treasuries, long steepeners. btp's in the middle of the chart up by a tick. the business flash headlines, rosalind chin is with the team in hong kong. itslind: alibaba thinks stock offering will come at a discount. shares will price at 106 hong kong dollars apiece, nearly 3% below the new york close. it marks one of the largest in

the world this year, likely the biggest for hong kong since 2010. accused of having breached money laundering laws more than 23 million times. --is the biggest terrorist breach of financing laws in australia's history, failing to detect payments that may have facilitated child explication. and they saytions they recognize the severity of the issues. the u.s.'s investigation of swedbank -- the allegations are andto the baltic unit includes transactions after the u.s. imposed sanctions following russia's annexation of crimea in 2014. his contract until run -- runs until the end of the 2023

season. he most recently oversaw a disappointing spell as the manager of another team after previously coaching chelsea, madrid, and milan. that is your bloomberg business flash. nejra: rosalind chin in hong kong, thank you. the first u.k. to election debate ended in a tie. it is good news for jeremy corbyn who defied negative ratings.reasoning primen people said the minister won. we have a deal that is of an ready. it is ready to go and it is approved not just by our partners in the eu, but everyone of the 635 conservative counties and it delivers everything we wanted from brexit. >> we will within three months negotiate a credible leave option with the european union and with six months, but that way referendum for the british

people to decide between that option of leaving, protecting jobs and trade, and the good friday agreement with europe, for remaining as members of the european union. that will be the choice put before the british people. >> i've been very clear about the deal. there it is. you can read it. we don't know what mr. corbyn is -- clean't complain -- come with the electorate about whether he would -- >> thank you, mr. johnson. >> what i would leave under the tree for him is a christmas carol by charles dickens. [laughter] [applause] effort, myry brilliant brexit deal. is still al-hussainy with us. your idea is positioning around the bank of england's reaction function. how are you doing that?

ed: when you think of the pivot point in the uae -- u.k. economy beenast six months, it has the bank of england really recognizing there is an urgent need to ease and moving away from a hiking cycle that was on the table last year and fiscal policy moving away from a tightening bias to an easing bias and we will see that accelerate after the election. with the bank of england, it keeps the rate space quite attractive. we don't haveve, a lot in terms of easing, a little less than one cut at the front end of the curve and the long and continues to be a relatively attractive in the rate space. manus: in the medium-term, your medium-term is three to five years. you talk about the potential for a structural transformation. what is it that delivers the structural transformation? is it fiscal policy and what does it take to deliver a

structural transformation if that is the correlation? ed: when i think of the the shape and the fundamental structure of the u.k. economy will change. the productivity picture will change, the trading relationship with europe and the trajectory of growth that was in place the past 25 years will be quite different. that produces winners and losers. it is difficult at the moment to see what that structural change will look like. from an investment perspective, i choose to focus on the shorter-term timeframe over the next 12 to 18 months, where we see monetary and fiscal policy anchors in play. >> you prefer the u.k. front-end of the curve and ink that provides cover of fiscal easing. it is also about avoiding the two stands. -- twos tens.

ed: there is a little two-way risk. we don't have a lot of clarity in the u.s.-china trade outcome going into the end of the year. the data in the background have not improved adequately to be short durations so we are in no man's land and the front-end of the u.k. and u.s. curve are attractive in that sense. manus: what do you make of the curve? longest wanted to be steepeners but on the other side, i look at the flattening period and lacking the belief elixir of life of a trade deal seems to be dropping. curve is flattening. do you enter a steepeners or are you more interested in a flattening of the curve into 2020 in the u.s.? >> i don't want to take away from weeks worth of price action but it is clear we ran out of oxygen tried to get 10 year

yield to 2%. whenever broke that levels so there will be a steepen -- level. the front-end of the u.s. curve becomes more attractive and moving away from duration to the safety of the front end where you are anchored by what the fed has told it will do over the next 12 months is a safer place to be. i think there will be value in duration. manus: thank you for joining us this morning. that is ed al-hussainy, analyst at columbia threadneedle. coming up, we are on the ground in beijing. the next 48 hours, interviews for you. we have the bloomberg new economy forum starting tomorrow. the standard chartered ceo bill winters, ubs sergio ermotti, goldman sachs chairman david solomon. we are on tour. nejra: that is it for "bloomberg daybreak: europe."

you will continue from beijing for the rest of the week. the european open is next. tune in to bloomberg radio live on your mobile device and dab digital in the london area. futures, lower. this is bloomberg. ♪ ♪

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anna: good morning. welcome to "bloomberg markets: the european open." i am anna edwards alongside matt miller who is in frankfurt. matt: today, the markets say play nice. asian stocks and european equity futures fall as tensions rise between washington and beijing. the cash trade in less than 30 minutes' time. anna: power to people.