>> good morning morning from dubai. >> from bloomberg's european headquarters in the city of london, these are today's top stories. markets on the front foot. china's pmi data beats expectations. oil higher as the opec plus meeting looms. germany's social democrats elect leaders that favor exiting the coalition with chancellor merkel. herstine lagarde faces first testimony to the european parliament. you can leaders clash on the friday terror attack as we can --l so -- show the

>> warm welcome to the show. the data is driving the markets. downturn will stay for a long time. be prepared for overly loose policy, harm in the long term. no shock and ought to come. good morning. are we jumping too aggressively on the optimism after china data. there were factors to consider. we have to bear in mind there are expectations that inflation could rise significantly in the first part of the year. absolutely. let's talk about the bond markets because our guest host

says it is going to take 500,000 , 500,000 would not shake the fed. bond prices are falling. fedare going to see the cutting rates. the riskalk about market. what happened friday? cuts at opec this week. a sense of a relief rally in the oil market this morning. , therty values jumped largest jump since 2003. appetite returns to the aussie market. qe in australia, that is the question we can debate. >> green on the screen for the msci asia pacific index.

bullish views for asia in 2020. 0.4cline on friday of percent, the biggest drop in two months. that tells you what kind of moves you have had in equity markets recently. slightly.treating manus: breaking news coming through on nomura. the ceo is to step down, replaced by the chief operating officer, mr. okuda. if you look at the data, the ceo mr. nagai has been the president for 2.7 years. he joined on the first of april 2017. nagai is set to become chairman from april 2020. a rearranging of the chairs over at nomura. beenchallenge has integrating what they bought in the eu years ago.

morning? this nejra: we have a little more breaking news on the corporate front first. ceo will step down in february and handover duties. this is some news coming through on succession of the ceo, who will step down in february. let us move on to our top story. better-than-expected data from china. it adds to evidence the global economy may be turning a corner. november spikes in manufacturing pmi came in at 50.8, well the official number rose to 50 point -- to 52. manus: meanwhile the chinese government wants tariffs rollback as part of -- part of a phase i trade agreement.

tom mackenzie is our host and anchor in beijing. out instarting to bottom china? >> possibly. you have the official survey that went out saturday and the private survey early this morning. suggesting manufacturing is starting to turn around. you have production levels and supply levels, demand levels, i should say, improving on the official data set. in terms of that private survey, a tick up in terms of employment. say there are seasonal affect supply. -- affects at play. infrastructure spending has been starting. policymakers front loading it for the first part of next year. that may go some way to sustaining this. this phase iign

trade deal, that may help improve investments in terms of capex. the demand picture could pick up. that is the question mark. whether it will sustain into 2020 is what we are focused on. analysts saying consumer inflation could complicate the picture somewhat. in terms of the trade talks, what is the latest? headlines coming through from the global times. consumer prices, you are absolutely right. what is the response from the central bank? you are right to highlight that. times, they put out some commentary staying -- saying there are sticking point between the sides. one of them is tariffs.

they want the rollback of tariffs. and agricultural purchases, one of the easier things for the two to agree on. china does not want to commit to a dollar number at this stage according to the global times. some hurdles. economistse for many , those additional duties. nejra: thank you for joining us. --ning us for the hour is good to see you this monday morning. would you be fading the risk on? >> fading has been a losing strategy. we are cautious if not bearish on risky assets 2019. i think consistently wrong, essentially. it is difficult for me to feel convicted that we are about to

see a dramatic change. managing government bonds essentially, a call i think there. as you mentioned, it does feel like there is an asymmetry. i don't think what we are seeing to shift to the direction of travel toward higher rates. unless you're talking about dramatically higher inflation, you should not push bond yields that much higher. >> that is one of the defensive trades. quickly bringing up chinese government bonds, let us lean in. if inflation is the issue for china and you get these marginal , this is thepboc question i put to you about chinese government bonds

relative to u.s. treasuries. you see this outperformance. does that continue for you? a particularly high correlation. potentially that changes going forward. 's enteringn cgb global indexes we manage portfolios against. required to invest alongside the flow. that should go back to the inflation outlook. the headline for cpi in china is concerning. year-over-year, a significant part of the basket. is goingking like it to continue to do so. i do not think that is going to

lead to policy response. chinese policymakers are expressly aware. they need to look through that. abouthink you're talking a low inflation outlook. maybe that is going to constrain -- cgb's.in cgp's nejra: you have said the trend is for low inflation. in terms of the pboc, we have heard many times that large-scale stimulus is not in the cards. what are you expecting? >> communication coming from the pboc, specifically the governor, has been consistent saying we don't think we need to or we don't think it is the healthy stimulus.e piling

pulled harder on the fiscal lever. in the long term it's robbing peter to pay paul. i don't think it will be hugely in a period where confidence is not high. something i tried to balance in my mind is the balance between full deflation and deleverage versus keeping growth at 6%. which makes you more anxious? deleverage, default, or deflation in the china story? >> thank you. manus: it's monday. up. have to crank my brain

essentially it is all of the above. that is the paradox of that situation you described, to say, if you try too hard, you can actually create leverage because you are talking about crushing the economy, your ability to pay down that debt. if you look at that as a percentage of gdp, your leverage ratio goes up. it is always a balancing act when you are needing to delever. the best way to do that is nominal growth. what we have learned is that it is not quite so simple to just create nominal growth. we have gone too far and started to trip over ourselves. there is going to be a very narrow path that is going to lead to balance. so far they appear to have got that message, very much about

shedding that narrow part, getting things to prevent either of those extremes from playing up. that's playing out. manus: as long as you don't have a big pop on the default side. in china, mygs guest said yesterday. you stay with us. let's get your first word news. >> breaking ranks ahead of the latest opec plus summit, signaling the block will consider deeper cuts despite the rest of the coalition showing reluctance. most analysts expect no more cuts. opec's meeting in vienna starts november 5. germany's government thrown into crisis. the coalition partner elects new leadership.

the social democrats bringing in a team that opposes the alliance with angela merkel. the new leadership is signaling it will not bring an abrupt end to the coalition. it is more likely to put forward a new set of demands. president trump declining to take part in the house impeachment inquiry wednesday, keeping open the possibility of testifying at a later date. lawyers saying the whole process has been unfair to the president, adding the hearing was scheduled, quote, no doubt purposely while trump is at the nato meeting in london. mark carney has accepted a new job after leaving, he will become the special envoy for climate action and finance at the yuan -- u.n. his successor has not yet been named. he may be asked to extend his term. global news 24 hours a day

powered by more than 2700 journalists and analysts in 120 countries. so much.ank you coming up, the main u.k. parties play the blame game after an attack in central london. security becomes the main issue in the campaign. if you are traveling to work, tune into bloomberg on your mobile device or dab digital radio in the london area. ♪

nejra: this is "bloomberg daybreak: europe." manus: let us check on the asian markets. start to theood trade week and month. the final trading month of the year.

better china data. you also have the yen tracking a six month low, showing that risk on mood you are seeing. the nikkei leading gains. hong kong markets doing well despite the fact we are expected to get an ugly retail sale number later this afternoon. also watching a tick up in yields in new zealand after we have the treasury saying they hello their budget forecast. in korea, ahead scratcher for the bank of korea as it tries to work out how it can stimulate the economy. consumer prices rise in november from a year earlier. the first gain we have seen in four months. very near that zero percentage level. at the same time, exports contract. some including j.p. morgan suggesting a rebound in south korea, but it is worrying for

the bank of korea in terms of inflation remaining near 0%. nejra: bloomberg economics pointing to signs of recovery as well. thank you. let's get the business flash. >> black friday hit a record in u.s. online sales. nearly $7.5 billion in sales were made by smartphone or computer. it was the second-biggest digital sales they in american history behind 2018 cyber monday. today could be even bigger. it is likely to outshine that record by 19%. goldman sachs will avoid hard profitability targets in january according to the financial times. the investment bank will instead steer focus to its core business. the centerpiece of its announcement will be a new merchant bank with over $130 billion of assets.

hsbc giving its hong kong staff an extra day off next year. perseverance and dedication in the face of months of protest. the bank employs 21,000 people. apple daily reporting hsbc hong kong is planning to freeze its top executives, the bank saying it does not comment on rumors. that is your bloomberg business flash. manus: thank you very much. elections,test u.k. two men vying for the next prime minister play the blame game on the terrorist attack in central london. boris johnson and jeremy corbyn clashed over who is to blame for the attack. the prime minister used an interview to distance himself from the party's record on crime. i think this whole system of

automatic early release, put in by labor -- i have only been in office -- manus: jeremy corbyn blamed a decade of spending cuts overseen by the tories. >> you cannot keep people safe on the cheap. for too long, our country's leaders have made the wrong calls on security. manus: those are the politics of the sunday narrative on the u.k. tv. james, that is a narrative of the tragedy from friday and the blame game that ensued. i want to pivot to the polls. four out of five put labor rising. the lead has collapsed by 15%. is this a healthy reminder that it is not a done deal that you

will see this lavish tory victory and that we need to consider there is still live risk? >> essentially, yes. on how you position in u.k. assets. it looks like from the u.k. economic perspective, probably the worst outcome is this hung parliament without a clear result. historically good in giving us govern ability. even agree the withdrawal agreement bill, it is we worst of all worlds if get this purgatory continuing. , we are having flashbacks to 2017. exactly what we saw. the tory party had 10, 12, 15 points lead a few weeks out.

narrowings dramatic into the election. i'm sure there are people, myself included, that feel the polls have been pointing to a tory majority. you might have to question that view a little bit as the leaders get in front of the cameras on a more consistent basis. nejra: does that change the market where you would still sell on strength? >> for now it absolutely is. they are trading 10 basis points through the cap. a very simple basis there. isstill have inflation which higher than most places. rpi is down to 2% having been above 3%. predominantly has been running at a high rate of inflation. still a seller of strength.

manus: can we dig deeper into the guilt story? -- gilt story? hard brexit, that crocs point we crux point we went to, do you think if we get resolution and we get a majority government, if the market goes as we think it will, a tory majority government, do you expect a big return, an influx of money back into the gilt markets? essentiallylying u.k. glts are a credit market. we worry about the authority to pay back gilts. international

investors would assume in hard brexit the gilt market. i don't know whether that is necessarily the case. risk should be virtually zero. it seems a more appropriate story. also you have the currency impact for lots of international managing types. currency risks alongside bond risks. we saw sterling under weakening pressure. are you long sterling for the moment? >> it has been structurally underpriced. has been agenerally tough call this year. we have been expecting it to weaken and it just will not do so. sterling versus the euro is hugely underpaid long-term. pup, germany's sd

veered to the left. ♪

nejra: this is "bloomberg daybreak: europe." i'm nejra cehic in london. manus: on manus cranny in dubai. , thets around the world latest gdp report showed india collapsing and last quarter. how are the markets reacting? not too good, i'm afraid according to you. can have succumbed to the lowest part of the day. india started in the green with telecom stocks but that has given way. you seek indices in the red, banking .5%.

it seemed like the markets didn't care about what had happened with the gdp data. however, while the markets have corrected, still helping the market a little bit. i believe they are off the highs of the day, because for the first time in a number of quarters, we've had the indian telecom operators and value for customers, but finding good news. as a result of which, you've seen telecoms companies h-shares move up. companies' shares move up. other than that, not much on the positive side today. nejra: you are looking at cable today being looke -- moved by the polls. dani: the moves we see are so slight, but on thursday, we saw slight gains in the pound after we heard that the polls were

showing the tories had the biggest lead in about three decades, but now it has been mostly flat. the labour party, catching up to the conservatives in the latest polls. i want to also talk about the volatility in cable, because this is where there has bn the most action when it comes to sterling. when we dive into the charts, we can see a period where cable one month starts to track this latest election. that is where the red line is. traders are preparing themselves for the december 12 election and it has been elevated since. one month volatility at 11%. the last election, it was 7%. volatility, noticeably priced in despite the tory lead. we know polls have burned traders in the past so they are preparing themselves. nejra: thank you both. let's get the first word news with annabelle droulers in hong kong. annabelle: the outlook for china's factories is getting

brighter. isicial manufacturing pmi showing an unexpectedly strong november. the rebound in new orders, pushing the gauging into expansionary territory for the first time since april. the index also rose for the fourth consecutive month of expansion. another weekend of unrest in hong kong. police, firing tear gas as thousands marched in the tourist district. protesters express gratitude for the u.s. after president trump signed legislation supporting the demonstrators. protesters set fire to a subway station entrance. bank of england governor mark carney has accepted a new job. he will become u.s. special envoy for climate action and finance. his pay package, one dollar and year. he leaves his current job january 31, but his successor hasn't been named, which has boosted speculation he may be asked to extend his term.

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. this is bloomberg. much. as thank you very angela merkel's government has been thrown into crisis. the coalition partners, the social democrats have elected new leaders demanding a shift to the left. is make with her last years as german chancellor at risk, rejecting a candidacy. they signaled they are willing to risk a government breakup after 14 years of merkel. nejra:'s crisis in the german government comes as the new ecb president christine lagarde faces questions from european lawmakers today. or plan for the biggest reassessment of the institution's mission in 16 years are likely to play a role. do not miss our coverage from 2:00 p.m. london time. james athey from aberdeen standard investment is still with us.

let's talk about germany first. it will the thinking is put forward a set of demands, one of those could be abandoned merkel's cherished balanced-budget stance. does that mean there might be a backup in bund yields? paul: if there is credibility behind that, yes. the markets would be hopeful with respect to fiscal policy. we've heard the word bandied about with monotonous frequency and regularity, and that does occasionally see weakening in the bond market and steepening of the curve. i do struggle to see the political route forward here. of thisosed plan leadership team which have been elected by the spd has been rejected or pushed back. arepolitics are the sdu under attack from the rest -- -- finding a

stable coalition of right and left in a more extreme world is going to be very difficult considering this moderate coalition has struggled to find common ground. you lose your own voter base if you make the coalition work. this coalition was put together at the test of the president in the interest of national unity and it hasn't worked. i struggle to see how the weight forward politically -- the way forward politically leads to more fiscal spending them we are now. constitutional reform, all of this which has to happen in order to get germany to be more fiscally supportive. it looks like a tricky journey to me. manus: that is a tricky journey and a dissipation of what we had hoped for. have a look at this, the inflation expectation. take the dissipation of political will, tie that to this dissipation in inflation

expectations. one could say we are missing inflation. does this put more pressure on the ecb to cut rates? i'm seeing rafa bank say another 10 bips to go in march and june, and september. is that the take away from what you said? paul: the ecb was probably one of the more narrow inflation targeting central banks we have seen over the last -- that is what led to the woeful 2011 hiking into a massive recession because they had a narrow inflation focus. they don't have a jewel mandate like some others. in recent times, we have seen the ecb abandoning their inflation target. they have been forecasting over their forecast to rise in a huge miss on inflation and have not been doing it again out it. historically, that reaction would have been 1.9 or two.

that hasn't really been happening. now, they haveor somewhat given up on that forecasting euro inflation and managing policy around it. for what that means going forward has much to do with the politics of the institution, the financial markets and the way they are behaving. interesting thing to take the other side of what manus was saying is a lot of people have been thinking christine lagarde will be less tolerant of the negative interest rate environment, but is that trade likely to continue beyond hurt speech today and as we learn more about what she can do? paul: they are absolutely trapped. they have set up financial markets to be hooked on abundant cheap liquidity and incredibly low interest rates, not via economic banking channels but purely by financial market channels, forcing investors to

buy lower and lower quality debt because the higher-quality debt yields something negative, essentially. turn around and go actually, we decided this is not a good idea so we are pulling the plug. stabilization of the financial markets would be more disruptive than them staying the course at the moment. they are hugely trapped. the reality underneath all of this is we are still talking about an economic region which is poorly constructed, poorly put together, rigid, inflexible, and therefore, these travails will go on until the underlying structural issues are dealt with. manus: wonderful language for a monday morning. you, is that your view, and when we were in china last week, there was a move by the germans that we would get a formal banking union. would that be a constructive step forward in your view and

what would that do to the markets? james: it is constructive to the extent that yes, it is a step show somed it does coordination across the region, which has been lacking to some degree. it does not deal with the issues. the issues of european banking are numerous. one is the underlying economy is weak, two, the structure in the industry is not useful at this time. you have a massive fragmentation of banking across the region and flows from north to south. for men sticking point is still the quality of assets and the balance sheet of these banks. you've not had any clearing of the dekes post crisis. from 2008-2009 and from 2011-2012, not appropriate pricing, skeletons in the closet of these banks declared at. summit he has to take -- somebody has to take that hit. an you reprice it, there is

capital injection needed from public markets or via the merger of institutions, and nobody wants to take a financial hit. until they do, you can't move forward. nejra: what does this mean for your outlook euro-dollar? you are also not positive on the u.s. economy. james: it is still the cleanest shirt. euro-dollar is a tough one because the costs -- i believe the u.s. economy has had the best of it this cycle and we expect the federal reserve to be cutting rates in 2020. that should narrow interest rate differentials and put downward pressure on the dollar. you would expect to see euro-dollar rallying. that is not helpful for a thatnt account region relies on exports and it can short-circuit quickly. currently, i don't have a position specifically euro-dollar. i like being short the euro against the yen is i think the yen is the place investors will put money to work when risk assets and the economy start to

resume their downward trend. manus: uplifting top 31 from james athey, aberdeen standard investment. our guest hosts this morning. you've filled me with joy when the downward trajectory restarts. oil is rebounding, the biggest week since october. it was fairly tragic friday as iraq has signaled the opec plus consortium will consider deeper cuts this week. that is contrary to expectations. annmarie hordern joins us now. to a moment for the iraqis? iraq has broken ranks and we have seen the oil price higher on the heels of these comments. we have a risk on sentiment that is boosting confidence. the minister said iraq will consider -- the group will consider cutting production further. we need to take this with a

grain of salt. iraq has beeng cheating. dropped 100,000 barrels a day, but are still about their compliance target. secondly, we heard from the two biggest producers of the group, saudi arabia and russia, and both have signaled they want to maintain the status quo of the current production deal and review it in march when it is over. they are hinting to the markets they aren't expecting any further reductions in cuts. inside opec plus, outside opec plus if you are a traitor or analyst heading into this meeting, a lot of people are taking these comments with caution. manus: when it comes to compliance, they all start on a podium in front of us and said they would be compliant. he posted they said they are moving toward that. anne-marie, get your winter woolies out, we are heading out.

james athey from aberdeen standard investment is still with us. he is used to the cold weather. we are looking at in oil markets, $61.27. it is a fragile peace in the oil market these days, but what is the conversation you have around oil and commodities? james: such a tough call, isn't it? structurally speaking, my view has been for some time the ability of opec to manage markets, control the price in a way we have become accustomed to for many years. it has and continues to wane while shale production in the u.s. is so high and on such a steadily increasing pace. there is a bit of disagreement around forecasts of 2020 in terms of u.s. production, but it looks to me like you are talking about huge and globally significant numbers, and therefore what we have seen --

when opec tried to boost prices, all they do is squeeze themselves out of the market and you end up with the price where it was when they started and opec has a smaller percentage of global output. i don't think that is a particularly winning strategy for them. russia knows that, saudi arabia knows that, and when you look at their domestic situations, which rely heavily on oil revenue, that becomes a domestic issue quickly, particularly saudi arabia were wealth does not come cheap and needs a decent chunk of oil revenues to fund. nejra: if brent dropped below $50 a barrel, does that signal to you global demand is low? i'm worried about the economy or are lowell price is good for the consumer -- lower price is good for the consumer? oils: we go back to the industry problems of 2014 and 2015, what does it mean for the u.s.?

is a significant oil producer, what happens if oil price falls? of the guys connected to the industry gets wiped out. we didn't see much on the consumer, but huge problems for the production side of the economy. that would suggest whatever boost for the consumer is not going to matter. if that happens, the costs going into the downward part of the cycle, it is a saving story and i would argue the production side of the economy is where the problems will emerge. nejra: great to get your thoughts today. james athey, investment director at aberdeen standard investment. this week, the world's largest climate summit begins today in madrid. 200 nations are working on a pathway to rein in fossil fuel omissions. alliance meets in london as it faces concern about its purpose and durability. manus: we get to the middle of the week on wednesday. impeachment inquiry shifts to a

new phase with the public hearing in the judiciary committee. president trump has been invited to present his defense. is declined to do so. thursday and friday, opec and vienna bound. we are all there with the allies of opec and opec plus, who have indicated they are on course for a surplus in 2020. it doesn't plan deeper production cuts. friday, jobs reports 1:30 u.k. time. estimates for payroll, they rise by 90,000 in november after an acceleration from october. coming up, it is less than a month until the new decade. with global stocks up some 20% over the course of this year, how shall investors position for 2020? this is bloomberg. ♪

manus: this is "bloomberg daybreak: europepepco -- europe." a monthith less than until investors welcome a new year and decade with global stocks up 20% over this year, how should your portfolio be positioned for 2020? says equityt valuations remain high and it is not yet time to go over weight stocks. joining us, the head of portfolio management. when will it be time for you to go over weight stocks or at least neutral from the underweight? >> when you look at the consensus while macro has eased, the phase one looks to happen but the question is you got central banks around the world easing interest rates, so

there is a lot of money chasing risk assets, but economy numbers haven't been that strong. that perspective, equity market valuations have gone up quite a bit already so we look at how equity markets have performed this year. most are up in the region of double digits this year. post of that has been driven by multiple expansion, rather than growth. from that perspective, there is concern part of the expectations for the economic rebound have been priced into the marketplace, one of the reasons we have been underweight in equities. manus: you talk about defensive positioning. a variety of investors use that. is a long duration or is it scaling back u.s. equity risk exposure? for us, it is a question of increasing cash holdings because when you look at markets this year, equities and the bond

markets have done very well. when you look at the 10 year u.s. treasury yields in the region of 1.8%, we don't think there is much value holding overweight treasuries at this point in the cycle. everything depends on whether your view is you see a recession in 20's -- 2020. that is not our base case, i'll but we are late cycle. we are underweight bonds, so we are holding more cash, just waiting for the right time to increase equity allocations and doing risk assets again. nejra: when the time comes, which equities look best? daryl: for global markets, u.s. markets look pretty well priced in. european markets have potential to rebound. these are your cyclical markets. european markets are export driven. everything depends on whether trade normalizes a bit.

that depends on whether the phase one deal gets done. we think asian markets have the potential to rebound. one of the things we are tracking on a micro level is we are seeing the likes of samsung providing better guidance for 2020, which suggests the tech cycle is bottoming out to an extent and could improve into 2020. part of that has been driven by 5g rollout happening in most of the markets in asia. we also see a good pickup in terms of the latest smartphone rollouts, the new iphone, the new samsung galaxy, and that has been pushing the asian tech sector, which is a bit of encouragement for a lot of asian markets. take to getdoes it you to take more asian risks? does it take this drip feed of policy response from the pboc or are you expecting something more dramatic that might shift your gears on e.m.? daryl: when we look at the asian

markets, to see whether the supporting factors are there. i mean that interest rates remain relatively benign. i think that is pretty much the scenario for 2020. dollar, itu.s. remains relatively weak to range trading. we are talking about oil prices remaining under control. you have all of these factors falling in line and the emerging markets, asian markets do quite well for 2020. when you look at that, our outlook is relatively constructive on that basis. we are quite encouraged by the potential for asian markets in 2020. cuts inhen fed rate 2020 make you feel better about central bank support or worse because it means the outlook doesn't look good? daryl: that is a double-edged sword. if the fed is pushed to cut

rates further, that would probably mean economic numbers worsen. that would be a negative on the growth front, but if they cut rates, that could be positive on the dollar front. that would help emerging markets to a certain extent. evident depends on how the data is looking at that point in time. manus: thank you very much. daryl liew, the head of portfolio management at reyl singapore. let's see how the rates output comes to pass. coming up, we will talk about the chinese growth outlook because essentially, the data. do we trust the set of data we have? the official pmi rising and a kite asia -- and the index hitting some record levels. is it seasonal steroids? what is the outlook for

inflation for complicating the stimulus picture? when traveling to work, tune into bloomberg radio live on your mobile device or dab digital radio in the london area. this is bloomberg. ♪

nejra: from bloomberg's european headquarters in london, i'm nejra cehic. manus: i'm manus cranny in dubai. this is "bloomberg daybreak: europe." withon, december starts markets on the front foot have to the china pmi data beats expectations. oil also takes higher as an opec meeting looms. germany's social democrats elect leaders that favor exiting the coalition with chancellor merkel. in brussels, christine lagarde faces a grilling from lawmakers in her first testimony to the european parliament.

u.k. leaders clash after friday's terror attack as we get polls showing labour party gaining ground. all this as president trump lands in london tonight ahead of the nato summit. nejra: welcome to daybreak: europe. we start december on a high note driven by the heightened be -- pmi. the question is whether that is justified or to do with seasonal factors, and what it means for the prospect of stimulus? the pboc saying large-scale stimulus is not necessarily on the cards. manus: of course it is down to whether you think it will be a progressive response mechanism

from the pboc or more of a drip and the data really substantiates the official data and to that end, the glass is half-full as we start this last month of the year. a little bit of growth numbers from turkey now. nejra: absolutely. we'veg at turkey, what got is gdp year on year coming in at 0.9%, softer than the survey, that expected 1%. quarter on quarter, a gain of 0.4%, lighter than the estimate of 1.1%. in terms of the lira reaction, seeinged like we weren't a huge amount of reaction. to equity markets, three months of gains in global equities. we continue to see green on the screen for asia. european futures are not seeing a big gain in terms of european futures. we were seeing more positivity futures.rough in u.s.

we have seen the s&p 500 gain seven weeks out of eight and a drop of 4/10 of a percent is one of the biggest drops in months, which tells you how much optimism could be baked into these markets. looking at bond markets, we were talking about how the prospect of perhaps a spike in cpi in the first quarter, 5%, could copy late -- complicate stimulus. governor talking about hunker down for a longer period, but warning against stimulus measures. germancant moves at the government bond market, dropping over 40 pips. rabobank saying the ecb will cut 10 basis points in march, june, and september. you will hit -80, but risk on in equities, risk on in the markets, a fading of the move.

yields will hit 1% by the end of 2020 and if you look at the treasury market, down 29. will hit 1% ine terms of yield next year. the fed will be cutting rates and the one thing that came up on visits along the east coast was the possibility of negative rates in the usa. let's get to the rest of the markets around the world. here is juliette saly in singapore. juliette: a pretty good start for asian equities. month and this is on the back of the positive data out of china. we've got the yen at a six month low, suggesting the risk on mood across markets. that sent the nikkei higher 1% on the close. south korea, a slight pickup in consumer prices in november, but only to 0% level.

china, slightly higher into the close and we are watching hong kong stocks moving higher .4% despite more protests in the city on the weekend. konge expecting hong retail sales to come through after the closing bell in hong kong for the month of october, and the finance secretary has already flagged that they are going to be a in august to climb, -- an enormous decline, partly due to decline in tourist arrivals, down 45% for october. we expect retail sales for october to fall in value and more than 25% in terms of volume. this will lead to concerns about what the retailers do heading into 2020 today. continuing to fight or do they shift their investment strategies to mainland china? nejra: on to our top story,

markets starting december with a risk on mood after better-than-expected data from china, adding to evidence the global economy may be turning a corner. 'svember, manufacturing pmi official figure rose to for the first time since april. manus: the chinese wanting tariffs rolled back as part of a phase one deal. joining us, head of rates and credit research at commerzbank. we are waiting to see what happens. to go toward december 15 and either get a number of care mutations -- it will be rolled back and rapturous applause or no change and an extent to pretend or a ratcheting higher. what does it take in the bond market, which is pretty resilient at the moment? of those three outcomes, what is commerzbank?ly at

>> right now, i think the market is clearly positioned for a phase one deal to be accomplished, either by the end of this year or if not, in at at the previous hike that was planned for mid-december will be delayed or taken off. this is what the market was clearly expecting. given the hong kong legislation in u.s. congress, things are clearly getting more protracted, but overall, given the big picture situation, i would say there is a green chute spirit and economic data should have the upper hand for the bond keeping upside pressure for the near-term. sejra: that greennejra: chute

alive and well in the 10 year. is that justified given the china data today? a lot of questions being asked whether the data is down to seasonal factors and whether we can hope for more in terms of stimulus from the pboc. christoph: i would not trade too wereon that one number several numbers we have gotten this morning. they are probably still under the impression of this phase one latestile perhaps the difficulties with the hong kong bill have not been fully reflected in the sentiment data. having said this, it follows a range of different indicators that we have had, especially soft data so far but also expecting hard data later this week in terms of u.s. payrolls or german orders to also choose some stabilization toward the

year end. spiriteen --green chute and the economy has room to extend. manus: their glass seems half full. you like that green chutes and data. this is one of goldman's trades. they prefer buying downside protection on high-yield, but i suppose having listened to what you said this morning -- this is the corporate bond exchange traded fund. it started cheap relative to equities. listening to you, you might be a writer of these premium rather than a buyer of these premiums. near-term, i would say going into the start of next year, we are more positive in general on spreads. b's forh yields, single instance,. later in the u.s., the situation will not find legs.

the fundamental situation does look credit in general, also cyclicals, which we prefer right look rather expensive at current spread levels. very positivehave technicals in place, especially investment grade. seeecb is buying and we less supply. there is a lot of money to be invested and so all of this still argues for tighter spreads first before fortunes should reverse some time next year. nejra: does your glass half-full argument also argue for curve steepening via a selloff of the long and rather than a dip in yields at the front end? curve, 10 to 15 years remains very directional. higher yields mean steeper curve, there.

are looking for tenure bunds to trade -20, which should go hand-in-hand with a steeper curve. years, any inherent flattening bias will stay in the fall and when yields again, which we expect during the course of next year, we are looking at the tenure bunds at -60 by year-end, 10 years out the outerlect while long part of the curve should maintain this strategic tightening bias. nejra: christoph rieger from commerzbank stays with us. let's get the first word news with annabelle droulers. annabelle: deutsche bank is widening its.s.'s investigation into the lender following a report that the u.s. is investigating the banks role in the dirty money scandal at

oscar bank. a of inquiries is that deutsche helped move tainted money into the u.s. into u.k., prime minister johnson is painting his party as one of law and order after the terror attack in london that killed two people. it has cast a shadow over the election campaigns. the opposition leader jeremy corbyn blames a decade of spending cuts to prisons. johnson blames the previous labour government's criminal legislation. president trump's declining to take part of the impeachment hearing this wednesday, that is keeping open the possibility of testifying at a later date. his lawyer says the whole process has been unfair to the president, adding that hearing was scheduled "no doubt purposely while trump is at the nato meeting in london." another weekend of unrest in hong kong, with police firing tear gas as thousands marched in the tourist district. protesters expressed gratitude for the u.s. after president trump signed legislation

supporting the demonstrators. later, a group of protesters blocked roads and set fire to a subway station entrance. 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. this is bloomberg. manus: thank you very much. the world's biggest natural gas explorer and one of the top consumers of the fuel is set to cement energy cooperation today. russia is launching a gas linked to china. and reordering joins us -- and murray joins us. another sign of president putin pivoting east. annmarie:'s biggest pivot since 2014. is bringing energy to the east with the power of siberia pipeline. this deal has been in the works since 2014. both presidents launched -- will launch the endeavor in a joint

videoconference. industry and politics. the pipeline is a hedge for moscow against deteriorating relations with europe. most gas production has gone west with ukraine being the single most important route for european exports and a relationship between ukraine and europe has worsened since the annexation of crimea. china is the world's biggest energy consumer and gas consumption has surged in the past decade. up 30% in the last two years. demand has really climbed for china, especially given the fact the government has put i a lot of pressure on factories and homes to switch from coal to cleaner burning gas and since china's domestic energies can't fulfill their appetite, this pipeline offers a vital supply.

this comes at a time of heightened geopolitical tensions with the west. nejra: annmarie hordern, thank you. left in aspd veers massive blow to angela merkel's government. next, we will speak instability in europe. this is bloomberg. ♪

nejra: 7:18 in london and 41 minutes from the cash equity market opening europe. manus: this is "bloomberg daybreak: europe." i'm manus cranny in dubai. nejra: i'm nejra cehic in london. angela merkel's coalition partners elected new leaders demanding a shift to the left. this may put her last two years as chancellor at risk. joining us from berlin is

bloomberg's editor. how much at risk is the grand coalition after the week's developments? >> one could say the future is uncertain. you new leadership -- haven't openly come out to say they want to get out, but we know that they are somewhat divided on this question. he is more of a pragmatist, and he would probably want to stay because he doesn't see -- does see that new elections are somewhat difficult, but his running mate is an ideologue and thinks this grand coalition has down.t them she thinks the grand coalition hasn't done a lot for the party in terms of policy. she thinks the government has been too conservative on issues like climate and social policy, and she would really like to go out.

we have to see how this internal dynamic among the leadership is going to develop over the next few weeks. of my i must say, what favorite lines from angela merkel, you got to love this, we are not a therapy service for parties in government. she said in an interview. returning.s not we will not renegotiate the deal signed in march. what is the risk of the grand coalition pulling apart? you have a timeline, a base case? birgit: i think this is capturing the mood within merkel's cdu. her cdu thinks the government has already been told to please the spd, because they were always where the spd is in trouble and they had made a massive concessions on a lot of issues. wage, basic

pensions, so a lot of members of the cdu say we have done too much for the spd and this is it. we are not going to go any steps further. the spd has to accept that they are in trouble and we will stay. the wiggle room for compromise is limited at this stage. nejra: thank you to our german government reporter birgit jennen in berlin. ecbcrisis comes as the president christine lagarde faces questions from european lawmakers today. her plans for the biggest reassessment of the institution's mission in 16 years are likely to play a prominent role. do not miss our coverage from 2:00 p.m. london time. christoph rieger from commerzbank is with us. can we come back to the german politics, because our last guest said the political picture makes the prospect of fiscal stimulus from here more complicated

rather than less. earlier, you told us you expect steepening in the german curve. how much of that steepening is based on expectations for fiscal stimulus? james athey -- christoph: i would say the steepening is due to the backup and yields, largely down to the china pmi. however, i would say the change in german politics over the weekend are another argument for bearish steeping of the bund that because keep in mind there has been an impersonation of the minister, who has been defeated. if you look at the comments over the weekend, she wants a big stimulus package. whether this will come is a different question and i think the market sentiment should be that, given the difficulties that the coalition is now dogmatedly facing, this

might get water down at some point. we may be heading for new elections or a minority government of merkel. someect of the greens at point entering the government clearly mean more spending, sohaps with the left party, if the market prices these things longer-term, yeah. the bottom line from the surprise vote we have seen on saturday, the change in spd leadership means it is adding to the barest steepening in bunds we should see over the coming days. manus: i like part of your hangover.b's a form of fatigue from the ecb, limits for the downside of yields and spreads. where will that be most evident? christoph: i think it is clearly

how it is being repriced. the have barely another chance for a rate hike cresting. september, the ecb meeting, the easing fatigue keeps spreading and it is falling on fertile ground, given the economic data over the weekend and met him lagarde -- christine lagarde today will probably strike a neutral tone, but in the environment, these hawkish undertones will dominate in the sense the market thinks in this environment, the ecb is a big strategy review. everything is on hold. perhaps there is a chance for normalization. whether it comes, i don't think so, but this is how the markets should play it. nejra: one second while a breaking headline on the bloomberg.

china sanctions several u.s. nongovernment organizations. this line, just coming through from cctv. we don't have a lot more detail other than that china is to take further actions as the u.s. interferes in hong kong issue. again, we come back back to what may no longer be a crucialheading to the december 15 date. it falls on the december 15 tariffs. what does this mean for your u.s. strategy in terms of the fed's response to what we might hear from u.s. china and the impact that could have on the u.s. curve? christoph: the fed will not be in a position to even consider raising rates at some point and they would rather err on the side of caution, for cautionary rate cuts. we think another rate cut will come in the year.

conflict-u.s. sustained and a bid in treasuries to prevent selling they would onan the back of the data we have seen. manus: very briefly, we have seen a slight flattening mode in the u.s. curve in the past couple of weeks. does that end and do we re steepen into 2020? christoph: we are in a steepening from the long end and then the short end when the fed begins to cut rates again next year. manus: thank you very much. christoph rieger, head of rates and credit research at commerzbank. let's look at dollar one on the back of the headlines. china sanctions several nongovernment organizations, this is according to cctv.

seeing a slight lightening up in the yuan. they warned about a potential retaliation over trump and the house signing those support memos for hong kong. ♪

anna: welcome to "bloomberg markets: the european open." edwards in the city of london. the cash trade is less than 30 minutes away. data deluge. risk on after better-than-expected chinese pmi data. germany'smerkel,