best valuation levels. that the economy will still grow. small caps, especially the value side, that will be a pretty good formula for outperforming the market next year. romaine: the closing bell here, down about a percentage point or so across the board for the three major averages. really the only areas in green are consumer staples, energy, and of course a lot of those metal stocks. the issues going on with steel. scarlet: back-to-back declines for the s&p 500. this is a 0.9% drop for the s&p 500. we are so close to record highs and the market has had such an incredible run. joe: blistering speed up, and even this, not even a 1% down day. pretty mild in the context. romaine: let's dive into the action with our markets

reporters. taylor: i will take a look at a chart here i am showing which is looking at the s&p 500 for the month of december. i know it is only the first day of trading in december. we are off about 0.8%. this comes after a very good november in which we had our best month since june. if you think about historically where we have been, december 2017, nothing really happened. december of 2018, a big bottoming out. the index lost more than 9%, bottoming out there on christmas eve before a big run up which led to the 25% gain or self we have seen -- gain or so we have seen this year. is relatively muted. still early days. we will have to see how the rest of the month unfolds. called: the skew index,

the panic index. last summer, well ahead of the fourth quarter volatility, the skew index in white here, highly elevated as the vix index. stocks took a big nosedive in blue. the vix then caught up. this year, volatility relatively suppressed as the s&p 500 going for near all-time highs. since october, the skew index going toward its highest level of the year. last year, this is well in advance but if this skew index keeps rising, it tells you some investors are either hedging long positions or concerned about an outright correction. katie: i am looking at currencies. the dollar rally was cut short today after that surprisingly ugly ism.

that sent the dollar down by the most in over a month. it was especially ugly when you remember we had surprisingly strong manufacturing data from china and europe overnight. up until today, traders have been feeling fairly bullish on the greenback. the dollar posted its best month since july last month. i was told this morning that toay's ism print was enough spark fears over slowdown. they expect those concerns to linger over the greenback. back to you. and of: thanks to katie course everyone on the markets team. still with us, david of and cora advisors and gina martin adam in new york. let's talk about valuation. last week, we were talking about potentially oversold conditions. gina: our macro model, which

takes a combination of forward-looking economic indicators, forward-looking earnings growth, and bond markets, says we should be trading about 19% of earnings. last week, we were modestly overvalued in the index. there is such a skew toward defenses, toward bond markets and bond properties. risk premium is still very high. at ases are still trading tremendous premium. that is where all the valuation excess is. it is a bizarre scenario where the bond market is intimately involved, that makes us somewhat vulnerable to what the bond market does going forward at the same time, low yields are supported multiples. joe: one of the big debates i see happening among analysts on

the sell side, is this now the time we get a major turn in the relative performance of global stocks? in the u.s., people have debated it. context, people talking about europe. are the conditions in place where u.s.-based investors may want to put more money abroad? david: if i had a blank piece of papal, what -- piece of paper for $100 and had to allocate capital efficiently. orwould probably be about 80 $85 in the u.s. and the remainder in emerging markets. i don't see much opportunity in developed international markets. it has underperformed two thirds or more of the time. the growth rates are not there. the regulations are high, the taxes are high.

i want developed international markets versus heavy tilted domestics with some em kicker in their where the growth rates are taking place. scarlet: are you going to get the em kicker if the president continues to use tariffs as his blunt tool any time sees other countries' currencies weakening. today, his plan to introduce tariffs on steel and aluminum in argentina and brazil. even though he hasn't given details, it was enough to give people concern that perhaps a phase one trade deal will not get done either. david: tariffs can be a headwind. ultimately, what will carry the day for emerging markets is faster growth, less debt. god forbade, we try to forecast the dollar. the dollar has more likely peaked rather than continuing to appreciate. most importantly, growth and less debt than we are seeing

here in developed markets. i think emerging markets are really interesting. the reality is that emerging markets have shown some distinguishing performance across markets over the course of the last year. russia am constantly breaking to new highs. other emerginge, markets are struggling. it is hard to paint them with a broad brush. one thing we have learned over this cycle is the valuation discount in emerging markets has never been enough. it is short-term. it allows the opportunity for emerging markets to outperform. that alone does not catalyze their performance. what you need is the dollar has to weaken, you have to get credit spreads in emerging markets, and you have to have margin expansion. that has not existed through the vast majority of the last 10

years. david: but the long-term story is there for emerging markets. compared to developing -- compared to developed markets, the long-term story for emerging markets is more compelling. the batting average of a dollar of capital invested in developed markets. you know there will be a lot more volatility. joe: how is it different today going into 2020 versus that argument you could have arguably made going into 2016? they been growing faster on a gdp, valuation basis, yet it doesn't work. david: they have had the headwind of a stronger dollar that i think is more likely to have peaked. the evaluations, because developed markets in the u.s. have done better, it becomes more compelling for emerging markets. it is not just 2020. it is the next three or four years. if i had money to allocate

capital, i would want to lean to adding to my emerging markets exposure. scarlet: oil prices are higher today. they have come off their peaks. at $55.97. opec will be meeting at the end of the week. we have been reading stories about how opec plus is betting on shale. how would you want to be positioned in energy? gina: energy is still toward the bottom in our sector scorecard. the one thing energy does have going for it going into 2020 is 2019 has been such a difficult year for energy that it is almost impossible for energy companies not to print positive figures into the next year. that should provide a little support relative to where we have been. as long as oil is in this range bound trade, globally investors are increasingly concerned about environmental concerns generally

in their portfolios, as long as we have the policy environment that will be contentious towards fracking, it is difficult to make the case that these stocks get a catalyst to outperform. the valuations are somewhat compelling and they have been off and on. the other macro factors seem to be holding back the sector. scarlet: energy at one point was the best performer on the s&p 500. for the year, the worst performer. adams of bloomberg intelligence and david sowerby of ancora, thank you. "oming up is "what'd you miss? where we will continue to look at trade risks and disappointing data in the u.s.. this is bloomberg. ♪

♪ romaine: live from bloomberg's world headquarters in new york, i am romaine bostick. here is a snapshot of how u.s. stocks closed today, a sluggish start, stocks, bonds, the dollar all edging lower. disappointing data and trade tensions. america's industrial sector painting a bleak picture as president trump targets tariffs on brazil and argentina. the impeachment inquiry enters a new phase this week as president trump declines to participate. trump travels to london this hour for a nato summit. opec strategy in question. iraq says the cartel and its allies -- despite reluctance among eu members.

scarlet: global manufacturing little brighter with a pickup in china and germany validating calls that global growth is stabilizing. in the u.s., the two most-watched manufacturing in a different direction for november. joining us, bloomberg businessweek economics editor peter coy. the ism manufacturing, a fourth straight month of contraction. sh showed an increase. so which do you believe? ism is an older one. the ish market one is a little bit younger, goes back to 2009. it is more forward-looking in its components. economists pay attention to ihs markets.

i don't know which one is right overall, neither one is signaling robust health. overall, being said, prior to the u.s. data coming out this morning, we had a lot of data from overseas, all the ism's come out on the same day everywhere. that wasn't so bad, the overseas picture. peter: it was positive. that is why would not worry too much about the ism coming into low. we know that manufacturing is not strong. it is the u.s. consumer that has been leading the expansion. as long as the production side thatnot go into such a pit it drags down the consumer, the expansion still has some legs to go, i would say. romaine: part of the concern, we are not in this freefall, not headed towards a recession.

it also shows that there is no really strong upward momentum. is there something in the numbers we saw today that would give us hope that we would start to see the line go a little bit more upward. peter: we can look at some of the subcomponents in the market that look more positive. this is a sentiment survey, not an actual data survey of what is going to happen. sentiment and term. some of those numbers in the ism are reflecting the gm strike, which is over now, as well as trade which, yes, is a problem, but not a new one. scarlet: this is soft data which does not always lead to hard data. do people overreact then to the soft data? it is an early indicator that is supposed to give us a sense of what is going to happen. peter: markets tend to

overreact. every day is either a risk on day or risk off day. i guess this was perceived collectively of being a risk off day. joe: that is a good answer. ultimately, all of these things are open to interpretation. it is easy to imagine a day when the markets ended up and the ihs showed expansion, that looked pretty good. ultimately, data is noisy and whatever it is, you would not want to read too much into it. peter: exactly. joe: thanks to bloomberg's peter coy. morning, early this president donald trump announcing he is reinstating tariffs on steel and aluminum from brazil and argentina, two nations he has criticized for byting american farmers weakening their currencies. let's bring in a bloomberg metal

and mining's reporter. i don't think many people expected it. the accusation is that argentina engineered a massive financial crisis and a complete disaster and collapse of their currency to gain a competitive edge over u.s. farmers. >> your own words. on the steel side, they were telling me that this was completely unexpected. this was people on both sides, people who have supported the tariffs and have said the tariffs are not such a good idea. actually, that this feels kind of familiar. whilee not had this for a where trump was talking about steel and tariffs. thatne: there is a concern , with trump explicitly linking this to the currency issues, that this kind of tricks -- this kind of takes the trade dispute

and trade war to a different place than we have been used to in the past year. joe d.: we are suddenly delving back into steel, using this as a way to say, we will slap this against you because we think you are deflating or devaluing your currency. the backdrop being that more exports of soybeans are going from china to brazil, which is taking away the market share from u.s. farmers. we have not even talked about how this could all apply to the election. scarlet: just remind us, with the real position of these position ofthe reim these tariffs, the president cited national security concerns. what would those be? joe d.: the national security concern would be that another country is purposely deflating the value of its currency and causing an inefficiency or unfair balance of u.s. currency.

that goes into everything. we are paying more for our imports, not paying as much for our exports. you mentioned it but i want to make sure we don't skip over this important point. the china angle. anyway, by targeting brazil and argentina, it does relate back. joe d.: you could say that this is trump's way of saying, listen up, we had an agreement on steel , where we gave you quotas, but there is market share being taken from our farmers and your farmers are getting the market share in terms of exports to china. we are going to put these tariffs back on you. what do you think about that? scarlet: stop exporting to china? joe d.: i don't know. but it is a shot across the bow, at least bringing it to their attention. it is not all in stone yet there is a lot to figure out.

deaux, thanks. coming up, the fed announcing they will increase the next plan of repo to a maximum of $5 billion. this is bloomberg. ♪ -- of $25 billion. this is bloomberg. ♪

romaine: the federal reserve is acknowledging the year end demand for cash and examining the size of its repo action. attractedter the repo $42 billion in bids. joining us is bloomberg's alex harris. i thought this was an interesting story because these are the auctions that bridges from where we are now into next year. alex: it is the idea that the

fed realizes there will be a potential cash crunch at the end of the year, as there tends to be. they are trying to make sure they are prepared as much as possible to see that the volatility that we saw last year at the end of the year is basically not replicated. joe: can you explain the role of regulations in exacerbating the need for holding reserves at the end of quarters and end of the year? alex: year end is particularly tenuous in terms of regulatory pressures. the largest banks in the u.s., also known as the global systemically important tanks or -- important banks or gsib, they get scored. the more assets, more capital they have, the higher surcharge they have to pay. a lot of these banks, like your bank ofns, citi,

america, trying to reduce repo exposure. however, if you are pulling all this cash out of the market, those who need it, the sort of non-dealers in the repo market need funding, understand it and try to find ways to mitigate it it is not certain that there will be no volatility. the forwards market for year end repo is pricing in some potential pitfalls. the market is priced for 3.5% to 4% for overnight repo just to get us from december 31 to january 2. scarlet: the fed knew it, people in the market as well. the first was on the summer

second, increase of $25 billion. this was the second one, increased as well to $42.5 billion. what does that mean for the third? alex: it was actually $15 billion and up sized. after they saw today oversubscribed again, they said, we need to upsize it. g sonnouncing the upsizin quickly, they are saying to the market, we have this, we see what is going on, we are not going to wait to make a decision , we are just going to move them. there is a new schedule coming out on december 12 so it remains to be seen how many options we see that bridge year end and what those sizes will be. there is definitely more cash coming. romaine: our thanks to bloomberg's alex harris. another sign of weakness in american manufacturing. the factory purchasing managers index declined in november, the

fourth straight decline in factory orders. and, president trump just tweeting about the data, saying manufacturers are being held back by the strong dollar, which is being propped up by the ridiculous policies of the federal reserve, which has called interest rates and quantitative tightening wrong since the first days of jay powell, exclamation point. 5g phones for a carrier will hit stores this week. but it will not be the hyped services that they had been boasting about. t-mobile says it will offer a much better 5g network if its takeover of sprint is approved. that is your business flash update. joe: coming up, london calling. world leaders making their way to the u.k. to honor 70 years of nato. this time, it may not just be president trump looking to

disrupt the military alliance. this is bloomberg. ♪ everyone uses their phone differently.

that's why xfinity mobile lets you design your own data. you can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. all with millions of secure wifi hotspots and the best lte everywhere else. it's a different kind of wireless network, designed to save you money. switch and save up to $400 a year. and now get $250 off google pixel 4 during xfinity mobile beyond black friday. that's simple. easy. awesome. click, call or visit a store today.

with i am mark crumpton bloomberg's first word news. the united states is considering a hike in tariff rates on products from the european union. the u.s. office of trade representative released a statement saying it is acting on a ruling from the wto made earlier today. the devotee jo said the eu did not do enough to eliminate the adverse effects of its trade distorting subsidies to airbus, thereby hurting american rival boeing. georgia governor brian kemp is reportedly set to a financial executive to fill the u.s. senate seat held by retiring

johnny isakson. he is ceo of the atlanta-based bit coin platform and a co-owner of the wnba's atlanta dream. she has donated to super pac's in the past. new york city's new police commissioner says he hopes to make the city even safer than it is now. the 44th police commissioner sunday and made the remarks today during a public ceremony hosted by maier bill de blasio. bill de-- by mayor blasio. he said policing is about protecting those who cannot protect themselves. it is about changing lives. >> we are going to build upon the framework of neighborhood policing, bolstering relationships and creating new ones, from one new york city to the other. we must not only call on our colleagues from law enforcement.

we must also create new partnerships with residents, clergy, community-based groups, private sector entities. shea, the son of irish immigrants, was born in the borough of queens. he worked his way up from bronx patrolman to detective. mayor said he was dazzled early on by dshea's intellect. firing a police superintendent, calling ethical lapses about not being truthful about recent instances in which superintendent eddie johnson was found asleep in his car after having drinks. publicjohnson misled the on a press conference he called. he was not caught off guard and had plenty of time to choose his

words. he communicated a narrative with false statements, intended to hide his false conduct -- to hide his misconduct. finally, eddie johnson intentionally lied to me several times. that mayor lightfoot added former los angeles police chief namedwho was already interim police chief in chicago, is to take over immediately. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. up.let: pay that will be president trump's message to allies as he makes his way to london to honor nato. but it risks becoming a show of disunity. this time, it will not just be president trump disrupting the alliance.

joining us from washington with the latest we also hear from emmanuel macron, the president of france, talking a little clip how nato is not living up to what is meant to be. he said it is experiencing brain death and these comments are meant to be a wake-up call. could be a very dysfunctional gathering. along with the issues you mentioned, president macron was frustrated that president trump announced his withdrawal from northern syria without really consulting france or any of the allies. president erdogan of turkey arriving just as his country had been essentially kicked out of the f-35 program because of buying weapons systems from russia. then you have boris johnson who would probably like to get through the week looking statesman-like but wanting to avoid any gaffes that could

shake up the election coming on december 12. i think a lot of leaders will be looking forward to just sort of getting through the next 48 hours safely. romaine: when trump got to office, one of the big criticisms he had of nato was the idea that certain nato countries were not necessarily paying their fair share in percentage of gdp going toward military spending. how much progress has been made and is that still a sticking point? >> i think for sure it is an issue that president trump will continue to hammer on. with thep repeatedly obama administration and it was a 2014 meeting with leaders where they set the 2% gdp target. when president trump took office, there were perhaps five it has grown to about eight or so. it has gotten better and more nations are trying to accelerate

their plans for getting to that 2% target. you have a few countries in europe still below 1%. it is quite a ways off. the agreement was always that they would have to reach that target by the mid-2020's. president trump has been pushing all european allies and nato to get up to that target much earlier and i think we will hear more about that this week. joe: thank you very much. headshile president trump to london, he still faces an impeachment probe at home. the house moving forward with it this week on multiple fronts. let's bring in bloomberg businessweek executive editor ed -- anna edgerton. what is the latest? what is the next step? i heard they will have some scholars talk about something. anna: wednesday, the hearing

will be in the judiciary committee and we will have four constitutional lawyers talking about the constitution and how allegations of president trump play into that. tryingcompeting reports, to outline what they have interpreted from the evidence that has been gathered so far. romaine: i understand that this is part of the procedure that we have to have to move this proceeding along but do we expect to learn anything new from the judiciary committee's from what we learned in the past couple of weeks from the intelligence committee? anna: we have had witnesses so far that testified in the intelligence committee, so we pretty much have the facts and it is just coming down to how democrats and republicans interpret those facts. that will really be the purpose of the meeting, what happened in

terms of the president, his actions in ukraine, and put that against the framework of the constitution. does any of this count as bribery, high crimes and misdemeanors, extortion? bloomberg's and edgerton given us the latest on the impeachment hearings and inquiries, joining us from washington. thank you. coming up, oil climbing the most in more than a week as prospects of deep cuts take center stage. this is bloomberg. ♪

look at time now for a what stories are trending across the bloomberg universe. terminal users are reading about presidential candidate and

billionaire tom steyer's cyber monday special for buying the domain for trump's campaign. buy bumperople to stickers that say trump is a hazard and a failure. bloomberg.com has a story on a possible french fry shortage. potato processors are rushing to buy supplies and ship them across north america. cool conditions started to hate growing regions in october. some farmers were able to dig up but -- tictocrops on twitter has reported that cranberry farmers are turning to

solar power for extra income. cranberry prices are down about 57% over the past decade. farmers in massachusetts have begun setting up solar panels hoping the generated energy will create additional income. all the stories on your terminal, on onomberg.com, and @tictoc twitter. joe: it is a big week for oil markets as opec and allies meet in vienna to decide on policies. our bloomberg managing editor for bloomberg -- for commodities and energy joining us now. the economy,ut questions about the future of u.s. shale, the aramco ipo that is most out the door but not there yet. what is going to be the main thing on people's minds when

they meet? what we were thinking about as we approach this meeting, this was supposed to be kind of a quieter meeting, expecting a continuation of the existing production quotas. but not really anything remarkable. we heard from the iraqi oil minister who said they were looking at potentially cutting another 400,000 barrels a day. that is sort of shaken things up we have also seen the saudis have expressed to our reporters some dismay over the continuing cheating going on by the other members and they are having to pair the burden of that. they will have to be some sort of crackdown by the saudi's. we have also seen a little bit of disarray with the russians not making any decisions on expending -- on extending the output cuts. had to it, on top of

that, the aramco ipo pricing the same day as the members are meeting on thursday. scarlet: you also have rising output in other places. the saudis and allies can only do so much to control production flow. have i think what they been learning from the shale forecast is maybe it has been less of a real threat going forward. surgeve seen this amazing in output in the u.s. it is based on all the forecasts, that looks like it will slow down next year. that gives open a little bit of pleasing room -- of breathing room. romaine: we just came off of two relatively wild days in terms of oil price. anything else i should be buckling up for? tina: i think this will be driven by whatever the opec gossip is going into the meeting

and as ministers gather tomorrow -- romaine: gossip, is this like on page six? tina: this is speculation/gossip . we will be hearing from the joint monitoring committee on wednesday. we will get a press conference on thursday. opec plus could always upend everything with the russians declaring whatever the russians want to do. past hour, wehe got some data from last week in terms of hedge fund positioning. lot of money behind the idea that we are going to come out of this and potentially have a rise in prices. scarlet: certainly you will keep us on top of the gossip/speculation/buzz coming out of opec this week. bloomberg anchor amanda lange

sat down exclusively with the ceo of canada's asset manager. he says he is preparing for the next downturn but we are not quite there yet. anything in the current economic environment that troubles us, that there is going to be something happening tomorrow morning. having said that, we are close to 11 years into this economic cycle. i don't think economic cycles have been repealed. there will be a recession in the developed markets at some point in time. have very that, we high stock markets, and there will be disruption in credit markets and stock markets. in view is that when you are an environment that is more robust than you might otherwise have in an average environment, you should be careful.

more cash on our balance sheet, our balance sheets are more financed long-term, getting ready for the point when we can capitalize. if we don't, we will define, we will just keep investing. but we are more cautious today than we were in 2009, for example. had, other than the ones we were keeping. every dollar we had, we knew that if we invested, we would be fine. you knew you were buying it $.50 on the dollar. there are some places that are the same today. have in the prism we north america. financial crisis

situation going on which is similar to what happened in the united states in 2009. the banks are not in the shape and nonbank financials are in trouble. that means entrepreneurs do not have access to capital and of course they are selling assets and we have been buying a number of things in india lately. that was brookfield asset management ceo bruce flatt. coming up, china lifting the factory mood across asia. why it is a bright spot. asia had is next. this is bloomberg. ♪

promoting thepan, chief operating officer to be the next ceo. the job will be to complete a sweeping overhaul of the firm's

global operations. he will replace the current ceo in april. >> the sense of urgency is even stronger now than when he became ceo. there will be no big shift in management direction but i think speeding up this decision-making process is important to focus on going forward. nearly 60% of the cost reduction plan has been completed. shery ahn joins us now. this was not totally unexpected but it was still a big deal for a company that has been dealing with concerns about the leadership of the company. not unexpected given that he was the longest-serving ceo, which in japan is about seven years. the timing is interesting because usually do it at the start of the fiscal year, which would have been next year. we have seen these cost-cutting measures in japanese banks, of

course very important for the future of this bank. as we continue to see japanese banks struggling because of the retail business at home being suppressed. joe: at the start of the day, it would have looked like it would be a risk on vibe. people were surprised because we saw the official manufacturing cpi over the weekend, rising to 50.2, getting out of that contraction territory for the first time since april. we had confirmation of that with the private sector pmi, that line in yellow, which also was already pretty strong relative to the official number. we saw it even higher than expected. when you look at the underlying components, there may be some weakness when it comes to the

demand and supply side. expansionary territory but still weakening slightly. goodet: normally if it is eco-data, that would be bad news for anyone expecting stimulus. what does this mean for chinese stimulus? shery: it seems that nothing changes when it comes to monetary policy. we have seen targeted as yours continue for years now. despite the weakening chinese economy perhaps rebounding slightly, we are still seeing stick to hisrnor prudent monetary policy. what was interesting from an article published over the weekend, he was saying that economic development should not simply be judged by a gdp growth. that is interesting because we know growth targets that they set up every year. we are now going to see them

this month, with the growth targets for 2020. romaine: we got the retail sales numbers. obviously the protests, huge impact. anybody was't thick expecting it to be this bad. fromlue, a plunge of 24.3% a year earlier. mostly because chinese people from the mainland are not coming to spend in hong kong. scarlet: for more on these stories, don't miss "daybreak: australia" and "daybreak: asia." the nato summit kicks off in london tomorrow. joe: the reserve bank of australia announcing decisions tomorrow. romaine: salesforce re-think third-quarter earnings after the bell. "bloomberg technology" is next in the u.s. joe: this is bloomberg. ♪

♪ i am taylor riggs in san francisco in for emily chang and this is "bloomberg technology /." black friday sales breaking an online record. how it will be following cyber monday. crypto crackdown. china continues its assault on crypto exchanges and currenc