>> good morning from dubai. this is "bloomberg daybreak: europe." >> these are today's top stories. sunday pulls put the conservatives in the lead ahead of the u.k. general election, though there are signs of the labour party narrowing the gap. china's exports unexpectedly drop in november as the cost at -- the clock ticks down to a key deadline. riyadh, aramco will soon reach a valuation of $2 billion ahead of its listing on wednesday.

we preview the budget. manus: it looks like we have been living the dream. mohammed said he prefers cash. he talks about that minute move in the curve. 2%. has troublee, one and drive. nejra: we have arrived at a pivotal week. we have decisions from the fed and ecb. there is a sense there are things that could happen this week that could perhaps lift risk appetite again. you look at the u.k. election and that tariff deadline.

hurly-burly is done -- i'm quoting macbeth, for the oil market. look at this. five days in a row. you have just come off a fairly magnificent move. the china export data wobbles the market. 1990's.oing back to the more about that in a moment. have a look at that. versus eye on germany the united states of america. of course, global issues may hold the fed back. , long-term bond holdings, you can diversify with a little bit of gold. kills the market more than a bit of fear. not a lot of fear in the asian equity session. muted gains, but gains

nonetheless. different from what we are seeing in s&p futures. we saw the s&p 500 gain following the blockbuster jobs report. concern around that chinese trade data weighing on the aussie. the worst-performing g10 currencies. the dollar index steady overall. boris johnson heads into the final days of the election campaign with his key message that only he can deliver brexit. parliament voting to leave the eu by january 31. u.k. opinion polls have been wrong in the past. joining us now is the chief economist for the americas and europe at standard chartered. for your base case, is it that we get conservative majority and brexit happens january 31? >> that seems to be the way the polls are pointing. in the past, the polls have been wrong.

this election is difficult to call. party, thee brexit liberal democrats, off balance. chanceance iia -- a 60% to a conservative majority. that still leaves room for an alternative outcome. magnificentretty market has been sterling yen, eurosterling, talking about 12% on sterling yen. what are the biggest consequences of the remaking of sterling? are we priced to perfection? >> we still have further to go if indeed the polls prove correct and that is a conservative majority outcome. forets have been looking resolution to brexit and the likelihood is we do get a conservative majority, brexit will happen at the end of january.

we would caution what happens after that. beappears there are going to tough negotiations around a trade deal with the eu. they may well not be done before the end of next year. then we get into that question about the end of 2020. we see upside for sterling. we would caution that there are limits, particularly once the next round of trade negotiations come through. nejra: there are a lot of pieces on the bloomberg talking about japanification and the threat of it going global. in terms of the u.k., there are analysts saying that u.k. could be the next to follow in the euro area path if the risk of no till brexit or the reality of no deal brexit is realized again. is that a material risk for the u.k.? in the sensetion that we are talking about

long-term structural limits for growth and downside inflation risk. i'm not sure that applies to the u.k.. we have very weak growth forecasts for next year and the year after, and of course the treasury's own analysis shows brexit outcome does lower gdp compared to where it ought to be given the trend ahead of the referendum. u.k.,ms of inflation, the we have strong wage growth. we have inflation around target. the bank ofoks like england will have to keep it on hold rather than being able to lower rates even though we may be facing a subdued picture over the next couple of years. >> that is interesting. citigroup have a note out. they reckon gilt yields could declined to 0.2%, and they say the bank of england will be forced into right cutting,

forced into q. week. qe.orced into that is a contrarian view. does any of that shine for you? >> it is quite a contrarian view. for us asould chime we do think the economy is going to be showing relatively weak growth next year. set against the uncertainty that we think will be dominant over the next 12 months or so is the fact that you have a strong labor market. you have real wages rising. we have something of a fiscal stimulus. not a big fiscal stimulus, but enough to offset the uncertainty impact. cuts,ally dramatic rate maybe the house is looking for, don't seem likely.

nejra: do you not expect either party to live up to the spending plan they promised? onthe initial focus will be what the next stage of brexit, a free-trade agreement with the eu, for the conservatives, part of fiscal stimulus has already been put in place. for the labour party, if they are in government, it may be in coalition. there may be limitations to how far they can follow through. there is quite a bit of stimulus over the next few years according to what was promised. we had a j.p. morgan asset manager going, come on, bring it on. stay with us. our guest host this morning. let's get you up to speed now, the first word news now from hong kong. >> the mayhem in the u.s. repo market was not just a temporary

hiccup according to new analysis from the bank of international settlements. the market was upended because the big u.s. banks now hold more liquid assets in treasuries relative to what they park at the fed. reduces theirblem ability to supply funding in short notice. indian lawmakers are set to approve legislation to prevent fromret's -- migrants getting citizenship, the in narendra modi's hard-line hindu-nationalist program. citizenships allow to those who arrived illegally from other countries. capex was revised higher in the third quarter. gdp rose at an annualized rate of 1.8%. three times faster than economists were expecting. private consumption also jumped

ahead of october sales tax increase. global news 24 hours a day hour by journalists and analysts in 120 countries. this is bloomberg. >> thank you so much. emmanuel macron will welcome , zelensky, and angela merkel. they will discuss tensions in crimea. >> if you're driving to work, tune into bloomberg radio. bloomberg. ♪

europethis is "daybreak ." manus: let's get you set up for your agenda. saudi arabia is expected to

reveal its 2020 budget. onare looking for a u-turn public expenditure plans as they try to bolster nonoil growth. emmanuel macron will welcome vladimir putin, latimer zelensky, and angela merkel, to discuss tensions in crimea. nejra: just days from the general election, we are expecting gains to heat up on all sides. to the latest in hong kong, hundreds of thousands of people marched to mark human rights day. we are joined by yvonne man from hong kong. great to see you. these were fairly peaceful protests. what have you seen so far today? >> today there was a general strike plant. -- planned. it was not as widespread as we thought. there were rail lines disrupted during the morning rush hours

traffic, but overall it seemed pretty tame. it was a big turnout on sunday and it was a relatively tame turnout as well. 800,000 people took to the streets according to the organizers. this was a deja vu moment. what a factor the rally we saw six months ago where it drew hundreds of thousands if not millions of people that marched peacefully. this was the first rally since august where police actually approved it. that prompted more people to show up. families took to the streets. today we have seen in terms of the cleanup, limited as well. you see crews cleaning graffiti. that is the extent of it. a far cry from what we saw weeks machines, subway stations were torched.

this seems to be strategy from the protesters side. what is the government going to do now? carrie lam has said if the violence dies down, if this stops, the government could start dialogue. concessions, possibly. we will see if carrie lam brings anything tomorrow. i find it interesting you talk about the lack of having to intervene to defend the pound. we put that together in the gtp library. v library. certainly from the currency side, do you see some green light? itcertainly, we don't think is at risk. we may see from the weak side. we certainly expect this is going to be easily dependable.

that is a point of stability for the economy which is extreme is significant. back yearlyxpect contractions in 2019 and 2020. how much relief can fiscal easing bring? >> we will see a small deficit going into next year. the first time in a number of years. provide some relief. the downside of course is the impact on retail spending, potentially the commercial property market as well. all these factors weighing on gdp. we are expecting a decline next year, like this year, of 1.5%. >> let us get the bloomberg .usiness flash

>> tesco says it is considering selling its operations in thailand. the retailer is carrying out a review after what it called inbound interest. tesco thailand is the largest market chain in the country. the operations are reportedly worth as much as $9 billion. internationa flavors and fragrances have emerged as a nutritionto purchase business. dupont could reach an agreement to sell the business, which makes bacteria strains, food additives, and nutritional programs, as soon as the end of this year. a struggling italian flag carrier is reportedly 26 --ering jumping to the the move would bring alitalia closer to lufthansa.

state appointed management intends to reduce job loss to 1200. previously reported. that is your bloomberg business flash. manus: coming up, china's exports surprise to the downside . is the pressure coming to bear? we discuss. ♪

nejra: this is "bloomberg daybreak: europe." china's unexpected drop in exports in november. hurting the are economy when demand is already week. juliette saly standing by.

>> this chart really shows in all. an uptick inting overall exporting. instead, they declined significantly when you look at exports to the u.s., down 23% in november. the worst read since february when they were down 29%. since march it has been steady decline overall, down for a 12 month and a row. itth for month, tit-for-tat, is really starting to impact both economies. if we see tariffs come into effect, that is going to put further pressure on china's economy and make things more pricey for the u.s. consumer as well. if there is one chart to watch today, it is this one so you can deal off the this ground ahead of looming tariffs expected on december 16. nejra: thank you so much.

showed,s juliet just imports from the u.s. gain for the first time since august 2018. is this likely to put more pressure on china to want to deal? >> the pressure is there. it is not unexpected. the tariff impact on trade has been evident for some time. we already seen the impact of weaker euro area and japanese growth as well. china, they have taken alternative measures to try to support the economy. while a phase one trade deal would certainly be in china's interest and also the u.s. interest, beijing has taken action to offset any impact if there is no agreement in time

and the next phase of tariffs are imposed, that would be negative for the economy, but spending would increase. just in terms of the response mechanism, when you see what the japanese are doing, does that bring more pressure to bear having the number from japan? does that make more pressure on the pboc and their reaction function? are operating relatively easy policy. they are making sure policy is accommodative, that there is adequate liquidity. a lot of the stimulus has come from the fiscal side as well. we will see that getting more traction in 2020. we have growth above 6% for next year. that is even if we don't get a full resolution of the trade

pressure currently ongoing. i think easing monetary policy, using fiscal policy, both of those factors are supportive going into next year. with a phase one trade deal we get a pause on tariffs and a minimal rollback of existing tariffs. does that mean china remains as it said before and we talked about in a positive sense, one of the central bank that still has conventional monetary policy? >> i think they certainly do. that's what we would expect over the course of the next 12 months. focus is to say it has been on the fiscal side. this more broadly is what we are looking at for other economies as well. given circumstances were monetary policy is very limited

>> one thing i kept an eye on, i want to get your view from the china side, there is stoicism to the fx reserves. fromipped ever so slightly 3.1 trillion two a little bit later than that. there has been no wholesale capital flight. if there is a minimal rollback of existing tariffs and existing -- that is your worst-case scenario. do fx reserves hold in completion of a phase one deal, or do they rise? question. a good you might well see some build in reserves from the fact that we don't have pressure on external accounts we are seeing. more broadly, there would be more confidence in the market.

the confidence factor is at least as important if not more so in the pressure that brings to bear on the economy. phase one agreement, whether it is this year or early next year, as long as we do see it, december 15 tariffs, that could be supportive of reserves. nejra: how do you factor in the stability risks for 6.1% growth next year? we have had an increasing number of defaults and even the pboc itself has slashed -- flashed the warning signs of financial stability. does that concern you? seen bankruptcies, not surprising, given the strains there have been in parts of the economy. overall, the situation is under there isnd as long as scope to underpin growth and

keep growth at 6% plus range, we think those can be adequately dealt with. that number is incredibly important to the region, certainly from an emerging perspective as well. that growth in china is going to underpin em 2020. >> that's right. a very strongis commitment to achieve more than 6% growth next year. this will help with the doubling of gdp between 2010 and 2020. nexty see growth below 6% year. other parts of the emerging-market world are doing pretty well. i think we should not be too gloomy on the prospects for emerging markets. there is a reasonably good outlook if we get reconciliation

between the u.s. and china. hewin stays with nejra and myself. coming up, what caused mayhem in the repo market? we have one report. ♪

morning, i am nejra cehic along with manus cranny. polls deliverday for the conservatives, a lead ahead of thursdays u.k. general election. there are signs jeremy corbyn's labour party is narrowing the gap. high-stakes, china expected to drop in november, -- goldman sachs treasury yields hitting 2% on a phase one deal.

aramco will soon reach valuation of $2 trillion on the listing wednesday. we will preview the kingdom's budget. ♪ nejra: restart monday with green on the screen in asia, futures -- slightlyffs soft. also taking down the december 13 deadline. all the market action from around the world. the good, bad and ugly. it is a question of which days are when. the latest from singapore. we have our partners joining us. kicking things off, looking at the impact drop on the export numbers for china. we are seeing broader asian

markets moving higher. if you look at the asx 300 it is in the red. we also have this report china has ordered the removal of foreign technology. the offshore and onshore renminbi trading weaker today but it is muted. the historical volatility at its twost level in more than years. i am seeing a surge in iron ore futures after china's leadership vowed to keep growth in a reasonable range to boost infrastructure spending the midst of the angst of the trade was. -- trade woes. but less than $20 to dig up shouldn't cost more than $90 in a market. investors should exercise caution. nejra: you have got your eye on volume levels. how much liquidity can we expect? particularly with what

happens around the world in terms of global flows, but this time be different? years, december volumes have been sub average on most occasions except one. four of the five last ones, they have been subpar. volumes this time around might be simply different because of the domestic investor flows are much higher than what they have been in the past. volumes might stay higher and it could give a leg up. manus: let's get to the u.k. election. some of the big trades investors are putting to prepare themselves for this week's vote, what are they? >> it is all about the yen. i haven currency moving to the upside, and this is popular we

look at the sterling-yen cross. being a one-week risk reversals, it has longed to the lowest in six months but that is important because it is march when the original brexit deadline was set to expire. the idea of magnitude investors are taking no chances with the election. across yen crosses we are seeing the call being popular because of the election and ecb and the tariffs deadline. it is all about seeking out the haven. nejra: bloomberg's dani burger and juliette saly, thank you so much. let's get to first word news. annabelle: hundreds of thousands of people joint hong kong's biggest demonstration in months in a sign popular unrest will continue into the new year. organizers say 800,000 people marched through the city sunday.

police put it around 180,000. was the first to have a official permit since august. force johnson is returning to a key election message only he can deliver brexit. his conservative party is on course to win a majority in thursdays u.k. election. thursday's u.k. election. the opposition labor party will tell voters to put money in their pockets and power in your hands. indian lawmakers set to approve legislation to prevent muslim migrants from gaining citizenship. it is the latest move in the hardline hindu nationalist program and seen going against india's secular constitution. it allows citizenship for other people who arrive illegally, but not muslims. japan grew faster than expected in the third quarter as capex

was revised higher. gdp rose at an annualized growth rate of 1.8%. three times faster than economists were expecting. private consumption jumped ahead of the sales tax increase. struggling italian flag carrier alitalia is considering jumping from the one group of airlines to the star alliance. the move would bring alitalia closer to lufthansa which is a potential investor. the new state appointed management intends to reduce job losses to 1200, lower than reported. global news 24 hours a day on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you. here is what you need to know.

the latest market analysis from the bank of international settlements, the central bank for central banks. they have a grim report. they say the vital cog in the financial system is under threat from structural problems. joining us to discuss is dani burger. saying -- the it wants to a concentration issue. there are four banks which are vital for the repo market which is important and provides short-term funding, liquidity that helps market continue to go. because there are only four banks, they have shifted into treasuries from liquid assets. that means their ability for short-term cash is limited. hedge funds have been using the repo market for the short-term funding. you have a mismatch between supply and demand. what happened in september with the fed having to jump in, we

need more than a temporary fix. it is a long-term structural problem. i should say that report is on the miss -- is ominous in december when we see seasonal liquidity. we could see a fire sale. nejra: thank you so much. first it was japan, then europe, now the scourge of stagnation could spread further. the u.s., u.k. and australia are likely candidates to fall victim to japan a vacation. .- japanificatoin -- japanification. manus: what may 2019 a dream year will be a concern going forward. >> we have been living the dream in 2019. we got higher equity prices. we did not have to pay for communication. bond prices went up and we got no volatility.

looking forward it is a concern that it is not easy to have medication. cash gives you one added characteristics. that is agility. i believe will enter a time of greater volatility. sarah, when we talk about the next candidate for japanification, is there a next candidate and where is that person? >> it is challenging when you talk about any of these countries. this process, there is a combination of factors. demographics comes into it. the focus is on the euro area. if we look at demographics for germany and italy, we see shrinking populations. that is tied in with a risk of

relatively low trend growth and the inability of the central bank or authorities in general to stimulate growth. i would look at that europe rather than u.s. or u.k. or australia because that is where the risks lie. manus: in terms of what the bond markets are pricing, fairly muted inflation drive going into 2020, the piece we wrote this story says the limitations will be on display in the upcoming meetings for the fed and the ecb. the lovely line is the surprise to be delivered, they will need monetary acrobatics. what do you think those could be ? i think central banks have been incredibly innovative over the last 10 years. we should not think that is

over. for quantitative easing, talking about the euro area, it is where do they go next, and it is by the third quarter next year, they need to do more, to extend what they are currently doing and adjust parameters and look for new areas to invest in. maybe there is some link with global warming and with environmental type of purchases they could do to support governments as they try to shift away from carbon intensive investments. forvation will be with us some time. it is the effectiveness. what we are seeing increasingly is question on how effective easing monetary policy is. negative rates, the prospect fueling that debate. one of the latest

to talk about the risks of negative rates and the bank profitability, something we have heard about a lot. but it could impact consumer spending. is that something that concerns you now as people say the consumer is the one thing propping up the global economy? >> the consumer is important across the u.s., asia. the negative interest rate savers rather than spenders. not sure that that would necessarily be one of my key concerns about qe and the negative interest rates. i have some sympathy for the which iscentral banks negative central bank has been positive for the economy and therefore banks. going forward, those huge cries for fiscal policy to pick up some of the slack, and that is something we could see more of the in 2020.

if we look at the european side where there are constitutional, legal limits on what can be achieved on the fiscal side. one of the other stories this morning.i.s. we have a structural problem and it is not a temporary hiccup. it is a damming report about four banks that hold 25% of reserves in the u.s. and 50% in treasuries. that is concentration risk, isn't it? >> it is a very interesting report and it does address some of the concerns in the market and the disruption to the market wasn't just a one-off or temporary issue. it is here again and it could be something that is more of a systemic rather than a sort of

short-lived issue. how is the fed going to address this? further balance sheet expansion, maybe there needs to be some change in regulation. all of these will be features of the debate going forward. manus: stay with us. sarah human from standard chartered. can europe find a way out of japanification? the outlook of someone with rather unfashionable take on the argument. this is bloomberg. ♪ this is bloomberg. ♪

manus: this is bloomberg daybreak: europe. europe -- can europe save itself from japanification? many investors think it is

unlikely to find an escape route anytime soon. >> this morning's call comes from jefferies analyst geoff -- david owens. he says it might be unfashionable to say this but the euro area is not going in the same path as japan. he says there is upside for the 2020 euro area and points to two areas. he says companies in europe don't look like that of japan. they moved back into deficit and that means gdp growth will be supported. he is saying there is a strong they were market especially with quality jobs and there is more disposable income. both of the factors combined means the 2020 outlook is brighter than some believe but the one fly in the ointment, it needs to be determined by what happens in this week's general election. but the euro area brighter than some expect.

thank you very much. dani burger rounding up the latest thoughts. our guest from standard chartered. when we talk about the ecb, we had a conversation earlier and the guest said the biggest risk is this. lagarde, does it lose the momentum to bolster asset prices fades? idence to a certain extent it is a risk because clearly the limits on what they can achieve under their current agreement, and the question is is there enough support in the governing council ? do what it takes at the moment you have a big dispute about whether the governing council should be

running negative interest rates at all. there is some doubts over the effectiveness of quantitative easing. to the extent it suggests a limit on what they will do, it reduces effectiveness of the ecb. when it comes to it, if they need to extend qe behind -- beyond next year, they will find a way to do it. they have kept the door open to do whatever it takes. there is still a reasonably good underpinning trump monetary policy. focused on fiscal policy. we need to be cautious about anticipating a huge fiscal boost in the euro area. more stimulus than we have seen recently but not the type we have seen in china or in the u.s. over the last couple of years.

nejra: the euro could be getting to 115 by the end of 2020. the speed of the revival could koch -- good catch people off guard. after the blockbuster jobs number friday, some commentary saying when it comes to the u.s. labor market the concern should u.s.- about the impact of china trade. a liver market could point to slowing of job gains in the future. do you see upside surprise for the u.s. economy in 2020? >> we are not looking for recession. we think we will see growth continuing positive but we have a slowdown next year. around 1.8%. it will not be very shocking. it is around the pace we will see in the current quarter but there are signs on the business investment side and employment, great set of numbers friday. if we look at monthly trends, generally they are showing there

is a slowdown on the employment side. if we look at this time next year it is likely we are going to see softer jobs growth inding to a better friend 2021. manus: hold those thoughts. we have got more to do. ricky news from china. they will actively boost imports from -- that is the official statement from them. tidings are great. this is bloomberg. ♪ ♪

nejra:

saudi arabia -- looking for the kingdom to do a u-turn on public expenditure plans as they try to bolster nonoil growth. yousef gamal el-din is on the ground. what can we expect in terms of the outcomes? yousef: it is gearing up to be a massive week for the saudi's. hopefully we will get clarity on that front. the thing has been they are going to change their position, looking at lower fiscal outlay instead of higher fiscal spending. gdp growth at 2.1% in 2020. going into tuesday, the dcc summit, the regional leaders will come to the capital, and the question will come up whether qatar will be brought back into the fold after this standoff with its neighbors. the qataris have confirmed they

are in conversation with their neighbors. wednesday is the big day for shares of saudi aramco. they start trading. at $1.7 trillion. interesting to see how the government has taken every tool out of the toolbox to make sure the launch is going to be successful. nejra: thank you so much. sarah human is still with us. what are your expectations for expansion in the nonoil economy? >> we will see slightly softer expansion given the 3% cut in fiscal spending. 2% which is softer than this year. the question is what about the overall economy given the unexpected cuts from last week and broadly we would expect the

economy to recover next year. relatively soft upswing. manus: you have got 2.3%. do you expect that to rise? >> we think it will. the aim is to become more sort of self-sufficient in terms of developing the domestic debt market. issuancel be increased and ongoing reliance on foreign borrowing. a dual approach here. nejra: thank you for joining us. let's take a quick look at the european futures, over an hour from the start of cash equity trading. we are looking flat. we saw quite a strong going -- gain. u.s. futures coming off the lows after the block buster jobs

number. looking at the big week for the fed and ecb. bloomberg users can interact with this, browse the charts, download for future reference. this is bloomberg. ♪

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nejra: good morning, welcome to bloomberg markets, the european union. -- european open. >> markets say blame the big guys. the b.i.s. says u.s. repo problems were fueled by big banks and hedge funds. european futures are in the red. the cash trading at less than 30 minutes away. ♪ matt: who is hurting most?

surprise drop in chinese exports show the trade war is still biting but a bullish report shows asian stocks in the green. the final stretch, three days away from the u.k. election and conservative party is ahead in , but onee polls influential analysis shows the labour party narrowing the gap. biotech tie up, sanofi 170%.sing sin for at a this could top $2.5 billion. we are an hour away from the start of european equities trading. let's look at what futures are showing us now in terms of the set up. we have dax futures in the green but barely above water. cap futures and ftse futures are down. we see u.s. futures down across

the board as well. redht red arrows but nonetheless on the dow, s&p and nasdaq many futures. hour from the start of european trading and many more from the start of u.s. trading. what do you see? 7:00.t gone u.k. corporate increasing for the food delivery process. 740 pence per share saying the reduced level is acceptable. they are now suggesting they will go with a reduced level of acceptance. ,t is about 5.1 billion pounds so much value in fast food delivery. you have been through the futures picture. the picture for asia suggests weakness. thee -- overall upside in

malaysian session. the hong kong market in forecast -- in focus because of protest activity. larry kudlow was downbeat after what trade could deliver or the motivation to get a deal and we have only got a few days of course. next weekend is december 15 when we are supposed to get increased tariffs. we got chinese export data. maybe that has taken the edge off. we had on friday the strong payrolls number and focus on central banks with the fed and the ecb. let's get to mark cudmore, the bloomberg markets live managing editor from singapore. theme ask you first about chinese data. one of your colleagues was writing on the blog it is rather import increasing than chinese exports to the u.s. dropping that is the big story for stocks. what was your take away?

>> i have heard both interpretations. it depends on underlying bias which way it concerns. it is bullish for the chinese economy and how it influences the trade talks. a story theonfirms trade war has had a real impact on chinese trade. it has had a real impact on the economy and we want a resolution so markets get the all clear and to rally strongly in 2020. but china is shifting its economy and supply chains and there is a sign of domestic resilience even though we export model is being hurt. matt: what do you think when you look at the numbers we are getting? germany had a real slow down in production on friday and mohamed

el-erian said it is one of the reasons you did not see bond yields rising with risk assets. i see the global growth picture is quite negative. i am very worried with the u.s.. germany has avoided a technical recession. the zero growth. overall europe is not doing great. the u.s. has more downside next year. slightly slower. asia may have seen the worst. if you have got optimistic growth, you have got to believe the second derivative in asia has turned around. it doesn't matter china will do much better. china everyone expects 6% growth but the rest of the region has adapted to the trade war. it is the new normal and they can build on the domestic regional strength. let me bring some breaking news. this company is guiding lower as

to what they can achieve, production significantly below if you'd. -- below expectations. there were negative news flows surrounding their production levels and it had a significant impact on the share price. we will see how much more there is to go. let's get back to cover station with mark. should markets be pricing out a 2020 rate cut from the fed? this is hot on the yield of the strength of the 266,000 jobs created number from the united number on friday. they seemed to price out and now have gone back to pricing one in. what is your take? reporter: it is interesting we have one kind of cut priced in. it is very different from what we are seeing as a changed narrative area u.s. equities are rallying quite significantly on

the story the u.s. slowdown has seen the worst and we are seeing a pickup. even if we don't get a deal soon, we won't get the december .8th at -- december 15 tariffs equities and other asset classes are trading off of the idea the u.s. economy has bought into a pickup. the rates market, we might have a second downturn. i would be more biased towards the rates viewpoint. the rates are right to correct in the price that. it is equities that might do -- might be disappointed. but into 2020 we will probably see them going again at the end of the first quarter. not anytime soon. i don't think you should worry about fighting the divergence into the year-end. matt: the mliv managing editor out of singapore. you can join the debate on the question of the day. give him and his team insight,

should markets be pricing a 2020 fed move? ib+tv on your terminal. we are minutes away from the stocks, 53opean minutes away from the open. we will take a look at your stocks to watch at the open including a supermarket chain considering selling its asia unit in a pivot back to the u.k.. this is bloomberg. ♪

nejra: welcome back to the european open. 50 minutes ago the start of cash equity trading for another week in europe. future suggesting weakness at the start of the european trading day. let's go to first word news. thank you.

hundreds of thousands of people joined hong kong's biggest restriction in months in a sign popular unrest will continue into the new year. organizers say 800,000 people marched in the city sunday but police put the number around 180,000. it was first promoted by the civil rights font to win an official -- it was the first promoted by the civil rights front to win an official status since august. new analysis from the bank international settlements. the market was upended in part because the big u.s. banks hold more liquid assets in treasuries relative to what they park at the fed. the b.i.s. warns this reduces the ability to supply funding at short notice. and we expect the head of the monetary -- that is 9:30 london time.

and an offshore new zealand volcano killed one person and injured dozens more. many people were on or around white island as it sent a plume of white smoke thousands of meters into the air. it is 30 miles off of the coast of new zealand's north island. global news 24 hours a day on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ matt: thank you very much. let's get your stocks to watch. sam on instead is from our equities team call a break -- covering the all-important u.k. grow sure. and dani burger focusing on santa fe and a takeover with a big premium. what is the story with the drugmaker? two times theying closing price of the u.s. biotech company called since or.

on 12 increased novel drugs. perhaps this will meet the market taking on a bigger cancer treatment portfolio. $2.5 billion with the heavy premium, markets might say it is good for sanofi but they are overpaying. what is the story, the retrenchment? >> they have confirmed they are taking a look at the time and malaysian businesses. it could be interesting because $9se have been valued around billion. if they sell these it gives the money to refocus on u.k. operations. the u.k. business spaces huge competition, there has been price pressures. so they and their rivals are struggling to keep margins at reasonable levels. this will give them firepower to do what they need to do to get

-- to get the business back on track. matt: you can get the latest gocks stories on to -- first on bloomberg. leave it in one of the panels and let it take down. that is helpful ahead of the open. get it on the mobile device as well. joining us now is and catherine peterson, investment strategist at allianz. and probably the most important question for broader equities investors now is what happens on december 15? the big terrorist date, 100 , 100 $60 billion in additional goods coming up. do you expect that to get into play or the u.s. to go ahead with that? >> good morning. one of the most support questions right now when it comes to u.s. trade dispute. let's be clear if it becomes

, then many market -- thepants might be conclusion might be doubtful. regarding the 15th of december tariffs, i think it is not easy for president trump theory it in the end he has an incentive not to -- for the u.s. consumer to be hit. on the other hand he also has to manage internally those republicans that want to take a tough stand regarding china. let's not forget with the next year he has to declare some sort of victory ahead of the elections. overall i think that the next volatile --e great quite volatile when it comes to

this trade news. the outcome remains critical. highly unpredictable. if we put the concerns around december 15 and focus on the data, would you say it is fair to describe a goldilocks situation when it comes to jobs out of unemployment rate the united states? concerns, when you look at the data out of the u.s.? >> and we look at the past labor markets that were released friday. these really support the u.s. economy and u.s. consumer. the consumer is this possible the u.s.hirds of growth outlook. in thea has been mixed past month. is trade.certainty

as long as trade uncertainty is not listed, u.s. manufacturing will continue to be soft. i see a mixed picture. hasrisk of recession lowered over the past for the u.s. economy. there will be more muted growth and slowdowns to be seen in 2020 compared with 2019. this leads to a situation where it will be quite comfortable with is accommodative current stance. matt: what kind of moves do you see from the fed? what is your take on their position? hikes, ithe three rate think the fed will continue to signal a pause in easing which will -- it signaled at the

october meeting. for the time being. they will continue to show no policy change in 2020 and maybe some gradual tightening in 2021 and 2022. they will continue to highlight depending on the current situation if they are ready to act. the message will continue to be this has been a midcycle adjustment to question softness in the economy and accelerate the u.s. economy rather than fighting the imminent recession. from catherine peterson allianz global investors to discuss. the liquidity crunch, we get the chief economic advisor mohamed el-erian on the repo blow up. and when you are traveling to work, tune into bloomberg radio live. this is bloomberg. ♪

back, this is the european open, 30 minutes to go. let's catch up on one of the stories you need to know about this morning. manus cranny joins us from dubai. you had a great interview with bloomberg contributor mohamed el-erian. he is in our region. we leaned into one of the top read stories on the bloomberg, liquidity in the repo market. the story is really quite telling. they use language like mayhem in the repo market, structural problems. it is not a temporary hiccup according to the b.i.s.. he referred to pockets of liquidity.

of -- pocketsits of illiquidity play out because of structural balances in parts of the system that had been for now hidden by ample liquidity. at a certain point they impose themselves. you will see it in segments of high yield, loans, and in the wholesale funding market. remember the notion of pockets of illiquidity. is funding who. those are the questions we need to ask them some -- ourselves because there is a gouging but is it from hedge funds -- is wet the central bank of -- can ask your market participants, but the article goes on to define what going intoon risk is

2020. some of the data is pretty outstanding. america,ited states of 25% is held by four institutions and likewise try percent of the treasuries. so if it is a crunch, is there sufficient liquidity in the system to fund everybody? those are the risks. even for me it is a wonderful adjective, mayhem. manus cranny. let's get back to the investment strategist at allianz global investors who is with us. your over the chaos the repo market drama caused earlier on this year. we heard him talking about illiquidity in a time of ample liquidity. is there time to be concerned about any investments you have?

what this clearly shows is as a matter of fact, the low yield environments have pushed investors into high-yielding assets including high-yield assets for emerging markets. those areas where we might see according to mohamed el-erian -- the message is clear for investors it is about being very selective. into the bond markets and beyond as we have into 2020 which is going to be a more challenging year for markets than 2019 has been overall with more muted growth, central banks , but being accommodative reaching some point of exhaustion in which political risks continue to linger. expect yields to be

lower in 2020? , showing 10-year yield across japan, the u.s., the e.u. and australia, coming down to zero over the last 30 years. do you expect to see yields going even lower? that depends whether the economic taylor will play out or materialized next year. in bond markets we can see on the one hand of variation of lowtion given the already environment. on the other hand there are several factors which will continue to put downward pressure on bond yields including economic tariffs related to escalation of the trade war which has not not not the table. -- not gone off the table.

-- at 11th year of the some point in time, growth will continue to slow down. monetary policy remains -- all init puts downward pressure here. the potential for yield to move higher is limited in this thisonment area anna: cycle is long. do you still see reason to buy equities in the end of the year? >> one reason is the over valuation and bond markets we just talked about and then compared with pockets in the equity markets. it is stille basis relatively attractive particularly when we look at emerging-market equities or european equities from a variation.

also at the moment markets are playing that. anna: up against a break. global investors, thank you for joining us. we'll take you through the day with what you need to know. this is bloomberg. ♪ this is bloomberg. ♪ here, it all starts with a simple...

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looking back to bloomberg markets. a half-hour until the start of cash trading across the continent. we want to take a look at the events you have to be watching out for today. saudi arabia is expecting to reveal its 2020 budget here in . in europe, emmanuel macron welcomes the leaders of russia and ukraine, as well as angela merkel. they will discuss tensions in crimea as protests continue across france and in the u.k., now in the final week of the election. we are exciting campaigns to heat up. there is a lot going on this week.