>> good morning from bloomberg's middle east headquarters. it's daybreak europe. china cuts tariffs. levies on almost $400 billion of import. will 20/20 be the year of re-globalization? bets on europe. the tech giant looks to expand its business beyond china. investments.ost and the usual suspect. credit suisse is to report the

results of another -- how will investors react to the second scandal of the year? warm welcome to daybreak europe. nejra cehic absconded on a holiday. can we spell that word? a wood.s diverged in chinese equities and u.s. equities. we are trying to make sense of what this rolling back of tariffs by china really means. there is a platform for a phase one deal? the u.s. equity markets are set, correction,ity for 15%. it is time to become guarded. perhaps we have become

irrationally exuberant. positive news flow on tariffs eking out again. the 200 dayby moving average. wti, the uae oil minister saying things are good, they will talk about the expansion of the deal. let us talk trade. the u.s. -- china says it is cutting import tariffs on certain goods from january 1. expanding imports. the news comes from beijing and washington finalize the signing of a first phase of their trade deal early next week. let's get to simon french, chief economist. good to see you on this beautiful, crisp day in dubai. are we setting up for re-globalization? >> good morning.

i don't think we are. i don't think what we have seen this year, the enthusiasm with which capital markets have seen recent announcements tells us investments are actually expecting this to be back to the last 20, 30 decades of global integration. the removal of u.s.-china as a risk factor in 2020, anybody who thinks that has been overdoing the crystal spirits a little bit too early. pause -- andterm this is a near-term pause. model of the chinese economy. i don't think this is a moment in that regard, but it is undoubtedly good news for investors in the short term. manus: certainly, we have cleared off a couple of the big risks. i think, personally, it is moot

whether we have. i want to dig into the chinese story. of whatthe reality actually happens in the dtv library. library.o -- g tv stoking the chinese fire. of caveats that have been sent to our attention. veracity of this growth, saying a lot of this is smoke and mirrors. what do you think of the stimulus 2019 we have seen in china? is it cloak and dagger or smoke and mirrors in terms of financing fire? >> the credit expansion of 2019 has shown diminishing marginal returns on this kind of stimulus.

profit margins are not just shrunk. they have gone into speculative territory and are trying to offset the risk corporate capacity gets removed. some of that is simple. it is maintaining status quo. at the macro level, look at the expansion in china of monetary supply throughout the year. it has not translated into hard economic metrics. to the same extent adjusting it has lost -- it does not have that reflationary impact it has in previous economic cycles. >> i should probably caveat this with a little bit of balance. the morning we heard from chinese housing ministry. they said they're going to focus on stabilizing prices. they won't use property of

short-term stimulus. i think that is quite important. what that says to me, that is trying to engineer a soft landing. methodology.nal what does that say to you as an economist? is it more rrr? is it more targeted nuance financing? >> it tells me two things. that chinese authorities have not totally dismissed structural forms as they try to achieve in 2017, 2018 when the chinese economy was doing well, the global economy was doing well. they are not saying the near-term imperative is out the window. i think that is welcome. i would say for investors, those going into detail -- in terms of what it means regarding the

policy stimulus they may require does notobal economy rebound with the same vigor in 2020, i think it is reserve requirement ratio, weakening of the one, they are likely to take an already boosting heavily your financial sector. -- heavily geared financial sector. manus: we talk a lot about phase one. the one thing i think the market needs to know more about is what are the benchmarks? you can buy $50 billion worth of agriculture products. you can aim to buy more technology. breaches?he what is the carrot and what is the stick? what is the restriction that comes into play? that's the piece of the jigsaw

that is missing for me against phase one, phase two, any of it, any veracity. >> you are trying to instill a model, a quantified model that probably is not there in terms of the reaction function. it is quite interesting. the announcement from beijing -- this is nothing to do with the trade war. this is everything to do with opening our market, something we have been doing many years. i don't think anybody truly believes that. the pressure they have been coming under means it has triggered these kind of moves, but the communications they need to make to their domestic audience, and crucially, the messaging donald trump will have to take it his reelection campaign, it is unlikely to be threshold based on a certain amount of trade movements in

terms of the balance of trade between the u.s. and china to drive the next behavior. but with the political optics are in those two countries. a fairpoint. it is about the political messaging globally. belief and counter belief. simon french, stay with me. let's get the first word headlines in beijing. >> in hong kong, protests are easing into the holiday season, but it follows a tense weekend in which a police officer drew and pointed his revolver at protesters. no shots were fired. the incident came after a reported attack on police. documents show president trump asked about ukraine aid before his call with the country's president. the conversation that went on to trigger the impeachment investigation. heavily rejected emails were

obtained. they show the administration ordered a hold about an hour after the phone call. morgan at hsbc and jp may be among those who access the high-speed audio feed from the bank of england, according to the financial times. it says investment banks are trying to establish whether traders used to seats. it is subject to a probe by the u.k. financial regulator. the banks declined to comment. this is bloomberg. thank you. rounding up the agenda. coming up, we will definitely see a leadership change of the bank of england in 2020. we may not see much policy action. we bring you our outlook for global central banks 2020. this is bloomberg. ♪

europe a is "daybreak moment of reflection. bloomberg economics sees the next downturn coming in 2020 with little room to maneuver from the central banks. our team expect cuts in emerging markets and a heavy reliance on fiscal policy. when downturn does come, a lower for longer will lead -- leave central banks without any options. simon french is still with us. if you read this outlook for central banks, it does not make for good reading. it points out who's got a little bit of slack in the bag. 20/20 is going to be less about develop central banks, more about emerging central banks. let's jump off their at the first proposal. >> that's right. you have to remember, this comes

off 2019, the most coordinated easing in central banks around the world since 2009. a lot of people walked into 2019 expecting central banks not to be particularly active. they did not have any policy ammunition. this is a narrative has been around for a number of years. it did not stop the global central banks having a thatinated cutting cycle in the back end of q3 this year was down a 10 year high in terms of that cycle. >> it is interesting isn't it that in q3 it took that sort of to get looking swarm ugly, i.e. trade. political and policy response. that adding hugely to equity market values. to propagate those values, let's

say from markets in 2020, you are going to need something that is supplanting gains. by benchmark has been set japan. is that a fair estimate? is that the benchmark for fiscal stimulus 2020? >> it is the benchmark, but it is also the geography that is going to be easiest in the near term. find agoing to disappointing downside across most other economic geographies. a combination of in the u.s., you could argue most fiscal stimulus is already taking place. zone, it isuro riddled with political lackdependencies, cultural of support for this kind of fiscal stimulus.

see ak it is very hard to 20 plus gain in equity markets being supplemented next year just by fiscal policy alone. manus: is the most overbid story that the europeans are going to moment, the lights are going to go on and the germans are going to become fiscally benevolent and we are going to have this dancing moment for fiscal policy. do you buy that? i don't. there must be very few investors who genuinely buy that. christine lagarde has been put in charge of the ecb to try and deliver on a political front but mario draghi attempted to almost throughout his tenure. to get some of the heavy lifting done by the other levers.

we talk about fiscal policy, but deep structural reforms that union a morepean optimal currency area. he was not successful. can she be successful? i don't think anyone is banking on a runaway. at the margin, she might be able to unleash some fiscal stimulus, but it's not going to be the only game in town that is sufficient to see the euro zone through the year. manus: christine lagarde and the word marginal, they don't go together. let's come back to that. simon french stays with me as my guest host this morning. 21 of the lead stories. tencent, looking to boost investment in europe by $10 million annually.

for more, let's get to our bloomberg opinion editor. good to see you. big news for tencent if it comes to pass. >> they have been investing in asia for the past decade. if you look at the bloomberg terminal, they have done more than 360 investments. they are very prolific. most of that has been in asia. they bought up a few european companies from time to time. i think they are running out of ideas and options for asia. they also want to expand globally. to build staff there so they can tap into the european market. that it? that they want to expand their global reach? >> that is what they have been saying for the last couple of years.

we want to be global. in reality, they look at what tencent has been doing. they are still a chinese company. they have not expanded that much outside of china. they really do focus, i have argued many many times they have focused too much on china and they have not expanded enough. when you have such a large economy growing at such a fast rate, it is very easy to just stay in china and not bother with more small growth countries or regions like europe. they are getting to a point where they have tapped out a lot of the growth in china and they have no choice but to look elsewhere for more growth. manus: thank. coming up on the show, we take a look at why hedge funds are bearish on the greenback. ♪

manus: it is "bloomberg daybreak middle east. we are from dubai this week. let's focus on the world's biggest economy. the world's biggest economy. how is the consumer confidence? we asked the bank of america ceo. consumer, look at the the last time we talked, we were talking about the year-over-year growth rate for consumers. closer to 6%. you are seeing it now through cyber monday. you have great discussions about how many days are between christmas and thanksgiving, but even halfway through the period, you are seeing the growth rate of 6% year-over-year, almost 10% overall. there is a lot of spending in cash. we feel very good about the consumer in the u.s..

that is two thirds of the u.s. economy. those are big anchors. you put that together, that's a big part of the world's economy solidly moving forward. moynihan reminding us the consumer is alive and well. the bank of america ceo. simon french is my guest host. take us straight to the consumer chart in the gtv library. i want you to reflect on one hand -- brian moynihan. consumer, athe consumption expenditure in five years. the consumer is strong in the united states of america. how strong is it in europe -- in your view? >> before the break you rightly said it took the q3 event to trigger stimulus. there were signs the consumer

was starting to crack amidst what was an ambiguously a manufacturing sector, the trade recession around the world. it appears the consumer has won this particular arm wrestle, the key question mark facing investors. with the consumer get dragged down by trade and industrial weakness? they have not. if brian moynihan is anywhere less partisan sources tell us consumers continue to shrug off industrial sector weakness. they appear to now be dragging the industrial economy back out of the red zone, which suggests they have won. -- by if they have won the way, you're able to read record low rates. , a lot of people have said flagging risks for 2020.

uoyed.e so b last year we were fraught. going into 2020 perhaps we are low bit -- a little bit more enthusiastic. because the breakevens are creeping marginally higher. simon: i don't think we are underpricing the inflation risk. convincedd to be most by the secular long-term inflationary -- or deflationary story. i don't see the u.s. labor market translating despite headlines, there are underlying factors there. the fed economists is don't know how much there is. is not 2020. my concern is never 2020. i thought the political cycle would lend to a near-term pause

in the trade war. an inventory up cycle. my concern is much greater going into 2021 where the structural risk and the dominion ration of stimulus we saw in 2019 when those rate cuts from the fed and the rest the world, the central banks, started to tail off. the question is what comes next. that is of much greater concern than inflationary spike. manus: you have given me a whole new word. we have 10 seconds. does that take bond yields lower? view. yes, in my still very unconvinced by that inflationary premium. ok. apparently we have more time. -- that is live television for you. , are youe is of course

in the 1.25 camp? 2% is the new 3%. underperformed quite dramatically. do you think a dominion ration -- diminuation of the marketplace for the consumer, do you think that soaks up risk and takes you closer to 120 in terms of yield? what does it take to get you to 120? >> we are talking about 10 year treasury, yes? manus: yes. what woulderms of take us down to the sub one 20's in terms of yields going forward, look. a very benign economic seeronment where you confidence in buying u.s. assets. you don't see movement in the

dollar price. you also don't see the global risks spiking up during the first half of the year. simon, we are going to talk about year-end optimism. ♪

good morning from bloomberg's middle east headquarters in dubai. i'm manus cranny and this is daybreak: europe. china cuts tariffs from frozen work -- port the parts. will 2020 be the year of re-globalization? tencent bets on europe, looking to expand its cloud business beyond china and looks to boost toestment in the continent more than $12 billion. the usual suspects, credit suisse is set to report the results of yet another spying probe. how will investors react to the

second scandal of the year? we have our -- six: 30 a.m. in london, 7:30 a.m. in paris and berlin. the top story this morning is about the shift in tariffs from china as we are still near record highs. china to cut tariffs on everything from port to tech items. is this an olive branch to global markets? let's get to juliette saly in singapore. we have our quaint partner in mumbai and dani burger is in london. chutesf a more green from the manufacturing side, which will help sentiment. the south korean --

juliet: always a bellwether to how it is going. korea is important in the overall chain when you look at global manufacturing and we saw when you look at the 20 day data, a brighter picture than we had seen in the past. down 2% years were on year, pointing to the lessihood there could be a than double-digit decline. south korean exports were down 17% and shipments to china rose 5.3%, so they are on course to post the first monthly gain in more than a year. perhaps another sign we are seeing a bottom in the global manufacturing cycle. that is certainly what everyone is hoping for. the bonds are gaining in hong kong. this is before the central bank

undertakes a version of operation twist today. iraj: yeah, and we discussed that it has led to the 10 year coming off, some six points. we hit a peak of 6.82 or 6.83 the week before. already aappened on small sum of 10,000. the market believes this is not it. more versions of operation twist will come and there might well not be higher, even if it doesn't cold -- go too much lower from the current levels. operation twist in india, a whole new policy adjustment for 2020. how is the oil market? dani: last week, we saw wti klein, but it is looking

weaker today after kuwait and saudi arabia signed a deal to renew output, even though it is hovering around the $60 a barrel. if you look at the chart, that is investors getting year-end optimism on where oil will go. we saw bullish contracts on wti climbed 19%, mostly having to do with the macro outlook. prices and positioning, doing a different dance. we will see which wins out at the end of the year. manus: rate rounding up. juliette saly in singapore, niraj shah, and dani burger. simon french is with me from panmure gordon. if you look at the oil market from a terrorist attack that wipes out 5% of the value of oil huge ipo of the world, to opec's shock and all last week, and we have really been held back.

this goes back to the going -- global trade story. would you say oil would be at $60 or are you shocked there has not been more reaction? simon: it is a good history of the year and the surprise with which the terrorist attack, the supply story was restored took caution thatof the was pushing prices higher out of the marketplace. it hasn't really returned in any great vigor despite the opec action. why going forward, we are cautious on global oil price. this may head lower despite being the top end of expectations on growth. i still don't think this is a demand side story. and if supply side story you look at the swing producer, the u.s. economy not playing the opec game, it will seek to try and get oil production higher

and higher in 2020. reelection year, that is jobs in key electoral states, passing on a potential tax cut to u.s. industry. all the dynamics suggest we will see production move materially higher in the u.s.. it will be a her -- headwind to price from here. manus: bear with me. one of the most read stories and the single biggest zeitgeist, was her rise to prominence -- greta thunberg. that is perhaps the biggest challenge to the energy market of all. a sense of self reflection that everyone wants to get a piece of. it is, and there are two areas where this impact your

viewers. risk in standard assets as a result of the zeitgeist starting to move consumer behavior. behavior, butial if it material impacts consumer behavior, a lot of long-term forecasting models will be offkilter for where the consumer will actually go. the second one is the choice regarding institutional investors to chase some attractive investments, particularly on an income story. they may not be seeing much coupon into the bond market. they are looking at the oil and gas producers with fairly hefty .ividends, cash return i really can't afford to be out of this marketplace, but who am i going to sell my stake to down the line if i am wrong on the geopolitical question?

absolutely. simon, thank you. your tolerance is greatly appreciated. simon french at panmure gordon. one of the risks for 2020, no one saw coming at the beginning of 2019. a spying scandal and there is a car two. credit suisse to report the second probe into the spying claim. this is bloomberg. ♪

manus: it is "bloomberg daybreak: europe." for the trading day ahead, here is what you need to know. credit suisse to report the results of a probe it spied.

here at the details is dani burger. dani: the second investigation into spying a credit suisse is likely to follow the playbook of last time. the firm, blaming rogue operators that acted without knowledge of the ceo or the board. specifically, the onus may fall on the coo, who also took the fall last time in this investigation into the head of wealth management -- the former head who is at ubs. that is following the same playbook, but adding another twist into the investigation, which report we are supposed to see this morning from credit suisse. we heard a net executive also said in manhattan, she was followed by a "striking tall blonde." the twists and turns keep coming in this spying scandal. manus: it certainly is quite gripping in terms of the

storyline. dani burger on the credit suisse spying scandal. let's speak to our finance reporter, nicholas comfort from frankfurt. can you give me some context around us? it is not just an isolated incident, the spying. would one say now this is systemic? i wouldn't say systemic, but you are right. -- they need to address the wider context. ase, the chairman said spying is not part of our toolbox, an analyst spoke about this being an isolated incident but clearly it is not isolated and you could well say maybe it is part of their toolbox. what they might need to do now is address how this works from a perspective if they choose to use surveillance. who needs to know when and how

do these processes work? can't come up with an excuse about this being rogue people or individuals going beyond their jobs. and ourt just investors view on tv, but the regulators are looking into this. the swiss regulator is looking closer into this and they have some pretty uncomfortable questions to ask, as well. manus: they do, indeed. in terms of who sanctioned, when it was sanctioned, and let's widen this out and talk about the future of the banking industry. thank you for joining it. unicredit plans to eliminate 8000 jobs, pushing the total cuts announced by the banks this year to more than 75,000. are to go80% of those into europe where the negative interest rates and slowing economy are forcing lenders to slash calls. deutsche bank is hitting 8000

jobs, unicredit 8000 jobs and 5500 jobs at santander. it has been a pretty brutal year. this is a battering on bank jobs, isn't it? is this just one of those moments when you realize the big banks with the heft are doing the business and the flow and if you haven't got the flow and the mandate, you need to reappraise where you are? i think it is a question of the operating environment, as well. we had a lot of banks cutting jobs a couple of years ago, 2015, 2016, there were overhauls and banks said this is the new course we are on and this will raise our profitability level. this is the way forward. the operating environment is pretty bad at the moment and we had lower for longer rates. that's certainly a factor in the job cut plan of the german banks

and unicredit. they are looking at the fact it will be tough to be earning on traditional bread and butter banking businesses. margins are under pressure, so the inevitable consequence is, you've got to custom -- cut costs and at banks, there are two types of costs, i.t. and people. you really need the i.t. manus: you do, to be fair. it is the human capital that needs to worry the most, probably. nicholas comfort, european finance reporter. simon french is from panmure gordon. pricedngs to beard christ, the challenge nicholas outlined but significant repricing in terms of what the ecb will do and a repricing in the bund yield all the way back. that crisis moment in august when we were -.7, -.8. it is it -- is it the repricing

that is giving more than the outlook for growth? positioneds the risk for lower rates in perpetuity has been wrong. you will see some fairly hefty capital losses, not just in private investors, but institutions who have got huge inventory here. i didn't see the big -- i am irsonally watching -- personally watching christine lagarde's first press conference, didn't see repricing. she seems to have held togethered the fractious views that came out following draghi's final policy decision. when asked about reversal rates and whether negative rates are starting to have the reverse because of thed

damage to the european banking system, she was confident in her answer and the analysis is on her side. you say, we had a fundamental repricing. i always get impressed when i can build something on the bloomberg. i'm looking at the price of value of deutsche bank. it is .25. commerzbank is trading at a point toy for. -- .24. will be an interesting year on the banking front in 2020. simon french, my guest host this morning at london hq. coming up, ducks may be flying high into the year-end, but money managers warn of a looming correction. it is your morning call. this is bloomberg. ♪

manus: 6:49 a.m. in london. it is "bloomberg daybreak: europe." i'm manus cranny in dubai. the markets could be getting ahead of themselves according to vanguard, who. has sent a warning into the new year. right, a 50-50 shot of u.s. stocks and stocks in general having a correction in 2020 according to vanguard's chief economist joseph davis. he said usually the odds are 30%, but elevated chances of a more than 10% dip in stocks. simply, the market optimism is too hard, especially on inflation. it is pricing in 3% growth in the u.s., and that is unobtainable, davis says. he says he was volatility is at an unsustainably low level and looks for that to pick up, but the market they need to be moreng forward need to be

guarded and prepare for a more ugly year in 2020. manus: kim hak-song, dani. your morning call -- tin hats on. your morning call. ds believes one of the risks next year will be polls of too circumscribed. anne: i observe now calls of aretal -- pools of capital more narrowly circumscribed and have been for a long time and it thingsly in response to like banking regulation, which has been trying to take away systemic risk, so within a bank is defined byital country, it is defined by types of business within the country. tois prescribed within banks

which particular day how much capital it will have, and that has been done to reduce systemic risk. the consequences when something unexpected happens over here, it is not always that easy for capital to jump from one pool to another pool to mitigate the risk of that. i think strangely and perhaps without intention, by trying to remove systemic risk from individual banks, we've actually created a different risk, which is the capital can't move around in response to an event and when you look at some of the spikes in the repo market, for example or contortions in the currency market from time to time, i think there is a sense that once in a while, we had a little warning signal that capital can't just move where it needs to to respond to something quite small, but nonetheless significant that has happened and that is giving regulators pause for thought at the

moment. manus: fidelity international ceo and richards speaking to francine lacqua. you can see the whole interview on "francine -- "leaders with blackrock." -- lacqua." i listen to and richards and think, what a beautiful description of capital management. is what she is talking about an under assumed risk going into 2020? simon: yes, and we could do a full show on those issues raised by anne. ,uch an interesting area because what we have had for a ,ecade is a regulatory up cycle increasing the capital requirements of banks, layered on new regulation that hasn't really been tested in battle. we could say there have been moments of acute market stress

over the last decade and you can make a point, but we haven't seen a protracted economic downturn, a depression site -- where the consumer changes behavior, starts to withdraw capital and at that point, what anne richardson is talking about, the ability of institutions to do horizontal capital management has been in paired. regulators have been focused on vertical capital management, insuring that vertical is saved, but what are they doing? is the lackflagging of market stability as a result of the flexibility these totitutions used to have introduce to the marketplace in times of stress. manus: looking at 2020, obviously you have this idiosyncratic risk going on in

the repo market. isn will you be satisfied it idiosyncratic risk and not something more structural in the repo? manus: there is -- simon: there is an awful lot going out there. in terms ofponse the federal reserve balance sheet and i suspect other central banks will be worried, although they are not the guardian of the dollar market, they may see something similar as they try to adjust for what their optimal balance sheet sizes. when would i be reissued that it wasn't something more malign them federal reserve seems to think? we need to go through a full 12 month period and see other events like real big cash calls e -- howking that th the balance sheet is sufficient to deal with that to make you think this was an inevitable

stress point and will be reached as the federal reserve reduces the size of its balance sheet coast you -- post q1 and q3. manus: biggest risk for 2020? what do you reckon? simon: i'm sorry if it is a boring answer, but it is we are wrongly positioned on the idea a phase one trade deal means u.s.-china and indeed the other u.s. commercial trade conflicts are going to relatively plateau into the reelection. that, thewrong about 20% plus gains we have seen this year will be based on the foundation of sand and we will see a crumble fairly quickly. that has to be the biggest risk going into next year. manus: there's nothing boring about the answer, but your presence on daybreak is good. we wish you well on this holiday season and we will see you in

2020. big thanks from nejra and myself. . if you are traveling to work, you can hop in, and on your terminal, you know the destination. tv go.

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anna: welcome to "bloomberg markets: the european open." i am anna edwards live from bloomberg's european headquarters in london. the start of the cash trade is less than an hour agaway. the usual suspects. credit suisse is likely to blame a second scandal on its former coo in a report due today, but another cases emerging. china cuts more tariffs from smartphones to pork, slashing

duties on almost $400 billion starting january 1 and holiday cheer, global stocks near highs after wall street caps its best week this quarter. points slightly to the downside. just under an hour to go until the start of the trading day in europe. in these futures, this is the picture for european futures. some muted losses expected at the start of the trading day, but one big difference between this week and others, as always, we often see the lower volumes than usual at this stage of the trading year. let's show you the u.s. futures. u.s. equities, s&p in particular hitting record highs friday. that is the backdrop to bear in mind, the landscape that has gone before us in terms of talking about where markets head from here. on the gmm, this tells us where

we have been through the asian session. moves to the upside on the equity indices, but more broadly, we are near record highs for asian equity market as we are for the u.s. equity markets. that's the backstory. volumes remain pretty low. that is the picture we have for markets. making slight moves to the upside. in terms of the sovereign bonds market, that seems to me where a lot of the action is going into the end of the year along with rallies in global stocks. we see a steepening of the yield beve coming through, as may investors put aside concerns about the potential for investment into the united states. we see a steepening of that curve, but yields hold about 1.9% in terms of where we head on the u.s. treasury. the curve, near the steepest in more than one year, but today we see moves in the opposite direction. that is the picture on the gmm.

china says it is cutting import a move partlyds, aimed at expanding imports. it included frozen pork at a key item to alleviate shortages due to the outbreak of african swine fever. the news comes as beijing and washington look to finalize the formal signing of the first phase of their trade deal early next month. joining us to discuss in more detail, bloomberg's executive editor for greater china, john leo in china. why is china cutting tariffs now? john: you mentioned pork. we are coming up on chinese new year, that would be the end of january. that is the peak season for me to consumption, so lots of reasons for china to try and make it easier for the consumer to buy the meat as cheaply as possible. thealso mentioned smartphone equipment, the country is going through an

economic slowdown so anything the government can do to help industry pickup reduction would be a good thing in china. anna: so that's why they are doing this. i'm going to break into the conversation break lead to give you an update on a story we are following around credit suisse, the spying scandal. of ceo had no knowledge spying, this is in relation to some of the most recent spying allegations. you'll remember this caused great intrigue in switzerland earlier on this year where it was found that a former credit suisse employee had been spied upon as he was getting ready to depart the business for ubs. we will keep an eye on this developing story and get a report from one of our colleagues later in the program. this is the latest we are hearing from credit suisse at this time with regards to their internal investigation. let's get back to the trade

story. what does this tell us about the phase one trade deal? i don't think this has any formal lead -- link to the phase one trade deal but maybe helps the mood music. tariffs there is no -- there is no direct link, but the mood is good. you would see president donald trump, moments after the tariff cuts were announced, tweeted about it. this is in gender and goodwill on all sides of the pacific and leads to pointing to a deal next month. anna: my thanks to bloomberg executive editor for greater china john liu. joining us on set, the head of equity capital markets at ubs. good morning to you. wherehead into this week we typically see lower volumes, we are coming off record highs in u.s. globally -- equities, global equities doing well. some suggest overbought.

does the level globally concern or excite you for 2020? >> i think it has been uncomfortable for everyone for some time. this melt up has been capitalized by the u.k. election results and improvements to the u.s.-china tariffs, but what is driving this is asset allocation in a low interest rate environment into equities. anna: an asset allocation story. a technical chart showing relatively strength indicators and suggesting that when we see when inthe s&p, overbought territory, this can be profitable. it doesn't necessarily mean that will revert at any time. you see thesehen stocks in overbought territory? there is plenty to worry about and that is usually a healthy sign for the market. next year, it is about can these stocks deliver the earnings growth expected of them?

investor attention will move away from political concerns and stock fundamentals again. anna: in the decade, some of the best returns in a decade across a number of asset classes. what does that tell us moving into 2020? gareth: i think the biggest howacteristic has been difficult investors have found it to make money in this environment because you have had asset to rerate all the time. when you look beyond a growth driven technology sector leadership, it has been quite difficult to find other narratives to really participating. staysgareth mccartney with us. we will look at stocks to watch at the open and keep credit suisse later, but the u.k. grocery has suspended a chinese card maker over false labor allegations -- forced labor allegations. remember, bloomberg radio is

live on your mobile device or dab digital in the london area. this is bloomberg. ♪

anna: welcome back to the european open. -- 50 minutes until the start of the trading day, but futures tell us a downside move at the start of the trading day, but coming off record highs in the u.s. during friday's session. let's get your stocks to watch from around the newsroom. tesco, credit suisse. let's come to you first on tesco . this is perhaps not something that will move the stock, but not the kind of news reporting you want for the time of year. >> quite an amazing story by "the sunday times." a child in london found a christmas note from china saying

labors were being forced under prison labor to make these cards. tesco is investigating. it is quite a dramatic story reported by "the times." tesco sing all cards made at this factory have been withdrawn and they have started an investigation and of wrongdoing is found to be done, this company will be removed from their list indefinitely. the company has called the report ridiculous and slander, rebuffing this report from "the times." it was saying it was independently audited around a month ago, so it is a strong denial of the wrongdoing but it is something people will be talking about over christmas because it is quite an amazing story. whether it will stop people from going into tesco and filling up on christmas shopping is unlikely. i think the next catalyst for the stock will be the first week -- full week back at work after the new year.

report from tesco along with sainsbury and morrison's. it is negative publicity heading into this key last days of the christmas period for tesco. anna: let's come to you on credit suisse. we heard these lines, an ongoing story that keeps gathering momentum. dani: the latest twist in the spying scandal. credit suisse out with its report of its second probe into of spying scandal, this time following the same playbook as last time, saying the executives had no idea there was a rogue operator, specifically the x coo that acted here. the investigation was spying on time, head of hr and last it was the head of wealth management that left to ubs. we will see if these headlines knocked the stock around. this risks reputational damage and if it does move, that will be the fear that drags it lower. anna: first go is the function

on your bloomberg if you want to stockrack on your specific news flow at the market open. let's talk about the credits we story in more detail. nicholas comfort joins us from frankfurt. give us some context on this credit suisse story. let's linger a little on the back story here. we drill down a little bit, what is being said today is the people who were didn't on the khan case speak truthfully on the wider case of surveillance of the seemed when it was said earlier that the khan spy matter was isolated and not part of the toolbox, they were making a statement in good faith and

the subsequent allegations which they admitted to of the hr chief or new to them. they learned it through the media. it doesn't look great and yes, you can say someone withheld the truth or lied to us and we can't do much about that, but you would have hoped the probe would have gone deeper. when they say this is not the corporate culture the board promotes, the corporate culture involved looking as far as you go and getting to the bottom of it. as an observer, it doesn't look like it puts its to bed. fact thatints to the the swiss regulator is looking into this more intently. credit suisse saying it will cooperate. they have a lot of uncomfortable questions for them. anna: questions will be asked about the autonomy or lack of supervision of certain members of the supervisory board in this regard.

european finance reporter nicholas comfort get the latest on credit suisse. let's reflect on what has been going on in the role of ipo's. from silicon valley to saudi arabia, 2019 has been tough ipo backers. areorns from uber to wework preparing to sell stakes and then saudi aramco started gearing up for its own public offering. flash forward and these deals have become emblematic of how things can go wrong. banks behind aramco's offering made no profit, even after it became the world's biggest ipo. wework scrapped its altogether, causing others to reconsider plans. on the subject of ipo's, gareth at ubs.y, head of emea inould throw beyond meat

there, but with so many unicorns looking to list, exciting times and yet failing to deliver. let's gone wrong? one, a dislocation between the secondary market and a premier market which is more selective and on that selectivity theme, an investor base that is looking at this stage in the cycle for certainty and that they are finding in companies giving them growth so large ipos with a growth angle are doing well. everything else is more challenging. anna: is it the case that geopolitical risks have happened to focus around some key markets where these might have taken place? . new york, but london and hong kong for sure? gareth: politics has played a disproportionate theme in equity markets in 18 months. looking forward, you could be more optimistic with the u.k. election not of the way and progress on the u.s.-china tariff. debate. .

arguably, that would be helpful going into next year and the u.k. should benefit from the. . anna: what is in the minds of companies looking to come and whether publicly list or engage in private funding rounds, what is the calculation they are making? gareth: it is straightforward. it is very attractive and optics on what secondary valuations similar tocompanies yourself trading at high multiples versus the uncertainty of selling a near fraction of the company today with a more uncertain outlook going forward versus the certainty of a full exits through m&a and private route you described. anna: gareth mccartney, head of emea capital markets at ubs. big,nt is betting reporting the chinese giant is boosting its european investments to over $10 billion in 2020.

more on that and europe more broadly. this is bloomberg. ♪

anna: [the european market open. 20 minutes past 7:00. we are expecting a downside move, although nothing extreme. u.s. futures look fairly flat this hour. iscent, the chinese giant investing over $10 billion in europe per year starting in 2020 a newspaper. this marks an uptick in investment as the company looks to expand cloud services that compete with alibaba. thousands ofte jobs. let's talk about investment opportunities in europe. let's get the details on what

tencent is trying to achieve. selina wang joins us in beijing. why is tencent looking to invest in europe? what are the details? >> this is part of tencent's globalization efforts. they invest billions into europe over the past few years and germany is a specific focus because the president of tencent has said that is the biggest market for its cloud business outside of china where it is dealing with a slowing economy and more competition from alibaba. we have seen tencent make aggressive investment with hundreds of investments worldwide. in terms of targets in europe, it will focus on manufacturers and industrial designers but the cloud business is a big focus for tencent. anna: what geopolitical hurdles might tencent face in its effort to invest in europe because

we've seen a number of big chinese investments, particularly into germany, raising eyebrows. these are ambitious targets, $4.8 billion into europe in 2018. please targets are significantly higher than that and it comes against a complicated geopolitical backdrop. we have seen germany step up protection measures against chinese investments into germany after the 2016 takeover of a german robot maker. we have seen more scrutiny of chinese investments in germany, which could be a struggle for tencent looking that they are to invest in technological areas but even then, it could provide more opportunities for tencent in europe and you compare it to other opportunities in developed markets like the united states where making acquisitions has become challenging for tencent and its counterparts given the stepped-up scrutiny from the committee on foreign investments in the u.s. anna: thank you, bloombergs

selina wang live from beijing. let's delve into the broader repercussions of this argument. gareth mccartney, head of emea at ubs. some narrative is built around maybe this is the year europe catches up with the u.s. gains, but i guess that would be to discredit the extent of the gains we have seen in europe. at 25% in europe, that is a strong return but the narrative here is europe has lacked same growth technology engine in the u.s. and as a result, most of the u.s. domestic investors have stayed within the u.s. and played the silicon valley opportunities. anna: the technology story in europe, just not developed enough for exciting enough? in europe andnies exposure in that regard, but it is not silicon valley. gareth: investors are showing

appetite for european technology. i think it has been a selective supply to a market has strong underpinnings of demand in europe. anna: without that strong technology poll, can the european equity markets play catch up in 2020? gareth: there has been a long-running value case to europe versus the u.s.. we have not seen anything more than tactical short-term moves from investors looking to capitalize that investment rather than strategic reinvestment into europe. if we look forward to where the u.s. market is now, there are signs europe could be more investable now than it has been in previous years. anna: one of the things that always ways on europe is trouble in the banking sector and weak valuations. you point out the european banks hit 20 year lows over the

summer. over two thirds of sectors year to date in returns. it is not the global banks have done so much better, but better than europe. gareth: people are crying out for consolidations. whenever we see signs of that happening, you see interesting european banks and the last three months or so, the value momentum and trade has gotten overstretched and from a tactical perspective, we have seen value being bought and banks represent value so we have seen a good rally in the last few weeks but to turn that into something more tactical and more of anit needs equity story and a consolidation really underpinning that. to bedoes that have cross-border consolidation, because that is where things seem to get difficult? gareth: agreed, that has been the biggest challenge in europe. in the european union, it has been hard to do cross-border. are still enough individual banks in countries, but for a strategic change, we would like to see that cross-border. anna: the extent of over banking

in some markets, in germany, we've talked about this for decades the memory -- maybe there are sufficient m&a opportunities to keep it domestic. gareth: i think that is exactly right and it is about addressing the cost base in a more challenged or slower macro environment where the top line is harder to achieve and it is about how you get synergy and take out cost. anna: gareth mccartney, head of emea equity capital markets at ubs. next, a tale of two trade wars. china says it will roll back tariffs on nearly $200 billion of u.s. goods. japan and south korea will attempt to patch up relations this week. we will get to the latest. we will talk about some lesser mentioned trade wars. your mobile device for dab digital in the london area. this time of year, typically very low volumes and that is

what we have seen through the asian session. those prize, but as we remember from last year, these days around the holidays, christmas and new year, can produce volatility. futures in london suggest weakness at the start of trade. this is bloomberg. ♪

30 minutes until the start of the cash equity trading day and here is what we are watching for this week. italy's lower house discusses the country's budget for 2020. fiscall targeting deficits to remain at 2.2% of gdp needs to be approved by the end of the year, becoming an annual ritual in italy. tuesday, shinzo abe and moon jae-in will meet in china. the summit is an attempt to patch tensions between the asian neighbors. day, european equity markets will be closed. lower volume and --