manus: good morning from bloomberg's middle east headquarters in dubai. i am manus cranny. it is "bloomberg daybreak: . china" unveils a economy up for a stronger start to 2020. -- boeingsts its ousts its ceo. bmw faces an fcc investigation. the german automaker comes under months after fiat chrysler paid a penalty for

similar issues. ♪ it is "bloomberg daybreak: europe." a warm welcome to the show. five days of misery on the pound seem to have come to an end. we have given down -- given back the boris bounce. it will be a jagged path. $1.38, squeeze out to about $1.40 by the end of 2020. he does not see political brakeman ship ending anytime soon. 500, irrational exuberance for 2020. that's what we need to ask ourselves on the s&p 500. consumer spending is strong.

new-home sales, you saw the best three months since 2007. i always get very nervous when people refer back to 2007 and 2008. catherine man has a warning from citi. china is stepping up measures to support the economy in 2020. it is a multi prong policy drive. tariff cuts on goods will be delivered and it is supporting the domestic consumption. selina wang with me from beijing. good to see you. a little bit more on this. give me the details. >> we are getting sort of a blitz of news around some policy measures that china is looking to take to bolster the economy in 2020, starting off most recently with the premier league signaling there will be more trouble are cuts, more funding.

china is going to boost the private sector, so that includes market easing measures, measures to level the playing field between private companies and the state owned sector. he always -- also had measures to boost the funding of some of these companies. on top of that, we also had china cut import tariffs across a wide range of product categories, including food products, high-technology products. this is not directly tied to the u.s.-china trade negotiation but it overall since a positive message that china is seeking to open its markets. manus: we have had a pretty gathering,ifecta china, japan, south korea. abe,jae-in commissions a -- shinzo abe, xi was yesterday. >> this trilateral meeting is still ongoing.

we have heard the premier talk about the need for deeper cooperation amid increasing economic and political challenges. we heard all three sides have vowed to continue to accelerate negotiations for their free trade agreement, they needed to enhance multilateralism, defend against protectionism. the backdrop is that south korea have been facing deteriorating relationships when it comes to trade, national security, deep-rooted disagreements over this forced wartime labor. the fact they are talking at all is a big deal. we are not expecting a big breakthrough but the fact that they are talking face-to-face raise the prospects of coming to a solution when it comes to japan's exports of critical material important to south korea's technology sector. we got some headlines from south korea's president talking about peace on the north korean peninsula is in the interest of all three countries and that south korea is going to work with the u.s. to try to come to a tangible solution.

manus: that political pendulum may swing a little bit more than it does across from china to the u.s.. great reporting. my guest host for the next hour is ricardo evangelista, senior analyst at activtrades. he joins me now. great to have you with me this morning. the new top line is about the stimulus that we understand that china are going to promise us into 2020. come.riple r's to what does that do to your view on the yuan? ricardo: good morning. thank you for having me. i think the outlook for the yuan in 2020 is negative. i think we will see china seeking to be more dependent on internal consumption rather than just being almost completely dependent on external factors for the growth of its economy. therefore, i can see that there

will be less focus on manipulating the yuan. i think the stance of china is becoming more positive. china is being more positive than the u.s. in the ongoing trade dispute, at least in attitude, public attitude. i believe that there will be manipulating. therefore, it is my belief that you have to look for the -- the outlook for the yuan in 2020 is negative. manus: so if it's negative, does it -- you know, where does that take me to in terms of a softening in the yuan? is there more volatility on the way? i was looking at some of the volatility on the yuan, so tie those two things together. there were times when it was almost -- in terms of volatility. three times we spiked five times the average. 020 a weaker yuan?

ricardo: yes, i believe it will be. there will be more volatility. the yuan will be more at the of market forces rather than so much under the control of the political will behind china's efforts to keep growing its economy. morefore, we will see volatility a more at the mercy of the currency market, the fx market. from there, we will see more weakness as well. manus: ricardo, i know that you have got a line in terms of the fed's communication style. what did you make of the pboc communication style this year to wrap up the china trend? ricardo: well, i would say that their communication style is in line with what it has always been. it is more, let's say

discrete, less generating of headlines, and is quite effective. said, itg that it started this process well before coming up. i would say the people's bank of china has a style of communicating that is actually very effective, while the fed in recent times on occasions has not been so effective. manus: ok. we will dig a little bit deeper into that. ricardo evangelista stays with us from activtrades in the london hq. coming up, boeing. the american playmaker ousts its ceo-- plane maker ousts its to restore confidence the 737 max crisis. has it done the job? we will talk about the shakeup at boeing. that's next. this is bloomberg. ♪

♪ manus: this is "bloomberg daybreak: europe." i am manus cranny in dubai. boeing has ousted its ceo. the embattled airplane maker named a new president and ceo. decided the changes necessary to restore confidence in the company. it is the latest twist in the turmoil that led to the grounding of the 737 max. benedikt kammel joins me from berlin. good to see decided the changes necessary to restore confidence in the you. is this a cathartic moment for boeing? does it close off one set of issues but create new ones? >> absolutely. with the departure or removal of dennis muilenburg, they are obviously trying to overcome probably the biggest crisis in the company's history. stabilize theo company? that is what people are looking

for. this is a company in a deep crisis. it has sort of accelerated in the last couple of days really. we had the production stop of the 737. we had a public rebuke from the regulator. we had the mishap at the space station. all of that was probably too much for dennis muilenburg. lifer, sort of boeing was liked inside of the company, an engineer from a humble background. he never got the tone right to respond to these tragedies, the twin crashes on the 737. on sunday, there was a board meeting and it was decided that enough is enough, we need a clean slate, we need somebody different to take the company forward. manus: in times of crisis, it certainly throws up -- i reflect back to tony hayward of bp, which is about the reaction functions to crisis, two very

different crises but very real human stories. what is top of the agenda for the new ceo? stabilize, stabilize, stabilize. he has to stop the bleeding at boeing. this is a company that has kept producing the 737 but has not sold a single one. you see these airplanes piling up. we are talking about 400 unused airplanes sitting on the tarmac. that is about $50 billion sitting there. we don't know when it will come back. they have to repair relations with all the different stakeholders, with customers, two, the, regulators victims of these crashes -- regulators, the victims of these two crashes. looking inward, sort of stabilize boeing properly, make the company proud again. this is america's biggest

manufacture, biggest exporter. this is a proud company really a proud company really on its knees right now and that is really what the ceo needs to do both internally and externally. manus: great reporting. our global business editor, benedikt kammel. selina wang is with me from beijing. >> thank you. bmw is being scrutinized by the securities and exchange commission over its sales reporting practices. this coming months after the regulator find fiat chrysler $40 million over similar issues. it comes as a german carmaker is in a tight race for diamond -- tight race with diamond -- daimler. bmw says it will cooperate fully with the investigation. -- is considering selling a stake in tictoc. washington is worried the popular video app is a security threat. selling over half the business could race substantially over $10 billion. tesla shares hitting a record high.

we have learned that the automaker has secured $1.4 billion in financing for its shanghai factory. the deal comes as it prepares to begin deliveries of chinese made model three sedans. tesla is hoping the shanghai plant will help it build on recent momentum in the country. that is your bloomberg business flash. manus? manus: selina wang, thank you very much. let's dig into the u.s. a storyteller bit. consumers have powered the economy through 2019. you have had weakness in the manufacturing numbers, a pullback in business investment. they have all weighed in one way or another. the fed is currently on hold. a significant deterioration in the economy could force the central bank's and. let's take that proposition -- hand. let's take that proposition back. to our guest in london. ricardo evangelista from -- in london. ricardo evangelista from activtrades joins me now. i want to ask you why personal

consumption expenditure is the best in five years. home sales have had the best three months since 2007. so what is it that is going to propagate a rate cut, two rate cuts, in your view? domestic, or global issues, first of all? ricardo: i think that is both. starting with domestic issues, the american economy is coming to the end of the cycle. it is still growing. it is still displaying many signs of health and vitality. this cut is mainly driven by consumption. in the u.s., this consumption has been driven by credit. the levels in the u.s. are very high. we will have a for sure political pressure on the fed. it is not also real economy pressure from data that will be coming through the year of.

of0 the fed at the moment -- 2020. i think the data will deteriorate. data iso think that the going to deteriorate -- i always get nervous when i reflect back on data from 2007 and 2008. i do get nervous. there is one lady i pay attention to, catherine mann. she spoke to tom keene yesterday in the states. she says we have got ourselves all buoyed up on these rate cuts. take a listen. >> what is going to happen next year when the market expectation for federal reserve rate cuts does not materialize? because a lot of equity prices and a lot of other asset values and spreads are predicated on

additional. rate cuts they are predicated on that happening because that what the market has currently priced in. whicht doesn't happen, asset classes going to react to ,he most to the disappointment "disappointment" that the fed stays on hold throughout the year? manus: market bullishness is predicated on the assumption of rate cuts. you are in that camp. what if the fed stays on pause? what happens to the dollar? if the fed stays on pause, that sort of says things aren't too bad. does that because the dollar to ause ther --if the c dollar to roll over? ricardo: that will have a momentum effect on market sentiment and we are likely to see move towards risk off. ultimately, this will not be such good news for the dollar. there will be a balancing exercise between the dollar being supported by the fed not

cutting rates, but at the same time, the sentiment of investors risk-- the sentiment of off and this will ultimately be detrimental to the dollar. the risk of sentiment will prevail out of the two and we will still see some dollar losses. manus: ok, hold those thoughts. ricardo evangelista from activtrades stays with the daybreak team. we are approaching christmas and in the spirit of giving, we look at philanthropic businesses. shoe.says haiti on the >> based outside boston, earth shoe released issue maiden haiti. 100% of profits are being donated to reforestation in the caribbean nation crippled by natural disasters. >> we are so excited to be able to create jobs and keep the haitian people working and

putting money in their pockets. money people -- many people are unemployed in haiti. >> buy a pair, give a pair is the business strategy of companies including warby parker and tom's. tom's has donated 95 million shoes. over 4 million pairs of eyeglasses have been distributed through warby parker's program. business philanthropy is not just good public relations. >> if it is done in a good way and aligned with the company's well-being. it is also aligned with shareholder interest. that philanthropic airport -- effort could be considered an investment, not a cost. >> after the global backlash from the financial crisis, wall street banks debuted initiatives highlighting not just how much they give, but the causes and communities in which they invest. goldman sachs has invested in its 10,000 initiative, 10,000 small businesses and 10,000 women. the latter aims to close the

wage gap and grow local economies by providing access to capital, mentors, and business education of underserved women in 56 countries. , a businessmmunity imperative, is how jp morgan describes its corporate front the -- corporate philanthropy. advancing cities is a 500 million dollar initiative that focuses on the economic and data investment in small businesses come in cities including detroit, michigan. businesses in cities including detroit, michigan. as for 2020 -- >> i think it will be a pivotal year for companies increasing actions on environmental and social issues. howivotal, because companies react to certain galvanizing issues can be a business risk or an opportunity for companies to gain a business advantage.

bloomberg'swas viviana hurtado bringing the christmas thoughts of giving to life. affects volatility goes missing ahead of the new year. we investigate. ♪

♪ manus: this is "bloomberg daybreak: europe." the dollar nears a two-week high. volatility has gone missing in the currency market. here is our very own dani burger. >> global affects volatility has sunk to a five-year low -- volatility has sunk to a five-year low. all of them have dropped to their lowest levels since. . 2014 according to credit

agricole, this big drop off we have seen as of late has more to do with central banks on hold, not to mention improvement in u.s. and china trade relations. looking at this chart, the one big fear you might come away with into the new year is the sudden mean reversion and a pickup in fx volatility. manus? manus: thank you very much. never far from a mean reversion is a dani burger. ricardo evangelista is with us in the studio. are you looking for a mean reversion? if so, where does it come from? ricardo: i think we will be that will be20, packed with action. course, the, of election that will come in november in the u.s. looking ate the fed cutting rates at least twice. we will have developments in

europe as well. hopefully, europe will start catching up in terms of growth. many believe they will do so. of course, we will have the fiscal to develop a more policy based attitude towards kickstarting the economy in europe. therefore, i think that these are the great trends, of course tied together with what is going on in the trade front. the trade talks and disputes are going to stay with us for decades maybe between china and the u.s. i think how that goes will be a game of hot and cold come up and ld, up and down. that may also trigger greater volatility.

manus: if i told you this time last year that the riksbank would normalize and take the rate back to zero, what could be the biggest shock that happens? i am thinking probably from the ecb, is there any risk of a shock from the ecb 2020? if so, what does that do to the euro? ricardo: i don't think there is risk to the -- risk of the ecb shocking us with a rate hike in 2020. i think europe will be looking towards a path that will go along some sort of fiscal stimulus, rather than monetary policy. i think the ecb has pretty much done all it can in terms of monetary policy, asset purchases. we will be now looking at actions concerned on the political front. it is no coincidence that christine lagarde is now heading the european central bank. she is a politician. manus: thank you. ricardo's call on euro-dollar is

1.20 driven by dollar weakness. coming up, cuts and complaints. that could be 2020 -- compliance. that could 2020.

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♪ manus: good morning from bloomberg's middle east headquarters in dubai. i'm manus cranny. these are your top stories. new year's resolution. prongedveils a multi policy pushed to set its economy up for a stronger start to 2020. he paysusts its ceo as the price for a tumultuous year. se investigationc -- sec investigation. the german automaker comes under sales reporting

practices after fiat chrysler paid the price for a similar issue. ♪ it is "bloomberg daybreak: europe. the world" wakes up to the form of trouble -- wakes up to -- a little bit of slippage in the asian session. let's stack up your day's trading before santa claus arrives. singapore, mumbai, and london. juliette saly is looking at the naughty and nice. ejrandia, we have got n shah, an dani burger has a christmas surprise for markets. tell me what's not, tell me what's nice -- what's

naughty, tell me what's nice. juliette: we have seen these records on the msci all world index. if you dig deeper into the equity markets and how they have performed, you can see the csi 300, on my chart the purple line, is the best year today come up by about 31%. the white line is the s&p 500 index, which has arisen 28%. the yellow line is the 20% gain have seen for the euro stoxx index. a gain of 17% on the topix. we have seen the malaysian market down by about 5% over the course of 2019. manus? manus: thank you very much. good to see you. repressed volatility has been a theme we have been exploring and you have not escaped it in india. >> it's not. good morning to you.

11.8 or 12 will be amongst the lowest levels for the calendar year at large and certainly the lowest level since july of 2019. interesting, because we are at the cusp of the options and the futures expiring in a couple of days. typically come around this time it tends to pick up -- typically, around this time it tends to pick up. the union budget is expected to be very volatile. for now, volatility certainly down and not too many people will be complaining about it. back to you. manus: thank you very much. dani,s get to youani, -- let's get to you. talk about the tail risk hedges inthe u.s. >> volatility might be down in india, it is down in the u.s..

i have found the contrary in trade in the skew index, the index that tracks tail risk, black swan type events. we have seen elevated to a near december 2018 hike. high when you. have things looking eerilycalm and these hedges looking so cheap, why not get yourself a little bit of protection in this holiday season? manus: never far from a few dollars on volatility. thank you very much. great contributions. i enjoyed it all. let's see what 2020 brings us all. niraj shah with repressed volatility and dani burger. >> china is on a mission to create an aircraft carrier sized investment bank. the nation is opening up a $45 trillion financial industry but it also wants to beef up its own

players to go toe to toe with wall street giants. china's brokers don't have much of an international presence at the moment. the 130 brokers have about as many assets as goldman asked -- goldman sachs by itself. germany expects the nord stream 2 gas pipeline to be delayed but it should be completed in the second half of next year. the costs are rising due to u.s. sanctions on the project but only about 7% of the pipeline still needs to be laid. 2019 has been a good year for the superrich. added almostt man $17 billion to his wealth this year. $11 ma grew his by over billion. -- big winner of 2019 was billionos last over $13 -- lost over $13 billion.

global news 24 hours a day, on-air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus? manus: thank you very much. selina wang in beijing. let's turn our attention to the oil market. opec plus has come to an agreement on supply cut. adhering to those will be a real test. opec has pumped well below the agreed level so far. that is largely due to saudi arabia's overcompensation. non-opec adherence has tumbled to 61%. bloomberg calculations show the numbers and despite the recent productions, iraq has historically pumped more than russia and nigeria are also serial offenders. wallace has joined me in the studio in london, alongside ricardo evangelista from activtrades. it is a roundtable. good morning. you have created the rogue gallery in terms of noncompliance.

the saudi's have agreed to cut, but it is based on compliance. do you trust the deal we walked away from vienna with? >> no, not in the slightest. the problem here is that the countries that have the highest levels of noncompliance to some extent have a very strong argument. they are some of the most economically challenged countries in the world. they have a terrible civil strife problems. they need all the cash they can get. it is saudi arabia that the market is looking at. we have had early indications from nigeria, that meeting last month, that they would do more. iraq seems to be moving in the right direction. does the market believe all will suddenly snap into line? i don't think so. manus: so you don't think so. i suppose the question is this, what do they need to do, do you think, to reengineer some confidence in the market? what would change the narrative

for you in 2020? is that the demand side or the supply-side? >> i think it is more on the supply-side. we are looking at a further deterioration potentially in venezuela, iran, potentially nigeria, iraq. let's not forget that a lot of the heavy lifting was actively done by saudi arabia but a lot of it was done sorted by accident or mistake in the sense that production went off-line because of the tax, unrest -- of attacks, unrest. we are also looking very carefully at the shale industry from the supply-side. the u.s. is the biggest producer. it is redrawing the way the u.s. is thinking about geopolitics, particularly in producing regions. we are looking at evidence that is sustainable into next year. and that they can keep production going at that rate in the u.s. manus: we will come back to the

price target for saudi arabia because that is quite surprising. let's bring in ricardo. you have a view on oil. you predict higher prices going through into next year and yours are predicated on the demand from em. where do you set the benchmark for oil going into 2020, given what stuart? has just outlined? ricardo: well, i think if we get to a price of consistently priced -- a consistent price of $65 come around that mark, per barrel, -- $65, around that mark per barrel, it would not be surprising. manus: in terms of the fx then, if the, t worst global manufacturing is -- is that what breaks the $65 for brent tostently for

stay above there? ricardo: well, of course. thehe global economy -- if global economy's outlook becomes more positive and we see consistent growth across the board in developed economies and also in emerging economies, then of course oil price will be pushed up, will be supported, and so we will be about $65. -- above $65. that is my base case, above $65, mainly driven by emerging economies rather than the developed economies. manus: let's just rounded off with you. that will make the prince quite a happy man. think thatent do you the aramco ipo pushed them to do the shock and awe? give me the sentiment? >> i think happy is a strong

word. fine, but not enough to break even on their budget. at a time when they are trying to turn the entire economy around after several decades of one system into something a bit more strident, a bit more industrialized, they are going to need a lot more cash in the bank. the aramco ipo certainly has not provided. we think the ultimate international listing this year and equity sale are pretty unlikely. manus: thank you very much. stuart wallace and ricardo evangelista stays with us. we've got more value to extrapolate from activtrades. coming up on the show, it has been a rocky year for the u.s. ipo, marked with some major pitfalls. we will get more on the story next. this is bloomberg. ♪

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manus: it has just gone 6:43 a.m. in london. it is "bloomberg daybreak: europe." it has been a roller coaster year for the u.s. ipo market. ,ework, a wash in the red think k, has seen in its evaluation slashed and ceo ousted. in 2019, the class of ipo's includes a number of so-called unicorns, including uberl,yft, pinterest, and yet, those shares have hit the skid. joining us is dani burger. >> one thing we have seen, remember the good old days when you had companies like microsoft that would wait until they were profitable before ipo? now you are getting these companies who have yet to turn around a profit. over the past two decades, we

have seen investment banks undertake the -- overtake the underwriting process. these massive banks have a higher risk tolerance. at the same time, you have companies like uber and tesla, they tend to have unproven business models and unproven technology that is really difficult to price. often, that means that investors can get the valuations wildly wrong. long -- manus: when they are wrong, it can be fairly tragic. wire investors willing to pay such high prices for these companies? >> it is a strange phenomenon when these unicorns debut and are priced much lower than when they were private. last week, a private equity manager told me she thinks it has to do with the value that a private manager brings being hands-on with a company. the cofounder of the world second-biggest hedge fund thinks it has to do with the allusion

of -- a private company has. investors cannot tell how volatile the shares actually are. once they become public, they see the day to day trading and swings that come with it. you have this irrational biasvioral bias -- leading to this phenomenon where -- where a public company trades under lower value. manus: tougher the unicorns in theica -- tough for unicorns in america. sterling and u.k. stocks surged in the wake of election results 11 days ago. the pound is at least the -- hitting a realization that a hard brexit is still a risk. is pre-election

level against the dollar. it slipped beneath its 50 day moving average for the first time in more than two months. ricardo evangelista is from activtrades. he joins us in the london studio. if i was to look at cable, the longest decline since may, is this a reality check that 2020 is literally a graveyard of brexit risk? ereardo: many investors w under the impression after the election that it would be a smoother ride. after the election, many people expected boris johnson to adopt a more positive and flexible stance, in terms of perhaps extending the transition period, in having a more constructive approach towards a dialogue with the european union. we have already seen the early signs of what appears to be the opposite of that. boris johnson is adamant that there will be no extension to

the transition period, he's been quite tough and some of the ways he has spoken about the future relationship with the eu. therefore, the sentiment has changed. that positivity that followed the election has been replaced by the realization that as 20 20 progresses, there will be more downside risk for the pound. is still very much a possibility in december 2020. the political uncertainty regarding brexit is gone. it is definitely happening on january 31, however, the economic uncertainty over what the impact of brexit will be is still here. manus: that's what you lean into really in your notes. this is where i want to draw some sense. this is where i want to draw some sense. you lean into the economic uncertainty and economic downside. so you are on the downside. where does that take me to in the near term? how quickly can i see a

dissipation in the value sterling? standard charter says there is a 1.40 by the end$ of 2020. $1.40 -- climbto to $1.40? ricardo: downside is, if there is a hard side brexit at the end of 2020, if there is no extension to the transition peri od, and no trade deal is in place with the eu, we could be looking at $1.10. it from then onwards. manus: ok. what would need to happen for me to get to $1.40? is your a hard brexit call. you find it hard to get to $1.40, even on the resolution of a trade deal? ricardo: i think an extension on wouldransition period

definitely support the pound. an extension on the transition and constructive discussions, more positive signs come from the u.k. economy, that could support the pound to the $1.40 level. manus: thank you very much. ricardo evangelista stays. with us coming up, boeing's ceo is out. intake a look at the shakeup your morning call. this is bloomberg. ♪

manus: dennis muilenburg has been ousted as the chief executive of boeing. it is a shakeup but is it enough to restore the streets confidence in the firm? your morning call with dani burger. is it?

>> according to cohen, it is. your morning call with dani they think this will restore confidence. the analyst says he's not sure what changes the incoming ceo buckingham says it's odd to have a new ceo in the middle of a crisis. investors might be expecting too much too soon. jeffries sounding a bit more saying this change was necessary to restore confidence with both regulators and customers. manus: thank you very much. dani burger there with your morning call on boeing's stock. we are heading into 2020 with what somewhat say is the biggest risk in the global economy passed. hank paulson says any future financial crisis is likely to have its origins in the u.s. he spoke to david rubenstein. >> lehman was on the verge of going bankrupt.

you did not have the authority to save lehman at that time. in hindsight, is there anything you could have done differently with respect to lehman? >> boy, i tell you, i don't think there was. we tried everything we could to get a buyer. lehman was an even bigger problem then bear stearns, because they are insolvent, there was a big capital hold. wase was no way that a loan going to solve the problem. it took capital or a loan guaranty. >> ultimately, the banking system and financial system came back. as you look at the system today, could something like that happen again? with the legislation that we now have, are we better able to protect against something like that? >> our financial system is much stronger than it was, banks are better capitalized. it is much less likely to start in the u.s.

sh to startss dry bru a fire. i hate to say this, but we have less authority today than we had then. the number one problem we had then, the number one problem by far was we had a financial system that had outgrown the regulatory system. our regulatory system and authorities had been put in place after the great depression when there was a run on banks. we had a situation where 60% of the credit was flowing outside in the -- outside of the banking system. manus: that was hank paulson with david rubenstein. ricardo evangelista is my guest from activtrades in london. hank says the problems won't come from the u.s. what worries you the most globally in 2020 and which trade with do i protect myself for the risk? ricardo: i think the great issue of our times remains the trade

issue. situation,ical atypical scenario -- a typical scenario where the existing power enters a conflict with an emerging power. this is the u.s. and china. this will stay with us perhaps for decades. i know we now have a phase one sort of trade deal. we may get a phase two. i'm optimistic for 2020, but i think overall, the trade issue remains the biggest threat to the growth of the global economy 2020.n manus: what is your top hedge for that risk? ricardo: i would say that dollar-swissd franc are good hedges for that risk. ricardo, thank you very much. great to have you on board as a guest.

enjoy the christmas festivities. from me in dubai, that's it for 2019. we are going to do it all over again in 2020. have a great christmas. ♪

>> welcome to bloomberg markets: european open. the city of london, the cash trade is less than an hour away. ♪ investigation, under scrutiny for sales reporting practices just months after fiat chrysler paid a penalty for a similar issue. the other trade war, leaders from japan, china and south

korea met at a summit today. investors look for signs that tokyo will relax its control. and boeing ousts its ceo. david calhoun faces the daunting task of rescuing the 737 max and the plane makers reputation. how much ground will airbus gain on its rival? good morning, just an hour away from the cash equity trading day in europe, december 24, we know what that means. not a great deal of volume expected in the markets today, and this is what we see in futures. fairly flat coming through, no moves at all really expected at the start of the trading day, but we will be here in case there are any. does look at u.s. futures as well and see where we are on that particular side of things. the s&p 500 closing at its highest for the eighth time in nine sessions yesterday, such has been the strength, the run of gains we have seen in u.s. markets, and also in the futures

markets. we are not seeing a great deal at the start of trade, but the dow got a boost yesterday at the start of trading from the boeing news. we will have analysis. let's look at what's going on in the asian session. gains have been fairly muted, we are kind of treading water. some strength in the chinese market and singapore market. the malaysian equity market a little under pressure. yesterday we saw chinese technology stocks being sold, but today things look calmer and we see gains coming through on the csi 300. in the fx markets on the russian ruble, despite expectations to the contrary, this has been something of a strong point for emerging markets fx, the russian story. the ruble up 1.3% in today's session, a leader in 2019 despite the sanctions environment and headwinds from oil prices.

russia cut back on oil production along with opec. we will pick up on that conversation through the program. that's what we have in fx for you and the broader picture for the asian session. but as i say, it is december 24 so we are not expecting much volume in these markets. let's get a first word news update. >> the leaders of japan and south korea holding their first formal meeting in 15 months. it is in a bid to end a long-standing historical dispute that has hit trade in the region, and comes at a trilateral meeting between tokyo, seoul, and beijing. for regionalng cooperation in dealing with north korea. the fed may be doing more to calm the retail market the on liquidity injection. the amount outstanding in its foreign reserve has shrunk 18% since mid-september, that's where other central banks can now part with cash, they are

adding reserves and the banking system and may reflect a shift in foreign central-bank behavior or maybe a self policy set. residents are looking for apartments in other parts of the protest antigovernment look to drag into next year. real estate brokers have seen a surge in interests over the past few weeks. among the popular destinations, australia and canada. year forbeen a good the superrich. almostrichest man added $17 billion to his wealth this year, and jack ma grew his by over $11 billion. the big winner of 2019 was anand connor -- was someone whose wealth grew by over $30 billion. jeff bezos lost over $13 billion. global news 24 hours a day on air and on quicktake by

bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> thank you. china is stepping up measures to support the economy in 2020, a multipronged policy drive. the government will continue to lower the amounts that banks must put aside as reserve for a rrr rate. this after yesterday's announcement of a tariff cut worth $400 million aimed at the mystic consumption, allowing more -- domestic consumption, allowing more pork, for example. let's get our chief fx strategist who is kindly joining us on the 24th of december. let me ask you expectations for the trade story. we got quite excited in november in december at the possibility of a phase i trade deal but we haven't seen much detail. the phases as though

i trade deal was invented to make up for the fact that we don't have a full trade deal, so the phase one thing is an interim measure to give us an indication of progress, and then stalling and slow moving and being confident is this coming -- it is coming through the end of the year. i expect we get it signed and sealed and then conclude this aase one deal was not much of deal, that the real trade deal is what matters. then we go on talking about all next year. anna: yes, all next year. there are some concerns markets have in 2019 about the difficult points on the agenda, international property, state support for old industries. they have not gone anywhere. kit: they are difficult. timetablelectoral plays a part, if president trump wants to declare a, all-encompassing trade deal, if he does it now, he needs to show

some benefit between now and next november to encourage his base that he is winning. it is easier, and the temptation must be, and less he can get a fantastic deal, to continue using his willingness to fight the good fight on behalf of working america as part of his reelection plan. the longer you don't get something, the more likely it is that you don't get it until the next presidential term, and i ,ear that is the base case now the phase one deal is a good steppingstone in that sense but it doesn't get in the way of the bigger picture. anna: how much self-help should we expect from china? i spoke to someone at citi yesterday, and she suggested that the market is may be surprised at the lack of action from the chinese authorities to stimulate their own economy, because some of the slowdown in china is to do with the trade

war but some of it is domestic policy, things they are actively doing to deflate bubbles, for example. we have the expectation of rrr cuts coming. they have cut the rrr quite a few times, they have a more complex range of policy tools available to them in china. what do you expect a c from the chinese? kit: more on monetary policy rather than fiscal policy. they shifted back to monetary policy measures. they spent a long time getting control over the capital control system so they could keep control over domestic financial conditions, and now that they felt they have done that, they have an experiment with letting the currency weaken a bit, they have put it back in the basket during the trade talks, they have little rate cuts along different parts of the yield curve to affect housing and borrowing. i think this is a work in progress and we will see more of this. i don't think the chinese think they can stop the economy

slowing steadily further, because they don't want to just dangerous asset bubbles, housing bubbles, but they will be more activist and monetary policy through next year. look,world, that means with a good trade deal and a good trade deal entities in u.s. economy that performs well, maybe dollar yuan will be the most boring currency next year. anna: sometimes boring is ok, isn't it? you, kit is staying with us on the program. a german automaker being probed over u.s. sales reporting practices. remember that bloomberg is available on digital radio in the london area. this is bloomberg. ♪ ♪

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european open. , 8:11 in1 in london paris and berlin. stock stories, one in particular caught our attention today, bmw being probed over its sales reporting practices just months after the regulator extracted a fee from fear thing. >> we will see what happens with the investigation, whether bmw gets a similar fine, but as you say, is about sales reporting practices. bmw says they have been contacted by authorities and are

participating. the issue here might be having to deal with dealers. they have criticized bmw for pressuring them to buy vehicles in order to loan out to customers getting their cars serviced. if that is the case, we might see inflated sales numbers. what is at stake is the lead over mercedes and terms of luxury car sales in the u.s. this year, they were able to clinch the lead over mercedes, which for the past three years has sold more than bmw. there is something funny going on with the reporting that the theys targeting them, and may drop behind mercedes in terms of cars sold in the u.s. anna: thank you, we will keep an eye on bmw with that in mind. you can get all of the latest stock stories from our equities team going to first go on your bloomberg and via the mobile app. the end of 20 19 some change of the european central bank, but will it lead to a change of policy? itistine lagarde said that will likely remain on hold next year as it conducts its first strategic review and several years. kit is still with us.

a strategic review at the ecb, what is the purpose of that? kit: i am genuinely not quite sure. what will be looking at is, should we change the inflation target, what should we do differently, how do we change our role and decide what we do? is somewhat of a sheriff with no guns or ammunition talking about what his job should be viewed the answer is get a new gun and -- should be. the answer is get a new gun and ammunition. the challenge is they have very little they can do, so what are they going to do in a review that changes that? need is to tie monetary and fiscal policy together in terms of both being usable at the same time. i'm not sure the review will cover that. anna: we will come to the fiscal side in a moment. i wanted to show you this chart, five-year inflation, much

beloved by mariota draw a -- mario draghi. should we detect higher inflation expectations on the right-hand side of the chart? is that reading too much into what has been a fairly range bound past? kit: we have been the squiggly line going sideways for quite some time. the good news is the big decline is over. there has been, for example, tightness in the german label irket -- labor market, but would be amazed if we didn't see in germany now that the unemployment rate doesn't go up as much as you think but that there is more and more willingness to have people work reduced hours and a much less aggressive wage demand from the unions at the beginning of next year. the sort of things that feed into inflation in the european economy, which sort of some --

sort of protects itself from the extremes of the economic cycle. the effects of this year's trade weakness will be felt next year in a big way. how do get significant inflation against that backdrop really? trade it, i would be selling at a five-year inflation rate. anna: we were just hearing about the travails at bmw and that whole sector is troubled, isn't it? euro, as webout the don't have that long with you, and this being your area of expertise. i feel that j.p. morgan is saying they see gains in the euro in 2020, they say it is relatively cheap, an element of global reflation, and they see loosening fiscal policy. what supports the euro in 2020? kit: it's like an elastic pulled as taut as you can get.

right backms, we are down where we were in 2001, 2002. what supports it is the u.s. economy pulling the dollar up, and european sentiment is about as low as it can get, so you can go down, but the u.s. economy could do better than people expect. what will send the euro up is that there is too much optimism, particularly in the united states, about how much the u.s. economy can grow next year. we could mess around -- this will be the euro's smallest annual range by miles unless we in the next week. anna: thank, kit. he stays with us a little bit longer on the program. also, our guest says the economy is in a good place going into 2020. we spoke to him about his

outlook for the u.s. economy. when you are traveling to work, tune into bloomberg radio on your mobile device in the london area. this is bloomberg. ♪

♪ welcome back to the european open. 7:30 in london. this is what the futures tell us, were not expecting big moves because it is december 24. last christmas eve was fairly eventful, so we are here just in case. the boston fed president think the u.s. economy is doing fine but he is concerned that the central bank has been unnecessarily accommodating with its recent rate cuts. onsat down with mike mckee november 18. >> we are close to inflation target, core pce's off where we wanted to be, we wanted to be at 2%. the unemployment rate is quite

low, by historical standards. gdp is growing roughly and what we would expect, which is around potential. in terms of economic data, the outcome has been good. >> chair powell said last week the economy is in a good place. would you agree with that characterization? >> i think we are in a good place. the composition has been different than we expected, we expected business fixed investment and exports to be stronger, we did not expect consumption to be quite so strong. the imposition of the tariffs and global slowdown resulted in both exports and business fixed investment weaker than we would have forecast. consumption has picked up and been quite strong and we expect it to continue. >> you think it would've been that way without the fed rate cuts? you consented -- you dissented on all three of them. >> we would have been softer in some areas, residential investment looks like it is picking up. one of the challenges is thinking of what the side effects are of very low interest

rates. there are two side effects i am continuing to worry about. one is how much room we have if we actually do get an actual slowdown as opposed to a concern about a slowdown. in that case we don't have much room before short-term interest rates would hit zero. the second concern is the stock market has been quite well -- has been doing quite well, other areas have been a few and, is this the stage where you want more push to financial markets, and i would argue i'm not certain that is necessary. bothu made your point on of those in a speech last week in oslo. first, you are saying the fed is almost out of ammunition? >> i'm saying we don't have as much room as we had before. prior to the last three easing's, the fed funds rate was close to what i would expect to be as neutral over the longer run, 2.4%. since then, we have reduced the federal funds rate by 75 basis points. given the level we were at, that

was a substantial amount of easing. both monetary policy and fiscal policy are accommodative right now. i'm not so sure we needed quite so much accommodation at this time. i am a little worried that we have less room than we otherwise would have if we were to have a big negative shock. but i would say is not just the short end of the markets or the longing of the market, it has been fluctuating between one point 5% and 2%, a lot lower than what we were experiencing prior to the last recession, which means even quantitative easing will have some limited effect given that that could get down to zero more quickly than we are expecting. >> what do we do? >> we will need fiscal policy at that stage, fiscal policy in a low interest rate environment, and it becomes a much more important tool. in the talk i just gave, it also highlighted this is a time when we should be thinking about buffers, including buffers for capital ratios for banks and general fiscal policy, you like

to have more of a buffer, state and local government, to have a buffer so they can weather the storm and hopefully not have to cut back if we had a recession. >> you look at what is happening in washington these days, there's no guarantee we'll get any fiscal policy, so what would happen then? >> we would have a longer recession than we would prefer. anna: that was the boston fed president speaking to mike mckee. as we head toward the end of the year, kit is still with us. a good place seems to be the phrase the fed has landed on. do you think the u.s. economy is in a good place? kit: it is a nice place. i think it is slowing on balance, slowly. i think the economic cycle has been revived in the last 12 months in the sense that we started seeing the u.s. they were market run out of people, we saw some wage pressure from bits of it. the fed raised interest rates and the corporate earnings cycle rolled over, and the earnings cycle has still been rolled

over. that i think defines the economic cycle. when you have no pressure on earnings. but it is now going down. i'm not sure you can stop going down unless you do something dramatic and i'm not sure anything is dramatic enough. i think we will see disappointment in the u.s. economy coming from that. arguing that you have to have fiscal policy to make the next move, that will not happen in the u.s. anna: it is a global topic. is in thedollar heads mix and that matters to emerging markets. a couple of emerging markets just briefly, the best-performing em currencies, the russian ruble and the thai baht, the thai baht is interesting, the thailand government has said they have narrowed their inflation target from 1% to 3% next year, that is pretty low for an emerging market. kit: thailand is a success story

on policy management to a huge degree. 1990's,back to the mid- when the financial crisis hit thailand really hard, they pegged themselves to the dollar, they had massive capital inflow, they built resorts and casinos and fire the people that ran the central bank and had a disaster. now they have a sensible monetary policy and inflation under control, a big surplus, and the similarity in that sense is with russia. what you want this year, any year of weaker global growth, with some emerging markets being irresponsible, you want an independent inflation targeting central bank and then you are in great shape. anna: that is the secret to success. kit: that is russia, the thai baht, the opposite of things like, i don't know mother turkish lira. anna: really good to see you this morning, kit. enjoy thelease you to

rest of his december 24. coming up, boeing going wrong. the american playmaker ousts its ceo to restore confidence. more on that, next. ♪ here, it all starts with a simple...

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>> welcome back to the european market open. let's check on what you need to be watching out for today. we are live with a couple big stories you should be aware of. european futures are pointing to a slightly positive open in a shortened trading day before christmas. in the get details later program. a couple big stories. in the japanese capital, trilateral meetings between china, japan, and south korea. government'san decision on motorway concessions. let's talk about what is going on in asia.