>> good morning. these are today's top stories. holiday cheer. an amount -- amazon buys itself on the nice list. record seasonal sales helping to propel the nasdaq to a record high. rally.ted china's industrial profits rebound. will a phase one trade deal boost sentiment even further? and bargaining chips. the times reports that the eu will use the city of london's access to markets as leverage in

a post-brexit trade talk. ♪ matt: good morning, let's take a look at what you need to know this morning, starting with gold. it is on track for a fifth day of gains. let's look at the nasdaq, why don't we? year-to-date to date, hitting another all-time high. there you see gold. actually down this morning. if it rises, it will be a fifth straight day. interesting to look at u.s. treasuries right now. we do have a story out on the

bloomberg where michael kelly from pine bridge investment expects it to be up to .5% in the spring. almost $100 billion. have to listen to what he says about the 10 year yield. in asia overnight we see gains in european futures. tech shares is really the top headline. amazon was among the top performers. it reported a record-breaking holiday season. bloomberg's index of consumer comfort hit a nine week high on greater optimism about the economy.

what do you think about all of the good news we have had on tech in the holiday season? haseems like the growth expanded at a record pace. if we jump back 12 months ago, we were very bullish on the start of last year. fiscal policy has seen a significant easing. this combination of monetary and fiscal easing together is very rare. that combination is the reason we have had this rapid market.

the nasdaq started a decade ago at 1000. matt: is that underpinning the consumer strength that we see here? everydaym line is your consumer going out and spending money that has boosted the tech stocks. >> absolutely. ago, jump back three years the american consumer is the significant leader here. saw a deterioration in trade. the wages and the employment structure is exceptionally solid. three years ago, the trade was jumping to $51,000. that is the reason why we have

solid consumption and numbers. could you see stocks rising further? ratio oning at the p/e the nasdaq. it is already pretty rich. mentioned, it is over 9000. up 35% year to date. amazon or apple going to power the nasdaq to even higher highs in 2020? last 12n see that the months, significant stocks and tech stocks in particular where the key winners. we may see rotations. there is absolutely no reason to be bearish. every single factor we look at from a macro perspective is actually bullish. this is one of the factors why

we have this run-up. investors have to purchase. they have had a defensive posture. people are going to have to invest. we are going to continue very solid gains during the first quarter. our outlook for the next quarter is solid double-digit concerns. i was talking about michael kelly from pine bridge, his call on treasuries. it, does thet negativity cartel break in the spring? what do you think about that chorus of economic bearishness we have been hearing throughout 2019? where do you see treasuries? >> absolutely. i would totally agree.

the key issue is, if we have to flip at the other way, if we see lower yields, there is a major problem. we have to see higher yields. asset price performance. the economic performance. the economic stability that is now appearing. higher yields is what we have seen. we could have a bullish equity environment. and slightly increase in interest rates. that will make us more bullish. we don't want to see 100 basis points higher. but 30 basis points higher over the next six months, that is a very positive signal for us to look for. matt: we will keep you with us. let's get the first word news. >> in israel, prime minister

benjamin netanyahu has fought off a challenge to his leadership. likud party the into its third election of the year. he has recently been indicted on charges of bribery and fraud. the eu may threaten to block the city of london's access to markets. this comes with post-brexit trade talks. the e.u. will use the threat as leverage. hong kong is bracing for more disruption into the new year. that follows protests over christmas leading to clashes between demonstrators and riot police. more gatherings are scheduled for today all you major rally. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries.

coming up, the u.s.-china trade-off has been one of those toys that has dominated markets for years. heading into a presidential election. are we expecting a complete trade deal and 2020? we will discuss further. this is bloomberg. ♪

>> until such time as there is a deal, we will be taxing the hell out of china. >> we have made tremendous progress. >> we are now working on a new trade deal with china. real, must include structural change to and unfair trade practices. >> the biggest deal ever made. >> this is the granddaddy of them all. >> it would be historical.

we are totally open to it. >> we have a long way to go. we are talking to china about a deal. i wish they did not break the deal that we had. >> they are very much want to make a deal. we will see what happens. >> i think they want to make a deal. >> we will do the deal. let's get it done. we are looking for the big deal. we have come to a deal. pretty much subject to getting it written. if we do not make a deal we will substantially raise those tariffs. we have come to a substantial, phase one deal. the idea of, i like waiting until after the election. be finalized over the next couple of weeks. we made a great deal of china. matt: president donald

trump talking about the u.s.-china trade relationship. that has been at story that has dominated the relationship this year. world's two largest economies agreed to the first phase of a broader trade agreement. that will reduce tariffs. escalationars of an in the trade war between those two countries. year take a look at the that has been in trade. we have seen president trump's view of the trade deal change over time. but we get it. what is the view from china? >> china is happy to have this phase one deal. they have always wanted the kind of deal where they could buy a lot of goods from the u.s..

they have always wanted this. they have seen it fall through a number of times. it is hard to believe president trump. that he would take a deal. it has been hard for them to finalize this. they have wanted a deal. their economy is growing at the slowest pace in two decades. from their perspective, putting a lid on the trade war, it allows certainty for businesses that are investing. including many that are now considering options in southeast asia. now can put a lid on that and work toward these bigger issues that are coming up in phase two. matt: what are the next steps

int you are looking for here the phase one trade deal moving 20 days to -- two? >> the phase one deal is just to see where it will be signed. china said their president would not be going. it could be the trop tate -- top trade negotiator heads over to washington. we expect something before then. then it is a question of when they start the phase two trade talks. intellectual property rights, competition with phase one

enterprises. industrial policies. government support for various industries. all of the things that are fundamental to the chinese political system. the hard issues that will be tough to find common ground on. there might be a deal on this before the election. china is happy to put a lid on everything at the moment. thank you very much. what do you expect from 2020 from the u.s.-tried -- china trade relationship? martin: the uncertainty will

dissipate quickly. there is a tremendous multiplier effect. the u.s. and china are a record 43% of global gdp. picklitical leader once to between trump or xi, they prefer to have a relationship with both. this is not just a u.s.-china deal. we have a mexico-canada deal. a european-japan deal. tpd. the u.k. is going out into the world to make trade deals with america and asia. there is a significant multiplier effect. matt: are you concerned about

the u.s.-eu trade relationship in the coming year? martin: to a certain extent. but i think the rhetoric will be de-escalated. this puts a significant focus on supporters and leaders who are in the front seat of these deals. action thatolitical we will not see in the markets this year. we could see the reverse. matt: where do you think we will see the biggest benefit? if you get a u.s.-china trade deal, all boats will rise with the tide. which have been held back the most? when you have politicians driving policy, it

gets very troublesome. once politicians start getting the traction they desire, that feeds rapidly into the corporate sector. theas underinvested over last 18 months because of these blowups. investments will be a key growth driver this year. the corporate sector should be deployed in investment very rapidly in 2020. our guest will stay with us for the hour. right now let's get the boom blurred -- bloomberg business flash. elina: amazon surging after reporting record holiday sales. including tens of millions of amazon devices. the commerce giant did not release significant -- specific details.

apple is set for its best year in a decade. stocks up over 82%. that gain is more than the market cap of all the five companies. it has been helped by positive holiday spending. tiffany's is reporting a rebound in sales in the run-up to christmas. bought. brand is being by over $16 million. the recovery comes after a decline in profit in the nine months through october. that is your bloomberg business flash. matt: thank you very much. coming up, gold gets its santa claus rally. breaking through $1500.

we will have your chart that matters, next.

matt: i am matt miller here in berlin. gold prices have been in a tear in a post-christmas rally. here with your chart that matters is dani burger. back about $1500. gains were slightly weaker today. we are surging above that level. rallies, so does equities. rarely do they move in tandem.

i did not bring a correlation chart for you because i know those are not your favorite. the reason investors are doing this is because they perceive gold in the new year. matt: thank you very much. . i always find you can mess with correlations to tell the stories that you want to in terms of charts. why do you think we have seen this rise in gold? >> the recent leg up is a region -- recent catch up to the global liquidity we have had.

we are seeing a significant catch up. is the topnk gold trade of 2020. where do you see the biggest gain in central banks balance sheets? we have already seen assets triple over the past decade. everyone is doing a lot of buying. whether that is with matured .ssets or new purchases martin: i think we have seen significant rate cuts this year. central banks want to step away

from rate cuts. negative interest rate structures. liquidity will be a serious issue. we will see the fed, that ecb, and the chinese bank have liquidity measures. this liquidity issue will increase central bank balancing. that is behind the gold factor that we have at the moment. rises,sually when gold inflation has been a concern. is inflation coming back in 2020? martin: i doubt it.

the structurally forces that are discretionary. very good news. it will be a very big surprise if we see an inflationary uptake. there inflation rate in 2020 is tracking to 1%. the u.s. is relatively close to 2%. we are not seeing any inflationary stress in the system at all. we will keep you with us a little bit longer on this friday morning. coming up, the city of london could be a key bargaining chip for the eu in the next round of breasts it -- brexit negotiations.

latest and look at what 2020 has in store. this is bloomberg. ♪

matt: good morning from berlin. i am matt miller. this is "bloomberg daybreak: europe," and these are today's top stories. amazon finds itself on the nice list this christmas as the e-commerce giant reports record seasonal sales, helping to propel the nasdaq to a fresh new high. asian equities and futures also gained. china's industrial profits rebound amid signs of stabilization in the world's second-largest economy. will the phase i one trade deal boost sentiment even further? and a bargaining chip. the tamped reports the e.u. will use the city of london's access to markets as leverage in

post-brexit trade talks. we have global markets coverage from singapore. here with our global markets coverage is bloomberg's juliette saly. she is joining us. niraj shah as well as dani the worldoking around this morning. let's kick things off with you in singapore. you are looking at more encouraging green shoots in asia. matt.te: that's right, you mentioned the industrial profits in china. last week, we had encouraging signs in the first when the days of exports out of south korea. i am seeing encouraging signs in the retail space. have a look at my chart. the white line was the rebound in retail sales in november, up 4.5% month on month.

slightly lower than estimate but retail sales slumped due to the introduction of that sales tax hike. we are seeing the yearly decline of 2.1% still, the introduction of the sales tax hike likely to take some shine off japan's economy in the fourth quarter. bloomberg economics expecting a quick rebound, saying japan -- seeing japan avoid a recession. matt. matt: thanks very much. let's get over to niraj vr bci. -- the r.b.i. says it will buy. how big of a surprise is this to markets? niraj: matt, good morning to you. to a lot of people who probably get this right, when the first instance happened, that was not the only one. there would be more surprise. the pace at which it has happened caught a few people by surprise, but mind you, the

reaction as a result of that is 6.8, it is high of currently at 6.5 zero. mind you, this is despite the news coming in that the divestment target might be missed. it is harder because of the fiscal stress. most people are staying with the reserve bank of india. it might be headed lower. nejra: -- manus: thank you very much. dani, you are looking at the volatility gauges paired what are you seeing? dani: europe's volatility in the large-cap space is sinking. the vix is nearing single digits, at about 11. that is half of its level back in september, so this is nearing the lowest in two years just about, but the ominous thing about this chart is we have to keep in mind volatility in itself is mean reverting. the past two times, and dropped to that 11% level, we saw it spike up shortly after 1.2 years

ago in january. that was a spike up to 35%, so some might be due for the new year, matt. dani burger out of london. niraj shah joining us out of mumbai. juliette saly out of singapore. thank you so much for that. let's get to the first word news out of beijing and selina wang. in israel, prime minister benjamin netanyahu fought off a challenge to his leadership. he won a landslide. he will lead it into israel's third election in less than a year. the challenge came amid a corruption scandal for the prime minister. he has recently been indicted on charges of bribery and fraud. at the federal reserve took $18 billion of bids in its 14 day repo operation, the third straight time for the sale that has been under subscribed. balance sheets are nearing capacity or that those who need

year-end funding have already secured enough. from japan's state broadcaster. it mistakenly issued an alert saying north korea has launched a missile only to retract it a few minutes later. it is the second such error in as many years. the mistake highlights the increased tensions in the region. it will use the holiday season to deliver a "first miss gift" to the u.s. -- "christmas gift" to the u.s.. 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. wang in beijing. now, as the deadline for the u.k. to leave the e.u. comes closer, the focus is turning to the next round of talks over their future relationship. the city of london will be an important bargaining chip for the e.u. according to a report in the times. brussels will threaten to block the city's access to european markets and put up barriers to

personal data sharing as well according to the paper. that is part of a strategy to demand britain aligns with e.u. regulations and meets a tight timetable for brexit talks. martin malone, chief economic advisor at alphabet is still with us. does it seem that brussels could really cut off london to the financial markets of europe? i think it's virtually impossible. int companies that are europe and european companies use london from a financial point of view. globally, most companies use europe and there no real competitor. frankfurt, midland, that can take over today from that, because we don't have a banking union and we don't have a capital markets union. it is still a work in motion in europe. i think that is a threat if

those factors were in place but we are a long way away from capital markets. matt: and how detrimental would it be to european financial markets if london was all of a sudden cut off? negotiations a employee. it would be very detrimental. and i think that is a very low risk factor. it is a negotiation ploy. the next six weeks, both in europe and in the u.k., they are trying to set out there play for the trade talks, especially in the first six months of the year, before that in july. the key date of no transition from december 2020. matt: there is a lot to negotiate in a very short period of time. do you think it can be done, martin? martin: quick answer is yes. europeans are going to use may

be the same team that they used on the brexit negotiations. will be a lot different. they are resetting the entire cabinet office, civil service. it will probably be around 4000 officials in wt minster that will be driving these talks and a core group in downing street among the capital office will andthese talks as well, they have got a very clear focus thinkting it done, and i basically on october 15, to the last european council meeting, macron said most people got to boris johnson wrong, and i think they do have the upper hand in getting this deal done this year. matt: u.k. stocks have really under par weren't -- underperformed in 2019. do you expect them to play a little catch-up this year? martin: yes, besides the brexit talks, the prime minister, boris

johnson, can such a very, very ambitious economic agenda. leveling off is a global factor going on at the moment. we see it in japan. we see it in china. we see it in america. that is basically reasoning lies asian -- regionalization. theerty was five times northeastern center of england. now, it is 15 times. and we need to see an employment , wages, productivity, investment really being regionalized, and that will be a key focus of the new u.k. government with a very, very strong mandate to push regionalization. matt: we will keep doing this a little bit longer. .he chief economic advisor our guest cohost for the hour. record rally. apple hits an all-time high. more on what is happening with tech stocks, next. this is bloomberg. ♪ ♪

matt: this is "bloomberg daybreak: europe." i am matt miller in berlin. good morning. here is what you need to know today. apple shares have risen, hitting the latest in a series of record highs. the stock rose 1.6% again yesterday with early reads pointing to strong sales over the holiday season. it was not just the end of the year that was good for the tech giant. dani burger joins us now. dani: i am not sure if you were gifted any apple this year, but a lot of people were. apple products, air pods, iphones were all on the top must have gifts for this holiday season. because of that, apple continues to hit record highs yesterday after the post-christmas rally. that means that your today, apple has gained 80%. that is its best returns in a decade. in 2009, it gained more than 150%. but of course, that was a

recovery from a crisis era low. this time, it was already gaining from some pretty high numbers, so apple having a fantastic year, and it is not just apple. it is all the same stocks. amazon having a post-christmas rally. faangs,k at the their revenue is more than 5.2 trillion dollars, giving them a market cap better than the gdp of the u.k. and france combined. matt: thanks very much for that look at apple. let's get the bloomberg business flash. we go to selina wang in beijing. selina: thanks, matt. amazon surging after reporting record holiday sales. it shipped billions of dollars including tens of millions of amazon devices. the giant did not release specific sales but it's statement backs a broader report that shopping picked up this year. mastercard reports says u.s. sales rose 19% this holiday season.

tiffany is reporting a rebound in sales in the run-up to christmas. that is good news for lvmh, which is buying the newest brand for over $16 million. the recovery comes after a decline in profits. tesla has lined up $1.6 billion of financing for chinese banks. it has a new gigafactory in shanghai as it prepares deliveries of model three sedans. the electric car maker closed at a record high yesterday, over $430 apiece. that is your bloomberg business flash headlines. matt: selina wang in beijing with your business flash. european health care stocks are on track for their best year since 1997. analysts see plenty of reasons for momentum in 2020 despite the inevitable noise around pricing in a u.s. election year.

areas to watch include expansion in china and innovation with new technologies such as medical equipment. in europe, bloomberg intelligence things pharma will benefit from investors rotating in defense of sectors as the economic outlook remains weak. di things astrazeneca and novo nordisk could both see double digit earnings growth. joining us now is tim lowe from munich. whatf the key themes -- are the key themes heading into 2020? tim: china is a big topic. it has been a massive source of growth. the country in november signed off on 70 new drugs for the reimbursement list, so that has been a real bright spot for the european pharma players, and it will continue to be. second, the u.s. drug pricing debate heading into an election year. it has been kind of a bogeyman

in the sector for a while. campaign's heat up, there's less time for congress is becomingt increasingly expected that this will be a dog with more bark than bite. and the pharma players will be spared the worst this year. they are two of the probably the biggest. matt: the u.s. election is going to be at least big in terms of the noise. what about the signal? well, it will be a massive part of the debate, naturally, and it could signal heading into beyond the 2020 election, some big changes. for the short term, investors are not expecting there to be much potential for inflation in drug pricing, and if there is downside risk, it is that, you know, i have seen the word

draconian thrown around. policies get put into place beyond 2020. that could have some real bite into the sales of the pharma giants. but for the short term, i think 20/20 is looking like it is not the year you will see something happen. matt: what are your picks in 2020? novartis and roche and sanofi seem to be getting a lot of buzz right now. novartis and roche have done m&a inretty big recent months, gene therapy, emerging technologies. sanofi had a capital markets day that was well received in boston earlier this month. so i think those three are, despite pretty good track records in 2019, the momentum is still there. matt: thanks very much. tim loh talking to us about pharma stocks. we are still joined by martin

malone, chief economic advisor at alpha book, part of one of the biggest brokers in the world. what do you think, martin, about the possibility of health care stocks heating up in 2020? martin: it would be a top picks. they are a highly innovative sector, just like the technologies sector. it manufacturing lead. is a keyng structure political football in america for 2020. that is disinflationary, which is a key macro driver. very positive for the health care sector. matt: in the rotation you are talking about earlier, does that make sense? martin: i think we know the technology and industrial sector have done very well over the last decade, but the health care sector actually has kept up, and we would think that trend for the next decade is going to continue, and most of the

tailwinds for the health care sector is very, very positive. they can handle the disinflationary position on drug pricing. it is not an issue for them. because of that innovation that i am talking about. matt: it has been a pleasure having you for the hour. martin malone's chief economic advisor at alpha book. coming up, negative rates we will discuss europe's longer strategy, next. this is bloomberg. ♪

>> i think when we look back on negative rates, i think when the book is written, it is not going to look like a great experiment. i don't think negative rates are bringing the benefit we would like to see. there is no question that growth in this part of the world has been lagging and negative rates have not allowed an acceleration of that rose, in my opinion. growth, in my opinion. matt: martin malone, chief

economist at alpha book, is our guest cohost for this hour. it is part of btc, one of the biggest brokers in the world. of negativemake rates, and do you expect the trend to reverse in 2020? martin: not reverse. negative interest rate structure is part of the monetary policy toolkit. necessity, but there is also a cost to us, and it is plugging a gap while we are waiting for fiscal measures or waiting for economic recovery, or asset prices to recover, so it really is an emergency measure. in the know, we all know financial sector, it's really taken a significant hit to negative -- sorry, net interest-rate margins for the financial sector.

but the negative interest rate structure has also caused investors to launch a program about products, global high-yield, global emerging markets, and all of those factors have seen a significant benefit with the lower interest rate structure and the long-term rate structures and spread products. on a wider picture, it's very beneficial on a sort of local financial sector. it actually has been a trouble for many banks. the: so what do you think rate scenario means that in 2020 dollar?ple, the u.s. martin: we are structurally positive for the u.s. dollar. the interest rate structure is a key feed into that. we did see in 2018 for rate hikes from the fed. that was partially reversed in the last 12 months with three rate cuts, and we still feel

there is potential for rate cuts in 2020. the market slightly differs on that and the market pricing. we will see. but the main reason why we are bullish two dollars for 2020 is matt america is growing and expanding in almost every measure versus the rest of the world, and it's basically america's share of the world. that's why we remain polish the dollar on a structural basis. this is a multi-year dollar basis that we continue to be positive on the dollar. matt: and what is your emerging markets view? , that'semerging markets a negative factor to have a strong dollar. but like we have seen in brazil, india, indonesia, malaysia, and china, they are going to have to use structural policies domestically to cope with any type of strong dollar factor that will be negative for them,

so they can locally borrow rather than borrow in dollars, and that means that global investors and local investors will need to be more confident within the management, the economic management, and that is why political risk factors are issuemore of a key throughout the em space for the next one year to two years. matt: bottom line, you think that european and other foreign investors would do well to buy the s&p? martin: yes. our key factor is that we are going to get continuous double-digit returns. we could see, for a target, in 18 months, the s&p traded 4000, but at least a 10% gain even from these levels over the next 12 months. matt: all right, martin malone, thanks so much for joining us. martin malone, chief economic advisor at alphabook. nasdaq.ke a look at the

i think the story of the day really is this bullishness. if you bought the nasdaq at the beginning of 2019, you have seen a 35% return. if you were bullish for stocks at the beginning of 2019, if you thought that investors would drive prices up, regardless of the reason, be it a cynical reason, central bank easing, quantitative easing, whatever you want to call it, you still would have made a lot of money this year. and i am not sure how many investors have really gotten in on this, but the nasdaq, you can see here, yesterday reaching another record high. gold continues to rise as concerns about what drove those gains continues to mount. right now is the price for an ounce of gold and the 10 year yield remains to percent as we head to the end of

2019. the question is, does it go higher or lower at the beginning of next year? euro stock futures are higher. we could see a risk on day today. stay with us for the european market open. ♪

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matt: good morning. welcome to "bloomberg daybreak: europe." this is the european open. i am matt miller from berlin. the cash trading just one hour away. a record-breaking christmas. global stocks hit new highs, bolstered by the tech sector after amazon said it had the strongest holiday season ever. the nasdaq rises above 9000 for the first time. best year in a decade. apple closes at the highest

price of its january -- sorry, double the price of its january low, with suppliers bullish on the year ahead. but can demand keep up? and christmas chaos in hong kong. it will pave the way for a messy new year as protesters gear up for another major demonstration on january 1. we are just under one hour away from the start of cash equity trading in europe. let's take a look first off at what futures are showing us in terms of what to expect this morning. rena rose across the board -- green arrows across the board carrying the u.s. rallies and asian trade, so european futures are up across the board. we see u.s. futures also gaining so we could see yet again record highs in u.s. stocks. let's take a look at what's

going on in terms of other assets. the gmm is a great way to get a --k at stocks, and at gold gold would be up there if you look at the five-day chart of gold. it has been a good run. i have a three-day chart myself here in the berlin studio. because it has come off a little bit, it is not as impressive as it could have been but it is over 1500 andup ounce. i think this is always an interesting sign. even as we see these rallies, new highs in equities, you may still be a little bit concerned when you see something like gold continuing to gain. this is another part of the market telling you to watch out. maybe those gains are not for all the best reasons. we will keep our eye on gold throughout the session. let's go over to leigh-ann gerrans with your first word news. >> matt, good morning. in israel, benjamin netanyahu fought off a challenge to his

leadership. he won a landslide in the race to lead his party. he will lead it into israel's third election in less than a year. the challenge came amid a corruption scandal for the prime minister. he has recently been indicted on charges of both bribery and fraud. the e.u. may threaten to block the city of london's access to european markets according to the times. it says the move will come as part of a post-brexit trade talk in the new year. the e.u. will use the threat as leverage. the bloc wants burton to stick closely. to stick is -- britain closely to it. protests over christmas in hong kong leading to clashes between demonstrators and riot police. more gatherings are scheduled for today before a major rally that's happening on january 1. in the philippines, the death toll from the typhoon has risen at least -- has risen.

thousands were forced to see their homes -- leave their homes. extreme weather knocking out power to entire provinces. the typhoon is expected to leave the philippines tomorrow. 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. matt. matt: thanks very much. leigh-ann gerrans with your first word news out of london. now, a rally in tech shares sent the nasdaq above 9000 points for the first time ever. amazon was the top performers after reporting what it called a record-breaking holiday season. a strong u.s. consumer helps underpin those gains. bloomberg's index of consumer comfort hit a nine week i on greater optimism about the economy. on greater optimism about the economy. luke, let me first get your take

on what we have seen in tech stocks. is this really all about a strong u.s. consumer? ane: i think there is element to that, sure. it is wrapped up with trade deals. it is wrapped up with a decent industrial production number this morning from china. there is a whole raft of things that's pushing things higher and higher towards the end of the year and it is all good news. i just wonder how long it can last, matt. matt: well, when you look under the hood at the u.s. economy, does everything really look that rosie? -- rosy? we see tiny unemployment percentages. we do see wage inflation of more than 3%. but then you hear so much about income inequality and people working in jobs that do not pay enough for our only part-time. are you really going to see u.s. consumer continuing to drive

gains at premium products like cane or by everything they online at places like amazon? luke: i think you are absolutely right. it is like a year of twin peaks. i think we have had the peking consumer both in terms of confidence and spending, and let's face it, 2020, when you look back, your base effects will be really, really tough to grow against as you go through next year. it is going to appear, for sure, that the consumer is not as strong as it was in 2019, just purely mathematically, but i think your point about high-end women levels is also going to hold back industrial spending, and i think that kind of peak uncertainty that we have seen around trade in 2019 could fade quite slowly, and then unless we get more good movies, continuing good news there, i think it is really hard to buy into a big

consumer boom. and until we see the high street retailers, what they say about christmas, there could be a transfer of shopping from the high street to amazon, which let's be clear, has been happening for some while now. matt: of course. i think it is interesting that it has not happened even more and we could see that. what is your take on how the high street retailers have done over christmas? we are only a few days passed. most people still have not come back to work yet. wasou think the consumer buying at brick-and-mortar stores as well? luke: we are at work. i don't think they were. polla completely informal around a few friends and family. how many of you went down to the physical shops to get your christmas shopping done? this year was one of the lowest numbers i have seen in a long time. people have been buying online

rather than going down the high street. as we start getting numbers through in the first couple of weeks of january, i would watch for january 9. they are already on shaky grounds and may lose. there is a risk they may lose the investment grade rating they had. i think it is serious. important period for retailers. and consumer spending has changed and continues to change at an extraordinary pace. what do you see happening to this rally? does it continue to gain momentum? clearly, for today, we see futures are up in europe and the u.s., even on the nasdaq. but do you at some point see traders fading this rally as we get into the new year? to fightis really hard the q1 seasonality, right? this is a time of year where you tend to find money gets allocated.

you look around for your choices. where can i go? it is going to be in equities to begin with. it is going to need more good news to reinforce that review with valuations getting to quite high levels, particularly places like the u.s. maybe some of that money shifts around a little bit into the u.k. and europe, but i think, you know, you are going to need better news on trade, and that is going to be hard. and i think you are going to have to have a stable economic background, which i think is probably ok in q1. simple answer, yes, you will probably see the rally continue into the first weeks of january, but we will be fading as we get into the later parts of january and into february, certainly for our credit portfolios anyway. matt: we are going to talk more about that as well. we get to keep you around this morning. that is my holiday treat. , investmente

director at aberdeen standard investments, stays with us out of edinburgh. we will take a look at your stocks to watch this morning, including apple suppliers st micro and dialogue semi. a lot trading here in 15 minutes time. bloomberg -- 50 minutes time. also remember that bloomberg radio is live on your mobile device and dab digital radio in the london area. tune in. this is bloomberg. ♪

matt: welcome back to "bloomberg daybreak: europe." this is the european open. i am matt miller in berlin. we are 47 minutes away from the start of cash trade across the continent in the u.k. let's get your stocks to watch. dani burger in the u.k.. >> apple had a very strong holiday sales season according to evercore isi.

europe -- see in a high.europe raced to it is not just the u.s. consumer. we heard from a japanese apple supplier today who said that demand in china is likely to pick up in 2020 thanks to 5g-related orders. so stocks like ms, dialogue semi, stm micro, all might rally today. it is already a strong sector in european stocks. we also have to look out for any of the companies with strong e-commerce related businesses after amazon also reported a very strong holiday season, so by all first accounts, it looks like the consumer was strong, so look for those retail stocks to also do well in today's trading, matt. matt: thanks very much. dani burger with some of the stocks you want to watch this morning. get all the latest stocks stories from our equities team. best type first -- just type first .

luke hickmore is still with us out of edinburgh. he says one retail stock to bech in early january will marks & spencer's. with what is the story marks & spencer's with its credit rating, especially relative to its peers? luke: the s&p have had the triple b minus. that kind of got resolved and then capped at that level fairly recently, but the things s&p are looking for our improvement in operational performance, and i think that has been really a struggle for m&s to see. there is a risk on about this of course because new management are in place, coming out with a lot of positive noises about changing the business, new things they are trying with food in particular. they have been working very well. i wonder whether it is quick enough and it is convincing

enough to keep s&p keeping this company investment grade status. we have seen tesco go through this of course over the last few years. they dipped down into some investment grade for three or four years before coming back just this year, so i think there is a real risk here, and it is just a -- just a really important day for marks & spencer's when they come out with their christmas sales numbers to see if we have that stabilization the management have been looking for and failing to actually get. matt: what are you seeing across the high street in terms of credit worthiness, in terms of credit ratings? firms think the ratings are keeping up with the deterioration in credit profiles? luke: actually, they have been pretty good. flagging up where the problems are. we have seen it both in terms of the actual store owners, the bricks and mortar, if you like,

but also the retailers themselves. they have been saying the last few years there is this big shift into that spending, and the impact that will have on the high street has been well flagged. rating agencies often take some while to actually get a change companieshat risks a investment grade -- company's investment grade status. next will probably come through ok. they have been performing so well online and have themselves really sorted in terms of how the deliveries were to and from even when you are returning goods to the stores. i think they probably come through that ok. other retailers, tesco, probably going to have a reasonable christmas, although maybe not as good as last year. i think that will be wait and see. the high street place like -- will be struggling for a while. theyer group, i think could be reporting a typical period as well. typical early january

bit of a risk sector. and one i think this year investors are well worth just keeping a really close eye on ahead of what could be more cba's, more bankruptcies on the high street, and more problems for local authorities to sort out once the battle happens. matt: of course, we get to look ,orward to all of the brexit while negotiations are affecting prices as well. luke hickmore stays with us. our guest cohost for the hour. coming up, and experiment gone wrong. what does david solomon think about negative rates? we will hear from one of our best interviews of the year, next. and, when you are traveling to radiotune into bloomberg live on your mobile device and , dab digital radio in the london area. this is bloomberg. ♪ ♪

matt: welcome back to "bloomberg daybreak: europe." we are --"bloomberg markets: european open." we are 40 minutes away from the start of trading. futures are up across the board. we see positive futures even after these record highs that we have seen. now, let's take a look back at one of our top interviews in 2019. i spoke with david solomon last month just after mario draghi's final meeting as ecb president. we spoke about negative rates, banking consolidation, and goldman's focus for its european business. david: we have been investing. we have got new leadership in our wealth management platform over here in europe, and we are focused on expanding our market share. if the right acquisition came along, we would consider it, but we see good organic opportunity for us by growing our people and our footprint to expand our wealth management capabilities in europe, too, so that is

something we are focused on, too. matt: there's a lot of talk about bank consolidation in europe. a lot of regulatory hurdles. but do you expect banking consolidation -- is it coming for european banks? does goldman sachs want to play a role in that? david: on the question of banking consolidation here, i think that there are lots of compelling reasons why some consolidation here would benefit the strength of the european market. but i think it is hard, and it is not clear that it will actually happen. i do think it would be good for the european market and for the european capital markets region if you had more of the european leader consolidating european leader in some way. whether or not the local politics or the business rationale allows that to happen, i am not sure, but i wanted as you do. you do. it as there is an opportunity to

strengthen the position through some consolidation. matt: mario draghi said we are very happy with our negative rates experience. christine lagarde taking over and expected to tow the same line. sameegative -- toe the line. our negative rates -- are negative rates helping to bring growth back? david: when the book is written, it is not going to look like a great experiment. i don't think negative rates are bringing the benefit we would like to see. there is no question that growth in this part of the world has been lagging, and negative rates have not allowed an acceleration of that growth, in my opinion. i don't think negative rates are really constructive, but we will have to wait and see how this all plays out. i worry that when we look back on this experiment of negative rates, we will not like what we see. when it is all over, all unwound. matt: fiscal stimulus is needed to mitigate the unwanted side effects.

i know you are going to be talking to companies around germany. surely, they will have something to say about negative rates. they will probably want to talk about infrastructure spending that they think is needed. do you feel like fiscal spending is needed? do governments need to chip in more? luke: if you talk to people in germany, there is a significant amount of fiscal stimulus. if you look at some of the capital being spent to move germany toward a more green economy, there is no question. relatively significant fiscal stimulus. matt: my interview with goldman sachs's ceo david solomon last month. let's talk more with luke hickmore. ike, he was polite about think his view on negative rates. what do you think? has it been as helpful to the economy, a good experiment, as mario draghi says? ashas it been a disaster,

you will hear from most big bang ceo's? big bank ceo's? luke: it has created a hunt for yield that we will probably never see again. has any of that fed through to the real economy? really hard to judge. ofhink it has changed some the decision processes companies make in particular about their investment plans and probably put a lot off or extended their horizon for these things. in ways which are probably not healthy in the long run. so did the whole growth of the zombie companies we saw through the last decade, supported by an endless supply of capital, whether they were running into problems or not. now, surely, all that really does is just avoids the issue? this whole kicking the can down the road. at some point, you have a fence with a lot of cans on it and at

that point, we look back and think maybe we should have had a gentler period where companies are allowed to reconstruct, allowed to go through bankruptcy, allowed to come through the other side. a creative destruction way. you know, i am guessing negative rates has probably made that a more gentle experience. of probably, for the length time it has been in place, not behavioror investors and consumers expectations about what debt really costs into the long run. which really, let's be honest, they cannot have any sense of what that would be like in the 1990's for a lot of consumers growing up today. matt: the concern i hear from bankers is that negative rates have increased inequality. how do you think we will get out of this loop? or will we get out of negative rates? luke: it could take a long time.

i think europe could be looking at a decade of skimming along between positive growth that's very small and negative growth that is very small. and really, every time you get positive growth, people want to start paying down the very large amount of debt that is around that will hold growth back again. so it's going to take a long time to get through or are we actually get some growths, some inflation, some fiscal spending that's meaningful right across the continent. and at the moment, that just does not seem a likely outcome. so the end may not be in sight for some while, i am afraid, matt. matt: especially meaningful fiscal spending. it is difficult to understand where that would come from. the government in berlin does not think it is really possible. luke hickmore, pleasure having you with us. thank you for joining us. have a fantastic friday. investment director at aberdeen standard investments, right back

at work after the christmas holiday. coming up, christmas chaos. -- in hong kong may give way to a messy new year as protests continue on the island. we will get an update, next. this is bloomberg. ♪

♪ matt: welcome back to "bloomberg markets." this is the european open. 30 minutes from the start of cash trading across the continent and in the u.k. looking at futures pointing to gains on this friday. hong kong is bracing for more disruption over the holidays. totests over christmas led clashes between demonstrators and right police, with dozens injured. smaller demonstrations have been organized for the weekend. the next major rally is scheduled for new year's day. joining us with more from hong kong,