>> good morning from london. this is bloomberg daybreak: europe. new loanadopts a regime, another step in the opening of china's financial system. tesla delivers its first china belt car. accelerates the push into the world's largest market. president trump faces criticism for naming the alleged whistleblower. ♪

nejra: welcome. if you are a little bloated after all the christmas cheer, it is a little quiet in the moment. under the surface you are seeing strength and china, weakness in japan. s&p futures not giving us much of a direction. it has been a good month for equities. 3%.s&p 500 gaining both benchmarks with double digit gains for 2019. index onberg dollar its third day of decline. the pound is one of the best performers. oil holding there a three month high. let's turn to china.

a senior chinese diplomat has suggested the u.s. should honor its commitment to the one china policy as part of a phase i deal. always the nation will implement what has been promised. the comments come as beijing and washington are working on the final details of the deal. china central bank is shifting to a march it -- market-based system. great to have you with us, christopher. i hope you had a good christmas. turning to the low crime rate that is china now implementing. it is a sign of a liberalization of a system? a directioninitely of travel now. it has been in place for many years. maybe it was one we forgot about over the last 12 months with all the headlines of the trade wars. policy of opening up

its trade. nejra: will this be enough without any reform of the state owned enterprise sector? >> no. each journey has a small step along the way. how do they deal with the bloated debts that sit on the balance sheets? by trying to allow defaults in strategic places. an opening companies do not blow up along the way. . it is a tricky thing to pull off. to 2020, we look ahead how would you imagine them actually pulling off the challenges they have they been facing. most of their debt is held domestically.

emerging markets have borrowed on foreign marketthat e talking about. the debt all sits in chinese hands. the way to deal with it is to slowly absorb the bits of the debt that are strategically placed. allow the other nonviable debt to slowly unwind and default. kindtructuring of some needs to happen in large parts of the chinese economy. that does not need to be as scary as it sounds. nejra: is the lone prime rate going to make the transition mechanism better? if so, does that mean we can expect less in the form of monetary easing? christopher: it should make the transmission better. allow price signals to do the heavy lifting. in principle it should make that

transmission better. the great thing about monetary policy as it gets into all the cracks. know which channels of monetary policy and transmission are likely to fire. this should be moving toward a system that allows loosening. how positive are you on chinese assets for 2020? you have a presence -- preference for equities over bonds? christopher: the question would be how positive are we on chinese growth? not particularly positive. you have a heavy debt burden. we think we are close to the bottom end of the consensus growth next year. one of the things we worry about is how enthusiastic investors have become on emerging-market equities. a big chinantially

play. theould struggle to make case with chinese equities next year. we do like emerging-market debt in general. that is not a china story. nejra: we will pick up on this conversation later in the hour. let's get to the first word news. lina: donald trump is facing criticism for outing the whistleblower who triggered the inquiry against them. the retweet may have violated the law. hong kong's economy is set to contract in the fourth quarter as the city reels from six months of violent unrest. inevitable that negative growth will continue. mass rally is scheduled

for new year's day. in australia, thousands of evacuate as wildfires sweep across the southeast. temperatures hitting 40 degrees celsius. authorities are warning conditions in the forest and coastal regions are the worst in the decade. nine people have been killed and hundreds of homes destroyed. tesla is handing over its first china belt car. it is a milestone for the company. the first-round of cars are going to local employees. workers will receive vehicles in the next few days. 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. this is bloomberg. nejra: let's stay on that tesla story. why is it so significant? selina: it is quite symbolic because this is tesla's first

car manufacturing plant outside of the u.s. it is china's first fully foreign-owned manufacturing plant. things have moved very quickly for tesla. they have already reached production of more than 1000 cars a week. inn musk set that target out april. him to a huge bid from break into the world's largest electric vehicle market. it is incredibly crowded with local players. also foreign manufacturers like audi, bmw, mercedes-benz all trying to get a bigger slice of the electronic vehicle market. they will have an edge ahead of their competitors. have said by next year they could reduce prices of the cars by 20%. nejra: interesting.

thank you so much. we will take a look at central banks in 2020 as investors monitor fiscal policy. as you are traveling to work, tune into bloomberg radio. this is bloomberg. ♪

nejra: its focus on central banks in 2020. we are looking at opposite in. -- ends. the rba is interesting. previewing what central banks will do next week -- year.

great to see you. let's kick it off with this outlet -- outlook that bloomberg has for 2020. in terms of monetary stimulus from the major banks, it will be more than 2019. the central banks were dealing with the effects of the trade war between the u.s. and china. we will probably have a bit more debate going on. particularly in europe. what about elsewhere if we broaden it out to central banks? what are the points you are focusing on? some of these other

central banks, think of emerging , they will probably be pursuing additional monetary stimulus. nejra: do you concur with their also being that tilt? david: i would. but does it tell us anything? australia and new zealand have been the leading indicators of what is happening in the rest of the world. does the swedish experiment about negative interest rates tell us anything about the euro zone? that is a part of the world where we have monetary policy rates pretty much on the floor.

inflation picking up. a country liket hungary, core inflation has had 4%. those chickens might come home to roost next year. that would be an important indicator about what might be coming down the track in europe. nejra: and an opportunity as well. to talk about australia for example. aat should we take is more of signal of where global interest rates are going? christopher: that is a great question. there is aells us global demand problem centered on china. chinese domestic demand has been pretty weak.

the biggest victim is australia. there is still a demand problem in china. data would domestic justify a rate hike. that they have hikes twice. nejra: what about inflation? we really struggled to rationalize that. theyare doing this because have become allergic to negative interest rates. that canparent reason be seen in the data. if we pick up on what he just said about the bank, coup sweetening not be seeing it as a signal of what the pboc might want to do? david: i would say it is not a great indicator. in sweden does not justify tightening monetary policy.

we certainly have that criticism. there are a lot of banks in germany that have been critical of the negative interest rate policies that the ecb has ignored in pursuit of its inflation objective. in the past, the bank has been more conservative than the ecb as a whole. over the last 10 years. it has been slightly more conservative. perhaps not a huge surprise that that happened in sweden. nejra: what is the base case at bloomberg happen -- economics for with the ecb doesn't 2020? we think it will continue buying assets. a continuation of what we already announced a mario draghi.

christine lagarde is probably not going to announce any new monetary stimulus. the one thing she revealed that her press conference was that the ecb is going to be very focused on strategic review. shealso emphasized that will be leaving it as more consensus driven then in the recent past. if you are doing a soul-searching exercise and you're trying to be more consensus driven and avoid contentious debates, probably that means no big monetary stimulus. how mindful should investors be in terms of actually taking action in portfolios of fiscal spending in 2020? everybody keeps talking about it. is it something to take action on? christopher: no. there is a lot more heat than light here.

japan is one place where people say, there is not a big shift toward fiscal policy. we remember one of the three arrows is supposed to be aggressive fiscal policy. issue,look at the net they are marginally lower. i do not understand how you can square that with this specific stimulus. we have heardne, that they are having a big debate about fiscal policy. is the german consensus really going to shift rapidly? i doubt it. in the u.k., there has been a lot of discussion about stimulus in the run-up to the election. it is looser but it is not radically looser. yes, fiscal policy is doing more.

nejra: very briefly, yield stay low in 2020? christopher: yes. nejra: thank you very much. let's get the bloomberg business flash. work will have to pay $17 million if their co-ceos are fired or leave the company. this is according to the financial times. we work may continue to's -- experience a lot of turnover among senior management. goldman is using lower capital requirements. in the u.k., farmers are getting

nearly 3 billion pounds to offset losses. they will receive the same funding last year -- next year as they did from eu subsidies. they count for about 60% of the average farmers income. nejra: thank you so much. melt up., the year end a rally for u.s. stocks. this is bloomberg. ♪

nejra: time for the chart that mattered. in u.s.year end melt up stocks. >> what we saw at the end of the year is a huge rally and equities, especially u.s. equities.

what it shows is we could be setting up for this technical sell signal. tradershe few lucky working during this holiday week, this is the chart that matters as we end out 2019. our guest is still with us. would you be wanting to sell u.s. stocks right now? christopher: i think it all to -- depends on the timeline. we have seen an unusually strong december. we get a short-term temporary setback from that? absolutely. when we think about it longer term, we have to think about the historical record and fundamentals. unless something goes badly wrong and the next day and

since 1930. and those years have typically been followed by another strong year. that is the historical record. the fundamentals, yes it has been bumpy, but do we see a u.s. recession around the corner should be the first question. the answer is, not really. we have not seen any late cycle indicators that we would worry about. we have not seen the pickup in core inflation. yes, it is a record long u.s. expansion. but records are there to be broken. nejra: i am loving the stats you have. when a lot of people show concern about the fact that the fundamentals don't match what is happening in u.s. big these, the opposite argument is that the s&p 500 often front runs the

fundamentals. see a strong earnings season in q1 and even q2? people are making a forecast about the future. not be surprising that you get that relationship. it will be a puppy quarter for growth because of the boeing news. q1 on expecting a week the growth side. earnings have been trending at the mid to high double-digit levels. we don't really see that slowing down. at some point that will cease to be sustainable. this recovery has created more and more jobs than anybody anticipated. it has created more and more earnings at the corporate level than anybody anticipated.

nejra: one criticism of the forecasting is the proliferation of passive, systematic, quantitive strategies. if we take the argument that the s&p 500 is still forecasting the fundamentals and corporate earnings, what signals would tell you that maybe now is the time to sell? short-term: in the it is the euphoria we have seen at year end. what people can focus on is where are the leading indicators? you have to you can think about. there are no signs of it. we have seen spread tightening at the year end.

when we think about what we have been worried about going into the end of this quarter, there have been a couple of dogs who just have not barked. we have seen no repeated repo stress. new year's is a time you see fireworks around the world. but you see none in the repo market. very briefly, why haven't you added your equities version? christopher: that is a great question. we are worried about that in the short term. we -- we will be looking that again in the new year. up, the fed in 2020+. what impact could the annual rotation among voters have?

this is bloomberg. ♪

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nejra: a new era. the pboc tells banks to adopt a new pricing regime. another step in the opening of china's financial system. a big move. the first china built cars, a must for elon musk. and blowback. president faces criticism for thatg the whistleblower led to his impeachment.

it is all quiet on the market front as we head towards the end of december and the end of the year. the 10 year yield is steady as well. we have reaction from around the world. here in london, great to see you all. no action at all, but below the surface, quite a dispersion. >> i'm looking at the potential for hong kong's economy and we have trade data after the bell in hong kong. it is expected to show a sharp decline. after we heard that the finance secretary warned that we could see further contraction coming through.

we have had two quarters of negative growth in hong kong, pushing hong kong into a technical session. -- it's inevitable growth will continue the government forecasting of 1.3% 2019. be budget speech will delivered in february to try to prop up the economy, being hurt i six months of protests. is india looking today? >> yes. good morning. between .25%, looking at this. to do withtion has the flows that have come into india. they have put in a lot of money, but just look at the chart. it tells you something.

correct,lculations are the indian market, and asian youons into 19, it tells that the -- despite all the possible shortcomings. nejra: you are looking at optimism in the commodities market. commodities probably at their highest levels. what is going on? >> commodities are having their moment from oil, to metal and farm products. they are having this year and rally. since 2016.rally up from 11% in 2019. what is behind this has to do with the trade wars. momentuming a lot of given the trade tensions. saly andliette

everyone, thank you, all. president donald trump is facing criticism for outing the allegedly so blow her who triggered the inquiry against him. have violatedy the law. they have advised the president to spend less time tweeting. talks.ng silent on the two sides had agreed to --olve by yesterday, but if they cannot reach a deal -- in australia, thousands evacuated as well fires sweep across the southeast. thatrities are warning

conditions are the worst in a decade. at least nine people have been killed and -- hundreds of homes have been destroyed. growing demand for behavioral scientists and clothing designers. an economic slowdown could have the biggest impact over the next 10 years. this is bloomberg. -- 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. this is bloomberg. thank you so much. federal reserve productions show no rate changes next year. but it could influence policy. called for chief rate cuts into 19 and is a clear dove. he joins alongside robert kaplan and retta.

investment management is still with us. how much will a -- will -- how muchem make of a difference will replacing them make? permanent, they set the tone and the agenda. it is hard to be how it makes that much of a difference. maybe a little bit more airtime, but it is not a first order change. nejra: we have the biggest dove actually departing. it sort of balances things out as well. is fed policy going to be on hold all year? >> they set a high bar to change anything. told us that any pickup in

inflation would have to be sustained and consistent to consider raising weight. trying to so many commence the market that they will not change anything, but it would be a huge u-turn. it would be huge for them to change policy. if it is going to be occupying them, this exercise is quite important. we think we know where they will settle. we think they will settle average inflation targeting. but we do not know. that will be the big thing for the market to be looking at into 2020. rather than about the day-to-day, month to month policy decision. as youif it turns out have described, does that mean that low yields are here to stay for 2020? >> it means that you should be

split with inflation higher. with the kind of overall level meeting. not changing hugely. for us, this framework could mean that the fed is willing to tolerate a higher level of in nation during pension, which leads us to thinking about, is inflation pricing something that exploit nejra:? that is what i was going to ask. taking that as an opportunity? >> yes and yes. we just heard about the commodity rally. inflation expectations have been living with that. this is kind of the easier case to make, but we still think it is underpriced.

nejra: he stays with us. coming up, golden parachute. we will look at the potential cost of a high level exit. this is bloomberg. ♪

nejra: this is bloomberg daybreak europe. let's get to the bloomberg flash. itsesla is standing over first chinese built car. for theerates motion largest electric vehicle market. more workers will receive -- deliveries will start in january. goldman sachs said jp morgan have found ways to limit the impact of regulation on repo trading. they have lowered the capital requirements of regular repo trade.

in the u.k., farmers are getting nearly 3 million pounds. the system was announced by the chancellor. farmers movers see the same funding next year. u.k. farmers are not viable without. that is you bloomberg business flash. nejra: thank you so much. here is what you need to know. we work will have pay millions if they are fired or leave. how much could they pay out? much theylion is how will have to pay out if the co-chief executive are fired or leave the company for multiple reasons. that is about 8 million each. this is a report from the financial times and they cite

documents and people briefed on the matter. they may continue to experience a significant amount of senior management turnover. you so much. emerging markets are about to embark on another year of wealth creation after adding $14 trillion to investment portfolios. peersill outperform their with asia having the best prospect according to bloomberg's survey on their outlook for next year. had marketsve across the board. if you look at yen for 2020, which asset class would you like to be invested in #>> they have been doing well. emerging markets have outperformed.

they are in line with corporate credit spreads. it has been relative to the market. looking ahead to next year, we think they will continue to struggle on a regular basis. relative to the developed markets. the em will continue to struggle. there something like a 50 basis point pickup. southern bond, investment read corporate bonds. we are really comparing night and day when we are thinking about negative interest rate. you have positive, real interest rate, 3% across the large-company index. turkey, healthy,

real interest rate. nejra: are you interested in the debt side as a those to equity? does that mean that you are by the interested in fx? >> yes. less enthusiasm about asia and want to resume about -- enthusiasm about the rest of the world. in the short-term, most of that is in fx. risk,ing like 70% of the on the fx channel rather than the interest rate channel. are we comfortable with that? yes. us,ooks reasonably cheap to those high interest rate and lockdownfed on a thick

, wethe course of this year are going to get the risk off by policy and monetary tightening. basically u.s. china trade issues and growth outlook are the top two issues that they see impacting em, which has surpassed. his time of the key to em and 2020? >> i think. that explains the preference that we were talking about. given that we do not have a particularly optimistic outlook, asia prefers not to take the risk. they have the influence of monetary policy. thea: that brings me to dollar. what is your dollar outlook and how that might impact anything.

>> triggers to large movement, one of them is interest rate inferential's. it is hard to get the outlook for europe and the u.s. next year. think about capital flows. maybe we could get some disruption as the election becomes clearer. until we have more clarity on who the democratic nominee is going to be, we do not know how to think about that. quarter, until we get into primary season, the dollar is not going anywhere. nejra: he will stay with us and coming up, turning bullish on the euro. a new wave of investor optimism. that is next and this is bloomberg.

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nejra: this is bloomberg daybreak europe. after two years of setbacks, they are enjoying a wave of investor optimism as 2019 draws to a close. it has been a little bit of a snooze fest. think that would change in 2020? what analysts are saying is that the euro is going to come out on top. just look at the forecast. you can see the fourth -- the forecast will be about 115 for the euro-dollar. all of these banks are buying into the trade. it will come down to political tensions and on top of that, the global economic conditions

becoming much better. one of the biggest one will be the trade war. the trade war adding to these tensions. the optimism will help us in 2020. nejra: thank you so much. christopher jeffrey is still with us. >> not as much as some of these analyst. we can see where the rationale is coming from. you are in the area where the manufacturing has been meticulous. i think that chart we just saw tells of high. it has been around all year. the idea that the euro is about to rally has been the mantra from these analyst. what is the missing component? extent to is the which negative interest rate have become entrenched.

i talked a little bit about the fed frame overview. it would be extraordinary if they come up with anything more interesting. stuff.ardly radical with european central bank unable to escape the incredibly low interest rate, i failed to see how it -- view onoes your sort of china mean that you do not believe in that view either? >> we could. biggest protagonist have not been the biggest victims. europe has likely been on the sidelines. is as youor next year move into the crosshairs of the trade war. there is a carbon border tax.

we have the eu puzzle to move ahead with. a broader revenue tax. france has come under enormous fire. it will begin in 2021. , they are bypassing them in 2020. nejra: european equities have had a pretty good year as well. not that far off from a record, but you're not exactly positive on them. why not? earnings side.e if we think about where the , weor of growth strongest like tech. have a look at europe.

quite a lot of banks. look at the nominal growth backdrop. germany, we are expecting to see growth less than 1% last year -- next year. we have yet to find a magic lit that lets it climb above zero. with the backed up being so weak, you are left arguing the would join the tailwind from overseas. rather than picking up by proxy. u.k. is quite interesting. there has been a decent risk premium in the u.k. and political uncertainty. has beenqueen says it a bumpy year, it has been a bumpy year. the positivebout

risk, we had a huge potential of outcomes. there is still a lot of uncertainty around the withdrawal agreement. about ao longer talking huge array of potential outcomes. for is really important bringing global investors back into the market. nejra: you are talking about the prospect of fiscal expansion and you were skeptical. are you more of a fiscal believer when it comes to the u.k.? >> u.k. has more scope. of the clear implications of leaving the eu, they are no longer bound by the fiscal rules. it would not be consistent with the european treaties. therefore, there is more freedom

there. a party with a majority in the bounds, itn certain can do what it likes. looksiscal stimulus here clearer. lot would depend on the bank of england in the next 12 months. ratew a members voting for cuts, rather than hikes. think of the balance of risks tilted towards them doing something, given that inflation is dropping. be a guilt story, primarily. yield very briefly, could get to 1% in 2020? >> they could easily get there, but that is not our potential case. jeffrey, ouropher

guest on the show. a statement saying if italy is to prevent its plan for a stake sale at 2020. that is it for daybreak europe. the european open is next. this is bloomberg. ♪ [ dramatic music ]

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matt: good morning. welcome to bloomberg markets. this is the european i am matt miller from berlin. the cash trade is less than one hour away. new era. china scrapped its benchmark rate from ending in 2020 -- lending in 2020. the pboc opening up its financial system. made in china. tesla delivers the first cars aslt in its shanghai plant

elon musk accelerates his push into the world's biggest auto market. plus, president trump faces criticism for naming the alleged whistleblower whose complaint led to his impeachment. we are just under one hour away from the start of cash equity trading in europe. let's take a look at futures. first, we had seen asian markets mixed with chinese markets gaining, but the japanese equity indexes are headed down in the close and we see that same bearishness across european equity index futures. we do see u.s. equity index futures gaining slightly. that is i think one of the big driving stories of the day. this is a chart of the bloomberg dollar index over the past month.

december issee set to be a big drop, down 1.5% they. that, in turn, is driving other assets like gold and oil considerably higher. let's get into the markets with mark cranfield, bloomberg mliv strategist in singapore. what do you think about the dropping dollar? what effects is this having throughout the market? is partly a say, it year-end affect but it is also people looking ahead to what is probably going to be a tough year for the dollar in 2020. when you consider that the fed is going to be sidelined and u.s. growth is probably going to be ok, but the rest of the world is going to catch up a lot with the united states. it is going to be different compared to this year. this year, it was pretty clear the u.s. was leading the world in many respects, but with this

trade situation much calmer going into next year, it looks as though the rest of the world is going to do a lot better relative to the united states in 2020, and that is going to put pressure on the dollar. it is hard to help the securities markets in e.m. and the rest of g10 as well probably. that is beginning to be reflected. it could be that during the presidential campaign, talking the dollar down could easily be something u.s. politicians choose to do as it affects the economic outlook and their point of view. there will be a number of things weighing on the dollar next year. the deficits may come back as well. it is starting to happen now. it could well be that it picks up in the first and second quarters and next year becomes a bigger trend for the dollar going down. matt: how does the trade situation look to you considering we heard from a chinese diplomat that he expects the u.s. to honor the one china policy? of course, we have seen some pushback in congress when it

comes to things like hong kong. much that is true but so of what is based on markets has to do with relatives and when you think back 12 months ago, the situation was really much more disturbing between the u.s. and china. it looked as though they were -- there were loggerheads. people were fearing the worst for the global economy. fast-forward to where we are today, and the situation just looks so much better than it did 12 months ago. it might not be perfect. there's still a lot of things that need to be sorted out. as you say, china has got some concerns. the united states will have it as well. when you compare it to 12 months ago, the outlook is so much brighter and you are beginning to see that reflected in the way that people are putting money to work and it will certainly be reflected in equity markets going into 2020. matt: what is the mliv

perspective on brexit right now? i mean, we are in a bit of a lull news wise as we head into the new year. markets will be traded very thinly, but that could mean we see some big moves, and there has been renewed concern about the possibility of a hard brexit. fun: we could have a lot of with the pound year. we will be talking about it. we will see a lot of bizarre movements in the pound. you cannot really write off anything. even if the u.k. government is bluffing, if they don't want to extend this deadline for the negotiations beyond the end of next year, it will take a long time before traders really believe that they are willing to extend the date yet again. it could take several months before people actually are willing to place that in still going to have lots of opportunity for headlines, an side or the u.k. side to push

the pound around and other u.k. assets as well. when there is news suggesting that the deadline is not a hard one, the pound will do better. when it looks as though the hard brexit is coming, the pound will do worse. in between, anything is possible. matt: i don't want to leave without asking your take on the new directives. for thes this mean chinese economy and for the global markets? is anotheragain, it incremental move. pboc is doing more to try and get interest rates and credit price for market fundamentals rather than from the official angle, so certainly rates will continue to come down in china. they have been already. they have room to come down a bit further. overall, that is a very positive thing. good quality companies will be able to borrow at lower rates. you are starting to see some differences occurring next year where they will find it even

more difficult to get borrowing while the good ones get more money than they really need. that is all part of the functioning of a market system and china is gradually moving itself towards a market-based system and this is another move in that direction. matt: mark cranfield, thanks very much for joining us. our bloomberg mliv strategist out of singapore. speaking of china, when we come back, tesla reaches a major milestone, reaching its first batch of chinese made cars. the first 15 going to employees. more on that, next. remember bloomberg radio is on your mobile device or on dab digital in the london area. tune in. this is bloomberg. ♪

matt: welcome back to bloomberg

markets. this is the european open. right now, we are just about 50 minutes away from the start of cash trading across the continent and in the u.k., you can see that we have futures down, although it should be pointed out that there will be very light trading, both today and tomorrow, as we head into the new year holiday. let's get the bloomberg first word news. we go to laura right in london. laura: president donald trump is facing criticism for ousting the alleged whistleblower who triggered the inquiry against him. a lawyer who specializes in this says the retweets may have violated the law. a republican senator advised the president to spend less time tweeting. hong kong's economy is set to contract in the fourth quarter. as the city reels from six months of violent unrest, the financial secretary says given the current situation, it is inevitable that negative growth will continue. this weekend, protests in hong

kong were relatively muted. russia and ukraine are remaining silent on their closely watched talks. other self-imposed deadlines pass. the two sides have agreed -- that is to reach an agreement allowing them to continue passing through ukraine. if they cannot reach a deal, they may need to halt gas flows from january 1. in australia, thousands evacuated as wildfires sweep across the southeast. temperatures hitting 40 degrees celsius. closing sections of the highway. authorities warning conditions are the worst in a decade. at least nine people have been killed and hundreds of homes destroyed. the next decade will see growing demand. according to the u.k.'s society for encouragement of the arts, manufacturers, and commerce.

brexit, climate change, and an economic slowdown could have the biggest impact over the next 10 years. 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. max. -- matt. matt: your first word news. tesla is handing over its first china built cars. it is a milestone for the company as it accelerates its push into the largest electric vehicle market. let's get the latest with some weighing in beijing. what did you see at the event and what does that symbolize for tesla? we saw tesla hand over the first 15 cars produced out of this gigafactory. more workers will be receiving these cars and they will be starting deliveries to actual customers. it is very symbolic because this

is tesla's first car manufacturing land outside of the united states and china's first wholly foreign owned car plant. this opening is really symbolic of how quickly things have moved for tesla when it comes to production. building this factory, financing, getting the necessary permits. the plant is producing 1000 cars a week according to the factory manager in shanghai, and that means he has reached a target he set out in april. targetusand carpet week took months for the original tesla plan to reach. big ambitions here for elon musk to get a significant slice of the world's largest market and largest car market. so far, things are on track. matt: it is a risk for quality control of those vehicles. it is just one of the challenges that tesla faces in the chinese market. there is smooth

competition domestically and foreign. for the domestic players, they unveiled their newest suv model. also, they have -- bmw. they are all coming out with electric vehicle models to get a bigger slice of the market. it is takingnoting longer than expected when it comes to tesla forcing local components, which is a big part of why they built that so they can get local components which will be cheaper. some of these cars coming off the plant are using imported materials. in addition to that, you have the macroeconomic backdrop where china's auto market is in this unprecedented slowdown amid the economic slowdown. you also have easy sales slowing sales slowing down. the early signals show that demand for tesla's are going to be very strong. for the november new car

registrations for tesla, we saw this registration jumped 14 fold in november to more than 5000 from a year before. is the outlook for the market? overall, china has the biggest auto market in the world, but as you mentioned, it has been slowing down. selina: right. it is a complicated picture because it is the world's largest market. seen it fall quite dramatically, but when it comes has not fallen quite as steeply. china is trying to reach ambitious targets in terms of the number of electric vehicles they want to sell. we have not seen it slowing down in terms of their efforts to break into the chinese market. tesla's executives have said has very high demand. elon musk wants to target 3000 cars per week from the shanghai

plant, so they are forecasting huge and growing demand here in this market. we know tesla has pretty strong brand presence in china. despite the macro slowdown, there's obviously a huge window of opportunity even though that beh may be -- pie may shrinking. matt: selina wang in beijing talking to us about tesla's ambitious production targets with chinese components. now, after two years of setbacks, the euro is enjoying a wave of investor optimism as 2019 draws to a close. according to a bloomberg survey, the shared currency will rally more than 4% against the dollar in 2020 in what would be the world's best affects performance, -- fx performance. betting on gains is among morgan stanley's top trades for the new year. joining us now is the senior fx

and precious metals strategist at abn amro. are you also bullish on the euro's potential in 2020? i am a little bullish on the euro in 2020. we see the dollar rise to 116, which i think is a modest upside . the thing is, in 2019, we have very, very small moves, especially intraday moves. looks likecus, that a very big move. modest this is a quite one. there are two things to the euro side. we have seen years of weakness on the economic side, which was tempering the euro and pushing the euro lower. we are now at the point in time where we are not much weakness

on the euro zone economic side. it will push the euro much lower. i think it is mostly in the price even though on our side, we still expect some weakness. we also expect an ecb rate cut in q1. not hamper orll push the euro lower. we think it will move up, especially if the economic economies index -- the economic side -- things start to improve somewhat in the sense that you have it. this will be a positive thing as well as if you look on the others of the atlantic. we are not that optimistic on the dollar either. overall, from a technical point of view as well as most weaknesses in the price, we expect a higher dollar. matt: we will get to the dollar on the other side of that in a moment, but i want to focus in on your ecb call. you expect christine lagarde to cut rates even deeper into negative territory at the

beginning of next year. and what do you expect as far as the bond purchase program? georgette: we expect a bit more qe. program thanger the market is currently anticipating. as well, we have another rate cut. and even though both are not really priced in, we have at the same time also fed rate cut, so if you add those two together and the impact on euro-dollar, we don't think it will push euro-dollar lower, but stabilize a little bit higher even. matt: you expect the fed to cut rates as well. do you think, to get to the other side of that pair, do you think we have seen the u.s. dollar peak already? we have seen a pretty deep down move over the month of december. we think if you zoom out, the dollar has been

for a long rally for about seven years now. and at some point in time, you should see another move. in fact, a change in direction. we do expect that, but it may not have come as fast as people expect it on the background, we have a fundamental on the dollar. it is weakening. that is the long term for the mental, talking about fiscal deficit and also the account deficit. at the same time, you also need to have a really big downward on the dollar. supportso less cyclical . in fact, more weakness on the cyclical side. rate cuts as well as weaker u.s. economic data. these two together or these start the move. but what has happened in 2019 is that because of all the uncertainty around the markets, the dollar also received support from safe havens. and we expect that that will in 2020 so wene

are not optimistic on the sentiment front. we expect a huge risk of mood. -- we do not expect a huge risk of mood either. the cyclical side starts to weaken somewhat. of some see the start dollar weakness coming into 2020. also 2021. matt: we are going to keep you with us. georgette boele, abn amro's senior fx and precious metals strategist. i have zoomed way out on the bloomberg dollar index. this is a 10 look and of course, we have seen a massive rally throughout the past decade. the question is, what happens if this bloomberg dollar index comes down? it will be a big effect on the precious metals meant georgette boele covers. it has been a perfect storm for precious metals.

in has outstripped the rest 2019. we will have a look at what is driving that rally. there is a little tease if you are looking at the screen had when you are traveling to work, tune into bloomberg radio, live on your mobile device. you will not be able to see all that glitters, but you will hear it for sure. tune in. this is bloomberg. ♪

matt: welcome back to bloomberg markets. this is the european open. right now, we are 35 minutes away from the start of cash trading in equities, and currently, futures are pointing to a lower open across the continent and in the u.k.

it has been a very strong year for precious metals, and they are for the most part up again today, but one stands out above the rest. palladium prices have surged in a deficit fueled rally that's seen the raw material breach $2000, making it more expensive than gold has ever been. georgette boele from abn amro is still with us. before we get to gold, talk about what is going on in palladium. why the big surge, especially in such a weak auto market? georgette: yes, you have alladium which had magnificent rise this year. there are a few things on palladium compared to the other precious metals. the first thing is you have south africa and russian and vietnamese flyers. we had some issues because of this. market isthere is the

anticipating that there will be less supply going forward. there is a shortage of supply in the market. that is the background of the automobile sector. stringent the more emission regulation in china but also and the euro zone. that has resulted in palladium. even though the sale of course in china has come down, the content of palladium has risen, so in fact, even though you would expect that there is less , in fact, palladium demand has risen. on the one side, you have an increase. on the other side, you have lower supply. we have quite the supply shortage. we also see that in the curve going forward, so more in the near term done further up.

and the thing as well is palladium is a very thin market, so -- matt: we are going to get back to you in a minute. georgette boele from abn amro. ♪

welcome back to "bloomberg markets." we are 30 minutes from the start of cash equity trading. it has been an up-and-down year for the federal reserve, cutting rates three times in the face of weakening global growth. dallas fed president robert callan that robert kaplan sat down with bloomberg's kathleen hays and she asked whether the fed's shift back to neutral was about global growth or the yield curve. >> you roll back the clock to june. it was weak