>> good morning from bloomberg's european headquarters. this is "bloomberg daybreak: europe." an airstriketer kills one of iran's most powerful generals. u.s. stock futures fall while treasury futures, gold and the yen all gain. a perfect time for some key commentary. we hear from charles evan, then it is over to the cleveland fed president. do not miss it.

welcome to "daybreak europe." started the year risk on. that has taken ahead after reports u.s. airstrikes have killed the top iranian commander. you are seeing red on the screen for the msci asia asia-pacific index, excluding japan. japanese equity markets still closed for the holiday. yesterday we saw the essence 500, nasdaq, and the dow hit records led by mega caps. futures taking a big hit as well. s&p futures down 0.8%. money moving into treasury futures as well. japan closed the 10 year yield flipping yesterday dropping back below 190. the yen hitting a two month high. gold at a four-month high. oil rallied strongly as well. brent and wti approaching $17 a barrel, hitting its highest since the attacks on saudi arabia and infrastructure in

september. our top story, iran's supreme leader has about super -- severe retaliation after the united states killed one of the islamic republic's most powerful generals. great to have you with us. what do we know so far? >> what we know is the strike and the hours ago pentagon came out shortly after and said it was at the order of president trump. general be killed. they said it was a defensive posture. they had been concerned after an attack on the baghdad embassy, the u.s. embassy in baghdad. there could be attacks on u.s. personnel and service people. this was a coordinated attack done by the u.s., a direct hit. this was a general who is revered in his country.

there been a top official perhaps second only to the ayatollah in terms of importance. he was an iran-iraq war veteran persons against the islamic state. he has been a foe of the u.s. for a long while as well. initial reaction in the u.s. has been mixed. we have heard from presidential candidates joe biden and elizabeth warren, mostly democratic congress people saying that while this general -- no one in the u.s. is going to mourn his loss, they are concerned about the potential escalation this could represent and also that congress was not informed. that is the big concern we are seeing in world markets today, oil and other markets, about what is next.

tehran saying it will retaliate. the be revenge. -- there will be revenge. we have heard from individuals including the ayatollah and there is concern this could countriesthe other and be a serious escalation in the region. bloomberg's senior international editor in hong kong. the senior currency strategist -- great to have you on the show. as jody was pointing to, the key risk for markets is the threat of escalation and the fact we have had comments from the u.s. defense secretary talking about, be prepared to exercise self-defense, be prepared to deter bad behavior. we have the yen at a two month high. how much more could we see money flow into safe havens of the markets perceive a threat of escalation. your ultimate safe haven currency.

also because of its large net foreign asset position. the yen tends to outperform even the u.s. dollar when you have intensification of geopolitical front. if things get ugly between the their respective militias, their allies, we can see the end -- the yen higher against the u.s. dollar. tradenteresting currency could also pan out from geopolitical tension. the canadian dollar outperforming other commodity-centric currencies like the australian dollar and the new zealand dollar because of crude oil exposure. the yen, we go back to we are seeing a move in dollar-yen up 0.4%. a muted move at the moment. what does that say to you? is there so much certainty

investors cannot work our this is going yet? how much more of a pronounced move might we see if the concerns increase? >> we will see the undue much better against the other currencies. especially in the commodity sensitive currencies like the aussie and the kiwi. this is where you will see the most volatility in the japanese currency against the dollar. expect the yen to do well, but not outperform as much against the euro, for instance, or other g10 currencies. nejra: a way to trade this could be euro-yen or aussie-yen. oil jump to the highest since we got the attacks on the saudi facilities in september. how much more of a pronounced move could be see in oil? is that something that's going to drive your fx strategy? >> not really. that is a good point. in terms of oil we see oil around $60 a barrel. unless you have a significant

pickup in global economic activity, it is unlikely you will see a sustained upward cyclical trend in crude oil prices. of crude oilrtive prices aside from the fact downside risks, global economic activity have lessened, is also backact we have had opec in december extending the crude oil output for -- output production cuts until q1 of this year. all of this is supportive for crude oil prices. it is not enough to lead to sustained cyclical upswing in crude prices. as long as the global growth remains relatively -- >> we kind of started off 2020 with risk on and it would help to some extent by the rrr cut, even though that was flagged. do you see 2020 as being a risk on year generally in markets? policy settings are

loose. fiscal policy settings are also going to remain loose. leading indicators that have bottomed out, it looks as though the contraction in manufacturing activity has bottomed out. , look at all this and for me it is a relatively constructive outlook going into 2020. clearly, you add the fact that the u.s. and china are on the way to an initial trade deal, the risk of hard brexit has diminished, 2020 looks relatively constructive in my view. nejra: elias haddad stays with us. now let's get to the first word news. >> sent minority leader chuck schumer is insisting the impeachment trial of president donald trump include new documents and testimony. that follows the revelation of administration emails showing

officials question the legality of delaying aid to ukraine. it extends a stalemate with senate majority leader mitch mcconnell, which resists the call for a longer trial. spain is finally set to get a new government. persuaded the catalan separatist party to help him take office for a second term. that means another socialist coalition and the first proper government since last march. a final vote is expected on january 7. boris johnson top advisors in the driveisfits to reform the u.k. government. a wider restructuring of the service, he says there are profound problems at the core of how the british state makes decisions.

bybal news powered journalists and analysts in 120 countries. this is bloomberg. nejra: thank you so much. coming up, a couple of big interviews on the docket. charles evans joins our u.s. colleagues at 4:00 p.m. london time. and the cleveland fed president joins bloomberg tv at 6:00 p.m. london time. we get fed minutes. ♪

nejra: this is "bloomberg daybreak: europe." the federal reserve may drop a hint for plans for the repo market in minutes from its december meeting today. nine states economies are expected to slide into contraction within six months. the most since the financial crisis ended. that is according to financial

projections from the philly fed. the dollar had a bad december and things may get worse according to fund managers and strategists including those at abm. not everyone is convinced the greenback will keep weakening. citibank saying it will strengthen against the canadian dollar. elias haddad of cba europe is still with us. looking ahead to the fed, the key phrase that came out of that december meeting was a material reassessment of the outlook. is that what you are going to be looking for in the min >> there is that. we will be looking to see, how high is the bar for the fed to raise rates again? rate hikest implied for 2021 and 2022. the postmeeting press conference, jay powell saying it would take a significant and persistent increase or overshoot in inflation the fed to start raising interest rates.

core deflator the is at 1.7%, still below the 2% threshold. inflation expectations are drifting lower. you don't have the overshoot the fed is talking about to justify their dot plot or their fund rate projection. interestinge other developments in the u.s. that's just me actually the risk is the fed cuts interest rates in 2020 or even 2021. outside the fact inflation expectations are drifting lower, you have capital goods or business investment that is about to turn negative judging from the capital good shipment. we have a fiscal policy in the u.s. that is not going to be as stimulative as 2019. it is going to be neutral from a fiscal stance. on the consumer front you have

this cyclical headwind because the consumer in the u.s. are deleveraging. disposable incomes are dripping lower. saving rates as a percentage of disposable income is drifting higher. you have this deleveraging situation that will be a big headwind to consumer spending. that's why i think there is probably the risk of if the fed cuts interest rates in 2020. look at the u.s. curve. it is roughly discounting a 50% chance of a 25 basis point cut in the next 12 months. >> those things outweigh for you the fact that you think the global manufacturing cycle is bottoming out. we are of course looking at u.s. manufacturing as well. locationterms of the for the dollar when you put this together, that suggests we should seen a u.s. dollar starting to weaken in the second half of this year. that is basically our forecast. the u.s. dollar is a

countercyclical currency. it does relatively poorly when the global economy is on an upswing. i'm not expecting a big upswing in global economic activity, but certainly the downside risks of global growth have lessened. one of the big reasons we are seeing this is the contraction in manufacturing activity globally has started to bottom out. the latest gold manufacturing pmi that was released is still above 50 now. >> so global manufacturing starting to bottom out and you have concerns about the u.s.. that makes you a little bit bearish on the dollar, but against which currencies primarily? a lot of people who argue against dollar weakness say, look, what is going to strengthen against it? elias: in this type of environment, i like the commodity sector currencies. the canadian dollar, the new zealand dollar. currencies that should do relatively well if we have this pickup in manufacturing activity. going into 2020. i like the euro to a certain

extent. a lot of the leading indicators of the euro zone .2 a greater euro zone growth outlook. policy is going to remain relatively stimulative, not as much as 2019. still supportive of economic activity. have green stimulus in the euro zone. all of this is going to be supportive of euro zone economic activity. less interest rate expectation and a former euro against the u.s. dollar. do you see the yield differential playing an important role? of the the front end two-year. elias: matt: that is right. if we look at the differential between the u.s. and the rest of the g10, what we are already seeing this yield differential

for the u.s. dollar, this is a trend that is going to continue into 2020. with: elias haddad stays us. now let's get the bloomberg business flash. . carlos ghosn is distancing his son from his escape from japan. the auto giant says his wife carol and other family members played no part in the escape to lebanon. the statement is the first comment he has made since fleeing tokyo earlier this week. he says he's ready to communicate with the media freely as soon as next week. tesla has cut the price of its china-built model three sedan. it will now start at $46,500. that is after the carmakers set up efforts in the world's biggest electric market. apple has fired the former head of -- hired the former head of hbo.

company will make original programs exclusively. he joins a list of notable names working with apple including oprah winfrey, steven spielberg, jennifer aniston, and reese witherspoon. that is your bloomberg business flash. you so much. coming up, we will stick with apple. the tech giant shares top $300 for the first time. this is bloomberg. ♪

nejra: apple shares have surpassed the $300 mark for the first time on optimism around the holiday order. annmarie hordern has the details. >> the rally is continuing for apple. to watch out for.

they appear to be overextended and overbought. analysts expected really strong holiday performance. what apple is doing is leveraging their consumers through the products outside the iphone like the air pods, like the apple watch, things like that. things people put into their -- your member 2019. nejra: apple went on to outperform other mega cap tech stocks with a gain of 86%. we will see if 20/20 brings something similar. the u.k. is on guard following -- as borission to johnson ponders his decision on whether to adopt huawei technology for the u.k. 5g network. the prime minister seeks to strengthen ties with china ahead of brexit.

the pound started 2020 on the back foot halting a winning streak. it caps its most successful quarter in a decade. elias haddad is still with us. we are seeing the pound weaker today. cable trading around 1.31. is it reality starting to set and after the optimism we saw? elias: first, you have this broad strength in the u.s. dollar. uncertainty generated by this post-brexit trade negotiation that is a big headwind for the british currency going into 2020. our broad view is that the pound will remain roughly within this wide range this year. at thexpect hard brexit end of december 2020. get towill manage to some kind of basic trade agreements on goods. nejra: you see a trade agreement rather than any kind of extension which the government has ruled out? elias: they have ruled out also day before andt

they have reneged on their promises. i still think a basic or bare-bones trade deal is doable over the next 11 months, but also, if push comes to shove, we will probably see also the u.k. extend the transition period. it is in nobody's interest really to have the hard brexit at the end of december 2020. we had manufacturing data that was a bit of a concern. do you see the economy bouncing back meaningfully? >> the big drive for the u.k. economy is because of the brexit uncertainty. one of the big supporting factors for the u.k. economy going into 2020 is the expected fiscal -- judging by the conservative platform. the conservative platform looking for an extra 0.4% of gdp

and capital spending for 2020. it should take a lot of the pressure off the bank of england to deliver more rate hikes, which is what is implied right now by futures in the u.k.. i think the bank of england will be quite comfortable, especially if we have support from fiscal policy in the u.k.. >> you think the pressure is off the bank of england to deliver a rate cut. do you just see it on hold? should we be pricing more for a hike? uncertainty is there between now and the end of next year at least in the nerd term -- the near-term. that will ensure the bank of england keeps interest rates on hold. i don't see the bank of england cutting interest rates, which is what the market is currently implying. nejra: is your preferred way to

play this in the fx market with cable given that earlier you were saying you are positive on the euro? perhaps you are seeing less upside in the pound against the euro, but also with the geopolitical risks we have been discussing, you say the yen could benefit. perhaps sterling-yen is not the best trade. his cable the best way -- if you want to play the range in the pound between 130 and 135, that would be a good strategy to play the pound rather than to played against others. nejra: you see euro-sterling trading in a range as well? elias: i think euro-sterling is due for a valley year, especially after the post-election decline. i would say eurosterling also within the range. i would expect the euro to outperform the pound in 2020. anna: -- nejra: that is to do

with the bottoming out in the pmi's mainly? or does your forecast for ecb policy have anything to do with that as well? leaninghere's a lot of to a brighter eurozone outlook for 2020. this will lead to an upward revision to euro zone interest rates. expectation in favor of the euro. you also have fiscal policy in the euro zone. all of this in my view, then you have to look at the balance between the euro and the u.k.. the euro has a massive current-account surplus compared to deficit in the u.k.. this will be one of the reasons why the pound will have to continue to trade at a discount. to attract foreigners in the u.k. to refinance this current account deficit, you will have to see the pound continues to trade at a discount relative to its value. nejra: are you trading volatility in sterling right now? elias: i don't trade the

volatility. but i think it's going to be a wild ride 2020. speak toming up, we the global cio of one of the world's largest wealth managers. this is bloomberg.

nejra: this is "bloomberg daybreak: europe." these are today's top stories. oil surges after a u.s. airstrike in iraq kills one of iran's most powerful generals. the supreme leader vows retaliation. risk on sentiment takes a hit. u.s. futures fall while treasury futures, gold, and the yen rise. fed minutes are on the docket. first we hear from charles evans. then it is over to cleveland fed president loretta mester. do not miss it.

after a buoyant start to 2020, risk sentiment taking a powerful hit. u.s. futures lower after all u.s. benchmarks hit record yesterday with geopolitical risk back front and center. oil jumping to the highest since the attacks on saudi facilities in september. we are also seeing gold at a four-month high end the yen out of two month high. let's get all the action. in beijing and annmarie hordern in london. let's kick it off with you, selena. what are we seeing in the asian session? we have seen equities reversed earlier gains. >> that's right, but overall we have seen this trend where msci emerging markets have really rallied. take a look at this chart. bearhave rallied 20% off market lows and developing

nations stocks are firmly in that territory. by rally is being fueled confidence the u.s. and china will reach a trade deal with some saying the signing will happen january 15 and that china's rrr cuts are boosting investor sentiment. this chart also shows dollar weakness is helping to aid stocks. the index declined 2% in december, the biggest in almost two years. while there is some automated rebalancing going on, you will see a bigger boost as investors look more actively to emerging markets. nejra: thank you so much. and you are looking at nifty mid-caps. >> absolutely. what we have seen as far as this morning, a little bit of dampen sentiment when it comes to benchmark indices. however, they have had a stellar run through the course of the year. going up as much as 14%.

what has happened is the mid-cap index, the rest of these smaller names, that index has not moved up by more than 1%. which is why the next chart that should come up for you on your screen is very interesting. it is starting to see just a little bit of gains coming in. it has broken out of its worst technical trendline, which has been falling off. move andw there is up the real question is, should it sustain the gains, can we expect the mid-caps to outperform the benchmarks? that is the big question everyone is asking. there are a lot of hopes pinned on the relatively small names to do better from here on. nejra: thank you so much. anne-marie, yesterday we talked about lingering mideast tensions propping up oil prices. 24 hours later it is not just tension, it is outright fear with tensions ratcheting up. >> that is exactly right.

not a single oil facility or production was hit, but the killing of one of the most powerful generals in iran is a provocation of risk that could destabilize the middle east. oil prices we have seen jump on this move. barreljust under $70 a on brent. it is the biggest day since we had those attacks in september. what happens next, whether or not prices stay elevated, remains to be seen, whether or not the escalation of the current situation and relationship, but just yesterday, rbc said iraq ranks one of the top risks of 2020 it is and she said that potential tripwire for u.s.-arabian clash, -- u.s.-iranian clash, which we are just starting to see today. nejra: let us get the first word news. >> senate minority leader chuck schumer is insisting the

impeachment trial of president donald trump includes new documents and testimony. the revelation of administration emails that show officials questioning the legality of delaying aid to ukraine. mitch mcconnell has resisted calls for a longer trial. spain is set to get a new government. acting from your -- the acting premier persuaded the catalan separatists party to help them take office. that means a socialist coalition and the first upper government since last march. a final vote is expected january 7. boris johnson's top advisor is looking for weirdos and misfits in a drive to reform the u.k. government. seekingt, he said he is an unusual set of people with different skills and backgrounds to work on downing street.

they have profound problems at the core of how the british state makes decisions. global news, 24 hours a day, on air and at quick take by bloomberg powered by journalists in one hundred 20 countries. this is bloomberg. you so much. after a record-breaking 2019 for the bond market, our next guest says no yields could sit for prolonged time. he says it requires a fresh look by investors and adds that instead of waiting patiently for higher or positive bond yields, investors need to create a considered response to the current situation. let us will come the global cio of one of the world's largest wealth managers. christian nolting from deutsche bank wealth management. you for sticking around. monetary magic. we are still living with the

effects. that's how you put it in your outlook. what do you do now if you want to allocate to fixed income? >> good morning from frankfurt. thanks for having me. i think what is important is to look at fixed income to take a fresh view. in a lowrobably stay yield environment and negative one in europe for quite some time. if you need to justify holdings ,f negative fixed income yields i think some of this is important in the portfolio as a diversifier. what you need to do is look at the right strategic location, justify this negative yield environment. we have seen today is tension in the middle east's up. that justifies some diversification. this year already shows in two trading days it can be very positive. there are also risks out there. also a different year from 2019. nejra: what would you say to

investors who say i just want to allocate to cash instead? >> if you allocate to cash in a negative environment, it is not a good idea. i think what you really need to do is probably look at the things you are investing in. you can take a bit more risk. we do expect slower growth, but no recession. that is very important. if you invest with a buffer, that is the best way to deal with that environment. what: within fixed income, would be your preferred areas of diversification? are you looking more the corporate base? are you looking elsewhere? christian: i would say treasuries, to be honest. we don't forecast massive change in the currency spectrum. we probably have seen the peak in dollar strength. we don't expect the dollar to

massively weaken. for european investor it makes sense to look into u.s.. it is still the highest yielding g10 currency if you look at the u.s. dollar. there is no real move on the fixed income side. side, thatrest rate is interesting. we still think looking at emerging market bonds and emerging-market fixed income, especially in the asia region, i think that is also quite interesting. there are still some returns to be made from that perspective. nejra: i want to pick up on what christian was saying on treasuries. the 185 handle is not far from where we are now. do you see treasury yields, the 10 year yield, remaining where it is now or significantly lower? or perhaps higher? christian had good points with respect to the yield outlook.

we see this for the reduction in global economic activity combined with monetary policy that remains very loose, we should see the yield curve start to steepen. treasury yield, at least at the long end, to drift a little bit higher. i believe closer to 2% would be a more reasonable forecast. nejra: a little bit of a difference in view in terms of the 10 year yield. christian, you mentioned emerging markets. are you looking at sovereign debt? are you preferring emerging-market corporates? where are the best returns for you in 2020? christian: we looked certainly at sovereign debt. we don't expect really a recession. slightly lower growth, but no recession. there is time for emerging margaret -- emerging-market

corporates. i think you can do that. in a diversified way. i would rather pick from the fixed income side than the pre-or equities side -- the peer equitiesside -- pure side. nejra: where are the best opportunities within developed markets? if you look in the fixed income side, it looks that in the growth area and the equity indexing side, we want to balance as well a little bit. we have seen quite a lot of growth. we have seen quite a lot of change or i would say a little change in market behavior between value and growth. that is something you can also play in the fixed income side. we want to look at the consumer sector. companies in the fixed income side. equities as well.

that is why we would probably pick on the profit side fixed income. nejra: we will get more of your thoughts on equities in a moment. christian nolting and elias haddad both staying with us. coming up, a state of emergency. live in sydney with the latest as wildfires rage. ♪

nejra: this is "bloomberg daybreak: europe." the death toll from wired fires -- wildfires sweeping australia have climbed to 20. joining us from sydney is our editor katrina. great to have you with us. what is been the political impact of these fires? wererlier this week we talking about the outpouring of anger we are seeing on twitter and facebook and wondering

whether that would spill over from the echo chambers of social media. thursday we saw that happen. prime minister scott morrison was heckled in the town where two people have died in bushfires earlier this week. others including a firefighter refusing to shake his hand. member of morrison's own party said he probably deserved that reception and that he should be opening his own checkbook to help people rebuild their lives. beganiticism of morrison when he took an unannounced pre-christmas break to hawaii just days after calling the fires a natural disaster -- national disaster. there is concern about the impact of global warming in australia. it is the world's driest continent. morrison is a very strong supporter of the coal industry. britain gets about 2% of its power from coal-fired lands.

in australia, that is closer to three quarters. there has been strong criticism from environmentalists. nejra: thank you so much. of deutschelting bank wealth management is still with us. he says after a bullish start to the year for the stock market, equities remain a key part of most portfolios. he sees scope for further gains. risk of further volatility. elias haddad still with us also. when we were talking about fixed income, you were saying in the corporate bond space, there is an opportunity perhaps in value over growth. -- hasng that is underpinned over the past few years is low rates. if you see rates remaining low, aren't growth stocks going to prevail? >> you need to take a more balanced view on the fixed

income side. if you look at value and growth, the difference in valuation is very high. in august we have seen quite an interesting move. quite some rotation started in the market. a lot of people are talking about this in the equity market if you look at positioning of portfolios in the market, it has not been happening so much. the start of rotation could still be there. we are not saying sell all your growth stocks. not necessary in this environment. no recession, interest rates staying low. but to rebalance makes sense because we have seen this massive outperformance. that is what we are doing right now for 2020 to rebalance, not forcing so much on the growth side. nejra: are you rebalancing regionally at all? in terms of the u.s. versus europe versus emerging markets, for example? christian: the growth value we do globally, so when we focus on the value space, you cannot use

the same traditional value. for traditional value to outperform, you probably would need higher interest rate, which is not our forecast. what we are looking at from a value perspective is cash flows. that is important to us. also as a diversifier in times where risk is coming up a little bit higher as we see in the middle east. it is still of course mainly in the u.s. where value is a large story. it is also true for europe into a certain extent for the emerging markets. there is a global trade we are doing there. elias, what christian and his team see is slower growth, but no recession. is that what you see or are you more upbeat? elias: a little more upbeat. 50% of global central banks have cut rates in 2019. policy rates are well below the level implied by the nominal

neutral rate. then you move to fiscal policy setting, and fiscal policy settings remain quite accommodative. look at the liberal platform party of canada. they are looking for a boost in capital expenditures. same thing in the euro zone. they have announced a ¥26 trillion package in japan back in december. new zealand has announced an additional spending measure over the next four years. we are moving into an environment where we are going to have loose fiscal and monetary policy. the big headwinds we had in 2017, trade escalation at hard brexit risk, they are no longer going to be a material risk into 2020. on the point of fiscal policy, are we getting ahead of ourselves in terms of the expectations there? any lift that could give to equities? 2019, manyr like

people still expect modest gains in equities in 2020, but what is your take on how much that game might be and how fiscal might continue to it? -- that gain might be and how fiscal might contribute to it? elias: you can look at the fed, the ecb especially. i would say the effectiveness of the twos is probably reduced. it certainly calls for a lot of fiscal policy in the euro zone, i doubt if we get a boost on fiscal policy. there is a lot of hype on germany's policy. i think that will not change. there is room for some fiscal policy. i would be surprised if there is a massive boost in the euro zone. that is one reason we expect a slower growth. 2019 have priced in a lot of positive news, so i doubt

a physical boost in the euro zone. there will be some in asia and the u.s.. the corporate fiscal policy will stay for quite some time. that's why we also have this major theme, the end of monetary magic. nejra: elias haddad and christian nolting both stay with us. coming up, charles evans joins our u.s. colleagues at for -- 4:00 p.m. london time. loretta mester also joins bloomberg from 6:00 p.m. london time on the day we get the december fed minutes. ♪

nejra: this is "bloomberg daybreak: europe." rbc has raised its 2020 gold forecast and sees further gains

a year after. annmarie hordern has all the details on your morning call. >> gold set to shine in 2020 and 2021. rbc is saying above $1500 an ounce for 2020. that lifts to $1600 an ounce in 2021. their reasoning is gains and buoyed by etf, but also geopolitical uncertainty. yesterday with north korea, today with the middle east, we are already seeing that come to fruition. nejra: thank you so much. christian nolting of deutsche bank wealth management is still with us, as is elias haddad of cba europe. your call for gold is that $1550. not that far off what rbc have been calling for. what is driving that view for you? not that much higher than where we are now. christian: definitely correct. for gold, let me talk about two correlations. the first is inflation. we don't see massive gains in inflation, especially not in

expectations, which would be necessary for us. there are two other aspects. the other correlation i want to mention is negative yields. the chart of negative yielding bonds globally, you plot the gold price, there is a very high correlation. it is probably because of opportunity cost. there is no dividend. you have to pay for storage. in a low yielding environment, the opportunity cost is low or even negative. that's why we want to increase the gold price forecast. something we already see today when there is tension, it is good to diversify the portfolio. as we increase, not a massive one because we don't expect inflation higher, but it makes a lot of sense. nejra: you have mentioned geopolitical risk, which we have all woken up to this morning. ins incident we have seen the middle east, which has

reverberated across all asset classes, how much does this concern you in terms of the risk and the potential underpricing of geopolitical risk by investors in 2020? christian: we have talked a lot about geopolitical risk, but nothing has materialized. maybe 20/20 is different. this escalation is there and that could stay for quite some time, maybe throughout the year. it is an election year in the u.s., so there will be a lot of focus on politics. politics trump's policy. maybe more politics than policy. that is something to take into account. nejra: thank you so much. and elias haddad, thanks to you as well. that is it for "bloomberg daybreak: europe." we are looking at a down day for equity futures in the red, both in the u.s. and europe after u.s. benchmarks hit records in yesterday's session.

geopolitical tension in the middle east front and center. it has sent gold to a four-month high and oil soaring as well. when you're traveling to work, tune in to bluebird radio on your mobile device and dab digital. ♪

>> good morning. we are life from our your headquarters in the city of ended read i am anna edwards -- city of london. >> the markets essay what a day a day -- difference a day makes. geopolitics smashes a sentiment. the cash trade in europe is an hour away. >> oil surges after a