manus: good morning from dubai, this is bloomberg "daybreak: europe." nejra: these are today's top stories. the yuan hits the strongest levels since july as the u.s. amoves china's designation as trade manipulator. fresh records, but howard marks tells bloomberg that investors should beware the full market. the market has put up 11 years. we are in the longest expansion in history. profits are not rising, stock

prices are. it does not mean that the market will down tomorrow but it does mean that the odds are not, in my opinion, in the investor's behavior. jp morgan hoping that revenue will benefit. hit today.s also manus: it is "daybreak: europe." the theme is rip it up and start again. they say growth will be 1%. 2.3% this year. against the going consensus of the march -- of the market. i quite like what they say, between bond traders and equity traders, apparently they say

that bond traders might be more right but of course they are not infallible. it is a really: interesting bearish call. what i would say about the equity market, both of us have observed the fact that that rally has been led by the mega caps, so you can question whether you look low the surface, if the equity market has that much conviction in growth. caps did, maybe the small would not be lagging as much. manus: one sentiment, that it is no longer a currency manipulator, that moniker is gone. break 6.8?, willie -- will it break 6.8? what does a stronger yuan mean for the pboc? let's roll it over because, where the yuan goes, so does the

rest of the market. this is the jp morgan asia fx index. it is the dollar index. course, can see, of that is on the back of those fed comments from bostick, etc., last night. the oil market, six-week low. we caught up with the voices that matter, prince abdullah telling the market that it is back to the five-year average. that is what we want to stick to. a key yen has crossed level, weakening past 110 for the first time in eight months. dollar-yen again reflects the risk on picture in the market. equity pictures pretty flat. today, we saudi s&p 500 and nasdaq hit records. the spread between tech and

banking shares hitting extreme levels. some green in asia for the fourth day in a row. back to our top story, the u.s. has dropped its label for china as a currency manipulator. they say commitments not to devalue the yuan have been made. thes: that news boosted yuan, touching the highest level since july in the offshore market. it is not the only news driving the currency up. the data signals that china's economy is on its way to a steadier grind. strongerr exports on global demand, trade disputes with the u.s. and the volume. let's get to tom mackenzie, looking at the numbers and digging into the details. he is our anchor of bloomberg's china open. should i dig deeper beyond the

headline or be comforted by the fact that there are fairly robust numbers at the top level? tom: they are fairly robust as far as export-import. 7.5% for december, well above the estimates. imports coming in above 16%. over the year of 2019, china still managed to grow exports globally by about half of 1% despite the trade engine with the u.s. these are probably positive numbers, the question is how long can they be sustained for given that tariffs to remain on a large chunk of chinese exports to the u.s. sentiment does seem to be improving.

maybe q1 will remain positive. toward the second half of the year is when the questions remain. a lot of that will come down to the trade talks. another section will come down to the global demand picture, whether that can maintain the momentum. nejra: thank you for joining us. theing us for the hour, chief investment strategist at northern trust asset management. we are heading towards the signing of phase one and the dropping of the trade manipulator. i am wondering whether these latest developments are tempting you to broaden your risk profile toward emerging markets. >> for us, it is still that trade-off between the current news being better than expected. we are fully in acknowledgment of that. we are hoping it will lead to a phase two and phase three trade

deal. we still think the u.s. and china have irreconcilable differences and that means we are very worried that the trade tensions will come back, especially as we get close to the election. the whole theme of china being a currency manipulator becomes more important. that is why we are still underway. i would like a moderate overweight to risk, but we use the em underweight to position us with respect to the u.s. and china. manus: so, phase one deal, we were given this language as a mini deal on october 11. our last guest said that is when trump said 60% would be done. phase% will be done in two. the last guest said you wanted to construct a portfolio that is phase one resilient. they want to be longer of

utilities. does that construct hold for you given your risk profile? >> we are not quite there to be honest. the whole problem is you have to believe that these rules will be the nextnot just over six months but over the next 12 to 14 months as well. we are worried that china is playing the long game, focusing on the phase one trade deal knowing full well that after the election, things could change dramatically. to construct your portfolio now for that 24 month period, knowing full well that everything can change 10 months from now, we are not in that camp. does that mean there is a reasonable risk that the yuan weakens from the levels it is now? >> there is a risk. position for that risk but whether it is six

months or 10 months, that is a hard call to make. the global growth picture improves, the china stimulus helps that growth improve, and we are getting that benefit through our overall exposure, not just the em exposure. this is a tenuous relationship between the two countries and we don't believe the current detente will hold for long. manus: the question is, it will be rules-based and if you break the rules, there could be consequences. can i take you to this chart in the dtv library? this is the spillover effect. we have had this roaring yuan trade. effect.e is a spillover one of the risks associated -- what are the risks associated to that?

having ans measures impact on global growth as well, i think this trade should have some legs. we do think the overall emerging markets spectrum should be strong here. again, the question is how long you think the trade will last and that is where we are holding back a little bit. we are worried that everything is good now but, as always, with mr. trump, we are one tweet away from everything turning on its head. manus: we are always one tweet away from a potential implosion. the first's get to word news with annabelle droulers in hong kong. a goodle: now is not time to be investing. that is the opinion of howard marks. he says bets on u.s. stocks,

because sooner or later, they will go over the cliff. >> the market has been up for 11 years. we are in the longest bull market, longest expansion in history. it does not mean that the market will go down tomorrow. but it does mean that the odds are not, in my opinion, in the investor's favor. iraqi leaders privately want american troops to stay in the country, according to u.s. secretary of state mike pompeo. voted to expelnt american forces after the killing of the irani in general at the beginning of the year. apple says it is helping the fbi investigate a december terrorist attack on a florida naval base. the tech giant is pushing back against criticism that it will not unlock phones belonging to the terrorist. it says that there is no such thing as a backdoor just for the good guys.

day onnews 24 hours a air and at quick take on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. nejra: thank you so much. citigroup,jp morgan, and wells fargo kick off the u.s. bank earnings season. next, more on the sector and performance relative to tech. this is bloomberg. ♪

it seems like, even at the worst of the times, the renminbi has been holding well. with all this new optimism in the market, i think you have to see even bigger inflows in the coming days and years. was the b.n.p.

paribas china ceo speaking about inflows. this is bloomberg "daybreak: europe." technology stocks have driven u.s. benchmarks to fresh records and their dominance is becoming even more pronounced. with the details and the chart that matters is bloomberg's dani burger. dani: it continues to move to fresh records, really driven by tech stocks. thecan see a little bit of globe here. china down today, not really matching what the u.s. has done. buying this map, the relative strength index of tech stocks. u.s. benchmark, dominated by the top five stocks. according to morgan stanley, that is more than the tech bubble. the rsi has moved above 80. , that is since

last march. we tend to see stocks fall around 3% after they reach such a high level. the question, are valuations going to scare off investors at these levels are -- these levels or are investors going to keep riding these waves? manus: the tech mania. we have not seen this kind of value differential for quite a while. investors are laser focused on the forecast with big u.s. financials. jp morgan, citigroup, wells fargo. chief executives will help clarify whether the low interest rates, geopolitical tensions are enough to end the good times. faang stocks trail the broader market so far this year. the chief investment strategist

at northern trust asset management is with us. we are going to go into the jaws in the banking. we have seen a swath of global job losses in the past year. arbitrage look at the of global thanks? -- global banks? wouter: we still think the u.s. banking sector is better positioned than the european banking sector. the u.s. looks a lot better than europe. valuations are also different. underlying trends look more favorable to the u.s. fourth quarter earnings for the u.s. will be interesting. but it will be messy because we have new accounting coming in and we don't know how that will impact different banks and reserve accounting measures. nejra: you are overweight

broadly u.s. equities. i want to circle back to the chart showing the outperformance of tech versus financials. does the outperformance and the fact that the rally has been led concern you at all in this broad rally? some might say that investors are not actually that convinced about growth. wouter: that is right, but we don't think that is necessarily a negative markets -- a negative. markets climbed this wall of worry. if it is all positive, markets get a little nervous. the second part, we don't think growth will be all that great. the hurdle we have to jump over. we think 1.8% for the u.s. should be achievable. it also means there is no

inflationary pressure, no wage pressure. will come back to that debate between what is consensus. technology and banks, i want to know how to differentiate technology going into 2020. this is the faang versus the stocks, which is the philly semiconductors. relative to the s&p, it is at the strongest level. let's have a look at the chart. my question, how do i differentiate between faang, which is apple, microsoft, amazon, facebook, the 18% club, and the hardtack. is it 5g that drives hard tech higher? wouter: that is part of it.

there are technologies out there driving the new tech wave. ai and 5g are part of that. quantum computing. there is a new world we are entering that investors should be looking for. there is certainly a new wave of tech, that will be very interesting and particularly compelling to investors going forward. from: wouter sturkenboom northern trust investment management stays with us. let's get the first word news from annabelle droulers. -- gskle: gsk seeks seeks approval for new drugs and 2020. she told us the importance of drug price transparency. >> we support any kind of regulation that continues to support innovation, where value can be innovated.

importantly, passing on the discounts that manufacturers bring. out-of-pocket challenge, which is a real one for many people. no one should have to ration their medicine. wholeheartedly support more transparency. airbelle: indonesia's lion wanted to put pilots before simulator training before flying the 737 max but boeing convinced them it was unnecessary. that is before 189 people died when a lion airplane plunged into the java c. that is your bloomberg business flash. much, thank you very annabelle droulers. coming up on the show, investors take note. the odds are against you according to howard marks, warns against the dangers of a liquidity driven bull market.

our exclusive interview is next. this is bloomberg. ♪

this is bloomberg "daybreak: europe." manus: the agenda for the rest of the trading day. these are the events that our viewers should be focused on. the eu's new trade chief is heading to washington. he will meet with the u.s. trade representative, robert lighthizer. then, less than three weeks before the state contests to begin to choose the candidate for the presidential election, the party holds its seventh debate. nejra: bank earnings season with signs of stabilization over recent months. jp morgan, citigroup, and wells fargo all report. in the u.s., cpi inflation data at 1:30 london time.

if you are an investor, the odds are against you according to howard marks. the billionaire said we are in the longest expansion in history. profits are not rising, stock markets are. he added that, "it does not mean the market will go down tomorrow but it does mean the odds are not in investors favor." he went on to discuss the merits of luck versus skill. speaking exclusively with our colleague in new york, he also warned that too much money has rushed into direct lending. howard: we are better off -- we, as lenders come are better off because a bunch of competitors we don't have. here, directeople lending is great because the banks are inactive, if two much money rushes in as a consequence and tries to invest too aggressively, that is bad news. we have to take account of

faulty the considerations, not merely the banks' reticence. >> do you think too much money has rushed into direct lending? howard: i think so. nejra: let's get back to wouter sturkenboom. one market where howard marks said it is still not efficient enough is high yields. would you agree? wouter: firmly so. we think high-yield is one of the places where alpha can be generated. it is still one of the places where you have an upside down risk profile. turn. market were to but you also have pretty good upside participation if the market continues. we are still high-yield as a result. manus: this year will be year in theory without the fed moving aggressively as it did last

year. my question, how much of a non-qe toion with the perpetuate trades like that? theer: we still think that global easing cycle driving in the second half of the year is going to taper off and moderate in 2020. clearly, the fed is not going to be as aggressive as it was last year. we think overall monetary policy will be support and high-yield by extension. it is not going to get there through direct rate cuts by the fed. it is going to come through a continuation of the policy we had built up in 2019. manus: stay with us, wouter sturkenboom, from northern trust asset management. coming up on the show, oil steady neary six week nest steady near a oil

six-week low. easing tensions in the middle east. mike pompeo downplays iraqi demands to expel u.s. troops. this is bloomberg. ♪

nejra: good morning from bloomberg european headquarters in the city of london, i am nejra cehic with manus cranny live from dubai. caret today's top stories. -- here are today's top stories. deals --ase one trade the signing is expected tomorrow. proceed with caution. optimismes and trade push u.s. stocks to fresh records. investors should beware of a bull market. >> the market has been up for 11

years. bulle in the longest market and expansion in history. it does not mean that the market will go down tomorrow but it does mean that the odds are not, in my opinion come in the investors' favor. manus: and here come the banks. kickinggan and citibank off with wells fargo also reporting. with fiveldman sachs executives and the top management committee. nejra: the u.s. lifting the currency manipulator tag from china giving risk assets is a lift this morning. asian stocks in the green for the fourth day in a row. and the yen weakening. and a stronger yuan.

we have the markets from around the world. manus: the what are the policy ramifications for the pboc. we are standing by in mumbai and dani burger is at home in london. we have the asset move for the yuan. that moniker as manipulator is gone. how is that playing across the market for you this morning? >> big moves coming through the day after we saw the off and on currency -- they are both at six months high fueled why the removal of the manipulator tag and the positive trade data out of china today. we are seeing about $13 billion

worth of options trading hands. and china's currency has now regrouped about a third of the thees it sustained against dollar since mid-june, 2018. many analysts out there expecting 6.8 to the dollar to be reached within a couple of months. nejra: juliette saly, thank you so much. you are taking a look at the enemy of bull markets which is inflation. >> good morning to you. that is probably the reason why india is not joining the party. spiked inflation has india. out.ata that came the net result of all of this is that bond yields are back at levels they had before the operation twist. believe thate to

bonds will stay lower. indian equity markets are joining the party. watch out for this because the bond trader is caught between a rock and a hard place. we don't know how this will turn out. back to you. manus: it is like good and bad volatility. dani, good morning to you. let's go to bitcoin. bitcoine debuted options yesterday, the second large offered to do this in two months. -- thisns more look means more liquidity coming into the cryptocurrency. now, trading at a two-month high. i should say -- only 54 option

contracts traded. but it is not the number the first day that matters but what we see in the coming weeks and months that will show whether the bit point options are important for the market or not. and if it shows that they are important, we see future bitcoin options on record. nejra: thank you so much to juliette saly and dani burger. let us get to and about rulers in hong kong with the first word news. >> apple says it is helping the fbi investigate a december terrorist attack on a florida naval base. the tech giant is pushing back against criticism that it will not unlock plane -- phones that long to the terrorists. such thingre is no as a backdoor just for the good guys. airline wants to put

pilots through training. a disaster blamed in part on inadequate training. manchester united risks losing its position as england's top club after a string of subpar performances left the team out of a lucrative competition. behind manchester city and liverpool. 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 very much, and annabelleus -- jewelers. -- u.s. troops to stay despite the public

pronouncements to the contrary. easing tensions in the middle east. futures in new york edging higher after falling from a percent in the last five days as a threat of outright war between the u.s. and iran for now seem to have receded. >> i do not think we are on the brink of war. the escalation is continuing. what i see from afar and everyone sees is a type of de-escalation which is happening so i am very much comfortable with what is going on. ands: still with nejra myself is wouter sturkenboom from northern trust assets. i know you said one of your

hedges was buy high-yield. but when you saw the amount of -- what doesloded this say about geopolitical risks for the rest of the year? translate those five days into trades for me. wouter: what happened in our view is you had this geopolitical event. and people were aware that oil is a risk to global growth especially areas that are energy sensitive like europe, asia, in india. as well what you saw is this geopolitical risk dissipated in a matter of five days and everything went away again. ishink what that did for us it showed the risk is still there and oil is still a factor to be reckoned with but it also showed that you need to be calm

and you need to think about the scenarios and not just focus on the worst-case outcome. and then basically trade accordingly or not and stand still and wait what will happen next. nejra: what would you do out of those two options? take a step back and stand still or did you reposition? wouter: we stood still consciously. the retaliation could be relatively small which it was and the u.s. could not go for the extra step and the whole thing could dissipate rather quickly. that is one scenario you need to consider. but there is also the scenario of a full-blown war. but we said -- until we get confirmation of the worst case scenario, we should assume it won't get worse and that trade -- and the tension will dissipate which it did. , from wouter sturkenboom northern trust assets, thank

you. coming up, a financing shift. aims topean commission drive. everything you need to know. that is next. ♪

manus: this is bloomberg daybreak: europe. i am manus cranny in dubai. nejra: i am nejra cehic in london. at climate change as the wildfires in australia rate john. -- rage on. >> it is not an issue of this applies out there but the reality is they are starting at such a low base. gas has to be the fuel that does this for you. only one in plentiful supply that we can get into the

marketplace. manus: climate change is also the focus for the european union as the president looks to build her green deal with one trillion euro financing plan. what does it mean? what are the ramifications? , good to see you today. how will she finance this? maria: that is a big question. we have not had many answers though that will change today. we are expecting her to provide information on who will pay for this. the reality is this transition will cost a lot of money and the european commission needs to show it is able to attract and allocate capital for this to be credible. she is promising one trillion euros over 10 years. say theshe well commission will pledge at least

to spend 25% of its annual climatento financing activities. and she will also say that the european investment bank will more than double the amount dedicated to climate. she will also promised to leverage between private investment close to 300 billion euros. this plan -- it is worth noting that the final word well, down to european leaders and not every country is on board with this. , our reporteradeo in brussels. and with us is wouter sturkenboom, in your five year outlook you have a section on climate risk. you differentiate between physical risk and transition risk. what maria is talking about is more the transition risk.

how are you protecting against that transition risk in a portfolio? wouter: we are telling clients esg aware.more that is the first step. the second step is we look for investment classes, asset classes that is that are positively exposed to the new changes coming with respect to this transition and that is why this eu deal is very interesting. there is a lot of money coming into this space and a lot of infrastructure spending. intowon't -- it will come this space and make for an interesting return profile. that: you also point out even more than transition risk is political. if you don't move enough on climate issues, you run a political risk.

in terms of portfolio allocation, does this mean we expect portfolio managers like you to up your expectation? wouter: that is not the way we of looked at it. look atat it more -- australia. if you ignore climate risk, is a political risk that is manifesting itself and their could be a political backlash. investors do not want to be exposed to that. tied directlyuch to private equity investment or alternative investing but it is tied to making sure that the politicians understand that climate risk is here. we need to monitor it. and doing nothing could be more costly than doing something like europe is now doing and the number is big but -- as

australia is showing come it could be worth to buy the cost of not doing something. nejra: wouter sturkenboom staying with us. glaxosmithkline sees the potential for new drug approvals in 2020. we spoke to the ceo in san francisco. she talked about the importance of drug price transparency. >> we absolutely support any kind of regulation that pushes for innovation where a can be demonstrated. but also more transparency and particularly passing on the discounts. there is a challenge of escalating out-of-pocket. we wholeheartedly support more transparency. purchasing -- 45

the deal caps in new york rise. the sale price has doubled its valuation. visa has seen its stock triple in the last five years. working on a secondary listing in hong kong. the company is working with goldman sachs on the share sale. they are seeing china as cordless sometime this year. that is your bloomberg business flash. nejra: thank you so much. coming up, has a u.s. growth engine run out of steam? said is time to diversify away from corporate america. that's up next. ♪

manus: this is bloomberg

daybreak europe. i am manus cranny in dubai. cehic ind i am nejra london. here with your morning call is bloomberg's dani burger. goldman says one of the reasons the u.s. has been so dominant is how strong epf growth has been the peak in 2006. earnings have grown 90%. the annual rise rate looks like 5% and goldman sees that falling to 4%. that still beats out europe at 2.7% however, asia's growth rate according to goldman will be 5.9% beating the u.s.. goldman says there is no huge reason for the u.s. to underperform but if anything, the growth gap shrinking is a good reason to rotate outside of the u.s. coming yet exposure in asia and europe especially they

havehen risks like exit faded and now shifted to the u.s. residential election. manus: ok, maybe it is time to make that move. thank you. our guest toast this morning is wouter sturkenboom -- our guest this morning is wouter sturkenboom. it is incredibly interesting to see the momentum in china and asia and the kind of money that has flowed in there. take me through your thinking of the allocation to that part of the world and the growth differential that goldman sachs has laid out. wouter: goldman make some good points. we still prefer u.s. assets over the rest of the world the we have a all overweight to develop. it is not like we are having a trade-off there. on the asia part, we are still cautious that the trade conflict might flare up again later this

year especially close to the election. that is why we are a little underweight there. when it comes to the u.s. side of things, we do think profit growth will be equal to europe and the rest of the world and the devaluation slightly extended. the underlying trends are still moderate. so we think the valuation will stay flat. that: i know you have said there are developed markets outside of the u.s. is it the u.k. you are looking at? europe? wouter: both. we look at the u.k. and the eurozone and at japan and the rest of asia as well. when we look at europe in particular, we like what we see. we do think europe should be

able to do better. mid single-digit returns in terms of growth or earnings, sorry. about an 8.5% growth. play 5% return. slightly higher in the u.s. and in that sense we are aligned with goldman. but the gap is not big enough for us to take that overweight down. we started the conversation at 6:00 a.m. about vanguard's call running against consensus on the u.s. in terms of growth for this year. in that kind of scenario, is that the concept of a new recession at 1%? what does that do to bond deals? if vanguard were to be proven correct, look at the scenario -- we have to think

about what will happen with respect to the impact of the wing on gdp growth as well as the relative fiscal tightening. not absolute but relative to the fiscal loosening. dominate, thats will feel like a recession to a lot of americans and that will be a bad environment or financial markets and a good environment for bond markets. 10 year u.s. bond yields will go down to a level close to 1.25%. nejra: what do you make of gilt yields -- gilt yields. with several including mark carney giving dovish signals. wouter: from the bank of england, we expect two rate cuts. that is because of the growth of inflation in the u.k. still being very weak.

there will be fiscal stimulus coming through but before that, we will be close to 2021. and we feel the bank of england has delayed the cuts because of brexit uncertainty and how it needs to catch up with what the world has been doing for the last six months in the policy space. tagged forprice brexit has been ratcheting higher. the bloomberg economics team did the analysis. much more issuance to come on the gilt side? wouter: boris johnson wants to thet the majority -- cement majority that he got. he wants to get those in northern england on board and will spend a lot of money on that. there is a delay on this. looking at 2021 for those changes.

nejra: thank you so much. will continueboom the conversation with us on bloomberg radio at 7:30 a.m. the european open is up next. ♪

>> good morning and welcome to bloomberg markets come of the european open. we are live from our european headquarters in the city of london. i am anna edwards. >> no sign of a bubble here. highs. 500 hits fresh jp morgan says there is still money to be made in the market but could another trade escalation derail the bull train. -- the bull train?