manus: good morning from dubai, i am manus cranny. nejra: these are today's top stories. death toll rises. beijing extends the lunar new year holiday as the coronavirus now claim more than 80 lives. new evidence that the disease has an incubation period of two weeks. saudi arabia says the crisis will have a limited impact. china mainland markets are

they say the bond market is dislocating at a level we have not seen. many questions about the

globality of the coronavirus. >> and how much that move in yields in treasuries is short covering as well. we saw yields move even lower. stocks at record highs. the question you want to ask yourself. this going tod is be. princehe oil market, abdulaziz saying we are perhaps a little bit overly pessimistic, referring back to 2003, an extreme position to the currency markets. aussie dollar-yen, shortly asian currencies, likewise aussie dollar is the ground zero for global growth. if the coronavirus gross in its momentum around the world come

growth in thehe aussie dollar, 74.2 is where we are. 10 year paper, is it 30 basis points to cheap? that is the question that jp morgan are putting into the market. they are positive of the very human aspects of the coronavirus but they need to look through the prism of risk. stop did see the biggest since october for u.s. equities on friday. europe ended in the green. european and u.s. futures firmly on the back foot and global equities have a loss last week. emerging markets having a hit after seven weeks of gains. the yuan at its weakest this year so far. concerns around coronavirus grow.

>> indeed. >> the latest on the coronavirus outbreak. newa has extended the lunar year holiday by three days to february 2 to help stem the spread of the virus. xi jinping's government is under pressure to combat the virus. manus: the outbreak has killed at least 80, second thousands. france and japan are planning to flyinge u.s. in nationals out of womb and -- out of wuhan. thanks for joining us. what is china doing to address the crisis. i mentioned context of 2003 and the economic outlook. tie those two things together for us. >> this is effectively the biggest test to xi jinping and

his administration since he took office. governance,ina's with the world spotlight where with how much better it can do this time around then it did with sars in 2003. president xi jinping held a gathering of the politburo standing committee on saturday. this is the highest leadership body in china. withremier has been tasked being essentially the first responder, leading a group that will report to the top leadership body. ,e is down there in wuhan ground zero today, taking a look at the situation. on the ground, reports indicate that essentially the infrastructure has been overwhelmed. with feverseople

who have been turned away from health care facilities because there is just not enough beds. there were reports that as many as 5 million people might have ont wuhan for the city went lockdown last week. the situation clearly seems to be far from ideal, far from contained. chinese health officials have been saying the past couple of days that they have yet to see a peak in the numbers. every indication is that, from the leadership on down, they understand the gravity of the situation and they are moving quickly to address it. keep in mind, this is not a democracy. lower-level officials in china do not take initiative. everything goes back to beijing. the signal from beijing is, we have got to get a handle on this situation.

it is our top priority. >> thank you so much. joining us for the hour, global market strategist at jp morgan. talking aboutre how jp morgan was talking about shortening the bond. citigroup was saying on the trend break, we could get to a 150 handle. the 10 year yield where it sits now, is that reflecting the worst case scenario of the coronavirus having an impact on chinese and therefore global growth. >> clearly, the move in treasuries is reflective of a risk offset. people move into their most trusted safe havens in this type of environment. to me, it is quite reassuring that treasuries have behaved as we would expect them to do. as to how far this can go, i think it really ties back to trying to call how this health issue spreads. to be, it is too early to tell

quite how sustained this kind of shock will be. it ultimately comes down to confidence in the communication and strategy in terms of getting this under control. i have seen lots of reports over the weekend, comparing this to different scenarios of previous epidemics. really, it is about taking this as it comes and following the news without getting overly confident about predicting. manus: it seems to me that we were leaning into the mortality rate over the weekend and reality has come to bear. my last guest said global markets have been ambivalent global risk in 2020. you are neutral your equity allocation. does that shine for you. are you worried that the markets are not taking enough notice of some of the risk flags that have risen in the 20-odd days of

january? hugh: it would be disingenuous for me to sit here and say we had this type of epidemic on our list for 2020. i think this caught everyone by surprise. that said, there are plenty of issues that remain unresolved. i think the optimism we saw through december and the start of this year has really been reflecting a positive scenario and perhaps not quite appropriately reflecting that, for example, the optimism around u.s. and china come around brexit, both of which picked up significantly in december, in the face of significant questions. nejra: emerging-market assets had seven weeks of gains before last week. the time to sell out of those areas of emerging markets that would have benefited debate detente -- benefited most from a

detente between the u.s. and china? hugh: timing is always difficult. short-term trade, i am not sure it is always the right place to go. opportunities in emerging markets are around shifting consumer demand and consumer preferences and finding companies that can tap into the reorientation of the largest economies in the emerging markets. i understand why some investors are taking this as a reason to pause given the strong gains over recent weeks, but me you have to look at emerging markets on a multi-year time horizon. manus: what about the commodity market? i am a chart. known fact, 2003 chinese growth, 2%. commodity markets came under tremendous pressure. iron or is tanking. how do you look at the commodity complex?

are you part of the you bf on these massive selloffs? perhaps it is a better buying opportunity. that is typically the lesson for these types of issues. typically, these moves are overdone. i don't feel we can take comparisons from previous epidemics. the driver of these markets over the medium term does tend to come back much more the short-term. nejra: what strategy would you take from here? is it a question of staying put are looking at entry points while adding tech should hedges, perhaps buying gold? hugh: i think the moves in the past week show that the strategy

remains in place, looking for your highest quality equity markets, you're more defensive plays within equities. the yen to try to give you some risk off cover. those kind of levels, jumping back into treasury markets now is perhaps not as attractive as a few weeks ago, but we do think treasuries still have -- still give you some cover for these unlikely events. manus: what are you going to be watching for as a canary, red flag as far as liquidity? for the asian markets at the moment, it be interesting to see how long they close for. not always reflective to what we will actually see in those

markets when they open. trying notis about to get overly caught up in move self one or two days. a potential to have a sustained hit for global growth. friday, the pmi data when people were turning slightly more optimistic. trying not to get overly caught up in worrying headlines and focusing much more on the economics. manus: hugh gimber from j.p. morgan asset management. italy's matteo salvini has suffered a stinging defeat in a key regional vote. it provides a much needed boost to prime minister conde's government. salvini thought he could force

early national elections that his party would likely win. senate republicans are facing increased pressure to call 'stnesses in president trump impeachment trial, after a report in the new york times says trump wanted a continued freeze on ukrainian eight back in august. it cites former national security advisor john bolton, was fired in september. israeli prime minister benjamin netanyahu says he will make history with president trump. he is visiting washington this week as the leader is set to unveil his peace plan. also joining, benny gantz. israel is set to hold its third election in less than a year in march. testable icahn kobe bryant is died in a helicopter crash. bryantetball icon kobe has died in a helicopter crash. nine people were killed, including bryant's daughter.

the nba commissioner says the league is says the devastated by the news. 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: thank you so much. oil was tumbling this morning on fears that the spread of the deadly coronavirus. abovent cannot sustain $60 per barrel. right now, 59.34. anxiety gripping the oil market due to the spread of the coronavirus. what does that do to demand? does that curtail consumption, especially with china not allowing a lot of travel and extending the chinese new year. we heard from the de facto leader of opec. they said opec and partners are monitoring and can respond, and

have the ability to respond if needed, but saudi arabia says right now they only see limited demand bullish before this because we saw a ton of geopolitical risk in libya and iraq. prices were still shrugging off that and now we have the coronavirus. there seems to be too much oil in the market. and princeman sachs abdulaziz, between goldman saying barrels can be knocked off demand. this is the debate, saudi arabia saying extreme pessimism and you have, as far as i can make it, goldman saying 260,000 barrels could be knocked off demand. we're way past that. this will market has already corrected. hugh: to me, what has been most frightened about oil over the past few months is how insensitive it has been for

these types of shocks. we were talking about the potential for a spike following the tensions between the u.s. and iran. you have to give the oil producers some credit in the way they have been able to manage supply and demand balance. with the way that u.s. oil producers are particularly sensitive to moves in the oil price, i think makes sense that actually market is being told that these moves should not be overly exacerbated . nejra: producers in the u.s., the moves might have had to do with hedging and banks selling out futures contracts. how much can chinese authorities support that through stimulus measures and 2020? they have talked about targeted measures. do you think that might shift if outlook gets worse? hugh: i think that is possible.

they have told us that they will be there when needed and keep their economy grinding slower on that glide path. they have so far demonstrated the ability to control chinese growth and i do think they would come back to the market if necessary with further stimulus. bp has a yield of 5.3%. of 5.71%.a yield when it comes to equity allocation and yield, when i look at this particular sector, some of those look juicy to me. how important is that for you this year? hugh: very important. those numbers you are quoting sound high, but in the context of incredibly low bond yields, they are even more attractive. the big challenge for clients today when i am speaking to them at --und income, looking

personally, i think the equities will have to play a bigger role in providing income within folio's and, as you say, the energy sector is one of those core holdings. clearly, there are risks to the outlook around the sliding prices we have seen that i do think the dividend yield is important. populistming up, a defeat. salvini's group loses. when you're traveling to work, tune into bloomberg radio on your digdigital device or in the london area. this is bloomberg. ♪

nejra: this is bloomberg "daybreak: europe." manus: to italy.

salvini has suffered a stinging defeat in a regional vote. the centerleft coalition got to 60% of the vote. the center-right group trails on around 44%. in the context of this, we are joined from bologna. where does this leave the ?talian coalition >> this was a regional election but it did feel like there was a .ational story hopingsalvini was really league region. a of course, he did not manage to

win yesterday. that defeat is good news for the italian coalition. we have heard from a number of politicians from the centerleft, which was the winner, saying they have been emboldened by the result. they feel that the coalition at this point is stronger than ever. this was a confidence vote and the italians have said that they liked that. matteo salvini has not conceded the election and it is very tight. nejra: thank you so much, maria, for us in bologna. ptp's breathe a sigh of relief. is this the moment where you would like to enter into a ptp trade? hugh: the news overnight is helpful in that direction. incrediblehave these hunt for yields within european markets.

anything with a positive yield frankly is looking attractive compared to any other part of the fixed income market. there will be broad support for the periphery. salvini knows that he needs to his strongitalize on polling currently but he has no way to force an election. clearly, salvini was hoping that this weekend could be the they see the need to stay stable at this point. ofus: what is the risk getting backbund to zero. we forget sometimes, it could be twa risk, could be huge -- two-way risk, it could be huge

to the upside. hugh: i think the way you get that is improved inflation outlook. we have the ecb project and they will miss inflation targets through the end of 2022. if you were to see inflation cap through the eurozone, that puts it back in place. we will persist in this low but peopleflation are starting to talk about the potential for inflation as a black swan event. how aggressively should you allocate to europe based on the pmi data we had on friday? hugh: it was encouraging but not as strong as i had hoped. we did see a pickup in the manufacturing sector but i think it is too early for the all clear. i would be looking for better numbers to come over the coming

weeks. we have more german data this week and also an improvement in the chinese situation. manus: porta, -- more to come. this is bloomberg. ♪

nejra: good morning from bloomberg's european headquarters in this of the of london, i am nejra cehic with manus cranny live from dubai. manus: the death toll rises. beijing extends the lunar new year holiday as the coronavirus now claims at least 80 lives. evidence thating the disease has an incubation period of about two weeks. fears about demand growth. saudi arabia says the crisis will have a very limited impact. u.s. stock futures on the nikkei slump. the leader of italy's

right wing lead party -- right defeated inparty is a vote, providing a boost to conte's government. we are live in bologna. nejra: coronavirus fears pushing the 10 year treasury yield to an october low. futures lower after global stocks posted a loss last week. a big earnings week with tech heavyweights microsoft and apple set to report as well as facebook. all the market action around the world. we do indeed. it depends which house you read, whether it is the ups -- the ubs that says you want to buy the

dips, or my guest. mood, have this risk off evasive across equity markets and effects. how is it looking in the metals index for you? >> quite unlike what has happened to the benchmark industries in india. the metal index has cracked and cracked. when we saw the chart, down about 2.5% come all the base metals, iron ore has fallen. without exception, all the companies come a result of which you see that sharp drop toward the left side of your screen, in the index today. a couple of steel majors, but that is notwithstanding. i think the larger reason is what is happening around the world with these metals. these stocks are all under pressure today. commodities very swept up

in the risk off mood as well. >> a perfect segue here. you mentioned metals. that is certainly one of the commodities under pressure. threere falling at a standard deviation point drop. interestingly enough, the agricultural commodities under threat here as well. we are not only having flashbacks to the sars epidemic, but also the african swine flu virus. china was dealing with the peak of that just last spring. china is one of the top consumers of livestock feed, grain, so we are seeing futures fall today, nearly 1%. this was already had by trade concerns, hoping that a deal would give these traders and farmers a reprieve. now, these commodities again are falling. containment and consumption, the two things the

market seems to be focused on now. let's get to the first word news. death toll from china's coronavirus has risen to at least 80. the country has extended the lunar new year holiday by three days. china as well as at least 15 other countries and territories have reported cases. pushing local officials to strengthen prevention and containment. trade deal with the u.k. this year, according to secretary of the treasury stephen mnuchin. --yen says a lot can be done steve mnuchin says a lot can be done at the same time. >> there will be certain issues that perhaps they need to resolve with the eu before they finalize our deal, but a lot of the issues can be dealt with.

we look forward to a trade relationship. >> israel is allowing its citizens limited travel to saudi arabia for islamic pilgrimages or business trips. been now, israelis had prohibited from visiting the kingdom. it will still be difficult for israelis to travel to saudi as no airlines flight directly between the countries. 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. the u.s. is facing the busiest week for earnings. at the heart of it is tack. it means that we will be getting updates from some of the largest companies. tuesday, apple's numbers hit the wire. the results of last quarter of the year. we will get a read on the shift

in focus to services and the apple plus streaming service. anda: wednesday, facebook microsoft releasing figures. payment companies and at&t will also report results. thursday, another payment processor, visa, and also verizon and charter. between techcation stocks and the rest of the market come to an overstretched point? hugh: in my view, no. it has been driven by strong earnings outlook. in tech, you can make the case that there is a large part of the tech stocks with large earnings. some look a little more frothy withelevated valuation met poor earnings outlook. i think this week will be interesting looking at guidance going forward. we have been scanning the data for signs of improvement in

sentiment. for me, the semiconductor outlook and expectation of future orders is probably one of the clearest signs we will get. that is part of what drove the intel momentum. can i ask you about the debate? apple playing this catchup game. rates doubled last year, catching up with coca-cola, mcdonald's, and procter & gamble. the question, that kind of speed of rereading, have you seen that kind of momentum before and does that stack up for you in terms of taking apple into the echelon of a consumer stock at the level of mcdonald's, proctor, and coke? hugh: it shows how quickly they are adapting. the largest technology players are expanding their business model into a whole host of new

business lines we may not have expected a couple of years ago. the boost in market cap i think is reflective of how they are having more of an impact across different sectors. nejra: are you leaning into a late cycle dynamic inequities at the moment? hugh: very much so. while you have to be aware that we are looking at a pickup in the data, that is not guaranteed. you still need an element of caution. looking at your more defensive plays. quality is the main way i would do that. the tech sector, i am much happier to be looking at the tech companies with really strong balance sheets and strong levels of free cash flows rather than those where the market is hoping about the future but with little concrete evidence of success today. of the techrms and, how important is 5g

its potential impact, and is that one of the key drivers for this year? me,: i think it is, but for it is more of a geopolitical question. the way i'm am watching that debate is around the way the u.s. have broken themselves off from the groups of recent decades, now forcing different companies to really make a choice about whether they are planning to side with the u.s. or china. there is a lot to be learned from the 5g debate but not in my view around the outlook for specific tech stocks. nejra: you have some concerns around margin pressure. how optimistic is that make you about earnings in the following quarters? hugh: these companies just defined topline growth and -- these companies are struggling to find topline growth. for me, signs that companies are

able to manage that through this earnings season and perhaps they are turning more optimistic in passing increase costs through to the consumer. at the moment, i think the best case for 2020 or the most realistic case will be something around the mid single digits for earnings growth for the u.s.. manus: thank you very much. knowis what you need to for the day. basketball icon kobe bryant, who won five nba championships with the los angeles lakers, has died in a helicopter crash. annmarie hordern has the details on the man, his triumphs. >> he is an absolute icon for the nba and an inspiration for those even outside of basketball. we are seeing an outpouring of love, support, and sadness, including tributes from both

presidents trump and obama. kobe bryant wasn't one of 9 -- kobe bryant was one of nine people killed when his helicopter crashed. his daughter was among the was as well. won five championships with the lakers. he joined the nba right out of high school, at the time making him the youngest player in the league. won two gold medals at the olympics, received an oscar for a short film based on he was a wrote, and focused investor. those who worked with him said he showed the same intensity in the office as on the court. >> royal bank of scotland is planning to eliminate thousands of jobs at one unit according to

the sunday times. it is part of a cost-cutting measure seen by newly appointed ceo. the newspaper says one idea being discussed could see 3700 retail banking jobs cut. the times says that a spokesperson said the bank did not recognize the -- the head of south africa's state power company will this week present a draft plan based on how they operate. they have and the cost of server and -- the cost of servicing loans is higher than the money they are generating. they are considering breaking up the utility at a slower pace and the government wants. a former lawyer at softbank has been arrested for stealing confidential information. he was believed to have given data russian officials. the worker was dismissed in december. that is your bloomberg business flash. thank thank you --manus:

you very much. it is fed week. no changes expected from jay formerand the fomc, but policymakers, veteran fed watchers are increasingly preoccupied with what the central bank will be able to do and the tools it will need for the next downturn. gimber is from jp morgan and is with us. they are saying at this point the bank is pretty much out of ammunition to fight the next recession. i have heard this countless times, 1.5 to 1.75%. during a downturn, you need five rate cuts. do you agree that the fed is practically out of ammunition to fight the next recession? hugh: i would not go as far as that personally. what we have seen from the fed and other banks around the globe is that their ability to

experiment and find new ways to stimulate the economy remains intact. yes, you look at where fed funds like today. i agree that perhaps only using interest rates will not be enough, but i am sure they will be looking asset purchases and other forms of policy to get their economy going again. clearly, the outlook is more challenge than relative to previous sessions, but i am confident they will be able to do what it takes if and when. cash: ideas from direct injections, a digital dollar, all those options, what is the towards?y to lean hugh: this combination of monetary policy and fiscal policy. the bank of japan has been the most explicit in saying they are

willing to anchor borrowing costs. much regardless of how the government boosts their spending package. think others out, i central banks around the globe will be looking at this as to whether it is a workable model in the future. this is our peace this morning, the debate. i am talking about fives and tens being below the upper band width of the fed funds rate. the analysis in this story suggests that more qe would have a limited impact on driving rates down. maybe that is where we shift to yields targets from the fed. hugh: i would not rule anything out. i think it is very plausible that they would need to shift their approach if and when the

next downturn arrives. the other point i would make, that to me is more about ecb and doj policy than it is about fed policy. it has been closely correlated with the global hunt for yield. i don't look at that and say, this is fed policy driving five and 10 year yields lower, i say this is a global hunt for income and investors are being forced into the u.s. market. ifra: what i want to ask is, we get any sort of pullback in the liquidity the fed has been providing because of all the repo action, is that going to cause dislocation in the market later this year? hugh: i would not expect the fed to be willing to tolerate largest dislocations in the market. they have been clear on their message since the episode in december, that they want to be there to support the market. clearly, they have handsome

challenges and work -- they have had some challenges in working ze ofhe appropriate sid their balance sheet. i do not expect them to pullback in, which creates a dislocation. manus: doesn't that just say they are really just hostage to the market? hugh: that is a strong way of putting it. i would frame it as saying they know they will have to run a large balance sheet in the future and they are accepting that the likelihood of them being able to return large portions of the assets they have bought to the market is quite low. nejra: you say that the risks are asymmetric and the fed is much more likely to raise rates and an election year. is it possible it gets behind the curve and we see a breakout in inflation? hugh: i think it is possible. when you couple what is to come with the strategic review, i

think that would provide some sort of outcome that would cause the fed to be less worried about inflation running hot for a significant period of time. whether it is a tweak to the wording that suggests that an average 2% target would be appropriate, i think the fed would be quite happy to sit back in that scenario. manus: i think they would probably all have a party along with other central bankers. you can just imagine christine lagarde hosting a party saying, we did it. sincest miserable thing 2012 in the u.s.. what does that do to markets when you see real yield in the u.s. at -66? hugh: one of the main lessons for me from 2019 is that yields will still find room to fall in a downside scenario.

looking across the fixed income market, large parts remain relatively unattractive. if the macro weakens further or we get new geopolitical shocks, yields will still find room to fall. even at current levels, i think government bonds have an important place in portfolios today. nejra: coming up, as fears over the deadly coronavirus continue, one analyst says to be careful pricing and risk. manus: it is not all about the fed. thursday marks one of the bank of england's trickiest rate decisions in years. this is bloomberg. ♪

nejra: this is "daybreak: europe ." i am nejra cehic in london. manus: i am manus cranny in

dubai. amid shockingays backdrop the next few weeks, you have pricing. dani burger has the details. >> i have been talking to him for years now and he is one of the more levelheaded strategists i tend to talk with. that is why i was really surprised when i got a note in my inbox from him saying to be prepared for chaos over the coming weeks as traders hedge for the threat of the coronavirus. separatet is hard to any signals from what is happening in the bond market. he says the flattening of the yield curve really is not consistent. there is stable economic activity and stock yields are attractive relative to the bond market. pandemic, he says to by the weakness in stocks and

cyclicals. manus: thank you very much. gimber from jp morgan asset management is with us. be stoic, hold your water, hold your nose. it? scale do you lump in and look large or do you fade the move over a period of time to a variety of products? hugh: i think for me it is the latter. what we are focused on is whether this has a sustained impact or whether this is a short-term phenomenon. it is only a scenario where economic growth is hit for sustained period of time where you should look for geopolitical risk. that is my main focus at the moment and therefore why i would not want to be rapidly shifting allocations given the passage of this issue. nejra: i guess you could be

looking at some entry points. also, in terms of waiting for the bank of england decision this week, one of the trickiest in years. two officials looking to ease policy and three would have to join to force a move this week. they say that is more likely than not pricing in around 55%. gimber is here to discuss that with us. we are seeing a divergence from what the rates market is pricing and the divergence of sterling. how vulnerable is sterling if we get a dovish signal? hugh: to me, not that vulnerable. the fundamentals of the u.k. economy look reasonably strong in my view. we have had two pieces of data since the election the first was a surgeon the labor market which was really even predilection. market, in the labor

which was predilection. the reason the pound has been stable, people are balancing the tone from the boe which is not entirely in line with the economy and fiscal stimulus and the u.k.. manus: are you part of the deployment of capital? nearly 2 billion pounds of come in since the week of the election, and mutual funds. how do you deploy to the u.k.? hugh: in my view, the u.k. equity market does look significantly more attractive than a couple of months ago. that is a combination of a clearer political path. yes, there are still risks around a cliff edge brexit, but i think those are quite unlikely. at the same time, we are focused on what the government is doing in terms of boosting fiscal spending. in that environment, i think the

u.k. stock market looks fairly attractive. nejra: thank you very much --manus: thank you very much. e.gh, thanks for your time. jp morgan asset management. european market open is next ♪

>> good morning. welcome to bloomberg markets the european open. anna edwardsds -- alongside matt miller in berlin. matt: today, the markets say seek safe havens. tumble.n the yuan the cash trade is less than one hour away. the death toll rises. china extends its lunar new year