>> good morning. these are the stories that set your agenda. european union futures slide as donald trump vows to impose additional tariffs on china and

levies on imports from canada and mexico hitting america's three biggest trade partners and israel and hezbollah are said to be close to finalizing a cease-fire deal with the security cabinet set to vote on the agreement later today and the european union proposing sanctioning chinese firms. more restrictions on russia's oil tankers also set to be under consideration. happy tuesday. european futures led to the downside and dramatically. maybe equity markets and investors asking the question of his europe after the terror threat.

european futures down almost a full percentage point. s&p futures currently flat after some softness and nasdaq futures flat. u.s. stocksu.s. stocks ended wif around .3% but now being recalibrated around additional tariff threats. you saw that rally and treasuries on the nomination of the treasury secretary and we will see if he gets confirmed. some of that being unwound on the back of this news from donald trump. the two-year currently unchanged. yields have come in around .4% since november 5 in the election of donald trump and euro-dollar currently at 1.04. brent crude 73.26.

and after the moves we saw yesterday we are lower on cease-fire expectations and have opec-plus and that decision is coming up with bitcoin currently up 1%. let's get to the details. donald trump saying he will impose an additional tariff and canada citing a clampdown on migrants and illegal drugs. let's bring in our chief north asia correspondent with the details with a focus on what's happening in the implications for china. what is the rationale? >> donald trump two months before he takes office for his second term on january 20 is again ratcheting up the rhetoric as far as the threat of tariffs not in relation to that campaign threat of 60% tariffs across the

board on all chinese imports to the u.s. but in addition based on other campaign promises to seal the border and crackdown on illicit trade across borders, including fentanyl, and he has firmly blamed china for at least helping facilitate that with a precursor potentially coming from china and then being processed in mexico and being brought across the border so in addition to putting an additional tariff to all chinese imports to the u.s. regardless of that threat of 60% this would be on top of the 20% tariffs instigated in his first term and he is basically saying china needs to respond and react to this claim that they are facilitating the fentanyl trade, something china has denied and

donald trump says all his efforts and pledges of the chinese government so far are for nothing. perhaps more interestingly is the 25% arabs on day 1 -- 25% tariffs on day one that he will sign on exports to the u.s. and canadian exports. and probably the canadian one is oil and gas exports canada provides to the u.s. as well as auto parts and autos themselves. they are heavily intertwined and those are the two big exports. we will have to see but donald trump is stirring things up right now. >> he certainly is and as you say stinging criticism of these trading partners but also the potential massive impact of terrorist. -- of tariffs. what has the impact been? >> we're hearing from china,

from a spokesperson at the chinese embassy in the u.s., saying there will be no winners in a trade or tariff war and says china has taken measures to combat drug trafficking and has informed the u.s. of the progress of its anti-drug law enforcement operations. they came to an agreement in san francisco that china would do what it could to crackdown on the supply of those precursors for the potential creation of fentanyl and other illicit drugs , perhaps in places like mexico without necessarily admitting that china is responsible and we are also hearing prime minister trudeau has had a phone call with donald trump explaining canada and the u.s.'s long-term position as cooperative neighbors.

you can see the deputy prime minister also highlighted those strengths between canada and the u.s. and went on to remind in the statement that 60% of america's imported fuel needs come from canada. >> stephen engle, thank you very much indeed for the details. let's get the market reaction and check in on how asian markets are faring with a real us out of singapore. what is the picture right now? >> it is mixed. we see the knee-jerk risk off reaction in japan, taiwan, south korea but it's not as bad on chinese stocks. we saw they managing to clock gains but the turnover is low so there's not a lot of strength. some are attributing what we are seeing to the idea that we will have it fiscal stimulus

maybe the idea that there is room for negotiations on these potential tariffs. i think the clearer read on the narrative surrounding tariffs is on the currency space and i will show you how the currencies are faring today. this is an economy that is closely tied with china and we saw it losing against the greenback paring some declines. the renminbis both weakening towards that handle. the japanese currency is among the top gainers today and this is a bit of an old-school haven play and perhaps also traders warming to the idea of a december boj rate hike. i went to highlight what chinese authorities have been doing recently in terms of ramping up supply for the renminbis, the

rate around which the chinese currency is allowed to trade and we are seeing that it is stronger than estimates recently and something that our colleague, you know i love quoting him, has been highlighting that when you see china trying to stabilize the stock markets, the last thing that they need right now is a freefall in the chinese currency so keep that in mind. >> pronounced support coming in for the chinese currency and facing the pressure coming through for this. avril hong with the market reaction. let's get more analysis particular with -- particularly with the dollar. of course the ripple effects across the global financial markets on the back of this.

and talk to us about the potential impact of 25% tariffs on key trading partners for the u.s., mexico and canada. >> we are seeing most of the reaction in fx. the canadian loonie also sliding nearly 1% versus the dollar but it's notable to see that they are well off the lows of the session and if you flip on we can take a look at how these currencies traded on the announcement, where the have strengthened back from the lows, so the canadian dollar and mexican peso weekend during that and has now come back. we are also seeing stabilization when it comes to the equity market s&p futures broadly unchanged but what's notable is these futures have sizable weakness so far in the session,

down .9%. and it could mean europe is bracing through their own trump memo on tariffs but it's noticeable to see the underperformance in european futures, maybe to do more with their links to china and they could hurt the chinese economy globally but interesting to see the underperformance centered in europe. >> bracing for maybe a tweet from donald trump. you passed this very closely, the fed's thinking. >> we heard from kashkari speaking to bloomberg and he was talking about tariffs and for the federal reserve they are only concerned about a broader inflation impact if we get retaliatory tariffs. and it is probably too soon to tell if we will get some sort of retaliation from china. because the fed only meets in

the next two weeks but we have seen pricing for this weeks bute seen pricing for this meeting basically subside in the market and we are now looking at 14 basis points of a cut for that meeting and we are now only pricing in 20 basis points total cumulatively over the next two meetings for a cut from the fed. he also told us overnight that he very much is keeping the door open for a federal reserve rate cut and we have yet to hear of any strong narrative from a fed official that they are going for a pause but the market is increasingly pricing in. >> thank you very much indeed on the market reaction to this story of the day. and now to one of the geopolitical stories. bloomberg understanding israel and hezbollah are reaching closer to signing a cease-fire deal that may happen in the coming days and possibly as soon

as today. let's bring in paul wallace in dubai. how close are we, them, to a potential cease-fire deal in this region? that the israeli security cabinet when it likely holds about sometime this afternoon approves a truce with hezbollah. it is a little bit unclear at this stage when a cease-fire would start if that agreement by israel's cabineand if it has to go and so there are a few steps that remain unclear but certainly it seems as if we are close to a deal and of course we have been in the situation before, particularly when it comes to gaza and in gaza's case no deal was reached but with

lebanon and hezbollah and israel it seems as if enough people within the israeli government and security establishment and within lebanon and hezbollah want this to happen to make it seem like it is close. >> so we look at that potential cease-fire. you suggest that this should be may be framed slightly different from the cease-fire talk around gaza so what obstacles will have to be overcome? >> one of them is the thinking in israel. there are some far-right members of netanyahu's coalition who do not want this to go through. one of them is the national security minister. he thinks israel should instead just crush hezbollah until the group is effectively no more as a military organization. he things it would be a missed

opportunity if they go for a cease-fire so that is a big obstacle and the other thing is just the messiness of the proposal that is on the table. i think it was always going to be complicated and riddled with contradictions but it is difficult to see how this will be held together if it goes ahead. effectively israel once hezbollah fighters to move away from the israeli border. you're talking about 30 kilometers or 20 miles away from the border and for hezbollah not to operate in southern lebanon on the israel-lebanon border. it is difficult to see at this stage how that will be enforced. there is talk of the lebanese army, which is separate from hezbollah, going into the region and policing it to make sure hezbollah does not operate there

but that is something that has proved to be ineffectual in the past and it has blocked does break the terms and start striking lebanon again, does that mean the truce is over and we are back to war? >> so still some important questions to be overcome but we look for more details on that paul wallace, comprehensive in terms of what we have been hearing. the european union proposes sanctions on chinese firms as the g7 prepares to boost pressure over alleged support for russia's war efforts. the details on those measures next. stay with us. this is bloomberg. ♪

tom: welcome back. welcome back to bloomberg daybreak: europe.

g7 nations will increase pressure on china for allegedly supporting russia in that war against ukraine the currently -- ukraine according to an early draft of the communiqué. ben sills joins us with the details. what are we expecting to hear in terms of this communiqué, the potential steps we are looking at taking are looking at taking on this front? >> this is a major escalation from the g7 in terms of their rhetoric the last time the foreign ministers met in april they were calling on china to ensure these companies within their borders were not supplying military equipment to the russians and this time the g7 are proposing to take measures themselves to stop that supply to the russian military and

within hours of breaking the news of that communiqué we had more news at brussels with the european union. they are proposing their own sanctions and these are the measures we are talking about on chinese firms that it says are supplying the russian military. >> so we look to see if those get across the line because it's my understanding 27 nations have to approve this but you can correct me if i'm wrong. what is happening on the oil front. there would seem to be additional measures they are looking at when it times to potential further restrictions on oil trading out of russia. is that something they are considering as well? >> they have been trying since early in the conflict to find ways to limit the amount of revenue that the kremlin gets

from the oil trade without doing -- going so far as boost prices for western consumers and the latest thing we are seeing on that is members of the e.u. who are looking to impose additional sanctions on russian oil tankers. this is the shadow fleet that russia has been using to resupply its clients around the world. what we have seen is they have targeted insurers and service companies that facilitate that trade so we will be paying attention to exactly how those measures shape up as they come down. tom: i should have spe and not e g7. thank you for the details on some of those potential

sanctions on china europe is considering in terms of the linkages between chinese companies and firms. the justice department is raising criminal charges against donald trump and mishandling of national security information. as reelection has shielded him from charges while in office. we take a look at who is backing unicredit's bid for bpm and if the offer could succeed in creating italy's largest lender. the details coming up. this is bloomberg. ♪

tom: welcome back to daybreak europe.

now into the banking space. we will be watching unicredit shares closely following the italian bank's bid for domestic rival banko bpm, which opens a second takeover front after the commerce frank approach with that transaction facing opposition from the german government. joining us for the details on some fascinating moves in the banking space is jenny. what do we know about this latest bid by unicredit for bpm and what it tells us about the appetite and the size of the deal and the likelihood of a getting across the line? >> that is the hardest one to answer. the italian government has been very pro banking consolidation and have been looking to line up a creditor and have been supportive of things like that

so it's interesting to see them squirming and saying we were supportive of that but maybe not so much this kind of m&a and i think that is what the ceo often does, puts a spotlight on some of the regulators and local government officials and puts them in the hot seat. >> they had a kind of framing around what they were looking for. and then he goes maybe this is the kind of tile and what does it mean for his potential takeover? that was dominating the conversation earlier and what are the implications of that? >> we are still doing a lot of reporting. as far as what we heard yesterday, the ceo talked about the reception they were getting in germany, which was very negative. you see him taking a step back, maybe putting some more irons in the fire, but did not say

anything about completely aban or rationale for not pursuing that in favor of this. this is a person who is a skilled makers so if he wants to do both i'm sure he could wind away to do both and he does not really mind if he rankles a few feathers along the way. >> he is certainly doing that and no doubt will be keeping you and the team very busy. thank you very much. coming up, downturn deepens. talking about the steel unit of thyssenkrupp planning to cut 40% of their workforce. we will get the details on that story. let's check back in on european futures, now shuttering under the pressure. is europe next will be the question for some investors when it comes to these new tariff threats from incoming u.s. president donald trump with

european futures currently down .8% and the messaging has been around canada, mexico and china in the last 24 hours but there will be a concern that germany and the eurozone will be next. u.s. futures currently flat on the s&p and nasdaq futures pointing to modest gains of under .1%. play more coming up. stay with us. this is bloomberg. ♪ it's our son, he is always up in our business. it's the verizon 5g home internet i got us. oh... he used to be a competitive gamer but with the higher lag, he can't keep up with his squad. so now we're his “squad”. what are kevin's plans for the fall? he's going to college. out of state, yeah. -yeah in the fall. change of plans, i've decided to stay local. oh excellent! oh that's great! why would i ever leave this? -aw! we will do anything to get him gaming again. you and kevin need to fix this internet situation. heard my name! i swear to god, kevin! -we told you to wait in the car. everyone in my old squad has xfinity. less lag, better gaming! i'm gonna need to charge you for three people.

♪ >> good morning. european futures slide as donald

trump vows tariffs and levees on imports. hezbollah are close to finalizing cease-fire deal. the european union proposes sanctioning chinese firms. restrictions on oil tankers. from trump european futures are down with maybe concerns europe will be next, lower by 8/10 of 1%, u.s. stocks had gains yesterday, ftse 100 futures

point to losses. nasdaq, modest gains, we been hearing from neel kashkari saying the door is open for a december cut. 2.9%. point. treasuries rallied, dollar strength is a key part of the story. and gold is trading down, brent in focus. $73 a barrel. expectations of the cease-fire

consequential for oil markets. the latest coming through from a steel unit reducing its workforce. looking to reduce that, reflecting a bleak outlook. let's bring in oliver crook. just how bad are things getting in germany's industrials? >> yeah, it feels bad but that's the job.

we've seen it on the charts. contractions, blast positive. in 2022, the reality is coming -- 11,000 job cuts. bosch cutting jobs, ford last week, have not got the final figure in volkswagen -- potentially into five figures. minimum of 30,000 job cuts across the board, where are we? i talked to the head of global macro at ing and he says we are

in the middle. we've heard nothing from bmw and mercedes but another piece of data it is small companies increased from one month earlier, unlikely to turn around. tom: what is that doing to the u.s. -- uh, the german elections. you will be covering it for us. ollie: i would not want to be incumbent.

this can speak for the detractors, on the one hand you could see this helping germany first parties, the far right and far left. they don't have the credibility who tend to -- it's the cdu. they are prescribing tax cuts and may boost the economy but it fails to address not having export markets, due to trade barriers and the trump

presidency. you cannot feel at ease because these generated wealth. the main question is not just marginal changes, it is what industries can you be competitive? even in automotive's, ev's is not a future facing industry. tom: oliver in berlin with the latest, thank you. pm is open to departure from the stance of conservative christian democrats.

they would limit net borrowing to keep the budget deficit in check. shares in tesla and did lower after gavin newsom announced elon musk would be excluded from rebates. it may heighten tensions between them. tesla accounts for more than half of all ev's sold. qualcomm's interest in buying intel is cooling. the complexities is believed to be the main hurdle. uk's most powerful lobby words that the government is in danger of losing the trust of

corporate. rachel reeves addressed the cpi summit saying it is important to have a firm footing. rachel: i have not heard any credible alternatives. i said it already, public services need to live within the envelope we have said. we've set the envelope. tom: let's bring in lizzy burden. what reaction did we hear? lizzie: i remember keir starmer was a rockstar in opposition and now they've had this boo jit.

businesses saying if you don't make up for that, you will not be the party of business, which is important. all the dater has been dour so the government's response will come today, a white paper called get britain working will take away welfare from people refusing to go into education or training. it will be controversial but as you heard from rachel reeves it's all about fiscal responsibility and increasing

the employment rate. tom: sounds like it was taken from the conservative party. how to get britain working. lizzy burden is covering the reaction. we will be talking to matthew long, tune in. now to ireland where voters go to the polls with a different dilemma or flush with cash from corporate taxes leading political parties to make big promises. that sounds different from the rest of europe.

jennifer joins us for the details. this is part of the big take. counter to what we hear how much money does this government have? >> the budget surplus is 25 billion, boosted by the apple tax, a lot of money. most of that comes from tax receipts and huge number of multinationals in tech and pharma based in ireland. tax comes from those. tom: how sustainable is this -- is this -- is this revenue stream?

check it out, whatever. on the terminal. it is pretty vulnerable revenue stream, vulnerable to trade frictions? >> highly concentrated. only three firms but only three are responsible for 43% of the corporate tax, highly concentrated and vulnerable, vulnerable to shocks, geopolitical shocks in the u.s. election given the protectionist measures so any change in tariffs or tax could be a threat. tom: ok, jennifer. fascinating story, check it out.

indeed. the hundred billion dollar dilemma for ireland leading up to the vote. donald trump vows tariffs on china and canada and mexico, we will bring you the details coming up. this is bloomberg. ♪ ♪♪

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>> this is what i'm trying to understand, what is the path for inflation? 25 basis point cut in december.

tom: keeping the door open, the dolla is up after trump says he will impose tariffs. this could be the time to fade gains. sophie quinn from bmp, thank you for joining us. talk about the dolla. it's up 3%, has seen gains, you want to fade dollar strength? sophie: if you look at our model, dollar index is 4.2% expensive if you compare 2016,

approximately same level and momentum is showing some signs of max bullishness. we would rather fade this move. tom: ok. in tom's of the swissie or the yen -- in terms of the swissie or the end how are you looking at positioning? sophie: wider range for equities, hyperfocus on the positive outcomes should fade in weeks if we have like a more hawkish trump scenario, the

protection makes sense and yen with bank of japan clearly putting a selling, a ceiling on how it could go. very attractive as short leg for any bet on fx side, negative policy, going to leverage weak currency. tom: ok, leading to the end. we saw a reaction on the back of the nomination of the sent with yields lower on the news. did markets overreact? sophie: still to remain seen.

we will have more clarity on words and what will matter is there has been this focus on re-acceleration and supply demand side. tenure treasury range closer to 5.5 or 6%. tenure treasury would be closer to 3.5, so in terms of actual policy as well as macroeconomic backdrop and how resilient economy is going to be, it is more important to level of the treasury in next 12 month. as you can see, the range is wide. tom: a wide range, today has

been a reminder with the threat of tariffs which leads me to the question how much is priced in, priced into the markets were how difficult is it to price in? sophie: if you look at what has been priced since the elections there has been more pricing of positive outcomes of trump scenario. top three priorities were tariffs, integration and fiscal policy the first two his growth negative, not adding better growth outlook so if you look at the rally it is more pricing the

positive outcome rather than negative so i would be more worried about that. tom: seems to be a mood today, investors consider europe in the crosshairs, how do you play european? sophie: bearishness of europe versus u.s. is so extreme, 2025, people have been piling on long u.s. versus europe so fx equities, asset classes, you need to think about how much pessimism is priced but in terms of the tariffs we could see

first quarter implementation, what if we have frontloading? usually that is positive and a time when earnings expectation are quite low. tom: really interesting. indeed. go along the yen. sophie, senior asset strategist. thank you. this is bloomberg. ♪

>> we know we have to get

inflation down and keep labor market strong. regardless of who is in the executive branch. tom: fed president on his thinking, keeping the door open. 60% john of a cut -- chance of a cut. also sees the neutral rate as flagged by the fed. fading out cuts, fewer than two by june, below 4% in september.

let's flip on and have a look at markets. headlines around terror threats from donald trump, we've seen the impact on canada, mexico and china are fading out. this is bloomberg. ♪

anna: good morning from london. here's what you need to know. donald trump doubles down on his tariff pledge, the dollar gains, u.s. futures higher.