tv Bloomberg Daybreak Europe BLOOMBERG November 28, 2018 1:00am-2:30am EST
nejra: good morning from bloomberg's european headquarters. dubai, this is bloomberg daybreak: europe. nejra: fighting the fed. trump renews his attack on the central bank. we hear from jay powell after other officials paint a mixed picture. the prime minister backing down from a key battle in parliament. is it a risk for theresa may's deal? and trade optimism. larry kudlow was hopeful for a breakthrough at the g20 but washington will not hold back on terra if there is no progress -- tariffs if there is no progress.
manus: a warm welcome to the show. theresa may goes on tour. visiting? the pound is virtually flat as we start the trading day. we have done our survey. we spoke to 17 strategist and fund managers. quite a substantial majority, 45% suggest this deal will get voted through. 134 on a vote through. 125 on a novo -- no vote. interesting. goldman sachs said you need a one million barrel a day cut to bolster the market. $50, you got credit. thrifty 50.
good morning. nejra: good morning. definitely still focusing on european politics today. some saying cable could drop as low as 110. 125.are questioning salvinine from italy, and demaio are involved on the ground discussions. italy's debt target must be closer to 2% for the eu. some rusk use says italy and the eu are so far -- still far apart. for now, let's take a look at what has been driving the session in the u.s. and overnight. we did see u.s. stocks gain in yesterday's session. u.s. futures have been coming through their on s&p 500 up 0.1%. the bloomberg dollar index is holding onto three days of
gains. jay powell speaking later, that is in focus as well as the fed minutes we get later this week. mixed messages from fed officials yesterday. the main focus was on rich clarida's comments. some reading a lot into the fact he forgot the word "some." let's check on the markets in asia. juliette saly has more. good to see you. juliette: volatility absent today, but the buyers are here. the msci asia-pacific index up for a third session. a positive commentary coming through from larry kudlow suggesting when we have that dinner date between presidents trump and xi, there may be a move toward a truce. the hang seng up by over 1%. a lot of buying coming through in china. the nikkei closing of the session further as well. we have a slightly weaker yen.
weakness in australia despite bullish calls from goldman sachs on commodities. also saying the iron or correction to be over. jakarta's market is weaker as well. good buying in india today. overseas investors have returned. let's have a look at stocks. tech players leading gains across the region. particularly in hong kong. sunny optical and tencent among the front runners. also seeing good buying in solar players in china. speculation china could announce supportive green energy policies before the end of the year. the downside, yes bank is weaker in india. falling for a fourth session. moody's downgrading the stock. you are seeing the 2023 bond fall as well. manus: thank you very much. juliette saly with the latest. question of the day from the mliv team, which country's will
outperform in 2019? when you take what is going on in italy, in greece, joined the debate, mliv team are standing by. let's get your first word news now with debra mao. >> prime minister theresa may is said to have backed down over voting plans in the eu parliament brexit debate. may's government attempted to terms ofhanging the the agreement. lawmakers will now be free to vote on a series of potential changes to the motion. including calls for another referendum or a different deal with the eu. trump has toldd the washington post he is not even a little bit happy with his choice of the head of the u.s. central bank. the u.s. president complained at
length about jay powell, blaming the fed policy for recent stock market decline and for gm's announcement it would close five factories in north america. will not ask for further funding from the international monetary fund when it's $12 billion program expires next year. cairo is open to maintaining a loose relationship with the lender to reassure investors. speaking to bloomberg, the finance minister said the government is taking steps to become more attractive to institutional investors. >> we are going more for the international market this financial year. we have not decided about the amount for currency and the time. we are interested. we will diversified markets, we will diversify currencies, we will diversify products. and xipresident trump
jinping are to meet over dinner at the g20. larry kudlow says trump is hoping for a breakthrough, but is ready to impose more tariffs if the talks do not yield progress. the meeting marks a pivotal moment in the escalating trade wars between the world's two largest economies. >> in terms of the much goingsed meeting, it is to be a dinner meeting between president trump and president xi and representatives from both sides. it will be bilateral. i want to mention what the president told is a short while ago. that is, in his view, there is a good possibility a deal can be made. debra: preliminary reports say a faulty sensor on the doomed lion before was not repaired the fatal flight last month even though it failed on a previous trip. investigators say the pilots were not briefed on the problem
of across the earlier flight. -- in the earlier flight. boeing is working with sayinggators and its -- it's jets are as safe as any aircraft ever flown. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. nejra: thank you so much. a host of the fed officials have spoken out a conference in new york. richard clarida backed a more gradual rate rise, calling risks less -- rates less skewed to the downside. atlanta's rafael bostwick also noted stress. esther george said the china trade fracas isn't helping. manus: trump has blasted the central bank, telling the washington post, i am doing deals, i am not being accommodated by the fed.
they are making a mistake because i have a gut and my gut tells me more sometimes than anybody else's brain can ever tell them. so far, i have not even a little bit happy with my selection of jay powell. cio for equities at allianz. do you make decisions based on your gut feeling? someday maybe when you do pull the cord, part of it is an inner belief. here we are with the president lambasting the fed. the risk is this. do you think the fed could be making a policy mistake if they continue on the trajectory have indicated? that is the core for markets. >> the pressure is off to some extent because of commodity prices. that means there is no longer such a need for removing the liquidity. ironically due to
the removal of sanctions by donald trump. in one way, he is giving, on another, he is taking away. they don't need to raise rates quite so much and the markets already reflected that. nejra: let's take a look at the chart showing two sides and breakevens, which does support what you're talking about. what about wage growth? does that and other elements of the underlying economy support the feds continue on gradual rate increases and not talking too much about pausing? >> absolutely. there is still upward wage pressure, which is what you would expect, particularly when you have the extra boost from fiscal policy late in the cycle. they need to watch that.
manus: lucy, one of the things we are trying to get and i on, bullard talks about the cracks, i had a look back in this is the housing data i have pulled up. this is the nahb. what you have is the lowest since 2016, this is the house builders index, dropping the most since 2014. if this were a look for a position -- are you technically moving anything for maybe some kind of a slowdown in 2019 in the u.s.? >> we are definitely anticipating growth could be slower in the u.s. next year. and earnings as well. we have been expecting that all year and looking into next year saying you are not getting the boost from the tax reform.
nejra: you pointed to the slowdown in commodity prices. some people have talked about that actually extending the cycle in the u.s.. what does that mean for how you would position in terms of space in the u.s. if the cycle is going to be expensive? >> we are not trying to call cycles too much. of where youcase see there could be potential macro impact on the company's investing. is not of the economy being impacted by a slowdown, that would be a better universe. we have not tried to time in the short-term a cycle. 10us: over the last seven to days, allocating more resources out of being u.s. equity story,
maybe this drop-down on oil prices, europe benefits more from that relative to america. are you of that school which says reallocate resources, trim on the u.s., reallocate to japan, maybe to the u.s. -- is there a strategy at play in terms of reallocation? certainly the expectation would be there is not such a favor toward the u.s. going forward. u.s.eason why the outperformed this year is partly the benefit of tax reform, but it is also because of the trade friction. not having the first of those possibly less debate, that should cause less within the region next year.
as far as trade, it is up for debate. nejra: we will be debating trade. lucy macdonald for allianz global investors staying with us. we will talk more on trade. president trump and president xi meet on saturday. we will get more thoughts on the trade when we speak to the chairman of estee lauder. that is that 9:30 p.m. u.k. time. manus: if you are traveling to work, you do not have to lose contact with bloomberg. we are live on your mobile device and dab digital radio in the london area. ♪
we have an audible sense of relief if larry kudlow is to be believed. we are about to change -- turn a page. the nikkei is a slightly better bid up over 1%. you are seeing this movement in the chinese market. is this a sense of what could come if we get a deal? goldman sachs have been on bloomberg this morning saying the market needs a million barrels of oil production to be cut. a little bit of a better story they're coming through on the oil market. what have you done, a little cable? cable under pressure, stable at 127.51 right now. theresa may could be backing down that parliamentary vote, introducing other elements for lawmakers to vote on. is it just political calculation to show there is no better deal?
that is something the market will be weighing. the bloomberg dollar index holding onto three days of gains ahead of jay powell. we heard from rich clarida. the 10 year yields not reacting much. up just a basis points on a 3.06 handle. manus: let's talk about the oil market. the head of commodities research i goldman sachs says the oil to cut 1.3 million barrels a day. brent could be back at $70 by next year. think it is in the u.s. interest to see oil prices higher. between trade war, u.s. china relations and a potential opec production cut, that is the basis of our call. >> demand continues to run hot.
people are buying more oil because it is cheap at these levels. consequently we think the market tightens up into the first quarter, which would see prices go back. back above the $70 towards the $80 mark. that is the strongest outlook we have on a single commodity. a round of is and ubs.achs 1.3 millionat the barrels a day to come off, the saudi's have said we are ready to do 500,000 in terms of our demand level. they have a bullish case. they say commodities overall have been so slashed it is time to reconsider. 2019 could be a rebound for them. goldman has been bullish on commodities for a long time.
you pointed out on the top of the show we have done this survey showing opec is expected to cut oil output despite what president trump has been saying. meanwhile, boston consulting has been talking about the shale drillers. shall drillers are on the brink of a stress phase according to boston consulting. the crude selloff may slow potential m&a encouragement be more productive as well. oils: jeff curry said $50 gives you credit problems. let's get to debra mao. she has your business flash. debra: deutsche bank has said to be considering placing senior executives who manage its relationship with regulators. member whot board served as the bank's chief regulatory officer and tom patrick, who runs operations in the americas, are among executives who might leave as
the german lender comes under pressure for authorities to prove it is fixing its -- fixing internal controls. bmw is continuing to preach free trade, investing more in its massive u.s. plant as the german carmaker shows off two suv's at the los angeles auto show this week. speaking to bloomberg television, harold kruger says both models will be made in the factory in south carolina. >> our strategy is quite clear. we are producing the product in the main markets. the main market is the u.s. market. the majority of those cars will go to the united states for the united states. we will continue to invest. general motors slumped as president trump warned he may terminate subsidies for its electric car program in retaliation for g.m.'s decision
to close factories and cut jobs. companyed anger at the writing that the u.s. had saved gm in the past and is being repaid with job losses and closures. the president questions why no plans are being shut in mexico or china. debra mao in hong kong, thank you so much. the u.s. is refusing chinese capital in the european union is implement in a vetting process. as choosing thing visits spain and portugal, maria tadeo -- as xi jinping visits spain and portugal, maria tadeo -- the spanish government is rolling out the red carpet for china. we get to see a new deal signed by the end of the today visit.
this has been a trend in the making for 10 years. china has a trade surplus with pretty much everyone in the european periphery. that is not unusual. this really does tell you a story in the making for a long time. the nature of some of these deals have raised concerns when it comes to the european union. the german government, they want to take more time to that deals -- vet deals. the reaction in the periphery is more friendly. it has become the number one destination for chinese investment in europe. looking more closely into some of these deals, at the start of the year we got orion securities with more than $1 billion still on the table. a proposed acquisition for more than $5 billion.
it does not always mean it works out. we have seen companies pull a number of this investments in spain because it did not work out. manus: i will pick it up from here maria, thank you. let's go to the global cio of equities at allianz global investment. a lot of globals in that. we are setting up for saturday night in the market -- what a we priced for in terms of trade? what is your base case trade tensions 2019? >> our expectation is that the tensions are not going to go away. as a long-term issue about the shift of power between the u.s. and china. however, in the short-term, it will tend to wax and wane in terms of how much tension there is. the u.s. the summer and china coming back from the
brink of imposing more restrictions. i think if that is going to be the short-term, backwards and forwards, a lot of grandstanding , but we are heading toward more tariffs going on in january. it would be nice to see that far back. hita: we saw apple take a with comments from president trump. my chart shows you the increasing correlation between u.s. and china tech after a divergence. when we have talked in the past, you have preferred sometimes asian tech over u.s.. does this correlation make you change her mind? >> we tend to look, that is really where we come from. most of those tend to be in the u.s.. where we are spending more time is looking at supply chain, any of at costs for these companies which are going to be affected by trade. that means spending more time
for three days in a row. what is behind the risk appetite? a bit of a contrast to what is happening across the world. good morning to you. the g20pproaching summit with a fair bit of gusto. it has got to do with the fact that the macros are a lot more stable. the currencies gained a little bit today as well. strength coming in for the indian rupee. all the key indices trading largely at the highest point of the day. driven by two factors. the macros, the information technology sector in india is backing that -- bouncing back. i.t. names in in the are doing well for themselves. that is one thing aiding the rally.
moody's yesterday downgraded one stock, which is yes bank. the has taken a beating. one sore spot that is standing out in the indian large-cap space today. manus: the bank very much in focus. anne-marie, let's take it to you. there is a cheeky number on the fx board. you have to answer it. >> that they are either going to see massive moves to the upside or the downside. this is the u.s. dollar versus the you one. -- yuan. the option market is pricing in serious moves. if there is no agreement, they could -- we could trigger a selloff. if there is, the bar is so low we could spur serious gains.
singapore the bank of saying if there is no agreement, we could we can pass that key technical level. another thing to watch is copper. this is a commodity front and center when you talk about trade. another thing is what this indicates for the oil market. copper is down into a bear market. the losses for oil could be elongated? the two move on similar indicators. one thing to watch for oil is putin and mbs meeting. could we see a deal before that? manus: the deal before the deal, well put. annmarie hordern on the oil market. lucy macdonald is our guest host. she is the cio of global equities at allianz global investments.
those are markets that are on the move. i want to drill in a little bit more to the oil story to china. is there a deal this weekend or not? china, my guess recently, socgen said we quite like china because there is going to be more stimulus. the chinese are going to have to balance trade. that makes them want to take more china. do you? >> yes, on balance. when we are looking around the world into next year and seeing where there is more opportunity. both for the china domestic but also china related stocks looking relatively undervalued. relaxation,e some even if it is short-term on the trade tensions which have been the biggest downward influence, that seems to be the catalyst. within china, it is not just
trade. there are other factors which have been going on, which has been restricting growth. at the same time, you have the more cyclical reactions from the fiscal and within the banking sector. there is a lot of moving parts within china. even more than usual. the negatives seem to be more priced into valuations at the moment. nejra: one of those moving parts is the slowdown in chinese growth. i know that you pick stocks, you do not make calls on growth. are there any stocks you are looking at in china you might be reassessing given the changing growth picture? >> yes, in china but also elsewhere. there are many companies which have -- in china.
we think the world in those terms, that companies are driving most of it. those companies which are being the rated are looking more on. you to finish ask off the global trade in the china situation, could japan be a net beneficiary if we go into still an unsettled or cause i -tarrifworld -- quasi world? could that benefit? >> japan and germany tend to trade in line with gdp and momentum. they are both big trading nation's. that's what i would expect to be more of the attack. nejra: lucy macdonald, we will
chat more in just a second. u.s. house democrats will have a closed-door vote today for a speaker nominee. so far, no challenger to nancy pelosi has come forward. president xi jinping is in spain for an official visit where he is set to meet with king philippe. looking ahead to the g20. manus: the bank of england will release its financial stability report, the results of the stress test. we're going to stick with the u.k. theresa may is said to have backed down in her battle with parliament. sources tell bloomberg the prime minister will ditch plans to prevent lawmakers from trying to rewrite the deal. this means mps will be free to vote on a series of potential changes to the motion which could include calls for a second referendum or for a different deal with the eu.
this could have a huge impact on the vote scheduled for december 11. lucy macdonald is still with us. i am not going to ask you to call the outcome of brexit. in terms of looking at u.k. equities, you along with others say they are under owned. how do you approach stockpicking given that we are reaching the end game with the parliamentary vote? the brexit is not the only issue. is, as much as we can tell, priced into shares. anre's also concern about extreme left governments. also in the overall
cycle, there are pressures in consumer debt. interest rates are rising. there are a lot of reasons for concern on domestics. then you look at the stock ofket, and there are a lot overseas earners in the ftse. think, there are some stocks there which maybe undervalued in global terms. on the domestic side there is value. one of the areas we are trying to understand, we are going to get the stress test results, none of which could be that bullish, but it takes us back to our question of the day. we asked our viewers to join in. countries banks will outperform in 2019?
how does that play into your thinking? you've got the u.s., you got the u.k. lenders, and then you've got these special vehicles in greece. there is a lot going on in banking. what juncture do you have bank risks on the book? >> we do not take much banking risk. the has been a good strategy over the years. there are more attractive places within the financial sector the banking. some areas of private equity alternatives, that is where we are tending to be more interested. that having been said, we do high bankselatively in yields. it is a mature cyclical regulated sector.
it is not a great choice. nejra: what about insurance? insurer, weed by an have a more stable area. crisis,rough financial our own parents managed to survive. others were not so lucky. insurance has its risks and challenges with the low interest rate environment. means a lot of new business is relatively unprofitable. where the insurers have better quality businesses like asset management, we will be more interested. manus: hold those thoughts. i think we have covered the world. lucy macdonald, cio of global investments at allianz global
investors. auto is the worst performing sector in europe. carmakers have to contend with uncertain trade landscapes, growing restrictions on emissions, and an expensive move toward electric vehicles. i talked exclusively to oliver bloom from the l.a. auto show where he discussed how his company is coping with trade tariffs. what have to think about we will do. today we have not decided yet. find a solution for our customers and our brand. would you consider opening a production plant in the united states? >> we did not think about it because production in the u.s. depends on volume.
a profitable production in the u.s., you need around 50,000 units. 60,000 we do with all our model ranges, it is difficult to talk about production in the u.s.. manus: can i ask you about china? we have seen auto sales drop for five months in a row in china. what can you tell me about porsche sales in china? are you seeing a slowdown there? we mentioned china especially
in are very -- cars like the 718.or the a very big increase and especially we have a good new one.ith a we are looking forward to the next year, another record year in china as well. manus: oliver, we have just written a story that you aim to improve your operating profit by 6 billion euros over the next eight years. the question that springs to mind, you talk about efficiency, about cutting costs, this is what we understand to boost your profitability. only about how that transformation might take place. is it going to be cost-cutting or new product? how are you going to achieve this boost profitability, ebit of 750 million euros? program,tle of this result improving program, we are
process inng on the or company. we start with engineering, go over to production, and our idea improve our5 to to support the lower margin with electro-mobility. the cars with electro-mobility have a cost higher than about 6000 to $10,000. we thought about to start the program now. we are in a very strong position. we want to remain our profit margin of 50% for future. we went into this program, therefore. bloom, the porsche
ceo. faster, more emotional, more connected. i'm talking about the porsche. coming up, an exclusive from egypt. seeking any further funding from the imf when the current $12 billion program expires. nejra: i struggled to keep up, manus. --er, mixed manic mess just messages from the fed. talking about cracks in the recovery and pockets of distress. if you have got to step away, do stay with me. if you are traveling to work, tune into bloomberg radio. this is bloomberg. ♪
nejra: to this is "bloomberg daybreak: europe." manus: let's talk a little bit about egypt. talking to the finance minister there. they will not be asking the imf for funding next year when the $12 billion loan program expires. the finance minister said the economy is now better and he is working to reduce the debt level to regain -- bolster investor confidence. >> let me say that we were happy with the imf. egypt is one of the few countries who completed such a program successfully.
us.thing very good for this program was very strict. it was very harsh. it took the egyptian economy to a good form. a good position. we got from the , wet of asking for funding are now in a position that we do not think we will need funding from the imf. tober two, where committed reforming our economy and making our economic form a good example for other countries.
with the imf of course, we will of the imf.orm this will get some sort of comfort to international investors. let me say again, this does not financing. we can be in some sort of operation. --have already asked the imf >> at what point does the high cost of treasury bills keep you up at night? --let me say we are very with the international community . the level of debt, we are concerned. we're working on that.
percentage ofa expenditure is high. when the interest rate went up, it added to our problem. let me say that we have a target , and we have a target to reduce our debt. i am just coming from a meeting with the prime minister. we are talking about specific measures. specific actions which will help us to address both. of --sing the level decreasing the level of debt. you will see we have taken actions and you will see our debt level is decreasing. >> you came to lower some of your borrowing costs.
how are the strategy is relying on international bonds rather than treasuries? as you look to 2019, how much debt will you issue? how much is in your plan? >> i am not sure about what will happen next year and the year after. it might be the same level as this your or even lower. nejra: that was the egyptian finance minister speaking to bloomberg. of globalnald, cio equities at allianz global investors is still with us. throughe punishing year august, we have been trading in a range. how much is the em fx impact of -- a prison through which -- a prism through which you will be looking at stocks? >> it is exactly the prism.
earnings have been strong. stabilization clearly will help into next year. the other area which has been an impact is the strength of the dollar. the impact that has had on debts in some of these countries. removal of that would be a help. when we look around where we can see that there is relative value , china is one area. manus: just building on that this is value emerging in emerging markets. it is in the gtv library. a white line you can see at the top versus developed markets at the bottom. where is the biggest value proposition as you going to 2019? >> i think it is china.
and china related. china has a huge impact on the region, but also more widely. that i think is a source of potential upside and value going into next year. nejra: thank you so much. ,ucy macdonald lucy macdonald great to have you as guest host. continuing the conversation on bloomberg radio at 7:30 a.m. u.k. time. like the stock markets are set for a slightly better open at the start of trade. you caner of course, access all the charts. gtv library. everything is there we have used from the breakevens rolling over to the trade war. all their in your chart library.
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mom. ♪ manus: good morning from dubai. this is "bloomberg daybreak: europe." nejra: these are today's top stories. manus: fighting the fed. trump renews his attack on the central bank. we hear from jay powell later. other officials paint a mixed picture. may's meaningful the. the prime minister backing down from a key battle with parliament. is it a risk to her deal or a political calculation? trump optimism. kudlow is hopeful for a breakthrough at the g20. washington will not hold back on chinese tariffs if there is no progress.
nejra: good morning, everyone. we are under an hour away from the start of european equity trading. yesterday was a negative session overall on the stoxx 600. carmakers and commodity producers were the biggest drag on the benchmark. we close down by 0.25%. we saw gains in the u.s. yesterday and asia has been trading positive overnight. u.s. futures are pointing toward at least modestly positive start in the u.s. session. we could see a rebound in europe judging by these futures. ftse 100, dax, and cac 40 futures on the positive side. we are just under an hour away from the start of trading. manus: those are the equities. let's have a look at the bond
side of the story, drill into the italian government, btp's dropped at the close yesterday. five years linkers go pretty well. four and a half billion dollars worth of paper to come. btp's inhave here is the middle of your screen just turning green. salvini and demaio are involved in eu discussions. other sources say the italian that target must be closer to 2%. then you have others saying we are very far apart. partners said by italy, by the bonds, by the stocks. italy needs more stimulus than the market currently anticipates. we will hear from jay powell later on. "some" left out the word .
when it comes to understanding the fed it will all come down to jay powell. juliette saly's tone it into nation always keep. -- and intonation always key. commentarye had that coming through from larry kudlow suggesting perhaps when we have this dinner date between president trump and president xi ires,t a series -- buenos a there could be -- , but wetocks well bid did see movement coming through in the asx 200. hong kong and china leading the way. a lot of rally coming through in tech players. australia did close lower. the rebound you are seeing in singapore on the back of that call from goldman sachs talking about commodities, saying the selloff in iron ore is mostly
over. they see a range between $60 to $70 to come. the yen is holding near a two week low. a little more risk on in this environment. from the bank of thailand november 14 meeting suggesting we could see a rate hike from the bank of taiwan. that would be the first since 2011. nejra: today we are asking the question on mliv, there is context we have been hearing from the fed. we look ahead to jay powell. how banks react to this will be key throughout the year. which countries banks will outperform in 2019? reach out to us in the mliv team. iv plus tv on your bloomberg. let's get the bloomberg first word news.
>> prime minister theresa may is said to have backed down over planes in u.k. parliament's rights debate. may's government intended to prevent the house of commons from changing the terms of the eu agreement. according to a bloomberg source, lawmakers will be free to vote on a series of potential changes to the motion. calls for another referendum or a different deal with the eu. the bank of england will publish its assessments at 4:30 p.m. u.k. time. mark carney holding a press conference afterwards. will bringelevision you more coverage later today. donald trump has told the washington post he is not even a little bit happy with his choice to head the u.s. central bank. the u.s. president complained at length about jay powell, blaming the fed policies for recent stock market declines and for g.m.'s announcement that it would close five factories in north america.
donald trump and china's xi jinping are to meet over dinner ires.e g20 in buenos a larry kudlow says trump is hopeful for a breakthrough but is ready to impose more tariffs if the upcoming talks do not yield progress. the meeting marks a pivotal moment in escalating trade wars between the world's two largest economies. brent crude rose on hopes of a trade breakthrough at the g20 &'s u.s. demand for fuel remains robust. ubs agrees oil will continue to rise saying $70 or $80 as possible. goldman sachs echoing the view that crude will bounce back. in the u.s.it is interest to see oil prices higher. war, u.s.-china relations, and a potential opec
production cut, that is the basis of our call here. >> april a minority report says faulty -- on a liner jet. the pilots were not briefed on the problems the jet suffered on earlier flights. boeing has responded by saying it is working with investigators and that it's max jets are as safe as any aircraft that has ever flown. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. manus: thank you very much. the very latest from dubai. a host of fed officials have spoken at a conference in new york. there were mixed messages. richard clarida backed more gradual rate rises. the st. louis president was more
cautious. he was saying officials must launch possible cracks in the recovery. also noted governor pockets of distress. nejra: meanwhile, president trump has blessed the washington post, i am doing deals and i am fed,eing -- blasted the telling the washington post, i am doing deals. so far i am not a little bit happy with my selection of jay powell. joining us now is the cio of northern trust. great to have you with us. you say the fed is the central bank at biggest risk of making a policy mistake. the markets have downgraded their expectations for 2019. should the fed be paying heed to
those signals? >> absolutely. we fear the fed may go too far. we are anticipating like the rest of the market they will move again in december. whether they announce a cause versus the intent they are going to continue and moved two or three more times, that is a pivotal point for the markets. it is not often we pay that much attention to any single meeting. the risk of the fed making a mistake is quite high. when you look at the inflation breakevens, we have put in twos, fives, tends, all beginning to roll over. should this rhythm flag for the fed? >> absolutely. we have never been in the inflation camp. we believe the forces that will the inflation low dominate
cyclical pressures we have seen over the past year. what happened with the gm announcement is a clear example over this. an industry that is incredibly competitive and good at providing supply to demand but technologicalith forces driving investment away from traditional automotive capacity into electric vehicles. that is just one example of where we think longer-term inflation is going to be relatively low, either driven by the global economy providing supply or technology driven price deflation. the fed has to be paying attention to that. us about how this impacts asset allocation. >> we are neutral risk. we started to decrease our risk positions at the start of this year and finally went neutral. we prefer high-yield bonds in the u.s. and are underweight in
the emerging-market equities. we have been taking u.s. equities and international equities are at the year. we are assigning a higher probability to our to risk scenarios. one, -- our two risk scenarios. one, the fed making a mistake. the second is the trade impact we are already seeing on china. is the china's slowdown going to have a bigger impact on the global economy? that is something else we are looking at. it is having an impact on decision making by ceos. it has had a limited impact on the u.s. economy. you have to think about the sequencing there. manus: let's dig a little deeper into the u.s. economy. what i have put together in the library is the probability of rate hikes. it is fascinating you said you have gone neutral. what does that do to u.s. exposure?
>> we are flat to our benchmark. we have often been anywhere from five to as much as a percent overweight u.s. equities over the last nine years. we have been back to neutral. portfolio you-40 can think of our u.s. equity portfolio being under 30%. nejra: you have a lot of differing views on yields. is this a view you to have just taken on because of the spread widening? >> we have always had a bias to the high-yield asset class. we liked getting much of our return upfront versus the promise of return over a multi-year period of time. we are not forecasting a recession. we are more cautious, but it is an important distinction.
we're at this pivotal point. assuming the fed only helps cause a slowdown as opposed to a recession, we think that bodes well for high-yield relative to other high risk asset classes. agrees will be more vulnerable to a slowdown and increased probability of a fed making mistake rather than high-yield bonds. bob brown, you stay with us. a little bit more to talk about. the pound is taking another stumble as theresa may starts -- she is said to have caved to stop moves by lawmakers trying to change brexit plans. you do not want to miss our conversation at 9:00 a.m. nejra: if any of you have to step away from the tv, don't do it, but travel to work, tune in
set for its biggest weekly gain in a month. we did see pressure on cable. we are steady now, 1.275 as traders assess the latest brexit developments. manus: we have just had the allianz global cio with us. u.k. equities are relatively cheap. ps. ftse is up 30 pi higher risk premium is justified by brexit. bond yields prevaricate. yields, there is very little that is moving from the fed speak we have had overnight. let's get the bloomberg business flash. deutsche bank is said to be considering replacing senior executives. according to our source, a
management board member who serves as the banks chief and tomry officer patrick who runs operations in the area -- the americas may leave. continuing to preach free trade, investing more in its massive u.s. plant. the german carmaker shows up to suvs at the los angeles auto show. models will be made in the companies factory in south carolina. >> we are producing the products in the main markets. the main markets across the global world is the u.s. market. the majority of those cars will go to the united states for the united states. we will continue to invest.
>> unilever is said to be in talks to buy from glaxosmithkline. unilever beat a bid from nestle with coca-cola also losing out to buy the drink. gs k's nutrition business could come with a price tag of $4 billion. that is your bloomberg business flash. nejra: thank you so much. let's focus on the u.k.. theresa may is said to have backed down in a key brexit battle with our limits. the prime minister will ditch plans to prevent lawmakers from trying to rewrite the deal when they debated next month. ours: joining us is european news director. and the cio at northern trust is still with us. a couple of lines coming through
from the u.k. chancellor. spendinging government a lot of time and money on contingencies and remaining in the eu is a better outcome for the economy. these are the freshest lines on the vote for this deal on december the 11th. the arithmetic does not stack up. next on december the 11th? >> we are in the middle of this election-style campaign. she is trying to sway public opinion change that arithmetic to persuade the and he this the best deal on the table. it is not looking great in terms of the numbers at westminster.
she has made one concession overnight as you just mentioned. she is now giving mps a little more sway over the process. they're going to be able to vote on amendments before the actual deal. it could be something minor or it could be some thing major, like we need a second referendum. the government is possibly betting none of these amendments are going to pass because there is no majority. as of yet, more uncertainty. >> if this is mainly cosmetic, does it make no deal more or less likely? >> no one knows what is going to happen if this vote does not get past. we really are in uncharted territory. today we are giving warnings from the treasury and the bank of england. they're going to put out their forecast of what no deal means. it is starting to look like an orchestrated plan to show the public and mp's the risks of no deal, to get them to back away. there are going to be numbers
put on the impact of no deal on the british economy. we are going to be hearing from mark carney later. i do not expect that to change anyone's mind. he has already warned this is just a rehash of the project fear campaign we saw in the initial referendum. no deal is very much an option if this deal is voted down. there remain other options parliament can pursue. the big option, another general election. manus: hold those thoughts, let's bring in bob browne. what do you make of brexit? what do americans make of brexit? what does it mean for you in terms of your exposure to the u.k.? >> it is a good time to be neutral. there is no shortage of different opinions. we used to joke at committee meetings that this is an issue
we wanted to ignore until the last three months before march 29. we did not think it was going to be resolved until the end. that is turning out to be true. we are at the point where we have to start focusing on it. i have been getting lots of expert opinions. when i am looking at it from a global perspective, this is a binary risk. it is going to affect the currency more than the equity markets in terms of a trading opportunity or risk. we would rather be in places where we have a more informed opinion, where there is a better have ability of being six -- probability of being successful. hearing your commentary does not give me a lot of confidence that i can come to the same conclusion about u.k. equities versus our view on u.s. high yields where we feel the analysis really can lead to an informed opinion. nejra: you have turned neutral
on europe as well. is that to do with brexit? is that to do with your view on risk? or is it things specific to europe? >> it is our general view on risk. i spend a lot of time on risk on, risk-off trade. we have been overweight broadly equities around the world for much of that period of time without discerning one market versus another. we just thought it was time to be risk on. when we went back to neutral in europe it was a reversal. manus: if i can bring it back to to me it is about the size -- by the way, we have done our poll. 55% say it would be voted down. 45% says this brexit deal will be voted through. i put it to you that it is the size of the vote down or the
scale of what they try to adjust, like take out the backstop. >> that is significant. that is the market view. no matter what political pundits may be saying, the currency thisrs, they are saying deal has a bigger chance of going through than you might think. possibly not the first attempt. maybe this thing is voted down. initially it is voted down, it prompts market chaos, and that sharpens people's minds. does the government have another roll of the dice? they come back to the table with small concessions or a slight change to the language and have another go, that is the big question. if it is voted down by a huge margin, it is going to be difficult for the government to come back to the table. imagine this is trying to get some kind of concessions out of european leaders. nejra: thank you to our european news director and bob browne.
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my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. anna: welcome to bloomberg markets, the european open. we are live from our european headquarters in london. i am anna edwards alongside matt miller in berlin. matt: asian stocks rallied into the close as tech shares gathered pace with investors optimistic about a breakthrough in u.s.-china trade, or possibly the fed officials slowing down rate hikes. the cash trade starts in 30 minutes' time. anna: fighting