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tv   Bloomberg Daybreak Europe  Bloomberg  November 29, 2018 1:00am-2:30am EST

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♪ nejra: good morning from bloomberg's headquarters in london. manus: this is "bloomberg daybreak: europe." these are today's top stories. nejra: equity markets rally on the fed chairman shift in tone. treasury yields dropped but how long can it last? carney's doomsday warning. he outlined a dire scenario for the economy if written crashes out of the eu -- britain crashes out of the eu. trade watch. president trump arrived today for the g20 summit. i over dinner on
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saturday. we are live from one osiris -- aires. ♪ manus: a warm welcome to "bloomberg daybreak: europe." how long will this theoretical -- possibly left? the dog -- last? this is the dollar index. we have dropped by nearly half a percent wednesday and we are adding to that. is it that the fx traders smell the top? that is what deutsche bank is saying. they say that data dependence was -- that lipservice was paid to in the u.s. in the fed. now it is coming alive. deutsche bank saying we have approached the top. you have the dollar, indonesian repeat. a weaker dock -- indonesian rupiah.
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a weaker dollar and you see the strength in the rupiah. all of these emerging-market currencies are flickering around but indonesian rupiah is the vanguard this morning and the rupiah is looking -- morning. nejra: those were prepared comments from chairman powell. he talked about being a long way from neutral just a month ago. interesting if you look at the slight difference that happened in the equity market and bond market. s&p rallied the most since march, meanwhile the 10 year flattening a bit in today's session. the 10 year yield down five basis points. if we drop down below 3% it will be the first time since september 18.
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futures down 0.6%. markets took a little while to catch up to the bond markets. the bond markets had already fully discounted the more dovish tone that the markets read from powell yesterday. we will dig deep into everything the fed chair set at the market. up 6/10 of 1%. ceopeak to the norsk hydro at 6:30 a.m. u.k. time. us to discuss in the aluminum and broader commodity markets. let's check in on the markets in asia. juliette saly in singapore has more. we see a rally on the msci asia-pacific index, but not quite with the strength we saw in the u.s. session. perhaps asian traders turning their attention to the g20?
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they certainly aren't you can see that reflected in the hang seng. elsewhere, it is a positive session -- they certainly are. you can see that reflected in the hang seng. elsewhere, it is a positive session. the msci pacific -- msci %.ia-pacific index up 0.4 0.6%.sx 200 up about a lot of the emerging markets doing quite well. you can see the jci up by 1.5%. is have a look at some of the stocks we are watching where you have seen the reaction -- let's have a look at some of the stocks we are watching. the australian banking stocks all looking good today. they all finished higher. that is because there is such an
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interest rate differential between the r.b.i. and defending on that tightening hike -- the fed being on that tightening hike. we are hearing that the ipo will be priced at ¥1500. a lot of weakness coming through in these jewelry shops and luxury goods makers in hong kong. just more sons that chinese shoppers are slowing down on buying those luxury goods. manus and nejra? manus: juliette saly with the very latest on the markets in asia. let's get to our question of the day on mliv. putlong will the powell impact really last? that is the debate. can join the team on to the plus, go to mliv and after the question -- after is a question -- ask us a question.
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let's get a bloomberg first word news. >> governor mark carney says the bank of prepared for the worst possible brexit, and that the u.k. faces the steepest economic slump since at least world war ii if it crashes out of the european union without a deal. the u.k. government and central bank both warned the economy could be as much as 11% smaller under brexit, compared with remaining in the eu. in the banks projections, the decline would be much more rapid, with property prices plunging almost a third and worst-case scenario. the bank being ready for brexit is not sufficient to guarantee a particular economic outcome. that is little monetary policy could do to offset the potentially significant hits to productivity and supply that brexit could entail. >> the bank of england says it is confident about the strength of the banks it regulates. the uk's and seven largest
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lenders all passed bank's latest stress test, showing they are strong enough to continue lending, even during a note of brexit. of the banks tested, the boe said barclays and lloyd's would be more vulnerable and a scenario of extreme disruption, leading to convert some subordinated debt to equity to replenish capital. says the xi jinping global economy is at a crossroads as he prepares to meet his american counterpart this weekend. he says the world needs to decide whether they want to continue to support the global system. he will meet president trump at the g20 in argentina, with washington indicating higher pres. erdogan: -- higher tariffs on chinese goods in the new year. we spoke exclusively to chinese economy minister. g20,r job as host of the
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of course is not to strike the deal between the leaders, but to act as an honest broker of the different positions. ukrainian president has called for nato's military assistance according to the country's transport minister. 35 vessels have been prevented by russia from entering or leaving ukrainian ports in the area, disrupting the country's exports. in an interview with a german newspaper, the ukrainian president claimed vladimir putin is planning to annex another part of ukraine. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. nejra and manus? nejra: debris now in hong kong -- that was deborah in hong kong. jerome powell has left the door open for a potential pullback in
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interest-rate hikes in 2019. manus: the consequences come stocks surge the most since march. the central bank chief struck a more dovish tone than usual as he addressed the economic club of new york. >> interest rates are still low by historical standards, and they remain just below the range of estimates of that level that would be neutral for the economy. that is neither speeding up north slowing down growth. manus: joining us now is bob parker, the investment committee an investment management company. powellkes me that jerome has closed the calendar spread between october and november with these two words, just below. is this the birth of a powell -esque put. robert: i would not put it quite that way. we have seen a significant change in guidance from the
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debtor reserve -- federal reserve. the fed with signaling previously very clearly that there would be three rate increases in 2019 happen expected rate increase in december. i think that has changed. you may recall that the last time i came on bloomberg, and the one point that i made quite forcibly was that raising rates three times in 2019 was incompatible or inconsistent with the fed economic growth forecast of only 2.5%. but we have seen recently, particularly the most recent data, the capital expenditure pmi's, it is clear that we are now -- talk of recession in the states is not. correct.
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we are certainly moderating and increasing that forecast. 2.5% looks very likely indeed. one rate increase next year is my view. nejra: i just want to throw to some sound that we have. we have a various views on whether a recession is coming in 2019 or 2020. let's listen to this. >> the normal signs of what causes a recession, these accesses, which is banks getting way levered up, having have to leverage they did before, residential construction out of hand, constructional -- commercial construction out of hand, those telltale signs are not there so i would be willing to bet no recession in 2019. nejra: jonathan grays blackstone not betting on that recession in 2019. chairman powell referred to the lack affect in monetary policy -- glag affect in monetary policy.
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bob: i think markets and investors would be very surprised if they did not raise rates by december. nejra: what about be on december? -- beyond december? bob: what has happened in the markets is logical. the market is adjusting to the probability that we will not get three rate increases and increasingly come in my view, that will -- we will probably one rate increase or maybe wo.n t manus: it looks as if the fx traders might smell the top of the dollar. are you sniffing the top of the dollar? to: i think you have got distinguish between the different currencies. three or four observations. we first observation is that have already seen the top of the of. dollar against a raft
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very oversold emerging currencies. you referred earlier in the program to the movement in the indonesian rupiah. look at the recovery in those eencies that were very distressed earlier in the year. the top of the dollar i think has already occurred against a number of emerging currencies. the yen is not really recovering and that's consistent with the bank of japan continuing to sit on the sidelines with those very low jgb yields. i think we're probably forming a base at the moment. nejra: i just want to quickly ask on the equity markets, we have the mliv question. my question is has this completely removed one of the big headwinds the equity markets in terms of the fed? hamlet -- life -- the the mliv question asks it a different way. bob: at the beginning of this
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year, i made a forecast that the return on msci world in 2018 would be zero. i was wrong, because the return has been negative. i think if one looks out over the next 6-12 months, the return on msci world will be marginally positive, and one factor, i mean or minus 5%.us question isty critical as well. manus: ok, bob, thank you very much. bob parker with his latest thoughts on the market. up next, we have the ceo of mitsubishi north america, who says it's as if as usual for the carmaker. more on that interview. if you are traveling to work, you may not want to lose contact with bloomberg. with our on digital radio in the
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london area -- we are on digital radio in the london area. ♪
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♪ surveys andfrom other u.k. authorities suggest that the country is not yet fully prepared for a cliff edge brexit. surveys suggest that less than half of businesses have initiated contingency plans for no deal and less than 1/5 of small businesses have done so. the european union, united kingdom, united kingdom government wants a transition pe riod to whatever form of brexit we are taking, and certainly from what we have seen for the economy as a whole, it is advisable to have the transition period.
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the bank being ready for brexit is not sufficient enough to guarantee a particular economic outcome. there is little monetary policy can do to exhort the significant hits to supply that brexit could entail. our job is to get us ready for all possibilities. it is a serious job. it is absolutely not our job to take one side or another on these issues. manus: ok, that is just a sample of what mark carney had to say. he is on the bbc at the moment. less than half of the u.k. businesses have started then no deal brexit plan. something to credibility of the bank of england is officially on the line, calling cable down to parity envelope. we would talk -- and below. we will talk about the drop in the commercial property prices. we have the newspapers every morning. prime minister conte
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optimistic. he also seeks to cut the deficit to 2.2%. a big headache for europe, 2.4%. 2.2% is not low enough. that is a little bit of a flavor of brexit-ology. and of course it is italy topping the agenda. nejra: we see the euro move a little. is it off those into the headlines or because we are seeing a weaker dollar across the board? china showing weakness. 1%,300 down almost meanwhile crude rebounding little. u.s. futures pointing lower after the rally yesterday, the dollar stays weaker. the 10 year yield reacting with a lag, barely budging yesterday,
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but asian trade is looking at. if we budge below 3% it will be the first time since september 18. the board of the renault nissan mitsubishi alliance will meet today for the first time since the arrest of its architect, carlos ghosn. what happens may set the direction for the world's biggest auto alliance. we spoke to the north american president and ceo about this time of flux. >> the focus right now is business as usual. the alliance is intact and the direction from the mothership in japan and the direction we are giving to our dealers and ,mployees and united states stay focused with the business at hand, selling cars and taking care consumers. >> when you talk about doing business as usual, i want to talk about your car lineup, and specifically where the mitsubishi brand is headed, specifically in the united states. are there any plans to expand
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into more fuel-efficient vehicles? i'm talking primarily electric vehicles. >> yes, in fact the vehicle you see behind me is a prototype, it's a concept vehicle. this is the design inspiration for where mitsubishi is going in the future, as well as the loaded technologies that this vehicle has, which is going to be a part of our future when the alliance platforms, and the alliance energies really kick into gear and these products start showing up in the united states, within about a 2-3 your time spent. ar -- year time spent. >> -- time span. >> is the u.s. a place that you want to add manufacturing capacity right now? >> we need to get to a point where anyone of our products once webring to market,
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can get to a point where we are manufacturing approximately 100,000 units of any particular product, the business case becomes very robust relative to a positive reason why we would bring manufacturing back to the united states. nejra: how important are subsidies at the moment? gms is something we hear at in terms of electric subsidies. is this something that you need as part of the industry? is this something you depend on? >> it's not something we depend on. it's clearly something that the consumers depend on and it makes these vehicles more intriguing. as we continue to make more of these vehicles and are able to bring their cost down, we will the able to get the manufacturing costs to a point where we might be able to actually operate without the subsidies, and consumers will not need these subsidies. they are important.
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range anxiety issues are quickly not becoming an issue anymore. i think we are in good shape going forward. nejra: that was the mitsubishi motors north america and ceo and ceo -- and president fred the diaz. said there is a chance of slapping a 25% tariff on european cars -- imported cars. how much have equity markets discounted the potential bad news out of trade? even if we were to get a little bit of relief bounce following this weekend. >> i think we will get a relief bounce if there is an agreement in the g20 between the u.s. and china to establish a framework for further talks, which would imply the proposed increase in tariffs were not occur in
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january -- will not occur in january. the current $200 billion of guest: at 10%, -- the current 200 million of , there is a0% potential trap of an additional $257 billion of chinese exports to america that will also be subject to tariffs. all of that i think is very well known in the markets. if there is any movement to delay the increase, the market reaction i think is going to be quite positive. manus: in terms of where that would manifest itself, bob, we put together three different chinese markets. just to take forward your argument, if there is that relief, it may well, -- i noticed that foreign investors are back into the csi. they put $600 billion last week. that is the biggest monthly influx of money since may.
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is this a coil spring? where would you take advantage of the trade you just outlined? think specifically on china, i think there is a high probability that the chinese renminbi will stabilize between 6.96, 6.97 against the u.s. dollar. we have now moved to a level where the renminbi is now fairly valued, if not undervalued. coming back to chinese equity markets, i think the themes are number one, china is relaxing fiscal and monetary policy. number two, the market valuations are cheap. nejra: bob parker, the market issues in china. he stays with us. ceo,eak to the norsk hydro svein richard brandtzaeg, at 6 :30 am u.k. time.
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to into bloomberg under mobile device or on digital radio in the london area. this is bloomberg. ♪
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>> u.s. futures, out of the rally of 2% in the s&p yesterday. in asia, in the green on a headline level, up .7% on the index but divergence below the surface. chinese equities, underperforming. let's check on the markets around the world. joining us from the by -- mumbai
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and here in our studio. great to see you. rising in line with global market, but there has been volatility today? goodod to be here and morning to you. not so much volatility, but three days ahead of today's session, in line with the chinese market, which are not doing all that well. indian markets are doing rather well. i think the rupee has recovered very smartly. a few days back, we were talking about 74 to the dollar. currently at 69.90 thereabout. it is a strong move for the currency. volatility, the only difference is what is happening at the broader end of the spectrum. while the benchmark indexes are doing well, the next chart will
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show how the mid-cap and small-cap hasn't been able to participate. we will take what comes our way and for now, there is green on the screen. manus: you are right. take those moments where you see the him. let's -- see them. morningt the pound this and one where two comments are it is a rather benign reaction call fromy aggressive the bank of england and demonstrated calls from the government in what could happen in a no deal. annemarie: certainly, a huge warning for mark carney, saying slump the worst economic since world war ii if the u.k. exits without a deal. maybe the pound was benign, but look at the volatility on sterling. we are trading on implied volatility, 11% above the blue line. mark carney is saying economic growth could slumped 8%. financial 6% in the
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crisis for perspective. it could drop 25% from parity against the u.s. dollar. in commodities, i am looking at something different. not gold, silver. it is all about palladium. it is poised to overtake bullion since 2002. is lots of -- there demand for the metal used in devices to control car pollution, but not enough supply. manus: ok, thank you very much. keeping us real with the 11%. thank you for the latest on the indian markets. today, the mliv question, to what extent do you think it will last? markedy the market has down one interest rates next year and it is in the price. do you agree? how long will the powell put last?
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join the mliv team and we will have a go at your responses. nejra: let's turn to an exclusive interview now. the industrial giant is norway's sixth largest company and largest aluminum supplier. this yeare fallen amid mounting concerns the trade war between the u.s. and china may derail global growth, hurting demand for industrial metals. the company says it hasn't been able to stay on course for several midterm goals. joining us, the ceo of north hydro. in london for a capital markets day. i want to get some of the concerning news out of the day because what you say matters to aluminum markets in general and are investors concerned about the refinery in brazil and the injunction there, so i want to know about the progress was brazilian authority -- with brazilian authorities
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and when hydro can return to 100% production. capacitying at 50%>> of therepresents both 5% global aluminum capacity outside china. the progress is that we have a dialogue with authorities. we have signed agreements with authorities in brazil related to terms of social agreements and also we are showing we are very eager to start and ready to start and we have people on board, so we don't know exactly the timing there, but are working day and night. manus: good morning to you. that is going to be good news for the markets. you have that constructive
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rhetoric, but what about your target for 2019? will it affect your targets? are you going to say to the market, i can beat my targets for 2019 as a result of this today? svein: the timeline we are following with regard to the project that we are working on in brazil, we are ready to start. andan operate safely responsibly going forward, but the dialogue we have to have now with the authorities, we also have to let them take the time necessary to make their decision. as a company, we are ready to start. nejra: given the supply this, how tight is the global aluminum market right now? svein: if you think about raw production,uminum there is a tight market, also due to the fact that there are sanctions against resolve,
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anotherplayer -- rusal, player in the market but aluminum is a metal, the demand is growing, the fastest-growing base metal in the world and we are happy for the market development. we also see balance. in fact, there is a global deficit in the aluminum market after several years of surplus. manus: let's just dig deeper into that because it was said global demand for them, they are concerned about global aluminum demand slowing as a result of trade. the imf are warning that the pace of slowdown in the world is worse than they got originally. you are at the front end of this queue, what can you tell me about demand in the past six to eight weeks? has there been any faltering of demand for your product? ofin: well, we see demand 428, will be 3% to 4%.
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next year, we expect 2% to 3% growth. there will be slow growth in china, but aluminum is a very important material for modern society and there are several driving forces that lead to higher demand in aluminum. we are satisfied with the market for the coming years. nejra: what impact is the trade war having on the market and on your business? svein: the u.s. introduced a 10 port in -- 10% import duty in aluminum and the premium has and in the increase is corresponding to 10% tariffs. it means customers in the u.s. are paying more for metal. we are selling metal from our plant in qatar to the u.s. market and we have the same margins. as before the duty was introduced. it is a situation where our plants in the u.s. market are
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playing -- paying a higher price for the metal and selling a higher price. in the end, it will be the u.s. paying for this. manus: you mentioned china carried i want to get a sense of how robust the strength of the china demand. svein: we see the demand in china slowing down. we also see that there is improvement in the supply demand balance in china due to the fact production was taken out last year, the improves -- increase the capacity growth, which is also healthy. when we look at the supply-demand balance in the world next year, there will be a small surplus in china, but there is deficit also in china and all in all there will be global.1.5 tons of
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he will be a tight market. nejra: a question on your key markets. do you see any slowdown in the car industry, in construction, partially linked to trade? svein: if you look at the u.s. market, we have expected there could be a slowdown in the construction market or automotive. we see quite a strong development, especially in the heavy truck and trailer market and it was prying into these market segments. have metals solutions. delivering to distract -- construction. is stillat there growth in the building and construction market in the u.s. and europe. in europe, lower than in the u.s., but the automotive markets in the u.s. are moving forward. not necessarily depending, but the institution is very important.
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taking everything you said there, aluminum is below $2000. it will be hard to get above. are we cap at $2000? give us a bandwidth of where prices will go. svein: there is a deficit this year in the u.s. -- in the supply demand globally and there will be a deficit next year. all in all, there are several factors for a more balanced market and we are quite optimistic in the market going forward and demand continues at a high level. manus: we will break $2000, will we? svein: i am not speculating on prices. let's see what happens. manus: [laughter] you didn't want to play that game. well done. we wish you the best today in
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london. let's see what the analysts make of the plan. svein brandtzaeg at norsk hydro, ceo. from commodities to the middle east. is the dubai economy running out of steam? one millionaire doesn't agree. spoke withogul, i him for an exclusive interview about where he sees investment opportunities that asked if there is anything other than a downward trajectory in this time. it is everywhere in the world. not only in dubai or the united emirates -- manus: you are at the front-end, you have hotels, construction, cars. that's talk about the hotel business. hotelse with your iconic were the occupancy rates, what are you seeing? is it on the turn? give me a depth of knowledge on the hotels first. not recommendd
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any expansion of hotels to anybody. we have our hotel. the beach hotels are doing very well, but with very low rates. piquancy --el, a occupancy fluctuates up and down, but the rate is down. manus: let's delve deeper. is it the responsibility of the to pull back on the level of development that they are doing in retail, in construction? khalaf: i have told them already. on social media and i wrote a letter to the government office that the government must stop. they have to stop even in the area where they are progressing on construction, because -- live
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with the people. hopefully, they will listen. hopefully, they will listen but i don't recommend -- the should stop expansion because whether they are making money or not making money, this is a problem. announcing so money rooms, why? we have rooms. i can give them 5000 rooms. manus: in terms of the expansion of the volume, how big -- of hotels, that is where we are, how big an oversupply do you see at the moment? on supplycannot say for the moment. if they stop, we will be lacking. we are selling now very low price to the visitor. cannot compare with anywhere in the world.
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london,ngle room in $1000 -- or pound. here, they pay $100. manus: we have done enough on the negative side. business leaders have been his -- into he has talked to people like you. he is implementing policies. is going to beew a material boost for to buy >? khalaf: an area in our business doing very well. education carried we are doing very well in schools. we are doing very well. ,etail now in the car business we are in the third quarter of this year moving up high. expecting that even the supply, cars, mitsubishi in japan, they cannot cope with our requirement.
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manus: you are seeing that level of an upturn in mitsubishi and your bentley brand? manus: yes sir. -- khalaf: yes sir. mitsubishi at third quarter of this year. mitsubishi, and we are expecting 2019 and 2020, etc., moving because we have a lot of commitment from overseas. manus: that was the al habtoor founder and chairman, khalaf al habtoor discussing the economy in an interview. he is ready to get involved in schools and a number of businesses. the show, u.k. government and the bank of england issued a dire warnings about the consequences of a disorderly brexit. mark carney says the nation could suffer its worst slump since world war two. nejra: u.s. stocks surge the most since march yesterday and the dollar dropped as jay powell
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strikes an unusually dovish tone on rates. when you are traveling to work, tune into bloomberg radio on your mobile device or dab digital radio in the london area. this is bloomberg. ♪
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>> interest rates are still low by historical standards and remain below the range of estimates of that level that would be neutral for the economy. that is neater -- neither speeding up or slowing down. we do not detect a broad-based lowering of buildup of leverage. dealers appear robust. from a financial stability perspective, today we do not see dangerous excesses in the stock market. we note the economic effect of
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gradual rates are uncertain. we will focus on what economic data are telling us. as always, decisions on monetary policy will be designed to keep the economy on track in light of the changing outlook for jobs and inflation. nejra: the bond market reaction in the u.s. session was muted to help off comments, but the s&p rallied more than 2%, the most since march. today, we are asking the question on mliv, how long will the powell put impact last? reach out to us and the mliv team on your bloomberg. course, u.s. futures, already pointing to a lower open today. manus: they rallied yesterday, today? let's pivot to mark carney because he has never shied away from doomsday brexit warnings, but the bank of england's latest analysis has gone further than before.
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the central bank says the economy could shrink by 8% in a year, prices could fall by 30% for houses. joining us now to consider some of these warnings is hampton's international head of research. let's bring it straight to you. these are pretty dire warnings from the bank of england of the worst-case scenario but the sense i want to get from you is, is there a real slowdown in u.k. house purchases? >> i think what we are seeing at the moment his house price growth in the u.k. slowing at the moment, but it is very much due to markets. we are seeing some prices in london xp in falls. north,midlands and the markets are doing well.
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reasons behind that are due to affordability pressures. fasterrices have grown than incomes in the last 10 years and that is putting pressure on the market. uncertainty plays a role in that, too but there are bigger factors at play today. nejra: what i find interesting in your research as well is that when you look at international buyers and u.k. property market, you found some interesting things in terms of eu buyers since the referendum. aheisha: absolutely, sterling depreciated quite drastically following the referendum in 2016 and that makes it cheaper for international buyers to buy property in the u k buyingtional buyers are a record proportion of homes in london, around 35% of homes today. like you said earlier, what is interesting is the fact that you buyers have returned to the market. they slipped -- eu buyers have returned to the market.
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they have come back in the strongest record for two years to replace the most important buyer group in the london market today. to me someone said recently, they are not building any more, they are not digging down or building up. let's bring in bob barker. astening to mark carney is fairly aggressive report from the bank of england. house prices, pound could go back to parity but on hard brexit, do you think that house really could go back to parity against the dollar? the first point to make was that mark carney was giving a forecast for an extreme events. one shouldn't interpret his comments as being a central case . this was an extreme risk forecast that mark carney was highlighting. whether the pound goes to parity or not is virtually impossible
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to forecast. what one can say is the market positioning at the moment on cable and nonsterling-euro is pretty flat. somequently, if we do get adverse news and investors think there is an increased probability of the eu -- u.k. crashing out of the eu, the sort of event mark carney highlighted, short positions would be reinstated on sterling and you will see a significant down move. that could be cable moving to 1.20. conversely, what happens if we get a positive event? we could move back to 140. nejra: i want to pick up on the property comments from mark carney. he was talking about an adverse scenario, not base case but house prices falling 30%. you say this has to do with affordability, but taking brexit
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and affordability together, what potential do we have for a downward move in house prices in london? aheisha: i think we are seeing house prices fall in london at the moment. according to the latest os inures, 4% year on year greater london. it is a mixed market and most .04% year onagree year is pretty flat. there is a mixed market in london and some have been going through a tough old -- tougher year anyway. now, they are starting to potentially come out the other side, sort of bottoming out. that slowdown we have seen in prime central london is spreading. draw awe will have to line under there and see where the next month take us in supply and prices. from hamptonsdge international and bob parker:,
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our guest host on the investment committee. bob continues his conversation on radio. nejra take you through the next 30 minutes of daybreak europe.
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manus: good morning from dubai carried i am manus cranny and this is "bloomberg daybreak: europe." inra: i am nejra cehic london. these are today's top stories. manus: just below neutral. equity markets rally on the fed chairman's shift in tone. bond yields drop, but how long can the powell puts last? the bank of england governor outlines a dire scenario for the economy if britain crashes out of the eu. next up is the ecb's financial stability review. trade watch, president trump arrives today for the g20 summit onmeet xi over dinner
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saturday. we are live from when does aris buenos aires. -- it has just gone 7:00 a.m. in london, so an hour from the european equity market open. futures pointing higher. you can see that from the board behind me. dax up .7%. up .6%, , so wefutures leading could open in the green but it won't be judging by the futures. over 2%, rising the most since march on the comments from fed chair jerome powell. did he put a towel put under the equity market selloff we have seen recently? he moved from saying a long way to neutral to just below.
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the markets picked up on that because it was in the prepared comments. we see repricing around the prospect for rate hikes in 2019, the markets looking at futures pricing in one rate hiking 2019. we saw a little different reaction yesterday in the bond market. the two-year yield dropped, the 10 year yield barely budged but we are seeing a strong word -- strong downward move in the treasury yield today. manus: breaking news, this time from everything you've got in the house from under the sink to the bathroom. unilever, the retirement. amazing looking at his tenure. 62 years of age and he has been with unilever nearly 10 years. 1, 2009. on january bill pullman to resign. his successor has been named. this is an announcement from unilever. let's quickly look at his
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performance in terms of his term over at unilever. jewett is the president of one of the big divisions within unilateral according to our data. under paul polman, he beat his peers 14.7%. alan jope is to be his replacement carried that is the breaking news from the u.k. the anglo dutch producer. unilever will be in our sites. as we get more through the day in terms of how the stock opens, we could bring you back to you. going to the btp, blends and andsuries -- bunds treasuries because two little words have moved markets. are we set for a towel put? bob parker says we are
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overstating it. it is too dramatic to say there is a towel put. the pound marked down, the probability of rate hikes down at one stage yesterday. one rate hike, one from the united states. the fed currently indicating three, goldman sachs indicating four. i'm surprised there are not better response from the btp's. every day, a press report so maybe we are getting weary. deficit canstic 2.2 avoid eu procedure, conte seeks to cut the deficit 2.2%. that is just not low enough, it was said. keep treasury bonds, because this is the great debate. these are your u.s. futures at the moment. this is the debate about what happens. do you break 3%? if the fed goes on pause.
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that is the debate. juliette saly is in singapore in the studio. day for: a pretty good asian equities with the exception of hong kong and china. investors, turning their attention away from the dovish comments from jay powell and more toward the dinner date between presidents trump and xi over the weekend. andcsi closing down 1.3% hong kong under pressure in late trade but elsewhere, as you can see from the solid green across the board, we are seeing most asian markets rise. australian banks, doing well on the back that it looks like there could be one rate hike from the fed next year and india's market, looking solid along with a very strong rally coming through from a lot of the weaker dollar.he asianaker dollar affects
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currencies. the indonesian rupiah, the frontrunner in asian currencies, 1.2%. weakness down the central bank in indonesia saying they will allow the rupiah to continue to strengthen. it is up 4.6% against the dollar in november alone. the yen is stronger, that is showing you the move into safe -trump ahead of the xi meeting. a slightly stronger fix from the pboc for the chinese yuan, up against the dollar 2.1% and the 25th day in a row we saw the pboc as liquidity to the system. the longest streak since 2016. a lot of people saying when will we see more liquidity? they say it is ample at the moment. nejra: juliette saly in singapore, thank you so much. get the first word news with desley humphrey in dubai. federal reserve chairman jerome powell has opened the door for a pullback in projected
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interest-rate hikes for 2019 following a widely expected increase in december -- following what was seen as a shift in tone from remarks last month. 's series ofthe fed rate increases brought policy could just below the range of estimates of neutral where it neither spurs nor restricts the economy. he noted the economy have yet to feel the full impact of hikes. >> interest rates are still low by historical standards and they remain just below the range of estimates of that level that would be neutral for the economy. that is neither speeding up north slowing down growth. desley: xi jinping says the global economy is at a crossroads as he appears -- prepares to meet his american counterpart. speaking in madrid, he said the world must side with supporting the global system because failure to do so would lead to barriers on trade. xi will meet with president with washington
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indicating higher tariffs on washington goods in the new year. ahead of the summit, bloomberg spoke exclusively to argentina's economy minister. job as hosts of the g20 is not to strike the deal between the leaders, but to act ofan honest broker positions. according to the country's transport minister, 35 vessels have so far been prevented by russia from entering or leaving ukrainian ports in the area, disrupting the country's exports. in an interview with a german newspaper, he claimed president putin is planning to a next another part of ukraine. 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.
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, thankdesley humphre you. a summit kicks off later today. we will be watching for bilateral meetings between trump putin as well as any news around scandal in saudi arabia, brexit, and the eu. michael mckee is amongst the great and the good. you are our international economics correspondent, in buenos aires for the latest. what are analysts saying about the possibility of a u.s. deal on trade saturday night? are we all overly optimistic? well, i don't know if we all are. a lot of people are thinking maybe we don't get anything out of it. hard to tell until they get into the room, but it is a major
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subplot. the most important things happening at the g20 summit have nothing to do with the g20 summit. it is the trump and xi meeting that captures the world's attention. saturday night, you will have to wait until the summit is over. trump and putin, will they meet, will they talk about ukraine and geostrategic decisions to be made there? saudiad bin salman, the prince is the first of the g20 leaders to arrive here. it is a rehabilitation core we are being told that how will the g20 deal with him? --far, the only person who's who has said he will meet with him his vladimir putin. the last those two had met ahead of an opec meeting, they sent signals they would raise prices and cut production. the oil world is watching that meeting very closely. on top of that, the u.s.-mexico signing the nafta
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agreement and theresa may trying to reassure the g20 after the treasury reports that britain is not going to drag the rest of the world down with it if it has problems getting out of the european union. an agatha christie -- novel. lots of plots. nejra: i love the analogy and thank you for your energy at 4:00 a.m. local time. appreciate your time. you have outlined so many issues that could come up in that meeting. you had the french president emmanuel macron commenting on arrival, saying president trump acts at the detriment of allies. will the argentines keep the meeting on track? michael: that will be a very good question. there are some who think this could mark the end of the g20 process. we have not seen the leaders of
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these countries be able to put any kind of communique together for the past couple of meetings they have and if they fail this time, we may see this get suspended. goes to japan and the year after, saudi arabia. is the world working together or are we seeing countries go in many different directions? manus: going to be like hurting c -- herding cats. no better man to chase them. nejra: thank you, mike mckee for joining us. jerome powell has opened the door for potential pullback in interest rate hikes for 2019 following a widely expected increase in december. today, we are asking the question on mliv, how long will the powell put impact last? reach out to us and the mliv team. ib plus tv on your bloomberg. guest.let's get to our
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the senior portfolio manager. great to have you with us. outmenu that mike laid there is almost like a banquet for risk in terms of trade. for you this morning, i want to focus on the two words from jay powell, "just below." our last guest said we were getting overly dovish. read the little words "just below her coat just below -- just below." have you turned more bullish on the prospect of an easier fed? >> i think rates still need to rise in the u.s. because when you look at where they are, they are just about 0% real interest rate when you look at the rate minus inflation. is probablyll looking forward to the next year and seeing slowing growth and realizing the economy probably doesn't need interest rates to
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be that high to keep things going. utts, we think growth is slowing and have moved money into bonds, government bonds and expect to see two interest rate hikes next year and that fed being data dependent. nejra: you are seeing more than the market, barely more than one. the big question we have been asking is about the powell put on equities. how do you put a floor on the equity selloff? i want to ask, has the floor been taken away from bond yields because we didn't see much reaction in the 10 year yield yesterday, but it is dropping fairly significantly today. we are down some five basis wents -- a question whether will drop 3%. shanti: bond yields were already fairly depressed in the u.s. because interest rate versus where the fed dot plots have
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been, the market has been consistently below are the federal reserve dot plots have been. we couldn't go below 3%, that would be an important psychological level, but given rates were already fairly low expectations, you wouldn't see 2.5%. , iarding the powell put think there is just so many other issues at the moment that even if powell says one interest rate hike next year, you still have g20, italy, brexit. there are so many other things that i don't think he alone can put pull on the market today. manus: one thing where we have seen this explosion, i have popped up gmm to look at the indonesian rupiah, the indian rupee. one could say there is a whiff toppy dollar exploding itself in the emerging market relief trade. are you tempted to take more emerging market risk on a plausibly pausing fed?
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shanti: emerging market asset classes would benefit the most. you have the u.s. planning to run large legend deficits of 4% to 5% and that has been associated with a weaker dollar. markets have a lot of borrowing in dollars and a lot of commodities they are purchasing like oil priced in dollars. it would be very helpful to their economy if we have the dollar weakened from here. littleld expect to see a reversion on a technical level. nejra: shanti kelemen, senior portfolio manager at coutts stays with us. coming up, the first print on italian bond yields. not huge amount of movement, just up a basis point on a 3.26 handle. we have seen headlines this morning. confident in
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avoiding a procedure. seeking to cut the deficit target but we are not really seeing subsequent rally in btp's. when you are traveling to work, tune in bloomberg live on your mobile device or bloomberg radio -- dab digital in the london area. this is bloomberg. ♪
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in buenos aires looking beautiful in the
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morning. president trump is due to sit down with china's president xi jinping at the g20 over the weekend. let's check in on the markets. we saw a strong rally in u.s. equities yesterday, jumping the most since march. rally continued to asia on a headline level. euro stoxx 50 futures pointing into a higher open, but in china, traders not listening to powell or perhaps focusing more on the g20. meanwhile, a bump higher in crude after two days of losses. data coming from the u.s. yesterday. manus: giving up a little ground on the s&p futures. is goldilocks back? mediocre growth and a fairly -- friendly fed. thedollar is offered to boys and girls on a pau fedsing. -- pausing fed.
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a big auction, five-year and 10 year paper. there is plenty of money coming into the system. it is said the market will get this one away quite easily. unicredit suggested shorter data securities look attractive compared to two and seven year. btp's are in focus. let's say your agenda for the day. mike mckee throughout the day in buenos aires. you have the option coming head of the -- auction ahead of the political drama in italy. the ecb published the latest edition of its financial stability review, providing an overview on the potential risks in the euro area. nejra: the federal reserve releasing minutes of its fomc november meeting. we have been digesting powell's comments, just below neutral. what are we going to hear in the
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minutes to do with december? , a near certainty but beyond that, we are focusing on. has never shied away from doomsday brexit warning, but the latest analysis has gone further than ever before. he says the economy could shrink 8% in year, house prices could fall 30% and the pound could fall below parity with the dollar. joining us, dan hansen and let's bring back shanti kelemen. great to have you with us. what is your assessment of carney's outlook? i know this was a doomsday scenario, but nonetheless. dan: it is pretty extreme. the no deal brexit scenario, the range of possible outcomes is in or miss in how the economy could end up. that means it is hard to tell, but i would put carnies
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estimates and england's estimates on the bottom end of the spectrum -- spectrum of outcomes. you can understand why they have done it, to test the banking sector and see if it was resilient enough to resist that shock and it turns out, by their assessment, it is. that is a good news story. the only good news story that came out of the headlines yesterday. my bottom line is it is pretty extreme. manus: pretty extreme. cable back to parity, house prices 30%. let's look on the upside. ofy talk about a growth rate 1% and 1.5%. spring ife a coiled we take a base case an area of down, which is not the extreme, you might get a return to the tables of growth rather than be at the bottom of them.
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dan: that has been lost in the headlines. the bank analyzed theresa may's , theres vague as it is are lots of different brexit outcomes consistent with that political declaration. deal, the bank of england is likely to forecast near 2% next year. conditioned on a brexit deal and that will mean interest rates will rise. we think rates go up twice next year, but it is contingent on that deal, yet potentially next year, 2% growth rate. i would say fundamentally in the long term the bank wasn't signaling that make's deal would provide a fundamental lift to the structural capacity of the economy. you won't see growth rates at 2% in the long run. you'd have a cyclical boost and a return to 1.75, 1.5% in the medium-term. nejra: what are you doing around banks in your portfolio at the
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moment? becausewe own bank debt we think in line with the bank of england's analysis, the banks are well capitalized even in a very difficult situation, they would be able to continue operating and pay their debt. we reduced bank equity this year because bank equity will take a hit if we have these scenarios and we think at this point, it is not quite worth the risk worth -- versus the reward yet. we could get to a point where that calculus changes if it falls further. manus: thank you very much for giving you sure thoughts. sterling, fairly agnostic on the back of those severe calls from the bank of england. 128.35. dan hanson in the united kingdom. shanti kelemen at coutts. that is it for me for the week. the european market open is up next. nejra, you can drive the bus on
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your own tomorrow. nejra: when you are traveling to work, tune into bloomberg radio live on your mobile device or dab digital in the london area. this is bloomberg. ♪
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mom. ♪ anna: welcome to bloomberg markets, the european open. we are live in our european headquarters in london. i am anna edwards alongside matt miller in berlin. matt: stocks in china have fallen into the red after the u.s. surged yesterday but futures in europe are pointing to the upside. how much life does wednesday's rally have left? the cash trade is less than to the minutes away. -- 30 minutes away. anna: just

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