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tv   Bloomberg Markets European Open  Bloomberg  February 11, 2019 2:30am-4:00am EST

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anna: good morning. welcome to bloomberg markets: european open. i'm anna edwards alongside matt miller in berlin. matt: today, the markets say happy new year. chinese stocks rally after coming back from vacation. european futures are pointing to gains at the open after two days of losses. but bunds already yielding near zero -- are yielding near zero. the cash trade starts in just 30 minutes time. ♪
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anna: back with a bang, chinese equity struggle as markets play catch-up after lunar new year holiday. holiday spending falls as the slowdown starts to bite. no guarantees. the u.s. china trade negotiations resume in beijing, but are presented of light heiser said a deal wasn't certain before washington more than doubles tariffs next month. according the opposition, theresa may place for time by accepting talks with jeremy corbyn as opponents in parliament plot to take control of brexit to stop a no deal. very good morning. matt: take a look at what's going on in bund yields here. we are seeing almost zero levels dropping down to less than 10 basis points on the german ten-year. very interesting.
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we will be talking a lot about the implications for this. what does this mean for the european economy, european banks? and what does this mean for mario draghi and the ecb? also take a look at futures. bund yields coming down so low we still have futures trading higher. we have gains on futures of .4%, gains of ftse futures about the same, and cac features up almost .5%. they looks like we could see a positive open to the start of trading as german ten-year yields come down the slope. what do you see on the tiananmen -- on the gmm? anna: u.s. futures point weaker. we'll see how long gains last four. we're getting mixed in the asia session, china back from the new year holiday, but japan is out so you're not getting a complete picture. stocks were weak, and yet
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chinese equity markets go higher. they are telling the equity markets, a more positive story for the week ahead. let's have a look at the other side of the gmm because i want to show you what's going on in iron ore. trading and we have gains on the chinese markets. interesting to see that. sovereign bonds are a mixed bag but interesting what matt was saying about weakness in the bund yield. let's talk about what is going the market.in mark cudmore is our strategist and he joins us from singapore. good to have you with us. let's talk about china coming back from the new year holiday and we see gains in chinese us stocks, weakness in the chinese currency. what does that add up to? mark: i think on the stock side, while last week there was negative news, global stocks
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didn't do too badly and they didn't move a massive amount in either direction. japanese stocks were down, u.s. was flat. expectations turned negative, but nothing too drastic. the fact that they are a little bit higher is a symptom of three things. people want to negative about trade talks. people think overall china stimulus will continue to support the chinese economy, or at least the government will continue to do more until they succeed. the initial signs on consumer spending on chinese new year, while clearly showing signs of a slowdown, where the consumer is still strong. the main takeaway, not looking too bad for onshore people relative to a couple weeks ago. matt: you had a very timely question of the day last week, which was, can the world avoid, can central banks around the
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world avoid falling into this japanese kind of you low yields trap? interesting now that we see bund yields coming down below 10 basis points, does it look like we're going to hit zero here? and is this a concern for investors around the world? mark: i think it is a concern for investors. the fact we're not going to stop normalizing policy, not getting back to the old world where people can judge on the old models for evaluation across many different assets. it is a concern. will blend-year-olds -- bund yields region zero? perhaps. the data has been terrible recently and i don't think this is temporary factors. i think it's been going that way many months. and they are slow to react and realizing the change in shift and data. the fact that qe did it ends in december was unfortunate timing. it was long scheduled, but it was just when the growth slowdown was hitting most.
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europe is being directly affected by what's happening in china. it's very dependent on china demand for exports. that is a real problem. it took china stimulus to re-support chinese growth. europe will continue to struggle. bund yields might go below zero. i don't think they are sustainable below their. of conflicting opinions on what happens to european exports if we see china and the u.s. bury the hatchet. where does the trump focused switch next? perhaps the transatlantic direction. let me ask you about our markets life question of the day. what is the largest uncertainty for markets for the rest of the first quarter? we talked about expectations for trade, and that's certainly one of the things that looms large on everybody's radar. mark: for me, i think trade is the most dominant the next couple of months. the other big concern is what happens with china's economy. those well-managed the ongoing debt bubble, large debt
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problems, increasing defaults, and the slight attempt at deleveraging while stimulating its economy, very hard balance to handle. i think overall this year, how china's policies work is very, very important. but i don't think we will be able to quantify that or reach a decision on that for another few months. many people think it's second quarter before we get signs of growth. so i think the next two months until the end of march, it's all about trade. if we get a good result and trade, that would dominate the negative news elsewhere. it won't matter what the fed is doing on the margin the fed can turn more hawkish, but if there's a trade deal, risk assets will rally. if we get an escalation, if china and u.s. suddenly say they will raise tariffs again, it. doesn't matter what happens anywhere else we will see bear markets in stocks. the harder area to predict is the middle ground fudge, which is quite politely outcome --
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quite a likely outcome. matt: thanks for joining us today. mark cudmore is bloomberg's mliv strategist. you can join the debate on the question of the day. just reach out to us on the mliv team by typing ib+tv to give your answer on the bloomberg. let's get to bloomberg first word news. for that we go to annabelle jewelers in hong kong. annabelle? annabelle: president xi says the top economic aid will be part of trade talks in beijing. the vice premier will meet with the treasury secretary steven mnuchin and representative robert lighthizer. the u.s. and china are looking for a deal to avoid ramping up of tariffs. president trump says the sides are making progress, but confirms he's ready to propose heavier duties if necessary. the lawyer for the national enquirer's owner says -- the attorney says the photo and other details about an
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extramarital affair came from a reliable source known to the amazon boss, not from president trump. meanwhile, saudi arabia is denying any involvement. >> we have absolutely nothing to do with it. maybe some of our citizens read the national enquirer in the united states. other citizens watch the soap opera unfold on the television. but that's it. annabelle: and theresa may is trying to find herself more time to renegotiate with brussels. the prime minister wrote a consolatory letter to opposition leader jeremy corbyn after he proposed february 26 as a new deadline for when he support for a new brexit deal. imf says britain's exit from the eu will be difficult. whether there is a smooth customs union, or the result of a brutal exit on march 29 without extension of notice, it's not going to be as good as it is now.
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annabelle: and there's a one in three chance the u.k. will go into recession in the next 12 months. this survey of economists was conducted before the bank of england, the slowest economic growth in a decade. u.k. fourth-quarter gdp data is due at 9:30 a.m. london time. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you very much. u.s. china trade negotiations resume in beijing. can a deal be reached before the u.s. doubles tariffs next month? more on that next. if you want to listen to bloomberg radio, it's available on your mobile device or dab digital radio in the london area. this is bloomberg. ♪
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matt: welcome back to bloomberg markets. this is the european open. we are 15, 16 minutes away from the start of cash trading. futures pointing up across the board and continuing to climb. you can see ftse and dax futures up .5%. cac 40 futures up .6%. it looks like we're going to see some green arrows at the open, even with german ten-year yields down below 10 basis points. so, very interesting to see the
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bund yield approach zero, but i will say that it's turned and is starting to rise again as i watch the bund yields. now, chinese vice premier leo secretary steve mnuchin and trade representative robert lighthizer for high-level talks in beijing. the march 1 deadline is nearing when the u.s. plans to ramp up tariffs. this comes as reports emerge president trump's advisors and formally discuss holding a summit with president xi in mar-a-lago next month. joining us now from beijing is our china correspondent tom mackenzie. how much progress should we expect from these trade talks, and how much weight should we give to reports that president xi may go to florida? progress,rms of the it's very unlikely we'll get a comprehensive deal from the two sides by the end of this week.
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but it's to try to nail the chinese down on their pledge to buy more agricultural goods and more energy from the u.s. they also want to get some details, or some commitments from the chinese side around structural changes. and then there's a question of enforcement, how you enforce any deal on the back of the stocks. the likelihood of getting all of those things accomplished by the end of this week is pretty slim. but if they get one or part of the issues, where we get some movement, maybe that allows president trump, who we know is keen to get a deal, to step back and say ok, additional tariffs off the table or we can extend the deal going forward. we have the depth of u.s. trade representative trade -- jeffrey gerrish. he hands them off to like kaiser -- robert lighthizer on the 14th and 15th. there was positively -- positivity that maybe the trump
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administration is looking at canceling in a meeting in mid-march. that seems preliminary at that stage. china correspondent tom mackenzie in beijing. we'll keep our eyes on beijing as we see the great and the good of politics gathering there to talk trade. let's continue the conversation about trade and the impact of the trade war on other parts of the world. one of the company's most exposed to any downturn in trade. let's get bloomberg's yousef gamal el-din, who's at the government summit in dubai with guests. yousef? theef: absolutely, one of prominent names at the wgs in dubai. joining me now is the chairman and ceo. welcome back to bloomberg television. we are going into a few days of
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uncertainty around what is going to happen in this trade standoff between the united states and china. talk to me about the numbers you are seeing. incense, and terms of the health of the global economy? guest: naturally. -- are therey that in the market. that's why you say it is going to be a year we will have to watch for. we take into consideration what happens in the world economy. the cold war between the united states and china, the trade war, is more of, in my opinion, a psychological fear than reality because the united states have by negotiating hard and make the agreement on something mutually that official. if that happened with mexico and the canadian government and
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europe. the problem with china is both economies are big. reciprocal advantages. china is interested. china is the biggest buyer of american stocks and bonds and someone and the united states last week in chinese markets. yous not a really how do come to an agreement where americans are treated fairly. yousef: that's the key point. are they going to come to an agreement sooner than later? is this going to drag on? guest: we don't know. that's why we look at 2019 to be a critical year. the longer it takes, the banks are in the business to protect the lending, protect the deposits of their customers, and they will be shy about lending people during this uncertain time. much as theyad as
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have. they are flush with money. the problem is, all of this uncertainty in the markets makes the banks shy. we actually looked at it and tond out what we need to do deal with in issue like that. our numbers are good. yousef: in terms of diversification, it's a core component. what are some of the markets you want to expand more in? guest: there are definitely three markets which are critical. one is africa, which is a continent that continues to have growth, and growth is actually needs to be bigger. they have issues with infrastructure, but that's irrelevant. molly, in egypt, in could go -- could go. in latin america, specific
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countries like chile, like peru. these are important markets for us. and we reacted in diversification by the loss of acquisition we had, which is amazing. brazil. we have to look at brazil. brazil is a huge economy. they have the political issue problem that resulted and caused a problem. they have a very efficient president that has good plans of how he can energize the economy. we are invested in the report. yousef: so bullish on brazil. guest: definitely. yousef: how much of a distraction is brexit and the uncertainty that comes from that? and the possibility of slowdown in europe? is that coming on your radar more and more? guest: u.k. economy is strong.
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u.k. is a big financial market, important financial market. the problem is not brexit. we are businessman. we want politicians to leave us alone. besides which way we are capable of fixing our probable. we are capable of bringing business. decided with or without agreement, brexit or no brexit. this is the uncertainty that is affecting the business in the u.k. once the decision is made, we don't care. we are capable of capitalizing on any opportunity in either scenario. we look at all scenarios. yousef: strong views there, as always. world,n and ceo of dp one of the critical names in the wider trade conversation. matt? bloombergks for that,
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anchor yousef gamal el-din there out of dubai. now we're minutes away from the open. up next, we take a look at the stocks to watch as the euro next raises the offer from norway's national stock exchange in an attempt to thwart nasdaq's rival bid. this is bloomberg. ♪
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matt: just about five minutes to go until the start of trading. benedikt kammel looking at justine, the you is covering also boris. what is the story with cap rock? >> the food delivery company coming under pressure from hedge fund, owns about 2% in the company, putting pressure on them, saying the country should look for some details to merge with. this is after the ceo stepped down last month, peter plum. they haven't found a replacement yet. they say the customary -- company should find somebody to merge with. matt: the hedge fund is called cap rock, which is why i said that. what have you got on the bidding war? >> that's right. it continues as era next rated softer for norway's national stock exchange early this morning. they are offering 158 kroner here, more than what nasdaq
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offered last month. matt: all right, thanks very much for joining us. get all the stock stories that you need by typing first go on the bloomberg. the open in four minutes time. ♪
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anna: welcome back, a minute to go until the start of cash equity trading day, another monday. futures suggesting we could go higher, but u.s. features looking you muted -- muted. this is the start of equity trading, euro fairly flat. lots of interesting moves in the bund. oil prices continue to move down. we've seen the worst week for oil prices in 2019 so far last week, and we seem to be continuing that bearish trend into this week. let's look at chinese equity market, the market open for the first time since the lunar new year holiday. equity markets globally retreated slightly during that period, by chinese equity markets looking on the bright side.
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big move in the pound in the last couple of minutes, down .2%, continued weakness as the clock continues to click down toward exit -- ticks down toward brexit. this is a positive picture on futures. we will see whether that transpires. u.s. futures looking more muted. will we have some positivity to price in before we get to the u.s. trading day? the asian equity trading session lifted by china, equity markets coming back after the holiday and choosing to move a little bit higher despite the fact they were closed, global equity markets did lower. on the currency side, chinese currency is interesting. the onshore you on opening weaker this morning. let's look at positive territory, up around .5% on equity markets in europe. let's see what's happening on the stocks from a sector perspective. let's see if looking get clues
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when the gains are coming from. it looks pretty broad-based. i don't see many areas of weakness. health care, slight slice of red there. on the back of reports they are looking to do a deal, acquisition over in the note states. we'll -- in the united states. we'll keep an eye on that. energy, allecoms, of those it seems unreservedly moving higher. looks to be some breath for this rally this morning. matt? matt: absolutely, a ton of breath, 520 stocks are rising right now. we've got 60 stocks down. so almost everybody is up. if you look at the gainers here, whose adding index points to the stoxx 600, airbus is right up there at the top. but then you have hsbc, nestle bringing up the rear. very diverse group of movers, i
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should say, helping to boost the stoxx 600. look at the biggest losers here. the biggest drag on the stoxx 600 is smith and nephew, down 6.6%. not a huge company, so it's interesting to see it taking the most points off of the stoxx 600, although probably because of the fact that no stocks are falling anyway, it gets that last place position. astrazeneca and rentokil also taking points off, but not by the same kind of percentage losses that we see at smith and nephew. anna: let's talk about where we are on european equity markets, opening higher this morning as the stocks rallied in china after the one-week holiday. lots of breath to this rally. that's where i want to start the conversation with the senior manager at aberdeen standard investments. good morning to you. last time i saw you was in the cold. very nice to be inside on this
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particular occasion. let's start talking about globally. we are saying the rally in european equities. i've got a chart here around a complex way of saying the rally in the united states, as well, that we've seen, is not just certain sectors or certain stocks, but a host of stocks going higher in january. is that because december was scary that everything rallied in january? guest: i think there are technical factors, as well, worrying about the performance in december, raising cash through the end of december and needed to put it to work come january. that's after equity markets drove better. it has not driven government bonds higher, which is an interesting part of it. that rally lasted through a little bit of a lawful last week. it feels like it's getting exhausted for now, but they are
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building reasons why that could continue until q3 at least. chart which i will say i cheated a little bit because he gave me this chart before the program, but it has the bunds here in yellow. and you can see we've come down to the lowest level since 2016, almost zero on the bund yield. the green and red portions here are the economic surprise, european economic surprise index. you can see we were happily surprised in 2017, when maybe the ecb missed the boat. now there's a chance of raising rates if we're stuck in the red done here. what do you make of that? better jobyou made a of putting the chart on the screen that i have. this is why i think i'm slightly more positive about risks now is that everybody else is worried about the economy and they continually got the numbers wrong in europe, lower than expected, lower-than-expected.
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that only goes on until they adjust their outlook and get realistic about the slower growth. at that point, we can actually see this rally continue longer.i think the bund yield is near a flaw. what that floor is, whether positive or negative, is hard, but it's a roundabout here. anna: our queen of charts ably assisting matt in the charts department. don't underplay her role slightly. let me ask you about the question of the day. it's to do with uncertainty in the market. what is the largest source of uncertainty for the markets for the rest of the first quarter? there are a host of things you can choose. where would you .2? luke: probably all of march. thet with the trade, and fact we could be popping up to a $.25 tariff, 29th of march for the u.k. is a really important date. but the 27th for march, when we
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get the european meeting around what happens in brexit. that's what we're working towards. those big factors will likely shift the markets around. and brexit, the term we hate to mention, is moving things more and more as get closer to that date. matt: so where do you see the pound? do you just not make these kinds of investment calls as we have so much uncertainty? luke: sterling and cable and sterling euro, i'm happy to not invest at the moment because it's difficult to know what's going to happen with brexit. balloon we get near that twinighter march date, -- 29th march date, i will close immediately afterwards. it's been around these political pitch points you had enough volatility to make the trade world -- worthwhile. anna: thank you very much. lou kick more stays with us. of next, the stocks on the move.
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including smith and nephew, stock is down on reports they knew it has implications of other medical devices, in particular over in the united states. this is the story we will watch m&a in this sector. this is bloomberg. ♪
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matt: welcome back to bloomberg markets. this is the european open, about 10 minutes into the trading day, green arrows across the board. let's get our top individual stock stories with and reordered. -- annmarie hordern. annmarie: mixed bag this morning, airbus to the upside just shy of 2%. analysts say better earnings growth over the next five years. they possibly did see historically. that's why the stock seeing a boost. 3%, increase up postage more than expected. on top of that, the delay was supposed to happen in april. it may now happen in the summer. smith and nephew one of the biggest losers, down more than 3%. they were in talks to buyset for more than $3 billion. they are to the downside, but friday, aftermarket trading in new york was at more than 25%. anna: thank you very much.
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let's talk about brexit. theresa may offered more talks with jeremy corbyn in an attempt to buy time to renegotiate her brexit deal after the opposition leader threatened it's a set a new deadline for her to win backing for her plan. joining me now is maria tadeo, whose in brussels for us. prime minister due back in parliament but doesn't have much to bring to the table from her trip to brussels. where do we go from here? maria: good morning. very little to bring to the table. we know the european union, the backstop cannot be time-limited. there is no appetite in the european union for the time being to renegotiate the withdrawal agreement, so really she has very little to bring to the u.k. parliament. i will say, in brussels, everyone is, i would say, keen, and they are curious to see what labor does this week.
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we know they put forward a new proposal last week. the eu has not made a secret about they would like to see a deal, by the close relationship between the u.k. and the european union is dead. the premise are trying to get the skeptic side on board. that is something everyone will keep an eye on this week on. matt: what's the view from brussels on the possibility of an extension to article 50? or is march 29 still the preferred date for europeans, as well? maria: that is a very good question. everyone i speak to him brussels told me weeks ago the u.k. will have to extend the brexit date. article 50 is almost unavoidable by this time. really, what we've seen is very defiant. she came out and said i won't -- i will deliver brexit and i will deliver it on time. a lot of people are trying to figure out what the game plan is.
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they will take the strategy at this point is to let the clock tick. that is a risky strategy in the eyes of brussels. you could get to a situation where it's good to have time pressure, but a no deal private by accident -- no deal brexit by accident, and that's what people in brussels will tell you. the actual possibility of a no deal by mistake have risen in the rise. matt: all right maria. thanks so much, maria tadeo joining us on the ground in brussels. luke hick more is still with us out of london. luke, what would you say the odds are of exit actually have -- brexit actually happening on march 29 as opposed to being pushed back to a later date? luke: i think that's getting higher, actually. it's been an extension to article 50, increasing the amount of uncertainty, which i buy into quite a lot. the chance for 29th march, as 70%, rather than
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extend article 50 today. anna: let me ask you about the impact on the underlying economy. we heard from dp world earlier on. they operate a number of ports. they say they see uncertainty here. mark carney talking about a no deal brexit increasing quarterly dropping. have that does it get in a no deal situation for you? luke: we're going to get gdp in the next day or two, north of 3% for the last print. that could easily go negative point quickly woman get through. -- when we get through. the build we have building into it have been so high, that needs to get unwound in on most any circumstance. if we get a bill to brexit, if that's even a word, a dealed
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brexit, that it can be ok, but well below trend. a no deal brexit will be exacerbated by the infantry build. we could be into negative. we could get a technical recession quite quickly in the u.k. so we had a technical recession in italy. we could get a technical recession in the u.k. first readings for german gdp seems like they avoided it. but do you expect germany to continue to have a rough time, economically, as the core, most important economy in europe, that would certainly be bad news. luke: the headwinds germany faced are easing up. the auto retooling is largely done. i think we get a trade deal sorted out, brexit, perhaps, the one thing out there, it's a big market for german exporters in the u.k. that could tip them over the edge again. we'vethink, hopefully,
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seen the worst in terms of economic performance in germany for the short-term. it may actually deteriorate next year. but for this year, i think we are ok. anna: there are pressure points in the bond market. talking about weakness of bond yields generally, a moment ago. also one of my colleagues point to the spanish german spread and saying politics flaring there. we might not have seen the last of italy, given the downgrade to italian growth. where are the pressure points you're watching? i think spain has done a remarkable job at retooling their economy, moving on from the problems they had. employment has been under control. italy still remains to me the poster child for problems in europe. and spreads are popping up toward the magical 300 number again, much as they did back in 2014 and 2015. for me, that remains the biggest concern. i don't think we will have a technical recession in italy.
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i think it's a proper recession in italy. it remains the one market i have a simple approach. don't buy it. matt: what is the investment or investment strategy your most excited about, luke? what do you get most pumped about as you head into the office? from we're switching high-yield bonds into emerging-market debts. it's really around the weaker dollar. it's around growth still coming through in emerging markets. i think that becomes interesting. you can get really good dollar yields, which you need if you're a sterling investor and your hedging out the currency. that's costing you 180 basis points. you need a good yield to make it worthwhile and you're still getting that it emd. anna: we appreciate you joining us. aberdeenmore from standard investments.
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luke will be joining us on london dab digital radio to carry on the conversation. we are bringing you live pictures of the islamic republic of iran, the president is speaking this morning and iran, space during the tehran commemoration of iran's revolution. one of the headlines crossing the bloomberg, rouhani says iran won't seek anyone's permission to build muscles. -- build missiles. matt: let's take a look as we head to break at what's going on in terms of sectors. we're almost 20 minutes into this trading session and we see green arrows across the board. every single sector is rising on the stoxx 600. this is the grr screen, group ranked returns. you can see basic resources. and interestingly enough, banks leading the way right now, even as we see that, saw that incredibly low yield for german bunds. basic resources, banks,
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technology, and oil and gas helping to boost the stoxx 600 this morning. up next, europe's health check. we continue to look at gdp numbers, readings from some of the biggest economies are coming out. and france's finance minister gives his biggest risks for growth. this is bloomberg. ♪
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anna: welcome back to the
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european open, 21 minutes into the trading day, making decent gains across equity markets this morning. the chinese equity markets back and play. we saw gains of 1.4% there, european equity markets doing well. he was futures pointing positive, fairly flat right now. we look for direction there. let's talk about the global economy, focusing on europe. the annual world government summit is a light in dubai. -- a way in dubai. mariana, very good to have you with us. i want to start by asking you about the u.k. economy because i know you spent a lot of time looking at it. we've done a survey of economists that suggests there is a u.k. recession over the next 12 months. would you go along with a that kind of percentage chance for the u.k. recession?
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mariana: i think it's really important to consider the u.k. even sort of separate from the brexit problem because the problems are there and they're still there and they are going to get worse. so my quick answer is yes, i think there's going to be recession. the kind of growth they've experienced hasn't been driven, it's been consumption led, and field by private debt. the ratio of private debt to construct -- consumable income is back to before the financial crisis, and that's what caused the crisis. we had lagging investment, financial sector that's basically been financing itself and not the real economy, and then we have brexit, which is reducing expectations for growth by companies who are making decisions to leave the u.k. that aggravates the problem, but it's not the only source. matt: just want to get your take on what a no deal brexit would be like for the u.k., economically. there's a lot of talk from brexiteers about the projects
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fear, is what they call it. but from the view of a real economist, what do you think a no deal brexit would mean for the united kingdom? mariana: well, we look at project did a. there is evidence out there and since the middle ages, we like to collect data to make informed decisions. so brexiteers should be talking more to businesses and saying how they make decisions. they invest in growth opportunity. that growth could be market growth or technological growth. currently, and no deal brexit would kill expectations of where growth is going to come from in the u.k., and it's going to be a disaster for investment. investment is the problem in the u.k. it's a country going through private, debt field consumption. investmentvers of are going to get worse because of a no deal brexit. the country is in for a very public that exit to a in for the next decade.
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anna: we spent time talking about the possible japan a fixation of europe, whether we get stuck in a low yield environment. we see low yields across europe, low inflation expectations as well. how concerning is that to you? mariana: first of all, i don't believe in the word europe right now. i believe in the european project, but europe is expressing different things across the continent. they have understood in order to attack the big problems, weeding around ai and big data, that requires investment from the private sector and public sector. and other countries, other because they been forced to or decided on their own, have been cutting public spending and have not been able to get renewed especially needed, not only after the financial crisis. extremely different realities. that's why they don't believe
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economically in that term, because it masks these hidden differences. what is really required is a more common agenda, both political and economic. the real issue is the compact, which should have met, let's have a common understanding of what's required across the region to get us to be really innovative. i'm met a conference about innovation and there's lot to talk about government innovation, in an area where spain has required, basically reduced public spending on research and development in order to get their deficit to fall. that's going to be really hard. the deficit was never the problem in europe. countries like italy have had low deficits for decades. debt to gdp is higher, not because the deficit was higher, but because it hasn't been investing in the private and public side, and the key drivers of productivity growth, which is the denominator. matt: i'd love to get your take
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on the mmt debate in the u.s., as well as share buybacks. hopefully we can get you into the studio soon. ucl professor of economics. ♪ i'm a veteran
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matt: 30 minutes into the trading day, let's get your top headlines. back with a bang, european equities take their cue from china, which plays catch-up after lunar new year. no guarantees. trade negotiations resume in beijing by robert lighthizer warns a deal is in certain the for washington more than doubles tariffs next month. and quoting the opposition, theresa may plates for time by accepting further talks with jeremy corbyn as her opponents plot to take control of brexit to stop a no deal. good morning and welcome to bloomberg markets. this is the european open. i'm matt miller in berlin
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alongside anna edwards in the european headquarters in london. anna: we talked about brexit, but let's do it again. 564 stocks going higher, only 50 or so going lower. this is a story this morning about broad strengths on these equity markets. china went higher. europe deciding to follow suit little bit. trading higher around europe. one is lifting us. there's appetite for the banking sector, whether italian taking names, weather call your bank, or financial services such as wirecard, specific story around that one. it's a broad rally. it's a broad picture to the upside. that's the big story, i suppose. let's look at the downside. the biggest fall on the stoxx 600, smith and nephew, down 3.5%. this is the medical devices manufacturer. it's often talked about as an m&a target itself and yet, on
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friday, after the close, we saw the report that suggested they were going to do a deal for about $3 billion for another medical business in the u.s. they talked about acquisitions before, but the market reacted like this, down 3.5% as a result. we went to hear from the company to see if there's any truth to the stories. that's where we are on the equity markets right now. the broad picture is we're moving higher on equities. the chinese equity markets went higher after the lunar new year holiday, and that's one of the big drivers for what we're seeing at the moment. chinese equity markets going higher is something we need to talk about more, the market returning after the lunar new year holiday, returning with a bang. gains were widespread, essentially, and we want to talk about the trade story. a shutdownto avoid hit a snag. some lawmakers are skeptical a
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deal can be reached by the friday deadline. without the deal, nine federal departments and agencies would shut down again, only weeks after the rescue -- president trump -- you know what, i'm going to leave that week is that chime with the pictures and looking at, which is not gray television. let's go to tom mackenzie on what his thoughts are on the trade story. bring us up-to-date with what we heard. will xi and trump meet, and if so, when? tom: there's been speculation maybe they will meet in mid-march, but it seems there was early discussions if they are indeed taking place. what we're looking at here this week is the third round of negotiations between the two sides, since that meeting between president xi and president trump at the g20. you have a trade representative. and then he passes it on to robert lighthizer, the u.s.
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trade representative, and steven mnuchin. there's a number of key issues the u.s. said they want to nail the chinese down on, things like commitments around buying agricultural and energy products, the more importantly the structural issues and the example of a necessity from the u.s. perspective of having an enforcement mechanism. whether you get all of those issues addressed seems pretty unlikely, and the likelihood of a wholesale comprehensive agreement seems far off. but if they get some movement, maybe that allows president trump to stand back and say ok, we'll extend the deadline in these talks or remove the threat of additional tariffs. matt: has anything changed in terms of china's strategy in these negotiations, tom? tom: essentially, no. they've been playing the long game. they want to remain at the table with the chinese. they need to remain in talks with the u.s. with their u.s. counterparts. they haven't ponied up and again
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changes around the structural issues and virtual property, holding back on that. slightly risky gain because the u.s. could remove negotiators, and that could leave china a long way away from its priorities, which are removing the tariffs already in place, and then removing the threat of additional tariffs. but it seems like, from the people we speak to, they may be getting down to the wire for the chinese. then they offer something substantial to the end of these negotiations that may move the dial for the trumpet ministration. -- trump administration. anna: what about the way people were spending their money and time? what clues do we have their? something of a slowdown in holiday spending. what's the message? builds on thehat data we've seen in terms of retail sales, which just a weakening appetite among chinese consumers. about $150m spending
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billion online come up big number up, but that was the weakest number that we've seen in terms of shopping spending power from the chinese since at least 2011. you had apple saying they are seeing slower demand, automakers concerned about auto sales. and nomura saying is only going to get worse for china's consumers because you have highly leveraged households now, weakness in wage growth and then a calling of house prices. the pressure on china's consumers is a major issue for chinese policymakers. they push through tax cuts, but haven't done enough yet to support the all-important consumer. matt: thanks very much. tom mackenzie, china correspondent lives out of beijing. joining us now to talk further about what's going on is freya beamish, chief asia economist at
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pantheon, coming to us out of newcastle. what's your take on the economic situation that the chinese are sitting in? looks like the typical spending binge we've seen in the new year holiday binge didn't grow as quickly as it typically has. freya: i think the data at this time of year are very hard to pass, but certainly the household sector has been under pressure on the slowing wage growth, in terms of the pmi's indicating jobs growth or in the manufacturing sector. we're reducing headcount continued. on the labor side, not much of a boost. on the wealth side of things, we've all seen what happened in chinese equity markets, and that does have an impact. we've also seen the property market starting to soften. in terms of fundamental drivers of growth, they are not really
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in place. we have had these tax cuts coming through in october and further in january. the text data in this time in particular, is hard to pass because we don't have breakdowns of december. but from what we can see, it looks like there's a positive feedthrough to the household sector, at least in lessening the other factors, the drags we been talking about. there's a little bit of green shoots coming through their in the vat data, implying stabilization on the back of those tax cuts. but the labor income side is really a lagging indicator and the overall economy still looks like it's going to be slowing in the first half with no sign of turnaround until q3. looks like it will continue to come under pressure there. anna: so where are the debts i need to worry about in the chinese economy? we're talking about pressure on the chinese consumer, but one of
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the big drivers of long-term imbalances is excess saving in china, or savings in china more generally. where are the debts exactly and how worried do i need to be about them? freya: i think overall, in the corporate sector, until the last couple of years or so, this has been where we see the massive buildup of debts. our estimates suggest at least 13-26% of gdp might be borrowing to pay the interest on previous loans, sort of evergreening, if you like. there's a lot of that in the corporate sector, particularly real estate, construction, retail, and wholesale. these are the standouts sectors in terms of that debts. -- bad debts. the household sector, when the mortgage market came to life, the corporate sector was trying to deleverage, the excess saving had to go somewhere. the attempt actually spurred the household sector into reducing
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their leverage position. the household sector now looks like it's got problems in terms of leverage, as well, in some parts of the sector. matt: does that, in some ways, encourage china to shoot for a positive result in trade talks? what do you expect from these trade talks? freya: our position has always been that there will be an extension of the stocks beyond march because it's just too short a time period to kind of build anything meaningful, although all that really needs to come out of this is that some kind of a win for both sides. it does seem that there is a broad consensus now that both sides are in a kind of a weak position in regards to talks and they want to come up with some kind of a deal. but the building consensus between the two parties, the
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kind of sense of mutual appearsnding, at least, to be on those key issues of intellectual property, where we even have the u.s. side recognizing that within china, there is some kind of domestic lobby now for intellectual property, as china itself moves up the value added chain, that domestic lobby for strengthening of intellectual property laws is there, as well. and that helps to build common ground. it seems like there's enough there for both sides to come out of this with something like a win, and the most likely outcome is an extension of the talks. anna: thank you for your time. good to have you on the program. let's get a bloomberg first word news update. annabelle jewelers has that for you in hong kong. anna. paulthanks, krugman says with increasing headwinds, it would be a bad
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idea for the fed to raise rates. we discussed the state of the world economy at the summit in dubai. >> i think we're in much worse shape. we probably don't have a crisis of that magnitude about to hit us, but much worse shape to deal with us the me were 10 years ago. u.s. is seeking support on a un security council resolution condemning venezuela. regime's blocking of federal aid and calling maduro to call fresh elections. the u.s. may press ahead, regardless, to keep global attention focused on venezuela. and the swiss experienced a mini flash crash. snapped back to trade stronger. the round-trip created a trait of almost double the daily average. the liquidity, due to japanese holiday, has been blamed for the
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move. and the biggest winner of the grammys this year wasn't even there. childish gambino claim to award for record and song of the year, first for a hip-hop audience -- artist. but he wasn't in attendance. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. anna, matt? matt: annabelle, thanks very much. your first word news. let's get our top stock stories. for that, we go to annmarie hordern. annmarie: let's kick it off with this italian theme happening, just about 5% higher, one of the biggest gainers on the stoxx 600. they said they exceeded ecb requirements for capital ratios. ubi, similar story there, as well, meeting those requirements. just eat also to the upside,
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more than 1.5%. this is cat rock, one of the shareholders, urging them to merge with another online delivery service. that stock getting a boost after the news. anna: up next, m&a monday. looking at some of the deals driving markets. more on that just eat story and the bidding war between euronext and nasdaq. plenty of m&a to talk about this morning. this is bloomberg. ♪
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matt: welcome back to bloomberg markets. this is the european open, 47 minutes into the trading day, looking at gains across the board. all of the industry groups are rising on the stoxx 600. most of the stocks are rising on the stoxx 600. and then a monday. monday.m&a let's take a look at the deals moving markets in europe, not all of them to the upside. joining us is ruth david. let's talk first off about the bidding war. it's not a huge asset, but seems incredibly important to euronext and nasdaq. ruth: yes. week,flagged last euronext has increased their offer this morning and they've now exceeded the nasdaq offer, and this, in the backdrop of the fact that they have the support
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base.5% of the investor so now you just need to see, probably see the finance ministry and the market regulator getting involved in that market and jesse which did they prepped for dust -- just see which did they prep for -- bid they prep for. both have experience in running exchanges in the region. anna: we spoke to an investor last week that said forced m&a was such a theme. let me ask about smith and nephew. investors are selling the stocks, down 3.7%. what is making everybody nervous? ruth: i think they feel like -- if you recollect, they have been --naling they are looking smith and nephew is so interesting because for years, there is talk about a stake in
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them, i don't know how many times. , think every analyst support there's some indication of, are they a target? anna: every year with a list of potential targets. they are still on their? ruth: they are. the growth makes a lot of sense. it's a big check for them to be paying up. market, how do they raise financing for that? it will be interesting if they announce this deal. matt: let's talk about just eat. rock is involved in this company and as a possibility we could see a merger driven by that. this yes, and cat rock, isn't the first time they asked to do more. in december, they were asking to selloff their spinoff. they also said in today's announcement, they have us take
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intake -- have a stake in takeaway.com. if you remember in december, they bought the heroes business in germany, where you are. so there is consolidation happening in this market and there is intense competition. if you just look at the share price of these three companies, these takeaway. just eat is doing the worst right now and there's been no m&a right now. the stock kind of revalued when they announced the deal last month. you'd imagine there is some rationale for this. let's see how the board and how the management takes it. i don't think they have a big stake, but they sure are really welcome. matt: ruth, thanks very much for joining us today, ruth david on m&a monday. if you're a terminal subscriber, get a check on the newest m&a stories. just go ahead and type ma . you can also see the cable and really a wealth of other mergers and acquisitions related
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information. i want to quickly bring you some breaking news on hedge fund investment. a new hedge fund run by michael phelps, was a former head of european credit at blackrock, has attracted a $200 million buy-in from blackstone group, according to a group familiar with that. we're tracking this new hedge fund by michael phelps. now going to become one of the largest startup funds in london this year. stuart roden, former chairman, is also investing interested or, and will also join, as a nonexecutive chairman, according to a person familiar that bloomberg news is citing. don't forget, bloomberg terminal users can interact with the charts they see on the television by typing gtv . look at that also chart hillary put together on the top left.
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also, coming up next, the battle of the charts. for you. this is bloomberg. ♪
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anna: welcome back to the european open, 54 minutes into the trading day, perhaps a surprisingly positive session, up .9%, outstripping expectations.
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the cac is up more than 1%, the dax not far behind. more strength coming through after we saw a bounceback in asia equities as a result of catch-up from the chinese market after lunar new year holidays. now time for at battle of the charts. annmarie hordern has been selecting the right material to go head-to-head with matt miller. you first. annmarie: i'm looking at iron ore today. depending on where you look, is either sinking or swimming. and china, playing catch-up today. the biggest user of the metal, prices surged 4.9%, the most since 2017. you can see this blue line, it's sinking in singapore. the singapore contract price in dollars is down some 3% today. depending on where you're looking, iron ore is either sinking or swimming. one thing for sure, chinese buyers are catching up to the news about valet and brazil, and possible concerns of a supply crunch.
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one thing is for sure, there's tons of volatility right now in iron ore. anna: devastating impact of what we saw, the deadly mine collapse in brazil still having inning -- impact on this market. what do you have this morning? matt: i've got something maybe a little bit closer to the hearts of european investors, and that is a look at eurozone banks. i've got them here in blue. and the interesting thing here in white is what you see as the bund yields. we've been talking about how it's come down to a level, the lowest since 2016. the interesting thing is the correlation that these two have with each other, and this is an interactive chart that hillary put together for me. correlation by moving up here on the bottom. it's pretty incredible that european banks are that correlated to the bunds.
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anna: chart with a reveal function. i'm going to go with matt on this goes it's very -- on this because it's very topical. gtv is the function to use to get those charts. this is bloomberg. ♪ ♪ the latest innovation from xfinity
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francine: playing for time. theresa may except the offer of more time for talks with jeremy corbyn as she tries to renegotiate brexit. u.s. china trade negotiations resume in beijing. more than double tariffs next month. and we will talk -- and talks to fund the u.s. government broke down over the weekend. the deadline is friday. good morning everyone and

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