Both companies. Manus welcome to bloomberg daybreak europe. Talking about donald trump. I have no deadline, the forwards that blew the consensus word out of the water and it were stocks that rocked the bond market. December 15 is live. Good morning, its all going horribly wrong. Thing,that is the key whether we get that ratchet higher or a pause even if we dont have any kind of phase one. It has rattled markets and we are digesting President Trump here at europe. He has done a uturn, but china is on the official agenda for the first time. Market got and little bit of a rock yesterday. We saw yields drop by 13 basis points. I can smell the short trade. You have got the msci asiapacific in their. In there. We had a onemonth low. Data, that brings bluebays short trade into play in the market has moved forward on the probability of a rate cut. It was a bit of a shock, the oil market has got swagger. The oil traders are not bothered by trade angst. Much, i asked myself. Credentials for protection from gold run high this morning. Equityand if what the market is pricing is some sort of phase one deal, what do you do now that we have seen three days of declines . Do take equity risk off the table or by on the debt buy on the dip . Asian features are not giving us much direction and a pull on the , the market is eyeing that 2020 rate cut. Manus indeed. We have been talking about december 15 and tariffs on china. If there is no significant progress on talks or a deal, wilbur ross says while talks continue, there is no big plan. Donald trump says trade deal will be delayed for up to one year year. He told reporters they will find out soon either way. In some ways, i like the idea of waiting until after the election. But they want to make a deal now. We will see if it is right. Has also vowed more retaliation after lawmakers passed a bill imposing sanctions on chinese officials over human rights abuses. It threatens to throw trade talks into disarray. Lets talk more on trade, joining us is sebastian the head bank ofegy at the America Merrill lynch. When you see headlines like this , are you tempted to take equity risk off the table . Sebastian as you say, the risks trades are too high relative to macro data. Where weays important are going to be in six months time. We think growth momentum will have recovered and there is ultimately a deal. There is momentum for both sides, and in the nearterm we have overshot postal have an upside, so we stay positive. Is that what the volatility indicators are saying . I looked at the vix and there is real stoicism. Traders and bond traders have dropped and are wrong, is there more mileage to go in the bond market . Sebastian i would say there is. Historically, the driver is Global Growth momentum. The best indicator we have of Global Growth momentum has just turned neutral. That is the rate of change with negative territory. That, u. S. Bond yields are still 30 basis points too low. The market is still priced for extra sentiment extra pessimism. The bondme might argue market is price for extra optimism. If you look towards the surface, how would you be wanting to trade the possibility of an extension into these talks . There are interesting opportunities in the equity market. We have got defensive sectors in that rotation. They have just been thrown out of the window. I am particularly thinking about food and beverage. It historically tracks bond yields closely, but it is a stunning 15 to low. That is the difference between equity optimism and bond pessimism. If you think things will either go wrong or take a while for the agreement to come through, here is one defensive hiding place that is very cheap at the moment. Manus how do you hide in asia . , youeres a phase one deal pick up more risk or emergingmarket risk . For me, i dont look too much into the details of the asian market. Performanceis the of the emerging equity complex overall. Markets are 6 . Its mainly a gauge of global risk. Escalation andew trade talks, the dollar will strengthen and means pain for emergingMarket EquitiesMarket Equities are already 6 to low too low. I think that is an attractive way to position for a potential resolution. Nejra though you dont take positions in asia, your view on china informs your European Equity strategy. China is one area where you are not as optimistic. Why . , a 17ook at defaults million default wave about to break a record. Sebastian im not so concerned about the financial risk. A lot has been written, but i would suggest you look at financial crisis is. Crises in the past. None of them are happening in china. Stress,to get financial you need house prices to fall because that is what the debt is collateralized against. Rising, the are lending rate and measures of stress, it is very well behaved. So we dont see any systemic stress signals. The problem i have is that growth momentum is very strong, unlike in europe and the u. S. China, we have pmis from the markets institute already close to a sixyear high. Plus, the credit cycle is rolling over. Its the only region where growth is set to slow. Manus sebastian, stay with us. , the summit taking place in the u. K. This week. Donald trump and Emmanuel Macron sparred in london over tariffs turkey, and terrorism. It was a tense meeting. Hours after the american president assailed his counterpart. Would you like some nice ices fighters . Fighters . I could give them to you. Lets be serious. A large number of fighters on the ground are from serious syria in the area. This is the overall problem we have in the region. Manus a comes after the u. S. Threatened to impose tariffs on 2. 4 billion of french goods in response to a Digital Services tax. In an interview, the dutch primus or has said that Emmanuel Macrons assessment of the lines is right on many points. I dont think we should move into a european nato. To come upeves this, the bond with america is crucial for us and the u. S. It is in their interests that this part of the world stays stable. Tadeo is in london covered this. Good to see you this morning. Great to see you. Lets talk about tensions with france. Can the two men heal their differences . From that body language, it would be hard. It is going to be very difficult. Donald trump just lashed out at Emmanuel Macron, saying those comments have been insulting and disrespectful. Nasty, butll very interestingly comes from the same man who called nato obsolete. This is not just about politics. You also have trade. One of things dont trump kept repeating that he is not going to let other countries tax american tech. He has repeated considering taxes on french products if they did go ahead. It is something he has repeated for many times. Them,one is going to tax its going to be me. And you have to look at the context of the timing. We have an election coming up in a years time. I have to say, they did it try to cool tensions yesterday, saying perhaps they will work around this. Emmanuel macron did not backtrack from the brain dead comment and said he is going to be speaking for the people of europe. Macron may have not backtrack, but President Trump has made a bit of a uturn in terms of his tone around nato. I noticed china was on the official agenda and the u. S. Is warning against countries becoming dependent. With the broader backdrop of trade talks, could that have anything to do with President Trumps change in tone . I think you are probably very right. It was almost a full uturn. This is the same man who said nato was not working, even considering leaving. Said this was an organization that was working and taking credit with this increase in spending. Nato is happy to let them run as long as he stays committed. But looking at the talking points, its clear trump wants to focus the agenda on a number of issues. He wants to focus on technology and wants to defuse tension to e of those rocky areas into some of those rocky areas and stick to his agenda. , the domesticht and then in the u. S. Trade war are playing a role here. Nejra . Today out covering the meeting. Lets get first word news. Opec plus is sending mixed signals about output. Irans oil mr. Reiterated his view the cartel should deepen its cuts. Meeting,lier technical it ended without any discussion of steeper cutbacks. There are a number of members who wants to that. The 1. 2. Additions to nobody is thinking of less than 1. 2. Australias economy slowed last quarter. Gdp grew just a 0. 4 as Interest Rate cuts failed to spur household spending. It is reinforcing expectations the central bank will need to resume easing next year. Is the chiefhai executive of alpha and google after the executives stepped down. They will remain active as board executives but say they have never been the sort of people who hold on when they think there is a better way of running the company. Offon is hoping to shake its patchy record in live sports , showing 20 matches from the premier league this month, taking over from regular broadcasters. The technology will be tested to the limits as highprofile occur today. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus thank you very much. Coming up, the euro area still not crisisproof. This ecb executive board member is calling for a strengthening of the eurozone foundations. We chat europe. Nejra and coming up to him a conversation with londons mayor sadiq khan. And if youre traveling to work, tune in to Bloomberg Radio in the london area. Bloomberg. This is bloomberg. Manus this is bloomberg daybreak europe. Nejra im a nejra che pitch in london. Cehic in london. Another riskoff day in asia. It now looks like november did not happen. We are back on the msci asiapacific index the level we last saw in october. The asx 200 the laggard today. Gdp came through at a miss. Questions will the rba need to cut again. They will seeing another to cuts by next year. Yields had their biggest oneday drop since the brexit vote. It is not going well and we saw data showing the private sector has had its biggest plunge in terms of pmi since the sars crisis. The november pmi reading coming in at 30. 5. This is on the back of those already terrible retail sales figures. Really just adding impetus from the government to add a stimulus to the economy. Carrie lam saying yesterday there are going to be more measures but we dont have any concrete details. Manus lets see what happens in regards to those measures. To the euro area, it is still not crisisproof according to this ecb executive board member. He is calling for a strengthening of Euro Foundations to ensure the region can withstand economic stocks. And we get eurozone pmi data. Economy, ours the guest believes that while the global cycle has toughened, the upswing will only be mild. Sebastian is from bank of America Merrill lynch, this is all about europe. I noticed that the vanguard ftse etf had the biggest inflows since june 2017. Do you join the phrase in terms of these kind of flows . Are you part of this flow and momentum of picking up more europe . Have a look at the chart. It is obviously an impressive chart whenever you see this, but for me, the main question is are these kind of statistics and data telling us something about performance Going Forward . Unfortunately, we find that these statistics about flows have little predictive power. That is not something we focus on. We say growth momentum in europe has been bad and we are seeing signs of this picking up. The domestic drivers of the cycle are improving. Had was weak we Global Growth backdrop, especially in the u. S. U. S. Isomentum in the the last headwind for growth momentum in europe. We come back to what is priced in already. The equityion is market has run too far on the straight optimism. Positive, but for those who think now it is finally europes time to shine, we think europe will still underperform. Saying we think the uptick in growth will only be mild. And with high operational leverage and structural growth weakness, it needs a strong upturn to outperform. Plus, we think the euro will strengthen, a headwind for earnings. Upside for the markets, but still underperformance. Nejra you anticipated my next question. A lot of notes have come out from yourself goldman sachs, barclays, being positive on european equities. You have still got caution amongst Asset Managers. In terms of that underperformance for europe, do you think that might actually bring more money into europe on a valuation basis . What could tip the balance . Sebastian effectively, two things. Have threes we powerful we accelerations since the Global Financial crisis. If you get a similar magnitude of the upswing, then europe has got higher leverage meeting it always benefits disproportionately. That would be really helpful. The second factor could help if you got a lot of weakness not driven by economic weakness. So additional monetary easing. We have seen how europe is outperforming, but given the little firepower the ecb has left, that is not in the cards. If they have little firepower left, as is the fiscalus, then is it stimulus you begin to construct around . And if so, who has the biggest capacity to do so . Sebastian it is clear the germans have the biggest capacity. The world is holding its breath waiting for germany to spend but i frankly dont think it will happen. Inhave seen a weakening choice momentum, but its nowhere near the crisis territory where people change their hands on these convictions. Remember how much pain it sucked the u. S. Congress pass that stimulus bill. We have got the obstacle with a constitutionally enshrined prohibition. A two thirdsneed majority in the bundestag to overcome that. Those are a lot of hurdles. Nejra Standard Chartered thinks that the u. K. Is most likely to act in terms of for schools as they deal with the consequent is a brexit. Dispersionot of between the various indices. Sebastian sebastian we have slight dispersion ahead. It is less due to a structural break, but rather the specific characteristics of these indices. Cyclical dax is very cyclical. Fx strategists think the pound sterling will rise next year as you price out the risk. ,he ftse is very export focused so if the pound rises that is a redwinged a headwind. Nejra coming up macron and trump clash at the nato meeting. We are live there next. Manus Oil Ministers say opec should cut further. We are live. Manus bloomberg daybreak europe. The nato summit taking place in the u. K. This week. Donald trump and Emmanuel Macron. The tense meeting came hours after the american president assailed his french counterpart with nasty comments about the alliance. Would you like some . I could give them to you. Everyone you want. [inaudible] nejra this spat comes ever after the u. S. Threatened to put tariffs on french goods in response to a Digital Services tax. The nato secretary disputed macrons characterization of nato as being in a permanent the digit of state. Vegetative state. I dont agree with that way of characterizing nato. More thantually doing it has done for decades. The largest reinforcement of our alliance, our collective defense, since the end of the cold war. Since the 1990s. Nejra our reporter is near london for us. All this before the official meeting has begun. What is on the agenda . Reporter this is day two. Day one was dominated by that conversation, confrontation between donald trump and Emmanuel Macron. There are still many open questions. Will we get a communique . What is the situation when it comes to nato and china . Will they toughen up the language . That is something the west wants. We dont know what will happen to turkey. President erdogan is insisting on using military equivalent from russia. He could face sanctions for that. We dont know what the situation is. The conversation is dominated by the trade tension. Deal,ve the chinese President Trump saying he could but care of some french products. At the same time, Emmanuel Macron saying, im not going to backtrack from my position. A lot of trade and bickering between nato leaders. Manus certainly the body language wasnt that comfortable yesterday. Great work over the past 24 hours. News on one ofng the big Telecom Operators in france. They are targeting a new average of 3 growth in 2021 through 2023. Part of the big restructuring here, they are joining that big infrastructure selloff. They will sell major parts of the network including mobile phone towers. It is frances biggest phone tariff. 1500 sites in spain for 260 million euros. This is the very latest from them. Its about getting partnership for 5g rollout in creating Power Companies in most european companies. Spain will return to growth by 2021. The dividend goal is . 70 a share over the next three years. Big shakeup. We will see how that shock stop changes on the open. Nejra its an industry push to hive off this Network Infrastructure into separate businesses to boost its value and bring in new investors. There is a demand for those assets among funds seeking reliable investment returns. Lets check in on the markets around the world. Lets kick it off with you. Weve had pmi data out of india today. How are Equities Trading off of the back of that . Theyve recovered from the opening lows, giving you a sense that there are lower levels. Weve scratched 11,950. There was recovery seen. We are trading close to the market. Market, there is pressure because of market risk in favor of the decline. A lot ofners brokerages have increased target prices. Companies that have been weak for the last three sessions because of the renewed feels fears around the trade wars. Fuels,gard to domestic market will be looking up for Monetary Policy tomorrow. Majority of the economists are expecting a rate cut of 25 bits. Manus thank you very much. Lets get across to you, stanley. The bond market, are they hedging . Is it more quiet under the hood . It is all quiet. I know you love a little bit of options. I wanted to show you s p 500 one day implied volatility. This is what im talking about when i say its all quiet. Traders are not preparing for the upcoming deadlines of december 15. There has been back on fourth back and forth over whether that is the deadline. December 11, volatility is under 90 bits. It doesnt really change much between then and the tariff deadline. That suggests that traders are not concerned. The s p 500 benchmark has fallen 2 over the past three days with the recent announcement of tariffs. Maybe traders are saying the worse is priced in. Perhaps they are not pricing in the tariffs, which could be concerning in itself if we get some drama on to some 14th. One area where options are pricing in some drama is the currency market. I know you look at this in the recent days. Its interesting to see what the development has been in the charts. When we look at the you want, the two week implied volatility is surging above the onemonth. Traders are more concerned about whats to come in the near future. That twoweek tenor covering the december 15 deadline. Typically, you see further out options, more expensive because the future is less certain. Traders are loading up on protections. We will see who is right. The currency traders are the s p 500 currency traders. Theres a thought for you. I will leave that with you. Great work. Lets get up to speed with your first word headlines from around the world. Thanks. another possible roadblock to a phase one deal. The u. S. Has passed legislation imposing sanctions on chinese officials over human rights abuses against muslims. Has vowed unspecified retaliation if the bill goes further. I still use economy slows. Rose 0. 4estic product percent. Interest rate cuts and government tax rebates failed to spur household fending debt spending. The central bank will need to resume easing next year. Sales sinking after giving a profitable for cats forecast. Its a sign that the Software Makers expansion. The end of in october. The biggest jump year on year since 2014. A hit afterk taking an online backlash over its holiday ad. Its a fixing woman showing a video of her time on the bike. But its have described it as sexist, saying it seemed like the woman was being pressured to keep her weight in check. No comment from palatine. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Nejra thank you. We are fast approaching what is expected to be the biggest ipo in history. Saudi aramco is pricing its shares thursday. The kingdom was hoping for a 2 trillion International Blockbuster dealt finance the transformation of its economy. Things have not gone entirely to plan. It makes more profit than any other company in the world. Liquid than five of the Biggest Oil Companies combined. Reserves could feel the entire u. S. For over 30 years. What should it be valued at . It is complicated. Saudi aramcos fortunes start with a well. Demand number seven of the persian gulf in 1938. Back then, its a joint venture between standard oil of california and texico. The company flourishes, eventually transforming into a state owned giant. Much of that is down to the price of oil. As the desert kingdom grows richer, the new generation seeks to transform and diversify the nations economy. How will the dream be funded . A listing of the crown jewel at top dollar. But then, the murder of journalist Jamal Khashoggi sparks international ondemnation while attacks key Aramco Oil Facilities highlight major risks for the producer and potential investors. The ipo was on, off, on, off, and back on but not at the hopedfor 2 trillion valuation. And not an International Blockbuster but a far more local affair. Still, it should become the worlds biggest publicly traded company. Where does this leave the kingdoms plans for the future . The world turns its back on oil. What do aramcos ups and downs say about the future of fossil fuels . It what ises it really worth . The ipo was supposed to come tomorrow. Chasel be a fascinating at the opec summit. It begins on the same day. To that subject, opec is sending mixed signals about whether they are considering deeper production cuts. Thes oil minister says group should people deep in its curbs by 400,000 barrels a day beyond the existing 1. 2 million. There are a number of key members within opec that want to do that. Yes. 400,000 euros a day in addition to the 1. 2. Nobody is thinking of that 1. 2. I look at the oil market and i have interviewed quite a few people on this. It seems like a goldilocks price. Oil in brent mean for us on the equity story . For us, would always matters with the growth in the macro drivers like the oil price is the rate of change. If it stays at 60, it means nothing. We think theres upsides for the oil price. A very powerful driver is the dollar. The dollar has been tremendously strong. That is weighing on emerging market and on commodity prices. The reason the dollar is so small, global uncertainty hits an alltime high in august because of the trade war in the fear of a no deal brexit. Uncertainty has started to fade since august. Weve been talking about it for the past hour. If you get a deal between china and the u. S. And you avoid a no deal brexit, there is more scope for uncertainty to drop. When you see sharp drops in uncertainty from elevated levels, it has meant dollar weakness. Dollar weakness is good for commodity prices. We see upsides. It would be a good side good thing for the Energy Sector. It undershot the oil price. It would be a positive for the credit market. Credit spence type two 10 to tighten because you have a large chunk of the u. S. Highyield market in the energy business. The Energy Sector certainly hasnt done well when it comes to the equity sector. On the oil price, i want to push you on that. I understand what youre saying about the dollar. You have to things weighing on the price. One concerns around demand. Convinced they will deepen those output cuts which would support the price. We might get an extension. Some say that is already priced in. There isnt much upside for oil from here. Them a big fan to look at data to see what factors make a discernible difference if you look at the historical behavior. There are only two factors that reliably have an impact on the price. One is growth momentum, when you have a sharp weakening in the economy. It is associated with lower demand. Supplies should make a difference. It is hard to show it empirically and statistically. If the growth momentum in the expect, andp as we the dollar weakens, that means both your main drivers move in a positive direction at a time when oil is already 10 to low. If i were to put on my bearish cap for the oil market, the current outages in the market because of venezuela and other emerging producer markets, the outages are close to 20 year highs. If that supply were to come back, theres a risk of an undershoot. Its not obvious that that is imminent. Us the other headwind thats a fascinating fact. Upsideer headwind to the , if i am correct, is the permian. One could say that opec and opec plus are banking on the permian topping out in 2020. Is that a risk in that assumption . Definitely. That the sharp increase we have seen over the past decade in u. S. Share production are tapering off. For us, we think about the next six months. Its unlikely that that will be a major swing factor. Months, is theix growth momentum going to accelerate . Is the dollar going to weaken after an 18 month bull run . A look at what you should be watching today. We are covering the second day of the nato meeting. 29 members have come together outside of london as it faces concerns about his continuing purpose its continued purpose and her ability. Euro area finance ministers meet in brussels to draft budget plans for member states. Manus that is as we watch out for new per pmi data coming out of european countries. How are individual economies faring . The u. S. House impeachment inquiry shifts into a new phase. This by being invited to present his defense, President Trump has declined to do so. Much more ahead on bloomberg. Nejra this is bloomberg daybreak europe. Im manus cranny in dubai. Lets talk about the big changes in the tech world. Step downnders are to as leaders of the Parent Company of the bet. Overeo of google will take the running of the overall group. The move brings an end to the day today improvement of the founders. Lets bring in our tech editor. Good to see you. How is this going to impact the daytoday running of google . According to an internal team will, it not it is not going to. Google will keep going exactly as it is. That makes a little sense. Founders expertise was as mathematicians. They are not great managers. Google, he is overseeing a massive empire of diverse businesses. He does not get down into the daytoday running of things. What he will do is expand his empire. Nejra yes. Certainly a Company Veteran is how you could describe him. Can a Single Person wrangle all the many alphabet businesses . Wasnt that the point of splitting it out . Right. Thats it. Idea of the parentchild relationship of alphabet in google, which is very unique, is that alphabet could focus on longterm projects. Things that didnt need to be profitable in shortterm, that could have timelines of years and decades. Google could be the profitable operation. What seems to be signaled by this new move, putting the company back together. Maybe google and of the bet is looking to have more discipline. The ceo has proven himself as a great manager overseeing all of these various businesses. Alphabetence as ceo of might be to make those projects a bit more disciplined on the financial side of things. Manus ok. As you say, a big moment in the history of google and after that. Also that. Alphabet. Bloombergs tech editor in tokyo, thank you very much. The team is on the ground in vienna. Oil minister. An he says the main purpose of the gathering of opec plus is to extend the oil cut pack as opposed to the iraqis who are talking about 4000 400,000 additional cuts. Are they deflecting from their compliance or lack thereof . Nejra great point. Lets talk equities. European stocks are set for their best year in a decade with 2 trillion added to valuations in the market trading at a discount for u. S. How should investors be position for 2020 . Our guest sees a renewed outlook for cyclicals. Our guest is still with us. Saying that you do expect european equities to continue underperforming the globe in 2020. When it comes to cyclicals, you see further upside. You are underweight a number of sectors. Luxuries . Derweight in here we have a sector whose global gram is the global cycle and the renminbi. It has been the breast bestperforming sector in europe this year. Excess thats a lot of optimism in that cyclical sector when the global sector is picking itself up after the recent downturn. Exuberance, one could say, im curious on the autos call that you have. We have seen severe weakness in the chinese auto demand cycle and challenges for europe. What is your base thinking in all of those . Im a big fan at of looking at what drives the sector. If you look at car sales globally, there was little collation between that and the performance. The main driver is a combination of the euro area pmi, the euro area microcycle, and the renminbi. We have seen the sector rally by 15 as we have this procyclical rotation since the end of september. The sector is 8 to high relative to these two main drivers. The renminbi will have to strengthened by 5 . We think that will not happen. The euro area pmi might pick up by three or four points overnight. Too much optimism priced into that sector. We think it has to come back a bit. Nejra you have a view on u. S. Pmis. Your view is that the dollar is going to weaken. You only see mile downside to the dollar. You are underweight farmer. Is the dollar weakness going to be enough to fuel that underweight you are holding in pharma . Its a mild weakness you are seeing. What always matters is the rate of change. Its a fascinating sector. A lot of people are underway. Overweight. Trading, outperforming by 20 since early 2018. Thats a very important point in the cycle. All the growth momentum started to weaken. The dollar started to rally. Bond yields started to fall. For pharma, the best possible environment is falling bond yields and a rising dollar. That is what we have had over the last 18 months. We think both of these trends are going into rivers. If the rate of change is adversely affecting pharma, that points to the downside. Manus well put. One more line coming from vienna. The gulf arab opec plus members are in consensus to extend their cuts, 1. 2 Million Barrels at the moment. The iraqis have a different agenda. We will discuss that in the next 30 minutes. This is bloomberg. Nejra good morning from bloombergs European Headquarters in the city of london. Im manus cranny live from dubai. These are your top stories. Sentiment drops. Asian stocks slide as uncertainty reigns ahead of a key tariff deadline. This as the u. S. House approves a bill that would impose sanctions on beijing over human rights abuses. There was no love lost between donald trump and Emmanuel Macron in a Tense Exchange over turkey. We are live from the nato summit all day. Not as easy as abc. Google founders step down as leaders about the bet of alphabet. The ceo gets the top job for both companies. Nejra they say theres nothing like a deadline to focus the mind. Nothing like the lack of a deadline in u. S. China trade talks to spur a selloff of equities globally. Manus read headlines coming in across the bloomberg terminal. Breaking news will move equity through the day. Ahold delhaize announces a Share Buyback of a billion euros for 2020. This is the second big equity red headline weve had through the morning. Orange is selling assets and they are talking about dividends. Ahold delhaize on the big retail side, they have a stop and shop president s presence in the United States of america. Share Buyback Program of a billion euros by 2020. Those are two things. What else are they saying . Maintaining a balanced approach between funding the growth of key channels and retaining excess liquidity to the shareholders. Thats the latest from them. How are the futures . Between the equity market there is a dissonance between the equity market. Nejra you saw bond yields side live yesterday. You are seeing slight optimism coming through with dax futures. That is dissonance compared to the asian session. The s p 500 dropping for a third day yesterday. European equities have declined for four days in a row. We could break that today. Dax futures in the green. For 100 futures struggling direction. A bit of uncertainty coming in. What will happen on december 15 . Do we still get a pause on the tariffs even if phase one doesnt come through . Manus there were two moments yesterday. The fox rocking moment, the fox news moment where an unidentified source said december 15 would see tariffs reinstated. We saw yields come back down to a onemonth low. 1. 69 . To 1. 6, you want to be short. Couldcould that be that be the torch to take yields lower . The biggest drop since august yesterday. The market is shifting its view on when the next rate cut in the u. S. Will come. Lets get to Juliette Saly in singapore with the rest of the markets. The msci asiapacific index back to the level we last saw at the end of october. That game in the month of november didnt happen at all. The nikkei closing up the session weaker by 1 . China resilient. A little bit of buying in that market in the latter part of trade yesterday. Hong kong under pressure. A bad pmi for november. We are hearing that there will be a press conference from the finance secretary at 4 30 p. M. Hong kong time on employment initiatives for the city. Have a look at australias market. Down by 1. 6 . This is a month back of Economic Growth figures out of australia. Slide ine biggest yields in australia, down by some 13 basis points. The biggest oneday slide since the brexit vote in june 2016. This is after gdp only rose 0. 41 last quarter, putting pressure on the rba to potentially cut. They see another to rate cuts from the rba by june next year which could push into the theory they will look at our unconventional Monetary Policy like qe. Absolutely. A great story about Asset Managers preparing for that. Juliette saly in singapore. The u. S. Will proceed on december 15 with plans to place more tariffs on china. Thats if there is no significant process in the talks or deal. Wilbur ross said that while talks between the two sides continue, theres no big meeting planned. Donald trump said a trade dilma may be delayed for a year. He told reporters they will find out pretty soon your way. Like the ideas, i of waiting until after the election. To make a deal now. We will see whether or not it will be right. It has to be right. China has vowed more retaliation after u. S. Lawmakers passed a bill that would impose sanctions on chinese officials over human rights abuses. It threatens to throw the already tenuous trade talks into disarray. Manus yes. Our guest host this morning joins us. Good to see you. Good morning. Manus the consensus trade has been blown apart, hasnt it . Everything you look at now in the u. S. Has to be looked at in the prism of an election in a years time. Donald trump wants to get a trade tilt done. Look at places like pennsylvania, wisconsin, ohio. They are close to contraction. It is pushing china to do a deal rather than wanting to delay it. He needs them to move. Nejra if the prospect of no deal until after the 2020 elections really comes to the forefront of investor minds, what could we see in terms of equity Market Performance in 2020 . There is so much optimism priced in. What is priced in is a phase one deal. I dont think the market really takes at face fell you what the president says. If he says he will wait for 2021, they know theres always a deal chance prospect likely for them. The fact that he has an election and needs to win, that is incredibly unlikely. Said sit . Do you a whole host of guests have intoned that the u. S. Going to 2020 will underperform relative to the rest of the world. Do you agree with that as a base Case Scenario as you look forward to 2020 . The u. S. Is trading on a much higher valuation than europe, then asia. Asia is more reliance on u. S. Trade. If the u. S. Slows down, that is not good news for asia. Europe has structural problems. Negative rates in germany as well. The u. S. Has new technology stocks, they all seem to be coming out of the u. S. Despite what happens with trade talks, those are still pretty strong growth Going Forward. While valuations are higher, so is growth in the u. S. If the market keeps looking for growth in a world that has a lack of it, i dont think you could easily dissociate yourself from u. S. Markets. Nejra does that mean that you would dissociate yourself from Chinese Market or should you actually be invested in both in different ways . Manus looking at things globally, look for areas where you think growth still remains. If trade talks are difficult, weve seen with australia now, anything commodity related is going to be pretty tough. If you dissociate the Construction Side of it with the consumer side of it, the domestic consumer remains strong. Onto the nato summit that is taking place in the u. K. This week. Donald trump and Emmanuel Macron sparred in london over tariffs, turkey, and terrorism. The meeting came hours after the american president assailed his french counterpart for very nasty comments about the alliance. Would you like some nice isis fighters . I could give them to you. You could take everyone you want. [inaudible] nejra the west threatened to impose tariffs on 2. 4 billion of french goods in response to a Digital Services tax. The nato secretarygeneral disputed macrons characterization of nato as being in a permanent vegetative state. That wayt agree with of characterizing nato. What i haveecause seen over the last years, nato was doing more than it has done for decades. We have implemented the largest reinforcement of our alliance, our collective defense since the end of the cold wars since the 1940s. As we have seen, tensions are running high between President Trump and Emmanuel Macron. Can the two men heal the divisions with tariffs looming on french products . Thats a big question. They disagree on many things. The language donald trump used was very tough. He said that Emmanuel Macron had been rude, that he had been very nasty towards nato. Of course, the trade situation looming. President trump said he would consider tariffs on french products if they go ahead with a digital tax on american tech. The obvious thing right now is that it is becoming way more difficult to separate the politics from the trade. Yesterday afternoon, the two did try to cool tensions. They said they had a very good meeting. They said they could probably work something out around the digital taxation. Emmanuel macron did not backtrack from the brain dead comment. Foraid that he is speaking the europeans. Donald trump said hes speaking on behalf of the u. S. You can see how theyre trying to reach out to their own domestic audience. Yourself, have to ask its a big old uturn. Mr. Trump claims that nato is a stronger pact, stronger because of him. The data does stack up. They are spending quite a lot on defense. They have curried an awful lot of enthusiasm from other nations. Exactly. When you speak to nato officials, they will tell you that from said, im not paying debtsuntries to pay protect for themselves. This pressure for companies to pay up or. It is not just trump. There have been other factors that play into this, such as the ukraine crisis. Nato is letting him run on that line. Why are you not taking more credit for this . He said, im not interested in that. I care about a strong nato. Trump is right. You can see that the europeans are trying to diffuse tensions there. President trump has many open fronts at this point. Hes taking credit card credit on this, trying to diffuse attention from impeachment, trying to make nato a success story. Thank you very much. Up to speed now with your first word news. Reporter thanks. Opec plus is sending mixed signals about output. They believe saudi arabia also supports the move. An earlier technical meeting ended without a discussion of steeper cutbacks. There are a number of key members within opec that want to do that. 400,000 barrels in addition to the 1. 2. Of less thannking 1. 2. Reporter australias economy slowed last quarter. Gross domestic product grew just 0. 4 . Interest rate cuts and government tax rebates failed to spur household sending destiny. The central bank will need to resume using next year. A hit afterk taking an online backlash over its holiday at. It depicts a woman showing a video diary of her time on the bike. Sexist,have said it is seeming like the woman was being pressured to keeping her weight in check. No comment from telecom. Amazon is helping to shape up its patchy record in live sport. Its prime Video Service is showing 20 matches in the premier league this month, taking over from regular broadcasters. The technology will be tested to its limits. The highprofile clashes. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Nejra thank you. Coming up, the euro area is still not crisis proof. An ecb executive board member is calling for a strengthening of the Euro Foundations. We will talk about euros, next. Manus later today, a that you dont want to miss. If you are traveling to work, Bloomberg Radio is with you every step of the way. Our team is live in it work. This is bloomberg. Nejra 7 18 a. M. In london. 41 minutes away from the start of cash equity trading in europe. Larry page answer key britain are stepping down as leaders of alphabet, handing off the responsibility to the current google ceo. Affects the alphabet umbrella structure. Is this a uturn . What is this really about . Dani burger has the details. The distinction between google and alphabet, this distinction is dwindling. Larry page was hoping to create a Berkshire Hathaway structure where you have the Umbrella Company of alphabet that gives operational independence to google and you get a separate budget for more decent projects. Now, the ceo will oversee both alphabet in google. The divided structure theyve had, it was constantly in trouble. You have the other socalled bet. They lost 3. 4 billion last year. It includes other Companies Like self driving cars. You have nest which were taken out from other bets and folded back into google. Former employees told us this structure was never quite clear. Google has always been the tail that wags the dog. Perhaps the need to shield the highly profitable google from ambitiouscostly projects is no longer urgent. Since creating the him rela company in 2015, google shares have really taken off. They doubled, gaining 95 . Perhaps the separate structure for alphabet no longer make sense. Nejra thank you so much. Our guest is still with us. Our columnist has says that alphabet answers the ceo question but raises new ones. Is the ceo ready for the tech hotseat . Does the Company Structures to work . That still work still work . Still beill steal on the board. They still control 51 of shares. Bill gates stepped back from being ceo but he was still involved in the organization. One thing you need to look at his regulation scrutiny of the company. The ceo has gone to congressional hearings. Is he going as the ceo as the Overall Organization . You have to ceos and a chairman and a president. This just cleans that structure up. Is he ready . 99 of the profits were coming from google. When you are building a technology go system, it is better if everything sits under that one platform and you can build off of that. Furtherets take that forward. Im looking at the performance in the s p 500 this year so far. Tech is up there. 58 . Semiconductor equipment up 76 . Tech, is itk at softwareand similar where you want to be exposed . Or is it hard tech . The world gets a little bit stronger into 2019. Tend to always look at investment goals in the longer term. Software businesses are high return on capital. They are not prone to cycles. They are a better investment. Semiconductor companies, against Pricing Power and the amount of capital they have to invest. They come against new and improved cycles. Google, amazon, facebook all required benefit from that. Valuation, you go towards Software Company rather than hard technology. Nejra if you are looking at how to position with the risks continuing in 2020 of an ongoing trade war, Big Questions over and inflection in the global economy. How would you be positioning encyclicals versus defensive start now . Defensives right now . Cyclical stocks are cheaper. In the recent issues with the trade war, they have come up. Look nearly a 6 dividend. It represents a Good Opportunity in this environment, regardless of what happens with trade. They will get through this. Chart onm looking at a bloomberg. It is the global commodity context. Oil is up 24 . 13 in london. Nickel is up 25 . Iron or is up 31 . Theres a certain amount of resilience in the commodity complex. We have opec plus meetings. What are you expecting over the next couple of days . What is important for you . On your first comment, look at how the world is moving towards electric cars. We need four times more copper required in electric cars compared to a combustion engine. We will need more copper and nickel and cobalt. These resources are getting more difficult to find, whether it be the geography or the Political Risk of the country. Touching more on your oil, the difficulty opec has now is that the incentive is asian for countries to cheat is increasing. It is called opec plus because russia isnt in opec but they decided, you benefit, you need to be part of this. They dont seem to be following the script when it comes to cuts. Same could be said for nigeria and iraq. These companies have themselves in a domestic position that they require a much higher oil price. Saudi aramco is now a Public Organization that has to put out their ipo. For the first time, theyve started to talk about peak oil. They are starting to talk about a world beyond oil. That is a risk for the business Going Forward. If you are russia and iraq in nigeria and mexico that started to look at the gulf of mexico for exploration, you think the Worlds Largest company now is talking in the next 25 years of peak oil and demand starting to come down. Do we want stranded assets . Nejra would you want to buy Energy Assets . You focus on he is cheap. Every Energy Company out there is trying to emphasize how green it is becoming. Would you buy Energy Assets now . Electric cars require copper. How Commodity Companies operate . Bhp operates the Worlds Largest copper mine. They have said that they will buy in the next five years that single copper mine, it will be energy neutral when it comes to attraction. Thats a huge move from very resource intensive companies and requirements. Nejra thank you so much for joining us this morning. Thats it for bloomberg a break europe. Coming up, Peter Oppenheimer is a chief Global Equities strategist at goldman sachs. That is coming up at 8 30 london time. More positive on european equities for 2020. Manus yep. Join us on radio. We are here every step of the way. The team is hard at work. The ipo for saudi aramco closes in the next 24 hours. Im off to vienna. Lets see what they think about the biggest ipo in the world. Good morning, welcome to the market open. Im anna edwards alongside matt miller in berlin. European futures point to the upside ahead of Services Data from across the continent. Despite a new focus elsewhere on u. S. China trade tensions. The castrated less than 30 trade isway cash less than 30 minutes away