Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240713

Any hints of restoring price stability, with yet another rate cut imminent. Manus a warm welcome to bloomberg daybreak europe. The fed near the line that defines this message, in order to move rate ups move rates up, i want to see inflation that is persistent and significant. That is the message from the bed from the fed. Those who saw was hikes rather than cuts, its interesting that with this decision we have total unanimity on the hold in rates. Commentary saying that the times when the fed has been unanimous is when the fed has gone in a different direction. Manus is it time to check out hotel california, you can check out what you can check in. 2019, christmas came early for donald trump, with a very dovish fed message. Saying the impact was quite astonishing, a message from the fed about open to expanding is it a message on qed . Gold is giving back a little bit of value. Some saying goal has further to run. Hold, talking about 1600. Nehra jp morgan taking the other side of the trade in terms of gold. In thely saw some buying equity market in the u. S. Session yesterday. Forng in the Asian Session a second time today. The pound stronger against the dollar for the fourth day in a row. The of it could be down to dollar weakness you just talked about. U. K. Votes to determine whether force johnson gets the mandate he wants to get brexit done or whether it had hence the range to the labor party. Will close at 10 00 p. M. London time. The result should be in by early friday. Here is our guest had to say on todays vote. Majority ofervative around 28 seats. This is a binary decision in many ways. A Boris Johnson government could deliver brexit or Jeremy Corbyn Hung Parliament. Usually you have labor significantly down. Now its saying were in the margin of error of almost a Hung Parliament. I think because they brought labor down weve got a good chance of a small labor majority. A Hung Parliament is definitely a possibility. Boris johnson and his party dont have many to ally with. Who areiberal democrats seeking more than 100 seats would have a significant we will not be going into coalition with either Jeremy Corbyn or Boris Johnson. We have made that clear. Nehra great to see you. The latest polls not showing anything different terms of the expectations of the conservative majority. Is that your based cases we had into the election today . Using polls to predict whats going to happen, we have seen some surprises in the past. Everyone is in wait and see mode. Its been interesting because its only the currency that has taken it as it lead to move upwards while the equity markets have remained relatively flat and is probably in wait and see mode. Manus good to see this morning. The fx market is literally on fire, breaking the 200 day moving average. Yesterday we had a conversation saying the position is long. I want to get a sense from you a positioning in the equity market what terms to 2020, the equity position in the u. K. For 2020 . Thats a very good question. It has been less obvious what has been happening. Talk to couple of times that particularly International Investors are disengage with the u. K. Market and it will be intriguing to see whether this is going to change on the back of these elections. What we have seen clearly is that the big internationals that have a benefit from the currency move, in particular when it was lower initially, has moved very much on the back of this, with a more favored earnings backdrop. U. K. Domestic or small business. Aps, a clear positioning there was a headline on your webpage yesterday that the small seenut u. K. Etf have massive inflows. If you believe we get a clear outcome from the election and conservatives will win come they have been left behind in this market movement. In your 2020 outlook you say we should watch the u. K. For clues to the trajectory of global fiscal and Monetary Policy going forward. Why do you say that the bank of england in some ways has been an outlier. Thats true. We have heard from both parties with a distinct focus on fiscal policy. It is something we will watch globally because it is clear that we might have seen depletion of Monetary Policy with a stronger focus on what governments will do and whether they will take over from central banks. With the u. K. Election today, there is probably a bit of a precursor because we will hear more on how its going to work out in the u. K. I think the situation is very in the u. K. Might be the first to say more about it. Little deeperig a into the fiscal strategy, the japanese set their benchmark down by 3 . The deficit would be the line in the sand for the tories. Do you think that fiscal pulse in the u. K. , because either party is suggesting that, does it shift your thinking and how might it impact u. K. Investments . Two things to that because in general, if we really were to see a much stronger emphasis on fiscal and policymakers more willing to use fiscal stimulus as a tool to revive the economy, than i believe as investors we have to understand that it probably comes with greater uncertainty and more volatility. Monetary gotten use to policy support for such a long time that obviously we have seen volatility at very low levels on the back of this. Theres a level of certainty attached that investors like to see because it gives them a better framework to invest against. With fiscal, its a much more broad and uncertain backdrop. We might see markets more volatile against it. Manus thank you very much. Forget our Election Special coverage begins this evening as soon as the polls close. Dont miss it, 10 00 p. M. Kickoff. Word newsthe first from hong kong. Read rate cut is looming in turkey. President erdogan saying Interest Rates will be moving to Single Digits in 2020. But economists disagree everyone in a Bloomberg Survey sees it continuing. That decision is due at 11 00 a. M. U. K. , u. K. Time today. The centerright cutting its rate to a record low 4. 5 . Many analysts also expecting policymakers to signal and into the easing cycle. The Central Bank Left the door open for additional cuts. Israel is heading for its third election in less than a year. The country has until midnight to find a lawmaker who can former governing coalition. This after Prime Minister Benjamin Netanyahu and the Opposition Leader failed to form a government. U. S. Sees deeply troubling indications north korea may be planning a major provocation. One ambassador said they could test launch Intercontinental Ballistic Missiles designed to attack the u. S. With nuclear weapons. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Thank you so much. Signals of being kept on hold until next year. We will get into that conversation. This is bloomberg. Manus this is bloomberg daybreak europe. Nehra here are some of the event you should be looking out for today. Its ecb decision day in Christine Lagardes first policy meeting is unlikely to deliver breaking news butter press conference will give a flavor of her style and tone. Turkish central bank may break the trend and cut rates. Morning, later this the oil report at the annual general meeting. Left rates reserve unchanged and signaled that would keep them on hold through 2020. Keeping it on the sidelines in an election year. Ahead, we will be monitoring the effects of our recent policy actions. Course if developments emerge that cause a material reassessment of our outlook, we would respond accordingly. Jay powell also open with saying the fed might buy shortterm coupon bearing securities. Temporary upward pressures on shortterm money market rates are not unusual around year in. Purchases are intended to mitigate the risk that such pressures pose to our federal funds rate. We think the pressures appear manageable and we stand ready to adjust to details of our operations as necessary to keep the federal funds rates in the target range. They also remove the word uncertainties. Sinces the first decade 1850 there has been no recession. Is it a little too soon to remove the word uncertainty for 2020 . I assume he will be able to adjust the wording because i think we have to accept that for the fed it is particularly difficult against the political backdrop. If you were to look at just the banks case from an economic standpoint you would probably be with him and say it looks reasonably manageable. You still have the ongoing trading negotiations between the u. S. And china and you have to prepare for eventualities that he simply cannot forecast at this moment. The fed has prepared the market that this would be coming and as such it has not been a big surprise that the wording was as it is. Commentn interesting from the u. S. Economists who said history has shown that whenever the fed is unanimous in one direction, the economy or inflation is about to take another direction. Agree or disagree . Forecast, wer own have been facing potentially a binary path for the economy because it all comes down literally to what the trade tensions will bring. We know if there was deterioration it could decelerate quite quickly. And obviously if theres a resolution to the trade tensions it would be potentially a slight acceleration. The gap between those two is large and as such you have to understand what we are doing, we obviously have to turn to political analysts these days because these are such important forces for 2020, that understanding and getting these right will tell us more than just looking at the underlying data. Manus its almost as big a graveyard for 2020 as this year for Political Risk. There was one line from the fed memo that caught my eye. In order to move rates up, i would want to see inflation that is persistent and significant, something we dont have. What does that mean for you in terms of translating that into investment theory . This is a very interesting one because i think we all agree that markets would potentially react before it this is even happening. It would not wait for centralbank action but would carefully analyze inflationary data coming in, and as such, this is something to watch very carefully in 2020. Gotten so used to Inflationary Pressure to remain subdued that securities its clear nobody really expects inflation to be a threat next year. Youa so how would pretension for that potential threat . ,he risk is asymmetric especially when you think of the market as facing a cut, whereas if a move was to happen in 2020 it would more likely be a hike than a cut. Im not too worried about this because i believe its been a while since the market was so close weve had bigger gaps in the past where weve seen a significant disagreement between believe the i underlying data could drive markets much more than just the narrow. Ion to i believe that to become investors would probably have to be more opportunistic and except that with the binary nature potentially in the economic outcome, Market Reaction will be strongly linked to that. Manus in terms of the preference in the market for bonds and equities, j. P. Morgan had a no doubt this morning, the top 20 calls saying short gold, they like japanese stocks, german equities and emergingmarket spirit is at the same message for you, remain invested even late cycle . Yes, remainsay invested, although we have reduced our equity risk in particular, simply because we have the u. K. Election today, we have obviously more political news to come, not only with regard to the trade tension but in preparation for the u. S. Election next year. We feel there might be better opportunities to fully engage in risk. If you look how strongly equity markets have performed this year we believe there might potentially be better entry points. Nejra we will pick up on this point later. Bloomberg business flash from hong kong. They wanted trading went well for saudi aramco. Allowed. The 10 limit lifting the market cap to 1. 88 trillion. Thatuch touted level saturday hopes to list at. , a dealrrys selling worth 4 billion. Nestle wants to grow to challenge the Global Leader in ice cream. Predictions of another 15 deadly crashes over 45 years if nothing were fixed after an faa Risk Assessment into the boeing 737 max. It was put together after the first of two deadly crashes that claimed over 300 lives. Dixonministrator steve said officials acted in good faith by not rounding the plane until after the second fatal accident. Thats your Bloomberg Business flash. Much. Thank you very coming up on the show, the hong kong dollar is of the most in over four months. That as liquidity worries surface. Nejra this is bloomberg daybreak europe. Manus lets turn our attention to hong kong and the dollar, of the most in four months after liquidity worries surface. Juliette saly is on the case. Cominge a big jump through in the hong kong dollar today, the most in four months. Is months of unrest barking gears of capital outflows but also seasonal demands for cash as well. Its interesting when you look at the hong kong interbank Interest Rates, trading about 73 basis points higher than the equivalent of the greenback overnight borrowing cost at the moment, very different to what we were seeing last time this year. Some banks are likely buying hong kong dollars at the moment to try to make the year on demand push for banks. We also have that weakness coming through in the greenback as well overnight. Thank youiette saly, so much. Jamie dimon said he expects a phase one trade deal between the u. S. And china. If it doesnt happen, it will hit markets and u. S. Economic growth. China is expected to come up with details on this Economic Strategy for 2020 today. Sonja is still with us. If thats what we get from the work conference from china, do you have faith they will manage the slowdown and the Financial Stability risk effectively . Sonja i think we have to bear in mind that for them to come up with the plan now when they havent settled the trade dispute might feel a bit premature. You would wonder whether there is something they know that we dont so far. Again i believe they will want to wait and see how this unfolds. The data weve had recently is a bit more stable, not an acceleration so it would probably project grow slightly below 6 . We will return to this a little bit later on. Sonja again, wait and see. Interesting that chinese stocks do not always correlate with the economy. It might be too early. The earlybird always catches the worm. We will dig a little bit deeper. We will continue the conversation and hit all the big issues, including madame lagarde. Im naraom london, chain which with manus cranny, live from to buy. This is bloomberg daybreak europe. And these are todays top stories. Manus 30 minutes until the polls open and the u. K. Votes yet again. Is at 10 00it poll p. M. London time. Dont miss our Election Special. Stands pat on rates and signals it will keep rates on hold through next year. Jay powell said the labor market has improved further and unemployment is at a halfcentury low. Christine lagardes first press will bece as president dissected for more hints on price stability. And yet another rate cut issue. Nejra equity futures drifting, the 10 year treasury yield holding and the bloomberg dollar weakness holding. We have all the Market Action for you from around the world. And kissing a to trillion dollar valuation. That aramco will open our round trillion dollars. This is music to the leaders ears. Is a split, theyre looking for 2. 1 trillion valuation. Lets get to the rest of the team. Off. Kick it big rise inng at a chip stocks in asia, helping push the msci asiapacific index and it could see that index trade out of the range it has been in for about a month now. Samsungen it overtake with a fresh record high. The kospi getting more broker love as well, upgrading the index 12 higher than yesterdays close following similar calls from Goldman Sachs and morgan stanley. So the big rally in chips helping the msci asiapacific index and it could break out of that very tight trading range. S p global has warned it ratedowngrade indias debt if it does not recover. How are the bond and equity markets reacting to that . The bond market, the 10 year , since december for us when we had a policy seen itment, weve moving to 6. 78 where it is currently at. On the equity market, the session seems to be going strong. Will be watching throughout the day today. 30 minutes until the polls open in the united kingdom. Of talking minutes about polls. What sort of lastminute election positioning are we seeing . I will try to make it count. Definitely the pound trading at eight month highs of skiers the uncertainty we are seeing below the surface. Volatility has skyrocketed. Of talk to letter traders about how theyre playing the election and i keep hearing the same thing. You go along in the cash market but underneath you by put options. Thats what has happened in the asian trading session with overnight volatility skyrocketing to its highest since the 2016 referendum. Socgen saying its a strategy they are seeing across the board. Perhaps there is a consensus that conservatives keep the majority but there is that lingering uncertainty that we might get a Hung Parliament and breaks its Development Gets thrown into question. Much. Thanks so news get the first word with annabelle in hong kong. Reserves l expects to stay on the sidelines in 2020. The fomc kept Interest Rates on hold forecasting no change through next years president ial election. Chairman jay powell saying current policy will remain appropriate unless the alec changes. Another rate cut is looming in turkey. President erdogan saying Interest Rates will be moving to Single Digits in 2020. Most economists disagree with the view that Lower Borrowing costs brings down inflation but everyone in of Bloomberg Survey sees the march to lower policy continuing. Brazil has lowered its benchmark point. A half percentage a record low for. 5 . Many analysts also expect policymakers to signal an end to the easing cycle at the Central Bank Left the door open for additional cuts. Election in less than a year. The countrys parliament had until midnight to find a lawmaker to form a governing coalition but the deadline passed with the stalemate intact. The vote is set to take place on march 2. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus thank you very much, i will pick it up from there. Christine lagarde is sharing her first policy meeting at the helm of the ecb. She will be judged on how she communicates the plan to restore price stability and therein lies the challenge. Dont miss our coverage on bloomberg tv. The News Conference is that 1 30 p. M. London time. Joining us is the chief economist for germany at ubs. Nja is still with us. Can i bring it to you first of all, felix, the challenge to Christine Lagarde is this perception of inflation. Is what does Christine Lagarde have in her arsenal to shift the inflation outlook in europe . I think in todays press conference its about signaling continuity. We think the macro not macroeconomic environment is not very much change from what it was three months ago. I think the ecb in its forecasts which were released today we show inflation going up to around 1. 7. There is still the idea that in the mediumterm inflation is moving toward the target. I think its about continuity but yes, she will get questions about how high is the bar and on further easing, what are the negative the effect of negative rates. Nejra great to speak to you this morning. She seemseople assume to be about continuity. There are number of notes out, bank of America Merrill lynch saying that any plan to get rates back to 0 i surprise the markets. Berkeley sees the risk of lagarde miss communicating to the market. How high a risk is there about this communication, given how well mario draghi used to navigate that communication to the market . Her First Press Conference so there is always a bit more uncertainty than you wouldve had under president who had been in place for a couple of years. But today is about continuity. We expect the governing council next march to cut rates by 10 basis points because we think the macroeconomic environment would deteriorate going into next year. So i think signaling that you have continuity but also signaling that you can do more, that would be important for today. With the broader question, how does she position bar . Lf and how high is the rhetorice big push in has been on fiscal stimulus. Back to 0 level rate in europe . You would need expansion of 3 4 of gdp is what is really needed. Is that a credible number . Can you envisage a europe that delivers that kind of fiscal arsenal . That would be a big step. If you think about next year and the fiscal policy expansion we expect is only about 0. 3 of gdp. So you would need to get to very high numbers. Thats part of the issue, if you call for more physical policy in order to boost inflation, what kind of numbers value are you looking at . And to get to those numbers you mention is a very far shot. When it comes to german fiscal policy which is at the core of this debate, we need things to get worse before they get better. Specifically we are looking for an increase in the german bond rate. That would be something that drives the political debate in germany and would lead to more stimulus. That would be much more of a trigger than the ecb just calling for it. Outlook you talk about the fact that the ecb has reached its limits, but you dont necessarily expect the fiscal move from 2020 to come from germany. So where does that leave the European Growth story . Sonja theres lots to think about here. Again, the question to me is not so much whether there is a further 10 basis point cut to me the question is how effective would this be, and what i think we will watch very carefully is how effectively she communicates with politicians. The market is one side of the equation. We know it will be a big step to follow but there is high expectation that she might be better linked to the politicians and as such can stimulate the debate to a slightly different extent than we have seen before. What i thought was interesting is that she put Climate Change is part of the ecbs focus area. Im wondering whether the fiscal stimulus and Climate Change, if youll in the spending to a topic that is core to the european union, we might see something very interesting. High expectation she will be able to engage a lot more in. Its aboutou said conductivity, bridging that gap between political and economic. Said qe willurvey to the end of 2020 and going into 2021. Risk, perpetual qe or more rate cuts in the new era under the guard under Christine Lagarde . We dont think you run into specific problems until mid2022 or so. So yes, qe can run more. Our forecast for next year are the year after, we think rate but i alsore likely, agree that the effectiveness of a further rate cut is much less than when you entered negative rates for the first time. Is i think the negative rate one effect that the governing council has agreed to more than any chance for qe. Nejra thanks so much for joining us today. Sonja will stay with us. Coming up, jp morgans top 2020 trades are out. We have a story you need to know. This is bloomberg. Nejra this is bloomberg daybreak europe. Manus heres what you need to know. Riskrgan is recommending a on environment allocations in 2020 in the wake of a slowdown. Top 2020 calls all about risk on for j. P. Morgan. They say Global Manufacturing has bottomed out and the labor market remains strong. They say there will be waning demand verb bond funds and that will hit the sector so stay clear of that. Following on the risk on attitude, they say its time to short gold, specifically through the cheap volatility levels they have. Short gold and buy stocks in 2020. The cio outlook has been published, suggesting although the outlook for the World Economy has perked up, down cycle remains on equity. The report points to equity having outperformed value for 10 years. Saying is down rotation for 2020 could have a significant impact. The groups Asset Allocation team is conscious on Global Equity but positioning is not too pessimistic, it remains positive on encyclicals, Technology Stocks and european peripheral debt. Us. A is still with weve given the outline of what youre looking at. When things have in common is that you are also cautious on corporate debt. How does that fit into the overall strategy where you sort of pullback a little on equities but youre not completely risk off . We have to put it in context. Were just really aware of the Political Risks ahead of us. Trying to put political you never get to the right outcome. Were very aware of how Strong Equity markets in particular have performed in 2020. We believe it is more to have ae waitandsee approach to identify where we would like to engage. We are facing binary decisionmaking across some weitical spectrum and if stick to todays election here, we might get some clarity around who will be the next leader in the party that will hopefully the brexit of negotiation. Even in a positive case of we will exit on the 31st of january, we still dont have a freetrade agreement. Harduld enter the next negotiation and uncertainty will remain. Although we could see that manufacturing is bottoming out, we are still in that cycle. To see a prolonged acceleration is difficult to see as way. As well. Make sure identify real opportunities. Manus lets round out your views. I love when you talk about value invest value investors. Is value versus growth the big turning point for next year . Sonja its difficult to focus, given the binary outcome in the economy. But just to highlight again, we have seen extreme positioning, extreme performance differentials opening up. In particular in the whole context of Monetary Policy, those focusing more on stimulus, might open up a few changes and what has been an entrenched position over the past 10 years. Nejra one thing you point out is that outperformance of growth, a lot of it is down to where bond yields are. Can we really see that take should be a meaningful and sustainable one while global yields are where they are . Sonja maybe not a full reversal, but what we have to be mindful of, as you point out, given the strong run lower, even if we were to stabilize along the bottom, with that allow a more nuanced view of what you would like to engage in . Its the travel and arrive concept, now that we are here, there might be a bit more easing from the ecb, but its not the big moves that we have seen. As such we should not underestimate the level of volatility in past years could be quite pronounced and as such it would be very interesting to see in terms of equity markets how they react. I would expect not such a clear year. E for next sufferand as you say, we from a dreadful bout of fomo, fear of missing out. Coming up, liquidity crunch in the s p 500. Will bank of america be worried as the year ends . We will dig a little deeper. This is bloomberg. Nejra this is bloomberg daybreak europe. Manus im manus cranny in dubai. Nejra bank of america is warning of a liquidity crunch in the s p 500 as the trading winds up in typical fashion for the year. Dani burger joins us now. Investing being called a supreme sport extreme sport. Thanks have step back from their moneymaking role. This is something we heard recently around fears on the repo market. Bank of america says etfs highfrequency traders have started filling that role but thats problematic. Theres a lot of Academic Research that suggests these type of traders will back away in moments of stress. Wework is or not, also a factor and they need to sell some of their liquid assets into market which likely will be equities. There is so much liquidity there. Manus thank you very much. Sonja, we are minutes away from the polls opening in the united kingdom. Is the u. S. Sk election in 2020, two youre thinking, or is it just too early to begin to think about it . In theit is too early context that we have not yet a clear understanding of what will be the main themes that will be discussed during the u. S. Elections. I think we will get a lot more when come to the democratic primaries early next year. How the fielding is in terms of candidates and themes. We know it will be more extreme. You have seen a real push out from the center to the left and the right. It will be interesting to see what is dominating the headlines. Nejra how can you take advantage of a market that globally is underpricing Political Risk . Sonja first and foremost to understand that this is the case. We talked about a lot of factors in terms of do we estimate inflation property and Political Risk. The dexterity will talk about today. Thanks for being our guest host. The polls open at 3 00. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone wifi up there . Uhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your local xfinity store today. Live from our European Headquarters in london. Im nejra cehic, alongside matt miller in frankfurt. Matt today the markets say nothing to see here. Stocks are mixed and european futures higher. The cash trade is just 60 minutes away. Will the fed signals it stay on hold dear, and now the focus shifts to the European Central bank. Frankfurt to cover Christine Lagardes first meeting. Aramco shoots the moon. Freemarket bids indicate the Saudi Oil Giant will hit a 2 trillion valuation today. Trading opens shortly. And nestles slimming regime. The food giant sells its u. S. Ice cream business to a joint venture that values the unit at 4 billion. An houre are just under away from the start of cash equity trading in europe. Lets take a look at the european futures. It is the same story we are seeing in u. S. Futures. Cac 40 futures edging into the grain, ftse 100 up to tens of 1 up 2 10 of 1 . The pound actually trading at an eightmonth high today ahead of the u. K. Election. In terms of direction for the equity market, not a lot. We did see some green on the screen in the u. S. Yesterday following the fed decision. The dot plot no change for 2020. U. S. Futures were flat in the Asian Session. We are picking up a tiny bit of momentum now. In the asian equity session, we have seen a lot of green on the screen. The Msci Asia Pacific higher for a second day. The Hong Kong Hsi up. Seeing gains in singapore and thailand as well. We did see some dollar weakness. The dollar are raising its gains for 2019 following the powell press conference, and that is giving lift to emerging markets generally. The 10 year treasury yield, we saw that fly five basis points yesterday. We are back above 180. Matt. Matt now we have got that magic to trillion dollar number thehed for saudi aramco, worlds Biggest Company already. The worlds biggest ipo yesterday after the worlds biggest ipo yesterday, it has reached a value of 2. 6 trillion. We now have indications of another rise in aramco. ,ou can see from the screen trading in riyadh of about 3 . 2. 06 trilliona valuation, meeting the crown princes goal on just the second day of trading. The Biggest Company in the world gets even bigger. Joining us from dubai is anthony dipaola. Anthony, talk to us first about what this means for the kingdom. Nbs has long wanted this goal. The west had told him it was unreasonable, and now he has achieved it. Anthony thats right. They have reached the 2 trillion, which is the figure mohammad bin salman had included when he talked about this ipo two years ago. There will be a little bit of indication in the kingdom that they did get that number. There were smiles all around yesterday when they rang the bell and listed aramco shares. It was really touch and go over the last three months, even. Lets put that into perspective. There was a lot of domestic and Regional Support for the ipo. Local investors will get basically one share for every 10 shares they hold after six months they keep the stock. There is not really incentive to sell, because it is such a domestic aim in such a subjective national pride, so there is not a lot of incentive for people to sell. From the point of view of the ipo itself, it did not bring in the massive foreign capital the government wanted at the start of this process. They initially started talking about listing 5 on the local as well as the international exchange. Instead wait gotten a 1. 5 on the local exchange. That could change things when we look at the International Exchanges later. Nejra anthony, great to talk to you. What is the prospect for this sort of valuation to hold up, and for aramco to target a second chair sale . Second share sale . Anthony it seems like we will have to wait six months to see what the initial valuation is as it moves around, because there is that lockup period where local investors have incentive to hold the shares. We may see it move more after that initial sixmonth period. It depends on the oil price, really, the aramco share price, how thats seen internationally. Oil is going into a period where we are looking at sluggish demand, other supply coming onto the market, so that is going to be impacting the prices. Opec has agreed to a threemonth cut through the end of march in order to support those prices. It really depends on how oil continues, what that does to International Investors view of the market. We should not expect International Investors will take that to trillion dollar valuation lock, stock, and barrel and accept that for the price for the international exchange. Investors will have to evaluate if they want to get into these wills, and the saudis have to evaluate what the prospect for oil is looking like and what kind of valuation they could potentially get on an international exchange. That will come after a year because there is a lockup period for the saudi government to not sell anymore shares. We have about two and a half years time to see how that shakes out. Nejra anthony dipaola, thank you so much. Lets get into the markets with Mark Camfield in singapore. Mark, matt is in frankfurt for the ecb meeting, a big focus for us today. What are the risks for the market going into this meeting, given the two words that ie are that i hear over and over again in regards to Christine Lagarde, continuity and over pilot . Mark i think the focus is review. The ecb has not done a review in over a decade. What is the basis for this review . It could be something along the lines of the ecb no longer sees the benefits of negative Interest Rate policy. There is nothing they can do in the short term. They are stuck with it and recently committed to it as well. Looking over the next few years, they are probably trying to find an exit route from this very unpopular strategy of having negative shortterm rates. This review could be a way of looking into that and pushing the ball back towards the government to get more fiscal stimulus out of the major countries in europe. Obviously germany would be at the front of that list. These are important times for the new leader of the ecb, and Christine Lagarde, people will be watching her closely to see how she maneuvers on this front. Theres not much she can do in the very shortterm, but certainly she can have a very big influence over the next few years if you can get the european government to spend more than they have been recently. If, and thats a big because mario draghi could not achieve that. And a lot of people in berlin would say even if they do spend more, it does not really help in germany, it does not really help the european economy broadly. I want to get to the question of the day. You are asking which asset will benefit the most from the feds outlook to keep rates unchanged in 2020. I want to hear what youre hearing, a, from clients, but also, more broadly, what does this mean for markets . Does the market believe the fed could hold rates 32020 . Through 2020 . Obviously if the economy changes, jay powell will have to react. Mark early indications from asia are people see this as an asymmetrical policy. The fed has sent a very high bar for raising Interest Rates. They are willing to let inflation run a little hot if necessary. On the downside, should the economy deteriorate, they certainly should be ready for lower Interest Rates again. People are interpreting this as a goldilocks scenario. The fed is telling you rates are certainly on hold through the end of next year, and thats not surprising considering it is an election year, but should the need arise, we will be ready to put our foot on the pedal and lower rates a bit as well. But in terms of hiking Interest Rates, the bar is very high, almost uneventful for 2020. This is a good scenario. Asian equities are off to a good start today. That may be true for the rest of the world once the ecb meeting is outoftheway. For now, people like what they are hearing from Jerome Powell and the fed. Nejra i want to know whether a lot of the reaction from asia, particularly in the fx space, is down to the dollar weakness we saw in reaction to powell. Whiting out the dollars gains for 2019 is another question, of course. For 2020,ing ahead there are many reasons to expect the dollar could be under some pressure. The cycles for the World Economy, the u. S. Has done extremely well, but a lot of people will be setting that is coming towards the end, the best of the u. S. Dollar growth is coming towards the end, for the rest of the world its time to pick up. You have an election cycle in the United States where some of the politicians may suggest the dollar is too high. They may want to talk the dollar down a bit. And youve got the relative situation with the fed now , and otherbe on hold economies may be going there as well. The outlook for the dollar is not that rose for 2020. Specifically the hong kong dollar. That is being affected by the funding squeeze, but it is creating interesting movements in the option curve, which people are focusing on today, because that may rebound quickly once the year end is outoftheway. Matt mark cranfield, bloombergs mliv strategist at of singapore. You can get the work from marcs team and answer todays question of the day. Remember, which assets will benefit the most from the 2020 fed outlook . Sent a veryey asymmetrical situation. Send your answers to mark. Join the conversation. Next, we will take a look at the stocks to watch at the open. Nestle is one of them, the food giant and really the waiting giant, one of the heaviest stocks on the european benchmark , selling its u. S. Ice cream business to a joint venture for 4 billion valuation. Also, remember Bloomberg Radio is live on your mobile device. This is bloomberg. Matt welcome back to the market open, just about 45 minutes away from the start of cash trading in europe and across the continent. I am in frankfurt for the ecb meeting, Christine Lagardes first meeting as president of the European Central bank. For the first word news, we go to Annabelle Droulers in hong kong. Annabelle thanks, matt. The Federal Reserve expects to stay on the sidelines in 2020. Last night, the fomc kept Interest Rates on hold, forecasting no changes through next years president ial election. Chairman Jerome Powell says current policy will not remain appropriate unless the outlook changes. Another rate cut is looming in turkey. President erdogan saying rates will be in Single Digits in 2020. Most analysts disagree with his view that lower powering costs brings down inflation, but most in a Bloomberg Survey see the policy continuing. Brazil has lowered its benchmark rate by half a percentage point. The central bank cutting the. Ate to a record low 4. 5 many analysts also believed they signal to the end of the easing cycle, but the Central Bank Left the door open for additional cuts. Israel is heading for its third election in less than a year. The countrys parliament had until midnight to find a lawmaker that would form a governing coalition, but the deadline passed with a stalemate intact. This, after both Benjamin Netanyahu and benny gantz failed to form a government. Troublingees deeply indications that north korea may be poised for a major provocation, according to u. N. Ambassador haley craft. She says the regime could launch space vehicles using longrange missile technology. It could even test launch Intercontinental Ballistic Missiles designed to attack the u. S. With nuclear weapons. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. You. annabelle, thank lets get your stocks to watch from around the newsroom. Full ebay is covering nestle and dani burger is focusing on believe it . Is covering nestle full ebay is covering nestle and dani burger is focusing on a lot of the weakness is coming in russia, one of the big countries outside germany, whereas the rest of europe has been quite strong. Is reducing the number of some of its smaller markets. That has had an effect, but not in russia, which is a key market. The dividend has been maintained, but the most points to highlight is the negative reading coming from the russian unit. What is the story with nestle . It feels more complicated than a straight up sale of brands. It sure is. It will be quite interesting to watch trading with the stock today, after they announced they are actually selling their ice cream unit in the u. S. For this say 4 billion figure which makes quite a big headline. But there is quite a puzzle because you are selling this for a joint venture they formed three years ago with a private equity firm, and this joint venture was actually with the european ice cream unit that they are now basically merging with the american business. The unit itself in the u. S. Had 1. 88 billion sales billion in sales this year. It is quite interesting to see this happen right now because it goes in line with what the company indicated in october in its Financial Update when they said they would be divesting from the slower growing businesses. The stock rose just 0. 1 yesterday, and it is interesting to highlight that they have 16 buyer accommodations versus 12 hold and just twosale right now according to what our bloomberg analysts. Danny, we got fourthquarter retail sales in line. How is the market likely to take this . Dani 10. 8 growth in the Fourth Quarter, order sizes stable, so it is hard to see specifics within the earnings. They are a big momentum trade. That should have an effect on how the market treats this. They looked at their range, and m s has cheaper offerings, so they are going to add more products, and that could add to the open. Appreciate your time. You can get all the latest stocks stories by typing first go on the bloomberg terminal. You can also get first word news on your mobile device if you have the bloomberg app. Coming up next, Christine Lagarde is sharing her first policy meeting at the helm of the central bank. We are standing right outside of it with a festive Christmas Tree behind us. It is zero degrees, by the way. We are going to stick it out for this allimportant meeting. More details next. This is bloomberg. Welcome back to bloomberg markets. Cristine lagarde is hairing her first policy meeting at the helm of the European Central bank. She will likely be judged on how consistently she communicates the institutions plan to restore price stability, reaching and inflation target has been the ecbs number one problem. Joining us outside the headquarters in frankfurt, standing outside their festive Christmas Tree, is deutsche banks chief economist for germany. Monetarylizes in policy and behavioral economics. He has written on germanys weakening export market. I want to get into that quickly, but first, what do you expect from madame lagarde today . Will be no real news, just atmospheric stuff. We will see how her communication with the press conference changes from mario draghi, and whether she conveys thecommunication within council itself is changing. I thicket is more a question of style. We wont get any kind of big policy changes today. Her a lot of people expect to be more convincing when it comes to government and physical spending. On the other hand, draghi had been trying this for years. Oloughlin said it would not help the european economy anyway. Fixed thermany crumbling audubon, that is not help thehat does not spanish or portuguese economy. Stefan the point is the economic argument for investment spending in germany for the sake of helping the rest of europe is very limited. Germany, capacities in especially if we talk about Infrastructure Investment, in the construction sector are just not there. We have seen basically in the first three quarters of this year, Infrastructure Investment nominally, half of that is on inflation. Lagarde is annexed minister of finance, so she has a better link to her colleagues, but it is an economic discussion, and i dont see why lagarde should be any more successful than her predecessor. Matt i have spent a lot of time driving from berlin to frankfurt and berlin to munich. What do you think about the German Economy . Are we going to go into a recession . Infrastructures spending taking place. Matt but there is no whenever working on them, they are blocking the road. Stefan im not sure. The government is trying to beef that up, and on some of the key projects, they are working nights and weekends. Going back to the German Economy, we basically avoided a technical recession in the third quarter. Now the start of the Fourth Quarter has been tricky. Retail sales and production were down. We might have another q4, but that is basically one positive or negative, so it does not fulfill the definition of a technical recession. Overall, the economy has been flatlining for a few quarters, but we expect it to pick up. Stefan and i will drive to berlin and do a little research. This is bloomberg. [ electrical buzzing ] [ dramatic music ] ahhhh ahhhh elliott. You came back matt welcome back to bloomberg markets. Right now we are 30 minutes from the start of cash trading. Nejra, what should we be watching around the world here7 here . Nejra lots to watch. A meeting between Angela Merkel and the new leader of her coalition partner. We are waiting for European Equity futures, trading flat along with u. S. Futures. The fed standing pat on rates and signaling no changes for 2020. Some green on the screen in asia, emerging