Articles of impeachment against donald trump. Adoption would set up a senate trial in january. Manus warm welcome to you. Europe. by 2020. Saying 1. 25 you do need a recession for that to happen. The president looking at copper to gold as one of the best indicators in the world for him. The two polemic views on the bond market for 2020. Zero bound by the end of 2021, these are big calls coming from citigroup. The 125itigroup on handle. Thisll talk to fox jan hour. On the other site, in terms of people who are bullish on copper, Goldman Sachs is one of them. No surprise they ca 2. 25 handle. So many calls out there. We will get into the mall. Manus lets look at 10 year yields. Motion sickness apparently in the 10 year Government Bond market. Down they came. The goldcopper ratio refers to, if you look at what goldman is doing, they expect higher next year. Citigroup urging the market to go overweight u. S. Stocks. My question to the market, do you need more rate cuts from the fed to make equity my equity markets go higher. There is one dominant theme for me, the unpicking of phase one. I would say, you are beginning to look a little bit less than the robust deal that everyone was hoping for. The euphoria really seemed to phase yesterday. One point that did it. Direction today, a little bit of weakness on the onshore, offshore u. N. We pushed through seven again today. Cable extending losses from yesterday when we dropped as much as 1. 7 . Some are saying we are not that cable iffrom 120 on things get worse. Our top story, fed officials are once again expecting rates are on hold unless there is a big enough shift. Policymakers believe they have done enough to support growth following three consecutive rate cuts. We spoke to dallas fed chief Robert Kaplan. I already have baked into my outlook weak manufacturing, pretty sluggish business investment, but with a strong consumer. There would have to be Material Change from that outlook. Nejra kaplan also spoke about the phase i one deal. Robert the trade issues with china will have to go on for years. I think most businesses are adjusted to that. Property,al technology transfer, the much deeper issues with china will be going on for a long time. Phase one is better than not having phase one but it does not mean there wont still be trade uncertainty. Hour, joining us for the you are in the camp that sees an easing cycle. What is it in the u. S. Economy that tells you we will see more cuts from the fed . Is some relief from the trade war, some relief from the brexit. But, there is normal fiscal the u. S. Government, this year in 2020, there would be none. Confidence, that has been slowing down, these are gathering on top of the corporate margins in the u. S. Which have been falling in the macro level. Leadhas always been a indicator of slowing down of the economy. Manus one of the things that caught my eye is the reference to the yield curve by mr. Kaplan , and the movement in the yield curve. Of how you seext 20 20, will the yield curve steepen further or have we topped out . Alain we can expect some steepening of the curve. It is later from q2 to q3, we expect cuts next year. The short rates will go down faster than the long end of the curve. We expect the long end fall at a slower pace than the short end of the curve. Nejra that makes sense as to why you see a handle on the end of the yield. By 2020, 1 of the more bullish calls out there. In terms of how else to hedge against a cyclical slowdown, what are the key calls you would be making other than being long u. S. Treasuries . Alain small caps, one equity tostic, the assets, very low. Are highly inducted and you face this slow down, that it that is also one of the reasons we have downgraded the u. S. Credit on equities. On treasuries. A gold, it will appear as safe haven later. Big riskming from the we have. Manus we have this debate between jeffrey saying that property gold ratio is a very bullish thing in terms of global growth. Versus the citigroup, which says they have a base case, that recession would have to come down to get rates down to 125. Which side of that trade do you confer with do you concur with . Withume you disagree gundlock. Alain to make a long story ratio,the gold to copper a proxy to give longterm rates in the u. S. When young when longterm yields go down. The debate we have, where are we heading for the end of the year, 2020, if you are bullish on rates, if you expect rates to go down, then you should be bullish on gold against copper and vice versa. Thea so you agree it is perfect correlation but you just take the opposite view. What does that mean in terms of the dollar . How you allocate across currencies. 2019, we have the fed changing outlook from tightening to flat, then loosening. , youther Central Banks have the bank of japan, you have. He European Central bank that is why the currency market and thedollar remain u. S. Has continued to rise. Not believe the other Central Banks are going to catch up. That means, in 2020, there should be a trend reversal. It inlue sign, to embed assets which are cheap comedy u. S. Dollar, it is the most expensive currency. Manus quick question. Fed will act aggressively. What is the definition of aggressive in your view . How many cuts . Alain we expect four. , much more than this. Manus thank you very much alain generale. Om societe nejra lets get to the first word news with Annabelle Droulers. Annabelle the uks Credit Outlook has been upgraded by s p and fitch. S p raise the outlook from negative to stable and fitch took the outlook off ratings negative. The agency did maintain a negative outlook for the u. K. Boris johnson, he is branding his administration word from officials that they do not want to undermined that image. Beenon has not always against attending that summit. He went twice as mayor of london. Trump and ministration plans to bolster enforcement of iran sanctions. It plans to increase production on Global Shipping and metal production. It is the next phase on the plan economy. E irans and, the u. S. Has the leverage to prevent the nord stream 2 gas project. It is a rare admission of failure after a years long effort to prevent what the administration believes is a threat to security. The u. S. Will dow pavitt to trying to impose costs on other russian will now pivot to trying to impose costs on other russian projects. Global news 24 hours a day and on quick take by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Nejra up next, our exclusive interview with a ceo. This is bloomberg. Is bloomberg daybreak europe. Christine lagarde is going to speak in honor of the member at 8 30 a. M. London time. To germany, the survey at 9 00 a. M. , that will be critically important. A slowdown has reached its low point, a chance that an improvement to be recorded in december. Nejra at 12 00 p. M. , chancellor Angela Merkel will take questions from the bundestag. To vote on President Trumps donald trumps. Mpeachment speaker inut at the a blistering six page letter and laid out his defense against charges that he abused his power and obstructed congress. Joining us is bloomberg Senior International editor Jodi Schneider from hong kong. What can we expect in the u. S. House today . What the house will do today is they will be voted on those two articles of impeachment. Approve very likely to those because democrats have the majority in the house. They are unlikely to get any republican votes. They will almost assuredly vote to impeach the president. That the senate will vote and act as the jury, hold that trial likely in january, and they want it to be a swift one without many witnesses. Byause the senate is held many republicans, they will almost certainly vote that the president will not be removed from office. When it comes down to, in 2020, you will have a very divided country going into those elections. It shows that a slight majority of people believe the president should be removed from office that is unlikely to happen even though he will be voted for impeachment tomorrow in the house. He will only be the third president in history to have been impeached. Manus it is certainly going to be an historic day if and when that happens. Our International Editor joining us from long from hong kong. Alain bokobza from Society General joins us. If we look at the risks, political risks, the United Kingdom now has the government. What are the biggest risks . Is it the democratic nomination, lets say, elizabeth warren, or is it the election itself . In the election, you have the background of the impeachment. Impeachment is extremely difficult to get through. Democrats, you would need to further progress in the investigations to switch 20 republicans into voting against President Trump. Theall watching but reaction to the impeachment. Some of the other matters including the trade war. Also, to besident reelected, he needs to have a Strong Economy by the end of november next year ahead of the election. Andill see, in the surveys the real economy over the next few months. In this election, beyond the Traditional Health care issues, the parties in the u. S. , the energy sector, Climate Change will be a new theme which is invited into this election. The democrats, that is a big game changer for the market. At the moment, we are too far away from the election. We dont even know who will lead the democratic party. If closer to the election, we would have a lead of the democrats, the market would be plan Climate Change as a global issue, not just a u. S. Issue. Nejra to get ready for the election, you are saying to go long old tech. On the trade war, one of your key market risks is the trade war receding faster. Is this mean you dont think the market is optimistic enough on u. S. China trade . Alain we wrote this two weeks ago and the market has gone into phase one. Proceeding on the second ones. The politicians have gone into this phase. It is not only not implementing new tariffs but rebooting but removing part of the old tariffs. That is the risk we have, bullish equities and their response, the relocation of one to the other. Now, lets get the Bloomberg Business flash with Annabelle Droulers. Annabelle the boards of fiat and psa have approved the next step in their merger. It would create the fourth biggest carmaker by global sales. It would rival volkswagen with a stock market value of about 46 billion. The two sides are hosting a Conference Call this afternoon to provide an update. Tesla is considering cutting the price of its china build cars next year. The price of the model three sedan could be cut by 20 or more. Sales of electric vehicles have fallen for months after the Chinese Government scaled back subsidies. Multibillion dollar wildfire settlements. Part of the restructuring plan. Now it has to win over californias governor. Last week, pg e drew a rebuke from the governor. The company says it is still in negotiations to resolve the differences. Manus thank you very much. A rallyp on the show, has created an historic dislocation for the markets. We explore the context with the chart that matters. This is bloomberg. Nejra this is bloomberg daybreak europe. I am nejra change in london. Manus i am manus cranny in dubai. The on has been pushing sector to historic levels. Here with a chart that really does matter is dani burger. Dani it is the perfect storm for junkbond appetite. We have this perpetual hunt for yields. That means that junkbond spreads have moved so low that the differential between bb and bbb is essentially nothing. Below 42 basis points, the lowest on record. You are looking at the highest form of junk bonds and the lowest rated debt, investors are basically treating them the same. It is not just the rallies in junk bonds, it is the warning about bbb. One thing to look out for, what happens to this trade once the credit cycle turns . Obviously, if you are concerned about the credit cycle turning, you would have missed out on a lot of junkbond gains. From Alain Bokobza soiete jenna rall from ciete generale is still with us. That, thats what, in the credit cycle is soon going to turn . At the moment and since september, we are removing extreme risks, so there is an ongoing Risk Appetite from sovereign into credits. This is why the collapse between bbb and bb. Back in spring, if you said this phase of extreme risk was done, then we go back on the real economy. The bbb, this is the one that, when you enter a slowdown, when you have the accidents, when some companies are fragile enough to make some default. Just to squeeze one more in, four rate cuts, you talk aret bbb to bb, these highyield spreads also being compressed. Very quickly, cuts and momentum continues next year. Do these spreads continue down as well . Then in 2019, you have three rate cuts from the fed. In the background, the real economy, the consumer in the u. S. , that is more than two thirds of the u. S. Economy. Theave removed some part of extreme risk coming from the trade war. Was the fear going through equity markets. Has grown a lot. Anus thank you, alain thank you, Alain Bokobza. From good morning bloombergs European Headquarters in the city of london, i am nejra cehic with manus cranny from dubai. This is bloomberg daybreak europe. Feds ericboston rosengren suggests a tangible change to the outlook will be the only reason to move on rates. The dallas feds Robert Kaplan agrees that it must be material. Citigroup says record low yields be en vogue 2020. Creating a giant. The boards of Fiat Chrysler and psa approve a big step toward the merger of the groups. We expect the fourth biggest carmaker before the market opens. The United States prepares for a vote on two articles of. Mpeachment trialld set up a senate in january. Nejra phase one euphoria fading a little bit in risk markets. A little soft across asian equity markets. In london, cable continuing declines. All the Market Action from around the world. The boris bounce is gone. Lets get a little bit more detail. Juliette saly is in singapore. Annmarie hordern is in london. Julia, let me bring it to you first. Asian stocks take a little bit of a breather. No one shocked at that. There are one or two more reasons at play here. Take me under the hood. Yesterday, talking about the index being at a high. When we look at some of the flashing signals, it is interesting to see the chinese indices because all four of these have been the front runners since last thursday. Signs of overbought territory. The shanghai and the csi 300 which, of course, we were talking about yesterday, hit above 4000 for the First Time Since april. We are also seeing relative strength topping 470. Today, Chinese Markets among those having a little bit of a retreat today. Nejra the copper gold ratio highest since july. Jeff gundlach loves it as a measure of where treasury yields could go. You are looking at copper stocks. What are you seeing . We spoke about records. Citigroup turned bullish on metals. Surge in may be metals across the board. Somen mental stocks, now, very strong gains. Despite the market again slightly soft, still a large quantity of metal names in the green. Very close to record highs. Another strong week for the metal names. Thank you very much. Oil coming off, inventories rising, but also a little bit of doubt by this phase one trade deal. What do you make of it . A lot moving in oil prices. This morning, seeing that dip because of stockpiles coming out of the u. S. 4. 7 Million Barrels per day. Oil supplies outside of opec, norway, guyana, brazil. We see obviously the u. S. Rising. Signedl do not have a trade deal. Even it could fall further. Manus great work, team. Annmarie hordern in london. Our partner in dubai, and her very own Juliette Saly in singapore. The central bank, meeting this the amid signs of a thaw in global trade tensions, and a launch of a stimulus package. In europe, the European Central bank. Jp morgan says negative rates are still bolstering the economy. They however cannot do magic. A call for more reflection than action. I think it is interesting that jp morgans view is that negative rates are still doing good work but they are not a panacea. We are in the land of negative rates. Want to beview, you long swaps and long breakevens in italy. Are you a believer in the repatient in the repatriation trade in europe, back to the 2 level . The long u. S. Breakeven is definitely a consequence of the extreme risk currency receding. Later, the u. S. Dollar will probably bring a bit more inflation into the u. S. System. The u. S. In the background of which will continue. In the european landscape, the thatoutlook, in the sense they new ecb leader is extremely clear that she will continue to be dovish, continue to provide the necessary liquidity. Mix will change, from monetary injection into a broader outlook. In a european policy mix, that fiscal spending after so many years of austerity, being put at work. Ae monetary impetus only to broader impetus which includes the policy, is what we expect in so many countries in 2020 in europe. Nejra a lot of people are getting more positive on european equities based on the brexit risk receding. Europeanaying that equities are still not a favorite because European Equity markets would not be immune to a u. S. Recession. But, you love japan. Why . Aain japan, you have had loose Monetary Policy. In october,ghtening all of the taxes easier in years to come. Policy, features which should ensure that the output which started in september will continue for the year 2020. Are it is no news that we starting in september but we continue to go with a huge outperformance to come. It cannot be said to be cheap because they are not that profitable. What we love and europe is the value side. Super undervalued within european equities, starting to outperform, and that should continue for the year 2020. Youa you have manus have core spreads is one of your trades on banks. Why do you want to play core spreads on the banks in europe . The idea is that banks, like financials, are heavily linked to the state of the longterm bond yields. We are expecting somewhere in 2020, from one terry conditions, longterm yields going down to negative yields. If you go into fiscal injection, that the banks, as a core part of the volume side, should do rather well. Nejra lets get to the first word news with Annabelle Droulers in hong kong. Trump is president accusing Speaker Nancy Pelosi of turning the white house into a star chamber, a European Court that became synonymous with abuse of power. The house is expected to vote to approve two articles of impeachment later today. The fed should hold rates next year, given the solid growth outlook. That is according to two regional fed president. Dallas chief Robert Kaplan was less upbeat but both rejected another call from President Trump for more easing. I already have baked into my outlook weak manufacturing, sluggish global growth, pretty sluggish business investment, but with a strong consumer. There would have to be some sort of change for that outlook. News 24 of theal day on air and at quick take by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Fedex earningsp, missed estimates. We discuss what is weighing on the career. This is bloomberg. Bloombergs is daybreak europe. I am nejra cehic in london. Manus here is what you need to know for the day. Fedex funk. The company suffered another blow yesterday when it missed estimates. The earnings will be no more the 11. 50 per share for fiscal year, down from the previous expectation of 30. Annmarie hordern joins us now. What exactly is weighing on the company . Annmarie one analyst called the results breathtakingly bad. It is the Second Straight Quarter they are cutting their profit outlook. A lot ofy, there are factors weighing on this result. First, they clearly have an amazon problem. This isnt just what happened two days ago with amazon blacklisting fedex in prime deliveries. Second, the trade war has been taking a bite out of fedex. Key industrial clients, this has hurt their demand for fedex. They have had to park some planes. That means less flying and the shipping. Finally, you can blame it on the calendar. Thanksgiving this year falling unusually late in the calendar year. That has meant an unusual start to the manic shipping and shopping frenzy. It has weighed on fedex not just for the quarter, but it has been a tough year for them. Nejra lets turn to the u. K. S p and fitch have improved their assessments of the Credit Outlook after Boris Johnsons conservative party won majority. Fromok shifted to stable negative. Fitch took the u. K. Off of ratings watch negative. Our next guest says the u. K. Is not out of the woods yet. She says, when the details of boriss plan is unveiled, she says the u. K. Could be back to another hard brexit scenario. Jackie, welcome to the show. Thank you for sticking around. How about how would you actually be inviting be advising investors and companies to hedge around this . What we have seen through the election friday morning in the beginning of this week but there is still a lot of volatility around. Dont call it quite yet. I think there was a lot of jubilation on friday, a bit of a relief rally. But we are saying to our clients, there is still a lot to happen between the next 18 months. That will be reflected in movement of the currency. Manus hold those thoughts. A little bit of breaking news. This is Fiat Chrysler and psa. They are entering into a binding agreement of a 5050 joint venture. Of course, they have been in these talks for nearly six weeks. Going to sell back to some of their holdings in psa. They hold about 4. 5 . About psa this is all getting that foothold into the u. S. A combination. Cap, 46of market billion market cap, so you will be able to go headtohead with ford. You have lines coming through from the ceo. Lets run through those. Seeing huge opportunities to share platforms with Fiat Chrysler. Also saying china is an opportunity for the company, and also saying it does not cover longterm governance and we do not expect issues of antitrust. Those are some of the lines coming in from tavarez. Fors jackie, thank you bearing with us, and your patience on that. I am interested to know about the positioning as the market is concerned. You have this euphoria, the ramp up, now a real dose of political reality, one could say, from boris johnson. How do you think the market is positioned . I think the market is positioned really well. One of the things i was going to say was that the u. K. Could see a little bit of a flurry of dealmaking. There has been real caution this year, you see it in the market becauseerms of m a people were not willing to go ahead and do transactions because they were concerned about the outlook. There is certainly a much clearer path and you could argue there is some good value. We are expecting an increase in m a activity. Again, that is an interesting story this morning as you start to see these deals come through. Nejra i believe that both of you think we will see a steepening of the guilt curve. Can i get a quick thought from . Ou as to why jackie we have had a flat curve for so long, it seems unnaturally flat. I think we will start to see Interest Rates come back in. Alain i think the key issue, we have been living in the u. K. Since 2010, austere policy. There is a guilt suite at the moment. We had some news yesterday of spending for the u. K. , and that is going to continue. Over the next few months, we should expect they move away from austerity that is not at. He long end manus there is a headline from yesterday that gilts are a sign of things to come. The bank of england, this amazing moment where we reprice the bank of england from a cut back down to 20 after yesterdays possibility or probability of hard brexit. The bank of england came back to a higher probability. Your view, and likewise to jackie. In play or not, 2020 . Alain i think the bank of. Ngland will be highly reactive then, you will need huge injection, not only monetary but probably fiscal injection at the same time. The boe would be a reaction function. Stage, if you were to say we bottom out at the partmy, the move some of this uncertainty, there should be some kind of relief that is good for sterling even though you should not be that enthusiastic. Jackie, do you play into that . Jackie i think they will be on hold for most of 2020. More chance of an increase. Some of the factors we are watching in the next few days or weeks will be the new governor of the bank of england and whether they will take a more hawkish or more dovish stance is something we will be looking at. Us,a thank you for joining jackie bowie from jcra. Alain bokobza stays with us. Coming up, we have your morning call. This is bloomberg. Nejra this is daybreak europe. Manus it is the deal that we have been waiting for. Psa and fiat getting together, this will create the fourth biggest auto company in the world. The italianamericanfrench linkup. It is a 5050 agreement. Carlos has ambitions, he will get what he will want. He says the merger does not cover longterm governance. They beast is born. Nejra exciting times. Today, strategists take on the rally. Dani the Battle Royale over emergingmarket assets. We saw citigroup taking opposite sides on where they think em will go. City cut their outlook on em in favor of the u. S. There were a whole host of reasons but onewest that trading volumes are slowing and Monetary Policy is actually tightening ineffectiveness in china. Jp morgan takes the other side of that, saying they like ems specifically, bullish on bonds and fx. They say recession odds are 25 from 40 own to in 2020. Manus lovely juxtaposition there in the market. From societe is generale. Are you a buyer of em in the equity space or you a little bit more doubtful . Em, relative to the u. S. , is it the Biggest Discount in 16 years . Alain we have recommended to increase. The reasoning is quite simple. Of yields atllapse the long end of the curve, which have been on all the bond markets in 2019. Risk on thee some currency. The total quantity of risk has lowered because the valuation has improved. Fear on the trade war receding as an impact on the risk premium. Em, three quarters of equities are in asia. , we like to floors recommend em equities. Nejra it is interesting because you are kind of shifting your focus away from china because of those trade war risks receding in the equity space. Alain bokobza, great to have you on the show. That is it for daybreak europe. The european open is up next. We are seeing a little bit of a fading in the phase i euphoria. Futures ,dax futures down. This is bloomberg. Nejra good morning. Welcome to Bloomberg Markets european open. We are live from our European Headquarters in the city of london. I am anna edwards alongside matt miller in berlin. A breather. Take investors wait for the next catalyst. Europe points marginally lower in terms of futures. The cash trading is just one hour away. Manus
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