Amidboc trims the rrr suspendedey have plans for the shanghailondon stock connect. Kim jongun says he will soon , adding to weapon trumps Foreign Policy concerns as we enter the election year. Carlos ghosns theories about how hes keep from japan with lebanon saying he thought he was released one week before he sled tokyo. Fled to tokyo. Under one hour away until the start of cash equity trading in europe. Futureske a look at how are opening. Down will dax futures futures on other european indexes are rising. Closed on the dax was the new years eve holiday. So playing a little bit of catchup. In terms of u. S. Stocks, futures are up decisively. Nasdaq futures are rising more than. 4 . Looks like you could see decent gains in the u. S. Anna, happy new year to you. What do you see on the gmm . Anna happy new year to you. A little bit of impact from the announcement that cut the announcement for chinese banks. Yuan not moving all that far. Broadly speaking, the picture is mixed. The rest of the week, that has an impact on equity markets in the region and treasury markets. Mind what we are seeing on the rrr. The announcement about more liquidity moving into the market. This pmi coming in nicely over 50. We keep an eye on all of that, of course. Bonds are coming office of strong levels, so after all of that exuberance cannot do we suffer a little bit of vertigo . Lots to talk about this morning. Not least of which moves out of china. Lets talk about this with mark cudmore from singapore. What does this cut tell us about the future . They have whole toolset in terms of ways they can simulate the economy. What to be read into this early move . It is obviously good news. It should be highlighted that this was widely expected. We had thecember, expected cut in january and anticipated it would come on the 15th. , little earlier than expected but this was widely expected. When it is delivered, it is still good news and emphasizes the pboc will continue to support markets and the domestic economy. Overall, they are doing a good job of managing a gradual stillwn, meaning it is growing quite fast even if it is coming down. Message,s a good saying they still have measures in the toolbox and will support markets. It is good for chinese and global assets. Matt i might as well throw in the question of the day and ask you for your blog responses you are asking which Central Banks matter most in 2019 2020. It interestingly not going to be the fed. They are going to be the fourth most in 2020. The pboc, ecb, boj all have over 5 trillion. So it is only the fourthlargest anyways. Be policy moves from the ecb that will be most interesting. At the end of december, ecb surpassed the boj to be the largest central bank in the world. It is their reignition that is important. Ecb might be the most interesting one towards the end of the were. Of the year. Stock as wetake start the new year. 2020 is upon us. The s p finishing at almost 29 . The dow and nasdaq surpassing both of those. Do with stocks and 2020 . Theres is probably some more upside. I dont think it will be anything like last year. I think stock outperformance has come to an end. We have seenr, other stockmarkets outperform and i think that is the start of a longterm the. Theme. It is too early to turn bearish. Later, but may come not yet. Well. Itself may do very i also think european equities can outperform u. S. Equities despite the fact that growth will be subdued. Matt i want to ask you about china temporarily suspending the shanghailondon stock plan. At least this is what weve learned according to reuters. Is this a big deal . China is, it seems as westernhe hatches democracy objects to the way it deals with hong kong. It is big news in terms of the political signals. It should not be a directly big market story but it did seem to be impacting sterling. I think it will send the signal the u. K. Could have another trade partner they could struggle to deal with. It is a slightly worrying sign. There is a message they are willing to take other measures to retaliate against countries that dont play along with their two on hong kong. Tune on hong kong. Ands a subtle story shouldnt be too direct, but there could be a secondary effect. Anna mark cudmore, thank you for all of your work. We look forward to plenty more commentary through 2020. Remember, you can join the debate. Which central bank matters most in 2020 . Anna im sure most replied it would be governments, that is something well pick up their the next couple of hours. Program, on the ghosns great escape. The former Renault Nissan chairman landis in lebanon with tales to tell and scores to settle. With theories running wild, we bring you the facts. Matt welcome back, this is the european open. We are 40 minutes away from the start of cash equities trading. The first day of trading in the new year. Lets get first word news with laura wright in london. Militia has broken up its encampment at side of the u. S. Embassy in baghdad. That comes after they attacked the compound earlier this week. Israels Prime Minister has said he will seek immunity from prosecution on corruption charges. He hopes there is no functioning government to consider his request, gambling that he will be leading the coalition. Australia has drafted in the navy to rescue torres from wildfires. Eight people have been killed in the blazes that have swept through New South Wales and neighboring victoria, destroying hundreds of properties. Global news, 24 hours a day on air, on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Matt Carlos Ghosns dramatic escape to lebanon continues to pose more questions than answers. Eirut may have been pressing for return of the chairman before returning from japan. Lets bring in our asia transport editor. Good to have you with us. Theories abound as to how he escaped. What are the facts . Morning. Is wetest development have got tokyos prosecutors searching his house in the city. There have been some colorful theories about how he actually got out of japan. The mechanisms of his escape are still unclear. Reported media has got into that he lebanon on a french passport they said they were holding his passportss ports and was flabbergasted as to how he got out he was allowed to hold onto a second french passport. He had the reported help of a private Security Firm to get him out and it would obviously take quite a lot of planning to evade all of the surveillance measures he was under. They are still working on the exact details of his escape. Matt it would make sense he had the help of defense contractors. Is there any concern in tokyo that he was helped directly i the lebanese government or allies in the middle east . Or that western intelligence agencies would have known about it . There are reports he has met lebanese leaders upon his room arrival, but there are some theories he may have been assisted by the japanese side, or at least let go without too avoid a perhaps embarrassing trial. The prosecution rate in japan is nearly 100 , so thats one of the reasons he wanted to get out. Whether or not he can leave their, we will see. There, we will see. Anna we will turn to the story periodically. Year with bumpy indexes across europe in bull territory. Goldhe year was marked by prices and equities moving higher in tandem with the precious metal sitting about 1500. Does this tell us anything about inflation . Says that this is a sign inflation is returning. Lets talk about inflation. I pulled up the chart of see to be and they do moving up a little bit. You thatnced are inflation is in the air. Gold andct that we had index prices going up, longterm Interest Rates rising. The dollar of it week. And the big cap u. S. Stocks soaring. Inflation. Long with the people are looking for some sort of safe haven against the upturn in inflation and that is indeed my central scenario. Matt anna anna this is because you think mobilization has delivered what can . These two powerful forces, globalization and redigitalization, globalization is already going in verse. Reverse. Digitalization is going ahead but it is one area where we are getting overinvestment. In some ways, you will probably see broader demand. Wane,forces wayne inflation emerges. Participantsrket believe the fed is on hold with a dovish tilt. Meaning that if they do anything, the fed will likely cut. Do you think we could see a federal rate reserve increase . No. I go along that we are not going to see any moves on right. But if you couple that with the inflation climate, there are going to be a growing number of people in the markets anxious the fed will get way behind the curve and we will be moving into phigher, sustained inflation eriod. Thats what could come back and knock the equity market. This assuming they dont want to call quantitative easing or do you think they could shrink the Balance Sheet . At the moment, they are expanding. Marketany sort of asset pullback, we continue with that. Importantly basically running an emperors new clothes policy, depending very much on econometric modeling. Whether it is a phillips curve or predictions. Econometrics are very unstable and tested. Is not in the environment to upset Central Banks. You go on to talk about inflation, but also downward forces. You list a lot of other downward forces. How does that sit with inflation . Coming back to my central scenario, inflation will be rising. We are in a very advanced stage of asset inflation and its easy to imagine various influences bringing deflation. Short by ave arises gathering of recession and forces. My central thinking is that inflation will rise, but we are unlikely to move into recession. Matt we are going to keep you with us, talking a lot more to bredna own Brendan Brown. Friday, the chicago fed president joins our colleagues at 4 00 p. M. And in time. London time. And the cleveland fed president joins bloomberg from 6 00 p. M. London time. Maybe stay in on a friday night and watch a fed governor if an area interview. This is bloomberg. Matt welcome back to Bloomberg Markets europe. European open. The dax was closed and is playing catchup. Other indexes that were open or showing gains in futures and should open in the green. Stayed manufacturing pmi expanisve, in line with the recent pick up in data. Later, we get readings for france, and, germany. Brandon brown is still with us. Are we starting to se e should we expect more positive pmi across europe . That is very likely given the prevailing story of the trump war. F we are going to see that reflected in the expectation of these indices, but i would caution about reading too much into things. We tend to hear more from the losers than the gainers. Anna this chart shows pmi. We have got the eurozone in yellow. That interesting to note it has been europe that has suffered the most. Does that change in 2020 . Iink it changes think it changes. Indeed, one big . We were talking about his inflation will be reaching 6 . China easingt see Monetary Policy given its commitment to keep the dollar rate fixed. Matt done you expect the phase one deal and working on a phase confidence improve and thats out the economy continue its recovery. I see that helping the chinese economy to pull up a little bit, but what will weigh china down is the continuation of the reverberation of its huge credit bubble and we should not under raised mate underestimate the extent to which that goes into the household sector. Anna thank you very much. Brandon brown from the Macro Hedge Advisors founding. China is tackling a number of issues, including north korea. Thei wanted to mention Foreign Ministry is saying they are not aware of specifics on stock suspensions. This false reports that china had temporarily locked plans for this and we will dig for more details. Talk more about this when we contact. Come back. Matt welcome back to the european open. We are 30 minutes away from the start of cash trading across europe and in the u. K. Mixed ook at the picture. Dax is playing a little bit of catchup. It was closed on the 31st. The cac was open for a short parttime. Old is continuing to rise. Our guest cohost at this hour talking about an unexpected rebirth of inflation. You know, in the past when i was a kid, thats why people bought gold to guard against inflation. Very interesting stuff there as well. Here you see gold now. That is a threeday chart. Of course yesterday was closed. Anna . Anna another reason you might boy gold is if youre worried about lets talk about some of those now. Kim jong un claimed he is no longer bound by his pledge to halt missile tests. President trumps Immediate Reaction to that threat was muted repeating that kim had agreed to denuclear leerize. President trump he did sign a contract. That was done in singapore. I think he is a man of his word. Were going to find out. I think he is a man of his word. Anna now with the u. S. Election coming up in 2020, President Trumps actions will be closely watched on this front. Our guest joins with us a look ahead what to expect in 2020. He says the u. S. Political calendar. What are the key dates to watch this year . Watching two months in particular from about february 3 to the first week of march and im watching for november into early december. Ill tell you why. The democratic president ial race really gets going with the iowa caucus that first week of march. And then it sort of comes to an early kind of resolution on super tuesday. One of two things happens. Either somebody races out and grabs all of the delegates really quickly, establishes momentum and becomes a runaway frontrunner and were all over after super tuesday or it gets sort of split up and you get into the democratic partys proportional rules on allocating delegates. In which case youre looking at a long fight. I expect really to have only two or three maybe four on the very high end after super tuesday going forward. Thats the first one. The second one is everyone is looking at november 3, the election day. After that is really key. Youre going to get one of two things. Either one, donald trump is not going to be the president for much longer or number two, he is going to be completely unfettered with everything thrown at him including impeachment and walk away with everything. He goes to the g20 at the end of november with all of those geopolitical lines going on. There on the u. S. Calendar two things im really watching. February to march and november to december. The key gates on the calendar for the u. S. This year key dates on the calendar for the u. S. This year. Matt clearly it is very early to talk about this and were going to and everyone is going to. I saw a poll on the 31st actually that showed that biden was slipping a little bit in the florida or rising a little bit in the florida horserace. What do you see in terms over the democrats right now . Yeah, matt, i think there is an interesting by fur indication in the democratic field. Bifurcation in the democratic field. State polls, youre looking at beauty gentlemen of the jury is in first. I think it is like a top tier tier and Elizabeth Warren has a lot of support and big money behind her and im watching Amy Klobuchar in those early states. Hes one that appeals to minnesota. You cant talk about this race without noting that Michael Bloomberg who is the founder majority owner of bloomberg l. P. He is also in the race putting most of his chips toward twofer tuesday. That first week in march. If you look at the National Polls you do get somewhat of a different picture on where this race is now. Anna thanks very much for oining us. We will look ahead to the u. S. Lection. Brendan is still with us. What interests you from investor perspective . Are you interested in geopolitics . Seeming to be still there between kim jong un and President Trump despite the words from President Trump or is it the political race that interests you from a stock perspective . Where are you focused . I would say geopolitics. Were in a vulnerable period for the u. S. Many trying to take advantage of u. S. Weakness. One aspect i would focus on particularly is the relationship between saudi arabia and china on the basis that whichever candidate wins on the democratic side, they are not going to be favorable towards saudi arabia and we are seeing this alliance sort of forming between the two countries and the hardliners probably got some encouragement from the deal. Anna why to you say u. S. Weakness . Is that because over the trade story . I would look at the background of the impeachment, and the sort of weak truce that has merged with china and that will be seen as some sort of opportunity and we should be here i think some geopolitical surprise as a result of that. Matt were seeing reports of this chinalondon trade link possibly being suspended and i would assume the reason is the u. K. s support of hong kongs push for democracy. It seems that that could also plenty a problem in the u. S. China talks. Does this develop into something bigger if western democracies around the world start to support hong kong and china reacts by clamping down, is that a problem in 2020 . Of t would not be forefront the various scenarios i would look at. Much more i would look at the relationships between china, taiwan, the relationship between saudi and china, how it will ffect the iranian situation, these are the sort of issues i would look at rather than europe, china. Matt all right. Thanks very much. Brendan. Brendan brown Founding Partner of macro hedge. Were going to get more on Carlos Ghosns dramatic escape from japan and lets talk about what could be next in the saga. We may here more out of this man. This is bloomberg. Anna welcome back to the european open. 20 minutes to go until start of cash equity trading this thursday. It is thursday and the first trading day of the new year. Lets get a Bloomberg Business flash. Thanks, anna. China is cutting reserve requirements for banks. The ratio for commercial lenders will be lowered by 50 basis points january 6. It aims to make it cheaper for companies to borrow money. Landing attempt a this year to become an ambitious space power. David stern, the man who transformed the nba into a global multimillion dollar powerhouse has died at age 77. He boosted revenue from 180 million the year before taking over to 5. 5 billion in 2014. He is the longest tenured commissioner of any professional sport. Matt thanks very much. Laura wright there in london with your flash. Carlos ghosns dramatic escape to lebanon continues to pose more questions than answers. Beirut may have been pressing for the return of the former nissan chairman just a week before he slipped out according to the financial times. Our asia transport editor, will davies, what do we know about the pressure beirut had been putting on tokyo in terms of getting carlos ghosn out of japan . A report has been denied that ghosn met with the president of lebanon when he arrived. The japanese side has been fairly quiet on the government side of things. They are on holiday at the moment, through this week. Playing golf and relaxing. It is a big holiday for japan. We havent really heard much from their side, the governments side on how lebanon was pushing for this. Anna no doubt carlos ghosn has a story to tell now. There have been reports that he might be set to do that early next week. What do we expect . He is due to hold a press conference in beirut on january 8. It is still a few days away. He already issued a press statement when he arrived in lebanon harshly criticizing the Japanese Justice system saying he would not get a free trial there. We can expect him to speak for freely. He is able to speak for freely. It could be quite a fiery conference next week. You imagine he will be aimingan at the Japanese Justice system and nissan. And the various conditions of his bail which were when he was under house arrest. He was not allowed to see his wife or any any contact with her. He will have some complaints bout how the judicial system works there. Matt there is more to discuss from hong kong with the latest on carlos ghosn. European shares ushered out the decade in style with their biggest annual advance since 2009. He green swept across sectors. Financial services, construction, technology, retail and industrials up more than 30 last year. Telecoms the biggest lager. What needs to happen to sustain the momentum . A european with equities strategist. It is too early to talk about this year isnt it . Of 2019 be repeated in terms this incredible overall performance . The quick answer from our perspective is no. That is not as negative as that oneword answer would shugget. You have to keep in mind 2019s huge performance as you said was the best in a decade. But there are a couple of things to consider with it. The first is it was an unusual year. It started at a rock bottom level. If you go back 15 months opposed stoxx washs, the euro up a modest 6 . You really do have to consider how we started 2019 and as we go into 2020, what we have is a need for earnings to carry the market. 2019 was a reevaluation year where we saw multiples move up sharply from those extraordinaryly low levels. Were now at a basically fair level and from here we need to ee earnings kick in. Anna ok. Matt europe started the year cheaper than the u. S. In terms of p e. It was cheaper than the u. S. At the start of 2018, 2017, 1015. It has always been cheaper than the u. S. Is that going to change this year . Matt, our view is that the reason for the underevaluation on a relative basis is for structural than anything else. It is not going to go away. As we see it, youre looking at the u. K. , ltiple for a 14. 5 multiple for europe, the u. K. 18 and change for the u. S. This has to do in part with big sectors in europe and the u. K. Such as financials and energy being basically just simply cheap sectors on a relative basis and you have got some significant big weights in the u. S. Such aztec, internet, ecommerce that trade at very high levels and they have significantly bigger weights than what you find here in europe. That change is not going to go away. Anna can the u. K. Reverse its underperformance in 2020 . Is that a big ask . We still have uncertainties. Our view is pragmatically optimistic i guess i would say. Look at financials. Look at energy. Hose were the huge drags in 20 19. Anna big weights in london. Big weights in london. As we look into 2020, we have already started to see the 10year to twoyear spread. You can use many other metrics and think about Interest Rates starting to tick up in the u. K. Some clarity with brexit. Clarity with global economics. U. S. China trade for example should continue to bolster that. If that continues, financials, specifically banks earnings will move ahead. Energy, we saw significant megarevisions in the last half of the year. We have seen oil pick up from in the 50s to now in the mid 60s. Were not super bullish on oil prices but we have seen an awful lot of negativity in the energy sector. Matt if youre bearish, gold has already had quite a run, so maybe not the best place to hide. On the other hand you have u. S. Treasury yields that have bounced back to almost 2 and the yen, you can buy 109 for a dollar. Where is the best place for bears to put their money . Not withstanding our more bullish tilt, matt, you have to ook at a couple of things from european perspective. European healthcare. That is the sector, from the standpoint of earnings revisions and it is not too extended on the evaluation basis and from a country perspective, it is switzerland and that is a tough call because it is heavily skewed towards staples an healthcare. Thats why it has a defensive characteristic. Evaluations extended with switzerland having done so well last year but if you want to put your head in the sand, that is still the best place to go. Anna thank you very much. Good time to mention that switzerland is not open today. I note with interest. Joining with us analysis of the markets. A few other market closures, many of these European Equity markets expected to open up in around 10 minutes of course. Coming up, how will the next 12 months in the Brexit Process impact europes super players. That is the feature of our morning call. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. We are seven minutes away from the start of cash, equities trading. Lets get straight over to ann marie. Talk to us about how the next 12 months in the Brexit Process impact u. K. s supermarket players. Jeffrey is out with ore morning call. Matt, you know that the brits love supermarkets and jeffreys are quite bullish on the whole sector. When tesco comes out with their trading, it is going to be upbeat and on a positive note. Jeffries is saying the asian process could materialize more quickly. A strong start to 2020. They also have a buy on morrison but a hold on sainsbury. Matt thanks very much. Looking at the jeffries call on tesco. Were also watching miners and steel makers and luxury stocks. What do they have in common . It could all be boosted by the chinese move to inject cash into its economy. Keep an eye on rio tinto, b. H. P. Lvmh care. Lencore, anna a couple of others that were keeping an eye on. An noum on announcement on oil. Also as we were talking about that, we have seen a note about the aviation sector. And agrade from lufthansa upgreat from i. A. G. Well see whether anybody picks up on that, 50 notes today. We have a few market closings. Switzerland. Their equity trading there. Russia, romania and others also closed. Those are the main ones. Ome positivity expected on the rrr cut from china. Matt we were closed here on the last trading day, december 31, maybe a little bit of catchup here. That could turn around. These are still keep in mind relatively light volumes that were going to be watching. Many people who were off on the 31st and the 1st are also going to be taking off the second and the third. Certainly here in germany, a lot of people are not coming back to work until january 6. Coming up, it is the market openings. Futures are pointing higher, especially london as the pound falls. This is bloomberg. When it comes to using data, everyone is different. Which is why Xfinity Mobile is a different kind of Wireless Network that lets you design your own data. Choose unlimited, shared data, or mix lines of each and switch any line, anytime. Giving you more choice and control compared to other top wireless carriers. Save up to 400 a year when you switch. Plus, unwrap 250 off a new samsung phone. Click, call or visit a store today. Anna mince away from the start of equity trading. Here are your headlines. The pboc trims the rrr at chinese Stocks Holding a twoyear high. Beijing has suspended plans for the shanghailondon stock connect. Kim jong un says he will soon debut a new strategic weapon. Plus ghosns great escape. How the former head of renault. D nissan escaped japan he sought his release a week before he fled tokyo. Matt were looking at european futures that are for the most part higher, especially in london. You can see the euro stocks futures gaining half a percent as well. Dax futures will play catchup because they were closed completely on the last trading day of the year. We see the market opening. What do you see on gmm . Anna we were expecting a little bit of movement to the upside. As you were saying, a lot of people will still be away today. A lot of Market Participants will not be at their desks giving the markets their full attention. We have some moves to the upside in the equity markets. The ftse up. 3 . The French Market really flying. 6 . Is it the impact of this rrr cut that we saw from china . Is that having an impact on Luxury Companies that sell to china or Mining Companies that list in london . The fx market, we see a bit of movement do to the downside in the pound. 132. 21. Lets look a at what is going on in the sector picture. Broadly looking fairly green. European equity markets moving to the upside. Financials moving to the upside. Tell comes, telecoms, financials the biggest gaining sector on the stoxx 600 last year. Technology also did pretty well. Construction did well. Financials doesnt include in that context, doesnt include the Banking Sector. That is slightly different and did a lot worse. Many of these sectors moving higher today as staples moving lower and healthcare was a laggard in 2019 but makes gains all the same in todays session. Im sure you have a few movers. Matt we do have a few. In fact 440 stocks are up and only 90 are down right now. For the most part they are roseing with the tide. The biggest winners in terms of adding points to the stoxx 600 are airbus at the top with more than 2 gain and we see b. P. Rising with a more than 1 gain so those stocks helping to add to the stoxx 600. We mentioned that you should watch luxury stocks, hennessy right up there. You see all of the oil stocks riseing with b. P. , royal dutch shell, total, all gaining right now. If you look at the losers, you diagio down. Then you see s p and linda taking points away as well. And linde. Gain oking at a 1. 6 point on the stoxx 600. This after a year in which markets which bumper gains across developed markets. We saw in 2019 the s p gaining nearly 6 trillion in value. The euro stoxx index up 25 for the year. The question is now can the longest bull market in history at least in the u. S. Continue to keep on running . Oining us is the chief strategist at global principle investors. What do you think . Do we continue to have gains . We had them across almost all Asset Classes in 2019. Do we continue to see these gains in 2020 . Hi, matt. Thanks for having me on. I think the key thing is that we will likely see continued gains given that we have had a lot of tensions and challenges that 2019 being s in lifted in 2020 so far at least. We could see a slight tilt in the regional performance. Were expecting the emerging markets in europe to outperform the u. S. This year. A different aspect than we had in 2019. Anna happy new year. Let me ask you where europe sits. This is a chance for european stock gains. 2019 for european stocks might not have been as good as it was in the u. S. But it was good compared to recent history, wasnt it. Where do we stand on european stocks at this point . We really like european stocks. The central bank accommodation, the flood of liquidity. That means that risk assets should continue to perform. From the european standpoint specifically, the macro performance we see needs a slight improvement. We think there is going to be greater pressure for the policy to come through. We dont think it is significant. It should perform decently. Matt what is the i mean, were still going to see a big spread i assume between the u. S. And European Equity evaluations. . O you think that contracts i think it contracts a little bit. In the u. S. Were not expecting a bad performance. We think there will be gains in the u. S. As well. We think evaluation gap will close a little bit. A lot of it depends on how the u. S. Elections progresses through the year and making sure u. S. China, the disillusion of the tensions dont come back. Anna you mentioned something in your notes that made me smoil this morning. We know that expansions dont necessarily die of old age and stock rallies dont necessarily die of old age but do they get vert go . Vertigo . It doesnt sound like you think so. Many investors will be reassessing the gains we saw in 2019. I think that is key. We had the central bank liquidity. It is not a strong economic environment. re not expecting a strong boom by any means. Economics continue to wide. That widening means investors over the progress of the year will get more what that was based on. Anna easy, lazy for all of that. Is that too lazy . Is there a lot more going on . There is a lot to say. Actually we like financials and technology for this year. Because of that buyback story. Theont expect recession on horizon either this year. There is no reason to be cash. You should be fully invested. That continues to push up risk assets. Matt you say we could see a pendulum swingow value. It has been long awaited of course. What drives that and what kind op pendulum swing do you expect in terms of sure. What were expecting to see is really something which is more of a technical thing rather than the fundamentally driven movement. What we have had so far and what we saw in october was that really big again disconnect evaluation side of it. To see a more Sustainable Movement back into value, from movement to stocks you need to see a much Stronger Economic environment. We dont think it is going to be a particularly strong growth environment but it doesnt mean recession is on the horizon. We think Technical Movement into alue is a significant asset. Anna thanks very much. Up next, well talk more about what is going on in china. The chinese pboc trimming the rrr. President trump cease january 15 for the trade deal sinings. Both of those seemingly avorable for equity markets. The first day of trading for 2020. Up. 6 . This is bloomberg. Anna welcome back to the european open. 11 minutes into the first trading day of 2020. Happy new year, everybody. We have European Equity markets in happy form. The stoxx 600 up by. 6 . Lets get a Bloomberg Business flash. Thanks, anna. Lebanon has sought to return carlos ghosn a week before he escaped house arrest in tokyo. That is according to the financial times. They requested that ghosn be tried in the country but japanese officials did not respond. India is shooting for the moon once more. The country will probably attempt a landing this year as it seeks to restore its credentials as an ambitious space power after a previous try ast year failed. David stern has died at age 77. 5. 5 ted revenue to billion in 2014. His 30 years of service make him the longest tenured commissioner of any professional sport. Matt thanks very much. Laura wright there in london with your business flash. Slashed the commercial rate for lenders by 50 basis point. The move effective for monday aims to help make it cheaper for companies to borrow money. Meanwhile chinas manufacturing p. M. I. Stayed in expansion territory for the fifth straight month and over in the u. S. , President Trump said he will sign the first phase of a trade deal on january 15. And he is going to go to beijing to talk about the second phase. Lets get back to our guest, a chief strategist at principle global investors. We started the show with the headline new year, new ye. Of course it is really more of the same. Is this looser Monetary Policy, is this stimulus of the combined with the trade deal going to help bring the economy in china back to the kind of growth that they want to see . Yes. Hat is our view. 2018 was a learning process for them to understand how the mechanism works. They have been fine tuning that. I think this yearered with see stabilize igse. Were not expecting to see a strong boom in chinese gothe. Growth but a level they are under confident in. Anna the instinctive response from economists, a lot of economists say were going to see more of this and they are going to keep stimulating the economy in this way. Always mindful of not overstimulating the economy that they have been trying to delever or some years. If the chinese economy is not responding way that hope, they will from the monetary side. Matt are you concerned about the rift that is growing between western democracies and china, concerning hong kong. Im sure that governments can ignore the push of the people of ong kong for democracy if it means a stronger financial relationship in the shortterm but longterm is i. N. G. Th going to be a problem . Is it going to be a problem . It is one of the key areas to watch this year. How does it impact a lot of the u. S. China relations and what is the impact on sundays trade . Hopefully the way that it is going, we think both sides will see there is a huge benefit in maybe trying to keep a little bit of status quo for this year. That is one of the risks that would be on our radar and we would advise investors to keep an eye on that one. Anna you talk about a bounce for markets being for the year ahead. Is that the case . How does that sit with the other things we talked about . Is that fairly risk on then . We do like emerging markets for this year. We think we prefer emerging asia. One of the key reasons is the u. S. China trade resolution. They made a partial deal of course. Central banks, stimulus coming into play as well. Also the weaker dollar. It tells us emerging markets should have a good year in 2020. There will be pockets you have to pick very carefully. Some areas of south america we have been seeing political hot spots there that you need to have an unconstrained action into those investments. Matt youre going to stick with us. Our guest cohost for the hour. Up next, the stocks on the watch o far this morning including tullo oil, discovered oil this guy janne. This guy janne. They are taking away fully 1 5 of its value 17 minutes into the session. This is bloomberg. S bloomberg. Matt welcome back to the european open. Were 21 mince into the trading day now and looking at gains across the board. Indeed the dak dax is up as well. 7 and the tse up character up almost one full percent. Lets get over to ann marie. Good morning. Basic resources helping lift the stoxx 600 this morning, up 1 . China injecting this move of fresh cash into the economy and also recently the data presents a brighter outlook for china which is going to help miners. Airbus up more than 20. 5 this morning. They had record deliveries for air craft. Up more than 202. 5 this morning. Tullow oil was the worst performer on the stoxx 600 in 2019. They are starting 2020 on the back foot again. They find oil in guyana but it just wasnt enough when they started to drill. Matt thanks very much for that. Were going to get a final reading of the eurozones december manufacturing p. M. I. At a. M. London time. It comes after the last surveys of purchasing managers for 2019, highlight of the dire date in industry in germany which was one of the biggest drags on the region last year. Anna on the policy side, e. C. B. Policy maker has issued a strongly worded warning to leaders that they must act to prevent the region sliding into a lengthy period of low economic growth, worth mentioning in that regard. The drop talked about the forecast of 47. That is the first of a series of p. M. I. Readings well be getting from europe today. Ur guest joins us. I have a chart that shows the p. M. I. s of europe suffering more than the u. S. And the chinese p. M. I. s in 2019 despite the main point of tension in global trade being between the u. S. And china but for obvious reasons that has european and we see this warning from one member of the e. C. B. Of course about the danger that lies ahead in slow growth from europe. What do you expect from the growth story on europe . We are expecting to see some growth stabilization in europe. A number of reasons may have to o with the u. S. China trade. A number of these structural issues still exist. We are not expecting to see strong growth fra the e. C. B. s perspective. Keeping up the stimulus plans will be very, very important but we also think that the Movement Toward negative Interest Rates has come to a halt. If europe does request further stimulus, it will not come from further rate cuts. Information that they can change the limbs. Give confidence to the market. Thats why were expecting to see Central Banks when you look towards governments more matt Brendan Brown was telling us that he thinks the e. C. B. Getting way from less negative and closer to zero. Do you think there is any likelihood of that . That is the movement that the direction of travel. Not necessarily for this year. Across the globe, i think this push away from negative Interest Rates has been an experiment that hasnt had the results they were hoping for. Looking out at what the impact is on bank lending, maybe it is better to not be anna speaking of banks. You referred to colonizeation that were going to see more of this kind of strategy for raising money. Particularly for the banks because you say regulation change is going to drive more supply. Demand is being driven by an ongoing hunt for yields. What we have seen over the last year, even in china, a lot of those positions that have oversubscribed. There is a huge amount of demand. When you have credit spreads so tight to get some pickup means the people are looking to go own the curve with coco, you tend to get a bigger pickup. It is not a huge risk here. We think there will be continued demands for preferred securities in 2020. Matt any possibility by the way that we start to see real european banking consolidation in 2020 . When you talk to Central Bank Officials or people in brussels they say they can do it. When you talk to bank chiefs they all say the Banking Union is too far away for that to be a possibility. I think it is one of those things that it is the direction of travel. European integration feels like the moving at a snails pace. Were moving in that direction. We dont think it will happen for 2020 but a Banking Union i think is the end game here. Anna interesting. I was looking at the function on the stoxx 600. Looking at things by sector. For the past 12 months and we have the Banking Sector is one of the worst performing but it still made gains of 10 . The argument there is consolidation could improve profitability in the Banking Sector in europe. One of the reasons that we really like financials is you mentioned it before. Buy backs. In terms of the relative evaluations, which sect of has underperformed the most and where we expect to see the movement. Speaking of the yield, not only in the u. S. But in europe. Anna great to speak to you. Thank you very much for joining us. Chief strategist at principle global investors. Up next, more on carlos geens dramatic escape to lebanon. Reports out of turkey investigating what role they might have played in this escape. This is bloomberg. His is bloomberg. Anna welcome back to the european open. 30 minutes into your trading day. Im anna edwards from our European Headquarters in london and matt miller in berlin. There might be a few Market Participants today. Early in 2020 but were still making good gains. Matt absolutely. 2. 5 points added for the stoxx 600 up to 418. It does look like at least for this day of 2020, the rally is going to continue. Around the world, not all of these not all of these countries are open for trading. These are just implied policy rates. Nothing to do with the moves in stocks. Where you might see policy going just in case you were wondering, there you go. Lets get to laura wright now for the first word news. Laura . Thanks, matt. An Iraqi Militia backed by iran. Fighters attacked the come pound early they are week. The move could ease tensions between iran and washington. Gamblingnetanyahu s that once the coalition is formed he will be the one leading it. North koreas leader has called shocking action against the u. S. Kim jong un said he is no longer bound by his pledge to halt missile tests. It adds to trumps concerns in a politically chaveraged year. Many holiday makers struggled to escape as the danger escalated. Eight people have been killed in the blaze in south wales and victoria. Global news 24 hours a day on air, powered by more than 2700 journalists and analysts in in more than 120 countries. This is bloomberg. Anna . Matt . Matt laura, thanks very much. Laura wright with your first word news. Carlos ghosns dramatic escape from japan continues to pose for mes than answers. More questions than answers. He went to lebanon. Beirut may have been pressing for the return a week before he slipped out of japan. They may have been pressing for the return a year before he escaped from japan. We know the lebonese helped him get a new mat less in prison and out of solitary confinement. What is more important is lets bring in chris bryant to join us. To me, the story has always been very fascinating because this is a rock star to have automotive world that i have followed for my entire career but it is not a surprise that maybe a Corporate Executive would do something unethical. It is not a surprise that other executives may throw the chief under the bus. For me the Biggest Surprise of this story all along has been a western democracy well, western, with a large w, could have a prosecution rate of more than 99 . Is that really does that really seem to you like a fair Justice System . Well, it certainly raises questions, matt. All along mr. Ghosn said he would not get a fair trial in japan and therefore really he should be tried somewhere else. The extraordinary thing here of course, is he has taken matters into his own hands. Matt if everybody who is tried is found guilty and convicted, how could you expect a fair trial . Exactly, matt. Not equally. It is extraordinary. Mr. Ghosn, next week will finally answer questions and will have to explain ok, fine, there are accusations against me. Those really now need to be dealt with and thesht just be dealt with in a press conference. He wants a trial in lebanon or france that his wife is suggesting. Anna do you think this is likely that he will go from lebanon to france . Legal systembe the would do what the legal system did if he decides do do that. Macron might not welcome that on his doorstep. I dont think it is a coincidence that ghosn has ended up in lebanon. It is a country that is extremely sympathetic to him. France has been retice end up to retice end up to now about ghosn. Acing the danger equally, i think if ghosn continues to hide out in lebanon and there isnt a legal case then everybody can agree it is fair and just, then he will never be able to fully clear his name because after all there are accusations out against him. Matt im not sure about that. Listen, here is the thing. There cant be a trial in japan that is fair and just. Would you agree to that if more than 99 pkt of the cases brought are 99 of the cases brought end with a guilty sentence and if you agree there is not the possibility of a fair and just trial in japan, you certainly cant imagine him being tried in france or the u. S. Where he would just be immediately sent back to japan. Right . They all have extradition treatys with japan. He has to stay in a country that doesnt have an extradition treaty with japan. Youre right. He is not going to go anywhere where he thinks he will end up in japan again. He feels very strongly that he is innocent and has the right to defend himself against those charges. Right now he has fled from Japanese Justice which means that if nothing else, he has that hanging over his name. A fugitive from justice now. Next weeks press conference is absolutely key. He is going to start finding his corner. It is going to be difficult for nissan and renault. Both companies deteriorated recently. If he is going to be firing from his corner, i would expect something to be fired back. Anna it is going to be fascinating. He is going to be able to speak freely when he finally gets to give his side of this case. Up until now, we have not heard that much from mr. Ghosn. He had an opportunity last year in a brief video message which he record. He feared he might be rearrested. He said there, look, he was innocent. He outlined there has been some kind of conspiracy at nissan. He did not name names on that occasion. One would expect he would do so now. He believes he was ousted and these ackizations were accusations were against him because he wanted a closer line with nissan and rhone and some did not want that to happen. Matt i look forward to your future columns on this. He knows this is a story that well be covering for a long time. Chris bryant is an opinion columnist. Up next , were going to bring you some of the stock movers this morning including commerzbank starting the year with some strong gains. Well bring you the story on that next. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. We are 41 minutes into the trading session right now and youre looking at big green arrows for the first day of 2020. Lets get to the Bloomberg Business flash and laura wright in london. Thanks, matt. China is cutting reserve requirements for banks. The ratios for lenders will be lowered by 50 basis points releasing about 800 yuan of liquidity into the system. The aim aim is to make it cheaper for companies to borrow money. The newspaper says the lebonese Justice Ministry requested that ghosn be tried in the country. Japanese officials did not respond. Ghosn planned the escape for weeks and months. India is shooting for the moon once more. The company will attempt a landing this year as it seeks to restore its credentials as an ambitious power. It failed just minutes before the scheduled touchdown last year. David stern, the man who transformed the nba into a multibillion dollar global powerhouse has died. He boosted from 180 million the year before taking over to over 5 billion in 2014. Thats your Bloomberg Business flash. Matt . Anna . Anna thanks. Now china has temporarily blocked planned listings between shanghai and londons Stock Exchange according to reuters. Joining us to discuss is kevin, Bloomberg News china markets editor in hong kong. What market implications might lifting the suspension have for investors . Well leave the details to have politics aside for the moment. What are the implications for the way the stocks are traded . Not much because there has only been one company that china has allowed to sell global depository shares. It has been years of effort to really get this thing going. We have had 3 billion to 4 billion a day of trading across hong kong and the chinese markets. It was never something that could approach that level and there has never been much interest from u. K. Companies to participate in that. The Market Impact of this at least for now is like really there is not going to be much. Matt is there any is there a political component of this . I mean, especially surrounding what is going on in hong kong or taiwan . It certainly seems that way. Bloomberg is reporting in the last few minutes that there is in fact a hong kong connection to this, to the politics and how the u. K. Has portrayed its sentiment regarding what is going on with the protests and the other political things in general here in hong kong and that does seem to be a factor in here but again there has only been one company that has been allowed to sell these g. D. R. s. There really is more of china trying to make a political statement with no implications. Thats what some of the analysts we were talking to this afternoon were telling us. Matt china markets editor out of hong kong. On this story, the possibility of a suspension of the shanghai london stock connect. Lets get to our top stock stories. Ann marie in london. Good morning. Happy new year. Were seeing a lot of moves to the upside especially in financials. Commerzbank the biggest gainer on the stoxx 600 more than 5 gain. This has to do with the whole broader risk after china injected the economy with fresh capital. Commerzbank is very rate sensitive. A. I. B. Group to the upside. Hartford International Value fund added a. I. B. To their investment. Investments to the downside. Down more than 2 . After sid bank is down with a note saying the Fourth Quarter intake didnt reach estimates. Anna thanks so much. All of the movers. There are a few. Some people are still on new years holiday. Lets get up to date with what is going on on the p. M. I. Story. Italian coming through. Manufacturing p. M. I. Fell. Just like the french number, it is a fall, it is well below 50 but unlike the french number, it comes below forecast, not french, spanish. Well continue to look at this picture later on this morning. European shares ushered out of the decade in style. The start for 2020 looks good. What needs to happen to sustain the momentum in stocks . Well talk about that next. This is bloomberg. Matt that wasnt just the united states. European markets also finished the decade in style with the biggest annual advance since 2009. The green swept across sectors with every industry group. Financial services, construction, technology, retail, and industrials all returned more than 30 last year. Telecoms were the biggest laggards with the sector little changed. What needs to happen to sustain that kind of momentum . Joining us now, a senior European Equity strategist for bloomberg intelligence. Tim, it is probably not even fair to ask how we could extend that kind of momentum. It is very unlikely that you get two years in a row where equity indexes gain 30 . And i would totally agree with you, matt. I think there is next to no chance but there are a couple of things to consider about 2019 that i think are important for the setup going into 2020. The first is we started from a hole. You had gone back to the beginning of the Fourth Quarter, the market is not nearly as much as the stats were that you correctly clearly stated. The u. K. Is actually flat essentially from the beginning of 4 q 18. If you were scared going into the end of 2018 and you had gotten out of the market and it took you a little bit of time to come back, if you had gotten in at the beginning of february, you missed the whole january rally which would have again made the performance much less. Bottom line is 2019 was a reevaluation year where earnings were under pressure, especially in the second half of the year and thats what has to change as we go into the new year. Anna it is under pressure. I want to mention were getting a picture of European Growth as were going through this morning. He number is about 50. Manufacturing p. M. I. 50. 4. Just a touch above the preliminary number of 50. 3. In expansion territory. Talk to me about the parts of europe that going to benefit from the type of year that you described . We do have a positive bias. We have a cyclical bias but a more pragmatic one than a rocket ship. From that perspective, sweden, at the front of the hit parade is the most cyclical and then you have as you just said france and germany both have got a cyclical kicker. French industrials are big. European autos and chemicals are big. I think that is where you need to look. We have suffered for the last six months in particular with negative earnings revisions in financials, in energy. And if we continue to see an uptick as we did in the last month to two months in Interest Rates, and Oil Stabilizes if not ticks up as it did to close the end of the year, those could be two big drivers. Matt in the u. K. , we saw a relatively weak performance. It is still i think the ftse was still a 13 or 14 gain at the end of the year. Something like half of what you saw everywhere else in europe. Does that turn around that underperformance versus the rest of europe . You know, it is interesting, matt. It really will be determined by three factors. Two that i just mentioned. Interest rates and oil. Those are the two biggest sectors for the u. K. , financials and energy. And they were under significant negative revision. It stood out relative to europe. It stood out relative to the rest of the world from the standpoint of Market Drivers and those are on a better footing with clarity on brexit to a degree. And a better tone to u. S. And china trade discussions. So that is a risk on from a u. K. Perspective that is quite important. The other aspect is simply the pound. It is a big globally exposed benchmark and if the pound is stable to up, that will be a bit of a Pressure Point for u. K. Earnings. Anna it is down today. Just. 2 . On the subject of sectors. Let me ask you about the sector picture. The u. K. And what goes on with oil and gas. I have said it for the whole of 2019, showing all of these sectors in positive territory. Just another ill stwrator of what matt started this conversation with. It is interesting to see the banks at the bottom. I was reminding myself what Financial Services is all about. It is not insurance. That is in the middle. It is not real estate either. It is actually some money managers. What do we expect from the sector perspective in 2020 . We run a sector scorecard that combines technicals, fundamentals, basically Growth Outlook and evaluations. As we look at that going into 2020, healthcare stands out as number one. It has earnings momentum behind it. Evaluation is fair and technicals are ok. The next two as it goes back to that cyclical bias that i referred to is industrials. It is discretionary. We expect to see in financials, excuse me, we expect to see these elementors a risk on higher Interest Rate environment move forward. Matt all right, thanks very much. Tim craig at senior European Equity strategist for bloomberg intelligence. This is bloomberg. New year, the pboc trims the rrr as chinese stocks hold near twoyear highs. This comes amid reports that beijing has extended plans for the beijinglondon stock connect. Hong kong starts the new year as it ended the old one. Protests, vandalism, and teargas in the streets. We are live in the city with the latest. Ghosns getaway. Theories emerge about how the former head of renaud and ni