Opportunities. The yuan went through seven offshore for the first time in a long time overnight. This, of course, a concerted effort to put pressure on the u. S. Rollback of tariffs, in which case president xi would travel to the u. S. To sign phase one of a deal, or so we are led to believe. Down. The lockup is expiring tomorrow. Some are seeing a net negative, and could be a little but of profittaking. Guy european stocks fading as well, now only up a little bit. It was a decent rally earlier on, but certainly fading, noun by 0. 1 . The euro continues to languish, 1. 1075. Why hasnt it rallied more over the last month . The rand continues to make gains as well. Didnt get a downgrade friday. We will go live to janice berg later in the program to johannesburg later in the program. Reaffirmsxi jinping that his country would open itself up to trade even further. Here to discuss all of this, jane foley, rabobank head of fx strategy. The trade rally has had a big impact on assets. Do you think all of it is price in . Jane i think perhaps there is a little further to go, but we do need to look at the three to six month horizon, and we need to consider phase two and asked the question, conveys to ever be two ever can phase be signed . Maybe not. We are looking at the u. S. Asking china to do things it will find impossible to do. This is why there is a phase one and a phase two. Donald trump didnt want this to be two phases. The fact that some things are just too difficult to achieve names they are just doing the low hanging fruit. Ands likely that trade tensions between china and the u. S. Are likely to come back onto the table, but for now, for be next few weeks, there may a little more further optimism to go. Guy if there is a trade deal, considering there is a lot of optimism baked in, when we get that deal, do you start to fade the optimism . Is the first thing you do buy the yen . We are now going to see those risk assets fading off because you see phase two is going to be so hard. Jane i think it depends on the Economic Data we are seeing as well. Part of the rally is on the assumption that it will be better for china, particularly for world growth. It is interesting we are seeing a pause in several Central Bank Policy decisions. We got the fed in pause, the bank of japan in pause. They have better domestic demand than people anticipated. The markets no longer think new zealand has to cut Interest Rates this year. The australians are in pause mode. There is a perception that maybe things arent quite as gloomy as we fear that they might have been just a few weeks ago. Thats going to come into the equation, whether this has further legs or not. Vonnie looking at charts of the ton, we went all the way up 7. 20, and now below seven again. Affectings this move currency markets, affecting traders . Its all part of the big picture. I think the aussie has potential he been affected most by this. Controls in capital that system. The aussie trade is a threat to the china story. I think the 7 level, chinese authorities have probably argued it doesnt mean much, but in the market psychology, it does. Have seenvel we touched today for the first time in excess of months. From that point of view, it is a psychological measure. What is quite important, i think, is to say not only do we have this threat potentially pushing down on risk appetite, we also have the pboc cut Interest Rates. This is a very small move. However, there are some commentators out there suggesting that the pboc could cut Interest Rates further. That is something that could chase away the ability of the room and be to hold this level of the renminbi to hold this level. Vonnie in terms of other currencies being impacted by all of this, some of the best performers are those currencies this year. The mexican, even. In terms of emergingmarket currencies, what should we be looking for to play out over the next three months . Jane clearly, some markets have some idiosyncratic things. Emerging markets do not perform well when theres a lot of headwinds for the global economy. These appear to be lifting right now again. This may not be the case if phase two appears to be too much of a barrier for the u. S. And china to break. But for now, those clouds appear to be lifting. Instance at the ce markets, weve got to try to gauge what is going to happen to the german economy. We see the Manufacturing Sector still in a recession. That is going to be and theres still going to be clouds over that region in particular. , the marketeaking does generally decide that there is a more optimistic tone with respect to growth, and emerging markets in general will do well. The yen thatbe will be the worst performer in that sort of scenario. Guy over the last month, the dax has done circa 10 to the upside. The euro has barely budged. Why . Jane i think there are some similarities, but it is a very different dynamic. If we look at the way the u. S. Stock markets have traded this year, new highs again for the dow jones yesterday, if we look at what the market anticipated for u. S. Stocks at the start of the year, it was not that. The market was looking at headwinds, not anticipating we would see new highs at this point in the year. I think we have to look at the real big picture. First of all, weve seen more Central Banks cut Interest Rates this year. That cheap money is going to help lift asset prices. Theres another argument, and i cannot help but think of bernanke and his savings glut argument. Theres a huge amount of savings in the world. Asia, and this is something that the rba was talking about at the imf recently. You look at the amount that people in asia save, a huge amount. That money has to go somewhere. U. S. Stocks are very attractive to many investors. That is why this is not necessarily a very keen correlation between the euro and the dollar. Of course, the euro has been undermined by more easing by the ecb. Guy i just wonder whether that was a slow argument. We will talk about it in detail in just a moment. The one currency that has outperformed over the last month, the british pound. James foley, rabobank head of fx strategy, sticking with us. Vonnie lets check Global Markets now. Heres kailey leinz. Kailey in the u. S. , stocks struggling to maintain their momentum after all three averages closed at record highs yesterday. The dow still positive by about lower, the nasdaq up not even 0. 1 . In the green on the stoxx 600. I want to take a wider lens look at the s p 500 performance relative to the rest of the world. It has actually been underperforming over the last month, only up about 4. 3 , whereas level equities ex the circa 6 . Tes are up thethree major averages in u. S. Are not yet in overbought levels. A few movers on the day, specifically those for apparels, chinese president xi jinping out with comment overnight that perhaps tariffs on apparel will be rolled back. That has macys, kohls, ralph , and gap up. You are seeing aggressive selling in the treasury market. Bonds are lower, yields are higher coming out the highest level since mid september. Vonnie thank you. That is kailey leinz with the market check. Member the function tv as well. It allows you to browse all of the recent charts featured on bloomberg tv and savior patriots and save your favorites for future reference. This is bloomberg. Guy from london, im guy johnson. Vonnie from new york, im vonnie quinn. This is the european close on bloomberg markets. Lets get a check on the first word news with courtney donohoe. President trump is urging voters in kentucky to reelect their republican governor to send a message to House Democrats conducting an impeachment inquiry. And other states are seen as a gauge of the president s popularity. If Emily A Mormon family of nine killed in northern mexico. President trump says the u. S. Is ready to help mexico defeat the drug cartels. In nigeria, two fires that broke out in a busy market in central lagos, the countrys largest city and commercial center. It is unclear if anyone has been hurt. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im courtney donohoe. This is bloomberg. Guy thank you very much indeed. Earlier today, the European Union chief exit negotiator Michel Barnier told reporters that the prospects for any divorce agreement will be difficult and demanding. As long as we have not completed post negotiations with the u. K. , the risk of a cliff edge remains, and we should all remain vigilant. We should all remain vigilant and prepared for that possible outcome. Guy like the backdrop. Still with us, james foley, rabobank head of fx strategy. Is that a mistake, not focusing on the potential cliff edge that could come at the end of next year . Jane i think that is quite possible. The market perceives that Boris Johnson possibly has the numbers to get through his Withdrawal Agreement. I dont think many investors are thinking what is going to happen beyond that. Potentially, weve got quite a rough road of trade negotiations. One thing that worries the labour party in the u. K. Was the changes to the Withdrawal Agreement or the future arraignment as designated by Prime Minister johnson. These are the labor laws. The Labour Party Said that this is something that could still be a trap to a hard brexit. If the u. K. Tries to pull back on certain regulations, it might be quite difficult to get a freetrade that ish the eu, and during the transition phase, and that is what leaves open the possibility of a no deal brexit potentially at the end of the transition phase, which is only at the end of next year. I believe Prime Minister johnson will have just one opportunity to extend that transition phase. He must do that by the middle of next year or round about, maybe july. If he doesnt do that again, if those trade negotiations have not been completed, there could be a cliff edge brexit at the end of next year. That is something i dont think investors are really taking into consideration quite clearly right now. Vonnie do you see a path to brexit and a subsequent trade deal with europe, and obviously with all of the various countries in europe, unilaterally or bilaterally, that is free of hassle for the United Kingdom . Jane that would be great, but that does seem like a little live in a little bit of an ideal world. To date, it does seem quite optimistic to expect that the trade agreements will be very smooth. You could argue, why wouldnt they be smooth . Weve already got an agreement with other trading partners because we are part of the eu, but that assumes that we keep all regulations the same. If we look, for instance, at canadian trade negotiations with canada clearly had to take on many of the eu regulations in order for their firms to sell into the eu. That necessitates chorley that in the u. K. , we would have to retain all of the regulations we have now in order to facilitate a freetrade agreement. If the government is unwilling to do that, if it wants to roll back regulations or perhaps make itself more competitive eye rolling back on various tax arrangements, there is the possibility that suddenly come of negotiations become quite difficult. 1. 2868 on trading the cable rate. What would this due to the pound . Jane i think it would trade lower. If you had the biggest party, the tory party, which is almost certainly going to happen, the question then is, can they form a majority government, and who with . If there are a couple of exite a couple of brexiteers from Nigel Farages party, the market would worry more because that leaves the door a little wider open for individual cliff edge brexit. If the majority was not Big Labour Party were to lead a government, a coalition government, the market would have to look quite closely that. Composition of the market generally does not like leftwing policies. However, a or been a corbynled government would be a sterling positive. If there were a liberal democrat ,s chanceller of the exchequer that would probably dilute a lot of the negativity that would be implied by having a hard left government. Vonnie we have to leave it there, but it is fascinating stuff, and we will see you again soon. Thanks to jane foley, rabobank head of fx strategy. Lots more today on the european close. We will hear from our exclusive interview with ben smith, ceo of air france klm, and we will talk live with colin coleman, head of the Subsaharan Africa group at Goldman Sachs. This is bloomberg. Vonnie live from new york, im vonnie quinn. Guy from london, im guy johnson. This is the european close on bloomberg markets. Opec blushed its annual World Outlook today, expecting opec published its annual World Oil Outlook today, expecting todemand will fall 4 fall 7 by 2023. Joining us now is Annmarie Hordern. There was a big review earlier on, very dramatic music and so on, and then the report came out. What were they Key Takeaways . Maria the report was annmarie the report was quite grim for opec. As you said, 7 we will demand dropped by 2023. In the report, they are talking about the main driver for this, supply coming from outside opec. They say shale is going to go to 1 5 of global oil supply, and we will see a lot more oil from the likes of norway, guyana, kazakhstan, and brazil. Share, is losing market so its not looking too great for them. Vonnie and yet, at the moment oil prices are going higher. Can you circle that square for us . Annmarie the oil market right now is definitely focused on the demand side. When you have optimism regarding a potential trade deal, oil is year athigher, but last the end of september, prices were hovering around 80 a barrel. We are 20 off of that today. So the big question is what do they do in december. With prices around 60 a barrel, this isnt viable for countries in the middle east, particularly the de facto leader saudi arabia. When you look at this report and see opec losing market share, you have to think, is this strategy backfiring on them . The more they cut, the more they lose to u. S. Shale . Guy is opec plus sustainable . Annmarie it is sustainable in the sense that if russia is able to come on board. That is a big uncertainty because russia does not have the same budgetary constraints i saudi arabia. Putin has said they could do 40 to 60 a barrel, where we know saudi arabia needs 80 a barrel for their budget. Vonnie what do we know about what opec might do to combat all of the negative points for opec in this . Annmarie they didnt give any conclusions in the sense of what they would do. This is the overarching report for oil demand to the year 2040. But mobic barkindo was sounding optimistic about 2020. This was quite a different tone that he took last month. He is saying that next year might not be as bad, and i think that was him signaling to the market that we may not get the deeper cuts that everyone is speculating about. It might just be a simple rollover of their production deal they already have on the table. Vonnie annmarie, thank you for that. That is Annmarie Hordern in london. Lets check u. S. Markets now. We are back positive again, at least on the dow, up about 0. 1 . Erased all of the games on the s p 500, down about two points right now. The nasdaq is up 0. 1 . A pretty muted vix today. Guy in europe, this is the picture we find ourselves with. We are up, but not as much as earlier. We did see a spike around the nonmanufacturing ism out of the united states. We have now faded that rally. Volume is actually ok today. Ftse is up by 0. 3 , the dax is flat, cac 40 up about 0. 3 as well. We are counting you down to the close. This is bloomberg. Erik 30 seconds to go here in europe. Lets take a look at the picture. The german is the big out performer. Today, its fairly flat. We will look at the ftse 100. Its much more flat and subdued for european markets. This is the stoxx 600. We are trading north of the 400 mark. 404 is where we are trading. Nonmanufacturing ifn. That is the spike. We are moving up a little bit. The spike fated. We are in the auction process now. The ftse 100 is up by 0. 3. The oil stock, the oil majors have been driving things. That is fairly flat. Inwill talk about air france more detail in just a moment. That stock is getting pummeled today over in paris. Happening you with an with the sector breakdown to give you an idea. The risk mentality within the market, it is still there. We are talking about the trade being on the side of the market being flat. This is continuing to charge higher. Banks are also up reasonably strongly. That risk on mentality here in europe is at the forefront. Oil and gas are doing well. Chemicals are doing well. Thats the performance you want to see as the market feels. The bond proxies, utilities, the money continues to rotate out of the space. At the index level below the surface, the market feels reasonably risk on from a sector story point. Lets look at the individual stocks stories in europe. We are looking at air france. We will talk about that in more detail with an exclusive interview. This is the strategy update that has fallen a little flat. Associated British Foods are up. In the u. K. And you can buy all kind of stuff there. It continues to do well. Its a widely held stock. Iny also have big stakes selfridges. The jeweler. Is they are down by 17 today. If you look at what analysts are saying, they are more positive a while what this about what this Jewelry Company is producing. Came a little while ago. There was a lot of excitement. We have one or two of them here in the u. S. Close. Kets are half a higher by percentage. That is mostly erased. We have a few basis points in treasuries. This is strengthening and one of. He currencies is the offshore that is strengthening as well. Helping thatight and the setting was below seven for the first time in several months. There is a bit of a regime change. Kroger is off 11 . Three dollars. Uber, weve been talking about that in the metrics are disappointing. There are some great signs. They had a disappoin