Said to be sweetening the deal in dubai. Fany saudi aramco meets investors as it looks to boost support for its mega ipo. It is bloomberg daybreak europe. We are live from dubai. Nejra cehic is having a wellearned day away from the mayhem and the carnage that there is in the bitcoin market. Day nine of a drop. A battering and value. Sub 7000. The pboc warning people away from bitcoin. What needs to happen to get bitcoin back on a rally, may be a complete drop in trade negotiations. Deal. Phase one committed to phase two and three. The two other risk markets, ground zero for trade for the aussie dollar and the won. Do we have those markets . Lets have a look at them. The dollar down, the yuan strengthening. Won rallies. The chinese playing to the hawks. The policy hawks. Up a twohe oil market month high. The daily machinations of trade drive the markets. To the u. K. , Boris Johnson unveiled a Safety First Program of policies in the partys election manifesto. Brexit boxnending set drama. Thingsging sensibly, putting into nhs and public services. We will continue to do that. My peer,ts get to anna edwards. Johnson playing it safe in the manifesto. Some people would say he capitulated again. He went from 20 billion pounds of tax cuts to three. Anna playing it safe manifesto promised to the british electorate. Playing it safe. Sensible. All of these words being used to describe a manifesto which stands deliberately in contrast to 2017. With theresa may as prime minister, she brought forward a manifesto that was about brexit but also about setting a radical social agenda that basically spooked the base and they did not want to do that this time around. They are playing it safer. There are things in there around tax cuts, but it is not the things you are referencing. Pledge to not increase income taxes. They want to put more money into the nhs on suspending health care. Itcially, they want to get done. He also talked about his other brexit deal. He wants to get that through parliament before christmas, which sounds challenging and busy for everybody in the runup to the holiday season. He wants to leave by the end of january. The scale of what was being pledged in terms of the taxing and spending plan, being described as modest. In contrast with what we saw last week from jeremy corbyn, a much more radical program. Manus to the polls. Where are we . I look atdid lead the note from nomura. He says where is the bounce in sterling . Labor might inch ahead in the polls and that is the risk we need to assess. Anna when you are looking back to 20, jordan makes this point in his note, he looked at where the labor surge came from late in the running in 2017 and it was around this week. Even though the conservatives are polling very strongly, that does not mean everything is over and the labour party will not necessarily come from behind to do much better. The labour party did not win in 2017 but they staged a late recovery because of the fact the conservative party is leaning so very strongly in the polls and we saw that once again reaffirmed over the weekend because of that. That is perhaps why we do not see a more radical plan for government coming through from the conservative party. Modeste able to be as and hope that takes them over the line. Puts 12 tracker Percentage Points between the conservatives and the labour party. They are benefiting still from the decision by the brexit party to step away in some conservative seats and doing better in scotland importing according to one panel. A projection tries to turn the percentages into seats. That is always a challenge. This one from data practices say the data suggests a lead for the conservative party. Wings can change. We are into the final few weeks before the election. We watched to see whether we do get any kind of bounce in sterling based around a conservative majority. Manus you are going to be working your fingers to the bone over the next three weeks. Anna edwards in london tracking the polls and the political theater of the u. K. Election. Ax kempner multiasset strategists at hsbc. Good to see you this morning. Where is the sterling bounce on a 40 poll . It is not there. Max good morning, manus. It is not there. I would ask, why would it be . It is just like you just said, theres a lot that can still happen. Actually, i think the market firmly already sort of things this will go very smoothly, and finally, we do get some kind of deal at the end of january next year, so a lot of that already seems to be priced information. If you look at the data in the u. K. , it does not look particularly rosy. We have a chance for rate cuts in 2020, by summer of 2020, so even if we do have a deal, even if we do get a majority by the conservatives, it strikes me that the growth picture does not look that particularly rosy, especially given the weakness that we see in eurozone growth data, so overall, if you look at our multiasset portfolio, we are still mutual gilts, mutual neutral gilts and equities. I would rather not play the daytoday politics. Anything beyond daily or weekly trading, i really cannot, you know, really cannot assess that with any sort of confidence at the moment. Manus sometimes, to be du ll is a good thing. To do nothing in these markets is perhaps the most prescient thing. I want to pick up on your neutral stance in gilts. Goldman sachs says they want to short the euro and gilts. May i push you a little bit . If there is a fiscal move by either side, labor, labor coalition, or toward a majority, i think the baseline that we are all assuming is there will be movement on the fiscal side. Does that become disappointing gilts . Max it would be disconcerting more for the long end. Curve, theret the has already been some steepening happening over the last couple of weeks. As you said, it looks pretty likely, i think in our view, that we do see some widening in the budget deficit in the u. K. , so that may put some pressure on the 530 curve still. That haswith already happened. Theshort end swap rates, parts of the curve on the long end of the curve, if you look at them globally, not only the u. K. , but really globally, what you can see is the correlations both at the front end and the long and. End. The correlation has really spiked in 2019, so that tells you it is also much more of a global picture. It is much more of a Global Development rather than only u. K. Development. You might see a little bit of shortterm steepening still for the 530. The problem is that most of that has already happened, i think. Manus there is little left perhaps in that trade. Cliche we hear from many people, trading like emerging market. Has there been any shift inflows in the market that perhaps our building up to a bigger tory victory . Or is it still quite marginal . Max pretty marginal. If you look at equity flows, of course, you have seen a bit more inflows into European Equity funds. You have seen that over the last couple weeks. That already has passed in europe. Not only the u. K. That plays to the conservative stance of most investors or of consensus with regard to not only u. K. Assets but also European Assets as a whole. Least inut the u. K. At sort of the same boat as eurozone assets at some point. Lets face it, what we have seen over 2019 has not only been due to u. K. Developments. With the bank of england, as much as they tried to defy gravity and rates, as much as they tried to avoid the rate cut race, they do not seem to be in the sort of do that future anymore. If you look at what markets are pricing for 2020, we do see a rate cut by Market Pricing at the moment. Manus max, stay with us. We have a little bit more work to do. To hongrn our attention kong. It has been a huge win for the prodemocracy candidates. Thanwon 86 of the more 440 seats in the local District Council elections on sunday. Residents turned out in record numbers to vote with more than 2. 9 Million People. Their ballots are roughly double the number. Pacific party in hong kong, audrey, spoke to bloomberg about the elections. The boys in the governments court, and they really have to respond. One of the five demands is an independent inquiry into the recent events, and at least the government has to respond to that. There is the demand of universal suffrage. The government says they are listening. More, for a little bit lets get to Rosalind Chin on the ground in hong kong. The significance of the results, it has taken carrie lam to respond. Rosalind very historic here in hong kong because it is the first time we have seen the prodemocracy camp take such a sweep of the District Councils. Prodemocracy candidates took the majority of elected seats, which is something unprecedented. A record being set in hong kong. Usually in politics at this level, it is not of much interest, fairly lowkey, but it is a reflection of the sentiment , a referendum on the government and on the protests that so many people have come up to vote. Put pressure on carrie lam. She issued a statement saying she expects the Election Results saying the government will listen to Public Feedback and reflect on it, saying also that they will strengthen corporations between governments and District Councils to solve problems of concern to the public. We heard from both sides of the political spectrum this morning on bloomberg television. Beenolitical figures have saying the government really does need to listen to what the public is staying out of these elections. Manus staying out of these elections. Manus what do you make of the proposition that this legislature is very disemboweled, does not have a great deal of power . If they are listening, what kind of response can we expect . Good question, manus. What can carrie lam do, how far can she go, how far wher will of the leaders be watching and prescribing the moves she can make . These are all questions many of the political activists here would want to know the answers to. We have heard from beijing, the foreign minister saying to reporters today that efforts to create chaos in hong kong or damage hong kongs stability will work, also underlining that hong kong is part of china. The global times is seen as a bit of a mouthpiece for the Chinese Communist party. The pro establishment camp needs to strengthen youth outreach h ofrts, saying a huge swat the protesters has recently come from the younger population of hong kong. Camp needsablishment to reach out to them to build a better relationship with them to perhaps stop these issues arising as things go on. Right now, we are waiting to hear more from carrie lam. She usually has an executive Council Meeting at a press conference on Tuesday Morning so we will be watching to see if she makes any more comments on these elections. Back to you. Manus thank you very much p Rosalind Chin tracking the hong kong election. Max kepner at hsbc. Having been in china last week, come back here, is a conversation around the politics of the usa, trade deals, what happens in hong kong, and the reaction function. How much conversation have you guys and girls had in regards to Henry Kissingers point, which he said last week . The foothills of a new cold war . Bit of you put it into a a broader context, it does strike me that risk assets really has priced an awful lot of hope already, and we still do not have a phase i deal, let alone any kind of progress on the more structural issues in a and potential phase three deal. If you look at an example for the relative performance for Global Equities and developed market rates, for example, and he sort of put that together with the Global Manufacturing pmi, we are pricing pmis one north of 50, and still, if you cant to investors right now, there are very few that are still concerned. It does strike me that the market takes a very, very sort of sanguine approach to how these political risks will unfold. And everything will be sort of going very, very seamless. And even if it does, my problem is that if we do have this sort of conviction that seems to be in the market right now, that we then let all these political risks behind us, and we are going to this sort of old world. The old world does not mean that we are going into a world where trade growth will suddenly pick up tremendously. We look for example at 2010 on and we see the relation of trade liberalizing and trade restraining orders. We have seen that much, much, much in favor towards trade restraining orders, so the sort of trend of deglobalization, of trade restraint, that has been in place for years already, and for almost a decade already, it is not something new. The old world does not mean prefinancial crisis, where trade growth picks up and we see double growth rates. Manus i mean, there is doubledigit growth rates. Suddenly, we get back to normal. I mean, companies around the world have made huge changes to the supply chain. I want to translate what you just set back into markets. This is what i have been touching on with the ceo who is with me. This is about volatility. A natural consequence of centralbank activity. Bump ass do hit the on , is this anmp opportunity for me to buy volatility in terms of the markets in which asset class to you think will have the most abng for bang for my volatility buck . Max if you look across the asset classes, volatilities across fx, rates, high yield, credit, equities, government bonds, they are all below the fiveyear average. That tells you something is not quite right, and theres too much calm in the market. Multiassetk at the allocation at the moment, we are tactically underweight in Global Equities, fairly cautious, underweight highyield, overweight bonds, so that naturally tells you you kind of want to have some volatility exposure. I would certainly be most concerned on the highyield and on the dollar highyield. Seen is sort of a bit of a sideline, not really following the riskon move that much in equities. It does seem like there is a bit concern spreading already in the highyield space. Manus max, stay with us. We have a little bit more to get through. Max. China is compromised. Trade talks continue. Beijing says it will get tough with those who steal intellectual property. More on the story. That is next. Manus this is bloomberg daybreak europe. I am manus cranny in dubai. 10 23 a. M. In downtown dubai. Juliette saly has the latest from singapore on the markets. Juliette certainly risk on to kickstart this trading week. The china looking like it is trying to diffuse trade tensions. You had the huge turnout with prodemocracy candidates leading the way. Hong kong stocks leading gains, up by one point this riskon mood reflected in a big push out from the korean won, leading gains in asian fx trade today. I am watching the yield tick up as well. China could launch a bond sale as early as tomorrow, tuesday. We are starting to get 2020 andcasts coming in thick fast. Led by the tech player. India will dok well. Jp morgan say they think asian exjapan andpan australia will go to 700 on that index by the end of next year. Upside and aing an recovery in indias market. Manus. Manus thank you very much. Juliette saly with the latest on the markets. Lets turn to trade now. It is one of those Sticking Points in the negotiations between washington and beijing. It is ip theft. In a compromise, china said it will raise the penalties on the violations of intellectual property. Hostettner is my guest this morning. I thought john bolton would be so pleased if he was back and he saw this kind of it is almost shakespearean, isnt it . We will be very aggressive when it comes to intellectual property theft. It is a line to appease trump, isnt it . Max what it tells you is that, at the moment, we do really see this sort of trade war we see and that we have seen over the last year and a half and it is in no ones interest and it does weigh on global activity and has weight on manufacturing in china and the u. S. It has weight on trade growth globally and it has diverted trade flows, which are not necessarily adding to efficiency. It is in no ones interest. Perhaps policymakers are keen on making sort of a compromise in the next couple of weeks and months. The sequence before, the problem with that is risk assets and market have already priced an awful lot of hope into that and have already priced a lot of the recovery in manufacturing and globally already. Manus can i ask you what is driving that they sing in manufacturing . Basing in manufacturing . Max it is twofold. It is first and inventory thing. Inventories, you have seen inventories drive down. There may be some additions. That probably helps to bottom out the manufacturing cycle so that helps manufacturing pmis as well, i think. That is the first one pick the second one, if you look at global monetary conditions, lets look at growth in the u. S. In china and the euro zone, for example. You see that bottoming out as well, and that helps. Thank you very much. Stay with us. Bloomberg daybreak europe. Europe. Hey. Hey. You must be stevens phone. Now you can take control of your home wifi and get a notification the instant someone new joins your network. Only with xfinity xfi. Download the xfi app today. Manus it is bloomberg daybreak europe. I am manus cranny in dubai. Lets check in on the markets around the world. We have our bloomberg partner in mumbai. We have dani burger. Excuse me. My apologies to you. Lets get to her first of all. I am taking a look at tech this morning because one thing we are definitely seeing is tech being some of the things propelling stocks to new highs. If you look at the market board, you see stocks in asia when it comes to tech and the u. S. Outperform certainly. You can see the nasdaq futures up. 4 , outperforming the main index. One of the things i want to look at is not everything is so sanguine when it comes to the u. S. Tech sector because actually, when we jump into the terminal, we see investors are starting to take profits. We have seen the biggest weekly outflows for the nasdaq 100 etf in more than a year, so valuations as rich as they our, future expected returns have diminished. It might help the sector as well. That has yet to be seen. It has been clear over the past week that tech is not as sunny as it has been, manus. Manus thank you very much. Lets get across to you. Awaiting the gdp data. That is going to come through on friday. We have Economic Growth slowing and this is one of the biggest concerns, isnt it . It is. I must say, this morning, i was thinking the markets were sideways in anticipation of that but the markets are searching. They are trading at the highest point of the day. I would reckon in part due to what is happening in the asian stream. I was listening to dani. If you look at indian voices, banks, telecoms, and metals, chinese steel stocks are searching to have some of the steel stocks surging in trade. It is good going for the Indian Markets right now. Lets wait and watch. It is close to. 75 so the going is strong for now. Back to you. Manus i am going to believe the indian oil minister that i spoke to last weekend i am going to believe this ceo of the national oil company. They both told me in no Uncertain Terms that growth is grand. Keeping it real for markets in london and mumbai. Saudi aramco, officials came to dubai yesterday. It was for the ipo for the largest ipo. It is the saudi it was the first outside of saudi arabia said earlier this month it was up 1. 5 of the company. Lets see where it goes to next. Aramco is seeking 1. 6 trillion dollars, one point 7 trillion, in a listing that is ending up much more local than anticipated. The deal has sidelined global banks. Saudi arabia looks to local vendors. It is expected to be huge. Aramco is set to overtake apple as the worlds biggest publicly listed company. Who better to put it all in context than our executive editor . Good to see you. Did you join the picnic . The bloomberg technique. We spared no expense for the executive editors. Lets talk about this ipo. They landed in dubai. They really do need one big pillar investment to, dont say to come onto this book, dont they . Thinking strategically for them, they will be somewhat limited in what they can sell to the emirates. Manus true. A fair amount of energy kicking around already here. But the chinese would be the big prize, i think, in this instance, partly because it is strategic and partly because aramcos strategy has been to go into the refining side of things. They have been going around the world, building these refineries and in effect tying up demand going into the future. China would be the prize, but can they persuade the chinese to buy in at this price . It is a fairly lofty valuation. Manus you are an executive editor. I have to grapple around down here. I had in the seat earlier this year. He said this is the preferred stock, a decent dividend, and there is this implied this is the difficulty i have. There is this implied assumption that the government stand back in times of hard times and give you, the shareholder, the dividends. Is that a trustworthy promise to the market . Stuart a lot of people are taking that view. I am not running the saudi government so i cannot pledge that we will have 10 years of unbroken dividends but what i can say is that is the rhetoric we are coming from. For thea dividend play saudi investor and a patriotic play. It seems likely it will get into several indexes so we will have a lot of funds who will have to buy it. In a scenario where there is a tiny free flow is most of the dividends in effect going to the major shareholder. Manus the other side of this 1. 5 offer, it is a lot more controllable. At that level. Creating the base, creating a issue,lets say, in this is a lot more controllable with a smaller domestic offering. Stuart they have a lock in for retail investors. If you hang onto it for a bit, we will give you more for nothing. That is quite an incentive to hold on and exactly what you said, the presumption is if there is something going on then the government will come in and pick up that price. Manus we are getting ready to go to opec, rallying the troops and the analysts. To what extent does saudi have an additional, i suppose, drive to go for a review of the current agreement . Is that me being optimistic about new slow or do you think there is real drive to cut further from saudi . Stuart we have no real indications that any of the major parties have interest in changing this agreement. Scenarios have a six month rollover of the existing agreement and that is problematic in the sense that clearly, the demand picture for next year is not looking that great. Things are starting slightly to improve but that will be a problem. What they are relying on his weaker members of opec not being the to produce at quota, so likes of libya, algeria, venezuela, iran, and that in effect is going to be false cut, and they are kind of open net that keeps going, that there is no resolution of these crises, so they will not need to cut as much. Heel. Coming tighter to thank you very much. Stuart wallace, always great to get your input. Commodities editor. Max kettner is our guest house this morning for hsbc in the london studio. Listening to that conversation clement and the oil is set. Of these, all commodities inextricably linked to the nuances of trade. How do you look at the oil market as we stand at the moment . We are underweight and oil at the moment and our multiasset allocation simply because of a couple of reasons. The demand picture for next year does not necessarily look that great. What we have seen in terms of trade, what we have seen in terms of the Global Economy and the Global Growth picture, yes, there seems to be some bottoming, but bottoming does not mean we see a vshaped recovery. It might as well be a sort of lshaped recovery. And including oil, they sort of prized this vshaped recovery at the moment. The second reason on the supply see supply do side, what we do see is we are getting quite concerned about this very, very huge inventory of uncompleted wells in the u. S. The higher we go and prices in wells willre these be put in action. That puts further, further supply in the market, and that obviously should also put some effort on prices. They are rather underweight and oil at the moment. Manus i pick up on one of the phrases you use, lshaped recovery rather than vshaped recovery. It ultimately has a linkage to inflation. City last week were suggesting you may want some inflation, you want to buy a little bit more tips as a hedge in the portfolio. If it is an lshaped recovery, what does that do to global inflation in 2020, max . Max max i would agree for the next 1. 5 months to two months. That is where breakevens can ti ck higher from oil prices and from Fading Base Effect in prices. That is what we have seen over the last two months. We have seen the yearoveryear change in oil prices flipping around some deeply negative to quite positive in the last couple of weeks. That has helped break even, has helped tips. That should be continuing into the First Quarter in 2020. My big problem is that will very, very quickly dissipate from at least mid q1 2020, and that obviously breakevens correlate very nicely with cyclical exposure. That say, for example, the relative performance of cyclical equities to defensive equities. Therefore, we also see a little bit of problem for more cyclical exposure and that translates not only purely into the inflation picture and the inflation picture being quite sort of subdued from the beginning of 2020 on, but also, that translates into our cautious stance on risk assets. That cautiouss of stance on risk assets, risk assets he said theres some cracks. If they become more manifest, do i go to gold, yen, in terms of the benefit of big cracks that may appear in the equation . Max we are overweight gold in the commodity space. If you look at real yields in the fiveyear part of that curve, they are lower since the beginning of september. That does not necessarily mean the rates market is particularly convinced about this stance and and also ints, Global Growth. That tells me if one of these risks manifests itself over the next couple of months, and if for example we rather see evidence of an lshaped recovery rather than a vshaped recovery, that means theres more downside for real yields in the year. If theres downside for real yields, that means theres upside for gold. Manus max, stay with us. Max kettner giving us the calls on commodity. Lets get your views for Annabelle Droulers with me from hong kong. Residents are handing a sweeping victory to prodemocracy candidates. A record 2. 9 million votes. Results showing probate in canada have 12 of the states up for grabs. 65 for years ago. It is the first balance since the unrest in the city began. In the u. K. , the conservative party unveiled its manifesto, including promises to hire 50,000 extra nurses and a package of tax cuts for working people. It also commits to delivering ofxit and ends years deadlock. Itss looking to consolidate lead. Former new york mayor Michael Bloomberg is running for president in 2020. He is joining a crowded race of democrats. Says President Trump is an existential threat to the u. S. And its values. Michael bloomberg is the founder and majority owner of bloomberg lp, the Parent Company of Bloomberg News. Lvmh is closing in on a deal to buy tiffany for 16 billion. The french luxury giants new proposal is 135 a share. Lvmh is not as dominant in jewelry as it is in fashion or cosmetics. It gives it access to a gamut of products from 160 five dollar earrings to 165 thousand dollars diamond chains. An agreement could be announced as soon as today. Global news, 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus. Annabelleeye droulers in hong kong. Lets take a look at how the agenda is set for this week today. Philip lane is not speaking about Monetary Policy in london. All eyes on the fed chairman, Jerome Powell, giving his first speech after meeting President Trump. Alibaba makes its trading debut in hong kong. It plans to raise 12 billion. The listing could be this years biggest Stock Offering globally. Data toy, a host of dive into in the u. S. , including revised reading of u. S. Gdp for the third quarter, plus durable goods and personal increments. On thursday, the u. S. Celebrates thanksgiving. Equity and bond markets are closed tomorrow the holiday. The holiday. It is black friday bonanza. We are going to be watching signs coming up on the show. It is a bonanza. The swiss drug maker agrees to buy Medicines Company for 6. 8 billion. We have the details right here on bloomberg. Manus this is bloomberg daybreak europe. I am manus cranny in dubai. Lets talk about deals. M a and the pharmaceutical sector. Novartis has agreed to buy Medicines Company for an equity value 6. 8 billion. Annmarie hordern has the details. This ceo is doing deals of size. Good morning. Annmarie thats right, manus. We have seen that throughout 20182019. This is how novartis is expanding and sharpening their portfolio. The latest being medicines. We have heard talk of this, but now it is ink. You can see that in the blue line. That is a 45 premium to this pink line here, which i doubted for november 18 dotted for november 18. It is a big premium for these medicine shareholders. What are novartis getting out of medicines . This comes to one key promising cholesterol drug. You can see it over 2019. Medicine shares have tripled in anticipation for this drug and analysts are expecting this drug , the sales that could bring in, one billion by 2024. Manus another blockbuster on the slate for mr. Novartis. Thank you very much. Rounding up the latest deals. Annabelle droulers is with the team in hong kong. Merger deal with fiat by yearend. That is according to reuters. It is reporting a memorandum of understanding scheduled to be signed in december. This is the missing allegations he played a role in a corruption screen. Carl icahn taking control of occidental ford. The investor plans to nominate a slate of 10 directors. He has a 1 billion stake in the company and has been a vocal critic of occidental. No comments from representatives of occidental. Hp is rejecting xerox. That is after turning down the unsolicited merger offer. It says it has not proven healthy enough for the deal. Hp saying there are concerns about the business and the bidook and the 22 a share undervalues hp. That is a Bloomberg Business flash. Manus. Manus thank you very much. Rounding up the news. U. S. A big week for the economy not just because it is black friday, but Jerome Powell gives his first speech since meeting President Trump. He may restate his preference for a cause at the december meeting. That is ahead of the data in the coming days, which is set to show how resilient the consumer and Consumer Spending has been. Max kettner from max kettner from hsbc is still with us. What do you think the tone from powell will be . He is not going to show too much of his hand, is he . Max i dont think so. My best guess for the fed, for what that is worth, i will leave that for you to judge. It will probably be sticking to where we are in the next couple of months and meetings, with regard to the fed funds rate. I think the fed and powell will thismuch clinch on argument of having now run through this midcycle adjustment so they can now sort of wait and see how this midcycle adjustment works its way through to activity data. And generally, what we have seen we talked about this in the previous sequence. Monetary conditions have picked up. See two toically three until that translates into activity pick up, so that is what we see at the moment. That argues for a wait and see stance, really. Manus lets take that. I touched on this yesterday with a guest. We have had this steepening in the curve. Foruards say we flattened two straight weeks the longest run of flattening since 2017 and they say how much stamina is left in that move . The movie is really down to trade discussion as opposed to the fed discussion. This resolution of trade, do we receive been resteepen . Max i would add one more element to that. I think it is also due to breakevens. Twoe look at the last months in nominal 10 year treasury yields, real rates have not really done anything. We touched on the issue of nowyear that are lower than they were in september. They are pretty stable. All of the moves we have seen was not breakevens. It is much more due to the market. What we do see in breakevens and what we do see in nominal rates is just simply momentum, simply due to these basic facts from oil prices, deeply negative to very positive, but only really for a couple of weeks, and then after q1, they are really fading again, and that tells you probably there will be more pressure on the downside for the long end not only for breakevens, but also for nominal yields. That iso tells you probably not really over with that move in the curve. There is matter much more flattening pressure coming now i think. Manus ok, so a little bit more flattening to come. You make ayou what financial conditions in the light of the fed binding their reform . Sheet in nonq max if you ask anybody in markets what has been the biggest, the most significant shift over the last year, it is centralbank policy, not only in g3, g10, but it is a global phenomenon, and that helps activity, it helps activity. If you look at Financial Stress indices, financial conditions indices, they are clearly sort of an easing path and that helps activity. The problem is, the market at the moment says it does not only trough, it gets us to a vshaped recovery. We see it picked up drastically and quickly over the next couple of months. I am not buying that. This is important when you look at your multiasset performance, you see developed Market Equities have outperformed those of the dm sovereigns and that is now looking a little bit stretched. How do you play that headline analysis . Max it means that if you are on the way to equities, it still means that you actually have the caution on the downside from the fed. I would not call for a december 2018 repeat. What i would call for is a range bound market still over the next six month to 12 months. I left the fantasy for any kind of really drastic pickup in activity, and therefore, outperformance of risk assets, but i also lack the fantasy that we go out right into recession. The only thing i am saying is that markets have sort of run a little bit ahead of itself, a ,ittle bit too hot, and too far too fast. That means we will probably have to sell the rally at the moment. You see implied volatility is are low across the board. You see volatility spreads across curves and equities. They have been compressed so people are very bearish on volatility. You look at positioning and a lot of people are telling me that is still very light. Actually, if you look at equity visas of equity funds, that has shot up tremendously over the last couple of weeks. I am not buying that argument that data tells us a different story. That tells you you do want to youin an overweight want to be underweight in equities. Ok. S max, very well put. My guest host this morning for the past hour. Multiasset strategist in from hsbc. You can catch max on radio. We are going to talk about the tories election promises. Manus good morning from bloombergs middle east headquarters in dubai. I am manus cranny. It is bloomberg daybreak europe. These are todays top stories. Global stocks rise as beijing says it will raise penalties on iep violations. Kong, prodemocracy forces win an overwhelming victory in peaceful local elections. The reaction. Th the conservative Party Manifesto pledges tax cuts, increased spending on the National Health service, and Boris Johnson says brexit has to be delivered. Lvmhg moves in europe, agrees to buy tiffany for 135 a share in an all cash offer. The deal hits the tape now. Looks as if he is set to get exactly what he wants. A little blue box with a ribbon on it. He is looking large for the honor. 135 a share. He has raised his bid. It started out 130 and it went up and up, so this is lvmh closing the transaction. They hope to do that by the middle of 2020. Is 16. 2 billion. The transaction will be all in stock, and therein lies the appeal to the board of tiffanys. If you think about the u. S. Jeweler, it lost some of the track of the consumer trend, some people would say. If you look at who is in the stable of lvmh, do your, tiffanyl dwarfing the sales of 50 billion. Adding tiffanys is going to extend the reach of some would say accessible offerings such as apparently 165 heartshaped earrings. Lets get to issue now. Juliette saly has got the rest of these asian markets. So juliette, i now know what you possibly want for black friday. They will be tiffany earrings, 165 dollars a pair. Good morning. [laughter] juliette i think you can spend more me than that, manus. We are seeing asian stocks higher for a second session and we have really got the riskon mood on the fact that china looks like it is diffusing trade tension. This big turnout in terms of hong kong elections, prodemocracy candidates getting the upper hand. Hong kong stocks in late trade up 1. 6 . Japan getting a bid on a weaker yen as we see money coming out of safe havens. The treasuries falling today and south korea an outlier as well as we see upside in the korean won, always a bellwether for these trade talks. I want to show you what we are seeing in terms of forecasts from a number of the houses in 2020. J. P. Morgan and goldman sachs, bullish on asian equities for next year, particularly the front runner tech markets like south korea and taiwan. Jp morgan actually sees an toide in terms of msci asia rise about 8 from the current level to a reading of 700 by the end of next year. They take out japan. It sees an 11 rise in earnings overall for the msci asia index, and both also see a turnaround in the Indian Markets as well, so watch out for the players from the tech market and also a recovery in india. Manus. Juliette, you are definitely worth a lot more than 165. Dont you worry about that. Juliette saly, we will dig into that lvmh breaking story on tiffany in just a moment. Lets talk about the politics of brexit and promises. The yucaipa prime minister, Boris Johnson, unveiled a Safety First Program of policies and his partys election manifesto yesterday. The promise and the seemingly unending brexit drama. Pres. Trump cutting vp. Pence cutting taxes, putting huge investments into the nhs and public services, we will continue to do that throughout this parliament. Is my guest host this morning. One of the debates we had in the last hour was that, actually, the positioning on the pound shaved back the net long. On these policy agendas that have been set out before the marketplace, a doubledigit lead for the tories. Can you tell me in your thinking why we are not seeing a breakthrough to the 130 level on cable . This is clearly because of the amount of spending that is going to be coming. One of the things you have to also take into consideration is that the u. K. Debt to gdp ratio is quite, you know, high, in sort of context. So if you had a massive spending, then it also means that Credit Outlook for the u. K. Could put downward pressure on the value of cable, which is sort of offsetting the positive momentum that one can see from a deal occurring with the e. U. Manus that kind of pressure on the currency side, what about on the sovereign side . Goldman sachs saying they wanted to short eurosterling, a bullish sterling position, but also shorting the gilts. They have a target of 1 . They would like to have a short position on gilts. Would you share that view . Kokou kokou because i think that is a sensible strategy because if you look at if you take away the risk of an flightt recession and a to safety, you have an environment where inflation is becoming more of a concern and you have to also remember the fiveyear breakeven in the u. K. Is much higher than that of the e. U. , which is facing negative Interest Rates. Willriver for the gilts clearly be pointing to higher yields because, a, you have rising debt on one hand, and number two, you have the risk of inflation through all of the spending that is promised by the different candidates. Manus i love your line this morning, which is fiscal salvation. Who has not the biggest ability to bring in fiscal salvation . Do you think Christine Lagarde can convince europe to release the pursestrings or will it be u. K. Will outperform europe in terms of fiscal salvation . Kokou that is a very good point. I think so far, germany is clearly the country in the euro zone that has the biggest ability to spend, but the thing is, the reason why fiscal salvation is something that is being talked about is because not only is Monetary Policy less effective in creating more inequality and distortion when you look at asset prices, but it is also important to remember the jack pinto for case and japanification lead to suffering. Ae suicide rate went 50 increase in the 1990s. Deflation implies a huge amount of societal suffering. European societies are nowhere near able to take this similar amount of pain on a society level, and therefore, we might go from a Central Bank Put into a fiscal put, whereby a government insulate their populations from outright deflation. Data inretty damming terms of middleaged suicide rates. Talk to me about your concept that this puts a europe cannot survive outright deflation. As such, that is going to create a floor on the inflation expectations. Surely, that is good news for the ecb, but tie that back to what that means for rates in europe. That thethink it means likelihood of seeing rates in negative territory for a long time is pretty low because the bond market is actually pricing not only a slowdown in growth andalso lower inflation, this is something that is not presentable because it is negative for the Banking System in terms of its impact on nhs margins, but it is also not sustainable because of what it means that the society level. It is as if you are seeing italy go through what greece has gone through. It means the past for Interest Rates should be gradually up going forward, and it also means for market that the rotation into value stocks or financials or sectors that are positively correlated to Interest Rates rising could be more sustainable than what is currently president. Manus precedent. Manus you think we could look at core options on the banks. Is it that you would do or how would you play it . Kokou if you look at value stocks as a whole, they have clearly underperformed because of this hunt for yield. Our argument here is that if you want to hedge a portfolio thats already very tilted towards the proxy, buying call options on value is an interesting value proposition, no pun intended. Call options on financials in banks being one of the sectors within the value universe is an interesting portfolio overlay simply because of attractive dividend yield and also very low versus its own history. Manus ok, stay with us. Kokou agbobloua, my guest host this morning from societe generale. Lets turn our attention to more politics. This time, to hong kong. It has been a big win for the prodemocracy candidates, 86 of more than 440 seats and local District Council elections on sunday. Standouts, two point 9 Million People casting their ballots. Roughly double the number we saw in the election of 2015. The former that told member and founder of the civic party in hong kong spoke to bloomberg about the elections. Now, the ball is in the governments court and they really have to respond. One of the five demands is an independent inquiry into the recent events. And at least the government has to respond to that, and there is also of course the demand of universal suffrage, and the government leads them to say they are listening. Manus for more, lets get to roslyn chin on the ground in hong kong Rosalind Chin on the ground in hong kong. Are you getting a sense of the magnitude and impact these results are having in hong kong . Rosalind certainly, it is something the chief executive, carrie lam, really cannot shrug off that easily anymore, because of the sweeping victory in these council elections. The District Council elections are very local. Traditionally, it is about Community Facilities and that kind of thing, but even so, the fact that prodemocracy candidates have really swept the majority of seats in all 18 District Councils really has something to say to her. She did come out earlier saying the government will listen to feedback. He political leaders on both sides of the spectrum saying she needs to listen to the voices of the public if they want to go china to maker for progress. He told reporters earlier today that no matter what happens, hong kong is part of chinese territory, and any effort to create any chaos in hong kong will not work. Coming out with a fairly strong line. The question is of course, whatever has been said, what will carrie lam do . What will her response be . What will beijing do . How will they allow the leadership to respond . Although they have won a big victory, they need to align themselves together because of course they have had lots of infighting in the past and may have pushed their way forwards to find out a plan. How they will make the most use of this advantage in terms of the District Council election. Manus thank. Rosalind chin tracking the poles and outcomes in hong kong. Lvmhg up on the show, agrees to buy tiffany for over 16 billion. More on the story. This is bloomberg. Manus just on 7 16 a. M. In the city of london, just under 44 minutes, 43 minutes. There you go. And counting. It is bloomberg daybreak europe and i am manus cranny in dubai. We are tracking the bid for tiffanys. The french luxury giant announced a confirmation. It agreed to by the dealer. Annmarie hordern has been tracking the story. Good to see you. Lvmh . S in it for annmarie two things. Looks like christmas came early for him in the sense that he got his deal. One is of course the jewelry section. Lvmh just is not as dominant in delivery as they are in cosmetics or fashion. Tiffany ranks second, below richemont and ahead of lvmh. The tie up could boost them to the number one spot and overtake richemont. This gives them access to the u. S. Consumer, which of course has played a backseat. These luxury shoppers to the luxury shoppers in asia, but they recognize this is a key market. For tiffany, the stock was trading over 100 before lvmhs interest. This is a big premium for them. Tiffanys has been struggling. Two things really. One is how they resonate with millennials. When i was growing up, nothing more i wanted than that blue box wrapped up in a pretty white bow. Is that still the same case now . They have been trying to revamp. They oversee buyers into the u. S. They are not spending as much as it First Quarter for tiffany, Chinese Tourists down 25 . Lvmh has a strong footing in asia and they could accelerate tiffanys growth there. Manus. Manus there you go. You want today tiffanys box with a bow and you end up working with me. What more could you ask for . Annmarie hordern tracking the lvmh story. Lets get to Annabelle Droulers in hong kong. Annabelle thanks. Briefingmco is potential investors in dubai, a sales push for the initial public offering. We have learned the invitationonly meetings include discussions on strategy and the dividends. The first talks outside saudi arabia around plans to sell stock. Novartis is agreeing to buy medicine co. In a deal, a stringup a drug into of acquisitions. Shareholders will get 85 a to thea 45 premium Closing Price on november 18. Novartis is sharpening its focus on cutting edge drugs for cancer and other illnesses. 50 billion merger deal with fiat by yearend according to reuters, which is reporting a memorandum understanding is to be signed in december. The carmaker is dismissing allegations that the latest Sergio Marchionne played a role in a corruption scheme. Carl icahn is seeking control of occidentals board. He plans to nominate a slate of 10 directors to the oil and gas producer. He owns a 1 billion stake in the company. No comment from the representatives. is rejecting xerox requests to open its books after turning down its unsolicited xeroxs request to open its books. There are concerns about the business and outlook and it says the 22 a share bid undervalued hp. And that is year Bloomberg Business flash. Manus. Manus thank you very much. Lets turn our sites back to trade. There is one Sticking Point in the negotiations between washington and beijing. Its around ip theft. It is a compromise. China said it would raise the penalties on violations of intellectual property rights, lowering the thresholds for criminal punishments. Intellectualal property is also under consideration. Commentatorsarket at the Bloomberg News economy inform in beijing. Even though i would be 6040 that we get phase one done, it is slipping. Ripping the economy as a part, putting a line down the middle i am not exactly sure we are in a trade war. We may be having a little skirmish. We are confident both countries want to find a resolution, a phase one resolution. China has been on a tear up trying to be the nice guy in the negotiations. The capability of china is superb and it is hard to replicate that. If there is going to be a deal, its one where the americans are doing the gimmick. Suspicion rather than trust, and i think that is the environment we live in. We should be open and we should cooperate with each other. We should seek winwin outcomes. More importantly, all players in this sector should trust each other. Is stillkou agbobloua with the daybreak team. We wait to see who gives the most and whether we get a phase one deal done. I want to talk about how you translate that into volatility in the currency markets appeared is tradingol above the threemonth vol. There is this tension of tariffs in december. How do you trade yuan . Are there better trades to be had . Akou the currency is mechanism that prices uncertainty and risk at the macro level. If you look at the dynamic for the chinese economy, the momentum has been slowing down, whereas in the u. S. , you are starting to see the s p making new highs. So the Bargaining Power clearly is in the u. S. , and as it were, the other way of trading it is through the equity markets, so could also show more volatility. And i think that it is less expensive to own volatility because of supply and demand distortion. In terms of the Political Landscape in the United States of america, you think the chinese i read this in the Silver Bullet which is that the biggest threat to the chinese is if Elizabeth Warren gets into the white house, because she will come at them hard and heavy on human rights relative to Donald Trumps administration, which is less likely to press them on that issue. This is an i think important point, because it is a lot easier to negotiate with someone you know in terms of, you know, their distribution of outcomes and meehans and feelings, etc. , than starting the process all over again with a different party. I think for china, it is more important to get a deal as soon as possible before the election than having to start from scratch with potentially a new president. And from the u. S. Standpoint, i think trump will also need to show that he is tough with china because this is something that will appeal to his base. Manus i want to show you the hsi. You mentioned it and i think this is quite interesting. It is in the library. , 1969, 50 years old. If i look at hang seng this year jones relative to dow jones and the s p, there is this lag in the hsi relative to the others. Do we play that they catch up on hsi the big ketchup game on hsi . Has a lot more banks and financials compared to the s p. Or the dow jones, which has a lot more tech names. I think the catch up could occur, but it would be relatively limited simply because the u. S. Tech is a lot more profitable so they are able to transform topline nominal gdp growth into a lot more Earnings Growth than their chinese counterpart companies are able to generate thus far. Manus i have had a number of people say to me emergingmarket currencies, in a relative sense, are in a two decade low. How do you play exposure of the backer of the chineseu. S. Steel into the emergingmarket spaces . Through rates, the currency play, and how would you execute it . Kokou the emerging markets, i think it is a combination of currency and rates. They are interestingly linked. If you get a deal, the impact on the Global Growth is going to be less severe, and therefore, e. M. Assets in general will outperform. Having a combination of currency and rates exposure could definitely be a way to play that. I also look at credit. In emerging markets. Because theres a lot of risk premium embedded compared to developed markets. Tradek it is ultimately a on Global Growth. Last but not least, it is important to differentiate between the strong Balance Sheets emergingmarket companies versus the week Balance Sheets emergingmarket companies which will suffer more, so it tilts toward quality emerging in my mind is what will make sense. Manus a tilt can make all the difference. Thank you for being with me this morning. My guest host, kokou agbobloua, global head at societe generale. That is it for bloomberg daybreak europe. The european open is up next. If you are traveling to work, tune into bloomberg radio, with you every step of the way. That is it for today and do it all again tomorrow. Good morning. We are live from our european headquarters. The jewel in the crown. Lvmh agrees to buy tiffanys for more than 50 billion. Ip crackdown. China says it will raise penalties for International Property theft. Asia stocks rise with e