S p and fitch approve their assessment of the u. K. s Credit Outlook, but the pound continues to slide as fears of a Nodeal Brexit mount. Fedex in freefall. The carrier cut its profit forecast for the second straight quarter. Deutsche bank called the results rest taking lee bad breathtakingly bad. A 5050 merger. Of course, one is buying. The others. We will sort out which. They will sell some of their steak but not all in peugeot. Lets get more on that major socalled merger with milan. Ureau chief tommaso i know that pr wants us to believe this is a merger of equals as so many do. Is psa buying fiat . Tommaso good morning. Good morning, matt. How many times we have discussed on bloomberg tv about the industry. Now, the deal is really announced after more than one month of talks between fiat and peugeot. The question the answer to your question is fiat and peugeot will put together their 5050 percent company. Actually, the new company will have half the shareholders by fiat and half by peugeot. Value of the two companies is almost equal. The board will have a director from fiat. This is where we can say peugeot is getting something. The 11th member of the board for the first five years will be peugeots ceo. But that does not mean that after the first five years there is any rule who will be the next ceo. The peugeot ceo will run the company. The deal between the two companies will be the chairman of the new company. Anna we certainly saw the share prices moving in an anticipation, didnt we, in recent months . Tommaso ebhardt, milan bureau chief. We will be in paris and milan throughout the morning to keep you uptodate with all the latest on this tie up between these two carmakers. Just under one hour away from the start of a cash equity trading day, lets take a look at the futures and european futures looks at for a little bit of weakness at the start of trade. The ftse 100. May be a little bit more muted. We have something of a pause coming for equity markets, it seems. Lets look at u. S. Futures and see if they tell us the same. The pause comes through loud and clear when you look at what is going on in asia. U. S. Futures with muted with slight look muted with slight downward bias. The u. K. Publishing space in focus with news out of pearson, but look at the gmm. The big picture is we are not moving anywhere very quickly on the asian equity session. Just as well on that. Show story on that story. Value,erprise substantially moved. We will see that particular business in the publishing sector and the united kingdom, when that one opens up a little bit later. On the gmm, moves to the upside from some individual markets. The asian equity session not really moving very far very quickly. He saw a new high on the s p yesterday in the u. S. , just eking out that high on that stronger data coming through from the u. S. From factory and in the housing sector. We have seen the pboc making some small moves. A little bit of generosity, prechristmas, prethe holidays. We will talk more about that in just a moment. With all of that in mind, lets get to mark cudmore, who joins us now from dublin. Ony good to have you with us the program in dublin. You know, usually, that is what we are talking to you about, and lets focus in on that and what has been going on with the pboc. A little bit more generosity from the pboc. Not exactly a rate cut, but something to shore up the economy a little bit. If it was needed, what work . Would it work . Mark it is not an official rate cut but it does not provide that signaled this morning. Of course, we have had that increase in open market operations, 200 billion yuan as well. They are not particularly shocking but they provide a sentiment boost, the support for chinese assets going into that low liquidity period over the christmas next two weeks and end of year. Overall, its a good move, but it is not necessarily groundbreaking. Matt are the markets pricing in a rrr cut in january after the spring festival holidays . Mark that is definitely speculation that there will be one. He is kind of saying to us that it is most likely going to be the january 15 date. It seems difficult to get it ready in time and they seem to come on january 5. That is when the traders in china start to speculate. That is another sentiment boost needed there. It is emphasized in this longrunning picture we have seen throughout all this year that china is being very practical about controlling the growth slowed down and reacting to the trade war we have seen. I think they are managing that overall as well. We are not seeing any hard landings. I think this kind of measure of doing the repo lending cut, the adding more money in the open market operations, and the rrr cut are all part of that same picture of gradually massaging the growth slowdown. Anna talk to me about what is going on in hong kong. Up for a nice day, set for its longest gaining streak since 1987. That sounds significant, but of course, it has been under pressure because of what we have seen taking place on the streets of hong kong. Mark i think this move was a little bit surprising. We have seen a squeeze in local money markets, the squeeze in the shortterm rates. It was supporting the hong kong dollar and seeing dollar hong kong come lower. It has gone further than most of us expected. It is kind of squeezing the volatility curve as well. The way you are seeing it does suggest this is more about a yearend liquidity issue that supported the shortterm money market rate and not about a fundamental shift in hong kong so after we get over the yearend break, we will see it return and dollar hong kong drift back up again. Matt thanks very much for joining us, mark cudmore, bloomberg mliv managing editor in dublin today. Next, we are going to take a look at your stocks to watch at a companyncluding slashing their full year outlook. Live on yourio is mobile device and dab Digital Radio in the london area. This is bloomberg. Anna welcome back to the European Market open. 10 minutes past 7 00 in london. Downside risks to the equity market session. 15 minutes until we start the equity trading day here in europe. Lets get a bloomberg first word news update. Thanks, anna. The u. K. s Credit Outlook has been upgraded by both ssp and fitch. That is after Boris Johnsons conservative party won a decisive majority in last weeks election. S p raised the outlook from negative to stable. Fitch took the u. K. Operating watch negative. That removes the immediate threat of a downgrade, but the agency did maintain a negative outlook for the u. K. Trump hasdonald accused Speaker Nancy Pelosi of turning the house into a star chamber. Thatis a Medieval Court became synonymous with abuse of power. Probably that trump laid out his defense. The house is effective to vote later today. The u. S. Has little leverage to prevent the pipeline project. That is the view of senior officials. It is a rare admission of failure after a years long effort to prevent what the administration believes is a threat to european security. The u. S. Will pivot to trying to impose costs on other Russian Energy projects. News, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Matt thanks very much. Your first word news. Lets get your stocks to watch from around the newsroom. Felipe is looking at a health care company. Annmarie hordern is looking at stereos. They are slashing their outlook. They were expecting revenue to grow by single digits, and now, they are saying there is going to be a drop of 13 to 18 . It lost more than half its value this year. You can look at its rival in the u. S. That has grown 45 . This morning, shares are going to drop. Anna we will keep an eye on that in the stereos business. Lets go to philippe. Big mover yesterday but more news flow this morning. Thats correct. This should be a very active session for this as well. The company felt the most on after yesterday in london muddy waters put out a report saying they are shorting the stock because you see there were many deals that were made here in the uae that were overpaid and they say their margins are way too high versus some of the local peers and we just had a statement by the Company Earlier today, a few minutes ago, actually. They say everything they are saying is basically unfounded, baseless, and misleading, and they are actually starting now a Payback Program of about 200 million that was already approved. Definitely, this is a name to watch as soon as london starts trading today. Matt thanks to both of you for joining us. You can get all the latest stocks stories from our Equities Team by typing first go on your bloomberg terminal and you can get the Bloomberg News on your mobile app. Lets get some more stock picks. Christian data care, head of ourarch, joins us from bureau. Talk to us first about the way you do your research, how you screen for stocks. We have a team of fundamental analysts who look at the of valuing aays stock when i look at earnings dynamics. It depends very much on the center. What we do on top of that is also to have a layer, to see what the market is currently, up analysis ofchnical the important input to see how the dynamics are and also to time some of the recommendations. That is quite helpful, i think, especially in a market that grew ever more efficient. The only thing you can actually see is the price action. Anna let me ask you what you think about the postal delivery business, the Parcel Delivery business at this point. We had an update from fedex that resulted in a big negative after hours share price move in fedex. We expect perhaps to see some reader cross into European Companies this morning. Fedex trading at a discount to ups, as you see on the chart. Is this a sector you want to avoid at this point or are there reasons to get in . Christian it is certainly a very competitive sector, and therefore, this is all about volumes and margins. It is certainly one of those sectors that fits into this secular scene. Where there is recovery, there should at least be momentum. We constructerall, this despite all of this negative news flow. The Market Reaction beyond the day will be interesting. We see some informed buying of that. The only thing we can spot is if on that news, stocks were to rise or stabilize, and then we see some rising price action. Especially in cyclical steps, probably the worst is over. Matt they had problems, of course, due to the holiday announcement from amazon. They will be banned from delivering goods for thirdparty vendors. You do like a lot of stocks that i think resonate with the holiday shocking theme, christian. Let me kick it off with the Bigger Picture stock of the week. Why do you like the credit card issuer . It is a structural growth story. We cannot see an end to that one. This is really the trusted Payment System of the global internets. Growth. Vide tremendous from all we can see, we continue to deliver it. Investors pay up. Havethat point of view, we no concerns. It is pretty much neutral. This is one of the important Building Blocks of a global stock portfolio. Anna i know that you like caring, but m a is a luxury sector and has been a real theme. It turned more positive. You dont like the companies being box, but the doing the buying, what does consolidation in luxury mean to you . Christian in luxury, as opposed to other industries, takeovers value m a were not adding in the red lecture he in the luxury goods sector. Usually, strong brands. They take over and are able to build further. There is a prime example of that. Companies inellent adding brands and building them on top and adding value for investors. Anna we are going to keep you with us. We have more to talk about with christian gattiker, head of research at julius baer, with us out of zurich. Coming up, the return of . 50. Options has the legendary, at least in our nerdy sort of global wall street terms, trader. We will explain and discuss, next, with bloombergs manus cranny. And when you are traveling to work, tune into Bloomberg Radio on your mobile device or dab Digital Radio in the london area. This is bloomberg. Anna welcome back to the European Market open. We are 40 minutes away from the start of the market open and this is what futures tell us about this mornings trading day, expecting weakness to come at the start of trading, in particular in the london market and the german market. U. S. Futures also pointing tentatively to the downside. The moby dick of options trading may have made a return. Thats bring in manus cranny to discuss. We are not talking about you of course, but tell us what is out there about the trader known as . 50 . Manus . 50 had a number one hit. Matt is standing by with number one on the billboard so that impressed everyone i know. Anis a moniker given to options trader who will ship in a few options on the vix. Take a look at the chart. By the way, the vix, fact of the day, it averaged 19. 15 since 1990, so we are way below that level. This will be the eighth year in a row that we are sub the average level of the vix. What does it take to explode the market to almost double the price that it is at the moment . That is the options trade that has gone on. There is a huge options trading that was put through yesterday. 100 30,000 call options. That is betting that the vix will double in the next 30 days, guys, anna and matt, so that is the trade. The reason why people are saying it could be . 50 is because, man or woman, that came to notoriety in buying these very short dated options and making a bundle of cash over the past couple of years. There are lots of people saying there are slightly more vix,ient ways to trade the which is buying call spreads, buying something which is a little bit more nearterm like 16, and you sell out of the money options, so it is a huge options trade, big in size, big in scale, and bake in a school board if it happens risk reward if it happens paired what would it take to double the volatility in the u. S. Equity market between now and january 22 . Manus well, matt there are so many things that could do it. You just need some problems with trade. Any geopolitical strife, certainly. It is a cheap bet to make on something thats got infinite possibilities. Manus, thanks very much for that explainer and for the . 50 for the 50 cent song in da club. Markets, more broadly, seem to be in a Holding Pattern after hitting those alltime highs on monday. Lets talk about the risk ahead. Fishing gallagher, head of research, Christian Data with gattiker is still us. What could kick up a little bit of volatility for 50 cent . Christian there is still the biggest risk for markets, which is markets itself. It is a market intrinsic event. We saw that over the Holiday Season last year, when suddenly, the thing was completely out of control and we saw probably nobody knowing what was going on. We saw some trading. This is usually triggered by some events, which by itself is maybe not as meaningful, which can trigger a lot of repositioning, and i think that is still the biggest risk. We are talking here about flash crashes and the like, but this ,s something they get paid for being able to weather that risk. There are trades and volatility going all the way. It can kind of workout maybe over time, but for the long haul, i think this is about just staying in and holding the course. Anna so you think the biggest threat to markets is markets themselves, something to do with Algorithmic Trading on the like. That makes me ask the next question. How strongwilled this years rally be . You sound as if you are a person who is a little scarred by ghosts of christmas past and we remember Christmas Eve of last year. Christian i think a lot of those dislocations are tied to the liquidity picture. Happened especially in the Fourth Quarter with liquidity. The dollar squeezed, central bank. A very difficult situation and that triggers uncontrolled reaction. Take it from here and i think it is the risks are a lot less at this stage. Trading and Monetary Policy and the fed actually ejecting liquidity and we have seen a lot of Institutional Investors being short or behind their benchmark. A repeat of what happened 12 months ago would be very surprising because a lot of things have changed. Matt thanks very much for your time this morning. Christian data occur, head of research at julius baer out of zurich this morning paired up next, more on our top story this morning. Up next, more on our top story. Fiat chrysler and peugeot are going to combine their businesses to make the fourth biggest automaker in terms of global sales. We are going to have all the latest details on this acquisition. And remember, Bloomberg Radio is live on your mobile device or dab Digital Radio the london area. This is bloomberg. Matt welcome back to the european open. 30 minutes from the start of cash equity trading across the continent and in the u. K. Im matt miller, in berlin, alongside anna edwards in london. Anna lets talk about whats coming up today. The Ecbs Christine Lagarde will speak in honor of been michael vick at 8 30 a. M. London time. The iphone will be released at 9 00 a. M. London time. The november readings showed slowdown have reached its low point. There is a reasonable chance that improvement will be recorded in the month of december, so we will be looking to where you are at the german data, matt. At 12 00 p. M. , chancellor Angela Merkel is going to take questions. Watch for any comments from her 5ghuawei and germanys networks. Later in the u. S. , the house of representatives is planning to vote on president Donald Trumps impeachment, with a likely januaryrial to begin in. Thats another i dont want to say end of a soccer, but a middle of a long saga th