anna: good morning, welcome to "bloomberg markets: european open." alongside mattds miller in berlin. matt: markets are on hold. european futures mixed. crude hold steady after tumbling below $47 a barrel. cash trade is less than 30 minutes away. anna: mnuchin the treasury secretary hits out at

high-frequency trading and the vocal roles. cker rules. deal reaches an informal with the eu, and the u.k. prepares for a no deal divorce. and -- matt: good morning. a half-hour away from european trading. take a look at futures. you will see a mixed picture as we saw in asia. japanese stocks down. , south korea, and australia up. a mixed picture. the ftse is unchanged in terms of futures. dax and cac futures are down. take a look at treasuries, this is unusual. everyone is expecting the fed to

rates at this meeting, and yet the yield over the last three days has come down. people are buying treasuries for at least three days into a meeting where we expect an interest rate hike. that is interesting indeed. anna: let's talk about what else we are seeing. indeed, what you were saying about the fed and the expectation of the market is that we will see a hike this time around. we see all of these emerging-market currencies moving higher against the dollar. that is the big picture. equity markets next in the asian session, waiting for the fed. also factoring in trade news. heard about mnuchin on how the

u.s. and china are talking. on a cautious note, we have gloomy profit news from fedex that sent that stock down. here is the surge on the two-year horizon, and keep an eye on oil prices. if you do not like the volatility of late, we get statements later today. the fed is the big picture. mixed,sian stocks european futures mixed. traders sit on their hands ahead of the big fed decision like the one coming up today. a hike is widely expected despite recent turmoil and president trump's ongoing campaign against tightening. oil is holding onto losses after its worst three-day slump since 2016.

global growth is haunting investors. in london is mark cudmore. how widely expected is a hike today? we have not just the president, telling big investors the fed not to raise rates. all jay powell be forced into position where he has to raise rates even if he did not want to? mark: whenever you go into a central bank meeting, there is a distinction between what they should do and what they will do. the vast majority of the markets are expecting a hike. it would be a surprise if it didn't, and it would be a scary message like they are more worried than we thought. believenumber of people that hike will be a mistake. they are saying the fed should not hike.

not many people believe they will not hike. anna: the conversation about what they should do and what they will do, and then what the market was expecting and where is the news flow? the hike has been expected for a long time. the market is reacting to help dovish the fed has been. the dollar is down 0.3% this morning. we have been asking how many rate hikes can the markets withstand? mark: the really big answer comes from the oil market. oil markets are falling at this pace, it is a deflationary impulse. it is cheaper energy for many companies, it is falling so fast it is worrying. and it is negative on the u.s. economy now that it is an export. growth next year will hold up ok. i do not think equities will struggle with a couple of rate

hikes. there may not be rate harks is there is no inflation with oil markets falling rapidly. it all comes down to the view on oil in your outlook. matt: i am looking at the italy-germany spreads, and we have come in substantially. a far cryking at 259, from the 400 we were approaching when italy remained defiant. eu and rome day agree on a 2.5% budget deficit? mark: i think today is the day we get a headline, what it will be i do not know. we have seen this steam for the next -- for the last couple of weeks. as we discussed previously, italy's that problem will rise again next year, but not into q2 with a second half. we need the hard data to see

italy's debt problem is still going. we are arguing over a tiny amount of money. the debt problem is too large. the europeanard election next year it will get more worrying. anna: italy's prime minister is saying -- he will speak on the budget midday rome time. if you want to join in the debate, and answer the question of the day, you can reach out to us on tv and the blog. use tv on the bloomberg. debra mao is in our studios in hong kong. china and the u.s. will have talks to discuss the ongoing trade dispute. steve mnuchin told bloomberg they held several rounds of

talks in recent weeks, and are trying to document an agreement for a march 1 deadline when the current terrace truce runs out. tarriff truce runs out. with 100 days until the country leaves the european union, prime minister theresa may's cabinet has issued further warnings to voters and businesses in the coming weeks. may said parliament will vote on her deal in mid-january. italy's populist government is betting the european commission will ratify its budget meal today ahead of a commissioner meeting in brussels later. a spokeswoman speaking anonymously said the government has a technical agreement with european officials. italy's deficit target next year is 2.5% of gdp in order to

persuade the eu not to start its sanctions procedure. glaxo and pfizer have agreed to a joint venture to be controlled by the u.k. company. glaxo will hold 68% of the venture. the u.k. company says it plans to list the new business within three years. sincerld's biggest ips 2014 has slumped on its first day of trading today. price, in500 offer spite of a network outage and continuing equity global selloff. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. thank you very debra mao in hong kong with your first word news.

coming up, we will speak to oksana markarova, the ukraine's finance minister. a bailoutimf approved program for the country. remember, when you're traveling to work, bloomberg radio is live on your mobile device or dab digital radio in the london area. this is bloomberg. ♪

anna: welcome back to the market open. we are 18 minutes away from cash trading as we wait for the fed. billions of dollars in aid for the ukraine. it is to stabilize the economy and pay back its debts. the president said it will strengthen the ability of ukraine against internal and external challenges. the $3.9 billion bailout comes after martial law in some regions with its ongoing conflict with russia. joining us from kiev is the finance minister of ukraine, oksana markarova. let me ask you about what ukraine is doing to fill the requirements of this money? previous payments were not forthcoming because reforms took too long to be delivered.

are you confident it will be delivered this time? thata: we are grateful they have supported us again, adopted thewe have budget for 2019 which is a good prudent fiscal budget. the earlier signs of ukraine's independence in november, and i think we will deliver on the program thatis will cover 2019 and give the green light to other confessional lenders. what are the most difficult reforms? what are the most difficult requirements from the imf that you need to comply with now? willa: by arrangement

focus heavily on fiscal reforms in the banking sector. service is one of the key areas in this problem. , but going to be difficult this is the priority for the president and our government. we will stay focused and deliver as much as we can. i note 2019 is the year of two elections, but for the government it is an opportunity to do work that does not require the of the mentation. anna: i know you have raised some money in the international bond markets with a $2 billion sale, what appetite the you gauge there is for ukrainian debt at the moment? oksana: this problem opens up

the possibility for us to continue with the world bank, and yesterday in addition to the $750 million which we can use for a. we are working with the european union on the market financial assistance. also we will focus on privitiz ation next year. matt: i am sitting here in berlin where as you know our german chancellor has backed vladimir putin's pipeline. in recent days, we have seen the european union and the u.s. congress come out with nonbinding resolutions against the pipeline construction.

how do you see that project going now? came back from brussels last week, and we definitely feel the support of the european union. we are working on the energy sector in the ukraine. and creating markets in ukraine, it is an important part of the imf program. back in november, there was a decision to impose martial law on the country. what impact is that having on the normal functioning of ukraine and the economy? law was implement it in response to the attack, so that we can be prepared if necessary. on the budgetary

there was no negative impact. there is a negative impact of but inack itself, general all the actions that were made by the president and the government and the national and wetigated the risks, see the economy continue to grow. we are on track to exit this by the end of the year, and we have adopted the budget to transfer ukraine. thank you so much for joining us, oksana markarova, minister of finance, ukraine, we appreciate your time this

morning during what must be a busy. for you. period for you. let's look at how futures are faring. picturel see a mixed with ftse futures down about 0.1%. cac futures up by half. that's go to debra mao in hong kong. debra: fedex slumped in extended trade in the u.s. after lowering its profit outlook, citing economic weakness in europe. it forecasted adjusted earnings for the full year, missing the lowest analyst estimates. fedex says it's china business has slowed due to trade tensions. is set to save losses as much as $180 million on an asian hedge fund whose foreign-exchange wages went

wrong. the sides are talking and board level discussions at the bank are considering an internal shakeup. the global hedge fund sector has been under pressure with a $3 trillion industry for its annual -- for its worst annual performance since 2011. blue apron has seen its market value disappear. gives it thenged dubious honor of being the third worst ip this decade. been energyave companies. that is your bloomberg business flash. anna: thank you very much, debra mao. we are minutes away from the start of the trading day. we are going to take a look at the stocks we are watching at the opening including glaxo after the company announced a joint venture with pfizer.

about retail as well. this is bloomberg. ♪

matt: welcome back to "bloomberg markets: european open." minutes until the start of trading. stocks to watch, we are looking

at the economy. we are covering glaxo. what is the story with the best company with the worsening in germany? a happy story, this company has had three profit warnings this year, and today is not looking better for them. they said that year will be a difficult year, a transition year. the executive suite is rudderless. hugee are not buying these anymore when they can buy dishwashers, they go online to buy that stuff and it is hurting the company. pfizer, big news today. >> an exciting story. axo you have the nicotine chewing gum, the chapstick lip

balm will be put under ruone roof. it will be a separate unit on the london stock exchange. glaxo has had a difficult couple of weeks. synergies can save half a billion, it is positive. absolutely huge story. that could spread to other names in the industry. watch the drugmakers. we think it is trending lower this morning, they took a hit in the fourth quarter. this comes from their asia unit. it is the first investment bank the reports the volatility that hits the continent. stock markets likely to come

under pressure. us.: thank you for joining you can get the latest stock stories from our equities team at first go on your bloomberg. the open is right after this break. this is bloomberg. ♪

anna: less than a minute away from the start of equities trading. the euro is a little stronger this morning. 3/10 of 1%. generally, it is the dollar weakness we are seeing. many in the market are expecting that the pricing suggests the market is expecting to see a hike from the fed, but how dovish will the signaling it be? an assumption of some dovish and is coming through in the dollar market. the oil price is a little more stable than we have seen. the csi 300 trending downwards,

a mixed picture. we'll put the futures up for you to show you what we are expecting. a mixed session in asia. i just think the latest news flow from steve mnuchin. i wonder how the fed ex numbers will impact trade, they were a little gloomy. it suggests we will be mixed, really, at the start of the day. fed, we arethe waiting to see what they tell us in their dot plot. will there be two dots in their? -- there? and what will they say about further ahead? i read some analysis that suggested that if they start suggesting rate hawks it will be seen as hawkish. seeing rates on the cap and the ibex. flat, the daxs a is yet to open.

what do you see? matt: let's take a look at the imap there on bloomberg. we see a bit of a mixed picture here. in healthot gainers care coming in consumer discretionary stocks, and the losers in i.t. and technology, as well as in energy. a very mixed picture indeed, just like the markets today. you will not see one direction or the other. it makes me wonder what the breath is like. what do you see as far as winners and losers? anna: let's have a look at where we are. this is the biggest gainer, up by 4.9. . combining their consumer health businesses, they plan to separate and list of that business in three years. looking for any read across as we mentioned. .4%.

rivals in the sector, you could say. i must look at the downside. we are talking about what has natixis.g on at the this is the french banking business, suffering around $300 million worth of heat from an asia trading hedge. also keep an eye, this is a very small task -- small-cap stock. 37% aftering some their profit warning. talking about a disappointing set of results and the ceo quitting that business, the stock down by 40%, essentially. european markets, we are looking at slight gains, really a mixed picture investors are widening toting a

happen, despite recent market turmoil and president trump's ongoing campaign against tightening rates. joining us now is a global investor from allianz. tell us what you expect from the fed today. >> good morning, matt. we think it is a done deal that they will raise rates. the people hoping for a steady signifying the economy is still growing above trend, wage inflation above 3%. very stable at about 3.7%. the u.s. economy is hot. where we would disagree is with the fed futures with their only looking for two more rate hikes. we're still in the three-for next year because they are so far behind the curve. if they get threatened by the temper tantrum, we argue that is

another policy mistake and would want to move more risk off. anna: that is us to something to talk about, don't we? you see the world different than the president, who is warning the fed not to make quarter" another mistake. you think they should be hiking more? >> yes, they should have kept going. anna: even with the market turmoil? 3%, that's a real setback. the world wasf down 15-30%, depending on which index you choose. i think the u.s. has barely had a setback, really. agenda the president's is slightly different, i think he is looking at reelection. he does not want a recession between now and 2020. lower interest rates would help that argument, and what is interesting is if he can do a deal with democrats and keep the

economy going to help his reelection campaign. i wonder what you think about the general state about growth in 2019. do you expect a significant slowing or even a recession? it seems like markets are tried to tell us. >> interesting question. , i argue the chat global economy has been fragmenting. is the tax will see cuts beginning to filter out. if we do not see more stimulus year, ina in q2 of next think profits look pretty dull. that is what i think the markets are beginning to sniff. when one looks at money growth data, one would be questioning

whether the fed should continue to do monte tightening. and i think you and i will be time we don'tthe brexit whether the ecb has also made a policy mistake with quantitative easing. anna: we will talk about the ecb in just a moment. you think there are fundamental reasons for the stocks to retreat. see steve mnuchin blaming volatility on the volcker rules, computerized trading. but you think there are reasons to take a step back and sell off? >> yes. i would argue that expectations, particularly in the u.s., may have gotten carried away because of tax reform. think tax reform means i want to play half valuation to u.s. equities. , maybe look into 2019 there early consensus is just too high for an economy that will be slowing to a 2% pace year.

-- next year. matt: what do you think about mnuchin's concerns? these high-speed trading concerns are ones i have not heard, to be frank, since the financial crisis. is that a problem? our algorithms a problem? the quad a complaint has been much louder and we have heard it from previously successful, wealthy hedge fund managers. >> the underlying structure is becoming more and more under strain. my handthe picture in shows that over half of u.s. equities are now traded by machine. often in only one share sizes. so they are not helping, there delivering unreal liquidity into the markets. policymakers 10 years ago took away the ability for there to be a backstop for

the markets, unless you think the central banks are now the backstop. so they cannot take the other side of the trades, the pension funds cannot. so i think we are to see regulation come back to bite us. leveraged in the financial crisis and now cannot help the market. we're going to see gapping like we did. i think that gives opportunity to asset managers who can be active and take opportunities when the market becomes illiquid and dynamic. anna: think you very much, stay with us. neil dwayne at allianz. let's continue the conversation. what's coming up, let's take a quick check of the markets. the overall picture, we are a little stronger. waiting for the fed is the big headline. up by nearly 6% this morning, climbing the most in more than 10 years as they do a deal.

they say the benefits outweigh the model. we talk more about this tie up in just a moment. this is bloomberg. ♪

matt: welcome back. we are 11 minutes into the trading day, still looking at a

mixed picture in terms of what is going on. we have gains across of the core, but losses in some places in scandinavia. let's go to annamarie with a look at some of the stock movers. >> let's kick it up, just short of 5.5%. one of the biggest gainers this morning. it creates the world's biggest supplier of over-the-counter medicines. the u.k. company will be the leader in this. downside, us to the one of the biggest losers down more than 6%, the french banking business took a 260 million euro hit to do with the hedges in asia. this is the first investment bank to really report to this hit from the volatility is going on.

finally, deutsche bank also pointed to the downside. -- deutsche post also to the downside. they cited global trade is slowing and indicated ongoing deceleration. thinking maybe matt miller is not posting enough christmas gifts to his colleagues in london, anna. anna: maybe that is exactly what it is. let's blame matt, that's how the show operates. a formal reached agreement on their budget plan for next year, though there is no word yet on the final episode. officials said brussels will ratify the deal today. joining us from brussels is bloomberg's maria tadeo. is this the end of the job around the italian budget? the great standoff between brussels and rome, is it done? >> good morning.

this is what we know, information from the treasury. they say they have a technical deal, of course, this is a political budget. again, the key here will be that deficit figure. 2.0% of gdp. we know the commission wants to this below 2% of the italian government started on 2.4, so we are seeing a reduction. it is very significant, and italian bonds are rallying from a three-month low. things are that easing is enough to see a rally. we got this ratified, and that is what we hear from the government. we still made to wait for the european commission. perhaps a little bit of momentum, even. matt: do we know which measures

will stay and which ones will be asked -- axed? and that't really know is something that everyone will keep a close eye on. of course, if you want to cut down, you will not be able to deliver on this very expensive promise, at least in the scale of the italian government wanted to initially. again, we have to keep in mind .his is a new government it is two political parties that ine never worked together the person who has put the negotiations on course has been the italian premier who seems to be independent. keep an eyeeed to on is which measures will turn out, the five-star movement or the league?

salvini has flipped and now there is speculation that perhaps the situation will not even matter because we could go to a new election in 2019. matt: all right, thank you very much for joining us. maria telling us what we are seeing. neil is still with us. the italian story seems to be pretty much in that bag. but you mentioned the ecb earlier, brexit as well. to a lot of people like the ecb is trying to hard to normalize at a time when it should not be >> -- should not be. neil: i agree from a monetary perspective. all.nt to have any at link between italian banks of the sovereign which

will remain a concern. i will simply point out two things. i talk about italy, which is barely have any economic growth. a battle brussels needed to fight come and now we know the french will have a budget deficit of 3%. every time they break the rules, they do not seem to care. so i wonder whether politics and italy will return as maria will wait toif we see what happens with the parliamentary elections. then we will see how politics wants to play. so i think it will build into 2019. anna: you are channeling salvini now. abouterceived difference how rome and berlin are treated. but this raises an interesting point about whether it is time or whether the markets would tolerate any rebuke of those fiscal rules.

is it right that those fiscal rules are set to where they are? italy.ot neil: i argue the roles of into constrained. they were made in the good times and did not work in the bad times. i think the frustration from mario draghi as he enters his chairmanship is that there has been no real structural reform leading us to the united states of europe. there is no budget, no deposit insurance. anna: they made progress, didn't play? -- they? neil: but they did not talk any numbers. the foundations are there for the next crisis and that is the problem. matt: do you still expect brexit to be done by march 29? neil: i do, and having traveled a lot through europe was that

everyone i met was telling me that we have to leave on march the 29th, otherwise the u.k. will be included in parliamentary elections in may and i'm not too sure they would 100 50 grumpy u.k. people trying to cause problems in brussels. i think we have to go. i heard a different date for the same reason. we will talk more about brexit in the days ahead for certain. at allianz, hest stays with us. europe, upstocks in 2/10 of 1%. waiting to hear just how dovish will the fed the. perhaps perceiving the fed will be quite dovish. the biggestrts of

gaining sectors across the european stocks spectrum. this is bloomberg. ♪

anna: welcome back to the european open. the stoxx 600 of the by .25%. assets in this fund have surged, far outpacing average inflows into u.s. trackers.

but is there a dark side to socially conscious investing? critics say the criteria are often so broad that a company leading in environmental aspects may have a board composed entirely of men. it is difficult to meet all of these criteria. neil duane is still with us. we look ahead, you see this is one of the bigger themes of 2019. the thinking suggests that these of funds actually invest broadly across equity markets, maybe they are not picky enough. neil: this is a journey, a broadening. not just to make sure they are managed properly, but maybe they do no social damage and manage the climate. we see it as engagement first. theon't do these because of fact that they do tobacco or child labor, though we don't

like that either i think it is about encouraging companies to be the best that they can you mentioned etf's, and what is interesting is if you look at as anp as a europe -- index, you will miss the parent climate change. they are delivering nearly 5% increase in global temperatures. if you are think about how you have an impact, young to think about how you reallocate capital towards companies developing sustainability. a longer-term thing i would offer is millennial's, or the children who are now entering the workforce. they are socially aware, they want to know where their food comes from. think that the changing consumer is also driving. a problem, i think, is the fee.

you even have these anti-fee companies slapping together indexes that hold 4-5 of the s&p 500 companies. -- not easy to believe that four of these 500 companies are socially responsible. so where do we go to make these investments? clearly, a lot of people want to do it but you don't want to pay. it is an additional level of resource. equity and credit analysts around the world who focus on these specific topics to engagekes time with companies and you have to pick your battles in theory, it adds to costs. but the flipside of the fee argument that i find delicious is that most of these etf providers like blackrock and

most of theirhe portfolios back into the market, to answer your earlier question about volatility. what i find interesting is that rather than getting the funds cut, they take 20-50% as a for administration. , when i'm not sure that is justified. they're funded structures are artificially underpriced as well. anna: have you see arguments about these companies which break. thank you very much, neil duane, allianz. we will have further conversations with him. checking in on broader markets, the equity market up by .4%. the ftse, i can say in italy, certainly,1.7%, to

the market is taking seriously the progress named between rome and brussels and clearly indicated on that world map. this is the function if you want to follow big picture were equities are trading. this is bloomberg. ♪ ♪ there's no place like home ♪

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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. matt: 30 minutes into the trading day, let's get your top headlines. steve mnuchin blames the fry --y secretary -- at blames high frequency trading and the volcker rule. and a budget accord. btp surges as italy reaches an informal deal with the eu thanks to france. meanwhile, the u.k. prepares for a no deal divorce. k and pfizer agreed to combine health care businesses. glaxo plans to lift the joint venture within three years.

the stock jumped the most since march. good morning and welcome, this is the european open. i am matt miller in berlin alongside anna edwards at our european headquarters. anna: let's talk about what is driving the markets. the big picture is around the fed. we are waiting for the fed, just how dovish they will be. down a fewth is percent. they are doing a consumer business and that has sent the stock up. they plan to deem are and the list the business. we see a solid bounce in italian stocks this morning, very much a feature of what we are seeing on the upside. tesla is higher, other italian banks moving to the upside. the downside, erste bank open down by 7.3% it takes us down.

there was a report about the amount of money they lost. down by 5%. fedex put out a warning yesterday after the close which sent to their shares down in after hours trading. let's get a first word news update for you from hong kong. u.s. have helde vice ministerial level talks to discuss the ongoing trade dispute. bloomberg that two sides have held several rounds of talks. both sides are focused on documenting an agreement by a margin first deadline. -- march 1 deadline. italian bonds surge as the country is said to have reached a tactical agreement with officials. ahead of a commissioners meeting in brussels, a spokeswoman speaking anonymously so the

government has a technical agreement with eu officials. fromcut deficit targets just over 2% in an effort to persuade the eu not to start its procedures. the world's biggest ipo has slumped in its first day of trading. softbank and its underwriters price despite a japan wide network outage and a continuing global equities selloff. this company has trapped dividends and warned they will decline. europe's biggest electronic retailer faces a leadership avoid the announcement that these -- the standing in executive will leave. they have been wrestling with competition from amazon and other online sellers. has seen a surge in turnover amongst investment

bankers since may as cost-cutting and sinking morale prompts leaving. 30% of the investment banking workforce has left. say eight managing directors and a dozen the directors are among them. squid asay became a the stars a failed to align for yesterday's record number of rocket launches. andex scrubbed its mission blue origin did the same on an infrastructure issue and aria on space was hit by bad weather. alliance began the last of for potential missions to postpone its lift off. global news 24 hours a day and a tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: let me tell you about some news we have across the bloomberg. the headline says that taisho farmer in japan will acquire

crystal myers. this is a deal we talked about a little earlier on this week. the acquisition by japanese corporate's into europe, we talk about this with one of our colleagues here at bloomberg about the propensity for that to happen with chinese money. and, perhaps, with japanese investors motivated to find growth elsewhere. this is the latest on that trend. for $1.6 billion. . matt. matt: these companies have agreed to combine their health care consumer businesses in a joint venture to be consumed by this u.k. company, creating the biggest supplier of over-the-counter medicines. they say they plan to list the new business within three years.

break down this deal for us. it is huge, obviously. who gets what? gets the lion's share, faisal gets the rest. have that perspective of the ipo's down the road. this is essentially a split up as we know today. vaccines, oncology, that kind of stuff. fisa brings in a brand like at bill, that we all know well. painkillers and so on. is brings them together through one roof. matt: we have been working together for all must 20 years, nobody believes in a merger of equals anymore. there is no joint venture that is 50-50. so is this them essentially taking control?

>> it is. and there were talks that they would be uploading their business. what they are doing now step-by-step, they done the joint venture can see how it rolls out. it will do the ipo investors will hopefully get a good share. where does this deal come from? we often see these consumer brands owned by companies. what is the story here? busy year for a there is thatis movement going on. traditionally, companies have tried to keep the consumer and the drug business under one roof, because they sort of move in different paces. one requires a capital, the other is more stable.

while we have said there are things we want to continue, there has been a bit of a change of heart. it is been a busy month from her , she sold an indian subsidiary and companiesonth a couple of weeks ago. that would did not go down so well. investors are really liking it and stocks are up quite a bit. here in berlin, our senior editor for global business. but get back to neil duane. you broach the subject earlier, and so far, nobody knows what the divorce is going to look like. theresa may has put the u.k. on high alert over the dangers of crashing out over an agreement.

as well, she says that no brexit is a no go. what do you expect? neil: we definitely expect some kind of deal. we could get a deal on the 28th, unfortunately we staring into the abyss, we never managed to get their attention. it will be very difficult. parliament sounds like they want to have a deal. you call it crashing out. nobody other than the bank of england have explained why crashing out would be that disastrous. but it think we'll find out as we go through q1, at the moment, it is phenomenally uncertain. can i just make another point about the markets? i think we will see more m and a , and that will tell you one of your earlier questions, what the world thinks about the next couple of years. toughergrowth will be

and companies will buy back so they have something to chew on. fascinating. you don't think a no deal would be that awful? the government clearly thinks there is something to be concerned about. that is why they are putting thousands of troops on standby. many people talk about what this does to water supplies, medical supplies. bringing food into the country. you are not concerned about those things? neil: i'm concerned we wasted years getting to a deal that we will not get through parliament. i think we should always had plans to be, c, and d. but a lot of the trade is done on wto terms. checked, airlines other than british airways fly around without problems. i refuse to believe the lights will go off and the planes won't fly and, you know, we get shut off like a third world african country.

anna: so it won't be that bad because europeans will, in their own interest, try and do small deals. they have said they won't do small mini deals on the side. but i think we are seeing that now. our businesses having to make decisions on the basis that we just don't know. i find it perplexing that canada plus and norway plus were offered 18 months ago when, for some reason, theresa may decide not to head in that direction. brexiteers will look worth while from the remainders perspective, but we live in a world of uncertainty. we will wait for the show to get back on the road. matt: all right. nonetheless, i will be standing

by with a camera on march 29. just in case everything gets shut down. thanks so much for joining us. pleasure have you on the program. let's quickly take a look at the markets, just about 42 minutes into the session. especially in italy, because of their expected to deal. 1.5% with italian 10 year yields dropping by 13 basis points. when wescinating indeed see the stoxx 600 rising by far less. it shows that italy is outperforming by quite a wide margin. this is bloomberg. ♪

anna: welcome back to the european open, we are 45 minutes into the trading day. oil is struggling to recover from the biggest three-day slump since 2016. annmarie hordern has got some charts for you to focus on. >> i have two charts that i think are very important. the first is looking at the oversold market. 7% yesterday, today

falling below $47 a barrel. but it is in oversold territory, so why aren't we seeing a rebound? maybe it will remain in oversold for the whole month, that's one of the big questions we are looking at. the other one i want to talk about is the price of oil in the heart of the permian basin. it is trading below $40 a barrel , it has not been that low since 2015 when prices collapsed. money,roducers can make but when you are looking at the heart of the permian low 40, it is starting to get a bit troublesome if you are sitting in houston. matt: thanks very much. anna marie with a quick check on the disastrous price problem in the oil patch, at least for the sellers. those, isia, one of spending at an all-time high in the coming year as government and boost capital investment and extends handouts to its citizens

worth billions of dollars. the kingdom is also making a rare, bullish call on oil, suggesting crude will average 80 a barrel. that is an optimism that defies most price forecasts and saudi arabia's history of conservative predictions, of course, they are the ones with their hands on the tap. this with the chief middle east economist at bloomberg economics in dubai is a middleondon east north africa analyst at jefferies. why do you think the budget figures don't add up? the main reason is oil revenues. they expect oil revenues to go up. now, that can come one of two ways. i did spent prices to go up or

production to go up, neither is likely. barrelve averaged $72 a in 2018 and is currently below 60. nobody expects it to trade above 72 next year. production, saudi arabia has announced they will cut production starting in january. it is unlikely to get any boost from higher production. given that it is very difficult to see what an increase is going to come from inside the budget. anna: good morning. what do you make of the assumptions behind the saudi budget? does that mean the budget has credibility? >> that is a concern markets have today. , don't think it is a surprise because i think we understand the context in which this budget has been made. this a budget is coming after a

and of almost a recession the growth is only recovering very slowly, it comes at the point where there is concern domestically about the political leadership, how the country is governed. basically, a need, to announced significant spending. on the issue of revenues, and i agree very much, by the way, hello, there is significant talkssm, which of course to either cutting more than expected. they are counting on an oil price rebound, again, markets not anticipate given the global outlook. this is where the problem is, definitely on the revenue side. i think there will probably be something like this.

did they have to keep buying the social peace? essential andis we saw that yesterday by the decision to renew the allowances. around $13 million in the hands of public sector employees. but on top of that, to increase the allowances for the citizens account. expected to mitigate the impact of higher oil prices. and higher oil prices on the population. we are back to the past, but at we are seeing too much pessimism about saudi arabia. say that they have done a great effort on improving oil revenue. it is not enough, given the challenge they happen terms of growth and job creation. but at the end of the day, the question is whether we believe

to hike spending were temporary -- were permanent or temporary? that is what we will see. matt: i wonder about the cost of killing jamal khashoggi. is part of these payments to gain back a little bit of ground after that was revealed? >> yeah, i think that is absolutely right. i agree, basically, growth is only going to come from public spending. if we look at private consumption, it was hit last year by the removal of subsidies. by the high utility bills, the expectoration of the levy. incident,he khashoggi which is basically leading foreign investors to shun saudi

arabia. they have been slow to come anyway but unlikely to arrive. the main way that public spending could drive growth is through the increased spending that we saw in the budget. contextwhy the general is leading the government to choose how's spending at the expense of sustainability. really fascinating to consider how the murder of jamal khashoggi impact here. thank you very much. thanks for both of you. up next, battle of the charts. g tv , that is the function to use. there's just a few of them, you can save them. ♪

anna: welcome back, 55 minutes into the trading day. matt is going head-to-head with dani burger. math, let's go to you first. that a've got a chart lot of us are going to be talking about today and in the year following.

the uncertainty about what is happening with the federal reserve. in blue, you see the index. we know what has happened to that since basically the end of september. come barreling down to a harsh correction, more than 10%, well over 10%. in white, you have the market expectation for rate hikes going noward and it looks like the market only expects the fed to hike one half of the rate hike now. previously, we were looking at only two rate hikes. no longer is that the case. the market is dubious that rates will be hikes at all. dani: faang has lost its crown as the most crowded trade. bank of america shows that long dollar is now the longest, most crowded. and you can see the dollar index has done really well these past couple of months, but options are now pessimistic on the dollar trade. anna: both related, i'm going to

go with dani's. we see the dollar index down by .3% of the which i find fascinating. more on the fed all the way through, this is bloomberg. ♪

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