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tv   Bloomberg Daybreak Europe  Bloomberg  December 27, 2018 1:00am-2:30am EST

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>> good morning, from bloomberg's european headquarters, i'm nejra cehic. the balls come roaring back with the dow placing its best ever point game and the nikkei bounces back. oil rights a wave of optimism to hold its biggest gain in years. momentum, copper rebounds as bloomberg learns a in january.s headed ♪
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matt: welcome to daybreak: europe. i wanted to shade the close in u.s. by yesterday. it was spectacular. since 2009, all but one stock gaining, a jump of 5%. u.s. equities have just averted a bear market, but previous that, we saw the s&p 500 closed lower. we have avoided a bear market for now, the dow having its biggest jump in my points ever. and judging by the futures, like that bounce we saw, it may not continue to date. futures lower, nasdaq futures lower, and dow futures pointing lower as well. is is going to be a repeat of 2011 or not? meanwhile, we are the dollar weaker against the yen. we saw it again just once in the past 10 sessions, that yen
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firmly been. japanese equities dropped into a bear market earlier in the 10 year yield down to basis points. so we are seeing money move into those safe haven assets. crude, we saw a drop below $50 a barrel. , somebouncing back positive sounds from russia in terms of another opec meeting. down 3/10 of a percent. yvonne man in hong kong has more on the markets. good to see you. >> good to see you, naral. -- nejra. a stunning reversal on wall street, but japan is the clear outperform or. as much as 5% earlier this morning. theselly has been oversold conditions that some say have liked to this surge here today.
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some are saying that perhaps the biggest rally is going to last. constantly giving up again that these games we are seeing are a perhaps more technical rebound something that changed. contracted for the first time since 2015. we're really seeing the effects of slowing growth. taking a look at some movers, russo here in hong kong, that stock has been flying, close to 8% on a news the chairman is resigning as part of a deal struck with the u.s. in order to lift sanctions. that stock is up about 6%. up about 1%, 6% lower here.
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sources are telling is the president of their trading unit has been suspended this week due to trading losses. nejra: thanks so much. let's get first word news from hong kong. u.s. government allegation has set a plan to go to beijing for trade talks in january. a to bloomberg, trade representative will lead the white house team and will be the first face to face trade 90 day trucence a was decided argentina. donald trump has voiced confidence in steve mnuchin after markets fell under reports the president had discussed firing the central bank chairman.
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trump said the fed is raising interest rates too fast, but he has confidence the central bank will get it pretty soon. >> is his job safe? >> 100%. >> not in jeopardy? >> that's correct, yes. of officers buying shares in their own companies has increased. the number of bosses making purchases has doubled in the past two months. an outbreak of the ebola virus in the congo went back a long way to the presidential elections. hundreds of people have been infected. they longtime president joseph kabila has already been put off for more than two years. england is planning to double it a chart on disposable plastic
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bags as part of a drive to protect the environment according to plans published by the government, these bags will also be extended for the first time from larger retailers to all stops. the government says the current five pence charge has cut average annual usage in england from 140 bags a person to 19. day, onews 24 hours a air, on tictoc, and on twitter. name. -- nejra. nejra: just got some breaking news. 50 point stake a in london gatwick airport for 2.9 billion pounds. we'll bring you any more updates on that as we get them. to the markets, u.s. equities some their biggest rally in nearly a decade. a search withces the s&p 500 up nearly 5% and the dow jumping its biggest ever point game.
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-- again. -- gain. meanwhile, trans economic advisor has said that jay powell's job in the federal aftere is 100% safe reports that trump had discussed firing mnuchin. james, great to have you with us. as we get this big rally today, some skepticism coming in as to whether this is a dead cat bounce. are you skeptical about the rally we have seen? james: it did not take long, did it? one day, and already we are skeptical. essentially, we're seeing in the market being forced to wean itself off of its addiction to central-bank stimulus.
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therefore, i don't read too much into the day-to-day gyration. it is fair to say we have come from a time of zero volatility are being a bottle or value investor did not work, the game was rigged, zero sensitivity. speaking, we've got to the other end of the spectrum you have high sensitivity in -- and every peace of news is being left upon and it has a dramatic impact, because for all intents and purposes, the fed has stepped away. that will mean the markets are really struggling for an anchor over the short-term. d.c. that the biggest indicator will be the fed? do you think it is the fed that
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is key in all equity markets? >> i have seen a number of things talking about how policy from the white house is a big influence, why they have been weak, and i strongly disagree. to me, this is a continuation of the process at the start of the year. at the end of january, equity markets fell fairly jim mattis dramatically. really, the structure of the market is such that the entire methods of investing system, all of these things are really set up for the central-bank policy which previously existed. it has changed recently dramatically and will continue to change. nejra: i have got a chart we just showed showing the number of positive finishes at a record. there are a number of things, i was reading and analyst saying that he needs to see at least
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two consecutive days in which the percentage of stocks rising exceed 90%. indid get that yesterday order to believe we have actually escaped the market and might get a sustainable run -- sustained bull run. saw a similar thing and a big bull run, continuing the market we saw almost and this week. what signs would you be looking for for true capitulation and the fact the buys will really come back either in the equity market or elsewhere? james: it is quite difficult. i have described it as the genie being unwilling to go back in the bottle. looking beyond next quarter's results at one of the longest expansions on record, one of the longest and lowest of volatility chart ratio equity bull run spirit the psychology is that we know it has to and at some stage and we have announced seen a number of
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signs globally and domestically which suggest that we need to start thinking about the end of the cycle. what does it take for us to extend? i think that is incredibly difficult. i'm not saying it cannot rally, because they look hugely oversold, and sank has played a huge part in the magnitude of volatility we have seen, that it is shooting back up to 2008 on the s&p and beyond. i think that is incredibly difficult at this stage. nejra: what about the correlation between equities and bonds? treasury yields no sitting just below to 18, we are down a couple of basis points. james: this is something i got incredibly wrong in q4. it is frustrating to see and emanates from the fnc, the rhetoric we have seen. essentially, that has reconnected the correlation
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between bonds and equities ditch -- which did not exist earlier. that is why we thought that 90% of assets globally in negative territory for 2018. but i think the fnc has shown they have some sensitivity to what is going on from early october, where we are a long way from neutral and it is put to the floor stimulus removal and there has suddenly been a softening of language. unfortunately, that has not had a positive effect on asset prices. think that suggests that the fmc is not able to divorce itself from what is going on in a way i hoped they would be able to. i think bonds are going to be far more reactive, meaning it is difficult for yields to rise. briefly, is the fed
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credibility damaged irreparably even though we have heard from the white house economic adviser? -- advisor? it will be the time opposed crisis which will do damaged the credibility. after that it became a habit almost constantly providing stimulus. even now, it does not seem to be a problem. period has been tricky to extricate the u.s. from all of this stimulus. nejra: james aberdeen stays with us. up, a u.s. delegation is said to be planning a visit to beijing. tune in on bloomberg radio. this is bloomberg. ♪
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nejra: we saw the nikkei fall into a bear market. a lot of benchmarks in asia. equities, looking at the u.n. -- yuan. oil struggling to hold onto its biggest gain since yesterday. it looks like that bounceback we got in the s&p 500 yesterday, the biggest since 2009, may not last. it is down against the yen again. looking to a positive open in europe. one of the chief concerns and .019
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the one area that china is unlikely to budge on his changes to the economic model. the biggest risk i would say is on trade policy. we don't really know what will happen on u.s. versus china. on one hand, you can have a benign outcome. markets,cess to the that are protection of intellectual property rights. we have a deal, life goes on. the key question about u.s. china negotiations on trade is how much is the u.s. going to press china on its industrial policy? if the u.s. expects china to give something on that, they theybe very disappointed get something by more u.s. stuff, they have already agreed to do that heard they can do more access to the chinese but if they want china
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to fundamentally changes economic model, that is where china will block. so the question is how much is the u.s. going to push for? >> where is the chinese economy heading? we're seeing them do more and more, they're trying to get some active lending money without deleveraging. it is a tough road to walk. >> they're trying to deal with excesses in the shadow banking system. up, butme to tighten unfortunately, the shadow banking system is essentially the supplier of credit to the private sector. if state owned enterprises and the private sector. back, theyo hold have been hurting the access to credit. this is happened many times. they try to address one problem
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and cause the economy to slow and then they have to step off the brakes. they still have a few tools available to them, i expect you'll see more chinese stimulus. issue is if the u.s. goes to putting 25% tariffs on all chinese import. that was a bill dudley speaking exclusively to bloomberg. now take your business flash. vincy is to buy a 50.01 percent stake in the airport. inspected towas complete of the first half and 2019 and comes less than a week after the airport was thrown into chaos by multiple sightings of an illegal drown.
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ended according to the investment company institute. billion, the biggest outflow since october. but investors added more than $25 billion into traded funds. india has tightened rules for foreign investment and e-commerce companies. retailersnistry says like, which acts as a facilitator, must treat all the vendors equally i providing the same terms. the rules are an attempt to stop predatory pricing. that is your bloomberg business flash. bloomberg has learned that the u.s. and china are set to reopen talks, the first since president trump and see jinping -- xi jinping agreed to a nine-day troops. our senior -- 90 day truce.
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our senior editor joins us from hong kong. how much progress can we actually expect from this? >> i think expectations are being cap in check on how much progress can actually occur. , there is sending not the treasury secretary, but the undersecretary, and not the trade representative, but it deputy treasury trade representative. already, it is not cabinet level people, a sign that the expectations are being tempered. it is a good sign, however, that they are coming to the table and china appears to be doing some things even before these talks to try to ease these tensions, to have some all of bridges, if you will, to the u.s. on trade.
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nejra: you're talking about some conciliatory announcements. but let's take the pessimistic view. if things go badly, how much worse could the negotiations get? >> that is what is concerning. rd -- is a 90 day peiod period set. even trump said that was a hard deadline. if they do not make progress soon, the question is if things could escalate. china has decreased some tariffs, they are buying crude oil and soybean. they have really taken some steps. the u.s. has said that during this time they will not further increase tariffs. but progress is not made soon, that's the real question.
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there's also skepticism that ,ven if a frame work is reached there is concern of what could constitute a real deal. nejra: thanks so much, i've senior international editor jodi schneider. james is still with us. it has been hey over us for quite some time. i think you can see in some of the business surveys were globally integrated businesses. a huge shock of economic activity, 85% of new job creation comes from smaller, medium enterprises. some are not exposed at all, actually come from the biggest risks to the global economy is probably going to be the eurozone, because they have to
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go through the difficult task of weaning themselves off of stimulus. the eurozone has high unemployment and fractious politics. cycles andconomic low inflation, really just a structurally weaker economy. needs to be far, far greater a risk to the global economy than what i think we are headed towards some sort of amicable agreement. nejra: interesting. i thought you'd say the fed is the biggest risk, but let me ask you, what is your outlook? given what you have to set. -- just said. theme it will be a big for the year. it probably won't be as dramatic, it will be difficult they have shown themselves to be more sensitive.
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keep ay will probably cap on how far the dollar can diverge. but it is still going to provide upward pressure in things like dollar u.n. -- yuan. nejra: you mentioned the dollar-u.n. -- dollar-yuan. james: it's interesting, because i have many who just offset risk through this. over thewe have seen last quarter, certainly, the dollar was probably the second biggest risk off current see. you tryingsk off of to express that, and that's been a good expression. i think it gets caught between a number of different crosses. nejra: james a stays with us. up next, hoping for a better
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2019. what can we expect next year? we talk european equities. this is bloomberg. ♪ amazon prime video is now on xfinity x1.
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that's how xfinity makes tv... simple. easy. awesome. ♪ nejra: let's take a look at the world map seeing gains of 1.8% on msci asia index, japan leading the gains. japanese stocks no longer in oversold territory. green, after the rebound we saw in u.s. equities yesterday, the s&p 500 and nasdaq jumping the most since 2009 and reversing the bear market for the s&p 500. let's check in on the markets around the world. near i shall -- niraj shah, dani burger. gains. asia seeing
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is india following the rest of the region higher? >> good morning to you, nejra, and good to be on the show. pretty much in line with what world markets are doing. indian markets had a bit of that rally yesterday. maybe preempting the bounceback we possibly could have seen. 0.5%, 0.6% in the green right now for the sensex and nifty, so a good start, steady for most of the trading today. the banks could have done better, but information technology stocks moving up, maybe taking ia cue. information technology is doing well for itself. the currency, ok, slightly neutral, some losses today. bond yields just about flat. indiane portion today, markets about 0.5%, not quite like the nikkei which went up 3%.
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back to you. nejra: you made the transition perfectly, to dani. we saw the nikkei follow the topix into a bear market, what does the rebound look like? dani: i want to show you how much of a swing we are having, a nearly 4% gain, the biggest gain in about two years. this is about a three standard deviation gain. i have the range bars here. to show you how much of a swing it is, on tuesday when we saw japanese stocks go into a bear market, this is a four standard deviation loss. leading the gains today, automakers, electronics. with volumes thin, expect more volatility. we saw gains and losses of more than four standard deviations, so perhaps this is the norm near the end of the year. even with the gain in equities, there is still a demand for haven assets. a look at gold, price versus sterling, we see a record run.
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pounds, the highest level in a year. this has to show you macro risks are still on the table, especially with the brexit vote in january and growth starting to weaken, this shows you that will still be a demand for haven assets, even with bullishness in equities, perhaps look for a bid to continue. nejra: speaking of havens, interesting that even with yen strength, such a strong move higher in asian equities. let's get the bloomberg first word news with deadly humphrey in -- desley humphrey in dubai . desley: a u.s. delegation will go for trade talks on january 7. a u.s. trade representative will leave the white house team, in the first face-to-face trade discussions since trump and xi
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approved a 90 day truce in argentina this month. donald trump says he has no plans to withdraw american military personnel from iraq. the u.s. president spoke to reporters after making his first visit to troops into combat sound as commander in -- in a combat zone as commander-in-chief. trump says the u.s. might use iraq as a base for attacks against regional adversaries, including islamic state. the visit comes days after trump ordered the withdrawal of u.s. forces from neighboring syria. a number of corporate executives and officers buying shares of their own companies is outpacing for the most in eight years. according to data compiled by washington, the number of purchases has doubled in the last two months. the partial u.s. government shutdown is heading for a sixth
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day, with lawmakers at odds with president trump's demand to fund a border wall. the president wants $5 billion for the wall, and democrats have proposed $1.3 billion for border security. democratic leader nancy pelosi says the house will pass a bill to reopen the government without money for a wall if a shutdown lasts beyond january 3. england plans to double the charge on disposable plastic bags to 10 pence as part of a drive to protect the environment. the fee on bags will be extended for the first time from larger retailers to all shops, and the government says the current five pence charge introduced in 2015 cut average annual usage in england from 140 bags per person to 19. powered by more than 2700 journalists and analysts in over 120 countries. this is bloomberg. nejra: thank you so much. here is a bit of what you should
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be watching today. time, an update on the spanish economy with retail sales data for november. jobs datau.k. time, from the u.s. with the publication of the initial jobless claims number. later, we find out if sales of new u.s. homes picked up from a two-year low. estimates single-family home sales increased 4.1% from october to november. it has been the worst year for the euro stoxx 50 since 2011. euro area stocks don't offer much promising qualities other than the fact is a lot of bad news is already baked in. so what can we expect next year? let's bring in our guest, an equities reporter for the markets live blog. and james is also still with us. heather, we outlined the lay of the land for european equities, may have editorialized a little. is there really no reason to be buying european equities?
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heather: a lot of it depends on what happens in the new year, whether there is progress on the trade front. a trade delegation is going to china next year, but don't forget there's a european aspect to the trade overhang, in the fact there could be u.s. tariffs on german car imports, and that has been a real overhang on european stocks, especially the german dax. so has that -- how that plays out if there's agreement could lead to upside, but right now traders are pretty muted in expectations. nejra: and is that to do largely because of the politics, some of which you outlined there? what about the earnings picture? what is that telling us? heather: my reporting suggested earnings outlook expectations are a bit too optimistic. in my reporting, we started to see some banks bring down their expectations for next year. it seems that expectations might have to come down a bit more heading into the new year as we go into the 4q earnings season
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for evaluations to start to look attractive and kick in, which is what we saw in early 2016. nejra: james? james: there's plenty of headwinds for european stocks. i have been pretty bearish on those in 2018, and i see not much reason to feel better in 2019. heather touched on some of the sector specific issues facing the market, but realistically if you have broadly speaking economically good news in the eurozone, which i'm not expecting, we will look to the ecb to take away the punch bowl, guiding us toward rate hikes later in the year, and they could try to bring that forward to get as much as they can done before the end of the cycle. putting pressure on the euro. when you have so much revenue abroad, as european equities have, you are so sensitive to movements in currency. and if the currency rallies, that leads to downside in stocks. we also haven't mentioned brexit . i have long been of the opinion that there has been far too much of a discount in u.k. assets relative to european assets in relation to the risks around
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brexit, so potentially you could have some good news there, if there is a good deal. but as we have seen the last 12 months, there's also plenty of potential for further bad news, further downside. a huge amount of headwinds. a have to a rally, but a very narrow path, in my opinion. nejra: if you look on a sector basis, every industry group is lower on the stoxx 600 this year, so no respite in any. group the best performer, utilities, still down over 1%. the worst performer, banks, down almost 30%. you mentioned the ecb could bring forward the rate hike. would that be a reason to buy banks? james: we tried this story on a couple occasions in the u.s., and it really seems quite difficult to just have this dramatic relationship between the banking sector and the shape of the yield curve or outright yield levels. there's so much more going on. essentially, the european
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banking system is too disparate, too many banks, but also there are skeletons in the closet. however many years the ecb had went from 350s billion in italy to 250 billion in italy. that was a huge and scary number and we didn't have preemptive recapitalization, which meant the banking system in europe is limping along.and you don't really need to look at the deutsche bank share prices to see how much of a problem that has potential to be, and i just don't see enough phenomenal growth, what we are talking about, to make that a healthy sector. nejra: heather, what could be the wildcard for euros in stocks in 2019? heather: an upside in economic growth, or a resolution of the trade negotiations would be two of the biggest things that would help european cyclical stocks such as your chemicals, automakers, industrials.
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some of these sectors have been the worst-hit, and it has fed into why the dax has underperformed. that could be some of the biggest upside next year. nejra: i just want to show you this chart, james. the rest of the world, catching up with u.s. equities, looking at valuations. but guess what? we see a little bit of a bounceback in the premium, as we have seen equities rally back yesterday. in terms of u.s. versus the rest of the world, how would you be positioned in 2019? u.s.: i would still favor i absolutely think the u.s. is in a more structurally and cyclically secure and stable place. not to say it is in fantastic shape. there are debt issues everywhere you look. and the issues of the u.s., versus those elsewhere, china and the eurozone, i would still favor the u.s. valuations, you cannot abstract valuations from a forecast about
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where the economy is going. it has to be an earnings forecast going into the p/e ratio, and that is where maybe the downside risks to the eurozone have come to radically in 2018. people were extrapolating q4 2017 growth, and we saw nothing like that. unfortunately i think that will continue. nejra: thank you so much, heather burke. james athey stays with us. coming up, oil rebounds and russia hints at more cooperation with opec and partners, the rebound struggling to gain traction in today's session after the biggest jump since 2016 yesterday. when you are traveling to work, tune in to bloomberg mobile live on your mobile device or on dab to jiggle radio in the london area. this is bloomberg. ♪
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nejra: let's check in on what is trending across the bloomberg universe. on tictoc, our newsfeed built for twitter, a new study
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suggests the world's wealthiest people lost over $500 billion in 2018. u.s., register their best rally since march 2009 after falling to the brink of a bear market. and are most read story on the bloomberg terminal, in third place, jpmorgan will pay $135 million to settle allegations it mishandled securities in representing foreign companies. not be paid awill bonus as his firm has the worst quarter in a decade. and trump's defense of the withdrawal from syria in his first visit to troops in a combat zone. russia hinted at more cooperation with opec and partners in supporting the market. wti jumped 8.7% yesterday, the biggest increase in two years,
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u.s. benchmark where it was before the christmas eve set off -- selloff. we are seeing oil a little softer today, looking at wti and brent. -- wti at $46. people were telling us, although we had global concerns about growth and demand, it will be difficult for oil to catch a bid. but then a comment from alexander novak, and look what happened. so what is driving the dynamic from here? how important is opec in actually moving the price higher? can it? james: it can in the short-term. structurally and strategically, they are a lot less important than they used to be. the u.s. has become the marginal swing producer, and for me the oil price journey over the last 24 months has been a supply-side story. the demand picture has not changed dramatically. the economy globally steadily improving, but probably becoming
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a little less oil sensitive, so not a huge demand story, but what we see in supply terms is the u.s., the cost of production following, has been and therefore production has been increasing all the livelong day, and opec has become more disparate, less strong, shall we say, at working together to control the oil price, partly because each individual country has a need to generate cash. we see the fiscal breakeven for a lot of these countries are way too high, so pump as much as you can to generate as much cash as you can. going forward, seeing oil to some degree is influenced pretty strongly by what's going on in global central bank policy, following equities up and down, as a picture of where the global economy is going. that makes it a complicated picture, but what we see is that equities and oil were oversold. we had people calling for $100. hedge funds are hugely long. a hugely cathartic clear out.
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the price is somewhat low for the cyclical picture. nejra: you told me on the break, the ride up to brent, you were a bear on oil, so given everything on how far we have fallen, how did james turned into able -- a bull? james: on a tactical basis, i think it has fallen far too far. i don't think we have seen a drop in global economic activity justifying that. we have seen noises from opec that they need to get together, think about production cuts again, and of course we have natural production cuts from places like venezuela and iran because of specific problems there end. broadly speaking, oil should be range bound, but a little higher than it is.
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other asset classes. we are both familiar with the precipitous drop in u.s. break-evens. would you be a buyer at this level? james: unfortunately, a buyer a little too early, going back to being an oil bear. nejra: i like that you admit your mistakes. nobody else does. [laughter] james: there are things i frequently get wrong, and it helps to say. i think i underestimated the extent to which we would see this huge clear-out in the oil market, and how dramatically that would drag the breakeven curve, which is nonsense, the 10 impacted by a drop in the oil price that will wash out every year? doesn't make a lot of sense, but that is the way of the world. looking at five-year inflation, 1.80 that is dramatically too low for this stage of the cycle. thatinflation is 2%, 2.2%, feels like we have gone too far. nejra: with inflation, do you see it sustaining about the fed's target of getting there? the breakeven suggests absolutely not. the bond market in general suggests the market doesn't believe we will get sustained inflation. james: that is the lesson we
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have learned of the last 10 years. we can talk about inflation for the next hour easily, and would not exhaust all that's going on there. but suffice to say, it doesn't work the way the textbooks suggest, and there is huge asymmetry. we believe the fed can hike rates dramatically and kill the economy, and that will hurt prices, but i don't think they can create inflation, certainly not in this globalized world with outsourcing to the cheapest marginal producer. the role that technology plays, the role that disruptors have played in keeping prices down, all that is disinflationary, in a positive sense, by the way. but it means prices can't run away in the way they did in the 1970's. nejra: thank you so much to james athey, senior investment manager at aberdeen standard investments. great to have you with us. let's get to the bloomberg business flash. vinci has agreed to
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acquire a majority stake in get airport for 2.4 9 billion pounds. with total traffic of over 35 million passengers in 2018, it will become the largest single airport in their global network. the purchase by the french company, expected to be completed in the first half of 2019, comes less than a week after the airport was thrown into chaos by multiple sightings of an illegal drown. mutual -- drone. suffered the biggest outflow in more than 10 years in the weekend -- week ending december 19. mutuals,estors dumped they added over $25 billion in exchange traded funds. india tightened rules for foreign investment in e-commerce companies. their trade ministry says online retailers like that act as exhib -- a facilitator must treat all
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vendors equally by providing the same terms, an attempt to stop predatory pricing and did discounts threatening the domestic retail industry. and flip cardazon will jointly contest the new rule. nejra: desley humphrey in dubai. thank you so much. approaching $300 billion, the global personal luxury goods market will likely grow 8% in 2018 after third-quarter spending maintained the same organic sales growth as the first half of the year. bloomberg critics a similar rate of growth for 2019. the macroeconomic uncertainties surrounding trade tariffs and lower chinese gdp forecasts have seen luxury valuations slump in recent months. here to discuss the global luxury goods market in 2019, and what to expect next year, is analyst for senior
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bloomberg intelligence. thanks for joining us. anymore read on luxury spending? deborah: we could look at maybe two different data sets. start with swiss watch. we had a 4% rise in november numbers. there we see double-digit growth coming out of china. we had 10% in hong kong, 15% in very, 18% in the u.s., so strong numbers from specific countries. closerond one would be to recent times, the start of december, on spend trends, 8% overall in those different categories. nejra: quite positive there, but how concerned are luxury brands about current trade tensions, and how they might play out in 2019? deborah: particularly in china-u.s.. nejra: yes. deborah: i think if we go through the luxury goods companies, they are very well spread.
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even the u.s. companies. think about michael kors, 64% of sales in america. there will be movement, there will be change. the numbers for chinese travelers in the u.s. in q3 is down 20%. but overall, they are well held. we have a lot of luxury goods brands out of france and italy. the swiss, free trade situation, so not really touched, so for us we are still very bullish. nejra: ok. what about any day? any -- m&a? any details in conversations being held? deborah: there are stocks out there that are vulnerable, that have underperformed, and anything with the market cap of maybe $2 billion to $3 billion is fair trade, so to speak, in potentially being looked at. but if we look overall at the luxury goods market, where we stand, we have about 8% net debt
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balancey, so very blank sheets in what they could acquire. you go back to a week ago and look at what lvmh did with belmont. there's a lot out there that will happen in 2019 in new deals. staging to move more into athleisure and footwear. it will be a buoyant, interesting sector. nejra: is there anything negative that could happen for the sector in 2019? deborah: we talked about repatriation of buying, but it's about making sure, also e-commerce growth, very strong, 20 process -- 20% plus in the year ahead. it is making sure companies have it in the right areas where shoppers are spending. nejra: thank you so much for joining us, deborah aitken,
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senior bloomberg intelligence analyst. u.s. markets saw the biggest rally in nearly a decade yesterday. will that continue tomorrow? this is bloomberg. ♪
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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. nejra: good morning. from bloomberg european headquarters in the city of london, i am nejra che catch. this is bloomberg daybreak europe. the bulls come roaring back after the holidays, with the dow posting its best ever point gain. the nikkei bounces back from their territory. the moves aren't limited to equities, as oil holds its biggest gain in two years. copper the momentum, rebounds on trade optimism as bloomberg learns a u.s. delegation heads to beijing in january. ♪ nejra: good morning.
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welcome to "daybreak europe," just one hour from the start of equity trading. this will be the first day of equity trading in europe since christmas eve. the move we saw on christmas eve stoxx 600 closing 0.4%, but nothing compared to the bloodbath in u.s. equities, just short of a bear market for the s&p 500. and then yesterday, this blowout session with the s&p 500 and nasdaq gaining the most since 2009, the dow gaining over 1050 precise, theto be biggest point gain ever, and the biggest jump since 2009 for the nasdaq and s&p 500.but u.s. futures are edging a little lower today , so is the gain we saw yesterday, that may not hold through the rest of the week. but it looks like we will see a gain when europe opens, ftse 100 futures up 0.7%, dax up 0.2%,
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cac 40 futures outperforming, up 1.4%. in the bond market action, seeing some bid on safe havens, the 10 year treasury yield lower by two basis points, below 2.80. judging by futures, you can see money moving into the u.s. futures. the 10 year bund yield could be opening unchanged, but money tp's, so we could see a touch of spread widening. let's check on the markets in asia. yvonne man has more in hong kong. broad-based rally after that stunning reversal on wall street. but we are mostly higher here today. japan the clear outperform are, up close to 4% today. every stock on the nikkei 225 ended in the green, the biggest rally since the u.s. election two years ago. die was securities -- daiwa
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securities said the worst might be over for japanese stocks. but not exactly broad-based. china, large caps down 0.4%. hong kong under pressure as well. alli pretty much evaporated gains from the earlier days, so we are suggesting this was maybe a technical rebound, not exactly an inflection point in the market. the trade headlines are not exactly helping as well. you mentioned the u.s. team heading to beijing in early january, and we got the weak profit china, industrial contracting for the first time since 2015. rusal, up close to 8% on news the chairman is resigning after six years at the company. his resignation was part of a paska struckri with the u.s. to lift sanctions on his companies. cnooc, up 1.2% in hong kong. bank of china, issuing their
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perpetual bonds. another move, the chinese really replenishing capital in some of these chinese banks, the stock rally in just a little bit. nejra: yvonne man in hong kong. thank you so much. let's go to bloomberg first word news. desley: hi, nejra. delegation isent set to go to beijing for trade talks the week of january 7. the deputy u.s. trade representative will lead the white house team, in the first face-to-face trade discussion since trump and xi agreed to a 90 day truce in argentina. donald trump says he has no plans to withdraw american military personnel from iraq. speaking to reporters after making his first visit to troops in a combat zone as commander in chief, trump said the u.s. might use iraq as a base for regional operations against adversaries including the islamic state.
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the christmas visit to the al base west ofasad baghdad comes days after trump ordered withdrawal of troops from syria. according to data compiled by the washington service, the number of u.s. company bosses making purchases has doubled in the last two months from the previous two. virusbreak of the ebola in the congo will push back a long-awaited presidential election. the congo election commission says the scheduled election will be delayed for months in certain communities where hundreds of people have been infected. the vote has already been put off for more than two years. the partial u.s. government shutdown is heading for a six-day, with the white house and lawmakers at odds over president trump's demand to fund a border wall. the president wants $5 billion for the wall, and democrats have
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proposed $1.3 billion for border security. democratic leader nancy pelosi says the house will pass a bill to reopen the government without money for a while if the shutdown lasts beyond january 3. global news 24 hours a day, powered by 2700 genera journalid analysts in over 120 countries. nejra: thank you so much. u.s. equities saw the biggest rally in nearly a decade yesterday. all major indices surged, the s&p up nearly 5% and the dow recording its biggest ever points gain, following a downturn which saw the nasdaq fall to a bear market, the s&p 500 stopping just short of that market. here is what an expert had to say about the rally. >> we got confirmation that it does not look like we are going into a recession, and we have y comingrce, fierce rall off this oversold condition. it's wonderful. merry christmas. >> people saw may the
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unemployment figures were not so good, housing figures, retail figures didn't seem quite so good, and the market got ahead of itself and people panicked. >> what we saw yesterday, overnight on wall street, from a valuation point of view, u.s. stocks are not expensive on fundamentals, and therefore investors who look at fundamentals as opposed to the noise out there, they are probably seeing good value. >> equity investors fear uncertainty, so they tend to discount the worst-case scenario, but if we see some positive catalyst going forward, valuations would likely from here.e-rate nejra: joining us now is eric lam. great to have you with us. we outlined massive moves in the u.s. yesterday, so many superlatives and size and scope.
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walk us through some things that caught your attention. eric: it really was a huge day for trading in the u.s. yesterday. lots of numbers, as you point out. here's a couple wants to think about. first up, to put this in perspective, we saw the three main benchmarks rise more than 4%, the first time that happened since 2011. that really gives you a sense of the scope of the rally. digging into the numbers, the dow, call 30 names on the dow rose yesterday, in contrast to monday when all 30 names fell. all 30 names in the red to start the week, and now in the green, and that is the first time that happened since 2015, andy lee the 10th time since 2000. finally, won a little more on the trivia side. 504ad all 505 stocks, stocks rather on the s&p 500 rise yesterday. the only name that fell was a mining company, newmont mining,
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and blame that on a bit of a dip in gold given the risk rally in the u.s. yesterday. interestingly enough, the s&p 500 has more than 500 stocks, but 504 of them were all up yesterday. nejra: some stunning stats. thank you for that. i am glad you brought up 2011 earlier, because the closest the s&p 500 has ever been to a 20% close to close bear market plunge was from april 29 to october 3 in 2011, when there were lots of headlines about europe's sovereign debt crisis pushing the benchmark within points of a formal bear market. that decline in 2011 ended with a one-month, 10.8% surge, the best monthly return of the bull market, and we know what happened since then. so what are the prospects for these gains we saw yesterday actually lasting? we are ready see u.s. futures pulling lower. eric: we are also seeing the
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picture looking mixed in asia as well, as you kind of touched on at the top of the show. the market in japan had a huge game today, the biggest in -- gain today, the biggest in two years, but that's off a pretty big drop. japanese stocks still look very cheap. it looks like it is a very bumpy market still, as some analysts are describing. until may we see a bit of a run upwards here, maybe investors are still being a little cautious, but as some analysts have said, it is still a fairly low volume market around the holiday season, so we will have to see how it plays out in the first weeks of january, but certainly encouraging signs for now. nejra: just want to point out as well that the vix closed in the last session of of 30, and we saw it hit 36 this week. thank you so much, eric lam. great to have you with us. some headlines coming across the bloomberg.
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basically, this from the chinese commerce minister, saying chinese and u.s. trade teams are maintaining close can indication. bloomberg reported about a meeting that could happen in early january face-to-face. potentially giving a bit of a lift to risk assets. gao says china and the u.s. plan to talk trade in january, and says they will continue talking by phone with the u.s. in january, too. joining us from frankfurt, an fx strategist at commerzbank. great to have you with us. thanks so much for joining us today. we for just talking about the fact we saw a bounceback in u.s. equities today, u.s. futures pointing a little lower. what has been interesting for all this, dollar-yen. yen strongly bid in the last 10 sessions. this trend in dollar-yen, yen
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bid, is it likely to continue, considering the market is pretty shortl ythe yen? >> we have always been quite bullish on the yen, because i think what the market has not been realizing is that the bank of japan is firmly on a path of exiting from its ultr a-expansionary monetary policy. was tost thing it did flexibleize the yield range and let the 10-year yield rise as much as 0.2%. this was the first step, and i would expect there are more steps to follow, because what we see, the bank of japan is increasingly worried about the banking sector. this is why they have changed their yield target. and my view, this is a very powerful, positive argument for is yen, because inflation
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still relatively low in japan. the bank of japan has not yet achieved its inflation target, and it has thoroughly abandoned its target. if inflation remains this low and the bank of japan is normalizing monetary policy, this suggests the yen should appreciate, and that is what we are expecting over the next couple years. nejra: what about the dollar as a broad basket,? we have seen that as a safe haven for a lot of 2018. what are the prospects for the dollar against other currencies, in 2019? thu lan: what has been surprising recently is actually that the dollar has been holding up extremely well, despite the fact u.s. yields have come down so much, and expectations for u.s. interest rates, so i think there is still some correction necessary. this should weigh on the dollar
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way more than it has so far, and actually we are quite bearish on the dollar for the next year, because the end of the u.s. rate hike cycle is coming into view, and this has been communicated by the fomc as well. thelly, what we see is that dollar starts to weaken as soon as the and of u.s. rate hikes comes into view, because high interest rates are not as supportive of the dollar anymore. this has already been priced in, and we are seeing the dollar hasn't been benefiting from the rate --- recent red fed rate hikes, so we anticipate the dollar to weaken. nejra: you talked about the process of fed policy. at the moment, if you look at the markets, there's no 2019 hike priced in. if we continue to see more losses in u.s. equities, does that strengthen your view to be
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bearish on the dollar because of the possibility of a feed through to fed policy from for example a bear market? thu lan: it is a risk. although this would not be my base scenario at the moment. you would have to see significant corrections on the equity markets for the fed to become worried. i think even at the moment, the market fears a little bit too exaggerated. we are still anticipating at least two rate hikes by the fed this year, which is what the fed has been communicating. aren understand that there fears, because the recent economic data has been weaker, but that's to be expected at the end of a rate cycle. this is the reason the fed started to normalize monetary policy, for u.s. growth to normalize. so to some extent, these fears are exaggerated. i would not expect the fed two
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become too dovish in the near future, just because equity markets are relatively weak. i would assume we would need to see more losses in equity markets, really, for the fed two become worried. nejra: thu lan nguyen from commerzbank stays with us. at more cooperation among opec and partners. traveling to work, tune into bloomberg live on your mobile device or on dab digital radio in the london area. this is bloomberg. ♪
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♪ 40ra: 7:19 in london, minutes from the start of cash equity trading in europe. and of course it has been a wild ride in equity markets this week. the nikkei fell into a bear market earlier in the week, bouncing back today.
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asia.leading gains across not really a broad-based rally, but optimism coming through in markets. bloomberg has been reporting that they will be trade talks in january, and we heard from china's commerce ministry to the same effect. the yuan not moving a lot off that. wti down over 1%, not holding on to the gains yesterday, jumping the most since 2016 after we heard from russia's novak about opec potentially meeting again. the rally in the u.s. yesterday was stunning, the s&p 500 jumping almost 5%, biggest gain since 2009.almost every stock gaining of the benchmark , but u.s. futures pointing lower now after the benchmark stopped just short of a bear market. a little dollar weakness coming through, particularly against 40 futures upac strongly. let's get the bloomberg business flash. agreed to acquire
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a majority stake in gatwick airport for 2.9 billion pounds. the airport saw traffic of more than 30 million passengers in 2018, and will become the largest airport in their network. the purchase by the french company, expected to be completed in the first half of 2019, comes less than a week after the airport was thrown into chaos by multiple sightings of an illegal drone. president donald trump is reportedly considering an executive order preventing u.s. companies from using equipment blockinguawei and zte, companies from buying equipment from foreign makers posing significant national security risks. that is your bloomberg business flash. nejra: desley humphrey in dubai, thank you so much. oil not really holding its biggest gain in two years, surging 8.7% yesterday, spurred
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by a rebound in u.s. stocks and russia hinting at more cooperation with opec and partners in supporting the market. the increase has taken the u.s. oil market benchmark above where it was before the christmas eve selloff. joining us from dubai, bloomberg's energy editor. good to have you with us. what are the prospects in 2019 of a sustained rebound in oil markets? >> it is actually not clear. the only thing we will see is more volatility at least in the first few weeks of 2019 as the market starts to digest the cuts that will come from opec and partners. the one factor that is really oil market, itat is no longer about supply and demand, but fears about a trade war and global recession driving the market.
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the stock market goes up, goes down, and oil plunges 6%, rises 8%, and the producers and buyers don't know where the price is going. nejra: we heard from russia's novak, something that gave the market a lift yesterday. so what is the prospect for more opec plus cuts in 2019 ahead of the next meeting? mohammed: so, this week has been a little bit extraordinary. it was supposed to be a quiet week, at least for opec and allies. they came out earlier in the month in vienna with a larger than expected cut, and they thought that would be enough to placate the bears, the short-sellers, but what we have seen earlier in the week, the uae minister, the opec president, came out and hinted at this extraordinary meeting. the minister from russia, novak, did the same.
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they are trying to tell the market that they are ready to take out any surplus, and bring back the balance that led to the rise in prices earlier this year. nejra: thank you so much. bloomberg middle east energy ergie, joiningd s us from dubai. joining us from frankfurt is thu lan nguyen of commerce bank. how are you expressing the gyrations we have seen in oil through fx trades? you have looked at the ruble. anything else you are targeting? thu lan: obviously, it's not only the oil exporting countries that are affected. commodity markets in general, i think. we are seeing some weakness in currencies, such as the aussie, the new zealand dollar, but obviously, yes, mainly affected are the ruble, the canadian dollar, the norwegian krone, the latter has been
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particularly weak in recent weeks. a lot depends on how the oil price will evolve in the near future, but we have also seen that most of these countries, these economies, have already coped with one big oil price correction in 2015, and most of them have recovered quite a bit, and the economies have structurally changed, particularly norway. so maybe markets are a little bit exaggerating the fears, particularly the krone weakness in my view is exaggerated. i think the economy will hold up much better than markets are faring at the moment, in light of the lower oil price, and therefore i am confident that these currencies are going to recover. nejra: thu lan, we just got some headlines coming through, to update you. we have been hearing from china's commerce ministry about a potential meeting on trade. bloomberg was artie reporting a
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face-to-face meeting in early 2019 between the u.s. and china. the commerce minister gao saying china is to encourage more fdi into the auto industry. this father way is the latest headline coming through. he also talked about closer communication. china watchers are split on cny for 2019, the biggest bull seeing 6.25, the top there -- bear 7.4. where do you stand? thu lan: more on the top. 7,see dollar-yuan close to relatively stable at current levels. is positive that u.s. and china are talking, but they have been talking for quite some time, and there has not been a conclusion to these negotiations is still the risk of further tariffs in the room. as long as conflict is not solved, i think uncertainty will
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remain high, and this is weighing on the chinese economy. nejra: thu lan nguyen from commerzbank, thank you so much. that is it for "daybreak europe." the european open is next. this is bloomberg. ♪
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>> good morning and welcome to bloomberg markets, european open, live from european headquarters in london. to cash trade is less than 30 minutes away. ♪ ♪ matt: a christmas miracle. the bulls came roaring back after the holidays, with the dow jones industrial average posting its best ever, over 1000 point gain, the nikkei bouncing back from


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