the ecu president, says the world economy remains sluggish and uncertain. gams ceohe line, the cutting up to 40% of staff. i am guy johnson with vonnie quinn. we have the european close here on "bloomberg markets." vonnie: a negative start this monday morning, and we're not improving. the tone is deteriorating. the s&p 500 down to session lows now, down .8%. fears and headwinds out there. the 10-year yield at 1.83%. and two sectors on the move, retail obviously today but also

streamers and those in competition with one another. 16.5 percent taken off the growth of the stock this year. it had been a 400% growth rate. not a huge amount, but a little bit of trepidation with disney getting in on streaming. disney down 1.6%. the market is dragging down with it. it had a great weekend with "frozen 2." disney to be happy about but the stock is lower. guy: in europe, we are at session lows. stoxx 600 down by about 1.5%. every sector in negative territory. we are suffering from a compound, compounding factors. it started with decent data and the market went up, and then not then thegood and

narrative has followed through. the u.s. data not helping. yields are eight basis points higher. a bid on the euro. euro-dollar, an incredibly tight range of the last month, but today up by around .5%. the ecb president is speaking on monetary policy at the european parliament, saying the bank will be resolute in restoring price ability. and she also said an upcoming strategy review will be open minded given the uncertainty around the economy. weakro-area worth remains with gross domestic product growing only .2% quarter on quarter in the third quarter of 2019. and this weakness has been mainly due to global factors. guy: global factors, a.k.a. trade. we have seen today the effect of

that trade rippling through some of the data out of the u.s. manufacturing data weaker than anticipated. joining us in london is christopher brightman, cio of research affiliates. of people are talking about the fact we're going to see green shoots. they are beginning to emerge and the global economy will re-accelerate into 2020. looking tone, people that to lead some of that. give us your of the world. christopher: we are a quantitative investment firm, and we look at models. models we used to forecast economic growth looking out six months in the future suggest to us and even chance of a u.s. recession in 2020. i am not saying we will have a recession in 2020, but i 50%

probability -- but there is a 50% probability. i think there is a political dynamic. if we do experience a recession in the united states in 2020, i think the chances of a thecratic win in presidential election goes up, and that is also bearish for the stock market. guy: i was going to ask questions about europe, but we will talk about those in few minutes type it 50/50, how are you getting there? what are the inputs pointing you to the idea we are heading for a recession in 2020 or at least a 50/50 chance of one? two strong leading indicators of future economic growth that i can .2, and that includes the yield curve, which while not inverted now did invert for over a month, a signal that has correctly predicted seven out of seven of the last recessions.

and number two, pmi, which has been very weak in the u.s. yes, people will point to strengthen consumer spending and employment, but employment which then drives consumer spending is very much a lagging rather than leading indicator. vonnie: now what happens when a tweet? does anything happen, not just a tweet but a headline, something unanticipated for markets? do you have room for that? christopher: i would say we don't. vonnie: in other words, your predicting a based on fundamentals and no room for any sort of black swan event here or any kind of macro strategy that might stave off a recession? not saying the president would want to do that, but how do you

factor that in? christopher: to be clear, i am not saying we will have a recession. i am saying it appears to s at the probability of having a recession is about even odds with not having a recession. if there is a trade deal, what does that do? christopher: trade deals are not something we can model. we do not have enough observations through time to incorporate that in the model. it is a genuine progress on trade. call implies whatever happens is at the margins. christopher: i would agree. guy: what will it come down to to tip us into recession or keep us above recession? that if it isming a recession, it will not be a particularly big one, and also assuming it will not be strong growth.

is that what i can take away from your expectation? christopher: you know, i think the likely future path of both the economy and markets have a much wider distribution than you suggest. we are very worried and quite bearish on the medium-term outlook for u.s. equities because of their extraordinarily high prices. cyclically adjusted p/e ratio of the u.s. market that is about 30 times. there are not any historical outcomes of getting great returns starting at those sorts of prices. and on your comment on europe, there are so many better opportunities out there than u.s. stocks. buy u.k. inou say european equities, avoid credit em stocks.ect can you elaborate?

christopher: on the cyclically adjusted p/e model, we have europe priced at half the u.s. level, and the reason i would encourage you to focus on the shiller p/e is it has been demonstrated to be a stronger signal for forecasting future returns. as far as em equities go, particularly value-oriented, you can get a diversified portfolio that is priced at a single digit andically adjusted p/e, history suggest forward-looking compound annual real returns. real returns of greater than 10%. vonnie: real returns of greater than 10% would be quite phenomenal. are you saying that is not possible anywhere in the u.s. market? are you out of u.s. stocks completely? christopher: i am sure there will be a few stocks here and there to do fabulously well. but the overall market i think

zero,end to be around , over a-3% or 4% 10-year horizon where i think a central tendency of em value stocks is more centered on a 10% forward-looking return. and we have seen this before. if you purchased em equities when they were at this level of prices last, which would have anytime late 1990's and in 1998 through 2001, you would have compound annual returns, real returns, of 10%. but u.s. stocks at that same point, in the midst of a tech bubble, you got about zero forward-looking return. where are we now in the u.s. again, a tech bubble. guy: back up a little bit to the em stuff. this year, i have a chart here,

-- this tellsdit me the rest of the world still feels like a very cautious place right now. christopher: one of the things about em is that most of the return actually does come into clearances, so you would never buy em stocks hedged. your giving up risk premium, and a lot of risk premium comes in currency. you might do well with em local currency bonds or even em local currency cash as the equities. guy: ok. stick around. we're going to carry on this conversation. christopher brightman joining us from research affiliates, where he is the cio. let's check global markets. kailey: allis -- three averages in the u.s. and the worst day since october with

losses nearly 1 -- nearing 1% or more across the board. weaker economic data and the u.s. and development's on trade with wilbur ross saying president trump will raise tariffs on china if no deal is reached. president trump saying he is reinstating tariffs on steel and aluminum from brazil. look at the impacts on s&p 500 futures. we started today in the green. sentthe tweet came, it stocks into negative territory at the open. thenata at 10:00 a.m. and the comments from secretary ross . you can see what happened. 10 of the 11 sectors are lower, one exception being energy. the technology sector is really lagging today. here is a look at a few of those names. these are down by roughly 3%,

the top three, also their worst day since early october. if we look at a few winners off the back of the tweet reinstating tariffs on steel from brazil and argentina, there is a lift to u.s. steel makers like ak steel, really outperforming. u.s. steel and alcoa higher. vonnie: thank you. fico allows you to-- gtv allows you browse all of our charts. this is bloomberg. ♪

vonnie: live from new york, i am vonnie quinn. i am guy london, johnson. this is the european close. that's get first word news with ritika gupta. >> the wto says the european union has not compiled with in order to end illegal subsidies for airbus. nots warned that the eu had taken sufficient steps to end the harm to airbus and boeing, prompting the trump administration to impose tariffs on nearly $7.5 billion worth of eu goods in october. the block is expected to appeal. president trump's were imposing tariffs on steel and aluminum on brazil and argentina. he tweeted that those countries have been presiding over a massive devaluation of their currencies, and he said that is not good for american farmers. the president again called on

the federal reserve to lower interest rates. china is striking back at the u.s.. beijing is freezing a visit by u.s. warships. some are sanctions on american rights organizations, and they threatened to retaliate the decision to sign a bill backing hong kong protesters. and the white house will not take part in this week's impeachment hearings. president trump's lawyer kept open the possibility he would be represented. white house counsel said the process has been unfair to the president. he criticized the house judiciary committee demanding a response before witnesses are named. global news 24 hours a day on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta. this is bloomberg. vonnie: thank you. still with us is research affiliates cio, christopher

brightman. we have talked strategies a little bit, and i'm curious why you think now is an inflection point and if you have any idea from your models how long a recession might last. is it possible to tell that from your models? chris: no, i think that is too much precision to ask for any sort of modeling signal. as to why i see evidence of an inflection point, i would give you a number of indicators. we saw recently some very strange plumbing problems in the repo market at the new york fed. we see credit being quite extended, and i am not just talking about tight credit spreads but deteriorating underwriting standards, as well as new issuance being much lower quality than typical. this is all very late cycle

behavior from credit markets. and while normally our study of markets indicates that you would want to ignore politics when making capital market the youons, i think norma's backlash -- the enormous backlash to the monopoly of profits being produced by u.s. technology platform companies who have led the market up in this cycle suggests this is the exception to prove the rule that coming presidential election cycle could be important to the future direction of u.s. stock market. vonnie: interesting, you say the poster section value outperforms growth. a lot of value managers say now is the time to get into values. are you saying to wait? chris: well, if you think about the cyclical stocks being more volatile than noncyclical stocks

and if you study the history in an industrial economy, that is exactly when you would expect value stocks to outperform. but i think even more to the point is the most overvalued stocks are the ones that are going to underperform during a correction, and the most overvalued stocks are the stocks that have led the market up. you just so what happened to roku today, and that could easily happen to the likes of netflix, amazon, google, etc. bubble and the tmt its correction, we did not see an underperformance of old economy cyclical stocks. what we saw was the underperformance of usually overvalued technology stocks. guy: you think the plan for next year should be to basically get into u.s. bonds, get out of u.s.

stocks, get into european stocks, by extension, do i get out of european bonds? want me through the mix of what levels we will be talking about. gore does the u.s. 10-year next year? where do u.s. stocks going here? by 25% this year. what is the relative outperformance of europe? the outrightompare nominal yield of bunds to u.s. treasuries and you can see in a different economic environment where the u.s. economy is as weak as the german economy, those yields going to simmer -- similar levels. at -- foror europe germany at the moment, so you can see that for the u.s. next year? chris: a lot of the decline in interest rates is a function of topography. germany following after japan. the u.s. next in line.

i do not see why you cannot have a yield in the u.s. at german level yields today, particularly in economic weakness. if you're looking for an asset class that is going to give you positive returns in the face of a weak u.s. equity market, i think the classic long bond is your answer. pointsare at 180 basis now -- guy: we are at 180 basis points now. you think we could go negative. chris: i do not see why not. i am not predicting. guy: if i was to rotate money into the u.s. 10-year, what rate of return could i look for next year? chris: i think the odds are that you're going to get at worst a zero, and you could easily see a 10%, 12% type of return. to 12%, christopher,

and what is the one factor that you rush to look at in the morning? i know you love all your factors equally. i don't have to admit, spend a lot of time looking at a daily data. as i say, we are a quantitative modeling aooks at couple of years out into the future. talking. christopher brightman, research affiliates cio. this is bloomberg. ♪

guy: from london, i am guy johnson. vonnie: from new york, i am vonnie quinn. this is the european close. let's get a look at your bloomberg's in his flash. amazon is gearing up for the online holiday shopping season

by fine-tuning its delivery network and winning back it -- bringing back an old trick, cheap warehouse space. the goal is to prevent running out of popular products, and it would let merchants avoid storing goods in amazon's more expensive warehouse space where they pay premium prices. t-mobile has jumped to an early lead in the race to offer 5g service nationwide. the phones will hit stores this week, but services offered now will not bring the 5g experience wireless services have been boasting about. it will not have blazing speeds. t-mobile says it will have a better 5g network of the takeover of sprint is approved. goldman sachs will reportedly avoid profit targets of investor they -- day, planning to put the focus on world trade businesses. they will announce a lunch of a new merchant banking division.

-- the launch of a new merchant banking division. let's check on u.s. markets. the indices are lower, close to the lows of the session. the dow and the s&p down about .25%. the nasdaq down at 1.2%. guy: a look at where europe is. negative everywhere, but the continent is suffering the most. the dax and cac trading down, close to 2%. london down close to 1%. well, ao return, as light volume session. the close is next. this is bloomberg. ♪

of: 30 seconds until the end regular trading for european stocks. it started off so well. the chinese data gave us a pop.

this afternoon has not looked anything like that. it is a sea of red. we are burning bright red for some of the continental markets. let me walk you through the session. the legacy out of asia was ok. that started over there. the morning was ok. we were in positive territory. the data out of the euro zone as well was ok. then things started to fall apart as we approached lunchtime. we saw the news coming through when it came to the tariff in latin america, brazil and argentina being hit by the president of the united states. then we got the data out of the u.s., the ism and you factoring data missing. then we saw the headlines from wilbur ross, calling into question whether tariffs on the 15th would be punted into next year. all of that coming together to produce this. ftse 100 down .8%. a relative outperform her.

it is relative under performer this year. point -- theone cac 40 down 1.9%. let's take a look at the grr function which will tell us -- what it will tell us is nothing is in positive territory. at the upper end of the market is where it gets interesting. basic resources, oil and gas. the commodity stocks had an ok day today. if you are worried about the world economy or trade, those would be the areas he would look at. opec is coming up but that is interesting that these sectors relative to the overall market have been outperform her spirit the bottom end of the market -- out performers. , technology is trading software. utilities down 1.7%. that takes us to what has been

happening politically in germany. let's talk about one of the main losses within that space. let's go to the single stocks and talk about what is happening utility,giant german down 5%. what happened over the weekend? we had the spd vote, which may result in the end of the current coalition in germany, which may open the door up to the greens entering government. that is the effect we have seen on the utility sector, down over 5%. a low bit of a political story as well. tullow has done a deal in uganda. reacting positively to that news. on fridayup strongly on the japanese automation deal but today coming through with a bigger than anticipated convertible and as a result trading down 7%. the fascinating day. we have finished at session lows

as we have come through into the european close this monday. we are at session lows in the u.s. with the s&p 500 down .9% even after a positive thanksgiving weekend in terms of retailers. fromis not stopping drops -- that is not stopping stocks from dropping today. the 10 year yield at 1.82. cx why is down about half a percent. poundro and the british making up half of what dxy measures the dollar against. emerging-market currencies are in focus today. not much movement from the brazilian real for the argentinian peso. that is what the president is tweeting about, those are the currencies he is grumbling about. let's take a look at crude.

it is off of session highs. obviously it is different story here than it is to brent. that has the oil and gas equipment index up .7%. baker hughes is the exception. halliburton, they are higher. surname well is coming back with week results and that has that stop lower. the retail index is not as bad as it seems, down 1.3%. department stores are higher in the index, macy's up .7% even as the cyber monday, the amazons are lower 1% or more. cyber monday. let's carry on talking about what is happening with the markets. there is been quite a lot of selling. bloomberg fx rates and european markets -- paul dobson is here.

good afternoon. walk me through what has happened this afternoon. everything is on offer. interesting, i saw at the end of your run through went down at the bottom you had the utilities under threat from the green party in germany, but also a bond proxy at the bottom which is unusual in a risk off world. the bonds have been hammered, especially in europe and around the rest of the world as well. treasuries may be outperforming a little bit in that market, but everything is down. a few different things coming together on that front, which is interesting. the possibility of fiscal stimulus in some economies, new zealand, japan, looking more electionsgeneral raise the possibility of something coming through europe at some point. that might incite euro strength today. then you have all sorts of other factors coming in today.

china data makes the rest of the world look better even if the ism and the u.s. is not quite so clever. massive bond suppliers we've been talking about for months and months. one thing that came through in the afternoon is the ecb qe program. they frontloaded quite heavily in november which means they might go off again in december when the markets are thinner, allowing for an increase in the yields. vonnie: to go back to the german 10 year yield, why such a move? significance?er is there contingent in the market that feels this could spread, this type of dissatisfaction from the electric? paul: it is definitely a strengthening move today. with moves of this kind of magnitude upwards and yields in the second half of the year, and the first half of the year were none, this half of the year there were four or five moves of eight basis points on the german

ten-year. it tells you that markets are more nervous and more inclined to sell heavily when we have that kind of momentum in the market. certainly the prospect of german fiscal stimulus as part of it, the park -- the prospect of germany spending more. area a sense that the euro is not in such a bad way in terms of level trade as has been feared. the argument goes something like this. we will see an end to the grand coalition, whether it happens this year or not. the greens are more likely to spend. it is still quite nebulous in terms of our ability to hang our hats on this. is it just that the incremental risk, the marginal risk of this happening has gone up? paul: i think so. moment they be

there was not so much buying emphasis left in the market. people already tying up their positions for the year, so maybe most of the year is away when you get to it. what is interesting to think about longer-term is this will not be good spending or bad spending. will this be the kind of spending that is stimulative, that helps the euro strengthened? it looks like based on today's performance it might be the kind of giveaway spending that is great for winning votes and not necessarily great for the economy. guy: always a pleasure. paul dobson, bloomberg managing editor. holdings considering major job cuts. bloomberg reporting 30% of the workforce could be a laminated. asset managers have been rattled by investor defections. is bloomberg finance reporter patrick winters.

gam40% enough to keep solvent? patrick: that is one of the key questions. you are looking at a company which has been trying to find its way for a while. gam is an asset manager with operations in switzerland in the u.k. and they had a scandal 18 months away which led to a loss of one of their biggest funds and 40% to 40% afterwards of the key moneymaking assets. what our story says today basically is costs will be reduced by about 40% under one scenario. if that will be enough, time will tell. the key question is what is going to happen to the assets? will they go up or down? it is probably going to be enough if assets stay the same for now. , it iscking up on that going to be interesting to see when you cut your way back to

growth, but clearly they need to do that, they need to rebalance the ship. what we know about the actual strategy that is going to take this business forward, where the focus is going to be, will be different to what it was before and how different? assets stay at the same level as they currently are, it is still an ok strategy. they have several pretty good funds and equities in fixed income, but at the same time you cannot have those funds and costs which are double eric triple is much as they should be because they are still basing them on a legacy company which has much more assets. i do not think there is a need for huge strategic change but i'm not sure what else the new ceo has in the pipeline. at the moment, is just a cut in the estimate to bring the company back to profitability. what i'm am hearing is just one scenario, and those final decisions -- no final decision

has been taken yet. m had 863 staff at the end of june, so we are talking between 250 and 350. where would they go? are hedge funds thriving in europe? would banks be thrilled to get these gam castoffs? patrick: what we are looking at is more of the back office and support side. cut 10% of its workforce earlier this year, that was most of the investment professionals. earners, thehigh front office people, and people managing the funds. what they are now looking at is the back office and support. guy: we will leave it there. interesting story. thank you to bring it to us. patrick winters joining us out of zurich. let's look at where european stocks have finished. these are the final numbers. midmorning into the

afternoon. for a little bit of a dip the comment all markets as we come through the option. the dax finishing down 2%. the london market is more stable. it was fascinating to see oil and gas in the mining stocks as relative out performers today. if you want to carry on the coverage of what is happening in the markets, you can tune into the cable show at the top of the hour. jonathan ferro is new york. i will be joining him in london. we are live on dab digital radio and the london area and around the world on all bloomberg devices. this is bloomberg. ♪

vonnie: live from new york, i am

vonnie quinn. guy: from london, i am guy johnson. this is "the european close." let's check in with bloomberg first word news. over to you, ritika gupta. ritika: the white house may take part in future impeachment hearings, but will not be present wednesday. the white house criticized the committee for demanding -- before any witness had been named and called the process unfair to the president. all eyes will be on china in madrid. negotiators from is 200 countries will be there for next round of united nations climate talks. china is in focus for several reasons. it is the world's largest investor in renewable power but it is also the world's top carbon polluter. opec and its allies are gambling the golden age of u.s. shale oil is over. when they meet this week they will discuss whether to expand

their current output target and reduce it. the reason opec believes the relentless u.s. oil production will slow rapidly next year. in germany, angela merkel's party is playing hardball. the christian democrats told the social democrats there'll be no renegotiation of the terms of their alliance. they can quit to the governing coalition if they cannot accept that. the social democrats have picked new leaders who they say will demand policy changes. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. . am ritika gupta this is bloomberg. vonnie: thank you. it is time for our stock of the hour. that is macy's. shares are rising a cyber monday caps off. adobe analytics says online black results are at a record. let's get the taylor riggs with our stock of the hour. macy's is having a good day for a change. taylor: exactly.

earlier this morning up 2%, now trying to hold onto gains of 1%. on the one-year chart, you hit it right on the head. frankly they could use all of the good news they could get on a year-to-date basis. they have been struggling, even though all of the other retailers like target or walmart or nordstrom have been doing pretty well, macy's has been struggling given their big exposure to women's apparel and inventory overhang and difficulty attracting younger shoppers. this is hopefully some good news they start to see black friday and cyber monday deals start to come through. i want to take a look at the space and where black friday and cyber monday are situated. billion with online shopping relative to a big total in spending according to adobe analytics. year.$7.5 billion this $9.5 billion on cyber monday. it is a record. i want to take a look at where

the in-store shopping years. when we look at macy's, so much of this is brick-and-mortar. the good news for macy's is they may get a boost in stores. brick-and-mortar spending is expected to rise 4.2%. on the flipside is they do not have a big exposure to electronics. companies like best buy have been start out performers. i think it will be a mixed wheree as analysts way macy's fits into the online story. vonnie hinted at, the earnings a few weeks ago did not look that good. what is turning things around? taylor: that is a good point. if you look at a chart i am showing inside my terminal, we just came up the third-quarter earnings. 4%,-store sales plummeted one of the worst quarters they have had in several years. that was as we were going into the key holiday season.

analysts were concerned about that. it also means one of the stock is one of the most shorted, 30% of shares outstanding have been shorted by analysts, one of the most in the s&p 500 retail. as analysts look at where macy's is situated relative to key players, they are saying macy's may require additional store closings given they have caps off digital sales. other brick-and-mortar sales have done well in terms of capturing deals. the curbside pickup, the online pickup you can do in-store. macy's has a lot ahead of them. vonnie: that is taylor riggs in san francisco. coming up, out global battle of the charts. this is bloomberg. ♪

guy: it is that time. it is time for our global battle the charts. you can find it on your bloomberg by running gtv . >> let's start with gold and the

trend is up. my chart is a chart of gold. five-year moving average, this is an annual chart turning back up. what is the key driver of gold? u.s. debt to gdp. it is just a matter of time for gold to get to new heights. high,ance 2013 was the gold is retracing. i think it is going back there get a key support is 1400. that was the high-end gold for five years until this year. gold looks like it is heading higher. what will it take for goldbach to go higher? back to you. guy: excellent. you can find mike's chart on your bloomberg at gtv . vonnie: that was pretty good, i have to say. congratulations. i want to point out this chart because we have not spent much time on hong kong today and we cannot lose sight of the fact that hong kong is still raging. protesters are back out in

force, even had some successors with local elections last weekend. maybe it motivated them even more. china sanctioning the u.s. as well and certain organizations to try to hit back at president trump assigning the legislation in support of the pro-democracy protesters. data wise, we can see a huge downturn in sales. this is the fourth consecutive double-digit decline in retail sales. in the last reading. gdp is the blue line and year-over-year gdp has turned negative. the latest read down 2.9%. all told, data wise and human wise, it is not a great picture for hong kong. guy: that is a great picture when it comes to a chart. . am going to give it to mike i thought that was nice chart. i thought they were both nice chart and i think the upside in

optimism when it comes to gold winning is over. congratulations. you can find the charts on gtv . coming up for u.s. viewers, "balance of power" with david westin. i have a strong feeling david and the rest of the team will be spending quite a bit of time talking about the new tariffs being imposed on argentina and brazil and what that means for the wider trade story between the united states and china. u.s. markets reacting to that news as they have in europe. very negative session when it comes to stocks. down ever 2% in europe. around one, aown little less than that. this is bloomberg. ♪

david: from bloomberg world headquarters in new york to our tv and radio audiences worldwide, i am david westin. welcome to "balance of power," where the world of politics meets the world of business.

on the brief today, president trump's imposition of steel tariffs on brazil and argentina. new stress being placed on angela merkel's coalition, and chinese manufacturing pmi numbers surprising to the upside. julia, let's start with you. we woke up to learn we will impose tariffs on steel from brazil and argentina. how is that being received in sao paulo? julia: it was a bit of a surprise when the tweet hit. the president was leaving the presidential palace. ,e said give me a bit of time maybe i will call trump. we will sort it out. we expected a negative market reaction. it has not been the case. steelmakers open the day lower.