Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240713

Manus it is all about the oil markets down here. We have had cracking conversations. They reckon it will be tough for the market to get above 64 a barrel. It is great to be back with you. On that trade discussion we are taking a look at the optimism around trade, catching a bid for safe havens as well as the reemergence of geopolitical risk with tensions rising in hong kong and the shooting of a protester. Manus we will get into the be hardoves, going to to get above 64. You have got the daily percentages of trade, aramco discovered more barrels and opecs outlook is not that great. You have got a couple of things we should keep an eye on. Gold, treasuries most important markets indicators. The worst week in three years last week. Slightly better this morning. Are thet positions highest since june this year. A little bit of a shift. People are worried about the rhetoric from donald trump. We have had the weakest shorts piling into the bonds but is it the right moment to do it . Nejra we have had five weeks of gains. We look at refraction reflection with weakness. The biggest losses in hong kong, the hang seng down 2 , the biggest drop since august. We have hit record after record on the s p 500, a new closing high on friday, assessments over where we were going. We hear from President Trump and he poured cold water on the optimism about a rollback, saying nothing has been agreed which might have been obvious but seeing weakness in u. S. Futures. The treasury markets are closed so the focus is on the equity markets in the u. S. Around seeing concerns bring liquidity forward to the highest since 2016. 109. En what get back to the trade conversations. Investors with mixed signals in the trade talks. Said negotiations were along nicely. Last week pointing towards a first phase deal which would but he tariffs rollback, suggests the u. S. Is ready to make concessions it is incorrect. China would like to get a rollback. Not a complete rollback because they know i wont do it but we are getting along very well. They want to make a deal. They want to make a deal more than i do. Nejra joining us is balance against, cio at alice higgins, cio at kong,itical risk in hong five weeks of gains, equity markets pricing in phase one. We are due for a correction. We have had stabilization, no surprise the risk off time, it is relatively limited on the s p 500 futures. But positive overall, ofufacturing showing signs strengthening. Impacting china, that seems to be blossoming. As for a trade deal despite everything, there is a deal to be done here. Great to see you. Speaking with Erik Schatzker said it all. We are trying to rationalize i want to show you negative bond yields. Six days to undo 2 trillion worth of negative debt. It screams something to me about what the bond market is saying about Global Growth. What does it say to you . We arranged to trillion dollars in six days. I agree with that. It is pricing in the same thing as equity markets. There is the negative correlation which essentially is the idea of the Global Economy is recovering. Consumption is held up but it is all about manufacturing and about time. Not sure we will get rid of negative yields completely atause we have the ecb negative. The short end will be negative for years to come. I think that is the wrong policy. The longer maturity bonds are going to become less negative. Nejra how does it fit into the fact we have had data out of china with factory prices, concern rearing its head, not exporting deflation but at the least disinflation . Us for someen with time. It is remarkable how low it is globally. Theurope negative rates and economy is going to get weaker this year but low inflation. Inflation prone economy but hard to generate inflation. I think globalization is alive despite the weakness from china that is keeping prices down. We remain a lowinflation house. That is why we see the rate structure overall. We will get rid of the negative yields but the rate structure will remain low. Manus if the rate structure remains low, what is the biggest trade to protect yourself or to take advantage of a low inflation environment . We have some bonds. We are basically leverage long the twoyear and short the 10 year. The way we look at it, it is a bit of a hedge in the sense that if things go badly like 2008, or like germany and the u. S. , the rate curve will be steep. It will not be a good time for risk asset. You could have bought bonds. In contrast, what we are looking at, you can see the graph increasing, more like a midcycle. Like that midcycle. Rates are going down because inflation is low and the economy is weak but we are seeing the curbs stephen because markets are looking forward to growth and there will make money. We are leverage long the twoyear. All of these treasuries need to be financed on repo. Nejra do you rank into that when you say you have cuts from the fed in 2020 . I have heard mixed views. The fed has cooled a bit but they are data dependent and market dependent. There might be room one or two more cuts because it is a lowinflation environment. The idea Central Banks have a premium over inflation, it is gone. The real rate of 3 , you dont see that anymore. Ofwont take much in terms low inflation. That is the focus to have another cut or two but the steepening is likely to come from the selloff in the 10 year. The last four or five weeks it is classic midcycle playbook. Manus we will go deeper into that later on. Allen higgins. Giving live trading in the market. Hong kong, protesters, they have had a series of incidents in the city. Shot byle have been police. Lets get to our reporter joining us. This is a ratcheting and escalation in terms of the response from the chinese authorities. Can you walk us through what is happening . Basically it started over the weekend. We saw the first protest related death, which really triggered the violence. Protesters then struck to disrupt the morning commute. Outng that time elyse went to disperse, there was a chaotic scene, police scuffling with protesters, it drew his weapon and fired it. Three shots were fired and at first they were saying two teenagers, now they say one. He was just out of surgery, now in intensive care. But we have seen after that is calls for protests across the city. We seen disruptions to the rail lines and tear gas fired in Central Downtown which many viewers are familiar with. Nejra thank you so much to managing editor dan kincaid. Lets get to first word news now. Tom australia is bracing for another week of devastating brushfires. Areas of greater sydney are facing a catastrophic threat that is unprecedented for this time of year. Three people have died and more than 150 homes destroyed as fires went through areas hit by a twoyear drought. Chinas consumer inflation could hit 5 in january according to economists at barclays, citigroup and bank of china. 3. 8 ose to a year high of because of pork prices. Demand from the spring festival in january will push the gauge up further. South americas longestserving president has resigned. The bolivian leader announced his departure after election irregularities triggered weeks of clashes and intervention from the armed forces. He claimed to be the victim of a coup and called to the International Community to intervene. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Lets pick up on the big story this morning, the shooting in hong kong. The market is being discreet in terms of liquidity. Msci in hong kong is down 3 . It is the biggest oneday move we have seen since august this year. 240 billion has been wiped off. There is the chart for you. Squeezed higher, you have the hong kong threemonth dollar cost ratcheting higher at this morning, the response mechanism from the chinese, in terms of response. The markets are beginning to Pay Attention to week 21 of the protests. Gamble. Out the election is it backfiring . The spanish Prime Ministers party loses seats, weakening his power. We will take you live to the spanish capital. This is bloomberg. Daybreak is bloomberg europe. I am manus cranny. Nejra i am nejra cehic. Has more. Aly good to see you. Risk off today but the big thing is on hong kong. It is. Index have a decline of more than 3 . The hang seng is off 2. 7 . Both of the indices with the biggest drop. There is one stock on the index in the black. You see the likes of the banks, m. I. T. , the under significant pressure. It has gone through into sentiment across the rest of asia. We have single day, that was off to a good start but you see this is off 1. 5 . The nikkei is tracking lower by a quarter of 1 with money going in on safe haven buying. Also a cloudy outlook in terms of the u. S. And china trade talks reflected in the other currency markets particularly the korean won. We had the first 10 days of exports also falling down 21 . The south korean one of the worst performers in asia. To add to the gloomy outlook we had more signs of factory deflation out of china over the weekend. We have the producers price index falling for a fourth month. The drop coming through in the the worstctober was we have seen. Economists are suggesting we will see weakness in the Fourth Quarter as we start to see import cost and Energy Prices falling since june the most since 2016 going to blow through into price pressures for the likes of europe and the u. S. As everyone looks to china for the downbeat read we have been seeing in Producer Price index. Manus the global threat, whichever word you want. Lets get our attention across the business flash headlines. Tom mackenzie hes with the team. Tom alibaba singles day promotion off to a flying start. The shopping bonanza 16 billion of purchases in less than 90 minutes equivalent to more than half of last years record for the 24 hour event. An estimated half a billion shoppers are expected to swarm the ecommerce giant site for everything from refrigerators to cashew nuts. Oil will peak in 20 years according to the perspectives of saudi aramco. This comes from the consultants ihs market which sees demand peaking around 2035. Officials agreement agree this is overblown. Instagram itching likes for some u. S. Users. They will hide them in attempt to remove social pressure following similar experiments in other countries. Speaking exclusively to bloomberg, the instagram head said it would impact user safety. I dont think it is likely. It is a possibility. It would be really bad for instagram. It would make it difficult for us to keep people safe. It could be difficult to build and innovate. A lot of the work on shopping is built on top of the infrastructure work the Marketplace Team has done the last new years. You have to take these things seriously. So we do. Bloombergis your business flash. Nejra plus get an update from spain. A gamble looks to have backfired with the general election returning fewer seats for the socialist party. The early poll six months after the last one oversaw a virtual wipeout of the potential coalition partner. That leads them again uncertain. Maria. Et more from really good to see you. After a bruising result, how is Pedro Sanchez going to pick up the pieces . That is the big question. This is the election that was supposed to went the deadlock before the election. If you look at the election butlts, the socialists won they lost seats and the Prime Minister doesnt have a path to a majority. He turned to the left, [indiscernible] to the right they have already said they are not interested in joining a coalition. Government inable this country. The question is what does it mean to the economy or for the markets . You look at the economy that had a strong rebound from that crisis in 2012, but you see the indicators point to a loss of momentum. The country hasnt seen 2015 orul reform since had a budget for two years. Political instability beginning to kick in for the spanish grudge spoth was a for the european union. Thank you very much. Scene, with political Boris Johnson is hoping his early election will prove more conclusive than spains. Labor claiming the Opposition Party spent 1. 2 trillion times over the next five years seeing economic stability in the u. K. Eye watering levels of spending, 1. 2 trillion it will be reckless and believe this country with a crisis within months, not years. Sunday politics programs in the u. K. Are the best. So claim a 1. 2 trillion pounds but the tories are proffering their fiscal latitude as well. Is the gilt market bridled and if this comes to pass from either of them, how quickly would we see a repricing in the gilt market . I think it is right to be cautious on this but it is a low global yield environment. When the yield is so low, we think it is right to spend and if you look at the playbook for japan, where the debt to gdp has indeed,very high levels the japanese Government Bond market is wellbehaved now we have qe which could help, but generally with the 10 year yield less than 1 , real yield negative, why shouldnt you gear up the economy, especially for infrastructure . Makes sense. The will be more guilt down the pipeline. We will put pressure on that to go higher but we believe it is a interest rateobal regime. How low will it go . Forget the scenario for europe. There was a gloomy use conference from mark carney. Whether it might see cuts, that is something people are considering. You are our you are long the pound. Is it enough pessimism priced into the markets to make the investment worth it . Trade has turned around. Sterling dollar not doing so well. Yes, but there is so much pessimism, if you look at the flows and the outflows from the u. K. Equities in particular where you can see this, it has this huge run. You look at wellknown bank of america survey, the most hated asset class is the u. K. , whether it is sterling or equities. There is a lot of pessimism. We are broad just like a lot of places. Looks like a high probability now priced in with the bookmakers of a conservative majority. You could see a very big yearend rally in sterling and u. K. Equities. Manus we have done the survey. Library. The gtv on a tory victory, it is up 34. One thing that struck me and i want you to focus on, the orange coalitionh is a labor. Doesability but only the 127 on the labor relation and 123 offer makes sense to you in the labor in the title . I think we will see more downside at least initially for the u. K. Assets, sterling and equities because of the views. Becauseto look at it is because u. K. Assets are cheap, you can understand why markets will come back to the level after initial selloff. Limited downside makes sense. Thank you. We will be speaking to the u. K. Chancellor coming up. Dont miss that interview later today. Aramcos ipo kicks off november 17 but what about their size or pricing . This is bloomberg. Mberg. Nejra this is bloomberg daybreak europe. I am nejra cehic. Cranny in abunus dhabi. Saudi oil producer aramco released the prospectus for its highly anticipated ipo. While the giant has laid out a timeline, investors have been left in the dark when it comes to crucial details. What is the latest perspective on the prospectus . 650 pages. Did you read all 650 pages . I did read most of it last night. I was going through a lot of it. The biggest take away is what was not in the prospectus. We dont have the share price range or the amount they are going to sell. It is a break from normal processes. The next thing to watch out for his november 17 when the Management Committee will be able to pitch the deal and we get an indicative price range. We know what they are doing to retail investors. Half a percentage point we have seen in the kingdom advertisement billboards on the side of the street, atms, twitter, twitter promotions will come up for everyday people to buy into this deal. Nejra what did we learn about Peak Oil Demand . They are 2035 is what looking at. This is the culprits consultants at ihs. Saudi aramco doesnt say it is reliable. Ipoou are buying into an that is all about hydrocarbons and you are saying peak oil is 2035, there will be questions for the institution and the big money backers. Analyst now onl the london said. Great to have you with us. Lets start on the issue about growth for aramco if you wanted to invest. Do the prospects look good . I think if you have already highlighted the demand in 2035, there will be questions about the longterm prospects for growth. There are a lot of details missing but they are promising a certain amount, 75 billion, will be paid out as dividends. As an investor, and they are trying to say right now he goes through the government but after a certain threshold we will guarantee x amount for investors irrespective of the oil price, that is where it can get exciting. If you are looking at a longterm horizon and see or Peak Oil Demand and they are transforming the company, there will be questions. You read through the notes, to say you are skeptical about the long reach of the governance within aramco from the royal family and your skeptical on growth, is that a Fair Assessment you are moderately [indiscernible] we need moreis details, need the share price, need to know effectively how much they are willing to give out but also how much will it be Institutional Investors . We dont know that and we know that aramco has generally gone around and spoken to a lot of investors in the u. S. , over here as well. It hasnt brought up that kind of excitement because of the unknowns. They want so much to be a part of opec because they need a high price level. They put out the budget for next year and they are predicting it to be 11 lower year on year. Suddenly it becomes an issue do you need to value this to get money in right now . Nejra i will go further and say when i read your piece, 10 reasons not to invest in this aramco ipo, it is a savage takedown. Good contrary and views. Give me your back talk about the valuation. People cited a range where do you see it . We dont do Company Valuation but the variation is huge. Nejra compared to other oil companies. If you do comparable numbers, it is less than 1 trillion but banks have put in more than 2 trillion. It is much more of an equivalent to a bond if you are looking at 3. 5 return on a bond. That is where a lot of the range is over 1 trillion. It is hard to come up with any value statement and say this is how much it is worth and how much should be the interest. It is difficult. But is called a credibility gap for bankers and in terms of valuation. 3. 7 , enough of the yield to entice you to pick up a bit of aramco . Are your clients prepared . There will be a few saudi connected clients who will get involved, but when you look at a global basis, you want to invest in oil you have shale, but looking at the bloomberg, 12 times, yield of 6 , for Global Investors it is not going to come cheap because with the company like shale, you already have the move towards renewable in place. Doing the right thing. , 75dea Global Investors billion if that is a dividend yield, it doesnt look enticing versus the other majors. Enticing to the other alternatives look if we are going towards Peak Oil Demand . We would argue Peak Oil Demand and the Energy Transition talk has gone too far the other way because in the next five to 10 years, even our peak oil around 25,er is 2030. There are no big projects after next year. Norway, brazil, they are all very much online now and next year from 2021. The big drop off we have seen starts to materialize. Nobody wants to talk about oil and gas investment. Shale, total coming out saying we need this. Growth will be slower. But we have demonized the sector to the point where i think we could really see a spike coming up because of the lack of investment. That is where aramco becomes valuable. I get the longterm valuation issues with Institutional Investors because they are years but in or 20 shortterm you will get another oil and gas cycle. That may come to pass because of the lack of investment. As we put on our winter coats and go to opec, the Nigerian Oil Minister was with me and said you are trying to build a they were last known to say they want to get the job done. Now i see there is no consensus for cuts. What are you hearing . I think and understand they are trying to cut but it will not be the saudis shouldering all of that. They need compliance. Materially,proves saudi arabia will not do extra cuts. The reality, we published this these last monday, they will need to the problem is all of the growth and surplus is because of the growth in the u. S. Everybody works with liquid balance. Every liquid balance is showing a surplus. They need to cut that down. To do it, they can only control crude. They will have to over tighten. If opec needs to get the overall liquids number down, they need to over tighten crude. If you are looking at an additional cut, which is not a big deal at all, but you dont need to do that. The crude market will be tight regardless, all of them looking at the liquid inventory built up they dont want that to happen next year and that is why they are talking about it is still early to talk about it. Thank you very much. Lets see what we get for christmas. The energy analyst. You stay there. More work. First word news. Tom mackenzie. Fired tear gase to disperse lunchtime protesters in hong kong after the citywide efforts to disrupt transportation. Police said two protesters were struck by buyer bullets but they revised the count after the of hospital authorities said only one person was being treated. Spains for the election in as many years has left it more ungovernable than ever. Won theng socialists best seats but there are now fewer lawmakers than before. The Prime Minister faces torturous new ghost torturous negotiations. The eastern seaboard and even areas of greater sydney are facing a catastrophic threat with unprecedented that is unprecedented. 150e people have died and homes destroyed as fires went through areas hit by a twoyear drought. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra thank you so much. Lets bring you an interview from the world of fintech, unicorns, investors and academia gathering at the 2019 singapore Fintech Festival. Haslinda amin has a guest for us. Great to see you. Haslinda with me is eddie mcguire, hsbc coo. Re have been concerns with what has been the results so far and windy you intend to scale . I do resist the blockchain it is important for us as it regards. We have been actively pursuing that three or four different ways for a couple of years. We think it will happen kind of industry, commodities. We cant make it happen. We are the biggest trading bank. We want to be at the forefront of each of the developments. Linda when can you see [indiscernible] it is when the customers and supply chains come up. It is not when we can scale but when enough people come into any given subject a system which will determine it. It is like three or five years, but with blockchain that has been around 10 years, it hasnt found that many knockouts yet, it could be longer. Haslinda is it a matter of changing the mindset . Not. Is normally banks get the stereotype of requiring bureaucracy and paperwork. It is driven by customs and , shipping, logistics company. We need to get together and Work Together to change that stuff out or move it on. A collaborative effort. We know that and Financial Services it takes a long time. Switch, itg like took a couple of decades to really get us to where we imagine we would get in a few years. Dont hold your breath. Haslinda hong kong is an important market. It accounts were more than 50 of your profit. What do you make of the tensions between protesters and the police . I was there this morning, going home tonight. Civil unrest is really sad. When you just love to see the situation go back to normal. We cant do anything about that. It is not really for me to say. Haslinda it has impacted your profits, your numbers missed estimates. Do you expect the number to be impacted until there is improvement . Our numbers held up well in 89 asian business creating of the profits. The impact has been relatively it isso far but i think civil rest obviously we would have a negative impact. I can see it in my everyday life. Hotels, hospitality, you see it there. In other sectors it is less obvious but all of it has a negative impact on the economy of hong kong and none of it is good for us from the Community Bank and we are committed to hong kong. We have done things to try and help the community in the meantime. We cant control the political situation. That is the odd us. Haslinda hong kong is in recession. Do you expect any turnaround . I dont think anyone can predict that . We are putting a lot of effort and running our money where our mouth is on that. We hope it results sooner rather than later and it would be good for hong kong. That is good for us. Your what is yours take on the status of the economy . You saw it in the q3 results, u. S. Interest rates which even though we are not that big in the u. S. , so much of global trade and our Transaction Banking business is driven in u. S. Dollars and in many of the markets we operate in globally, if not u. S. Dollar, the reference currency is. That has had an impact. Record secondquarter results, disappointing thirdquarter. Around interest rates. And then you have tensions, uncertainty with brexit, unrest in hong kong and it makes for a tricky situation for us and we are working our way through. Are there other pressures . The boe has warned you about conduct to do with risk control. Are you doing enough . We think we are. We are working hard on that. We have spent time, money and effort on it. We have to keep doing it. We are not perfect. Wendy to grind it out and get it done. Haslinda have a specified measures . Every bank in the world from big regulators gets a letter roughly once a year and gives indications they would like to see done over the next year. We have had one of those. We are working on those points. Haslinda the conversation at the festival focuses on digital banking, how court countries like singapore are issuing digital licenses to nonbank players. They may faceseen as a result . Customers are very attracted to the things they see in the digital world. And we need to be at least as good as all of those attackers and replicate those. We spend a lot of time copying with pride and stealing the best ideas and see if we can work them into digital applications, whether the retail or commercial or Global Banking and markets. We need to run hard to keep up. In the end for most people, individuals, banking is not a digital only thing, it is multichannel. We have an advantage which is we have got great people, fantastic feedback about our colleagues relationship managers. If we can be nearly as good as blend ital factors and with great people, we have come a long way in the last couple of years, it would be hard for the attackers to really attack us. They will keep trying and it keeps us on our heels. Haslinda [indiscernible] coming to you live from the Fintech Festival in the lion city. Manus thank you very much. Great to hear their voices there. Coming up, speaking with the ceo joins us later. It is an exclusive conversation on bloomberg. This is bloomberg. Manus this is bloomberg daybreak europe. I am manus cranny. Youa looking at what should be watching in china, alibabas annual singles day off to a flying start. It will be closely watched as a test of willingness to spend. The chinese president is in greece where the he will be meeting the Prime Minister. Gdp data in the u. K. Is expected to show that country dodged a second consecutive quarter of contraction. Oil, i am in abu dhabi. We have spoken to various people. Next is the total commentator, to mark pharmacists day. The bond market is closed in observance of that. The cio now. I want to take you to something which is flashing aggressively girlsthe bond boys and radar. Biggest ratchet and three months. I know you are long, but in terms of the spike in the term premium, does that worry you about what does that flashing red mean to you . It is telling us basically the treasury market got overdone. It is telling us Global Manufacturing is bottoming whether looking at new orders, and telling you to be biased towards risk assets like equities. We really like this move, but Government Bonds have had an incredible rally this year. For all citizens surprise the Government Bonds have gone up it is no surprise the Government Bonds have gone up. Nejra there is a column talking about a shift in emergingmarket european stocks and the fact global terms depends on equity hopes. Mohamed elerian said the rewards of a shift could be shortlived. Is this a tactical adding to european equities . It is more tactical. Investing in any kind of value proposition, when you invest, youre going long rally especially relative to the u. S. It is shortlived. But for us there is more juice in it. In particular we see the banks which are a big component of european equities, solid foundations, so that from the unit creditor. The italian banks are the weak link, but now it is looking stronger than the dividend yield a loan from the european banks is an equity return itself. Tactical, but as we go into yearend, see a trade deal, maybe optimistic about the auto sector as well because [indiscernible] manus gold was savage last week. I just want to get a sense. Jpmorgan want to go underweight. Central bank buying, the trade detente got a little bit of that this morning. Your take on gold . We have resisted it. We missed the rally, resisted at the highs. It is the same thing as the Government Bonds. If we are going to get involved we would want the Government Bond reasonable income when you are looking at the u. S. We are not interested in gold. Great to have you with us. And we will get more updates from hong kong, months of protests and what we had later in the shooting of a protester. The hang seng taking a beating, down 2. 8 . The msci also falling and surging the hong kong dollar surging. You can interact with charts shown using gtv. This is bloomberg. Nejra good morning bloombergs european headquarters. This is bloombergs daybreak europe. Tensions run high in hong kong once again. An election gamble backfires. In the u. K. , the tory party hopes to avoid the same fate as they attack labours spending plan. Aramcos ipo prospect leaves a lot of questions unanswered. The worlds most Profitable Company prepares to open the bidding. Nejra welcome to daybreak europe. We are seeing risk assets and safe havens bid on the reemergence of geopolitical risk in hong kong. Protesters shot and a question over where we go with trade talks. Manus it was this radical reshaping of the markets on thursday in terms of spiking treasury yields to a three month high. Morgan stanley has a note out. Trade is buy japanese Government Bonds. Gaps, price gaps prevail. Nejra what a lot of people are talking about is alibaba. More than 16 billion of sales in the first 90 minutes of its single day. We have been talking about a liquidity squeeze. Part of that is the geopolitics. Preparingt alibaba is for a share sale. In terms of equity markets, five days of gains on the s p 500, hitting another closing how i closing high on friday. It looks like a down day judging by the futures. Volatility in the equity market is in uncharted territory. For the bond market, what you want to hear is the hedge funds piling into the treasury net by the most in more than a year. , can ittion being asked turn back . This is the bond market does your. Bund up by 22. Christine lagarde, what is she force, cajole, and dear, maneuver . A new lady in charge in the ecb. Delivery will ultimately change. One lady in control, juliette saly. Juliette we are seeing weakness in hong kong flow into the region. Despite that positive finish from wall street, having a look at the shanghai comp, down 1. 8 on the csi 300. That disappointing ppi read over the weekend, despite the positive start to alibaba single day, exports coming out of south korea, the won is the worst performing asian currency today. The kospi weaker by 0. 6 . Money going back into the yen on that safe haven buy. Australia was an outlier, finishing higher by 0. 7 thanks to buying in i. T. And health care stocks. Lets focus more closely on hong kong, which is still trading. It has been the worst day for the hang seng index and the msci hong kong. Both of those index under significant pressure, falling by 3 . Its hard to find even one stock in the black in hong kong as we continue to see the protests and a big move in terms of the hibor, the borrowing rate as you see volatility on the hang seng index is also spiking. I comes to the hong kong dollar, weaker against the greenback, but we have been seeing steepening in the forward curve. Mark cranfield from our mliv blog says this could impact could in fact continue. Manus thank you very much. , futures are sliding. Thed signals from u. S. China trade talks. Donald trump has said negotiations are moving. Last week, signs were pointing toward a tariff rollback. Trump describes the report as incorrect. Not agreed i have to anything. China would get to get a like to get a rollback. We are getting along very well with china. They want to make a deal. They want to make a deal a lot more than i do. And the world was crestfallen. Up. Ere caught the one broke seven. Termsood was rushing in of the propensity for a deal. Our team at bloomberg has said, dont get swept up because the differential will drop and that love affair with the breakup seven will end. What do you make of that . I have to say we are pretty much in line. Probably on different rationales. Data, waye china cpi above credit consensus. We think even though the underlying demand, ppi, is a lot think it is great for chinese policymakers to air on the side of caution. Beingee with the call premature. We are waiting for the policy to come through to be more optimistic on china. We are asking questions as we do every time. It means for what the Industrial Companies within china, particularly, have they still got high debt, but their prices are coming down. Stimulusink fiscal will be enough . Policymakers have been behind the curve. January last year they came out with easing policy. Growth, they6 will have to do something substantial to support concerns you just mentioned. Lets pick up on one of the things about Central Banks being behind the curve. We had a long conversation from hsbc. Us. Ntroduced we have the new zealand this weekend we have a rate cut from the kiwi to just under 62 . What would you take away if they dont . The central bank governor, he is really pulling the direction of the markets. We are looking for them to cut. We think centralbank easing is australiaspecially in , that threat of easing will cast that aussie dollar going forward. Even if we get more positive mood music from u. S. China. Nejra how much of a cap do you see to the u. S. Dollar broadly . You see trends turning against the dollar. Do you see resolution to the u. S. China trade talks . At the very least, a phase one deal . Yes, i think it is premised on two facts. Agreement,s phase i but also easing Global Growth and that kind of growth differential narrowing against the u. S. The dollart of strength over the last 18 months has been because of the significant geopolitical risk. Especially with going on for brexit. Into 2020 does take away the dollars safe haven bid. I am a bit fixated on rbnz. There is a note out this morning. If you believe the fed is in qb mode, that Balance Sheet is is not going to bounce the aussie into more qe . Thats what jp morgan say they are going to do. They are going to go for quantitative easing as well as another rate cut. Is there more qe globally . Thee are not calling for rbnz. We think it is more as rates go lower, as they hit that lower bound, the threat of unconventional Monetary Policy will limit the rba. We think there is a high hurdle to do it and in economies such as australia, it will not have the impact in the Financial Market as other parts of the u. S. We think there is a big threshold for qe. The threat of it is going to keep the aussie relatively weak. Nejra lets get the bloomberg first word news. Australia is bracing for another week of devastating fires. Areas are facing a catastrophic threat that is unprecedented this time of year. Three people have died. More than 150 homes destroyed. The fire ripped through areas hit by a twoyear drought. Chinas consumer inflation could hit 5 in january according to barclays, citigroup, and bank of china. Cpi rose to a sevenyear high in october due to soaring prices. Demands from the festival in january push the gauge up even further. Longestserving president has resigned. Ralesian leader evo mo announced his resignation after violent clashes and an intervention from the armed forces. He claimed to be the victim of a coup and called for the International Community to intervene. Global news, 24 hours a day on air and tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus Tom Mackenzie in beijing. Police fired tear gas at protesters after the shooting of a protester. There have been citywide efforts to stop transportation during the rush hour. Lets get the latest from Jody Schneider in hong kong. These images we are seeing at the moment, this is a severe escalation. How would you describe it . Certainly an escalation. Core financial district during the weekday, during lunch hour. That is unusual. We have seen five months of protests in hong kong. The escalations, the clashes have mainly been on the weekend. This one occurred at lunchtime after protesters called for a general strike. A youngning after that, man was shot by police. That certainly escalated things that cause the protest at lunchtime. Fired in ther gas Central Business district, some Financial Institutions are sending people home today. This came after another weekend of clashes. After the death of a protester who had fallen off a roof during a Police Dispersal operation. It has been a chaotic weekend. It came to the Business District at lunchtime. In theit has cause chaos markets. Jody schneider in hong kong, thank you. Ighter liquidity the highest since 2016. Equity markets taking a hit. Sanchez election gamble backfires. The socialist loses in the fourth election in as many years. Live in madrid next. Manus live pictures of hong kong, where protests have escalated. One person has been shot. Police are investigating reports a man has been set on fire during an argument with a group of people. Police are investigating. There is an area in the northeastern area. Police are investigating that story. This is escalation. Tear gas been fired. Pressure, are under that is for sure. As we get more reports, we will bring that to you. Markets are reacting. Msci over 3 . You are seeing a tightening in terms of financial conditions and the hong kong dollar. You are seeing movement on the equity market reacting very specifically to the escalation of geopolitical risk. Its bloomberg daybreak europe. The bloomberget business flash with Tom Mackenzie in beijing. Alibabas singles day promotion is off to a start. 15 billion of purchases in less than 90 minutes, more than half of last years record for the 24 hour event. An estimated half a billion swarmrs are expected to the site to scoop up everything from iphones and refrigerators to cashew nuts. Global oil demand could peek within the next 20 years according to an assessment of saudi aramcos ipo. Forecast comes with demand peeking around 2035. Officials previously dismissed the notion as overblown. Is ditching likes for some u. S. Users. An service will hide them in effort to remove social pressure. Speaking exclusively to bloomberg about breaking up big tech, instagrams ceo says it would impact user safety. I dont think it is likely. It would be bad for instagram. It would make it more difficult to keep people safe. It would make it more difficult for us to build and innovate. A lot of the work we are doing is built on the infrastructure of facebook over the last two years. You have to take these things seriously. So we do. Is your Bloomberg Business flash. Thes thank you for roundup. Lets get an update now on the spanish election. A gamble by the acting Prime Minister sanchez. It looks to have backfired. If seats for his socialist party. Just six months after the last one. The virtual wipeout of one coalition partner. Path to a stable Spanish Government very uncertain. Maria tadeo is reporting from madrid. Where do we go from here . It was not a good night for the acting Prime Minister. He was hoping this election would give him a majority. In fact, he lost seats. There is no obvious way to form a government in this country today. The front page of the most read newspaper in the country, the editorial this morning says spain has gone back to square one. That is what it feels this morning in madrid. The Prime Minister could still try to form a coalition with the opposition. The leader of that party said he has no intention of joining. He wants to lead the opposition. Howbig question mark is much of the political paralysis affecting the economy in spain had a rebound after the crisis . What you see now is this is a country that is losing momentum. Governments are not able to get anything done. The country has not been able to approve a budget for two years. No meaningful reform in four years. Deadlock is translating into Government Action or the lack of, i should say. You so much. Lets stay with politics, turning to the u. K. Boris johnson will be hope his early election will prove more effective than spain. His conservative party ramped up attacks on labor, claiming the Opposition Party would spend 1. 2 trillion pounds over five years. These are eye watering levels of spending. Recklesse absolutely and will leave this country with an economic crisis within months. Not years, within months. Is still withdaly us. Would you be going aggressively long sterling . Very aggressively becauseo deal brexit theres a lot of hope it will be Boris Johnson to form a majority government. We are being cautious. We see massive risks to this. He forms a Coalition Government puts no deal which brexit back on the table. Effectively, he has said he wants a freetrade agreement by december 2020. Not, we havee does no in a sense, no deal anyway. We dont have an agreement to fall back on. What is the biggest risk to sterling . Hard brexit back on the table . Perhaps a harder form of brexit with an emboldened tory party . Or hard brexit in the form of trade talks falling apart next year between the u. K. And the eu . Instant market reaction, if it is a minority tory government forced to form a Coalition Government with the brexit party, that is your clearest scenario toward no deal brexit. Even if you got a labor minority government, you could still get a no deal possibility, but the clearest indication would be a minority tory government. Lets talk about the bank of england. It was a downbeat News Conference for mark carney. People in the markets were saying we should expect rate cuts in 2020. Are you bracing for rate cuts from the bank of england . They are a possibility. Something we have called for for a while. In terms oftations other g10 Central Banks easing. In terms of the frightening of financial the tightening of financial conditions, there is a lot of commentary about reinforcing the recovery, about stabilizing growth. I think that is basically easing. We will be looking for rate cuts. How quickly do we get 0 in the u. K. . What needs to happen to get us to 0 in the u. K. . 0 . E are a long way from at the start we will be looking for 25 basis point cuts. It would take a lot to drive us to 0 of potentially no deal brexit if they felt necessary to reinforce the economy that way. Is the euroupported against the dollar . Wey basically think basically think narrowing of that differential should support the euro. The euro zone economy would be biggest beneficiaries from a trade deal. Less geopolitical uncertainty. Of hows run out further going to ease even in terms of increasing their quantitative easing package . Very hard for them to buy more bonds. Manus thank. Thank you very much. Much. You very coming up, we will have a conversation with the u. K. Chancellor on his comments in regards to labour party potential spending. That is later on bloomberg tv. Ofleave you with a live shot hong kong. Escalation in terms of a shooting on the island of hong kong. Pressure on the equity markets. Escalation and reaction live on bloomberg. Anna good morning. Welcome to Bloomberg Markets the european open. Markets say, how bad can it get . Stocks sour after a weekend of violence in hong kong. Gdp data from britain. The cash trade is less than 30 minutes away. Violence surges in hong kong