Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240713

Welcome to bloomberg daybreak europe. Risk off in todays session and red on the screen. Below the surface, most of the indices are in the red after President Trump signs the bill supporting hong kong processors. The question is if this will impact on the market. It yesterday we saw the s p 500, dow, and nasdaq hit a record high for a Third Straight day. We saw a little bit of a decline in personal spending. Gdp Growth Holding up. Foot,utures on the back but expected liquidity in stock and bond markets. We did see the 10 year treasury yield up yesterday, and the dollar strengthened for a seventh straight session, hitting a sixweek high. The yen unchanged at the moment, but we have seen the yen balance back as a safe haven bid because of concerns around u. S. And china trade. Hitting a oneweek high after a key poll in the u. K. , very good at predicting the 2017 election, showing the conservative Party Heading for a majority. Oil, a little soft. To the hong kong story, President Trump has billd into law a expressing support for hong kong protesters. It requires annual reviews of chinas hong kongs trade status. The move threatens to complicate trade talks with beijing. Citigroup believes the prospect of an agreement is unlikely to be derailed, and the deputy chief of the Hong Kong Monetary authority told bloomberg the Immediate Impact will not be huge. It is not welcome news, but as you can see, the Market Reaction has been pretty calm i have talked to feel the Immediate Impact of the bill is not going to be huge. Nejra we are joined by yvonne man and Tom Mackenzie. Great to have you on the show. Is this likely to have in hong kong, will it fueled protests . That will be a key question, and galvanizes the protesters on the back of this election we got last week where there was resounding support for the democrats as well. Momentum building, though we see some calm in the city. There have been flash mobs in parts of the city, but we heard from the monetary authority, the Banking System has been robust and resilient. When it came to things like capital outflows, they have not picked up when it comes to the hong kong dollar monthly deposits. Back. Nced when it came to an unusual shortselling of the hong kong dollar, he said they are not seeing signs of that. There is this feeling that things are remaining strong when it comes to the financial sector. The retail and tourism side is another story. With President Trump signing this put at risk hong kongs special trading status . They have gone through this for 36 years, it is a bedrock for hong kongs financial status. It is not going anywhere. Reiterateda has retaliation, but we do not have details. What is likely to happen on that front . Far what we have seen as the u. S. Ambassador to china summoned by the Foreign Ministry for the second time this week for a dressing down. We heard from the foreign minister accusing the u. S. Of meddling in chinas affairs, saying it could jeopardize cooperation in other areas, and the concern for investors is that it could mean a complication in the trade talks. In terms of retaliation, they have reiterated they will hit back, but the rhetoric in the recent past has not been matched by any concrete actions on the ground. If you look at the supply of u. S. Weaponry to taiwan, they are blacklisting Companies Involved in the surveillance space. China has come with strong rhetoric but has not followed that up with particular measures in terms of retaliation. We are waiting to see if they do, we await those details. Nejra thank you for joining us, Tom Mackenzie and yvonne man. Joining us for the hour is Christopher Jeffery, head of rates and inflation strategy, Legal General Investment Management. Great to have you with us. We are seeing markets soft in terms of equities, and weakening in the yuan and strengthening in the yen. Is this a premature reaction given what we heard about the potential for retaliation . Christopher the thing it demonstrates is the trade is complicated and multidimensional. You are talking about two global superpowers clashing on this. Do i think retaliation is likely . No. Donald trump did not have a choice given that the majorities in congress were extreme. Nejra that is an interesting point, because it signals that the trade negotiations are not all about President Trump. Whoever ends up in the white house in 2020, it will be a longrunning issue with china. Donald trump and the Democratic Candidates do not agree on a great deal, but they seem to agree on the need for the u. S. To be tougher on china. You will not find much water between trump on the rhetoric on china and the likes of elizabeth warren. Those are the ends of the political spectrum that coalesce. It is a u. S. Push, not a donald trump push. Impact thedoes this u. S. China negotiations . We have optimism priced into markets, u. S. Benchmarks hitting high marks for Third Straight session. What are you doing in the portfolio . We have been dialing back our direct exposure somewhat. The way to think about this, there is a lot of optimism priced in. It will not take much on a trade side or the Economic News flow to dent that optimism as we go into the close of the year. Our primary move is to dial back exposure. Nejra dialing back equity exposure, you are adding protection via gold, the yen or bond markets . Christopher in the last case, we are looking to parts of the bond market which we priced significantly over the last couple of months. Less so in the u. S. Market where it remains several rate cuts priced in over the next several years. What about currencies . We have seen a little of the yen weakening. The you take a view on emerging based on where u. S. China trade negotiations are going . Christopher it is quite complicated because you have winners and looters from escalating tensions between the u. S. And china. We have seen a big diversion of trade flows into vietnam and bangladesh. Thee are small markets, but composition of the debt indices puts a lot of weight on small markets. In emergingmarket debt, we have seen the case remain positive. In emergingmarket equities, we will see that much less clearly. Nejra you are not necessarily making portfolio decisions based on the recent developments in the u. S. China talks, but you must be taking a view on how it will impact growth. Inflectione sort of of growth in 2020 . Christopher it looks like some stabilization and global manufacturing. Cycles kick in providing a boost to growth. Longerterm, we worry about the prospects for structural weakness in the Global Economy on the back end of next year. That is not about the u. S. And china trade tensions, just the maturing cycle and the lack of space for the u. S. To continue to grow without creating inflation. Nejra how concerned are you about china in isolation . Christopher we think china has to remain investors number one concern, it does not mean it will always be flaring up. China is going through a structural slowdown on the backdrop of a high debt burden. Have nominal growth close to the lowest levels in the last decade and slowing, that is not healthy. It implies there will be flareups that are hard to the creditacross spectrum. The trade wars do not help, but this is not just about trade wars. Domestic indicators in china do not look robust. , head Christopher Jeffery of rates and inflation strategy, Legal General Investment Management stays with us. Now we get the first word news. Did businessani with ukraines top prosecutor. The Washington Post says he agreed to represent the official for 200,000 at the same time he was seeking information about former Vice President joe biden. There is no sign giuliani was paid any money. No comment from either side. China is speeding up the issuance of its 1 trillion bond sales, ordering local governments to accelerate the sale of debt. That can lead investors in 2020 shore up the slowing economy. On when thedetails 140 million bond sale will begin. Mexico and canada have not yet reached a deal on nafta 2. 0, but there is progress. The administration and House Democrats have ironed out differences. Modest growth and a positive outlook is the view of the u. S. Economy from the Federal Reserve. The economic report for november say Consumer Spending global news 24 hours a day powered by 2700 journalists and analysts in more than 120 countries. Nejra coming up, a hotly anticipated polls sees Boris Johnsons conservative party on track to win its biggest majority in over 30 years. What that means for sterling and the u. K. Election next. Tune in to Bloomberg Radio on your mobile device. This is bloomberg. Nejra this is bloomberg daybreak europe. I am nejra cehic in london. Juliette saly has more. It seems the reaction to President Trump signing the hong kong bill. Juliette initially we thought resilient in asian markets. We are seeing selling as u. S. Futures take lower. The overall msci asia index is tracking lower by 0. 2 . The biggest reaction was in the currency market. Money going into the yen and the korean won. It has recovered somewhat. I have australia in there as well. A record high in sydney. We are seeing more bad news out of the japanese economy with the mostles plunging on record in october, down 14 poor for percent. 14 4 . Lower been significantly and impacting retail sales due to the typhoon that kept shoppers at home. This means the government will have to decide what fiscal package it can come up with to support the japanese economy. Nejra thank you so much. Lets get the bloombergs nest in hong kong. Some investors are given the option of given their money back after the lender was accused of the biggest a breach of Money Laundering laws in australian history. Before thestors allegations came to life have the chance to change their mind. From facing a backlash depictedfter its app crimea as part of russia. Thes Prime Minister sovereignty has not changed. The widely used google maps uses a dotted line to show the boundary. Amazon is doubling its Holiday Hiring to 200,000 people. It signed it expects a strong fourth quarter. It attributes the hiring growth to the increase of its would just ask operations. U. S. Shoppers are expected to spend a record amount in the final two months of the year. Nejra thank you so much. In two weeks the United Kingdom will go to the polls. Boris johnson pushed for the election in the hope of gaining a majority for his conservative party. The campaign has seen him debate Jeremy Corbyn. While there are other contenders on the dividing line of brexit. A hotly anticipated poll predicts the conservative party could be on track to win is biggest majority in three decades at the december 12 of election. It is forecasting a 68 seat majority for the conservative party, using a technique that predicted the 2017 election. Christopher jeffery, head of rates and inflation strategy, Legal General Investment Management is still with us. We have seen the pound higher, but still below 1. 30. How much more potential is there for pound upside, even though we saw a muted gain in reaction to this poll . Christopher you have to think about what the market was pricing before the poll. Had a 10e consistently point lead to for the conservatives over the past few weeks. The market has positioned that outcome, but we are aware of what happened in 2015. And there is a concern of once bitten twice shy. Addspiece of information to the evidence that that is the likely outcome, but it does not transform the risk. We could get a lastminute surprise in the campaign. As things stand, the market is positioned for the conservatives to win. That there are concerns it might lead to complacency among voters, and you have had warnings from the conservative party saying do not be too complacent, and that it could go either way. How are you choosing to approach this . Are you looking at the gilt market or taking equity positions . Christopher we have to think about where is the premium in the market. The u. K. Inflation market is one place that is interesting. It was not really consistent with the macro affect we would see if sterling depreciated from here. Sterling, this is not going to move a small amount. In the shortterm, it is u. K. Inflation, and longerterm, equity exposure. U. K. Equities remain of the material discount. That does look like an interesting place in the mediumterm. Inflation point is interesting, and that was a popular trade straight after we got optimism around outcome for brexit. What if you look at the gilt cur ve . What are you pricing for . Factors are two going on, the brexit election factor, and the u. K. Data. The u. K. Data has been consistently disappointing the past couple months. We have seen pmis stabilize. We have seen inflation in the u. K. Trade down. We have seen members vote for rate cuts. We think there is a kate for rate cuts and the u. K. Is starting to build, and that is dependent on what you think of the likely election outcome. That curve is not priced for a lot, and you have five basis points of rate cuts priced in. You could get a big step lower. You have not u. K. Seen the stabilization in pmis. The conservative majority that some polls are predicting and some certainty, there is the Withdrawal Agreement to negotiate, but there is an opportunity for a big downs back in the u. K. Economy and investment. Maybe the market is not pricing that. Christopher five of the last six calls have been negative growth in the u. K. Is that going to disappear after the election . We think about the transition period being important, and 11 month period. Is conservative manifesto explicit, we believe the Customs Union and single markets, and we will not extend the punishment period. That is a quarter to box themselves into, when we consider the model they talk about is the canadian freetrade agreement. That was eight years from inception to implementation. You have to compress eight years into 11 months, and that feels like a difficult trick. Nejra how much could we see sterling we can when investors wake up to more uncertainty regarding what comes out of the election, and what impact could that have on inflation markets . Christopher that means it is the past we are thinking of. Sterling likely to do well in the shortterm. Not a lot, a couple percent stronger. Over the course of the next nine months, there is potential for that to unwind more. Talking about something seismic, if the conservatives have a large majority, they have flexibility to adjust the manifesto commitments. They would not be the First Political party in history to do that. Factoring ine you the prospects of increased spending for both parties into the way you would trade the longer end of the gilt market . Christopher more fiscal spending equals curve steepening. We have not seen any of that come through, and it is a big between the perception and the reality of the conservative fiscal spending plan. Conservative fiscal Spending Plans are reasonably modest, but wrapped up in the rhetoric of the end of austerity. In terms of issuance, it is not obvious there would be a set change in issuance. Manifesto has more issuance implied that requires investors to get more compensation. There are a few different paths that would have different implications for the slope of the curve, and anything that puts rob ability back on the labour party led government would put pressure on that. Nejra Christopher Jeffery, head of rates and inflation strategy, Legal General Investment Management staying with us. Coming up, the gold Options Market is betting the Precious Metals rice could triple in the next 18 months. When you are traveling to work, tune into Bloomberg Radio on your mobile device or dab Digital Radio in the london area. This is bloomberg. Hey. Hey. You must be stevens phone. Now you can take control of your home wifi and get a notification the instant someone new joins your network. Only with xfinity xfi. Download the xfi app today. Nejra this is bloomberg day break europe. Youve looking at the gold Options Market that shows bling may be back. Thats what it looks like for gold. We saw block trades worth 1. 75 million, betting that gold would nearly triple in a little more than a year. You can see here, what has the gold price been doing . We came off a high in the summer and struggle to maintain that key psychological level but this would nearly trip they will price. B. M. O. Head of Derivatives Trading said this is about the next 18 months. What does the world need to look like, how bad does the macroeconomic environment need to be to push gold to the 4,000 level. Nejra that is a big question and well be keeping an eye on it. Now lets go to anna belle in hong kong. Hey, nejra. President trump signed legislation supporting hong kongs protesters in a move that could possibly disrupt trade talks. It places hong kongs special trading status under more scrutiny. China warned of retaliation and summoned the u. S. Ambassador. Earlier this year, rudy kiced business from ukraines top prosecutor. The he negotiated to represent the official for 200,000, that at the same time they were investigation of the idens. Amazon hired more people to raise their number of employees to 200 million. U. S. Shoppers are expected to spend a record amount online in the final two months of the year. Global news 24 hours a day on air and on ticktock on twitter, powered by more than 2,700 journalists in 150 countries. Nejra . Nejra thank you so much. Some breaking news coming through from, what were hering is that the first half current operating profit is stable at 138 at 138 million ewe roars euros versus a year ago. Just osort of flesh that out the medium term guidance is unchanged. So just a little bit of an update there. Theyve been saying previously or what the expectation was for the first half, that thered be modest profit growth. That was the expectation in the market. They received the medium term guidance, unchanged and stable. The u. S. Economy expanded modestly through mid november. Thats the result of steady Consumer Spending, according to the fed beige book. In manufacturing more districts resported an expansion in the current period than the previous one, though the majority continued to experience no growth. The slightly moreup beat tone compared to the october report affirms the feds outlook for moderate growth. Christopher jeffries is till with us. We also got a lot of data yesterday. What we saw was a little bit of shakyness in personal spend bug Business Investment increased, g. D. P. Looks ok. But the core deflator coming in at 1 ppt 6. A lot of signals to take there. What are you focusing on to tell you the pulse of the u. S. Economy at the moment . Chris i think its where you started. The beige book is one of the midwest narrators of whats going on in the u. S. Economy. There are small, unpredictable shortterm cycles but the beige book has been an exceptionally good anchor for the underlying term. The slightly more upbeat tone there is genuine good news. I think thinking about the kind of market impact, is it good news enough to change expectations about the Federal Reserve . And there, the inflation dates you pointed out are important. Jerome powell only a month ago said the pickup in inflation would need to be both sustained, persistent and significant for them to think about raising Interest Rates. Those are significant qualifiers he put in place there. When we see the number he is had in place, thats a significant pickup. Its not been above target. The Federal Reserve will just think this is steady as she goes in terms of any kind of need to be reacting to the latest day tafment if inflation is under by that much is there not a case to be made for cuts rather than being steady through 2020 . I think this play ints the debate around the framework review. We know the fed is launching a review of how they can consistently hit 2 through the considers of the cycle, are there complecages in terms of their ability to do that that are a function of rates being so low to start. With and we wont know a gate deal more about that until the deal is finalized other the first half of next year but i think it speak it is an easing bias which isnt terribly far away. You can best characterize the fed as being on hold, theyve done insurance cut and dont feel the need to do more but we dent think an easing would be too far away until you get more inflation data like weve seep. Nejra youve got an aggressive shortterm inflation forecast, c. P. I. Rising to 2. 8 early next year. Whatoffs that for you . Is that a call youre holding on to for now . Chris we see this as a shortterm spike and drift backwards. Partly its the wage story. So we have seen steadily building wage growth in the u. S. , steadily building labor growth. So far thats been pretty much entirely absorbed by margins in the corporate sector. But at some point, the rubber hits the road in terms of the single biggest component of the corporate cost basis is the wage bill and that can they can only continue to absorb that margin for so long. Theres someup ward pressure on u. S. Inflation, its just been very slow. I guess we wouldnt see that as hitting the feds threshold of significant and persistent relative to the target tooff a change in policy. Nejra so does a tightening labor market wage pressure mean you have faith in the robustness of the u. S. Consumer via the channel of the labor market despite seeing signs like the personal spending day that that may question that . Chris the u. S. Consumer is in a Pretty Healthy place. Theres no particular worries about the consumer Balance Sheet the way there were in the last cycle, in terms of income generation, the u. S. Labor mark surprised everybody with its canting to add jobs. Its been a job crease ating machine over the course of the last decade. If inflation stays reasonably low, employment growth doesnt have significant problems and there isnt the kind of Balance Sheet overhang that can derail the whole show. He worries in the u. S. Mix are in the corporate sector rather than the household sector. Nejra we did see business spending jump so some of the data monthtomonth can be noisy. In term of how youd trade this, you said on the font end you preferred to look at europe and the u. K. Because theres more potential for rate cuts there than the u. S. Which support what is you said about the expectation for the fed. What about the longer end . If youre positive on the outlook in the u. S. Do, you see perhaps at least a modest backup in long end yields which might make you put steepening trades on . Its a pretty popular trade on wall street at the moment. We both have said, its not that we are putting steepening trades off but we have been taking them off. Kind of the same direction but from a different starting point. The long end of the u. S. Curve if you look at 10 years and beyond that bit of the curve, youve got rates at 2. 5 in terms of the forward structure. Thats elevated. Think about the global world zero interest rate, theyre saying 10 years from now the fed will have got back to 2. 5 . That feels like a stretch for us. Its possible. But its hard to see how that happens with europe anchored at zero or below, japan anchored at zero or below. Were not in the bond bearish camp. Kind of see the, after the course of the last couple of weeks, maybe take off some of the structures which would benefit from lower rates. Not looking for the structural selloff this summer. Nejra chris will stay with us. U. S. Marks are closed today as americans head home to feast on turkey for the annual thanksgiving celebration, some pumpkin pie no doubt as well. Annmarie is looking at the numbers while feasting. I want to say happy thanksgiving to all americans watching. If youre in charge of cooking this years thanksgiving it wont cost much more than last year according to the farm bureau service. The average cost of thanksgiving dinner for 10 people is 48. 91. Thats a penny higher than cost of last year. I want to talk abwhats going on with the turkey. Obviously the center priest at the dinner. U. S. Retailers usually lower the price of turkey throughout november. This is because the stores want to get you in to buy all the other, the complementary itemers in side dishes. My fave being sweet po to toe potatoes and marshmallows. Ight now, its 1. 60 for turkey, a tofu turkey is about the equivalent of 16. 0678 while the cost of a traditional dinner has remained about the same if youre an american and youre traveling youll be paying more at the pump gasoline prices are the highest in four year, but its less than memorial day and july 4 weekend so theres something to be thankful for. Nejra i noted that, sweet potato and marshmallows. How could i suggest youre eating your yetting pumpkin pie, youre gluten free. I wont be eating pumpkin pie, but i will be eating Sweet Potatoes and marshmallows. Nejra thank you an happy thanksgiving. When youre traveling to work tune in to bloomberg raide live on your mobile device or d. A. V. Digital radio in the london area. This is bloomberg. Nejra this is bloomberg day break. To latin america where major currencies are facing a rout. Three of the regions most traded bills hit record lows this week. Pesos ombian and chilean hit lows. Brazil saw its currency also headed for a record low. The central bank was forced to intervene for the further time in two days. The mexican peso is ethe only currency to gain against the dollar. Joining me is justin kerrigan. Great to have you with us. This does seem endemic to latin america. There are different causes here a and we need to distinguish between different currencies. Walk us through the political turbulence and the impact of that first. The impact is clear. The markets are not liking this at all. Weve seen the dimension, the south american curnries going to record low this is week. The chilean peso, colombian peso and brazilian real the day before yesterday. What we have is a diverse set of circumstances, there are some commonalities. If you look at colombia and chile where its mostly about austerity, mostly about government attempts to shore up fiscal balances and so on. Brazil is rather different. Really got a sense Interest Rates were headed lower in a very low growth environment. Thats not good for the real. If you look at some comments, people talking about a turn about for the real in coming weeks, at the moment its not lacking very good at all. In fact, the three worst performing currencies in emerging marks anywhere this onth are all latin american. Nejra im glad you distinguished brazil there. Earlier this month they were quiteup beat on the growth and reform ayen da, some of the takeaways were troubled times in latin america werent dulling brazils sheen. Is there a danger to emerging marks in general, maybe even more broadly than latin america, if investors lump these country together . Or will it stay localized to latin america and who is likely to suffer most if investors start to see this as a regional rather than a ountrybycountry issue . Justin at the moment its safe to say were not there yet but the longer it goes on, the negativity adds to the global backdrop. Whats going o on in china and hong kong and how thats potentially going to impinge on trade talks between the u. S. And china are a much bigger factor in whats going on globally. But if yao got other pockets of, you know, market turmoil going on in other emerging marks, thats not good either. As far as who is going to suffer the most, you can look at the most liquid marks probably, were talking about south africa, you mentioned mexico which has been largely exempt from any of this so far. Its very much a south american rather than latin american notion hat at the moment. And obviously the weaker latin american credits themselves, weve seen how ecuadorian bonds yields have shot up in the past week or so, beginning to come back a bit now but it shows the level of nervousness out there. Nejra thank you for joining us. Justin kerrigan, our managing editor in dubai. The incoming leader othey have European Commission vowed to shift their focus over the next few years. She talked about tackling Climate Change. I think it is a must for all of us. We know that Climate Change is xiss enrble. Theres a huge opportunity too. At the moment we are european frontrunner in fighting Climate Change, new technologies, green financing, we have 40 of all the patents of Renewable Energy worldwide. If we do well, its not only good for the planet, its not only good for the people, but it will also be good for the european economy because we will be the exp exporter of knowledge and technology and well be the front rupper then. When you look at the disting between germ in and france, merkel said it was too drastic do, you see a bigger role for the e. U. Or sit time to consider a bigger European Army . Nato will always be collective defense, article v, without any question. Nato is the Strongest Military alliance in the world. The European Union has a different role. Of course we have many european Member States that are also members in the nato alliance. And as europeans, i see fields where we do not need nato. But the European Union is called upon. For example if you remember five years ago in mali, the European Union had the will to answer the crisis and to fight terror but neither the procedures nor the structure. Therefore were building up the European Defense union since three years, knowing that it will be complementary to nato. But its for cases where we need the European Union with its huge toolbox that we have, investment,ky diplomacy, service men and servicewomen so we can act when called upon. Nejra Christopher Jeffrey from legal and general Investment Management is still with us. Chris, what implications does the e. U. Commission have for the strategy in europe in chris there are three big roles in the European Commission. One was the climate agenda just spoken about there. Here its clearly one of the major focuses, i guess the question we have is sort of what is the teeth behind the mechanisms to tray to drive the change forward . European union spending is only 2 of total public spending across the whole of the e. U. Most of it is National Governments. Has to be a partnership with the National Government to drive that agenda forward. I think the kind of key important point is whether europe can make changes in a way that doesnt put European Industry at a comparative disadvantage relative to nonEuropean Industry. The other areas are the trade ayen da in charge of trade negotiation, thats vital with respect to the u. K. Negotiation that is now likely to be taking place next year. Appointing an irishman in that role, i think, kind of cements the importance of getting a decent trade agreement with the u. K. Theres no other economy in europe that suffers more than ireland from a particularly dysfunctional exit from the e. U. The third area thats important is to continue focus on the investment ayen da and the attempts to drive up friend growth in europe. Thus far its been a struggle. European commissions own reports that came out have nominal growth in europe, maybe 2. 5 next year and 2. 5 again the year after. Europe needs to do everything they they can to drive those numbers up. Theres an increasingly agitated debate about should fiscal policy take over . Thats partly a European Commission issue, how they choose to issue budgetary rules across europe. Nejra do they make the prospect of fiscal policy carrying the burden more likely . Chris la guard has opened a couple of speeches before she became e. C. B. President and just after that have been unusually clear in their naming and shaping of the nation states in europe she feels can be doing more. Its very, very pointed, pointing a finger at the netherlands and germany and pleading with them to loosen the purse strings. There are statements in the opening gambit to European Parliament about interpreting the stability and growth pact in as broad a way as possible. Theres clearly a desire to do it. They dont hold the purse strings. The National Governments hold the purse strings. Are we seeing that kind of sea change in attitude at the National Government level . Its unclear. Its a function of domestic politics in germany. We can have the s. P. D. Leadership election. Fiscal pl policy is one of the hot button issues there. It requires more than a change in attitude from the German Government and dutch government than from the commission, i think. Nejra in terms of potential changes at the e. C. B. , christine la guard talked about how he guard talked about a lagarde talked about a policy review. And others spoke about welcoming that policy review, saying the First Priority should be clarifying the inflation goal. Earlier you were talking about prefering the european front end to the u. S. Are you expecting the ecb to continue acting despite the limits of its policy in cutting rates further or do you think its going to be about q. E. Because when we were talking about curve steepening is that it would be abguidance thend curve steepening in europe would be limited compared to the u. S. And e. U. I think the thing mario did before he handed it over was to change the burden of proosm by having q. E. On an ongoing basis until theres a good case to stop it, you make the hurdle for stopping q. E. Higher than was the case before. The e. C. B. s economist has been at pains over the last can couple of weeks to try to keep the optionality alive for further cuts in Interest Rates. Thats clearly an issue where he doesnt see eyetoeye with his colleague bus theres a ground swel of opinion at the center of the governing council, you want to keep that option on the table. They want to keep it on the table because as much as theyd like fiscal policy to take over, it doesnt and theres another demand shock in europe, what are the options . The options have to be back to the emplet c. B. To provide that. Nejra why do you like european cyclicals . Chris theyre not necessarily tied into the european domestic story. Yes, european domestic demand growth doesnt look particularly strong but the companies domiciled in europe with global exposure can benefit from softening in europe that comes from the domestic european weakness and they trade on multiples which suggests theres a significant distress risk priced in because of that trade war. Theres an irony of the trade war over the last 12 month the two protagonists in china and the u. S. Inflicted the most pain on European Growth rather than something thats going to hurt them. European cyclicals along for the ride with it. Theyre cheap, theyve got global exposure and would benefit if the euro weakens. Do you see a weak euro in 2020 . Chris. Its a risk, certainly. It tie into the story we were talking about earlier. The market is already priced for 25 to 35 basis points of rate cut for the u. S. That would be no surprise to arket pricing. Europe is almost entirely flat. Nejra great to have you with us. Stopher jeffreys head of legal Investment Management. Coming up, donnell trump signs legislation supporting hong kong protesters. This is bloomberg. From good morning bloombergs European Headquarters in the city of london. I am nejra cehic. This is bloomberg daybreak europe. Backing the bill. U. S. Afterns the donald trump signs legislation supporting hong kong protesters. Asian stocks and u. S. Futures trade lower but avoid major declines. The pound jumps as a hotly anticipated poll predicts a big majority for Boris Johnsons conservative party. On the downside. Latin american currencies plunge. In the u. S. , positive data since the s p 500 to a record high. Today, u. S. Markets are closed for thanksgiving. Welcome to bloomberg daybreak europe. A little bit of risk off in todays session in asia but also reflected in the futures market after we saw the s p, dow, and nasdaq hit record highs for a Third Straight session. It took the dollar higher for a seventh straight session as well. 10 year treasury yields backed up a little as well but u. S. Stock and bond markets closed today. The stoxx 600 yesterday closed within 1 of a record high. We saw 14 out of 19 Industry Groups gaining. We could break those gains today judging by those futures markets. The 10 year treasury yields not moving because the treasury market is closed but futures not giving us a Lab Direction and not seeing a lot of direction in terms of the bund futures. Lets check in on the markets in asia. Juliette saly in singapore has more. Great to see you. In asia, we are going that reaction to President Trump signed the hong kong bill. Tte yes, but a bit of resilience from the asian markets. Hong kong holding up ok, only down 0. 1 . A lab analysts we have been speaking to say essentially investors have a little bit of fatigue over this and it probably had been already priced in. Attralia and Indian Markets records. Lets have a look at japanese retail figures because they were a shocker in october, down 14. 4 , the most in data going back to 2002. In 2014, we had the previous sales tax come into effect. 19, you have seen a similar plunge. Most analysts expected the japanese to whether this sales tax a little better than they did. Still going to be a headache for the overall japanese government to see whether or not they have to mull a bigger fiscal package to support the overall japanese economy. Nejra Juliette Saly in singapore, thank you so much. Actuallyom bloomberg, speaking with officials with knowledge of the matter about the ecb and the policy review, which of course Christine Lagarde mentioned in her recent speech. Ecb officials do not expect major changes from the strategic review. Reporting, they are said to see the 2 inflation goal likely from the review. Flaws inecognizes the the inflation gauge but dont at the moment see any good alternative. You can read more in the story on the blumberg. Lets turn back to bloomberg. President trump has signed into law a bill expressing u. S. Support for hong kong protesters. The legislation requires annual reviews of hong kongs special trade status and sanctions against officials deemed responsible for human rights abuses. The move threatens to complicate trade talks with beijing as the sides get close to a phase i deal. Citigroup believes the prospect of an agreement is unlikely to be derailed. Leerdly told blue howard told bloomberg the impact will not be huge. Of course, it is not welcome news. The Market Reaction so far has been pretty calm, so to speak, anduse a lot of bankers market practitioners i have talked to view that the Immediate Impact of the bill will not be huge. Nejra we are joined by bloombergs Senior Editor in singapore and john yo. Derek, lets start with you. How significantly should we look at the signing of the bill by President Trump given that he had little choice given how overwhelmingly it was voted for in congress . That is really true. You should look at this bill as a symbol rather than as some immediate sanction. This is something that requires report writing, something that requires annual look ins. If you are looking at your terminal, bgebsum. That is bill summaries. What you will look at when you see that is that it really does not do anything right now. It has a lab symbolism instead a lot of symbolism instead. This has been one of those things where it is a slowmoving process. Everybody has known it was going to get here, now it is here. You see some reactions from china that they are pledging that there will be some undetermined complications to the relationship. Realistically, this should not overwhelmingly change the u. S. Posture towards hong kong or to greater china. Nejra so derek, thank you. John, lets turn to. Derek was hinting at some of the response we got from china. In terms of retaliation from china, is it likely to be symbolic . Is it likely to be meaningful . What can we read into the steps taken so far . John i think from a chinese perspective, the strategy should be we want to retaliate for a domestic audience so that we can show the folks at home that we are not going to let the u. S. Get away with whatever they want to do. Two, not to retaliate so harshly as to derailed trade agreement, which is something china really wants. The economy is hurting, it is weaker. The Chinese Government is looking for ways to stabilize it. Beanything, beijing would shooting itself in the foot if it took too harsh of a retaliation in this case. Nejra thank you so much for joining us, Derek Wallbank and john liu. Joining is now is us now is david page. Is this issue of hong kong and the hong kong bill, are the u. S. And china and particularly china as opposed, likely to see this as a separate issue to the u. S. China trade talks . David i think they will try to come yes. Both site i think they will try to, yes. Both sides want to get to a deal now. The white house seems to have woken up to that view since the summer probably with a mind to the 2020 elections. They do not want to get back into the trade war or a significant tightening in financial conditions. That would not do the economy any favors going into those elections. They probably want to have this as a backbone. It was not something the president really had a choice over. If he vetoed the bill, it would have come back. It asill want to treat a separate issue. Nejra as we head into year end, what are your expectations for what we get . Do we get phase i, a pause on tariffs, it will backup tariffs a rollback of tariffs . David we had hoped the phase i would come around in the middle of this month but that dissolved. They have had nothing to anchor it to. I think the december 15 tariff increases are the next anchor. We would expect a phase i by then. Of course, we have the dornier trade issues thornier trade issues, which we think will be unresolved. We think the white house is happy to kick that into the next presidency. Trump will try to deal with that after the election, which should mean if we get phase i done, we have a relatively benign spell and we think that allows for some Global Stabilization and modest pickup. Nejra yeah. Is that across the globe or do you see it focused more on the u. S. . We can talk about the data we got yesterday. Sometimes the month by month data can be a bit noisy but we saw business spending increase. Perhaps a little bit of concern on. Personal spending. The fed beige book looking a little optimistic. What is your take away from all those different points . David we have seen signs that from a u. S. Perspective, the manufacturing side, which has been the most impacted by the slow in global trade, has stabilized. There are some signs that picking up. The domestic side of the economy has looked relatively resilient. There was a little bit of a wobble. The u. S. To us looks relatively solid. I think the bigger impact probably is global. I think we have seen quite a significant slowdown in global trade. The uncertainty of trade tensions has perhaps had a meaningful impact on economies like germany. I think we will see more relief coming through there but that will have some positive blowback for the u. S. As well. Nejra in that sense, do you see the rest of the world catching up with the u. S. Rather than the u. S. Catching down . You do see the fed easing in 2020. David we do, but i think thats a slightly separate [audio drop] we see stocks reach new highs. We have seen a pickup. I think it is likely to put down the pressure on the dollar. Currencies like the euro have seen some weakness come about because of the uncertainties. I think you get a sort of , abined impact for the u. S. Risk on period. Our view is that the fed has to return to easing by the end of next year. We could see larger pressures starting to weigh on u. S. Consumers in the second half of the year. I think the first half of the year we see this risk on recovery. Nejra some pressure on the u. S. Consumer in the second half of next year. You see the u. S. Dropping below stall speed. . Ow significant is that is is moderately below the consensus but is actually potential worth. If we see low potential, that risks the decelerate is kicking in, the fact that unemployment could raise quite quickly and that could impact household spending. That is the risky environment we think we are going to move into not next year but into 2021. If you see a combination of all of all those things come together, that could be quite mean for. We forecast a slowdown in 2021, so below 1 but there is a risk you could see something worse if the worst Case Scenario comes together. Nejra some people see the fed either on hold or cutting in 2020. Would you say that hikes are off the table in 2021 . David yes, if our forecasts are right, the fed has to ease further in 2021. Nejra great to have you on the show. Lets get the bloomberg first word news. U. S. , canada, and mexico meeting to push for a final agreement on nafta 2. 0. They have not yet reached a deal but there are signs of progress. There is also progress on the homefront for President Trump. The administration and House Democrats have ironed out a number of differences. Earlier this year, Rudy Giuliani pursued business from ukraines top prosecutor, according to the Washington Post. It says he negotiated to represent the official at the same time he was seeking information about former Vice President joe biden. There is no sign the agreement came into force or giuliani was paid any money. No comments from either side. Modest growth and a positive outlook is the view of the u. S. Economy from the latest beige book. The economic report for november striking a more upbeat tone than october. It reports steady Consumer Spending and brighter signs for manufacturers. Global news 24 hours a day, onair and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra . Nejra thank you so much. Coming up, i hotly anticipated poll sees Boris Johnsons conservative party on track to win its biggest majority in over 30 years. We have the latest on that and what it means for the u. K. Election and sterling next. When you are traveling to work, tune into Bloomberg Radio live on your mobile device or dab Digital Radio london. This is bloomberg. London, 42 a. M. In minutes or a from the equity market open in europe and this is bloomberg daybreak europe. I am nejra cehic in london. U. S. Markets are closed today as americans go home to feast on turkey for thanksgiving celebrations and all the trimmings of course. Annmarie hordern is looking at all the numbers. Annmarie it is all about the sides. Happy thanksgiving. The one good thing if you are cooking this year is that it will not cost you as much as last year. According to official statistics, for about 10 people thanksgiving dinner will cost 48. 91, only one penny more than this would set you back last year. I want to talk about turkey. Historically, turkey prices dropped in november. Stores do this promotion of the to get people into the stores promotionally to get people into the stores. It is all about the sides. Thats what the stores want to push people to purchase. At october it was 1. 60. If youre having a vegan furkey willg, a to cost you 16. 80. Americans will pay at the pump. Gasoline prices are the highest in 4 years. It is still lower than memorial day and fourth of july, other heavy weekends with people on the roads. Nejra annmarie hordern. Its all about the turkey, cornbread, and green beans. Whats your favorite dish . Annmarie i am eating tonight for sure sweet potato and marshmallows. Nejra you heard it, sweet potato and marshmallows and happy thanksgiving, annmarie and all the americans. Here is a Bloomberg Business flash. Some westpac investors have been given the option of getting their money back after the lender was accused of the biggest breach of Money Laundering laws in australian history. Retail investors who applied for shares before the allegations came to light have the chance to change their mind. Maps is facing backlash from ukraine after some apps depicted crimea as part of russia. Its sovereignty has not changed. The more widely used google maps uses a dotted line to show the boundary. Amazon is doubling its Holiday Hiring to 200,000 people. It is a signaled that they expect a strong fourth quarter. Amazon is attributing the hiring dthwth to the increased brea of its logistics operations. That is your Bloomberg Business flash. Nejra thank you so much. Now, in two weeks the United Kingdom will go to the polls for the third time since 2015. Boris johnson pushed for the election in the hope of gaining an outright majority for his conservative party. He has already debated Jeremy Corbyn while there are a range of other contenders with various views on the key dividing line of brexit. A hotly anticipated poll is predicting that Johnsons Conservative Party could be on track to win its biggest majority in three decades in the election. A 68 seat majority is forecasted for the conservative party using a technique that more closely predicted the 2017 elections in standard surveys. David page is still with us. We saw the pound moving on this poll. I guess there is some room for further upside. Sort of latest poll stick with your base case . David yes, it does. Three or four weeks ago we thought they would get a smaller majority than this. Brexit party we did not expect to standdown on a National Scale and we thought the liberal democrats would do better. This poll has suggested that were not really be the case. That , itaway just becomes easier for the tories against the backdrop where Jeremy Corbyn is failing to see his labour message come across to the wider electorate. This is not a result, it is just another poll. What we could see over the next two weeks will shape the final election. We have seen some tories warning about complacency. That can still influence the proceedings. Nejra you have got some saying that sterling will struggle to push meaningfully above 1. 30 until after the Election Results confirms what the poll is showing. Just going to break some lines ministry the foreign of china, saying that the hong kong bill is to be met with strong countermeasures. We are getting these breaking lines coming through. He says no one should underestimate chinas determination. I want to bring this back to you because you and i were discussing this earlier about the fact that the hong kong bill is likely to be kept fairly separate from the u. S. China trade talks and china may not want to retaliate too strongly. Do comments like this raise a question over that . David they do. It is also a question of not only the strategy from china but the potential misjudgment. It is catering to its domestic base. This you see china using to try and get more leverage, that could backfire. It could be that President Trump decides that he thought he wanted a deal but what the hell, i wont have a deal. You could see this blowing up a little bit. Will the risks be to the Global Economy if we dont get phase one and some sort detente by the end of the year . You could argue there is a fair amount of downside. But for the Global Economy, will that be felt straightaway . David pretty quickly. I think we would see a meaningful reversal of the risk on we have seen in the couple of months. You would need to see the tariffs being increased. You could cac includes of events you could see a sequence of events that if you dont get this phase i my President Trump feels he needs to increase 15. Ffs on december that could spark quite a meaningful tightening in financial conditions. There are some signs that we see some stabilization coming through now as those headwinds look to abate. You turn those headwinds back on and you could struggle more. Nejra we could tie this back to our brexit conversation. You think that by 2021, u. K. Growth should reengage with Global Trends . Top to me about Global Trends. Talk to me about what you see in 2020. Also, the potential for the conservative majority that is your base case. David we are assuming a benign global backdrop. Our key assumption for next year is that if we see a tory majority, which is our base breakwe expect them to the manifesto pledge of ending trading but 2020. The longer they persist with that pledge, the less chance there is a Business Recovery coming through. Assuming they break this pledge and we see the fiscal easing we are been told about for next year, then we should see some acceleration for the u. K. Next year. We are forecasting growth about 4 per quarter probably average and that would be some catch up. Year, we should allow some outperformance for the u. K. Economy. Nejra great to have you with us. Thank you so much for joining, david page, head of macroeconomics at axa investment managers. China says the hong kong bill is to be met with strong countermeasures. President trump signed that bill yesterday. Geng saying no one should underestimate chinas determination as we are wondering what sort of retaliation we might get from the signing of that bill. Markets have taken a little bit of a risk off tone. We are just over 30 minutes from the equity market open in europe. That is it for bloomberg daybreak europe. 500,rday, we saw the s p dow, and nasdaq hit good morning and welcome to Bloomberg Markets european open. I am nejra cehic live from a European Headquarters in london. The cash equity trade is less than 30 minutes away. Nejra caught in the middle. Risk sentiment takes a hit. Beijing summons the u. S. Ambassador after donald trump gislation supporting the cities protesters