As germanys spy chief says huawei cannot be fully trusted, we speak to the companys officer to the u. S. In this hour. It is 9 00 a. M. Across the emirates, 1 p. M. In hong kong. Im tracy alloway. This is bloomberg daybreak middle east. Manus im manus cranny in riyaad. There is a new globally important date. December 11, their remco ipl will start to trade. The valuation anywhere between 1. 5 to 1. 7, depending on which analyst or moneyman or woman you speak to. 40 from the u. S. The negative Interest Rates. Billion, buthe 15 only one question that matters in riyadh. What is the valuation and who is going to buy their remco ipo . We have a guest later on. Michael thompson in terms of flow of money. Joins me after 30 minutes. We will get his brexit take, the flow of money and how important the region is. Good morning. Tracy lots of interesting conversation coming up in just a few minutes. Before that, lets check in on the markets this morning. The benchmark 10 year yield on china Government Debt still trying trading higher. Lots people in the market expected the pboc to inject some liquidity, some relief for the market. That did not happen today. So, investors are left to parse the future for chinese fixed income. A different story when it comes to u. S. Treasuries. We are in wait and see mode ahead of the fomc meeting, but yields on the benchmark 10 year u. S. Going down by one bip this morning. Lets get more on how things are doing with Sophie Kamaruddin in hong kong and in mumbai. What is the latest . Sophie pretty much in a Holding Pattern for asian market stocks, trading mixed. Regional benchmark heading for this first session lower. The hang seng extending tuesdays drop with gdp data, which is expected to confirm the economy slid into recession. Carrie lam offering little on that front. Instead extending gains in hong kong. Rising as much as 3. 2 on its. While most em Holding Steady before the fomc decision. The korean yuan, the recent rally may have been excessive given the Overall Economic future for south korea. Belowout the yen hovering 109. The boj meetings will be game changers. Tracy lets check in on india. We have a positive start to the holding. Its holding pretty strong actually at this point in time. Contrary to the rest of asia, we have been holding onto stronger gain. It is off the back of the big move yesterday of 1. 5 . 11,800 was the crucial resistance level to take that down. Contributions coming in across the board not just from only the banks, but even the other smaller names within the index itself which has started to contributed. A more broadbased move into todays session. The midcap index has been contributing over the last sessions as well. Whether or not this continues, we will have to wait and watch. This is the crucial monthly for the markets as well. You will see that spiking as we move towards currencies. In todays session, the key highlight has been the bsu stocks which on the back of the Government Investment push has been seeing a lot of interest in the last trading session. It got the index on the back of numbers up 5. 5 . Pushback its quarter result announcements. It is giving a strong quarter. Right, Sophie Kamaruddin and devina, thank you for the update. Lets check in with the first word headlines. Good morning. Good morning. The u. K. Is preparing for a general election on december 12. Prime minister Boris Johnson managed to win backing in parliament to trigger the snap vote and get the election date he wanted an attempt to resolve the brexit crisis. It will be the third time the u. K. Has gone to the polls to choose a new government since 2015. Lebanons Prime Minister has resigned after two weeks of antigovernment protests turn violent, as demonstrators were attacked by supporters of the iranian backed hezbollah party. He said he reached a dead end and time for what he calls a major shock to confront the crisis. Protesters are now calling on other top officials to step down. House democrats have released the impeachment inquiry resolution ahead of a full house vote on the future of the inquiry that would come as soon as thursday. It is a signal that the public will get a look at the witnesses and evidence to build a case against the president. Republicans have complained the inquiry is illegitimate. Germanys spy chief says huawei cannot be fully be trusted. It is a signal that security hardliners in Angela Merkels government wants to keep the chinese tech giant out of the countrys 5g network. They say it is difficult to trust the company that has a high level dependence on the communist party. We will be speaking to huaweis chief Security Officer for the u. S. At 9 30 a. M. Dubai time. Global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts. This is bloomberg. Tracy thanks. As mentioned, markets and a Holding Pattern this morning as they await the Federal Reserve policy decision later today. The fomc is widely expected to lower rates yet again, having already cut in july and september. The key will be the tone of chairman Jerome PowellsNews Conference later in the day with investors try to ascertain the trajectory of policy heading into next year. Meanwhile, speaking at the future finance initiative in react, Blackstones Stephen Schwarzman voiced his concern about Central Banks not having enough ammunition left for whatever the next downturn actually comes. We sort of run out of effectiveness from lowering Interest Rates. I think negative Interest Rates really make no sense. When we have a downturn, it is going to be challenging and needs a lot of physical stimulus. I think in the next 10 years, we have a risky situation, very risky because in that 10 year time period, we will probably have an economic downturn, almost certainly, while there is a large wealth gap. And, while there is not effective Monetary Policy. Thats a scary situation. Tracy joining us now from abu dhabi is ryan lamont, ads Senior Executive officer. Great to see you. I wanted to start out with the dynamic between equities and fixed income. You point out in your notes that investors are basically buying overvalued debt with the hope that someone else will buy it at even higher price, but they are also buying overvalued equities. Which of these two Asset Classes are more overvalued at this point in time . Ryan good morning. Good to be back on the show and see you again. Obviously, equities are much more overvalued than fixed income by a longshot. Now, when the curve has inverse over suppertime, investors panicked and the tendency is to buyr your equities and just long and treasuries end treasuries rooted this person further into inheritance. As equity sustained their growth, people said lets move it back to equities, especially with the news we got on the trade war. The detante between the u. S. And china. People switched back again from fixed income to equities. This caused the Treasury Curve to steepen sharply as we have seen recently. Equitiesing overvalued and hedging with slightly overcome fixed income instruments. It is a very troublesome situation. Tracy it is not your usual strategy. Ok, so when it comes to risk appetite, we have seen a number of things rise to records. We have seen equities but we have seen a rally in emerging market currencies. Where did you recommend investors actually pick up risk exposure at this point in time . Ryan to be honest, i have to go back. The barbell portfolio, to switch between the two. On the equities side, you have to be one of the best lock pickers in the world today because you have to pick the right lock stock. Quite positive on consumer related stocks, especially in the u. S. , it remains quite Strong Despite Negative news, but consumers are still spending. We look at the consumers. On emerging markets, this ipo coming in saudi arabia, we see it as a big trigger for momentum of the whole area. Gcc equities markets are driven by momentum and we have had a lack of momentum recently in gcc stock markets. This ipo could break that freeze we have been seeing. Tracy lets turnover to the fed. We are awaiting the fomc meeting today, widely expected to get a rate cut from the u. S. Something like a 94 chance at this juncture. What are you going to be looking out for as we get the fomc statement and the press conference . Ryan the key is whether the fed will continue on its automatic cutting back or not. I am hoping they will not continue with the automatic cutting because as has been o andoned by ray dali other persons you interviewed, we are in a very dangerous situation today because cutting rates is not enough. If cutting rates were enough, germany and japan with negative rates should be having growth of 6 today. This policy has its limitations. Not facing a cyclical chain yet but precautionary cuts are very dangerous the guns because once you hit recession, you dont have tools to fight it. It is key to know if this will go and an automatic cutting path or not. Tracy what happens if the fed and other Central Banks are presumably out of Monetary Policy firepower . So the likes we heard from ray dalio and schwarzman. Is it fiscal stimulus . If it is fiscal policy, why havent we seen that before . Ryan well, we have seen some of it with some tax cuts in the u. S. , but they were not really enough. The world is facing some really strong headwinds and has been facing it for the past two years. The trade war has a much heavier effect than what was observed. The geopolitical risks, all of these are big headwinds. I am not sure you can solve them with a simple Monetary Policy change or physical change treated these headwinds are being solved as we speak. We are hoping for some relief whereby the fed does not need to cut even further. Could fix it. We will have a recession. It is impossible to avoid recession. Tracy is it a recession ryan healthy. Tracy is it a recession or an economic slowdown because lots of people are talking about recession, but the market at the moment seems to be pricing in something of a slowdown. Ryan absolutely. Given where we are today and how limited the tools the Central Banks have under their belt for the economic slowdown, we expect the economic slowdown will come to transform into a recession. We think it is unavoidable. Ites today been at 5 , yes, would tell you the economic slowdown could be caused by the Central Banks by cutting rates, some packages on the fiscal side. Unfortunately, no, Central Banks do not have the firepower anymore. Tracy all right, that is ryan grimnd, painting a rather economic picture for us. Thank you so much. Still ahead, as germanys spy chief says huawei cannot be fully be trusted, we speak to the companys chief Security Officer for the u. S. That is at 9 30 a. M. Dubai time. Before that, we will be back to rehab in the future Financial Initiative where manus will be joined by schroders chairman michael dobson. This is bloomberg. Manus it is futures investment. I am manus cranny. We are in riyahdh. I have the chairman of schroders, michael dobson, with me now. How are you . Michael pretty well, thank you. Manus valuations is what mohammad bin salman wants for aramco. I am hearing 1. 5. How important is it to get this valuation to the upper edge along of 2 trillion . Michael i think it will. It is most important to get this important ipo done well and how the market responds. Manus do you think it will be difficult to get to 2 trillion . ,ichael i am hearing 1. 5 to 2 based on the dividend indicated. Athat is the range and finding the right spot is important. Manus there is a bit of a gap. Can we talk about inclusion . Inclusion for saudi arabia was the defining moment. Would you agree and is that reflected in your business . Michael i think it is part of the whole reform agenda here. To 20 billion of index related flows into the market which is a positive development. I think post aramco, there will be an increase in the weighting of the index. That will be positive. I see that more broadly in the context of the major reform agenda. It is a measure of it. Diplomacy mades in this country and every time you come here, you see development. Manus what does it take to get the active money in . This market michael valuations are reasonably high. I think of opportunity is relatively narrow, but aramco is just one in a series. As that develops in the markets brought enough, investors will be interested. Manus elections in the u. K. We are going to the polls again. Give me your assessment of the risks. Donald tusk warned use the time wisely. Michael whatever that means. Manus the election in the u. K. . Michael like everywhere else, we are in uncharted territory. Three elections are less than five years which is incredibly unusual. Four major votes since 2015. People dont like that. I think johnson had no choice. His whole government was stymied by the situation in the house of commons so he had to do this but there are risks and they are quite comfortable. Manus what is the biggest risk now as you go into this . Michael probably the biggest risk is he ends up where he was before in a hung parliament. There are 150 that are hard to predict. Could be tactical voting. People dont like being forced into yet another election, particularly in december. Its unpredictable. The polls are saying it conservative majority. I think it is far too soon. Manus many people say hard brexit is off the table until the 31st of january but hard brexit is not dead if we are in election mode again. Michael i think it is highly unlikely. Johnson has to get it approved by parliament. I think the deal will be in the end probably get through. Manus from an investment point of view, mark carney was seen a couple of weeks ago at the imf. A constructed deal with due diligence. Clients, are to they trying to reengage capital with the u. K. . Michael absolutely. I think what is really causing a problem is the either in or out situation has gone on too long and people want certainty. I think if we can get that for some thing like it, people can move forward, make plans, invest and take a longer term view. I think both in europe and the u. K. , there is a sense of exhaustion and people want to see it done. Manus there are political risks coming to bear in the election cycle in the u. S. Im selling assets. Hes getting ready for something. Ray dalio says are we getting a sense that investors are becoming more defensive . Michael there is a lot of money on the sidelines. Investors have been pulling money out. I think everyone can see. Ray dalio looks at the five major risks. People can see that. Marketsaid that, the are at an alltime high in the u. S. I think we are looking we are not looking at recession, were looking at low growth, low in flation. Within that, some companies will do is truly well. Since you have zero yields on bonds, in some cases negative yields, i think investors will still look to equity markets to generate the returns they need. Yes, there are risks, but our expectation is the low growth, low inflation, low Interest Rate environment. Within that, some companies will continue to do very well. Manus we cannot cover therything that happened in space of a minute but i want to get a sense from you, how defining a moment has it been for Market Regulation . What have you learned or taken away from the woodford saga in terms of regulation . Woodfordi think that was an idiosyncratic event. Very few daily trading in the u. K. Which has very high proportions of situations. I think the read across from that to say active management is called into question, daily trading mutual funds is wrong. I think this was a very unfortunate event but idiosyncratic. I would not read across from that. I think unfortunately, this was allowed to balloon. But it happened and one has to learn from that. I dont think there is a read across from the industry itself or active managers are challenged. I would not have that takeaway at all. Manus hindsight is a great 20 vision. 20 thank you very much, michael dobson, chairman of schroders. Tracy thank you so much. Dont forget, our interactive tv function tv. You can catch up on past interviews as well as dive into any of the securities or bloomberg functions we talk about. Become part of the conversation by sending us instant messages. If you disagree on dobsons woodford agreement, you could let us know. This is for bloomberg subscribers only. Check it out. This is bloomberg. Tracy lets check in i where the markets are trading this wednesday. As we have been discussing, we are awaiting the fomc meeting which means we have a lot of stasis in the market this morning. Index,i asiapacific trading down 1 5 of a percent but the concealed mixed picture for the regional indices. The bloomberg u. S. Dollar index treading water, along with the yield on the benchmark u. S. 10 year treasury. Investors in wait and see mode ahead of that fed meeting. Almost a certainty we are going to get another rate cut. Markets pricing in a 94 chance of a rate cut this but the guidance will be important. We know chair powell has struggled with guidance in the past. We have seen markets ratchet down expectations for further easing in december so the question for the u. S. Economy and u. S. Monetary policy is going to be what exactly comes next. S p 500 active futures trading morning but wait and see mode for the markets. Up next, as germany spy chief says huawei cannot fully be trusted, we will speak to the companys chief Security Officer for the u. S. This is bloomberg. When it comes to using data, everyone is different. Which is why Xfinity Mobile is a different kind of Wireless Network that lets you design your own data. Choose unlimited, shared data,