The new Zealand Central Bank governor tells us he intends to keep rates low for a long time. About february. Outwould you shut optionality . Nejra wheres the money going . Hisoracle of omaha cuts bets on apple and wells fargo as of other Money Managers give facebook a thumbsup. Nejra welcome to daybreak europe. This friday. On green on the screen in the asian equity session. An agreement between the u. S. And china is coming down to the short strokes. They are talking every day. We see asian equities in the green. N. Strengthening a whisker above the seven level. The yen retreating for the first time in six sessions. That tells us about the risk in the markets at the moment. Yesterday, we really ended flat on the s p 500. A bit of a positive bias. We have a positive bias to the futures today. We have seen the 10 year yield in the u. S. Had towards a 180 handle this week on concerns. We had a trifecta of data out of china yesterday. Hat mate because in concern we back up a bit today. 185 handle on the 10 year yield. Oil drop yesterday after an increase in stockpiles in the u. S. We bounced back today, paring a weekly loss. Top story, china and the u. S. Are close to signing phase one of a trade deal. Thats according to larry kudlow. He says negotiations are coming down to the final stages. He says the two sides are in communication every single day. A less optimistic tone, the cofounder and former chairman of alibaba said trade turbulence between the u. S. And china could last for decades. The trade war might be usa and china relationship might be in some turbulence in 20 years. The next 20 years. We have to be very very careful. I think it is so important for china and the u. S. , two great countries, to work together. Supporting the economy. Keeping people prosperous. Share a lot of technology together. For so many years, china and u. S. Have been working together. Theres a proverb that is very natural. If there is problem, thats not natural. We have to stop the problems. We should not create more problems. That was the cofounder and former chairman of alibaba. Isning us now for the hour the head of fixed Income Research at sdc general. We hear the trade headlines every day. The latest one from kudlow putting more of a positive left to the markets. Turnaround inly a Investor Sentiment in the past couple months. Is that a turnaround you are getting on board with . Is, theroblem mediumterm challenges are definitely there. What we have seen is, a year ago it was possible to believe that the trade conflict would be shortlived and go away. Now its clear that the mediumterm differences between the two groups are persistent. That is having an impact on the u. S. Economic growth. We are quite negative about u. S. Economic growth for next year. One of the reasons is because we expect to see continued trade conflict. In terms of a move in 10 year treasury yield, do you see the recent backup as a correction . In thesimistic view market had gotten over extended. Is that how you read the latest move . Absolutely. We will see further declines in terms of Government Bond deals in the u. S. And europe. It will be driven by the fact that u. S. Economic growth will be week. We have an expectation of u. S. Economic growth next year of 0. 7 . That is less than half of the consensus. We are concerned about the impact of trade as well as the kind of natural slowing in the u. S. Economy. Nejra you talk about the impact of trade. Do you mean the feedthrough that has at from what has happened so far . If we take the feed from what has happened so far, what we are seeing is the beginning of the impact of higher costs on u. S. Companies in terms of their input costs. That is having an impact in terms of the margins for u. S. Companies. They are not really able to pause their cause pass the Cost Increases on. Now we are beginning to see , increasingly in 2020, because of the declining margins for companies, they will be getting out of certain businesses. That will drive Economic Growth down. Nejra you would want to invest in fixed income. Continuet yields to sliding. Certainly in sovereign debt. In credit, if you compare europe to the u. S. , europe is in a better position. The technicals are better. We have even lower Interest Rates because the extra yield that you can get in corporate is more attractive in europe than the u. S. Also because we have see as bp, and Additional Support for europe. That will continue. That will continue. , relative toth expectations, will be better in 2020 than u. S. Growth relative to expectations. Thea that is even with downside scenario you are pointing to with trade. Yes. , bits of theean european economy are sensitive to trade. , sensitiveith europe to trade with the u. S. And china. Europe is being more supported by fiscal expansion. Nejra interesting. You brought up china. Today we had the peoples bank of china surprising with a 200 billion yuan mediumterm lending facility. That is being interpreted as a pboc having an amazing bias. Do you read it that way . What stimulus do you expect from china . The pboc can easily bit. They are in a bind. One of the clear goals of china is to become less reliant on capex, more reliant on the domestic consumer. You dont stimulate the domestic consumer as much as you stimulate big investment projects by making money relatively cheap. Some form of monetary easing as possible. Its a little bit difficult in terms of china being careful in terms of its easing policy and various different levers it can pull. It does has scope and control of the domestic economy. It is in a bind in terms of trying to change the way the economy works. Nejra i dont want to get into any one specific central bank right now. We will pick up on the fed in a moment. The you think the supportive environment of liquidity from Central Banks is going to continue through 2020 as we see the slowdown you have pointed to . Identically do. In 2019, Central Banks are ahead of the game. That makes it more difficult for them to get ahead of the game in 2020. With the central bank of new zealand, thats indicative. They say, the conditions are bad , we are waiting a bit to go. At the stage we are now in terms of the Central Banks, they are on pause for 36 months. We will see more movement in terms of the middle or end of next year. Our guest staying with us for the hour. Lets give the bloomberg first word news with one half in hong kong. Good morning. The labour party has pledged to deliver free broadband across u. K. Within 10 years. What is the partys biggest new pledge of the election campaign, labor says it would spend 20 billion pounds nationalizing. The Opposition Party has already said it wants the state to update utilities. Labor currently trails the conservatives by 11 . Fed chief jay powell is calling on lawmakers to tackle the growing budget deficit. He urged congress to act to reduce the federal governments annual shortfall which is approaching a trillion dollars. Upbeat on the u. S. Economy. Calling it a star performer invoicing confidence that its record expansion will stay on track. President says the most pressing task for hong kong is to end violence and restore order. His comments were reported by state broadcasters as the city faces a fifth consecutive day of disruptions and a second protest related death in a week. Rare intervention came as the u. S. Senate moves to expedite legislation that would support hong kongs prodemocracy protesters. The European Investment bank has adopted an unprecedented plan to end all funding for fossil fuel energy projects. Its part of a move to become the first climate neutral conference on the planet. With more than half 1 trillion isoutstanding loans, the eib the biggest Multilateral Financial Institution the world. The governor of new Zealands Central Bank says rates need to stay low for a long time. Said the door was still open to further cuts. Convinced that these Interest Rates will have to stay low for a prolonged time. Stimulatoryave very monetary conditions. We bought her the opportunity to , watch thisdata monetary stimulus work through the economy, and we are starting to see all of the signs we were expecting of Monetary Policy being effective. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Money managers are out with the latest holdings and moves from the Third Quarter. Filings hit last night, revealing the latest trends among hedge funds. Your with the details is dani burger. Happy friday. I want to start us off with warren buffett. He spent the Third Quarter trimming the largest bets. This shows how much hedge funds have moved closer to the ground, getting more expensive positioning. Apple is one of their largest holdings. That was a decision influenced by one of his deputies. Alongholding was slightly with philip 66 and wells fargo. Wells fargo, he needed to stay underneath a 10 threshold limit. Buffett added to Home Furnishing companies are rate. You can see how much the shares surged after filing. They are up over a percent aftermarket. Buffets holdings are very influential. Text technto darlings in the Third Quarter. The harvard endowment buying into facebook despite the social media giant falling 8 in the three months. Netflix also a favorite. All of these hedge funds either added or put a new stake in or significantly boosted the one they already had. Netflix tumbled 27 last quarter. Maybe the one bit big bright spot was microsoft. All these funds sold microsoft last quarter. Includingicrosoft duncan Millers Family fund. They took a stakeout of uber. Nejra coming up, stock performance. Jay powell is confident the u. S. Economy record expansion will stay on track. ,e will discuss the fed polity next. Tune in to Bloomberg Radio live on your mobile device or on Digital Radio in the london area. This is bloomberg. Nejra this is bloomberg daybreak europe. Lets get the Bloomberg Business flash. Alibaba says shares will be offered to retail veterans. Its an auspicious number for its stock code. The South China Morning Post says there has been in a norms response to the listing which could raise up to 15 billion u. S. Dollars. Alibabas stock code will be 9988 which rhymes with prosperity forever in mandarin. Relief afterment posting the worst quarterly loss in local corporate history. Demand, thebillion idea took a charge leading to a 7. 1 billion loss for the latest quarter. The company says its ability to continue is dependent on relief from the government. Thats your Bloomberg Business flash. Nejra thank you. Calledirman jay powell the u. S. Per economy a star performer. His remarks reinforced the sense that Monetary Policy is set to be on prolonged hold. Its a view shared by James Bullard who says it makes sense to be wait and see hold. The dallas fed chief weighed in with a suggestion that theres a good chance for a 2 growth next year. Officials have painted a positive picture of the economy. The u. S. Economy is the star economy these days. We are growing at 2 or in that range. More than any of the other advanced economies are growing. Theres no reason to think that cant continue. The policy accommodation we have taken has put policy stance in a very good place to make that baseline come out where we need it to. The economy is in a good place. Monetary policy as well. My forecast is for moderate gdp growth. U. S. Inflation expectations today do reside at the low end of a range i consider consistent with our price stability mandate. Theres no reason to think that probability of a recession is elevated at this time. Nejra our guest is still with us. The two things that stood out to me in all these speeches from various fed officials that might convince us the fed is on pause is Jerome Powell saying the expansion is on a sustainable footing. He say we dont see the warning signs that appeared in other cycles. James bullard really signaling a high bar for another cut. Investors are on board. They are not pricing in a cut until september of 2020. Are you on board with pause for the for seattle . Guy yes. You have to listen to what they say. They feel that theyve got well ahead of any positive possible showdown. They have precluded a possible slowdown. Yes, the bar is going to be very high for another cut. Thats risky. It means that if the economy does start to slow down, the fed will probably be behind the curve rather than ahead of the curve. Theyve done a very good job in terms of the actions they did in the second half of the year. I think theres a little bit more risk that they may be slow to cut in 2020 as a result. Nejra you see for cuts in 2020. Thats quite an aggressive call. Negative inquite u. S. Economic growth next year. The comments he referred to, the fact that the u. S. Can grow at 2 , we think that will be a lot e difficult than the fed 2 is not far from the consensus. Its a question of how you see the economy unfolding. If you are concerned about trade, about the impact of higher costs on u. S. Producers, if you are concerned about the fact that we are at the stage in terms of the employment cycle where we are beginning to see lower employment productivity coming out of the data, we are still seeing highway it wage increases. They were costs are going up. That will have an impact on u. S. Companies. You probably will have a more gloomy picture for growth next year. Nejra these cuts you talk about, tell me about the timing of when they might come. How will the fed message that . It will be backend loaded. The wait to see real signs of the economic slowdown. If we start to see the economy beginning to contract in q2 next year, they will probably see that and then they will start to react in terms of cuts. They wont get that data until the second half of next year. It will really be back and loaded toward the second half of last year. Nejra how does the curve react to this . Guy the long and rallies, people are more concerned about growth. That will be the phenomenon in q1 and q2. As we get to the second half of next year, the front end rallies in response to aggressive rate cuts. Nejra uc see steepening but you still see the 10 year staying fairly anchored. Guy thats correct. More precisely, we will see flattening early on. The 10 year will rally when the growth is weakening and the fed is not being responsive. We will see steepening when the fed starts to respond aggressively. Nejra what about the fact that the u. S. Consumer is still in a strong place . We have global trade tensions. We are going into an election year. Some say President Trump will pull something out of the bag. We might get a deal. We have a strong u. S. Consumer. Why would we see slow growth . Consumer,rms of the thats the best point. The consumer is the most important measure in terms of the u. S. Economy. The consumer continues to be strong. If you are paying more, you would expect the consumer to continue to be strong. The biggest beneficiary is likely to be companies which export into the u. S. That will drive the gdp figures. Nejra lots more to discuss. From one central bank to another. Surprised investors by keeping Interest Rates on hold. The governor says the market needs to realize that the current rate of 1 is highly stimulative and he intends to keep rates low for a long time. Thing is, an Interest Rate of 1 . A very flat yield curve is highly stimulatory for the new zealand economy. The Exchange Rate to the new Zealand Dollar has been below measures of fair value. Also adding to a more stimulatory nature. That has been for quite some time. Despite the Global Growth slowing, our terms of trade, our export prices have been really quite positive. Defying gravity relative to a lot of other commodities. The Exchange Rate side is working through. The Interest Rate side, theres a broad pull. Were seeing it maintaining spending. Households are still spending at about the nominal income rate. Real here, it all starts with a simple. Hello hi hon i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today