By 2015 nuclear deal after the killing of its top general. President trump threatens disproportionate u. S. Retaliation should tehran take military action. Aboveextends its search 70 a barrel after the u. S. State Department Warns of missile attacks near military bases and Energy Facilities. Plus, riskoff rules as global stocks trade to the downside, gold searches to the highest level in more than six years. As i said, just under one hour away not from the start of cash equity trading in europe. Futureske a look at this morning after the first couple of days of the year traded in different directions. We are now headed firmly down in terms of sentiment. Clearly, over the weekend, after the attack that we reported on friday, you can see cac and dax. 75 . S down take a look at u. S. Futures. You also see losses there, about three or 4 10 of 1 . To a veryinting riskoff open. What do you see on the gmm . Anna the gmm giving us the same riskoff picture. As you point out, we see futures suggesting we are lower on European Equity markets. On friday, we asked a few questions about why we have not seen asian equity markets selling off to a greater degree than we did. Perhaps it was because it was so early in the year. Perhaps because japan was out of the picture. Today, we see the asian story, the asian liquidity back with a vengeance. Turkish markets, all trading to the downside. In the fx markets, we are seeing selling of emerging market fx, particularly where it is focused on higher oil pricing doing damage because of the way their trade relationship works, particularly in currencies doing pretty well since the middle of december. Those are the currencies where we see the vulnerability. You can see the moves coming out of equities going into sovereign bonds and going in to the Commodity Prices so we have seen gold spiking higher and brent crude higher, wti higher, over 70 of barrel on brent crude. We have fairly weak data out of china in terms of the composite number and the u. S. Ism still reverberating through markets as well. The weakest since the middle of 2009, matt. Now, President Trump. Lets talk about the top story today. He is threatening iran if major reality with major retaliatn if they do anything to avenge the u. S. Killing of top military general caps on so many this solemeni. Many there werepeo said no debts within the Trump Administration about the intelligence behind the decision Qassem Soleimani next week. Lets get into the markets from that with mark cudmore, or bloomberg mliv managing editor. Clearly, we have seen reaction here. The jump in oil, the surge in gold. What do you think about this rush to on the one hand, safe otherassets, and on the hand, infrastructure globally . Mark i think it makes sense. Investors risk pricing in a longterm story over the short term he had what i mean by that is this uncertainty is something we will have to factor into pricing for the next many months. We do not know when or how exactly iran might retaliate and that will be there on the horizon. That does not mean we have to price in all the risk in the short term. I think things like gold will probably keep a bit all year. They will do well in 2020 but it may be a little bit stretched in the shortterm. It is the same for oil prices. Maybe the risk aversion and equity markets might have done enough until we actually see some concrete retaliation. However, this issue will rear its head again. Its a little bit like an analogy to the u. S. China trade story, which was a longrunning theme. The traders struggled to price extremely and then price it the other way when we got optimistic. I think that could happen on the u. S. Iran situation where we kind of price in this extremist version in the short term. We might see you know retaliation for a wild, people might forget about it, and then it might flare up violently again. It will be a longrunning theme that we should not priced too aggressively in the short term. Anna stay with us. Our golf economy and government reporter also joining us. I suppose from an International Investor perspective, watching the region, everybody focused on commemoration, but further down, people are looking for how it is that iran is going to respond. About whate theories form that response could take . Definitely, people are bracing for what avenue iran will use to avenge the slain leader. And what which assets they are likely to hit. We have seen attacks on aramco, Oil Facilities in saudi arabia earlier last year. Some expect to see more of that. Others say possibly attacks on u. S. Diplomatic facilities and troops, etc. The one thing across the region we are seeing is trepidation and worry that this is escalating very quickly. The region is not ready for it. Even among the gulf allies, President Trump, who initially embraced the maximum Pressure Campaign against iran and wanted to see iran contained, most of them have come out with statements showing they are really worried about the fallout from this, and calling on the for d iran matt i just want to bring you some live pictures we are seeing here in the streets of tehran. We have got a feed showing the funeral of general Qassem Soleimani. Looks like the picture is frozen, but you can still see from this how many people are out there. Is youre bottom line question of the day, which is how should assets price geopolitical risk . What are you hearing in response to that question on the mliv blog today . Have ae probably need to slight extra premium and volatility markets this year that was not there last year, so is, in many asset last year, we saw a very extreme decline in volatility, most notably in fx markets, which saw the beast volatile markets ever. There will be extra volatility priced in this year, so we will see a bit more here. The other one is i think we will see that next little bid for havens. That is why people are calling for treasuries to selloff after the extremely low yields of last year were likely to be wrong. We will not see treasury yields tick up to much higher. Not expensive, up to 3 , or anything like that, this year. Gold, the move is the start of something that has been much bigger. It arguably started a year or two ago. Cannot conflate these mediumterm views that the extra within the shortterm moves we can expect for the next 72 hours, for example. Anna one we focus on the region, interesting to see that iraq has been voting over the weekend to remove foreign troops and President Trump pledging sanctions against iraq. It seems as if iraq played an interesting role in any escalation here. Upcertainly, iran is caught between two major countries, between the u. S. And iran. Is son influence pervasive across iraq, across most of the government and parliamentarians and government institutions. Its a very deeprooted influence that is being called expelow and being used to the u. S. Forces out of iraq. At the same time, we are seeing a group in lebanon, hezbollah, the leader was calling for the expulsion of u. S. Forces from anywhere in the region, and we are hearing more of this. That is definitely not good for iraq and thefor stability of iraq. With less u. S. Influence, that means the country will fall completely under the influence of its neighbor, iran, at a time where we may actually see more chaos among the different more sectarian issues among iraqs different populations, from ias. S, sunnis, and sh matt thank you so much for joining us this morning. Zainab soleimani is fattah is our reporter. Along with mark cudmore. Coming to us of course out of dubai. We are going to take a look at your stocks to watch this morning at the open, including royal dutch shell, british petroleum, total. Oil jumping on the back of those increased the increased attention we are talking about, and that is sure to move those huge stocks so heavily weighted on the indexes. And remember, Bloomberg Radio is live on your mobile device and dab Digital Radio in the london area. Tune in. This is bloomberg. Anna welcome back to the European Market open. 13 minutes past 7 00 in london. This is what the futures look like right now. We are expecting to see further riskoff moves in markets as we continue to respond to the developments in the middle east. Lets get your individual stocks to watch. There are some interesting stories on the individual stocks and from the geopolitical tensions into the stock market so lets focus on all of those things. Dani burger is looking at the mna story of 2019. Annmarie hordern is focused on the car markets. And philippe if the check to and another person is covering oil markets. Dani takeaway. Com looking like they are preparing to declare victory. This has been five months in the making. Half of like more than shareholders say they are willing to accept takeaway. Com takeaway. Coms bid. With this likely hurdle to be overcome, look for the shares to move. Matt lets get to you on the carmakers peered what should we expect today . Annmarie look out for the entire auto industry, especially the dealers in london. This comes after u. K. Data shows that sales have been the worst in three years, so we are still seeing the slump. And new auto registrations are at the lowest levels since 2013 and the reason behind all this was the brexit uncertainty and what that meant for consumer sentiment. On top of that, just a lack of demand for those diesel cars. Anna the whole sector caught up in the bigger macro moves. The geopolitical tensions that are likely to affect the oil stocks. Take us to the story. Of course, we should watch closely all of the big, major names throughout europe, such as bp, total, and smaller names such as those small caps from golf,k. , general energy, keystone petroleum. They have assets in iraq. Apart from those evident names, oil trades above 2 . We have gold miners at the highest level in over six years. Then, we should watch airlines, for example, because they could be repricing higher oil and they could be announcing different measures due to the increase in geopolitical tension. Finally, worth taking a look at shipping companies. In to theange tensions here in the gulf. Right. Ll thanks very much for joining us. You can get the latest stocks stories from our Equities Team by going to first on your bloomberg or via the mobile app. Lets get back to our top story, the flare up of geopolitical tensions between the u. S. And iran. Joins us. She has been covering fx for 15 years and because the latest escalations unfortunate. What kind of reverberations do you expect to see have you seen already and do you expect to see in fx . Good morning. We have seen already some of the impact of the spike in the geopolitical tensions. We saw it in the price action and risk correlated currencies, especially those for commodities importers. In particular, those with current account deficits. India rupee, korean won leaving the losses peered at the same time, equally, safe havens like the yen, gold, also the dollar, outperforming, and that pattern of heavier likely to persist at least in the near term, so long as we have that uncertainty or so long as really that conflict continues with both sides seemingly still willing to escalate that further. Anna we dont see enormous amounts of moves in the yen. Moves in fx. Today, its stock markets in asia that seem to be reacting. Again, 108. How much more strengthening and the japanese currency makes sense, do you think . Risktin they, against correlated commodities currencies. Dollaryen itself may be stuck in the middle, if you will, with the dollar also playing a role of a highyielding safe haven. It is a real indication of how the markets are feeling in the thepace after looking at Way Investors have been using currency, a funding with the highyielding south african rand and the turkish lira, which has suffered a lot. I would expect both the yen and the euro that have been widely used as funding currencies to fund and carry trades in the em space to continue to benefit against those currencies. Matt what do you expect for gold . I mean, its not a currency as such, but it is something that a lot of people use currency to trade into during periods of unrest. Valentin we expect the goal to continue to shine, if you wish. It is one of our calls for 2020 as a whole to be long gold. We have it for our nominal portfolio. Our target is 1600, and it seems like that we could well get there. The appeal of gold certainly has a lot to do with its hedge against spikes and risk aversion, but also importantly as a hedge against Currency Debasement because what we are dealing with at the moment is unwarranted tightening in the Global Financial conditions have prices, higher equity prices. The next step for the market is looking at central banks. In particular, one central bank. The fed, what is it they could do if we see evidence that the unwarranted tightening in the financial conditions starting to weigh on global and u. S. Growth . That is a prospect for more easing. It will likely boost the appeal of Currency Debasement hedges like gold. Anna we will pick up on some of that centralbank conversation in just a moment. Thank you very much. Valentin marinov, head of g10 fx research and strategy at cut at a call. We bring you our interview with a founder and president of an energy company. How high can oil prices go . This is bloomberg. Matt will come back to Bloomberg Markets european open. We are currently about 36 minutes, 37 minutes away from the start of cash trading across europe and the u. K. , and you can see futures are down across the board. We could be in for the third trading day of the year to be considerably risk off. Lets catch up on some of the stories that you need to know. Manus cranny joins us now from dubai and theres a lot going on, clearly, in your region. The u. S. A rainy intentions and now, u. S. Iraqi tensions. What effect are they having on markets there . Manus it is interesting that you start with the equity markets. I am looking at the oil markets. The equity market risk premium seems to be moderately contained. I would say the oil market is, if you look at two days worth of trading in oil, we are up 6 , about 70 a barrel. The state department and the in the United States of america warms up. This is about trying to assess the response mechanism from the iranian side to the soleimani killing. I cant up with bob mcnally caught up with bob mcnally and he things allout war might be avoided. The percentages of change and pricing of crude might have a little bit further to run. Overt u. S. Military conflict with iran went from 5 to 25 , and we think crude has some more risk pricing to be. At the day, we think we will avoid a war because both washington or President Trump and the iranian leadership wish to do so. Manus inherent in that comment, anna, from bob, was that we will avoid a war, and i think this was quite important. We will get your ratio with the big risks for 2020. The very First Response from the iranian side was a political response, where they stepped back from the 2015 iran agreement, so that is their First Response. The question is now, how will they act . Will it be via proxy . Will it be minding the strait of hormuz . Will it be an attack on facilities . Anna the Iraqi Oil Infrastructure in focus or the strait of hormuz . We will get to another oil conversation later in the program. Manus, thank you for setting that up for spn manus cranny in dubai. Our guest is still with us. It was interesting to see in that conversation, he went on, bob mcnally went on to talk about how oil prices could get to 80 a barrel. What does that do to oil fx in your world . If you look at the smaller currencies in our space, g10 and the region, Canadian Dollar in the region, they were outperform her spirit i would expect more relative resilience of those, especially against Oil Importing currencies in the region. It could outperform the swedish crown from here. Maybe a good entry point to establish a fresh long set. The fact that these are liquid currencies puts them at a disadvantage against socalled safe havens, especially against the dollar, and i think the dollars role now is also as an oil currency, where the u. S. Is the Biggest Oil Producer in the world and that is likely to benefit from a further increase in oil prices, likely to burnish anna dollar positive . Valentin the dollar is a highyielding safe haven, but it is also the case that Higher Oil Prices are not necessarily detrimental. They are actually supportive for the currency. Has won energy independence, so as such, the impact it is different from before. Oil pricesher is not negative for the dollar anymore. It could burnish its appeal. Head oflentin marinov, g10 fx research and strategy at credit at a call Credit Agricole stays with us for the hour. We take a look at the week ahead including Economic Data out of europe, china, and the u. S. , plus we continue to focus in on the ongoing tensions with iran. A press conference by carlos ghosn as well, and the brexit bill is back in parliament. Matt welcome back to the european open. 30 minutes away from the start of cash equity trading across the konta nintendo. I am matt miller alongside anna. Anna lets take the opportunity to check out with what else we need to be watching out for this week. Wore live in brussels as european leaders battle to come up with a response to tensions with iran. They begin with a debate on the brexit bill. Plus we are in berlin ahead of Carlos Ghosns press conference. With all of that in mind, we keep our eye on what is going on in equity markets. European futures are pointing to the down side. Stocks sold off in asia, more than friday. Lets pick up on the themes and get to our conversations around europe. First to bloombergs Germany Bureau chief, who is with us in frankfurt. Also with us, edward evans from our exet team in brussels. And ben