Away. Knife edge. Brexit talks near a compromise on fishing, leaving the level Playing Field the biggest obstacle. Can the side to get a deal through today . Sanctions hit sentiment. Stocks and futures flip as the u. S. Is said to add more chinese officials to a blacklist and the rollout begins. Coronavirus vaccines start in the u. K. Tomorrow. The u. S. May follow suit by the end of the week if the fda gives emergency and approval emergency approval. I have been away for six weeks on paternity leave. It has been fantastic. Not much seems to have changed in terms of markets. We are still in crunch time. We are still looking at covid infections rising to alltime highs. We are still looking at u. S. Stocks rising as well. I guess the vaccines is the hopeful sign. Maybe this week, the good change we have all been waiting for in 2020. On return, everything has changed and yet nothing has changed. Certainly new information. That has been a real game changer. But we are still as you say at crunch time for brexit. I think you said that at least 50 times over the last four years. Certainly there is momentum building. The pound is wobbling. You have breaking news in terms of the german economy. We have german Industrial Production numbers coming out. You can see at the bottom of your screen, production rising 3. 2 month over month. The estimate was for 1. 6 . If you have a bloomberg terminal you can pull up the ecofunction and see Industrial Production yearoveryear still a big drop. 3. 0 , not as big as the 4. 6 that had been surveyed. Figures,l production although yearoveryear still a big drop, both of the month over month and yearoveryear figures are better than previously better than surveyed and better than the previous figures along shop by a long shot. Lets take a look at where futures are pointing. The u. S. China relations seem to continue worsening. As a result you have euro stoxx futures down 0. 1 0. 3 . Dax futures down 0. 3 . As we said, you have the british pound off a little bit. Maybe that is why you see ftse futures up, although that inverse correlation has turned around as of late. Take a look at u. S. Futures right now. S p, dow, and nasdaq futures pointing down. Nasdaq futures, little changed. What do you see on the gmm . Mixed this hour. We keep an eye on brexit. The pound is weaker, down by around 0. 25 . Away from that, the bigger we are justes, coming off record highs. Friday we saw a record high on the s p. We are back in that bad news is good news because of fiscal stimulus. We have that fiscal momentum building. We are also looking ahead to vaccine rollouts and better signs there. The only offsetting negative is increased tension between china and the u. S. Coming together to create a mixed picture for asian equity markets. We are watching the brexit negotiations carefully. Brexit negotiators are striving to finalize a deal by this evening after resuming talk yesterday. Sources say a compromise is starting to emerge. That would leave the level Playing Field as the main remaining issue. Lets get to edward evans. Ring is uptodate. We have not gotten any definitive news, but comments from barnier and others. Barnier is just briefing the ambassadors from the European Union member states. There is still no deal, but they will continue talks. It has certainly been a very busy week for brexit. Suspended on friday that only resumed after a call between Boris Johnson and ursula von der leyen. They are moving toward a landing zone on fishing, one of the key issues. That still leaves the much more difficult issue of the level Playing Field to sort out. The issue is that france and other countries are extremely concerned about giving the u. K. Access to the market only for British Companies to enjoy the competitive advantage of their continental rivals. What they want to do is ensure britain signs up to not just the eu, but any changes in eu rules. That is something they have insisted. The risk is not for a deal being signed. Is that talks could fall apart. Evening they will decide effectively whether it is worth pushing on for a deal or whether they will have to concede that the game is up. We saw a report in the times that Angela Merkel and Emmanuel Macron are softening on the level Playing Field. It seems like the more important of the stumbling blocks. I would prefer to soften on fisheries where i the eu. Unmacron. Ery what do you read from this story . The picture is murky at the moment. Fishing is the order was always going to be fishing. The eu wanted a deal on fishing at the very end. There have been calls between germany and france and they are very strongly pushing for level Playing Field here. That is sorted out you can get a deal on fishing and then you could get a wider deal on brexit. Matt thanks very much for joining us. Edward evans, our brexit editor covering well, it is a murky picture and a complicated picture. At the end is when everything typically gets done in these negotiations. Showsobal equity rally signs of stalling. The pound is slipping as traders who speculated on a weekend brexit trade deal were left disappointed. Lets get to the markets now. We are seeing i guess you could say the rally is fading, but it is at an alltime high. Any time we get to these levels, it looks like down is the only way to go, but we have been full before, havent we . Before, havent we . Absolutely. It has been abroad climb for risk assets with pull back every now and then. Then we see investors very happy to buy the dips and keep going back up again. We may be in another period similar to that now given that we do have the latest risk off catalyst in the form of more potential sanctions against china from the u. S. And we are seeing the early reactions across the board both in equities and markets here taking that as a risk off. Investors will probably take a look at this and put it in the context of the longerterm narratives that they are celebrating is positive in terms of a vaccine rollouts as well as potential stimulus coming through. They will probably parse that accordingly. Anna let me ask you about the brexit situation. I know the markets live question of the day is how will a brexit deal impact risk assets . This goes beyond the pound, doesnt it . The pound is in play. Interesting relationship between the ftse and the pound, not necessarily how it had been. What are you hearing in terms of the broad picture for risk assets and the significance or lack of significance of a brexit deal . Absolutely. There is still you could tell speak settling into markets. We are seeing that being priced in in the pound more dynamically. Asset complex seems to have moved on from the brexit story. I think once we do get the deal, that is kind of the definitive yes or no for markets at this point. That is all they are waiting for is the binary outcome of whether there is going to be a deal. I think once we get clarity on that, we would expect a kneejerk reaction either positive or negative and then given all the other catalysts that are present for markets, i would expect investors to quickly move on. As far as the pound goes, if there is still a propensity for investors to react negatively to but quickly cover those shorts, we saw yesterday evening in london or monday morning in asia when we saw the pound lower initially when fx markets opened. When i woke up this morning, they were back above were just below that 1. 34 level. Positioning has started to turn more negative with the pound. How that plays out with the couldnear the years highs be quite interesting the next few weeks. Anna it is interesting how for some assets it is binary and for others to detail might matter. A quick line on brexit. Envoysbarnier telling eu the ball is in Boris Johnsons court. Coming up, backing the bill. The bill passes that is likely trump and mcconnell will be on board with more stimulus. Plus the positioning around brexit. What about other u. K. Assets . Strategists are telling investors to start a buying spree of abandoned u. K. Assets. Anna welcome back to the European Market open. Ftse futures to the upside. We will get into this conversation next. Brexit talks resumed with fishing rights one of the biggest obstacles close to being resolved. Another Sticking Point remains. Negotiators will spend today trying to find a solution. The times has reported Emmanuel Macron and Angela Merkel have agreed to weaken eu level Playing Field demands. Envoysbarnier telling eu the ball is in Boris Johnsons court. We are joined by the head of Economic Research at barclays. I want to understand more about the reaction function in u. K. Assets to a deal or no deal. Maybe we can start with u. K. Stocks. I was looking at the ftse 100 and often it has a negative correlation with what the pound does. That seems to have fallen away. The past week we saw a rally in the pound. In the ftsea rally 100. Wheres you think u. K. Stocks stand . Talks about the pandemic and other matters . U. K. Stocks about the pandemic and other matters . The pound does have an influence on equities. Reason, the second thing you said is very true. Global rebound these companies will do well. The pound is not an expensive currency anymore. One can well see independent of the brexit stories, there may be stocks that look interesting in the ftse 100 or in general the index in a scenario where the Global Economy rebounds on the arrival of vaccine. Matt what kind of stocks are you thinking . About lf am thinking i am not a stock picker but if the economyew comes back, global trade rebounds. Equity in particular would benefit from going back to normalcy. Normalcy meaning where you go back to having higher growth and of alle cyclical rebound these stocks that have been thatn down by other socks have been doing very well. Normalcy,eturn to some of this should be reversed. At the u. K. G economy, a lot has been talked about, the extent of the recession. Does that position us, looking at the glass halffull, for a very strong rebound . Goldman sachs sees a relatively rapid rebound given the rollout of the vaccine, also the reliance on the Services Sector and the link between the vaccine and Services Getting back to normal. We are going to see a relatively quick rebound everywhere if you look at numbers in the sense that we had a large contraction in the u. K. As well as many european economies. A little bit less in the u. S. Those economies that have been suffering heavy recession this year will be coming back on the back of them vaccine. You will see numbers that are very high. Similar to what you saw in the Third Quarter compared to the Second Quarter this year. The longerterm outlook for the u. K. Is a bit less certain well the u. K. Ow economy can flourish outside the single market. With the ability to set regulations, to set policies more independently of the eu, will this have the impact some hope for for growth in the u. K. . The immediate rebound next year should be numbers compared to this year. That will happen in the u. K. As well as elsewhere. Anna when you look at frexit negotiations, if we make the heart of a consumption there will be a deal, what friction do you expect for the u. K. Economy to get over . I was trying to think of the list of things businesses need to change january 1 even with a deal. You are going to be looking at customs checks, customs declarations, possibly of pointing appointing a customs broker. You need to get special registration to trade with northern ireland, to trade with the eu. You might need to check labeling. Rulesnds of different that u. K. Businesses will have to get used to. What friction does that suggest . Great point. This is sometimes underappreciated. Sometimes you have the narrative when you get a trade deal everything will continue as is. The tariffs will be less but you will have a customs union. There is some anecdotal evidence i believe that because of the high uncertainty, a lot of the businesses in the u. K. Have been reluctant to do all of that detailed preparatory work even though it is necessary in any case. It will betion is tension and friction in the early months. Given that will likely influence headlines, we believe there may be volatility in the pound. Longer term view, this may last one or two quarters, but then people should get used to it. You get used to the new regime. The trade deal is most important with regard to how expensive it will be to trade with the eu. Matt you stick with us. We have more from you coming up. Christian keller from barclays, head of Economic Research. They put out there q1 2021 outlook and there are a lot of fascinating points i want to go over with christian. We are also going to talk about the possible stimulus bill. Gop senator bill cassidy in the u. S. Said it is likely trump and mcconnell will be on board for another 900 billion. More on that next. Matt welcome back to bloomberg markets, this is the european open. We are 30 minutes away from the start of 38 minutes away from the start of cash equity trading in europe. Ftse futures up as the pound falls. Euro stoxx and dax futures are down right now. You can see the pound that 1. 33. Still a relatively high level. Christian keller from barclays is still with us. You put out last week your q1 outlook, which i thought was full of fascinating stuff. Use shows charts you u. S. Real gdp getting back to its precovid trend by 2024. Is that optimistic . We keep hitting new highs on u. S. Stocks. It is Pretty Amazing even as infection rates climb to new records also. Clearly what we forecasted, a very weak First Quarter in the u. S. Something could even be negative. Economy held up much better than expected. The momentum with which we went sets it Fourth Quarter apart from europe if you look at seasonally adjusted and annualized numbers. Moment is the the virus will influence the First Quarter. Patch,ket has this soft but the market is focusing on a world of normalcy, if you will. The vaccine will bring us to protected populations and therefore an economy that can go back to levels it has seen before. A lot of stimulus is still there. That will propel growth in the next one or two years. Anna we have had new data out of china overnight. Export data. Asia doesth of the growth of asia give you into 2021 . Very much hope. China was a country or an economy that transformed a bit earlier. China went back to precovid gdp in the Second Quarter or so and has continued recovery quite robustly. The numbers are very encouraging. Not only inrmance , but alsoted areas broader. China is doing very well, expected to grow over 8 next year. That is very important for the Global Growth picture. Anna thanks so much for your time. Next, back to the brexit conversation. Talks near a compromise on fishing, or do they . We will talk level Playing Field. Anna welcome back to the European Market open. 30 minutes away from the start of the cash Equities Trading session. Futures pointing to a mixed picture for European Equity markets. The ftse 100 expected to go higher. The pound clearly a factor to watch this morning. The pound down 0. 5 now. Investors are still questioning whether britain and the eu are close to a final trade agreement. Options traders are taking no chances. Here with the details is dani burger. The pound down now 0. 5 . Off that 1. 34 handle. We have to look at this gap we saw overnight. We saw this big drop when the markets first one of the things that will be interesting to look out for, we are seeing markets start to pick up. Typically during the early twilight trade of cable, those losses will tend to reverse as liquid trading gets underway. This is a pattern we see of traders in the cash market not really moving on to those bearish positions that dramatically. Maybe it is the weakening in the dollar keeping cable in the market. Me, theyader put it to talks continue to be at a stalemate. Cash pound dollar spot in the blue. One risk reversals are plunging. They are at their most bearish since the start of the pandemic. Something is disconnected between what is happening in the surface and underneath. Remember, these are from one week, so this is preparation for something bearish to happen soon. Pound, a lotn the of traders do not see them lasting much longer. The Bloomberg Survey says if no deal is reached by next year, we could see the pound fall to one spot 25, a nearly 7 decline from where it currently is. Thanks very much. Dani burger talking to us about brexit. To watch thosee moves in the pound and follow the negotiations closely. Hoping to finalize a deal by this evening. The sides resumed talks yesterday. Both are denying that a compromise has been reached on fish despite earlier reports. Tadeo ins now is maria brussels. We have heard reports they are nearing a deal on fishing. We have seen reports in the times that Angela Merkel and Emmanuel Macron are softening on level Playing Field. Both of those things still seem to be evasive. Yes, and there has been a briefing as you know by michel 27 eu countries. The mood was optimistic, Michel Barnier telling ambassadors he does not see a breakthrough one Sticking Points including fish, the eu now pushing back against the idea that a compromise was near, that a landing zone for fish was approaching, saying there still remains a Sticking Point, that this has not been resolved and that the level Playing Field, the overall governance on the package continues to be