tv Bloomberg Daybreak Europe Bloomberg November 22, 2019 1:00am-2:30am EST
manus: good morning from a bloomberg's new economy forum in beijing. i'm a manus cranny. nejra: i'm nejra cehic from a bloomberg's european headquarters in the city of london. these are today's top stories. a mixed picture for global markets as investors await -- china's economy will stabilize next year. hsbc's interim ceo tells bloomberg the nation's indispensable. >> i think a shift in production, either in china are closer to the u.s., great in theory, but in practice, the
production capacity of china's immense. the logistics capability of chinas superb and it's hard to replicate that anywhere in the world. nejra: and her lagarde -- enter lagarde. the german deputy finance minister tells us there should be progress on a banking union by december. think it's a question whether we will have something definitively agreed in the next two or three weeks. i think the key thing is that there will be progress soon. we aim to see first results in december. nejra: new pickup line. entice newooks to buyers as he unveils a cyber truck in los angeles. we are live from the event.
manus: a warm welcome to beijing. we are wrapping up a couple of days of great conversation. for me, the defining moment was henry kissinger when he sat on that stage yesterday and said we are on the foothills of a new cold war. if things are left unchecked, this could be as bad as world war i. the phrase that really caught my mind was, this is a minor crisis but needs to be mastered. those are the words of henry kissinger. the question is, is the signing of that bill, what will be the words that follow the signature from the president, if it comes? good morning. nejra: what will it mean for u.s.-china trade talks, which remain one of the biggest risks to the global economy. goldman saying they see some stabilization in the global economy in 2020. they see a baby bond bear market. they also say they like a cyclically sensitive risk
assets, for example, cyclical stocks in the u.s.. they like em stocks, u.s. breakevens and btp's as well. this will not be the kind of go-go growth that sinks the dollar. manus: it is a very full and robust note. treasuries flat. the debate here over the past 24 hours is the strength of the global economy really and what happens in china. citi to the other side of that goldman note. the phraseology that goldman uses is interesting. they talk about growth stabilization, not the go-ahead growth. stagnation and they see that as an opportunity to enter long-duration. this comes down to whether trump signs the protest bill. what does he say afterwards? citigroup quite likes dividend
momentum in u.s. stocks. oil pairs back its third week of gains. the s&p at the bottom of your screen in green. you have the longest run of gains since mid april. we are closing out the week with a little bit of, i would say, cessation of risk on hostility. nejra: yes. certainly closing out the week perhaps with a bit of confusion as well and that is kind of reflected in equity markets. after six weeks of gains for global equity markets, looks like we could see a down week this week. a mixed picture below the surface. we are also looking really at not much direction from european futures but looking at a weekly loss for european stocks. the dollar holding quite firm. that is heading for a weekly gain. let's talk about china's a chief trade negotiator cautiously optimistic about reaching a phase one traded you
with the u.s. the vice premier has also invited robert lighthizer to china for talks this month. negotiations have taken an uncertain turn this week after the u.s. congress voted in favor of legislation supporting hong kong protesters. hsbc ceo says it is hard to replicate china's production capacity anywhere else in the world. he spoke at the bloomberg new economy forum right here in beijing. >> i think that there are some long-term shifts taking place. i think we are getting much more regional in the supply chain so that you are closer to your customer. i think the emergence of consumer markets in asia, china, and the rest of asia are forcing people to put their supply chains closer to the consumer markets. there are long-term shifts and buying patterns in the underlying markets. there is the tactical changes taking place as a consequence of trade attention.
that is definitely happening as well -- trade tension. that is definitely happening as well. inhink shifting production china are closer to the u.s., great in theory, but in practice, the production capacity of china is immense. the logistics capability of china is superb and it's hard to replicate that anywhere else in the world. i think you also have to face reality. china is an extremely efficient and substantial producer and it is hard to shift that overnight. ceo -- noelinn, the quinn, the ceo of hsbc. joining us now is wouter sturkenboom, chief investment ac and att for ap northern trust asset management. i find it interesting that henry
kissinger called it the foothills of a new cold war if left unchecked. he refers to a minor crisis which could be mastered. he sort of seems to see through the hubris. do you? wouter: so we look at the situation very much from a fundamental point of view. we think there are irreconcilable differences between the u.s. and china. even though the short-term conflict could indeed be resolved rather quickly with a phase one deal, the overall situation cannot. we cannot assume that the u.s. and china, which have different strategic objectives and in the end come to a resolution of this conflict. we think it will stay with us for the long run. nejra: what would it make you maintain your proclivity towards risk? is it if we get a phase one deal with the potential for phase two by the end of the year and a pause in the december tariffs? wouter: we think that in the end , the way this conflict will sort of resolve itself is mini dealsrocess of
and resolutions and a flare up again. we think it is more likely than not we will get a bit of a resolution. there is elections coming, economic data out of china that needs to be improved. looks more like pushing in that direction but in the end over five years, this will not go away. nejra: mmm. manus: so that's about an enduring level of angst. goldman sachs with a couple of notes out. i want to get your response. weak sequential read acceleration is how they refer to growth here in china -- re- acceleration is how they refer to growth in china. deficits will be on fiscal measures -- the emphasis will be on fiscal measures in china. do you agree with that? wouter: we think it is both monetary and fiscal. on the monetary side, it's really all about the stabilization of the liquidity flows through the banking system. that is why they have been
lowering rates in that space. on the fiscal side, it is all about ensuring the growth rate stays where they wanted to be and making sure the negative impacts from the trade and manufacturing slowdown does not translate to the degree they are uncomfortable with. fiscal is really all about the fine-tuning of the economic growth profile of china, whereas the monetary policy side of things is really all about making sure the liquidity is there to manage that. nejra: i spoke to the cio of credit suisse the other day and he is very bullish on the global economy and on the portfolio construction in terms of being overweight equities, underweight bonds. he said, look, it's been such a great year for us, it is time to put some protection in the portfolio. where is the protection in your portfolio? wouter: we have indirect protection through our low-risk asset risk bias. it is all about making sure you have your risks there where there is a bit more downside protection and high yields in particular playing that role in our portfolio. we are still bullish on interest rates.
we think interest rates will come down so we are more in the than the c amp camp.n sachs we think we are managing our overweight risk stance and an overall sense. manus: exposure to u.s. equities , it depends where we go with the flow of money on that. i want to get a sense of where you think we could go towards the end of the year in terms of liquidity. you mentioned the chinese are cutting incrementally on the ml, mtl, along the seven day repo. the liquidity conditions and spiking to the highest level we have seen since january. perhaps this is one of those flashing indicators for the chinese economy that we should pay a little more attention to? wouter: well, it is certainly not what china wants to see. i think you are picking up on a very important point. plumbing of the financial system in china and that interbank flow
of money needs to be managed very carefully. china needs to make sure that this does not go too far. you're absolutely right that a rise in scheib or is not to china's economic growth -- chibor is not conducive to china's economic growth forecast. nejra: where do you see the yuan from here then? bulls eye wanting to use that to tread on optimism -- are wanting to use that to trend -- that trend on optimism. wouter: we are to careful -- we are careful in making to bold of an assessment. at the same time, we do think that in terms of the overall outlook for the yuan, and with that backdrop of a long-running conflict against the u.s., there is some caution baked into our views.
we are not very bullish on emerging-market currencies in general and by extension, the yuan as well. nejra: wouter sturkenboom stays with us. let's get the bloomberg first word news in hong kong. >> good morning. indicted on charges of bribery and fraud. that's the latest setback for the israeli prime minister, benjamin netanyahu. he is the nation's first sitting leader to be charged but he's heading back, accusing law enforcement of trying to stage a coup. all of this as an inconclusive election is raising the prospect of a third vote in the year. one of donald trump's picks for the fed is not so sure about central-bank independence. we have learned of the private comments made to a ubs executive last month. she is calling into question whether it should operate free of political influence, adding that trump's public criticisms of the institution are healthy. i fear this is all going to blow up. those were the words recounted by x national security council official fiona hill to the
impeachment inquiry. she said she told gordon sondland that when he was forthcoming. she says she now understands why he was not involved in security or foreign policy but a domestic political errand. global news 24 hours a day, on-air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. as republicans and democrats agreed for decades, [ indiscernible] as i told the committee last month, i refused to be part of an effort to legitimize an alternate narrative that the ukrainian government and ukraine, not russia, attacked us in 2016. >> global news 24 hours a day, on-air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
manus: thanks for the roundup in hong kong. billionaire louis bacon is quitting the hedge fund business. a lot of crime brokers around their. bacon will return outside investor's money in the three main capital management funds. it is the latest fallout from a difficult year among the hedge fund managers. dani burger has been tracking the flow. in cash to itsrn clients is by no means a unique phenomenon. for the past four years, hedge fund closures have outpaced new entrances. this year, as you said, it has been particularly difficult for hedge fund managers. for the past eight months, we have seen a net outflows from clients. this stretch of right here is a long stretch of outflows since the financial crisis. it totals for this year about $90 billion. that is more than doubled amount of outflows we saw last year. there are really two simple explanations for this, fees and
performance. on performance, you can see just how much worse hedge funds have done in the white than a simple vanguard s&p 500 etf, which has returned about 26 percent this year versus the hedge fund cohort. a big spread. the fee section. the etf costs only three basis points compared to the typical amount hedge funds usually charge. it is really difficult to justify high fees and hold onto client cash. nejra: dani burger, thank you so much. coming up, blade runner. elon musk flips the script yet again as he unveils an electric powered pickup cyber truck in los angeles. up next, going public. markets will be watching christine lagarde's first speech as the ecb chief today for comments on monetary policy and may be fiscal. we are live in frankfurt. manus? manus: coming up from the
manus: this is "bloomberg daybreak: europe." i am manus cranny at the bloomberg new economy forum in beijing. it is organized by bloomberg midea group, a division of bloomberg lp. nejra: i'm nejra cehic in london. let's check in on the markets in asia. david, great to see you. not a lot going on at the headline level. what's happening below the surface? >> where looking at these stories -- we are looking at these stories. the hong kong listed chinese furniture manufacturer, long story short, the stock was down
90% yesterday. we areit is up 550% but still down 40% from the peak. orca --any sank blue saying blue orca, what they said, untrue, misleading. the big one in australia has been westpac this week. the board just met. shares have basically erased all the gains this year. analysts are basically closest to the most bearish on the stock. i'm going back all the way on record. they are very sorry about this, but obviously it will take more than that for investors to really turn around and buy this one again. analysts not very excited over the stock. here is the state of play across asia. we are down for the week on track for the second week of declines here. just two event risks on the table here. obviously, trade. more locally in hong kong and intertwined with the trade
story, local elections in the city are something we will be city are something we will be watching very closely. there we go. you see declines across. we are mostly down across these benchmarks in the asia-pacific. back to you, guys. manus: thank for the roundup. david inglis there keeping us right. let's get you a business flash now. thanks. wework is cutting around 2400 staff, almost 20% of its workforce. this comes as softbank's looking at reducing the size of its rescue package. it wants to shrink the $3 billion offer. that includes limiting the amount paid to the we work co-founder, adam neumann. the selling spree hasn't reached almost $1.5 billion. the uber co-founder it sold off stocks over three days this week. it extends a series of sales.
-- more disposals could be coming. we need a decision. that is citigroup's message to britain over brexit. it's european head is warning that more uncertainty may force more staff to move out of the u.k. she says the moves will primarily be to dublin and frankfurt. she is calling for a deeper capital markets union in the eu. that is your bloomberg business flash. nejra: thank you so much. let's turn to europe and christine lagarde makes her first public speech today as the ecb president at the european banking congress in frankfurt. markets will be watching out for comments on ultralow rates, banking integration and renewed calls for fiscal stems. maria tadeo -- fiscal stimulus. maria tadeo joins us. what can we expect from her speech? maria: good morning. there is a lot of hype built into this a speech from christine lagarde today but we
are being cautious that perhaps exciting.y not be too she may not say a lot. investors do not actually know christine lagarde as head of the european central bank, they don't know where she is standing in terms of the rate debate. they don't know where she wants to take policy from here and this is somebody who does not come from the central banking world. we are being told that perhaps one of her priorities is not so much the policy, but to build consensus around the governing council. we know that there was a lot of pushback to the measures announced by mario draghi. the one thing she wants to do is to actually build teamwork to try to heal divisions within the governing council. that may be the focus today, not so much on the monetary policy front. nejra: thank you so much for joining us. maria tadeo in frankfurt. wouter sturkenboom from northern trust asset management is still with us. we started to see some inflows in recent weeks into european equities and european equities have not underperformed the u.s.
that much over the past 12 months. of have a lot of overweights various u.s. assets. are you tempted to add to european equities at this point? wouter: we are. we are. we have a small overweight in europe but it is very small. we have been thinking about adding to it because if you look at the economic data, it was pretty poor. there is still a lot of weakness but it seems to be bottoming out. perhaps with the pmi's coming out today, we will see a continuation of an uptick in the data. we saw germany avoid a recession, the euro zone pretty much stabilize in terms of quarterly growth. we think we are on the onset i think of a bit more optimism about the outlook for europe. that should be translated back into equity markets we think. nejra: mmm. manus: can i ask you about the fx side of the trade? if we are scaling back our views on negative rates or the
proclivity for negative rates going into 2020 and a push on fiscal in europe, if that is the case, is that an effective flow to the euro? if you look at euro-dollar, what does that do for the trade for you? wouter: that's right. in terms of the driver behind euro weakness, the monetary policy side, we are at the end of that driver. we think the ecb is really tapped out here and christine lagarde will not change the monetary policy mix materially from here on. she will be much more focused on getting the fiscal policy stimulus going and getting a banking union set up or supporting a banking union set up, helping set that up. we think that negative force on the euro should be waning. the next phase will come in, which is, what is the fed want to do next -- going to do next? that is pretty tricky. can they maintain that hurdle when the inflation side of the u.s. outlook continues to be so
weak? nejra: what does that mean for the dollar? the dollar side of that euro trade crucial. where does the dollar go in 2020? wouter: we think there is a risk weakness. if we are right that the inflationary side does not come through and the fed will therefore be pressured both by interest rates and on the curve and by inflationary statistics itself, you start becoming -- to start cutting again, that should put incremental downward pressure on the dollar. nejra: wouter sturkenboom from northern trust asset management, thank you for joining us. great to have you with us. manus will be speaking to hsbc's stephen king, also feeling cautiously optimistic on the he?e war, is don't miss that conversation. manus again ino a moment. tune into bloomberg radio live on your mobile device or an dab digital radio in london.
nejra: this is "bloomberg daybreak: europe." i am nejra cehic in london. manus: i am manus cranny on the road at the bloomberg new economy forum in beijing. china's chief trade negotiator is cautiously optimistic on a deal. in 2019,happened perhaps some of the most deming statements came from the former u.s. secretary of state, henry kissinger. he says the u.s. and china are in the foothill of a cold war. goldman sachs struck a more positive note on the economic impact. it says an easing on trade
tensions will lead to stabilization of the chinese economy next year. let's speak to stephen king and get his take on the world. he is the senior economic advisor at hsbc. good to see you this morning, this afternoon. stephen: whatever. manus: we were chatting yesterday. we were debating growth, stimulus, reaction, concern. you say political angst and populism have been perhaps the biggest challenge for the world to deal with this year? does it get worse in 2020? stephen: i hope not. i think the relationship between the u.s. and china has become increasingly difficult. it is not just about trade. you have a superpower rivaling a newly emerging superpower. that is a big issue. brexit is an ongoing issue from the british point of view. there is also a sense that within individual countries,
there is a sense that somehow populists have the upper hand. part of the reason for that is that there is a regional split within countries. there are some regions that have flourished with the globalization of new technologies and other regions have been left behind. manus: where is that most obvious? there is the brexit story, the united kingdom. whole,: europe as a there are elements of this in the u.k. and elements left behind. parts of greece, parts of france have been left behind whereas other parts of europe have absolutely flourished. ,he central european spine which has done incredibly well over the last 20 years, the collapse of the iron curtain and new economic finances been created, but at the same time, the geographic periphery of europe has been left behind. same thing in the u.s.. if you live in the bay area of
california and work for google, you have done incredibly well over the past year. if you live in some of the eastern inland states, chances are not only have you had a fall in income growth but your house price has probably fallen and you are stuck. manus: those are the birth fires of populism. the panacea being debated here and amongst the economic alumni such as yourself is that the fiscal response, is that the panacea we are all hoping it will be? will it reduce populism and redistribute some kind of income? stephen: there is certainly a fiscal response coming through. the labour party manifesto in the u.k. was released yesterday and is full of all sort of generous promises. it would imply a much bigger budget deficit than the u.k. has seen in some time. ist of the reason for that borrowing costs of governments are very low.
it is important to remember that we do have kind of a test case for us already, which is japan over the last 20-30 years. huge fiscal expansion from time to time, big increases in government debt. the impact on the economy quite minimal. financial transaction tax, hiking corporation tax, the tories want to rip up the rulebook in regards to fiscal probity so they are both perhaps to the same risk as japan. stephen: one thing that is emerging as a mistrust of how markets work. markets actually are incredibly effective most of the time in allocating capital. the whole point of having a stock market is to make sure that capital goes from company a making sure we allocate resources in an efficient way to get maximum levels of productivity. today, we are moving towards state provision.
the state have a habit of backing what he thinks are winners and discovering only much too late that it is backing losers instead. the sense of discipline that comes from markets is not always there. the consequence is that you find that is often spending but not much in the way productivity. growth therefore styles. manus: the other major issue -- i am just going to play some sound from ceos around the world that runs the major airlines in regards to climate change. take a listen. >> we are accused, we are designated as a kind of enemy. there is a new word. shame. chain is notlight very fact-based in my perspective. this is useful for the debate we need to have in society. >> environmentally, the planet is looking for something that we can bring to the market but we are at least a year away from making a decision on that. >> we believe that we do more than any other airline.
this is absolutely in line with what customers increasingly want the company to do. >> we have to explain to everyone that this industry is doing everything it can now, has been doing that for 10 years, to reduce its carbon footprint. voices.retty strong . we heard from the ceos about them being seen as the enemy. they are the polluters. we can cast our net wide in terms of who is responsible, but the climate change narrative has really shifted a gear to me in the past 6-7 months. what does it mean for us in terms of economics? stephen: one big issue is the market failure that we all pollute too much but nobody has to pay directly for the pollution. one thing we discussed at the conference is whether there should be a new higher carbon tax. i think it is also worth stressing that there is a big
shift towards renewables in the years ahead. what are the countries that are currently the major carbon producers, what do they end up doing in the future and how? politically stable will they be some of those countries, for example, -- politically stable will they be? some of those countries have built up significant sovereign reserves. they have protected themselves from the danger of the unspecified future. other countries have not done that, so russia, iran, venezuela have not got sovereign wealth funds, built-up savings based on their current carbon production. for them, perhaps the future is a lot less favorable, less encouraging. when you look at the carbon producers, there are some obvious not so much winners but countries that have shored themselves against future losses versus countries who have not.
manus: the aramco ipo is perhaps the very personification of trying to sell oil to the rest of the world in the form of aramco. wrap up just a couple of big policy issues. the debate is about recession risk in the u.s. the momentum is falling. where do you stand on this debate? if trump agree exceeds -- if trump -- stephen: the recession risk is already there. the inverted yield curve is not a guarantee of recession but a kind of barometer. nejra: you still -- manus: you still believe in the inverted yield curve as a barometer? stephen: it is an indicator. the second thing, if we are writing the history of 2020 and say, why is there not a recession, we point towards trade. the impact of trade. there will be no doubt over the last 12 months that companies have delayed or canceled spending.
global supply chains are in danger of going into reverse. under those circumstances, you find the world is much weaker. each recession has a different beca ---- different cause. trade,gest risk is absolutely. manus: thank you very much. we could talk. ad nauseam. great to see you at the bloomberg news economy form. stephen king, senior economic advisor at hsbc. nejra: onto another key interview from the new economy forum, the deputy finance minister of germany tells us there should be progress on the banking union by december. >> we are still very fragmented within the single baking markets -- banking markets. the goal of the european union is to have single markets for all goods and services. we still need to move a lot to
get that done for banking services. >> does that mean it is almost impossible to have something substantial by december? >> i think we will make progress by december. our position that has just been published, so we are still debating a lot of the impulses that we gave. i think it is a less -- less of a question of whether we will have something definitively agreed in the next two or three weeks. i think the key thing is that there will be progress soon. we aim to see first results in december. >> what are some of the concessions that have led to where we are now? >> i mean, our proposal has several pillars. we think there needs to be further risk reduction. that is important on npl's, sovereign risk on bank balance sheets. there needs to be further improvements to the resolution regime for banks if and when they come into crisis. we need an enhancement of the harmonization of regimes for the smaller banks that do not fall
under the resolution regime. we think we need for a complete banking union a harmonization, for example, of minimum taxation. last but not least, we think that if all of these things are moved ahead, we do think we can also move ahead on deposit insurance. >> do you think -- when we will get -- when will we get deposit insurance by? >> it depends on how quickly we can reduce the risks in the banking system, which everyone agrees still needs work. that is exactly the component of the negotiation. we also have to agree on when we will tear down the walls that still prevent the common markets for banking systems. at the moment, every member state has their own capital and liquidity rules. there has to be progress on that also. >> are there countries pushing back against this? >> everyone has elements where they are pushing back. allgood news is that if we
give up our redline, then we can make very substantial progress. there are self reinforcing mechanisms that if we improve the resolution regime, if we improve the insolvency regime, if we reduce risks, if we find some enhanced and incentive compatible ways of sharing risk, everyone can benefit, so it will help everyone to move their redlines. nejra: that was the deputy finance minister of germany speaking to bloomberg at the new economy forum in beijing. elon musk has a new pickup line for investors. he has unveiled an electric powered cyber truck at a high-octane event in los angeles as he looks to tempt a new audience to ev's. ed ludlow joins us from tesla's design studio. what is the thinking behind this move? ed: 75% of tesla's biggest market in north america is buying light trucks, of which pickup trucks make up the majority. this is the cyber truck that
elon musk has been warning us about for more than a year. he says it would not please everyone. it starts at $39,900 and could be north of 60,000 -- could go north of 60 and 2.9 seconds -- in 2.9 seconds. that makes it competitive against a large field of combustion engine pickups, which is dominated by ford, chevy, and dodge ram. there is a lot of brand loyalty for those three so penetrating the market will be very difficult. the immediate concern for people i have spoken to at tesla's design studio is that this is too niche a product and it will not appeal to the core truck buyer in north america. the space age body is made of alter reinforced steel, the same one that spacex plans to use for its starship. teslaid this demo whether chief designer came out on stage and smacked the truck with a
sledgehammer. it did not leave a mark. they tried to do the same to the reinforced window and metal boards smashed both windows. whether the specifications and price points for cyber trucks can overcome the normal design and appeal to court truck buyers north america. manus: do you know what that is? that is like us trying to decide what the top three headlines are every morning. ed ludlow on the ground at tesla was design studio in london -- tesla's design studio in los angeles. i would like one of those for christmas. well done. nejra: the implication being that our producer is the pickup truck. coming up, we will be speaking to maya tskitishvili, the vice prime minister of georgia. don't miss that interview. this is bloomberg.
nejra: this is "bloomberg daybreak: europe." i'm nejra cehic in london. cranny at i'm manus the bloomberg news economy forum in beijing. let's get your business flash now. >> thanks, manus. wework is cutting around 2400 staff, almost 20% of its workforce. this comes at softbank is reducing -- looking at reducing the size. of its rescue package it wants to shrink the $3 billion offer. that includes limiting the amount paid to adam neumann. travis kalanick's november selling spree has reached almost $1.5 billion. the uber co-founder sold over half a billion of stock over three days this week. it extends a series of sales since the lockup ended earlier this month. more disposals may be coming, signaling he could offload his entire stake. saudi aramco has raised $19.5
billion in the first five days of its offering period. the figures suggest that institutional portion of the deal is already 90% covered. the retail crunch is about 46% covered. that is your bloomberg business flash. much. thank you so let's turn to georgia, a country on the crossroads between east and west and a key trade route for some of the world's biggest economies. the former soviet nation has aspirations to join the european union and is currently has an association agreement with the bloc. it has fostered close relations with china, having signed a key trade deal in 2018. joining us in the studio is george's vice prime minister, maya tskitishvili, who is in london for the investment summit. welcome to the show and good morning. let's start with the relationship with china. you have a key role in georgia in the one belt, one road initiative. we have the backdrop of a u.s.-china trade war.
how does that impact your trade relationship with china? maya: first of all, you mentioned that georgia is on the crossroads between europe and asia, so it means that we have to deal with i a lot of trade partners. we have to perform our function as a bridge between europe and asia. we are part of one belt, one road initiative since we are on the historical silk road route geographically. of course, with all of our current policy, the very open economic policy, we are trying not just physically to connect to the market but also to serve as a bridge between the countries. in this particular case, we have free trade agreement with china. at the same time, we have a free-trade agreement with the european union. we also have the free-trade regime with the turkey, and
other countries, 19 countries. this provides also an opportunity to provide countries,to other which are willing to trade with each other. wars, era of trade georgia is a nice place where there is no trade wars and where there is opportunities for all the countries to bridge and to meet each other. nejra: when you mentioned the ts yous free-trade pac have, i noticed the u.s. is absent. are you concerned it might harm your relationship with the u.s.? maya: not really. what we have with europe is not just trade relations with europe, but very strong strategic partnership. nejra: right. maya: has you mentioned, we also
have very strong aspirations. it is part of our national policy as well. when we are talking about china, we are talking about one of the biggest, largest markets. all of the countries of the other regions are -- have a desire to participate in this trade relationship. of course, we are talking about our political aspirations. we are talking about our reform agenda. it is looking for the european and atlantic euro atlantic area. we do not think we will affect it anyhow. we are in the region which is very diverse, as already mentioned. georgia is very open, very business friendly. we think that we are not only providing opportunity for the markets to connect to each other the just to clean, but to meet in georgia maybe. ofra: with europe, in terms
the association agreement you have with the eu and the prospects of becoming a form member, is that complicated -- full member, is that complicated by brexit? maya: not really. we have large trade partners, countries which are in the european union. actually, the european union in general is our largest trade partner. brexit is of course unfortunate for everyone. signed an agreement with the u.k. which covers all the issues which are part of our cessation agenda as a. we already -- as well. we have already managed to manage all those issues with the u.k. as well not to be affected by brexit. nejra:. . ok. let's turn to some of your domestic issues as well because
that is something that will no doubt concern investors. you have had some violent clashes. the ruling party saying that it will not try to change the 2020 voting system. the u.s. and eu have urged calm and dialogue over the failure of the other torah reform. this might give an impression of -- electoral reform. this might give an impression of instability in georgia. what will you do if protest continued to escalate? stephen: the pictures -- maya: the pictures we are is not the that response happening in georgia. very minor, local protests because of the unfortunate [indiscernible] andave a very free trustworthy elections consistently and it is internationally proven. the main issue and the main
message from georgia is we have stability in georgia. and a of clashes that you might see -- any type of clashes you might see our very very local a very local of nature. in georgia we have 5% gdp growth. we still have the controlled inflation. we have very good prospects for the investment. standards import have upgraded -- standard import have upgraded -- standard and poor have upgraded george's reading. the prospects are very good in georgia's reading. the prospects are very good in georgia. all policies which are done in georgia are focused on investors and focused on this georgia serving as a bridge. nejra: will you give into the
protesters demands if they get worse? we are talking about thousands of people at the moment. maya: of course, the dialogue is the only way we can work with the opposition with the civil services sector as well. the dialogue is the only forum that we are following. clashes toxpect any have a bigger stale. everything is peaceful and stable in georgia. we are open to investors. we don't feel any affect of these actions to our economy. nejra: welcome to london and good luck with the eastern partnership summit. great to have you with us, maya tskitishvili, george's vice prime mr.. trade uncertainties after the u.s. congress passed a bill on hong kong. more on that next. that is what the markets are sort of focused on, although we see quite low volatility across markets.
nejra: good morning from bloomberg's european headquarters in london. i am nejra cehic. and i am manus cranny live from beijing for the bloomberg news economy forum. it is "bloomberg daybreak: europe." these are your top stories. mixed picture for global markets as investors await updates on the trade back and forth. goldman sachs says china's economy will stabilize next year. hsbc's interim ceo tells bloomberg the nation is indispensable. >> i think shift in production,
either china or closer to the u.s., great in theory, but in practice, the production capacity of china is immense. the logistics capability of china is superb and it's hard to replicate that anywhere in the world. manus: enter lagarde. markets brace for a first policy speech from the new ecb president at the new economy forum in beijing. the german deputy finance minister tells us there should be progress on a banking union by december. >> i think it's a question of whether we will have something definitively agreed in the next two or three weeks. i think the key thing is that there will be progress soon. we definitely aim to see first results in december. and a new pickup line. elon musk looks to entice new
buyers as he unveils a electric powered cyber truck in los angeles. we are live from the event. nejra: welcome to "bloomberg daybreak: europe." with confusion over trade talks and a holding pattern in markets, i want to talk about two big views that have come out. goldman seeing stabilization in earnings and global economy in 2020. they see upside in a number of cyclically sensitive assets. they see a baby bond bear market that takes the 10 year treasury yield to 2.25 in 2020 but citigroup taking the slightly opposite of you. manus: they are -- opposite view. are.: they they say everybody that has ripped their way out of the duration trend, this is an opportunity for you to look at a
stagnating economy next year. they want you to reenter long-duration trade, reenter your tips. it's not that they say it is going to fall apart. they say, look, global growth is not going to be so robust that it will sink the dollar. to the other side of the market, you have citi, that's called a bid and an offer and that's what makes the markets. how are futures? nejra: no go go global growth from goldman. let's look at german gdp numbers. we have a confirmation in the final reading of the third-quarter gdp, 0.17 growth in the third-quarter, which confirms that germany did in fact just about skirt that technical recession in the third quarter. that number just coming through now. we see the euro slightly bid above 1.10. in terms of the futures, we had six weeks of gains for global equities. this week looks like we could actually see some losses. ftse futures up on the front
foot come up 0.25%. 0.25%.t foot, a bit of a risk off week in equities, manus. manus: let's have a look at the bond market. if we played the bid and offer side of goldman versus citigroup are saying, the bond market is not going to completely fall apart. it would seem that they do not see it as being a moment where the market really unpacks itself. we have had three cuts from the fed. there seems to be building consensus that it was not that benevolent of the fed minutes. the german data is incredibly important. it was the litmus test on where we are in the european growth story. what if we do get a delayed phase one deal? even though the chinese have invited more members from the u.s. to come to beijing to talk about trade. .1%rd-quarter gdp up 0 a baby bear market. i haven't heard a lot of phrases
in my time. when a bear market starts on those bonds, they usually go like a river. let's check -- ripper. let's check it on the rest of the markets with david inglis standing by. how are you? >> it kind of tells you what kind of growth environment we are on where .1% growth is not seen as very bad. we are looking at options here, one and three months. one is implied volatility. it is a bit above where you are on the blue line. december 15 is essentially when donald trump has threatened to impose additional tariffs on china. even though it is common, there is a bit of movement and positioning and perhaps hedging happening when it comes to the chinese currency. one month from now encapsulates that date and perhaps a little bit. more this is what asia is looking at.
second straight week of losses following three weeks of gains. a lot of event risk. at talk about trade and in hong kong, this weekend will be local elections, which might present somewhat of a potential flashpoint when it comes to these flashpoint. the currency, the south korean equity market has in fact just clocked in its worst week since early august. that sort of encapsulates what the mood is like as we wrap up this trading week. back. . to you guys nejra: david inglis much.g kong, thank you so china's chief trade negotiator is cautiously optimistic about reaching a phase one deal with the u.s. the viceold bloomberg, premier has invited robert lighthizer to china for taxes month. the u.s. congress -- talks this month. the u.s. congress voted in favor of legislation supporting hong kong protests. quinn spoke at bloomberg's
economy forum in beijing. >> i think there are some long-term shifts taking place and i think we are getting much more regional in the supply chain so that you are closer to your customer. i think the emergence of consumer markets in asia, china, and the rest of asia are forcing people to put their supply chains closer to the consumer markets. there are long-term shifts and buying patterns -- in buying patterns. there are also tactical changes taking place as a consequence of trade tensions. that is definitely happening as well. i would put more emphasis on the long-term shifts rather than the short-term tactical changes that are taking place. i think shifting production out of china or closer to the u.s., great in theory, but in practice, the production capacity of china is immense. the logistics capability of china is a superb and it is hard
to replicate that anywhere else in the world. i think you also have to face reality, china is an extremely efficient and substantial producer and it is harder to shift that overnight. nejra: joining us now is joseph little, global chief strategist at hsbc global asset management. great to see you. bond -- aeing a baby bond baby bear market and a rally in risk assets in 2020 on growth.ation global they're economists saying the biggest risk to the picture of stabilization is a breakdown in the u.s.-china trade talks. do you still want to be invested in cyclically sensitive risk assets with a prospect of a breakdown in trade talks? joseph: great question. the discussion around trade uncertainty, political uncertainty has been the viral narrative all year for financial markets. we think we are in the age of uncertainty. what i mean by that is that
there are a number of really critical unresolved political questions, policy questions. questions.onomic only a few months ago we were all worried about global growth recession and a more significant slowdown in the macroeconomy. this age of uncertainty dynamic is the key challenge for investors. the real interesting observation is that despite the fact that we have had an awful lot of uncertainty this year, it has been a very impressive year in terms of investment market returns overall, whether we are focused on fixed income or equity markets. the challenge is how these forces play out from here. uncertainty.ect we have to be realistic about what that means for growth and investment outcomes. what i would say is at this point, we still want to be pro-risk in terms of our investment strategy. manus: this is where i love the phrase that you are using where you are saying compounding the carry for multi-asset investors. . if you take goldman's jumping off point -- good morning, i
should say. how rude of me. what is the compound carry trade for china and the regent -- region? joseph: good question. we like this idea of compounding the carry because it is reflective of this idea that we do not want to be too aggressive in what we can assume for market returns at this point of the cycle and in terms of the macro performance. i think asia is a really fascinating region at this point. it is unloved, relative valuations are attractive. we are beginning to see some evidence that the forward-looking economic indicators are beginning to improve. earnings momentum is beginning to return. data on the tech cycle, trade cycle is looking better and better. , think open economy asia emerging-market equities continue to look like a really interesting part of the world for asset allocators as we go forward. nejra: does that positive
momentum in asia feet into europe as well and make you more positive on europe going into 2020? joseph: european risk assets in particular are very well priced. versus their own track record in history. if we can begin to see and feel more comfortable in an environment where global growth is improving, asia demand, asian growth momentum is beginning to improve as well, that is the state of the world where european equities really begin to perform strongly. . the interesting thing in europe is that we were already seeing good internal dynamics, i would say. the banks are outperforming since summer, so since the most recent innovations in the ecb, the banks are outperforming. that is a critical signal for what's to come forward. manus: do you think that is driven by demand from the real economy? which has been the great debate. we had a couple of guests that
said if you throw money at the system enough, you will create the demand. you have doubters of that. what do you think the outperformance on the banking side has been or why? joseph: i think really it is linked to policy. i think it is linked to what the ecb has been trying to achieve and seems to finally have achieved after the recent policy innovations that we have seen. tieringevelopment of and the dual interest rates in the euro zone is a really important development for banking sector profitability. ae ecb finally got us to situation where they can provide liquidity to the macroeconomy and also support financial intermediation by reducing cost of capital for the banks. i mean, really, if you have the other scenario where you are just providing rate cuts, qe but the banks are still suffering, anyway, that is a form of monetary tightening still.
you are so dependent on the banks in terms of pushing capital through the economy. this situation that we have reached since the middle of august where we are beginning to see liquidity being provided by constructive policy and the banks performing, i think that all goes pretty well for the european economy going into 2020. nejra: what about the outlook for inflation? goldman says stay long 10 year u.s. breakevens. how are you treating inflation -- trading inflation? joseph: i think it is very interesting. we also like u.s. tips. i would see it more as a case that inflation is a neglected risk by investors at this point. we rarely hear on the bloomberg news articles lots of anxiety at the moment around inflation outlook, quite simply because there is no evidence of cyclical inflation really picking up and
macro data -- really picking up in the macro data. we still think we are in a scenario macro economically where inflation is pretty controlled but neglected by the markets. the odds i am being offered by the market to have that in my portfolio are really attractive. that is a nice hedging characteristic we can build into our multi-asset per folios -- portfolios. manus: ok, joseph, a nice healthy explanation on how to have a little bit of a hedge on inflation in the back of the portfolio. joseph little joining us. good to see that he did not disagree with his interim ceo. let's get your first word news now. let's get to hong kong. >> thanks. indicted on charges of bribery and fraud. that's the latest setback for israeli prime minister benjamin
netanyahu. is the nation's first sitting leader to be charged but he is hitting back, accusing law enforcement of trying to stage a coup.all inclusivethis as an -- as an inconclusive election -- we have learned the private comments made by judy shelton to month.xecutive last she called into question whether the fed should operate free of political influence, adding that political criticisms of the institution are healthy. i fear this is all going to blow up. those were the words recounted by fiona hill to the impeachment inquiry. she says she told that to u.s. envoy gordon sondland when he was not forthcoming to the staff but she says she now understands why. he was not involved in security or foreign policy, but instead, she says, a domestic political errand. >> the cost of this investigation, i would ask that you not promote politically
[indiscernible] has republicans and democrats ukraineeed for decades, is a valuable partner to the united states. i refused to be part of an effort to legitimize an alternate narrative that the ukrainian government and ukraine, not russia, attacked us in 2016. >> global news 24 hours a day, on-air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: thank you. billionaire louis bacon is quitting the hedge fund business after several years of poor performance. he will return outside investor's money. it is a latest fallout from a difficult year among hedge fund managers. . with maurice dani burger. how difficult has -- with the more is dani burger -- with more
is dani burger. how difficult has been? >> this year, it has been particularly difficult. over the past eight months, hedge funds have seen their clients withdraw cash very steadily. it was only february of this year that hedge funds did not see withdraws. this is the longest stretch since the financial crisis. it has to do with fees and performance. on performance, we can look at the hfr global hedge fund index in the white compared to a very cheap vanguard s&p 500 etf. there's about 20 percentage points separating the performance of the two. i mentioned the vanguard one was cheap. this one in particular is only three basis points in terms of its expense ratio. you compare that to hedge funds, the typical model of two and 20 and it is very difficult to justify those fees and justify investors staying with you when you have a spread that looks like this. manus nejra?
is 7:21 a.m. in london, 31 minutes away from the start of cash equity trading in europe. this is "bloomberg daybreak: europe." i am nejra cehic in london. atus: and i am manus cranny the bloomberg news economy forum in beijing. bank of america's ceo says the u.s. has no need for negative interest rates because it is a strong economy, like other regions -- unlike other regions. his comments, as the ecb itself pointed to the potential side effects from loose monetary policy on wednesday.
debate. a great let's welcome our next guest to the show, viswanathan shankar, ceo of gateway partners. the flow of money, negative rates, the great rate debate. i want to start with that concept, that negative rates, we hear the smith that negative hear -- here this myth -- this myth that negative rates are pushing up -- viswanathan: it is true. negative rates have the effect of creating an asset bubble. some valuations are high because you can deploy leverage at very low risk. manus: where is the most at risk? viswanathan: look, any asset against which you can borrow and borrow significantly is at risk. any place that has got easy, cheap money, like the united states. days, weu spent two
bumped into one another a couple corridors.ound the i want to get a sense of the conversations you have had around the flow of money in private equities. how is the trade angst impacting the private equity in our region? viswanathan: it has been a fantastic forum. great session, great conversations, great set of people. peopleow interest rates, has led to absurd situations where companies with ccc ratings are able to raise money in some markets so it's crazy. if one were to believe that interest rates will remain low in the long run, people need to look at assets including but not limited to private equity. that is the first point i would make. the second is, of course a lot of the discussion today is about u.s.-china trade friction.
when two other fins fight, the ants -- when two elephants fight, the ants get crushed. if you look at trade and investment flows across certain other corridors, such as china into africa, india into africa, intra-asian trade, you get -- look at even china into uae, that is still growing. china-africa trade i think over the last three years has grown by 50%. india-africa trade over the same time has grown over 40%. intra-asia trade has grown by 25%. there is still growth happening. manus: we talk about our home region, the uae, you have exposure in africa and asia. you are seeing the potential for more deals within gcc? viswanathan: yes, absolutely. we are close to consummating a deal. manus: are you going to tell me
which country? viswanathan: not yet. at the appropriate time, yes. we are excited for the opportunity. particularly things like the change in the social and cultural context in saudi is creating opportunity. manus: i was in saudi 10 days ago. a very global ipo has become very regional, 1.5% to go. is it disappointing or is that just media criticism? viswanathan: look, there is a time and place to grow global. . there is a time and place to go local or regional. it is a function of evaluation -- of valuation. i assume the people at aramco thought this valuation would keep the ipo small and domestically. right now, the fish are willing to invest at the right valuation. manus: what does it mean for global flow of money into the kingdom and our region? i think that is the most
important point because this is a litmus test moment. viswanathan: i don't think this changes the long-term or medium-term direction of the attractiveness of the market. clearly, there are always challenges and risks and opportunities. you can answer it in the macro, but ultimately, investors looking very micro at each situation. is a valuation right? is that a compelling attractive buy in relation to opportunities elsewhere in the world? atus: do people talk to home, are they tempted to buy this ipo? viswanathan: i have not spoken to them. manus:manus: the next time i see you, i need to know more about the ipo and your next -- take you so much for joining us. that is my guest. we are wrapping up. new economy forum 2019. great and amazing experience to be here in china, beijing. some pretty amazing people.
♪ manus: good morning, this is the european open. i'm matt miller here in berlin. today, the markets are muted. investors await further details on trade talks here in europe. it's all about christine lagarde's big speech on monetarily policy. the cash trade is 30 minutes away. matt: lagarde's debut, the e.e.c. president gives her first speech.