guy: here at the top stories we are covering. the fed wants and rising trade tensions could trigger a big asset price drop. speaks atthe chairman noon eastern and we will bring that to you live. brexit break down. the bank of england is about to publish the effects of breaking away from the e.u. we will bring that to you live. 600redit is forced to pay more pounds. is on the other side of the trade. let's talk about the markets and show you where we are in europe. we are still waiting for the main event of the day and that event of theent --

day and that is the fed chairman, j. powell. the market is ending fairly flat and the market is cautious going into powell. look at that. everybody getting flattened as we await for carney and then powell. we saw a built in the crude market that is having an effect with brent. 1% and nowding down we are down 1.5%. build than wegger were anticipating, but enough. we are waiting for the fed meeting to come up and waiting on the from saudi arabia issue of crude prices. what do u.s. markets look like? here's abigail doolittle. abigail: once again, we have the balls and the fire is out -- we

have the bulls and the fire is out. is the longest winning streak since november. a bit of a reprieve in the selling action we saw. we do have weakness for the semi down .5%.stock, tech is strong on the day. let's look at some of the tech winners. apple up .9%. a big reprieve. marketshares in a bear -- those shares in a bear market. salesforce is up. they boosted their guidance.

we have had lots of bearish action. could the three top performers build into something? futures, we see a sideways range between the bulls and the bears. right now, we have a varied interesting battle -- a very interesting battle. this chart is relatively bears -- relatively bearish. perhaps buyers will step back up. lots of movers in the retail section. tiffany down 11.4%. slowinging to do with tourists buying. out ofave strength

burlington stores. vonnie: abigail doolittle, thank you for that market update. banks will perform best in 2019? if only we knew in advance. he banks in europe, japan, and u.s. are all in the red by a lot. michael moore joins us now. which banks will do best next year? is as goodur guess as mine, but it depends on what you are looking for. are you looking at a region where banks have been beaten down the most? that would be europe. the u.s. is 30% above book value. so, if you want something that is a come back story, you are looking at europe. if you are looking at moment time, you are looking at brazil

where the banks have had quite a rally. and then in the u.s., it has been a mixed tale. rates are not providing quite the boost that some expected, although privates -- although profits are near records. makemichael, what do you of unicredit's bond deal? we understand it was with pimco but that has not been confirmed. sized europeant institution that is now placing six times the cost of capital that it did at the beginning of the year coming europe will face some really tough times going forward if those are the numbers they have to deal with. michael: certainly not a great indicator for the european bank, but it is specific to the italian bank. they are trying to lock in some funding, given some of the macro

concerns about the fight between italy and the e.u. over those budget concerns. i think this is a little bit of a one off. you may not see this with other european banks, but the cost and the funding is significantly higher than in the past. vonnie: we are seeing a whole new cost -- cast of characters. are there any more places that can be filled at this point? michael: we have seen a number of turnovers across the european banks over the last few years. deutsche bank is not done. they have replaced a couple of people on the market side, and they are looking at replacing some of the key executives the deal with regulators. is coming after some frustrations on the regulatory cyber deutsche bank has not been able to get on top of all of its problems. seems like every time they do something, something else is popping up.

you have the danske issues now. there could be more to go. the new ceos to relatively recent in his role. for deutsche bank, again, you and notuld be a one off an indicator for the whole sector in that region. ceo we were talking to the of unicredit a few minutes ago, he was questioning the idea that the ecb could raise rates in 2019. michael, if the ecb is unable to raise rates and if we continue trading off 30 basis points, how on earth to the european banks find a solid footing to generate some momentum going forward? it will be really tough. michael: yeah, that is the issue they have faced the last few years, which is, can they get a tale winds to the revenue pictures? the picture has been so much

about cost-cutting, and i think they have made some progress. they would like to see a little help from the revenue picture, and a lot of that is outside of their control. notou mentioned, it rates going to give them help, it will be tough to bring a profitability picture closer to what the u.s. banks are seeing now. vonnie: michael, thank you. sorry, guy. you michael moore, thank very much. the bank of england will release its financial stability report. we will get a sense of where the u.k. banks are dealing with. have a live news conference from the governor and details of economic impact of the brexit divorce. vonnie: here is courtney donohoe. courtney: another sign of rising

mortgage rates is higher prices are keeping buyers out of the real estate market. new home sales in the u.s. fell to the lowest pace in 2.5 years. single-family home sales are of $544,000.l rate skated on solid footing in the third quarter. the gdp rose 3.5%. investment iness a bigger boost from inventory -- president says the global economy has reached a turning point. -- he toldmakers if lawmakers about the economy. union has unveiled its long-term vision for fighting climate change. you outlined a strategy for

carbon neutral -- they outlined a strategy for carbon neutral issues. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm courtney donohoe. vonnie: thank you. coming up, we are going to die into the market wars -- we are going to die into the market wars. we will hear from an interview about g.m.'s decision to close plants and cut u.s. jobs. this is bloomberg. ♪ this is bloomberg. ♪

♪ i'm funnyom new york, claim. guy: and from london, i'm guy johnson. this is the european close in: "bloomberg markets." vonnie: let's look at the supermarket industry. frans muller is a ceo of supermarkets in the u.s. and europe. us about the year ahead. what do you see for the supermarket industry? frans: thank you for the question. there are a lot of things going on next year in the supermarket industry. we will stay very competitive. technology will play a more important role to make the customer for journey more efficient and more rewarding. technology will be very

important to reduce our cost. customers will be more interested in a unique channel solution with a combination of stores and online to have always a choice to pick up goods, click and collect online, or come to beautiful stores. and customers are very interested in total transparency in the food chain. we had that romaine lettuce problem. full transparency and how food is produced are big trends in 2019. vonnie: what will be the things that differentiate the way you operate in the u.s. from the way you operate in europe? i am talking about the economic headwinds. frans: in the u.s., we have a different economic climate, low unemployment, good growth, and confidence from the customers is coming up. it will be a good landscape for

the coming year to grow our business, but it is very, very competitive with online growing. we have to be very precise on our customer proposition and make the difference with great, local brands. close to theeing community with local farmers. guy: it is guy in london. are you facing any effects of the trade tensions that are rising around the world, particularly between the u.s. and china? but there are other factors as well. is this fading through to any of your costs? frans: none at the moment. -- not at the moment. the source the majority of our products locally. that means we have 90% of our products locally. thethat is why international trade wars is not

a big effect on us. trader,ader, -- as a when you have these issues, it is never good. to pay your having staff more in the united states? frans: we have a policy that we are compliant with legislation and if minimum wages go up, our levels go up. of the totalntage workforce on of minimum wage, we pay very well in the u.s.. , it iscompany like ours important that we pay according to market levels and have high engagement with our people and have an interesting workplace. vonnie: if oil prices come down thatantially, how is

impacting what your customers will spend on average in a store? to seeit is not so easy what customers get more disposable income, where that money goes. we see a few things going into 2019, care items and in it will come closer to the grocery channel. hopes forat are the next year in terms of margins, in terms of making up more of that market share that maybe amazon has taken away in recent years? gained marketpany share, 20 basis points, and the last year. we are gaining market share. we are winning in the markets where we compete, but the markets will become more tense. we think we can benefit having strong positions, but in europe, you see there is more tension in the european marketplace. will keep on as

the markets become more efficient. guy: one final question, what does the european market look like right now? there is a possibility that the ecb will start typing policy. end ofpe ready for the stimulus economic policy, or do they need more help? frans: at the moment, of course, we have a number of things in europe where people might get disappointed about. brexit thing is a loose situation. we see more protectionism in europe. but overall, with 500 million in memberand more states, the beauty of diversity overall, one single market is great news. we see with the introduction of

gdp and the directive of data protection, also europe can do a lot of things, which is in the interest of the single market. one single europe is also strengthening itself. you.e: frans muller, thank

♪ vonnie: the pressure is building on g.m. as the announcement plants are closing. our correspondent spoke to senator sherrod brown about g.m.. sen. brown: it is impacting the entire country because it is 14,000 gm jobs directly and thousand of other jobs. the president said, we would never close a plant down. and then, the first year not the scum of the president pushed a 50%cut bill that gives a

off coupon for companies that move. you move from youngstown, ohio to mexico, you get your tax rate cut in half. [indiscernible] sen. brown: they got $500 million for the tax deal. if they set up production in mexico, they pay a 50% less tax rate that they are paying now. >> americans are scratching their heads. gm was bailed out after they filed for bankruptcy, and the president is saying that gm has to return some of that money. sen. brown: i don't know how he makes that happen. don't forget, the contribution the president made for this move. if gm moves to mexico, they would pay 50% of taxes. ,he president talks a good game but he is contributed to these companies moving offshore. he has threatened a lot of

things. introducedpport -- i legislation months ago that takes away the tax break that encourages companies to not move buyseas and incentivizes to in the u.s. >> for me ask you. in the same breath -- let me ask out in have ford coming the same breath that there could be closures with ford. they said the trade policies have cost them $1 million -- $1 billion or so. sen. brown: it shows the whole populism,this phony where you criticize some to distract from the the trail of workers -- from the betrayal of workers.

this is undermining the by of american workers. >> what is your message? sen. brown: my message to gm is don't move offshore and cut american jobs. but my message to the president and the congress is fix the tax law so that we build incentives into the tax law to keep jobs here and not to send jobs overseas. >> you are calling it phony populism. considering running for president. what will going to the calculation for you or your family? sen. brown: i really had not thought about it until this election. my wife and i are pretty overwhelmed from people suggest i run because of my message about the dignity of work. we do not honor work in this country. whether you swipe a badge or work for tips, we -- people who work hard ought to get ahead in

that is not the case for young people. we got to go back to getting opportunities. the white house looks like a place for wall street executives. >> this is a serious decision for you and your family. you have a timetable? >> i have no timetable. people don't want to hear about this stuff this early. the first primaries are 14 months away. this is not a dream i had all my life. whether i run or not, i hope the message of the dignity of work in fighting for workers, however we define workers, that becomes the narrative. final question, ohio, ohio, ohio. said of folks i talked to it should be red and you won by double digits. how did you do it? sen. brown: it is becoming a more conservative state.

end, people want to know, do you have my back? are you on my side? that is what my career has been dedicated to. importancehonor the of work. minuteshave got three until the end of trading in europe. event at theh the top of the hour, markets are very, very cautious. london trading north of the 7000 mark. the "european close is next -- the "european close" is next. this is bloomberg. ♪

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start the countdown into the g20. a number of reasons why you may want to take risk off the table, and maybe that is what we are that isnd those -- and reflected in the numbers. the ftse 100 trading down. under a little bit of pressure, but the market is absolutely flat heading into the closing process. europe feeling quite cautious. we will be here for mark carney shortly as well. the timing of that is interesting in and of itself. let's talk about the stocks we will be watching. tenaris is trading down quite sharply.

unicredit raising money today. the stock rising 2.2% today. we are feeling and affect coming through from the assessment that the government has laid out, vis-a-vis the brexit divorce scenario that we are looking at this point in time -- looking at at this point in time. it could be worse if there is a no deal brexit. a quick look at what the volumes look like. a pickup we have seen with volume coming back to normal. we are a little light. the market getting more neutral as we head into some of the key, risky events over the next few days. vonnie: the dow is a little bit stronger ahead of the g20. up foril industries were

an intends week -- intense week. downto 10 spread is back to 22 .5 basis points. -- 22.5 basis points. and then, keeping an eye on the women be -- keeping an eye on the reminbi. in when it's iris, some of the domestic asset classes. japan is up by 1.8%. you can see bounceback in some of the trading -- of the trade year commodities like sugar.

and then you can see in the currencies, not seeing huge movements. eventet's talk about an that is about to take place and we are wondering when it will take place. 's first up england with the governor mark carney due to speak soonish. at the top of the hour, we will hear from j. powell around 10:30, noon and the united states. our editor of bloomberg economics joins us. the bank of england will layout its assessment of the brexit divorce effects. have we really learned anything new in these assessment in your view? >> probably not.

the treasury number that came out today was not inconsistent with other organizations, the national institute and others came out with a number of those. it certainly looks like the weks will be consistent and will not know what the treasury will do, too. you will see some numbers will beng brexit negative for growth, and mark carney will be very mindful about the brexiteers going after him again, trying to spread fear. but i think the reality is, a growing consensus as the u.k. economy slows that a lot of it has to do with brexit. and down the road, it will hurt. that is what mark will do, he will try to walk in narrow line so he doesn't get too political, but i suspect he will have a number not inconsistent with the treasury has been putting out. guy: what is your assessment?

>> what has been interesting about today and this range of options that the treasury put on out orle is pricing calibrating the cost of sovereignty. that is what the brexit debate was about. we get caught up in brexit will hurt the economy? all of the output shows the range. you have to decide if sovereignty is worth much? i think it hasn't been mapped out so clearly have a different variations effect the economy, even though we have had similar analysis. we get ahat happens if severe difference between the two scenario and the bank of england's assessment today? danny: i think you will see some differences in all of these

forecasting's. i agree with stephanie. this is a range of things trying to put on numbers. we don't know where they will go, but it is in the context of the slowing economy, and their pain commission in the last couple of weeks has forecasted in 2019 and 2020, the u.k. will be the slowest-growing economy in europe, so the data is starting to be consistent going forward. i think there will be a range of things, and i think that mark will not try to scare people too much, but the biggest downside risk to the u.k. economy is brexit of areas forms, so he will try to say that we need to be mindful. hope for iscan nothing to could do better in the worst will be horrid. stephanie: danny mentioned the downside risk.

none of these assessment we have seen today are talking about the short-term, car crash cost of us really falling out of the e.u. when theresa may is scaring are those to somewhat alarm with the process of not exiting the e.u. without a deal, they are not really talking about the no deal scenario that is being assessed by the government. but we are talking about chaos with the customs' border and planes not being able to take off. that could be really bad for the economy in the short term. you would not be able to model that or see it show up in a 15 year cost necessarily. vonnie: u.k. government is saying a 15% gdp shortfall in

the few years. with that be a -- would that be enough to scare parliamentarians to vote for something they don't want to vote for? stephanie: something that actually gets worked out over time a set of the worst things to happen, which you could talk about in the immediate scenario, but what they are talking about is not having a proper trade deal with that you -- proper trade deal with the e.u. gdp, i years, 10% of think he highlighted those. in the context of the slowing u.k. economy or world economy coming even a few fractions of gdp growth suddenly seems that the bigger cost now then when you were growing at 2.5%. guy: that is a long-term

prognosis, but talk about the issue of the chaos. do you have any idea of the magnitude of the economic impact if there were to be a no deal in the first 12 months? danny: i agree completely with stephanie. enumerate,hard to but it will look actually horrible. the stories of long lines, the story about whether planes can fly, i mean, this is complete and total disruption. it is like the financial armageddon we saw in 2008. this would be catastrophic. an obvious a something people would want to avoid. i think stephanie said it very well. it is something you really have to avoid, the economy grinding to a halt, how quickly can you be started -- how quickly can you restart?

it there are so many scenarios we can think of that sound that. i think everyone is critical for something you really want to avoid. guy: yeah. you would think this is actually catastrophic. guy: danny, take us through the process. if you were to see the process happening. they are a number rating the more long-term process. a disorderly brexit, can you discuss what that means? drop and a pound declining, sterling would fall by 25%. gdp would be 1.75% higher in five years time. the bank right raises 5.5% on a

disorderly brexit. banksly shock with the raising -- a supply shock with the banks raising rates. think, we have to look at how many years this is over for that gdp, and what they are assuming for disorderly? in whicho deal brexit some basic things are agreed, like aviation? the full somelly mario? i think -- or is it the full scenario? i think with the surveys we have had, forecasters, that is what they are looking at with a no deal. guy: they are assuming that they cannot cope with a disorderly brexit. stephanie: been it is not comparable -- then it is not

comparable to what the banks have done earlier in the day. guy: some of the biggest lenders have passed the stress test. no lender needs capital. but this looks like a very severe scenario. stephanie: in a year. when you talk about project fear, i think he has become the major general of project fear because this is the absolute worst case were somehow the european union and the u.k. will -- guy: it is a massive recession. stephanie: if i were -- even people who are not supporting brexit would say, this is quite an extreme scenario, and they are talking up about some arrangement with e.u. or at the least, a last-minute delay. amenable to a be short delay.

a disorderly brexit with assume a 30% price drop. a disorderly brexit is on one part of the spectrum. which a --y world in danny: it doesn't believe look like it. that is not something on the table, but down the road perhaps. people have to get really renegotiate something. i really don't know. when they talk about a huge drop in output and the bank of england will raise rates to 5%, i think members will be looking might huge drop in output not be an argument to raise rates. that would presumably, the raising of the rates which strengthened the pound. if you did not raise rates, you may see the decline in the pound being bigger than that.

you would have a very strong discussion about falling house prices, collapse of consumer confidence, and the issue would be coming if you have that big one off shock, how might will you restore that to the medium to long-term? they should clarify the minds of those who think some cliff edge in march of next are is a good idea. we will be hearing from the governor of project fear very shortly. stephanie flanders and danny blanchflower, thank you. governorring you the of the bank life. this is bloomberg. ♪ is is bloomberg. ♪

vonnie: we're moments away from a news conference with bank of income's governor mark carney after a report that the boe is warning a disorderly brexit could unleash but they are calling a savage recession the gdp dropping 8% and inflation accelerating 6.5% and unemployment 7.5% and britain going from migration to outflows of people. 25% below theng dollar. house prices down 30% of commercial property prices down 48%. let's bring in bloomberg's charlotte ryan and still on the phone is danny blanchflower. disastrousthis is a scenario being painted here. werlotte: one of the reasons are not seeing big movement at the moment is this is the

worst-case scenario and it is not a surprise to anyone that under such an extreme scenario, you know, the pound would fall to around. tea with the dollar -- around parity with the dollar. we are looking at the short-term play around the second referendum. outweighing the longer-term concerns. we were talking before the details came out and you are talking about how difficult it would be to a number rate the effects -- it numerate theeven mor effects. is the banks a better place to model at, or do they have to do that because of the mandate? danny: it has to do it. it is a tough thing to do.

in some sense, they set themselves up by continuously saying brexit, an orderly brexit line -- guy:t -- down.vernor has just sat that it will be a spicy press conference as a result of the no deal scenario that has been laid out by the bank of england today. remember, we have the stress test details coming through as well, but the no deal scenario is what we are hearing. mark: i am maintaining monetary and financial stability, meaning resilient and reliable financial systems that are there for u.k. households and businesses in good times as well as bad. the bank focuses on the

necessities of price and financial stability so that people can focus on what matters most to them, which is buying a house, saving for education, or buying a business -- or starting a business. outlook is the nature and timing for brexit. the bank has done everything we can to ensure we are ready for brexit, no matter what form it takes. the core of our financial system is strong. major banks have capital ratios 3.5 times higher than before the financial crisis. we have worked closely with the u.k. government and authorities and european partners to manage possible risks of disruption to the financial system and our institutional framework is robust. the bank has clear objectives and all the necessary tools, and financial to deliver and economic agreements. the bank is publishing two

documents today. the first is the financial stability report that details the current risk to financial stability and they run beyond brexit. but it also includes our latest stress tests a major u.k. banks. secondly, our response to the house of commons' treasury committee request for the bank to deliver our objectives. specifically, the tsa requested the bank focus on the consequences of a potential economic partnership with the e.u. and a no deal, no transition brexit scenario. libby began by stressing what these analyses -- let me begin by stressing what these analyses are. illustrate what could happen, not necessarily what is most likely to happen. requiresscenarios making assumptions about the form of a new relationship between the ek -- between the

u.k. and the e.u. with cost concerns and responsive macroeconomic policies. [no audio] economic relationships and the transitions to them. together, the scenarios highlight the impact of brexit will depend on the direction, magnitude, and speed of the affect of reduced openness on the u.k. economy. of direction of the effects the reduction and openness is clear. demand, acity, weaker lower exchange rate, and higher inflation. the magnitude of these economic impacts is modeled using established empirical relationships and a disciplined

model to ensure their coherent. the speed of adjustment is less clear given the lack of precedents of reduced openness. the worst-case scenario assume that adjustment to the integration happens more rapidly than it has over the past decade. this assumption is grounded by crosschecked including case studies and intelligence from the bank's agents across the net kingdom -- across the u.k. turn to a few observations, starting with the economic contribution. the scenarios reflect government policy that are most relevant for the npc. they show the sensitivities key elements of the new partnership yet to be negotiated, such as customs and regulatory checks,

the degree of nonparties barriers to trade and equivalence determinations for financial services. , gdp isive years lowern 1.25% and 3.25% than it would have been if the economy had continued growing at its may 2016 trend rate. relative to the bank's most recent forecast in november, inflation is lower in both scenarios given the appreciation of the sterling. it rises as the transition period ends due to the fading effects of that depreciation and in the less close partnership scenario as custom barriers take effect from 2021. a mechanical model of monetary policy generates a gently rising path for bank rate over the scenario. this should not be taken as a prediction of the actual path for bank rates, which will depend on the balance of the

effects of demand and exchange rate. deal in nono transition brexit, there are a range of possible outcomes in the event of that, consistent with the agreement to protect and enhance the brazilians of the u.k. -- and enhance the resilience of the u.k., they have focused on two variances labeled this orderly and disruptive, underpinned by the worst-case assumptions. in bolsonaro's, tariffs and other trade barriers -- in both cases, tariffs and other trade barriers will be introduced next spring. disorderly severe or scenario, the u.k.'s border infrastructure does not go smoothly with requirements for some time. there is an increase in the return of investor's of holding

assets. by the end of 2023, gdp is 10% lower compared to the may 2016 trend. despite the sharp contraction of unemployment rises to 7.5% lesson during the financial crisis and that reflects the supply-driven nature of the downturn. fold in sterling alongside the imposition of tariffs pushes up the cost of imports and cpi inflation peaked at 6.6%. in line with it, the in pc does what it can to reduce its inflation target. , that is and you mechanical calculation. the fcc has assessed the resiliency of the financial system, and the key findings

are, based on comparison with judges8 stress test, the -- the u.k. bank judges that the economy strong enough to serve households and businesses, even in the event of a disorderly brexit. to calculate the major u.k. banks will still have capital ratios around three times higher than they had before the financial crisis. i would -- i will ask you that the bank's stress test is 2.5 times more severe than the brexit scenario, the worst-case brexit scenario i just described. that is what is being prepared for all eventualities requires. secondly, major u.k. banks have withstand anty to major, financial disruption. additionalcess an

300 billion pounds of liquidity through the bank of england's regular facilities. major u.k. banks can now withstand many months without access. thirdly, they have worked with other authorities to assume most risks of disruptions have been addressed. back maingard, to actions remain -- two main actions remain. passed for ato be fully and functioning regulatory framework for financial services to be in place ahead of brexit. dear pain commission needs to provide greater clarity to reduce disruption in derivative markets following their recent statements. haslly, the bank of england put extensive contingency plans in place to support institutional resilience and market functioning during any

period of heightened uncertainty, as we did around the 2016 referendum. are closely monitoring market developments and can land in all major currencies, and if in all major currencies and if required, stand ready to cut the buffer if economic stress were to materialize. the bank's ability to achieve objectives also depends on the transition and end state. the preparedness of business and infrastructure, such as ports and transportation operations will be important determinants of how well the economy adjust to new trade barriers. evidence from surveys and other u.k. authorities suggest the country is not we prepared for a cliff edge brexit. surveys suggest less than half of businesses have initiate