| Welcome to your morning markets update, delivered every weekday before the European open. Good morning. China made a trade threat against Germany, the U.K. prime minister is preparing to re-shape his top team and there's a big food ingredients deal. Here's what's moving markets. China Warns Germany Investors reacting to an apparent easing in international trade tensions might not be celebrating for long. China's ambassador to Germany threatened Berlin on Saturday with retaliation if it excludes Huawei Technologies Co. as a supplier of 5G wireless equipment, citing the millions of vehicles German carmakers sell in China. It comes as some German lawmakers challenge Chancellor Angela Merkel's China policy with a bill that would impose a broad ban on "untrustworthy" 5G vendors. Re-Shape U.K. Prime Minister Boris Johnson is preparing to re-shape his cabinet after winning a big majority in last week's election, while also on a collision course with Scotland's leader Nicola Sturgeon over the future of the U.K. The backlash against those at the top of the Labour Party following the party's landslide loss in the election continued at the weekend. Leader Jeremy Corbyn wrote in an op-ed that the party had "won the argument," but what matters now is who will replace him. Here's who's in the running. Food Ingredients Deal A $26.2 billion deal in the U.S. could impact European chemicals stocks today. International Flavors & Fragrances Inc. reached an agreement for DuPont Inc.'s nutrition division, prevailing over Irish dairy firm Kerry Group Plc as it continues to expand in the fast-growing food-ingredients business. The deal is the latest as the food-flavoring industry rushes to consolidate as growth slows and flavor makers contend with volatile raw-materials prices. Markets Equities were lower in Tokyo and Hong Kong and little changed in Seoul, while U.S. futures edged higher after the S&P 500 closed little changed on Friday. While the clearest impact from Friday's U.S.-China trade announcements was avoiding a scheduled tariff hike, it's less clear how China will follow through on pledges to boost American agricultural imports, perhaps containing gains for shares. Meanwhile, the pound extended the post-election rally, and in commodities, oil slipped back below $60 a barrel. Coming Up… We'll get euro-area and U.K. purchasing managers index data following months of woeful readings, while Chinese industrial production and retail sales data beat estimates earlier. In earnings, Swedish fast-fashion group Hennes & Mauritz AB updates, as does Mike Ashley's Sports Direct International Plc. What We've Been Reading This is what's caught our eye over the past 24 hours. And finally, here's what Cormac Mullen is interested in this morning Hedge funds are beginning to back away from their bets that the risk-on market mood will keep smothering volatility in equities. Speculative net-short positions in futures linked to the Cboe Volatility Index have fallen from last month's record high for three straight weeks, the latest weekly Commodity Futures Trading Commission show. Volatility remains subdued, with the VIX trading close to its year-to-date low as the U.S. and China agreed to the first phase of a broader trade deal and global economic indicators show signs of improvement. While, the latest position data came before the trade deal agreement was confirmed, market reaction since suggests the fast money players weren't wrong in dialing back on their bullishness. U.S. stocks fluctuated before closing flat on Friday and Treasury yields gave back much of their previous day's gains. As always, the devil is in the detail which seems to be lacking in the trade agreement -- the key market driver for much of 2019. And with the end of the year rapidly approaching it's a reasonable bet hedge funds will continue to reduce their short exposure to volatility before reassessing how the land lies in January.  Cormac Mullen is a Cross-Asset reporter and editor for Bloomberg News in Tokyo. Like Bloomberg's Five Things? Subscribe for unlimited access to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Before it's here, it's on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can't find anywhere else. Learn more. | 
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