Repurchase and announces a new Global Wealth management unit. A very warm welcome. This is bloomberg daybreak europe today. I am joined by matt miller in berlin. We need to talk about whats happening in the markets and the breaking news coming out. Breaking news out of sanofi. The wall street journal is carrying this news over the last 24 hours. A company. D buy this is a touch above the number reported in the reports over the weekend, suggesting 11. 5 billion. It is expected to start in february 2018. They are giving us various details about the kind of eps secretion we will see as a result of this deal. This represents Something Like a 65 premium to fridays closing price. Strategy in with the of the business, trying to add treatments from layer Blood Disorders to the portfolio over at sanofi. Sanofi looking to offset some of those that of theen fading because insulin drug. That is the backstory. 100 five dollars per share in cash. A 64 premium. Lets talk about the Broader Market action because the u. S. Shutdown is entering its third day, one of the big stories for markets. Markets seem to be shrugging that off. We have the s p futures pointing by. 1 . The stocks market over in asia has been pretty mixed. We failed to make progress in the senate and that will be the focus of our conversations. The dollar index, pretty stable with that in mind. Balance in thehe euro. 6351, moving higher after last weeks selloff. 20 more from the russian and saudi oil ministers. Cooperation after 20, what does that mean for production cuts . Matt . Matt you talk about the euro. If you take a look at the chart, on the bloomberg, you can access this with your own terminal. G btv 9576. D up a little bit. We have been hovering at 122 and change for a couple of sessions now. Points out there is a bearish technical indicator going on right now and you have bearisheuro showing a divergence, as it is called. The reason for concern, even though the spd agreed to go alone a Coalition Talks is that Angela Merkel is no longer seen as the teflon of europe. That could be the wider european integration, even if the German Economy is taking a long quite nicely. Anna more breaking news. We are starting in a busy fashion this monday morning. Merger monday. Space. Nt in the luxury they are offering 38 euros per. Rdinary share this is big news in the fashion world. They are offering this. They are going to launch a voluntary offer. We are getting the details of this trickling through. 38 euros per share for that business. Setemont reported a solid of numbers and reported solid fiscal Third Quarter ending in december. Atording to our colleagues bloomberg in intelligence, that is likely to prolong not for long, likely to have a healthy 2018. They clearly feel confident enough to go out and do this deal. In 2007 and was boosting richemont. We see this deal. Great conversations coming up on daybreak europe. Great guests for you including our joint interview with Khalid Alfalih and Alexander Novak. We will be live in oman. At 6 45 p. M. Yucatan, the conversation with the ubs ceo. Manus cranny is waiting to bring us that conversation. Juliette saly. Juliette ubs announced a Share Buyback of up to 2 billion swiss francs, which will include 550 million this year starting in march. The bank said it will combine its Wealth Management business is to create a Global Division taking effect from the start of next month. They have been appointed copresident s of the new unit. Bring you our conversation with ubs ceo sergio ermotti. Reaffirmedssia have they will persevere with Oil Production cuts until the end of global glutclear a and signal their readiness to cooperate beyond that. In an exclusive joint interview, Alexander Novak told bloomberg russia is prepared to continue cooperating with opec even after the fire. We have seen cooperation between our countries is longterm. Regardless of whether it is in ,erms of the markets stabilization, or other areas, our cooperation is based on the agreements we find in china in 2016 in september, and over the past 1. 5 years, that will be and limiting this, it has shown a lot of success. We had a successful run. Juliette Angela Merkel has moved forward in her bid to form a fourth term government. That is after her Coalition Partner agreed to enter negotiations on the cal common platform. The question democrats will the christian democrats will coordinate, allowing talks aimed at a resumption of the socalled grand collision to begin s s tomorrow. Across the world, hundreds of thousands of people took to the for thethis weekend 2018 womens march. Demonstrations in london, paris, sydney, and other australian cities followed much larger progress across america. The event marked in the first out of three of president trumps inauguration in solidarity with women demanding equality, justice, and an end to sexual harassment. Global news, powered by more than 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Checking in on markets in asia s out theclose session. The boj decision in your part of the world from the ecb. We are seeing the hang seng. With two hours trade to go, trying to build on these record highs, although it has been in and out of negative territory. Down byi being weighed tech shares. Lets have a look at some of those stocks we are watching in the region. Noble group in singapore. Troubledd in the commodities trade. Noble jumped the most in six of an on this report interested buyer. Samsung electronics is showing you what you are seeing in korea. This is on new set up all has asked its korean partners to cut their parts to play, seeing lower demand. It is likely to boost its margins. Anna the u. S. Government shutdown has been extended into a third day after the senate deal. To broker a it began one minute past midnight after most government offices had stopped working. The deadlock means more americans will feel its impacts as federal agencies close their day. Kathleen hunter also with us. Kathleen, lets come to you first for the latest. We were told they were going to work over the weekend and there was some expectation a deal could be done. The primary action is in the senate now, so what are the next steps . Kathleen we thought there could be a vote now. They pushed that back into noon. Are they going to have enough votes for the thing they are going to be voting on . They did not on the previous thing friday night. This thing is not that different. Its basically the same proposal. It extends the february 8. What they are hoping they can get the support for this time around, because they have made some sort of vague promises. Mitch mcconnell made a vague promise to democrats. If you vote for this, then we will have some votes on providing protection. From proposals providing protection for daca, young people brought to the country. Undocumented status as children but meet certain criteria. I think the question is whether those guarantee that mcconnell are enoughd verbally to persuade democrats its not what they have been talking about in terms of the specifics. Probably not. Anna we will wait and see. Matt its interesting to me that none of the Media Coverage of questioned the role immigration in the budget shutdown. To me, it looks like the democrats are holding the u. S. Government hostage to get what they want on immigration. Does that not does that not look bad . Do they not risk that backfiring . Kathleen definitely. That has certainly been the republican narrative. They have been branding it the schumer shutdown. Republicans them have responded by calling it the trump shutdown. Not a lot of negotiation going on. Just a lot of back and forth in terms of the blame game. ,rom democrats perspective they felt like they had pretty of anegotiated some sort agreement. You will remember that amount to weeks ago. Dick durbin and Lindsey Graham were at the white house with a bipartisan proposal they brought to the president that the president rejected. This idea of protecting the socalled dreamers is something that has been out there for a while. It is republicans that are moving the goalposts by saying that is a nonstarter but certainly, each side has their own perspective on this. Anna kathleen hunter, with the latest on the shutdown. We will continue to watch that. What does that mean for market . Clearly, it has an impact. That could be short or long lived. What does it mean for markets . Rick, very good morning to you. This is btv 9327. It shows the s p plowing upwards as we have seen, and then the spike at the start is the 2013 level of news interest in the shutdowns tory. It was quite extreme. We see interest in shutdowns spiking up right now with this shutdown, but it did not derail the stock market rally. Will it this time . It came at a different time. Now, we have got an economy that is doing much better. You have top cuts. Sentiments are different. It affects the dollar as much as the equity market because this on thesentiment judgment ability to get things done. It has gone on long enough. This time, who knows . The difference is something that great. Anna you would expect that we would carry on as long as this os not to prolonged to prolonged. Stock key thing for the market is the earnings season. People are going to look at earnings and the projections based on tax cuts and think what that means. This is a sentiment issue. I think people would be concerned that the government could not get things done. Mean, thisder i if we hadfferent from one of the ratings agencies come in and say the u. S. Is getting closer to risk of default. That is the kind of thing that wakes markets, isnt it . That was definitely a different cocktail. You can remember people were concerned when treasury bills were going to measure, tuesday, thursday, and there was a lot of shuffling to avoid that technical issue, which money market funds certainly could have faced. This time around, you do not have that. That being said, at the heart of it, there is a financial issue behind this, which is to finance the u. S. Government. Matt what is your outlook for the dollar . We have obviously seen the dollar have a tough time. I have a chart here, 9017, which shows the bloomberg dollars next in white, over the last year since the trump bum has come down hard. Do you expect this weakness to continue to 2018 . Richard the weakness is strength elsewhere. Fasterozone recovery was than expected and that changed peoples expectations of rates. If we say what do we think it will be over the next year or two . It will be positive. That can be a really strong driver. It was not a strong driver in 2006. But it certainly was a strong driver in the late 90s. We would not want to bet against the dollar at this point. It is not far away from their value. We think it has got some way to go in terms of potential bullishness. It will likely stay in a range. Anna fascinating comments on the bloomberg. I was reading from devils reporters. Davos reporters. The year was very weak for dollar. With on the program. Cutting the glut, opec and what does that mean for production cuts though . This is bloomberg. We have seen that corporation between our two countries is longterm. Regardless of whether it is in , market the market stabilization or other areas who have shown a lot of success. We had a successful run. We produce around 22 Million Barrels per day. We cannot ignore each other. Cannot cooperate. Matt that was Alexander Novak, Russian Energy minister speaking interview from the meeting of opec and its allies in amman this weekend. Opec and pressure reaffirmed they will persevere with Oil Production cuts until the end of the year and potentially beyond. Joining us now is bloombergs and report. Nemariey horton an horton. Opened thelfalih floodgates, talking about 2019. When he got to the meeting, he first said he does not see the market rebalancing until the end of possibly 2019, and he said partsould be open to more of the market was not stabilized by then. He preferred not to cut but that he would be open it. I guess it is status quo for 2018, between opec and this extension deal. They might be thinking about opec and russia. They are already thinking about what they are going to be doing at the end of this year. Quo foretty status 2018. The one thing he made clear when speaking to me yesterday was that opec cannot do that alone. Novak next to alexander in a joint interview and said they need russias support for this. We need to have enough intervene atdy to the appropriate time to adjust production, to deal with fundamentals. We do not feel that opec alone can do it. Thats why we waited until we had enough nonopec countries led by russia to come together in late 2016. They made it very clear, matt want to, that they cooperate and continue working together to stabilize the market. Anna good morning. So they want to continue to work together, and given a new time horizon for that. What does that mean for the oil market . Annmarie we already saw this up ang in asia, oil ticked bit higher. It looks like it is sending a positive signal to the markets are in thing that was a dark a report it ie asked Khalid Alfalih and some of the other ministers what they think about it. He says he is not concerned about shale and you need to remember about the downturn in countries like venezuela and canada and mexico. He says if you look at it at a whole, shale is not moving the needle. Anna bold talk from the saudis. Annmarie joining us. The global cio at state street Global Advisors is still with us. The saudis talking tough. Are they right to be so confident . Yes. A few things have changed. Technology has got better so costs have come down for shale. It is the hidden factor. You just had tax reform, which means can be written off very quickly. If there is a desire to ramp up in shale production. There is leverage which may push the other way. I think that is a little bit of an optimistic view that shale cannot eat a mover. Although it is shortlived, the is veryvolution, it profound. Particularly if you get costs down. Anna they will face a communication challenge, wont they . 6622 on the bloomberg. We have been highlighting it. I was reading a really , talking aboutce the stages of the fight between opec and shale and suggesting we had round one come around two. It will be about the exit and how opec and friends managed to exit. It is clearly a Viable Technology becoming more viable. Have a globals we growth story that is synchronized. That being said, Climate Change is an offsetting factor. From a cyclical perspective, you will have more demand for the next several years because of that synchronization. Shale can make a difference to plug in the gap. Driving prices hire seems optimistic. Igher seems optimistic. Matt and the fed looks at quarte Energy Prices and food prices dont come through directly. Do you expect this to cause do you expect us to see some knock on effects from the gain in prices into inflation inputs in the u. S. And europe this year . Richard if you think about the context, when you had previously, surges in Energy Prices, when the economy was relatively weak, the context is very different. Nemployment in the fore unemployment coming down very rapidly elsewhere. Small changes like this begin to have an impact and perhaps this feed through is more likely to happen. Hotspots happening in the labor market. They may be compounding some of these other factors from transitory issues like food and energy. What about the possibility of the Rising Oil Prices . The rising price at the pump causing headwinds for consumers in respect to the Global Growth story . It could do, but we are not talking about a rise at the moment. The west gas prices reaching levels people have not seen before, we are a long way off having the writing impact on particularly the u. S. Consumer. If you look at the offsetting theors, wages are rising in u. S. , and the employment picture is very good. I dont think that will deter consumption in the u. S. Streetlobal cio at state advisors will stick with us. We have a lot to grow through this morning. A lot of developments over the weekend that we need to discuss including the political breakthrough here and in germany. Social democrats have backed formal Coalition Talks with Angela Merkel, moving her forward to her fourth term. This is bloomberg. Anna this is bloomberg daybreak europe. Welcome back to the program. 7 30 in paris or berlin. Markets dealing with the prospect or reality of shutdown in the united dates as we go into day three. The working day looms large for the United States. Lets get to narrative hits with a look at the markets as we keep that in mind. Good morning. U. S. Stocks shrugged off the prospect of a shutdown on friday. We are seeing asian stocks take a little bit of a breather. The msci asiapacific index pretty much unchanged. Across the region, there is a fair amount of green. You can he china leading the gains. Japan pretty much fat. Flat. We can see australia down. 2 as well. Treading water at the moment is where we are on asian equities and also doing that to a certain extent if you look at the 10 year treasury yield, down a basis point. Still at 2. 65 near the 2014 high for the 10 year yield. Big question asked where bond markets go next. The boj and ecb very much in focus with their decision this week. Looking at technical is, the relative strength index, and the 10 year treasury, the most oversold since the election. That last one in preceded a drop in yields. For saying to bear in mind the week. Im looking at the yuan. The keyotten past psychological level. Wells fargo saying its going to go to 633 and continue to strengthen by the end of the year. And finally, keeping an eye oil, resuming the gains in wti and a 68 vimplecom we have movement between opec and russia over the weekend. Those cuts could extend to the yearend. Record. At a that positioning was key as well. Anna lets talk about german politics. And the limerick will moved forward in her bid to form a fourth term government. This comes after her Coalition Partners agreed to into negotiations following a divisive convention. Coalition talks are expected to start as soon as tomorrow, ending four months of political stalemate. Matt miller has been following this story for many months. Matt, what has been the redirection to the the reaction to this . In markets, you saw a little bit of movement in the euro. I think a lot of traders are still waiting to see because there is a lot to come in this story. It has been interesting to see the reaction politically around europe. Out of the capitals for rome. A real sense of relief now. Relief insense of berlin. They say they dont want to be negotiating any further as far as the preliminary agreement. For their part, the spd had very mixed reactions. Some of them were saying that at this point, we have to negotiate until they squeal. Really want to get as much as they can. Its going to be difficult going forward. Briefly, what could go wrong from here . Although we have this agreement with the spd over the weekend, they put in place another hurdle to relieve fully formed Coalition Governments . Matt exactly, this agreement was voted on by 600 delegates. Over the next couple of months, the 400,000 party members, the base, will vote by mail. Some of them might not be so keen for the spd members in government. They would like to go into opposition now. Anna lets bring into the conversation richard. He is still with us. The spd voted this through. There are these other hurdles that we need to get through. The euro getting a little bit of a boost. What does this mean for euro zone assets to you . Micro implications or material . It may be material if it carries on for too long. Investors get the idea that french parties begin to partiesart fringe begin to participate. There is a coming together of the eurozone in a way that addresse many of the challenges. I think they would be very word. Matt do you expect this to go through . It seems like the last hurdle of the party member vote is going to come to next month and is a high one. Richard i could not possibly predict for the base membership of the spd might do. And sure they will be enormous pressure on them to agree to something which has that sort of continuity that many in germany might like. But in the end, Coalition Partners, junior partners, have a bad history if you look globally at what happens if you step in for a long time as junior partner. It can be really damaging for parties. I can see the step back into opposition may be attractive for some even at the expense of greater risk for germany. Ist how necessary for this brussels . Do you have a sense that we had the pause button on european integration . Richard i think brussels probably needs to stay a little bit silent at a moment like this. Because of the risk of brussels having a viewpoint that spills over international politics. If you think about european integration, there is a job to complete. Nd it is not i think brexit is a distraction. If you get back to that job and really think through how maybe merkel but certainly macron can help drive that a long, brussels credibility by the actions of those National Governments coming together. Anna do you think macron is going to get german support and be able to forge a common agenda with germany, and will it either right agenda to keep the populace that they at bay . We have for years to craft something new for europe, some thing the electorate will get behind . Need germanyon me as much needs macron. He has a significant reform agenda, something the germans went through in the past. He needs the support to help him opposing many of the forces within france, to see that that is a way through that france can see just as germany did as well. I think it would be really helpful if he had support from germany. Said, mott help at any cost. There is always a point where you say you cannot compromise anymore. Matt i think a lot of spd members were there. They managed to get over the smaller hurdle. He will stay with us. We have still got a lot more to go through on this monday morning. Saudi authorities are likely to recover more than 100 billion in settlement agreements, with the corruption suspects, in a probe implicating dozens of in a probe that remained fairly opaque. According to a senior government official, we are going to talk about that next with yousef gamal eldin, who joins us from dubai. What are the latest developments how many princes are still holed up in the gilded cage in the hotel . Yousef you hit the nail on the head. The key line being the vicinity of 100 billion dollars. First time we get a real figure as to how much they could recover from the corruption probe. I last spoke to the finance minister in december. He said it was too early to put out an actual number. Roughly 100 billion, a sizable amount, if you consider what saudi arabia is currently going through in terms of trying to balance budget. They provided a bit more of a breakdown. 90 suspectsing at that have been released. Youre looking at another 95 that are still at the risk, and with settlement proposals. The aim of the Anticorruption Committee is to wrap this up by the end of january. Those that do not reach a deal will be referred to the prosecutor as well. We understand as well from the secretarygeneral, the attorney beeral, that payments will processed with a combination of cash, real estate, stocks, and other asset classes. Everything that is available. Matt, anna. By crowns purge is led prince mohammad bin salman. Politically for him . Yousef the anticorruption probe has left a bit of an aftertaste. They pointed to the lack of transparency and some of the procedures. Now, the latest move will help of course negate some of that. Bear in mind that the key point here in the conversation is whether this will continue. That is what the s p global chief ratings officer told me this morning. Start, this is a good but he looks forward to continuing just to make sure that what we saw at the beginning is not something ad hoc. Anna thank you. Yousef gamal eldin joining us from dubai with the latest on the saudi story tweet coming up on the program, a conversation with the ubs ceo. He spoke to manus cranny in zurich. This is bloomberg. Anna this is bloomberg daybreak europe. A live shot of europe for you. 6 44 in the morning in london. A focus for european markets will be the shutdown in the United States as it is likely to be for u. S. Markets. On friday, markets trying to shrug off the prospect of a shutdown, but that has become a reality. What will we see stateside if markets open there . A buyback of stocks. The business, responding to investor demands. A Share Buyback over a period of three years will begin in march. 2 billion swiss francs is the figure. They have announced this morning that it is going to merge two of the wealth units. They set out further developments. What the ceo of ubs had to say to manus cranny in zurich. Have a Share Buyback program that will partially be executed in 2018. The highlight of this announcement. The Share Buyback is something many people have asked you about time and time again. What is that . Quiteually, its difficult to be ahead of our u. S. Peers. In Share Buyback is very line with our Capital Requirements and needs for growth and regulatory requirements, so i would not really benchmark it in that way. It is basically having a very flexible capital return policy with an attractive ordinary an opportunity to complement it with the Share Buyback. Anna you are putting Wealth Management together. What is this in response to, cy . Gin pressure, efficient it is a Proactive Movement we do following the relation we had in the last five years, and you think about those businesses. They went through changes, restructuring, refocusing. They went through growth, focusing on their own growth path. Over the last two years, we started both internally, but also externally, to communicate and make it. Our family operations were working already very close together. Our products and services were working together. The next step of our growth, trying to take advantage of a unique global capability we have so we can offer our clients the best. Anna will you be able to take cost out of the business . Will there be job, manus job cuts . We are going to streamline our support functions and we will have only one legal, one one chief operating officer operation. So we will of course streamline some of this, but this is a story of growth. This is a story of how we can do better. Achieve this us to going forward. Manus if i look at todays story, is this a reboot . I dont think there is any reboot. I would call it more and upgrade. An upgrade. Manus the Investment Bank came in below estimates. How did the Investment Banking . Beenvestment bank has facing a very challenging year. And i do think that i am very happy. If you do look at the 16 on its of the allocated capital with about 20 billion the allocated capital between equity and total loss absorbing capital, it is a very good job. The Market Conditions are tough, in im very pleased to see our advisory businesses, we had great success. So we are able to compensate for this environment we are operating in. Manus in terms of bonuses and compensation, when we caught up with andre, he talked about positives. In terms of payments, i think the payments are to performance, and i do think this year, we are going to confirm our policy that we pay per performance, in a balanced way, between rewarding, you know, our employees, but also keeping an eye on shareholders. Manus markets are flying. Records. Your stocks at a twoyear high going into these numbers. Sum up Wealth Management, client engagement, for me. Sergio i do see a continuation as we speak of the positive environment and the Wealth Management. They look at the macro picture, and there is a positive momentum. As we enter into the quarter, of course, a seasonality factor. I do expect this momentum to continue. Geopolitical risks are still there. We can avoid them. Our activity levels are still there and therefore, they are somehow impacting business activity, but overall, this is nothing different than what we have had in the last four years or five years, and i am confident we are able to manage any kind of Market Conditions in a successive way. Ermottiat was sergio speaking to manus cranny in zur ich. A lot of detail in this release. Interesting line coming from the interview where he talked about u. S. Tax reform and what impact that is ou having on his clients. He makes a point to me that actually, yes, there is a focus on the Banking Sector and the recovery in yield, but it is the Global Growth story. Richard i think first order is yield curve and then you have what the customers are doing. You have got a better credit story and more customer activity, if you have got a thriving global environment. If you can found that with the tax reform in the u. S. , and the ex,ire maybe to step up cap you have activity in the United States that might be interesting from an overall banking contacts. The Global Growth story is a net positive for banks. I know youre focused on what is going on in japan. I have got this chart that shows japanese banks of late. Interesting to see that the banks and japan have been rising on expectation that we might see a change in policy from the boj. We hear from the boj tomorrow. The expectation is that we will not get a change in policy. What are your expectations around the boj, and how does that affect you . Richard it is really all about Corporate Governance and japan recovering from its very long slump in a very long story of deflation. We are seeing recovery both in earnings and the real economy. That underpins our viewpoint that japanese stocks, although they have done very well, are not expensive. We are overweight overall, including in japan. Where do you see the best value as far as things are concerned . If you look at stocks across the globe, the u. S. Is trading at 24 times forward earnings. Closer to 20. Here in europe around 18. Is the Bank Situation similar . Do you see that there is more value in european banks man in u. S. Banks . Than the u. S. Banks . Richard outside the United States, they often find more attractive values stories. It is oftentimes a struggle if you are a value investor, looking at the longterm sustainable earnings of companies. What you see in the u. S. Is Many Companies are overturning in overearning in a crude sense, overall. I think we look from our topdown perspective, we still like u. S. , so although people make a point that these valuation levels are very high, the earnings story has been powerful. I do not think the trump reform is going to change the trajectory from a longterm perspective, but it does have that temporary tax reform that we think is going to feed through. We like the u. S. From a topdown perspective, one of the most overweight from a Global Equity viewpoint, but i think when we look at them up from a stockpicking perspective, we often find more bargains outside the u. S. Matt do you feel like the npl issue has to a large extent been taken care of in europe . Obviously, it is a bigger problem in the periphery, but it seems like they are really been unloading them quickly. Richard yeah, you are never done with npls. If you on a bank or bank stocks, you always have to think about the longterm and the cycle. We are at the point where npl was being chipped away and italy is the most obvious example where you have a shift of npls and the economy is recovering pretty rapidly as well. I think you have got to look for the next set of challenges. If you own banks, you have got to think about them from a cyclical perspective and except that you can always make wantsions and you just safety and soundness in capital ratios to be appropriate so the bank can survive do different Market Conditions. Anna given the maturity of the cycle, leave us with your overall thoughts about how long equities we should be, how much we should be loaning off on equities versus other assets . Richard you have got a synchronize recovery, but very different maturities. Years aheaduple of of europe, for example. Some are really trailing. Japan beginning of that trajectory, we like risk assets. Risk assetseight for a we are close to euphoria, which worries us a little bit, so we backed away from our risk positions, but we are still overweight risk, and we like equities. Banks, theres of is a long time where buying the credit was much more popular. Do you like equities more than the credit play when you look at banks . Richard not from a bank perspective, but overall, we are underweight, for example, in highyield, so we are always making those capital Structure Decisions at the top level. We are not making it sector by sector. We think the risk adjustment returns are better for equities than they are for highyield. Matt thank you so much for your time this morning. Really appreciate it. Lobal investors he has been cohosting. Closed for business. Americans accept to feel the effects of the u. S. Government shutdown as it enters its first day. What is the senates next move . Are we going to see an agreement today at noon when Mitch Mcconnell calls a vote . As all discuss, as well the market implications. This is bloomberg. Matt good morning from berlin. This is bloomberg daybreak. I am matt miller. Bloombergsive from new European Headquarters in london. These are our top stories. Matt ups buys back. Purchase. N frank a new dividend policy and a new Global Wealth unit. A flexible capital return policy. We can then attract ordinary dividends and an opportunity to complement with Share Buyback. Anna washingtons long weekend. The u. S. Government shutdown enters the third day as the senate fails to strike a breakthrough deal. Matt playing the long game. Opec in russia suggest they are ready to continue their Global Alliance into 2019. We will continue quite operating regardless of whether we need to extend the cartel or not because that would help the market and all consumers and producers. Matt let us take a look at how futures are trading on this monday morning after a couple of really big issues that were decided or undecided, depending on how you look at it, over the weekend. They continued Government Shutdown in the u. S. That technically started saturday morning but kicks into full force today. And we had a vote in germany over the possible future of a grand coalition. Making it more likely that we actually see that. As a result, when we look at the futures trade, we see green across the board with the exception of what you got there in london. Butftse futures are down the continental futures are gaining. Anna it will be interesting to see how we open up with the shutdown story dominating in the u. S. Do expect ares downside when we start the u. S. Trading day. How things develop in washington may did they where we go in europe and in washington. Some m a news. They are trying to do deals. We have the dollar index to show how that is responding or not to the shutdown in the government. Shutdown, it is up. We continue to watch the fx market. President trump will be in davos. We will have to keep our eye on that as well. Wci and the nymex barrel of crude up by 0. 2 . We will bring you that exclusive conversation from the oil industry. And some key conclusions of some meetings. What are we looking at in the bond market, matt . Matt if donald trump does make it to davos, do you expect him to hit the double black diamonds . Anna you will have to explain the reference. Matt i am sure he is the greatest skier you have ever seen. German bund futures. It will be interesting to see how it trades. A lot of people are watching the bunds. We see them down so we could see yield rise. They are opening up as we speak. Looks like we will see yields rise. Let us get the bloomberg first word news. For that we go to juliette saly. It will ubs has said buy back as much as 2. 1 billion of stock over three years. The Buyback Program will begin zurichbased those lender also saying it is starting a new policy. It wants to return excess capital through repurchases. We are able to continue and capitalnd retool our policy. We are able to increase ordinary dividends by 8 . And we have a Share Buyback program we are announcing that we hope we can execute in 2018. Russia haveec and reaffirmed they will persevere with Oil Production cuts to the end of the year to clear a global glut and signal their pregnant their readiness to quite break after that. The Energy Minister bloomberg that russia is prepared to continue cooperating with opec even after the cut expires. That theume cooperation between our countries is longterm. And regardless of whether it is in terms of the markets, or other areas. Our cooperation is based on our work in china since 2016. We have shown a very successful we have had a successful run. German chancellor Angela Merkel has moved forward fourthdid to fulfill a term in government. Into negotiations on a common policy program for germany. They will coordinate on strategy today allowing talks aimed at a resumption of the socalled grand coalition to begin as soon as tomorrow. Across the world, hundreds of thousands of people took to the streets this weekend for the 2018 womens march. Demonstrations yesterday in london, paris, and other cities followed much larger protests held on saturday across america. The events marking the First Anniversary of president trumps inauguration were in solidarity with women demanding an end to sexual harassment. Global news 24 hours a day powered by our 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. A little bit of a mixed picture when you look at the world map function on the bloomberg across asia but we did have six weeks of gains. You are still seeing solid gains in asia. Particularly the hang seng. We saw tech stocks in korea heavily sold off. The kospi is down. The nikkei rebounded. And weakness in australia come off by 0. 2 . In india, seeing pretty good gains across the country. In singapore, noble group has been surging on reports that bloomberg has confirmed. Noble jumping the most in six months. And impressive 31 . Samsung electronics. In korea. Weighing on reports that apple suppliers could have their demands cut. And the Energy Player in hong kong is looking good. It could increase Capital Spending by as much as 60 . That is . 5 million. Anna thank you very much. Let us return to the politics. The u. S. Government shutdown has been extended into a third deal after the senate has failed to broker a deal. Most government offices had stopped working for the weakening when the shutdown kicked in on saturday. For more, we are joined by kathleen hunter. And the Global Market strategist at j. P. Morgan also joins us. Good morning. The primary action is in the senate. What are we expecting . Is a votethere scheduled at noon today. The question is will there be enough democrats and republicans together to reopen the government and fund it at current levels through february 8. It comes with a verbal promise from Mitch Mcconnell to say they would vote on something related to immigration. Will that be enough for democrats . Seven moret least democrats to come on board with this to get to the 60 votes they need. It remains an open question whether they will get there. Matt how did the white house react . They were celebrating their one year in office. With the Government Shutdown, that seems odd. Is something trump, it least on the campaign trail, said he would not have as president. I wonder how hard he has been working to get through this impasse. Kathleen it sounds like he was working the phones a bit yesterday. It sounds also though that he has been leaving a lot of the nuts and bolts negotiating to top aides like Stephen Miller who was with him during the campaign and is a former aide to jeff sessions. Kelly, his chief of staff. I think the concern that has been reported about his white house aides involvement is that it seems as though when the republicans and Democratic Senators are ready to negotiate, there has been a lot of pushback from the white house from the white house. Toing it more difficult reach a bipartisan consensus on this. Anna kathleen, thank you so much. Let us bring in the Global Market strategist at j. P. Morgan. When you look at how this impacts any Government Employee who is going to be for load the impacts who is going to urloughed. What impact does this have from a market perspective . In the early stages, it does seem like very little. It is a big issue to keep in mind. Until it starts hurting the real economy, it will not start to her large groups of s p companies. There may be some sensitivity in the dollar and the 10year treasury, but for the medium and longterm, until consumers stop spending, this is not a concern. Anna how generally do you feel about the market marketsbout the exposure . And it shows that equity exposure is near record levels. Do you focus on that . How do those things make you feel . Huge thingns are a to look at. Expensivet look more than they did a year ago in most markets. That tells us that the earnings forecast for the next 12 months is quite robust and makes us confident in the equity market. Matt i want to share with you one of my favorite charts of late. This shows the valuations in different regions. You can see in white, we are at 23 point five times forward earnings for u. S. Stocks. In yellow, japanese stocks are up 20 times. 18 for europe and 16 for emerging markets. Do you think u. S. Stocks still have the room to run considering they are still so much more expensive than the other regions . That is the important thing about the ua shows. You are paying for the forward earnings growth. What has been a much faster pace for the last several years. Becauseaying a premium we have seen such strong growth. Some of the companies there are quite enticing. Islook at the u. S. , it it important to split out sector wise. We think some of the more value oriented stocks, by definition they will be cheaper in valuation, are all of the financials in the u. S. They could offer more growth. We dont have that many tech stocks on the stoxx 600 here in europe. With that kind of growth, often comes inflation. Especially with the tax bill a lot ofe are getting news at least about companies trying to give back in some part two employees. Do you expect to see Wage Inflation in the u. S. . The key question for us in the u. S. And the global economies is, is inflation coming back this year and what will that do to the broader economy . Wage growth being picky indicator for us for the inflation question. I do not necessarily think that Companies Giving back some of the benefits of the lower tax rates to their employees will pass through as some of the pass through as quickly as some of the other indicators. Indicators that tell us that wage growth in the u. S. Should be higher than what it is right now. Factors of globalization impact that coming through. They do not want to ask for more money. If the factors of higher wages outweigh the factors of keeping them lower, that will be huge for inflation in the u. S. And we may expect to see higher core and headline inflation in the u. S. At the end of the year. Anna thank you so much. You will stay with us here on daybreak euro. Coming up, germanys Angela Merkel closes in on a fourth term with a familiar coalition ally. We will talk about the next steps and potential hurdles as the christian democrats discuss further hurdles. Latvias lot minister will join us. This is bloomberg. Good morning. It is 7 19 a. M. In london. 8 19 a. M. Here in berlin. This is a day after the spd voted to enter into Coalition Talks. A sense of relief in the german capital. Taking a look at the markets. First, futures. Euro stoxx 50 stocks trading just a little bit higher this morning. Bond is a little the bund is a little higher in yields. The numbers are red even though the arrow is pointing up. The s p futures are down. That could change. There are still a lot of hours to go until the u. S. Markets open and a lot of haggling to get done in the senate to possibly of her a Government Shutdown to possibly to possibly avert a Government Shutdown. Biggest the french drugmaker. The deal values hemophilia drug maker at about 105 a share. That is a premium over the friday closing cost. Another company has offered to purchase an online company. To get complete control on the ecommerce business. Richemont already owns 25 of ynap. Hna has been facing increasing pressure from some banks talking about freezing credit lines. It was left with global assets including hotels and refrigeration trucks. Goldman sachs expects it to rolled over its obligations. That is your Bloomberg Business flash. Thank you very much. In germany, chancellor Angela Merkel has moved forward in her bid to form a fourth term government. Agreed to democrats enter negotiations on a common policy platform. Toare expected to talk start tomorrow. Ending a political stalemate. We will see if we get a vote by the spd membership on the final deal. There are further hurdles to cross. Tim says it is important that the government is formed quickly. Tim uncertainty is never good. Now, we will hopefully get a government as soon as possible. We need it. Just facing the digital environment, there are tech tectonic changes. Anna the ceo of Deutsche Telekom there. He says it is important to get the government formed soon. Is it from a market perspective . Whypiece entitled, markets struggle political says there are a lot of issues that markets might be fearful of. It is a tangible feeling of urgency on the business side. There are big projects to sign off on. That. Definitely see for markets, there is a sense like we may muddle through these political issues. Very concerned about the french elections. Now, we are higher than that and we have seen markets push through. Markets do seem to be shrugging off the political issues but they are still watching them. We are watching closely the german Coalition Talks as well as the italian votes coming up. Matt clearly, the German Economy is ticking along at a decent pace. I was talking to Goldman Sachs chief recently and he says he sees real stability there as well. How about the importance for europe . Doesnt germany need to get a government together in order to push forward things like Banking Union . Indeed. It is important to watch what the largest economy in the eurozone does. We do still see growth across the eurozone countries as quite high across the board. The only laggard is italy which is why we keep an eye open for the italian election. There is a lot of antieuro sentiment in italy. Watch germany. In the market perspective, what the german bund does is important. As well. Uro a lot of the stoxx 600 is listed in germany on the dax as well. Important to keep an eye out on equity prices as well. Matt we will hear from the ecb this week. Unlikely there will be any change. What do you expect from the bund . We are looking at 57 or 58 basis points. Can yields go much higher . What we are watching for this week is a bit less of a dramatic change in any type of language. The bigger thing to watch out reratingefully a upwards of growth for the eurozone. When you look at pmis, when of the business surveys, one of the indicators that lead gdp, it should be higher for the eurozone. We will be paying attention to that at the next meeting. And how long qe can go on. And the biggest thing is understanding that they seem to be separating the idea that inflation and qe purchases with info with an with Interest Rates. Anna the fact that the ecb is still battling low inflation will not stop them from unwinding their qe program. I think there is a chance they could take it down to 15 billion euros a month. We will still keep Interest Rates low to combat the low inflation problem. Anna thank you so much. That is it for daybreak euro. Bloomberg markets, the european open is next. We have more on the u. S. Federal Government Shutdown story and we will focus on new m a news here in europe. Ubs is out with their numbers as well. Plenty of coverage from here in london and davos this week. This is bloomberg. Guy good morning, welcome to Bloomberg Markets european open. I am alongside matt miller in berlin. Cash trade less than 30 minutes away. Guy gridlock. U. S. Government workers get ready to start the working week with no resolution to the federal Government Shutdown. Will the equity rally in this crisis . Biove agrees to buy