Funding deal, or have they kicked the immigration issue down the road . Value tops 100 billion. Shares surge in afterhours trading. We are less than half an hour till the start of cash trade. Lets take a look at where futures are indicating we could open this morning. Gains acrossg at the board and ftse futures are up. 4 . Ax futures indicated to open percent higher. The percent mispriced a little lower, but it looks like a positive day in europe this morning. Treasuries, ive got a threeday chart on my terminal. We have been hovering around the 2. 36 level. It looks like treasuries have been in a tight range the last three days of trading, but not low. 2. 63 is still a fairly high range. You can see the arrow there, the yield dropping a little today. Interesting action coming out of australia. Lets talk about that and the pound, which is on the move. The aussie market up. 7 , the s p pushing up 395 days without a five percent retracement. That is the longest run on record. Tells you a lot about this rally. The nikkei up by 1. 29 . Norway continues to climb, as well. The aussie dollar is trading lower, down by around. 5 . Commodities are generally lower, the commodities index is lower. Lets move you want to the commodities blocked to show you there. Iron ore trading down, the singapore contract down by 3. 4 . Crude is bid, then brent is bid, but iron ore trading lower. That is feeding into the aussie market. That will be interesting to see how that impacts the european open. Talking of trade that is dominating that boss. Lets look davos. Francine lacqua, what have you got . Francine thank you. We have a packed show. We will have a panel on the future of banks led by tom keene, speaking to mr. Corvettes and i will be doing a little later on this week, talking on a panel on easy money, Monetary Policy. We have seven heads of state addressing the congregation over the next couple of days, including president , due to talk on friday. Friday, we have the portuguese economy minister and carlos from the Mitsubishi Alliance and i have to say, i am looking snrward to speaking to mr. Gho about protectionism. We will also get a global view on the specter of protectionism with Joseph Stiglitz of columbia, university. Columbia university. Guy looking forward to that. Tom keenes panel will be something to focus on. We will be taking that live. Lets get a first word news update with juliette saly. Hasette donald trump slapped tariffs on imported solar panels and washing angering trade partners as he took his first protectionist move a year into his term. America will impose new duties of as much as 30 on foreignmade solar equipment while imported washing machines will see tariffs as high as 50 . China and south korea condemned the step calling them a misuse of trade measures. Signed a Government Spending bill that ends a threeday partial shutdown. Impasse broke after Senate Democrats accepted a deal from Mitch Mcconnell that will fund the government through february 8. In exchange, mcconnell agreed to address democratic demand that Congress Restore protection to young,portation undocumented immigrants brought to the uss children. Has maintainedan its massive monetary Stimulus Program and kept its price and Economic Forecast unchanged in a progress. Of it said Inflation Expectation had stopped falling. Governor kuroda sent said the central bank wasnt in a position to exit current policy after the board voted 81 to keep Interest Rates and asset personages purchases at level. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Juliette, thank you for that. The Economic Conditions in europe are right for the start of an exit from quantitative easing, at least according to the ceo of socgen. He spoke with Francine Lacqua earlier on. She started by asking if he was worried about the risk of increased protectionism. We all know there could be some decisions. Protectionism historically has not been good for trade and growth in the world. Francine if you look at some of the headwinds that a lot of the face banks face, you are talking for some settlements with authorities, there is an increase in Interest Rates which would affect markets, what do you worry about the most . Frederic i am optimistic for the european banking sector. Hopefully with this kind of growth, we should see the big beginning. Second, growth is good for banks. Flows and effectively, we are also seeing the end of the regulatory agenda. We are now able to focus on the Big Industrial transformation and i am very optimistic because when i see this world, yes it is fractured, at the same time, at the eurozone level, there is a big fraud project to further integrate. , good, positive momentum and i am optimistic for us. Ceo that was socgens speaking to Francine Lacqua. Next, we take you back to davos. It was announced yesterday, he would stay on another term as executive director. That is next. This is bloomberg. Welcome back to Bloomberg Markets, the european open. Lets kick off our interviews from that post talking about the future of the eurozone. Finance ministers around the region will focus on further monetary union. Francine lacqua is at the World Economic forum in davos with a guest. Francine thank you, matt. The portuguesey economy minister. Future oft onto the the eurozone in a second, but are you concerned that this week will mark the first protectionist move by President Trump and that would hurt economies such as yourself . This as disruptive to economies like the portuguese, but it is a sign we should be aware. In the case of portugal, we are doing the opposite. We are proud of being an open economy for trade and investment. In anyone who wants to live portugal. For solar panels, we are investing quite high in terms of attracting Foreign Investment for solar panels in portugal. We have some of the best conditions in the world and the panelsy we produce the in portugal, we may export the solar energy because we have better conditions of production the north of europe. Francine you export them to the u. S. . If you do, you will have tariffs slapped on you. Productiont of the in portugal is for european markets and the portuguese market, which is growing. We have almost 20 of our consumption of energy in solar energy. Solar energy is going to play an important role. We already produce 65 of our electric energy from renewable sources and we want to include improve that and maybe export some energy with the new interconnections we are building with moroccos and that will surpass france. Francine growth is actually quite strong, one of the strongest in the world. Does protectionism hurt that . Real, ifrts becoming we see a trade war between china and the u. S. , what role can europe play in it . Manuel i think europe should have a clear message about being open for trade. We have to sign the treaty with canada, we are signing it with important there is an trade agreement with mexico and south america. There was a treaty with the u. S. Across the atlantic that will be a positive step. I dont know the conditions now, but europe should, in contrast, reaffirm itself as an open, leading economy because that will be important for trade, for growth and also for innovation and to reaffirm as a developed region in the world, as a leading region, that europe should aim to be. Francine how do you see brexit developing . Be an agreement and if there is a hard brexit, are there winners and losers in the portuguese economy . Manuel i think brexit is a sensitive topic and is mostly about not losing too much from brexit. That should be what we are iting at because i dont see as a Good Movement for overall europe, but we should contain the damage and guarantee that trade is going to still be open. An Important Community portuguese in of britain and vice versa. We have an open alliance with written. Francine you also have a favorable tax system. Francine from all over europe. We have an interesting tax for nonresidents if they moved to portugal in the first 10 years. This has attracted a lot of residents. It is growing at 20 this year and helping the economy. Francine can you attract certain parts of manufacturing away from the u. K. . If there was no agreement with the eu or penalizing agreement . We aree manuel seeing growth of 11 . In some manufacturing like the automobile and aeronautics, we are growing at more than 16 . This is coming from french, german investment and even chinese and indian investment. We are in tracking a tracking investment from all over the world. With brexit, we are attracting more of the shared services that are moving part of their activity to portugal. Britain,appening with but also happening with French Companies and german companies. We cannot related only to brexit, but i think brexit is making some Companies Want to have a stamp on europe and portugal offers competitive conditions. Francine one of the concerns is the bad loans at the banks. Are there any new incentives you are putting in place to deal with nonperforming loans . Manuel we are dealing with the Banking System to put them in the market by people who want to buy the credits, research firms. We also passed a series of laws that pat help restructuring. We will reduce the bad loans in the mediumterm. The growth we are adding, wishes above the european average and also the biggest growth in 18 years, is going to create better conditions for the firms to strive and get out of the nonperforming loans. Francine at the same time, you have to deal with a higher euro. I dont know if there is a level that becomes penalizing for the portuguese economy and if you think the ecb becomes more aggressive with qe, putting it down, is that policy that portugal needs or do you need more accommodative Monetary Policy . I think the qb should continue for some years still and i think there is no solid reason for devaluation of the euro. Evaluation of the euro. Have a 20 , we still in increase in exports to the u. S. And also the 40 increase in the number of tourists from the u. S. , which has to do with more connections, direct flights to the u. S. More than anything, but i think we are still competitive in our exports. South to the west and america, and other areas dependent on the dollar for the currency. Having an interesting boom in our exports in those areas. I think we have some margin of competitiveness. We should be aware of the stronger euro. Francine do you worry about your debt level . You have the Third Largest that gdp. On average to if ge ended this year early 2019, how much of an impact will that have on your efforts to reduce debt . Manuel we are worried about our debt level, of course, but we are one of the countries reducing more of their debt. In two years, we are reducing seven Percentage Points on the gdp of that, and we also reduced a lot of our deficit so now we lmost 3 of the gdp and of the growth of the economy is guaranteeing that we have the confidence of the investors. Our Interest Rate now is lower than that of italy, which means it came down a lot in the last two years and we now have improved a lot the conditions of portugal. But we are committed to continue reducing the deficit and to have stable reduction of the debt in the coming 10 years. Francine thank you for speaking to bloomberg tv. That was the portugal economy minister. I will have plenty more throughout the day. Guy francine, thank you. Francine lacqua joining us from davos. We are minutes from the market open. Next, we will look at some of the stocks we are watching at the open. That includes Renewable Energy stocks after the president s decision on solar. Plus, we will be looking at sky. That is next. The open is 10 minutes away. This is bloomberg. Seven minutes till the market open in europe. Will the trump trade story have an impact on the european markets this morning . The story out of asia seems to be a relaxed one. Lets join mark cudmore in singapore from our mliv team. Are you surprised markets arent picking up on this more . Mark there is complete complacency in the market around the trade risks at the moment. We did see equity markets surge after we got the end of the Government Shutdown in the u. S. , and there was expectation of a positive open. It does surprise me traders arent concerned about the trump tariffs at all. Especially since they are targeted at asia. That is one of the genuine risks of 2018. Overall, me and the traders were rebuffing they were rebuffing concerns in the market. The three pillars we always areat behind a bull market still there. Structurally, it remains a bullish outlook. The risk we agreed on is the trade war this year if trump tries to aggravate Asian Countries on their trade deficits. A few hours later, these tariffs are announced. I am concerned that it but it may be a slowmoving story. Matt what is the significance of solar panels and washing machines . At first glance, it doesnt look like that much of a shot. , this is thelook opening blow. If it ends here, no one will be worried. These are minor industries, some have worried about the impact on the gas industry and the coal industry, but that is on the margin. Overall, this is the fact that trump is getting more serious and his first major attempt to raise tariffs is against asia. It is focused against china and korea. People worry it may be about mexico and we havent resolved at the whole nafta situation. Is this a sign that trump is more worried about the shutdown news flow and might be getting more aggressive on the trade front . If it is an indication, it is worrying. It is if it is a oneoff salvo, we can move on. Guy 395 days without a 5 pull back, that is an amazing number. Mark even though i argue that the structural bull market inequities is solid, that doesnt mean we cant have whole backs. Because we havent had volatility in so likely so long, doesnt make it less likely. And Hedge Fund Managers have to take more volatility. They are compelled by their mandate to have certain volatility levels. People are being forced to take more risks and that means the market will be more sensitive to negative stories. So far, we have seen no sign of it that at some time this year, we will get more pullbacks. Beart mean the start of a market, but expect more volatility in 2018. Matt mark cudmore, bloomberg mliv strategist. Follow insights on your bloomberg. We will go back to davos for more. Startne minute until the of cash trading in europe. Lets talk about what is moving these markets and what you need to focus on. Modded these a little weaker. The iron or contract is weaker, but oil is bid. The dollar is trading 1. 22. That is where we are this moment. Lets get back to this board. Hero dollar, 1. 22 2022. 51. 122. 51. Oil recently well bid, but iron ore has come down. Backays without a 5 pull that isack for the s p, a recordbreaking run. Lets talk about the wei screen. Look at the fair values. Have thee the dax will strongest start, up by around 1 at the get go. The trump story, front and center with the protectionist move. Lets look at the numbers and show you what is going on. Lets get back to the monitor screen and get an idea. 7716, the ftse 100 is bid. Dax. 1 in the we expect other markets to do well out of the gate. There is the cac, up by. 4 . Strong performance coming through their, but i am waiting waiting tout i am see what the dax does. I bet up by. 5 . Up of greene sea out there. Financials bid, energies bid, materials look more mixed. In theory, it should be those with exposure to iron ore. Sky could be a story to watch out for. , whichr electrolux should be affected by the trump trade story. It produces a lot in mexico, so it may not be affected by the story. Health care turning more mixed now as markets settle down. Anerally, it looks like market that has come out reasonably strongly. The dax has yet to open, so we will see how industrials do there. Over to you. Consumero see your staples slice lit up. I want to mention in the top left corner, you can see 431 gainers, 85 losers. The breadth is overwhelmingly positive. Leaders, a lot of Consumer Staples there. Nestle is one of the leaders, hennessywas up there, could be a staple for certain parts of the population. Take a look at some of the losers here. By the way, you see the Energy Stocks there. Some of the losers, we see bhp. Illiton, rio tinto those with exposure to iron ore on the way down. Power. Addy we will talk about the u. K. Gambling stocks with one of our first word stocks reporters. Overwhelmingly, we have positive breadth here. Everyone up from Consumer Staples to oil stocks. Market is up today and you can see that reflected across the cotton that. I believe the dax is now open and we are seeing the dax up. 2 . The futures trade was pretty amazing. About. 9 . Were up now it looks like the dax is up. 8 . The german index doing quite well this morning. Guy it is interesting what is coming through this morning. It looks like mobile speakers, the blue proof Bluetooth Speakers seem to be a driver carried easyjet on the front foot following its update. Car for his laying off staff. These are the stocks we are seeing a decent bid coming through. All of those three stocks really are up strongly this morning. Fromjarvis joins us now our stocks team. We saw tesco coming out cutting jobs, the market likes what he hears. Paul it will be interesting to see how it pans out over the day. This announcement has been expected for some time. There are a lot of comparisons to be made between where carr tesco. S to laggard. A they have needed to do something for a long time. It is not surprising they would have this Huge Investment and how do they pay for it, with jobs. Of jobs are going to go here in order to save money to fund the investment they need. Paul, we have easyjet, firstquarter revenues surge, they are interested in parts of alitalia. We know they were interested in pieces of air berlin. Airlines are doing fairly well today, but what is the specific story with easyjet . Manuel paul so another new ceo. Easyjet also has a new ceo. He has come in and replaced caroline mccaul. The firstquarter revenue performance is pretty decent, i think shares are trading about point 4 higher. They also announced today that the chief commercial officer p duffy is leaving the company. See. Ll be interesting to ay the funds a the funds trading up in italy. Thanks to our stocks editor paul jarvis. Lets get back to one of the main themes we are watching. Last nightrump announced slapping tariffs on solar panels and washing machines as firms try to untangle what this means for them. We now speak with the chairman to find out what this means. Haslinda amin. Building a share future in a fractured world and this move makes it difficult to do that. Lets get perspective from hitachis chairman. He joins us this morning. Good to have you with us. From france. What is the risk of a trade war here. Trade war here . I have had a chance to talk trumpresident tom before. He is a typical business guy, so we dont have any specific issues. His people talk about unpredictability. That is very important for us. What is next. Ine wet may happen in davos, have no clear idea. Haslinda but you get a sense there could be a trade war . Korea has come out to say it will fight back. Some negotiations may change his conclusions very easily. Side, bute positive the very unpredictable side. What impact will there be if any, on hitachi. Companies that have various operations in the u. S. , but whether investment is appropriate or not or political conditions are not. Does that mean you will be taking measures to counter what trump has done . Hiroaki in that case, a direct conversation is important for it also explains his unpredictability. The president directly is not so easy, but we will try to do that. Haslinda you helped turn around hitachi after years of losses. Give us a prediction of growth for hitachi in 2018 and beyond. What geography will be important to you . Currently, a very dynamic wave. Region, taking a different view for that. How to set up the most appropriate Business Conditions to promote there is a great opportunity for us, but also big challenges. Haslinda talk about the great opportunities in asia, because asia has 26 trillion worth of Infrastructure Project at stake projects at stake and rail has been an important area asia wants to build. What projects are you interested in bidding for . Hiroaki we have so many projects right now. Haslinda what are you interested in . New projects . Hiroaki the most important project right now is indias Highspeed Railway to mumbai. That is a new challenge, this is the first such train in india. We are trying to make it more clear it is us to implement highspeed trains. The Indian Government requested the local manufacturing capabilities. That is a big challenge for us. India,a apart from Southeast Asia is a big Growth Potential for hitachi. Countries like indonesia, the philippines, thailand wanting railways as well. In three to five years, what type of sales target would be realistic . Countries, itsian is not a single area. Avariety of nations different way of developing the business. For example, we are looking at indonesia. That is a big country, but simultaneously, myanmar is an exciting nation. Issues,s with political but for the business itself, it is growing. Haslinda can you quantify the sales target . Hiroaki quantify . Haslinda any number you can throw out there. Give us some perspective. Hiroaki currently, our number in asia china is the biggest one. The south asia area any number, sir . Already 10na, and approximately 5 billion or 6 billion u. S. Dollars. We are trying to make it double there. Haslinda you talk about china and its potential there in electric vehicles and you have a joint venture in china. What targets are you setting for yourself and how are you capping this huge market tapping this huge market . Hiroaki there is a big market in china, but simultaneously, so how changing a lot to make a different collaboration with the chinese partner is the big issue. The Automotive Industry is so exciting. So many competitors will come together. This is an important portion, but not the only one. Utilize to make a more growing industry. That is a big opportunity for us for developing business in china. Haslinda you have tied up with honda and they have ambitions in the u. S. And india. Are you intending to expand that partnership . Hiroaki yes, honda is an excellent company. It also has a different culture the Technology Development and business development. Have competition with honda. Haslinda you are poised to take over the kid run chiefs. What is your relationship with would your relationship with Prime Minister aubrey help . Abe help . Hiroaki i worked very hard making the economic policy. Which is more utilization for the improving of the various social conditions. We should have strong promotion to do that. For me, it is a continuous policy and actions. Haslinda ok, Hiroaki Nakanishi of hitachi, we thank you for your time today. We will continue with coverage throughout the day. Matt thank you, great interview with the hitachi chairman Hiroaki Nakanishi. We will come back to davos at the World Economic forum. Up next, we will be live with the who announced yesterday he will be staying on for a second term as executive director of the International Energy agency. This is bloomberg. Guy 17 minutes into trade. Lets look at what is going on. Apart from a very snowy davos, markets are on the move. Few transporta issues, but that is not the case in markets. Let me show you the mrr screen from the stoxx 600. Stories isstandout easyjet, out with numbers this morning. The entire aviation sector is well bid this morning. Logitech the main gainer, doing well. Akers easyjet is trading higher, into the is pushing online delivery story in a way it hasnt thus far. It is laying off a number of people a large number as a result of that. Flipside, a strong day yesterday and is pulling back in that space because of the story surrounding carrefour in france. We are keeping a for my on what is happening with the sky story as the u. K. Authorities push back against the murdoch takeover. Lets talk about what is going on. What we have got is a story about assets. The recent gains of stock markets and bonds. That is according to the head of canadas biggest pension fund. He spoke to air chaska in davos. If you look at underlying economic performance, the strength in the u. S. , europe is coming out of depression, japan is pretty steadily growing, china has robust growth in the last year and it seems to be continuing. India is strong. Canada is strong. World,r you look in the underlying Economic Growth is robust. You have an upswing in economic unexpected stimulus on top of that. The tax cuts, potential infrastructure plans in the u. S. There is a lot of push. I think markets are justified in pricing a lot of that in. The question is, what happens to inflation . Oft is the big question whether people are being complacent about if inflation rises properly. Cppib has a large amount of government bonds in assets, will that be a drag on government bonds if inflation rears its head and we enter a bond bear market . Bonds drop off, it will have a knock on effect to other assets, the real estate portfolio we have, the infrastructure portfolio we have and other parts of the portfolio. It is something we are watching. We have probably been more that market for longer than we should have been. We have probably been concerned about it for the last five years. It is prudent to the comes through. The we have had a top of house tilt on anticipating rate rises in the u. S. , and they are barely coming threat the moment. Is that to suggest you are comfortable with the way you are allocated now or comic if in fact you are right now, or if in fact you are right and you need to allocate out of Interest Rate sensitive investments like real estate . Mark we are super long term. We are measured over a 75 year time frame. Firm has to be sustainable at 75 years. Quarter for us is 25 years, not three months. That shortterm move, probably we wont respond to. You have to see a multiyour event . Mark if there is a multiyour event and weiyear see a selloff in bond markets over time, we will have to look at that and respond accordingly. We are very equity heavy. That means most of the rest of it is equity like exposure. Public or private. Ultimately, the diversification and acrossworld asset classes, it is also global diversification. One of the diversifications we are pushing on is emerging market. Where do you think it should be . Mark in the next five years, about half the worlds gdp will come from emerging markets. To move froming 15 to 50 , but you can see a longterm trajectory and that direction. What holds you back is the accessible public market, particularly in china. We are going to move up. Longterm, we are probably at 5 in china now, but 45 . We are close to 40 in the u. S. 2026, but it is a huge wave to converge over the longterm. Based on the way you see things today, is the if the outlook betterhe or worse than your fiveyear average of 12 . Mark given where asset prices have run to now, it is unlikely we can expect high asset price returns over the next two years. I think they will be quite depressed. Matt that was the president and ceo of Canada Pension Plan investment board. Canadas biggest pension fund, speaking with our canadian bloombergs erik schatzker. The u. S. President isnt the only world leader to make an appearance at davos after an extended. Of absence. This forum marks the first time indianears that an Prime Minister has come to the event. Indias indices are set for five Straight Days of records and gdp inforecast to grow by 6. 6 the year, faster than china. Prime minister modi is set to addressed davos address davos. Haslinda amin mean is joined by a guest. He has been trying to do the same thing president xi jinping did for china last year. Whether he will exceed to do that remains to be seen. He will be speaking in an hour and a half. In the meantime, its get perspective on india from the chairman of the state bank of india. It is good to have you with us. Inflation is a big issue in india. Oflation is above the target the rpi. You see Interest Rates rising faster than expected because of that . Years. Ation last three the whole policy of the bank of india has been about continuing inflation. We have been successful in that. We have seen pick up and that was unusual, but Going Forward, our expectation is the number should stabilize and at least in the next six months, i dont foresee any Major Movement further. As far as the policy rate is concerned. Haslinda having said that, when d. C. Rates moving . Rajnish rather, i would say that i am seeing rates stable for some time. A year or so. Haslinda the other issue in india is bad loans among banks, among the highest in the world. We are looking at 210 billion. Is it getting any better, given the injection from the government . Rajnish that capitalization of the governor Public Sector are a big positive for the Banking System in the country because the Public Sector banks comprised 70 . The bad assets were to be recognized, that part is over iw and whatever is remaining, am hoping all the banks would be able to recognize this quarter. Bankruptcy, which is new and got enacted in 2016, several cases were referred in july 2017 and now, we are at the resolution phase. The resolution process with respect to these cases is advanced. 2018 in my view is much better and fears in the Banking System are curbed. Haslinda but when we will see will we see the end of the bad debt issue in india . Rajnish it is a big problem and cannot be resolved in three to six months, but if we look that will take a little bit my capitale and the second is the process time periods are being honored. So far, i have seen the time periods that we are by and large able to stick to those. The reason for the lone loss, taking them into the Balance Sheet and moving forward. Haslinda Prime Minister modi will deliver a speech, the first indian leader to be heard in more than 20 years. What is a crucial message . What message should be sent to investors . What arent they buying into get in the indian growth story . Rajnish i will answer your second observation first. I believe there is a lot of interest in investing in india and the pace of the reforms has been very fast and deep. Seeing context, we are india as the thirdlargest to receive after the u. S. And china. I think the key message we are all excited about and mr. Modis visit, the key message we are expecting that even though the world is moving toward protectionism, india is still competitive. Haslinda one issue is the demonetization, some people have called it an epic failure. What do you make of the policy . If someone is calling the criteria on which it is to be measured is to if the idea of demonetization was bringing more people in as well as the general Awareness Among the public and the people that taxes are too big. To that extent, it has, in my view, succeeded in its effort. Economy and the whatever way we look at it, demonetization and positive not staggering. Not only forn is the sake of digitize a she. There are many benefits to the process. It was said work affected during the demonetization period, but if you look at once they become part of the formal system , the cash flows are captured, then for the from the lenders perspective, i think that is a big benefit which people have not accounted for. Haslinda Rajnish Kumar, we thank you for your insights today. India is the third Fastest Growing economy in the world, but still being saddled with lots of different issues including inflation and bad debt among indian banks. Matt absolutely, very interesting stuff. Thank you for that. Bloombergs haslinda amen in davos joined by Rajnish Kumar of the state bank of india. Now, we are 30 minutes into the trading day. Lets get your top headlines. Trumps tariffs, the president slaps duties on imported solar panels and washing machines in his first major protectionist move. Who are the winners and who are the losers . The u. S. To work, government reopens as democrats accept a shortterm funding deal. But have they just kicked the immigration issue three weeks down the line . And netflix takes the crown. The Video Streaming Service is 100 billion as shares surge in after hour trading. Welcome back to Bloomberg Markets the european open. Im matt miller in berlin, alongside guy johnson in london. Looking atwe are walltowall coverage out of the ski city in switzerland, davos. Guy and delivering coverage of what is happening in the markets. We are 30 minutes into the trading day. At the moment, the market is bid. The stoxx 600 by about. 4 . We have a number of sectors outperforming. Let me run you through the list. Travel and leisure doing well. The numbers from easyjet looking good. Also reasonably well bid going from strength to strength. Chemicals well bid, personal Household Goods doing well. On the downside, we saw iron or overnight on offer. That is taking the shine off the Mining Sector this morning. Basic resources down by. 7 . A first word update with sebastian salek. Sebastian donald trump has slapped tariffs on imported solar panels and washing machines, angering trade partners with his first protectionist move. America will impose as much as 30 on foreignmade solar equipment and washing machines will see as high as 50 . China and south korea condemned the steps in beijing, calling them a misuse of trade measures. The president has signed a Government Spending bill to end a threeday partial shutdown. The impasse broke after Senate Democrats accepted a deal from majority leader Mitch Mcconnell that will fund the government through february 8. In exchange, monoclonal mcconnell agreed to address daca. The bank of japan has maintained andmassive Stimulus Program kept the Economic Forecast unchanged. In a sign of progress, it said Inflation Expectations have stopped falling. Governor kuroda said the central bank wasnt in position to exit its current policy after the board voted 81 to keep Interest Rates at current levels. The price increase momentum in japan is weaker than that of the u. S. And europe. We are far from reaching 2 inflation target. We are not at a stage to discuss exit policy at this moment and we are keeping our powerful easing policy for some time. Sebastian global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Thank you for that, sebastian. We are looking at some tesla news. Really, it is elon musk news, as well. Is idea is that elon musk going to or has announced he is going to lead tesla longterm and going to forgo any kind of guaranteed compensation. They are setting a number of hurdles that he has to cross before he gets paid, basically, in a traditional sense. He still owns 20 of the company so anytime it does well, he does well. But the board is saying the market cap has to climb over 100 billion before elon musk is rewarded. It is almost a 60 billion company. He also has to meet certain and earnings targets before he can get paid as far as adjusted earnings. It is interesting, they havent come out with the full list of things she has to do or how much he will get paid if he does achieve those, but it looks like 100 billion in market cap is a ways off for tesla. Guy im very curious to see if there is an impact that flows through from what the president of the United States has done with solar overnight into the tesla story. It is part and parcel of the message Going Forward from tesla, the Energy Production will be part of the equation. It will be interesting to see if tesla is affected by this. That point to be made, the u. S. Vice president mike pence is speaking in jerusalem and has just said that the president will be going to davos and when he gets there, he will be delivering an America First message to the delegates in davos. Part and parcel, maybe, of his davos speeches what we have seen overnight relating to the overnight washing machine and solar speech. Tesla has anysure washing machine production, but remember how much analysts pushed back the idea of him combining solarcity with tesla and running both companies. He is the chairman of solarcity, as well. One of the things i was thinking is this could really increase u. S. Solar panel production. The question is, how much does solarcity produce in the u. S. , how much does it get from overseas . How much will these tariffs affect the company . I dont know the business as well as i know the carmaker, but if they produce more panels in the u. S. , obviously this will be a boon to them. If they import a lot of panels or pieces from asia, it will be an issue. Yeah, that will be an interesting equation for the tesla story Going Forward. Not theer whether or production story will shift and develop as a result of this. It is only on for three years, so that is another part of the equation. Next, we head back to davos. Are we heading for another crisis . Tom keene will pose that question to a Panel Including ceo. Ays ceo, citibanks that is next. This is bloomberg. We are 40 minutes into the trading day in europe. Lets talk about what we need to know. Lets get a business with sebastian salek. Sebastian u. K. Regulators have said 21st century fox is 11 point billion 11 billion pound takeover of sky would not be in the public interest. The Market Authority said the deal would threaten to give Rupert Murdoch too much influence over british media and should be subject to concessions. Cutefour has said it will positions at its french headquarters and invest 2. 8 billion euros in online over five years. The company will sell 273 former stores and reduce the sides size of its french market. Other initiatives include boosting its chinese units by partnership with tencent. Netflix surged in late trading after a blowout voting past 100 million in market for the first time. It puts it on par with goldman sachs. The tv network reported its strongest year of growth today, adding 24 million customers in 2017. For the final three months of the year, it crushed estimates and it is suggested to do so in 2018. Bill ackman is cutting 10 according to a person with knowledge. The company decided to reduce support staff as it overseas 9 billion, less than half the assets it had after 2017. A representative declined to comment. By acquiring Patron Spirits International in a deal valuing the company at 5. 1 billion. The purchase will combine two of the Worlds Largest distillers. That is your Bloomberg Business flash. Sebastian, thank you. Lets get to our top stock stories with a market that is up across the board. For that, nejra cehic. Nejra and i am focusing on gainers. You heard the stories in the business flash, but i will take you through them. , investors reacting positively to a pretty sweeping overhaul, cutting thousands of jobs at its french headquarters, selling stores, reducing the size of french hypermarkets and confirming partnerships with tencent and investing 3. 4 billion online. To of that taking carrefour its highest since august. Upgraded toing, outperform at rbc. The First Quarter revenue for stockrising 8 , pushing to almost a twoyear high. Finally, sky trading at its highest since december 2016. It has been downgraded for hold to hold and the markets authority dealing a little setback potentially to its 21st century foxs planned takeover of sky. We are hearing it would give Rupert Murdoch too much control over the media and is not in the public interest. Nevertheless, investors shrugging that off, perhaps not seeing that provisional finding from the cma as much of a threat to a final deal. Guy thank you very much. Next, are we heading for another financial crisis . We will be live in davos with tom keene and he will pose that includingo a panel jes staley. That is next. This is bloomberg. Guy good morning, we are 47 minutes into the equity market session this morning. Our stock of the hour is easyjet. Definitely up this morning. Of metrics. Ber basically, the share price up by 5. 88 . The average volume versus the 20 day average. We are trading nearly 700 times the average volume. A big pickup in the stock volume going through easyjet this morning. Morgan stanley out with a positive note on the business the fact that its revenue receipts line growing is a real win for the business. This is a business that has changed pilots. Is pretty good and Morgan Stanley says offsetting fuel headwinds, there will be profit momentum in the second half of the year. Interesting stuff happening in berlin related to easyjet, as well. Matt there is, and of course, easyjet has been involved in the takeover at least for parts of the business of air berlin. It looks like it could get more as the Cartel Office is concerned about deutsche onthansa having a monopoly domestic flights. I want to talk about a different stock trading in frankfurt and that is body us ideas. Adidas. Moving averagee chart. I have the 15 in pink, the 50 in green and i am highlighting the 200 day moving average. Its stock has blown through that on a tear. Gainer on thegest dax index. A big jump today. It had big jumps last week. The consumer is supporting this stock, nike has done well at the same time, but adidas a big gainer in helping the dax power to a stronger gain than the index is across europe. The dax up almost wonderful percent this year. Guy i think one of the real stories of the day is what is happening with iron ore. Sharply out of asia overnight and it will be interesting to see. That has fed through into the miners, but is that an indication we will see some growth slowdown. Is one metric we watch out for but it looks like the chinese are to switch to lower grades of iron or. We will watch that story from a global macro story. Apparently not even the government shut down in the u. S. Is effect and stocks at we have seen a positive start today. An incredibly positive start to 2018. Equities across the world continuing to surge with the s p and dow jones hitting overnight records. 395 days the s p has gone without a pullback. Are we seeing the beginning of irrational exuberance . A panel ons chairing the next financial crisis. Jes staley and others talking about this. Tom keene in the chair. About, we arelked honored to have you with us. Thank you for attending with your work in shanghai over the years and now in beijing. David rubenstein is with us, thank you for being with us with different views. I always start with and richard, but because of his acclaim on the financial crisis your book, which was my book of the year last year, i hear a new e dition refers to bitcoin . It is the last quarter of the book, actually. Tom it was my most courageous book ever. It is not just about the beginning of the book, but about negative Interest Rates. If we have another financial crisis, there really isnt a banks of what central would do. I think it is something we need to talk about. Tom lets talk about the acclaim of your work. This time is different. Do you feel this time it is different . I mean, i dont. I feel we are still coming out of the last financial crisis. A deep systemic financial crisis like we experienced has a long afterlife and taking eight to 10 years to fully recover is not unusual. I must say, a lot of the talk stagnation secular , productivity with the financial crisis and so, i am actually not going to tell you there is not going to be another financial crisis because sales of my books would collapse, but i am optimistic Going Forward where the worlds economy is going. Could there be a recession, absolutely. But i think we are at the tail end of the last one in a pretty typical trajectory. Tom what was the number one lesson we learned coming out of this crisis . Would leave it to no, i only have about three questions today. But in the middle of your book, you go into this whole thing on the spanish armada, the collapse of spain and it was longer than 10 years. Timertainly, it seems this is different as people convinced themselves that it is going to the moon forever. Typically, when you see debt rising at aggressive pace, you should look out for that. The current environment, Interest Rates are really low, so you could say debt levels are high around the world, but not compared to the Interest Rates. Thatld actually throw out the biggest risk to the Global Economy is that we are in an Inflection Point where tightening of labor markets, tightening of demand could get inflation, could get investment, and then if something pushed up real Interest Rates it is not my baseline case, but we dont really know why they went down so much. If they went up, the places that werent enjoying as much growth and have a lot of debt, italy, emergingexample markets could have a lot of problems. I certainly see china as a place where they are at an earlier stage. They did a great job in the financial crisis, but they do have a lot of the characteristics of a typical financial crisis building up. So many things to speak to our panelists about. I thought you had an important perspective in the room about our collective memories and the number of people in the have not business enjoyed how you get into a crisis. What would you say the young crew who havent enjoyed 2007 or some of the moments of 2008 and 2009 . I think what can said is right, there is not a plan a. We have far fewer tools to deal with any event that happens and it will happen when none of us are looking. It never happens where you are looking. It happens somewhere else. What has shifted over the last anyears, 10 years without form of credit cycle. We now have a whole bunch of people who have never gone through a default cycle. Financial crises are pretty simple. They start with somebody borrowing short lending loans, a bit of leverage and a default. We know the elements will be there, we just dont know what the traders are and when you look at some of the new structures that havent been through that tried and tested process around, for example, structured leverage, these things which are good developments that have not been through the rigor in the way that a 300yearold bank is that has figured out a credit cycle through that period, we have a lot of things that are big operators in the market that we dont really know how will respond to the next one. I think you have to look where rnels are when we go over the top and down the other side. It will be the unexplaineds is unexpected places. Tom did you figure out where to go next to among two different banks. I will just be polite and say b is before c. I will go with the bank names. When you look at the resurrection of barclays and look at how you are trying to steal the bank for the future, you mentioned that you see the acid size, James Mackintosh has a chart on the noncorrelation of stocks and bonds. How do you look at the markets and tie that into where we are now as we get ready for whatever the crisis is down the road . I do feel it is like 2006 where we talked about whether we had solved the riddle of economic crisis ease. Not see it imminently on the edge, but given asset valuations and that we have 4 global Economic Growth, it seems we are at a pretty good place right now economically, but we have a Monetary Policy which still seems like it is in the remnants of a depression era and i think we have the capacity to deal with the real moving Interest Rates. I would say that the banks are in such a different position in 2006, 2ere thousand seven. If there is going to be another financial crisis, my bet most es are ease crisi where we all missed it. 2008 was triple securities. 2009 was a eurozone borrower, we got that one wrong. There is something out there in equityital markets, markets are at an alltime high and volatility is at an alltime low. That is not a sustainable proposition. I dont think it will come from the banks and finally, for me, we have got done with our stress tests with the bank of england. ,hen i look at the stress test and what we focused on is how does barclays do coming out of that . Take the stress that regulators are putting the banks through and apply that stress to the rest of the economy. Andn where debt levels are where our exposures to low Interest Rates, if we do have another economic cycle, which i argue we will, Capital Markets will be tested. Tom there was an essay seven years ago on type two and type one regulation you cant see what you are supposed to see but you can see things that are a distraction. Not that it was confusing, but just goes right to it. We have stress tests. Do stress tests keep you from a financial crisis . Have done a lot with the conventional Banking System, but that pushes a lot of the problems into the shadow of banking and that could be where we see the next problem come from. Stress tests were a good idea, but are not perfect. Tom and you know that. Michael, there are different and you speak of resiliency, but we need scale. He told me we would have scaled and media like we have with fox and disney and maybe we can address that later on. Tell us about scale in banking to try to avoid the agony of the next financial crisis. Think about where some of the lessons came out in the last crisis. One of the challenges was that we had a Global Banking Business Model where everyone, or most big banks, were seeking or trying to execute against similar plans. Be everything to everyone. 0607. Member
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