Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20180131

U. S. Clamps down on one of the worlds biggest changes. Matt we are getting some breaking earnings now. Ing group, the dutch financial fourthh coming up with quarter profit of 1. 6 billion euros. Ing misses estimates on profit. If got a cost income ratio of 59. 9. 7 and itratio of 14 is looking at net results in 5 billion euros. That is the net result for the entire year. The fork or profit, 1. 5 6 billion the Fourth Quarter profit, 1. 5 6 billion. A big miss on pretax profit there, so look for ing to trade at the open. The ing cfo is going to be joining us for his first interview of the day in just a few minutes. Anna lets get to some other breaking news this morning. The wealth manager in switzerland, the thirdlargest wealth manager in switzerland is giving details for the past year. Under. Ew money the estimate was a little higher than that at 393. They say net new money is more than 22 billion. They are giving a net profit number of 705 million swiss francs. The new ceo has taken to the helmet after helm after we saw depart. And big focus on that new money under the new guide. Manus cranny is waiting to sit down with him in switzerland. We will have that later. Siemens is coming out with earnings as well. Many analysts expected weaker power and gas. That is a theme that you are going to hear across the board from any companies that are international and reporting in euros. Siemens industrial business profit, 2. 2 billion euros. Siemens beats just slightly on the industrial business profit. It still sees industrial margins of 11 12 . That is right in line with the estimates. Analysts that we surveyed expected that. Profit just beating estimates by a hair at two point 2. 2 billion euro. Anna samsung fourthquarter net income is ahead of the estimates. They are confident that samsung would deliver on target. Is crucial, because capital ratios have lagged. Brazil has been the big driver for this company. Is somethingrazil that could be at the heart of boosting this company. One quarter of their business is focused in brazil. A big focus on this capital ratio. We found out about an impairment charge so we knew that part of the story. Samsung fourthquarter net income is beating estimates, it sounds like quite comfortably. Lets tell you what else is going on more broadly in the markets. We had the address from President Trump. He is talking about a new america and what does that do to stock markets . We saw a bit of a rebound earlier on in the Asian Session. Tech stocks up in the Asian Session come but that has not helped keep their heads above water. As we focus in on everything that President Trump had to say. We have the dollar down. Matt i also want to point out profits that be estimates in the Fourth Quarter. Line also basically in with estimates, 17. 7 billion. Arcelormittal is proposing a new dividend policy starting at 0. 10 per share. Anna lets bring in the cfo of ing, who joins us now. Thank you very much for joining us. Tell us a story behind the Fourth Quarter. Are you satisfied with how the business has performed in the past quarter, based on what analysts were expecting and based on your own expectation . Yeah, i think if you look at our overall momentum, it is actually quite good commercially. We have had 500,000 new customers. 36 milliontotal now customers. We are happy with that. We are also happy, if you look at the whole year, we have generated 2. 7 billion in new loans. All of these parts are good. Cost isthat our risk good. 55 and income is at that gives us a profit of 4. 9 return, which is a 10. 2 on equity. If you particularly look at the whole year, it is good if you look at commercially, the Fourth Quarter. So in thatgood, sense, we are quite glad with the development so far. Matt i am looking at a costincome ratio in the Fourth Quarter of 59. 9 . You want to get that down to 52 , 50 in the longer term. Howxpect to get down do you expect to get down to that level . Number one, it is better to look at it over fourthquarter come up in the Fourth Quarter with always have our regulatory costs, which are higher. We have on Investment Program on which we are committed to spend 200 million per year to create and prepare ourselves for platform economy. That Investment Program will happen here in the Fourth Quarter. We also had some commercial growth and incidental factors. I found that the Fourth Quarter was quite high. If you look at our ambitions, it is for the 18 that week more or less keep our cost income around 55. After 2018, are program should bear fruit and you should see our cost income come off and moving more to is our 52 target. Wards our 55 intentionsare your to step up dividends to shareholders . It is good that we have some clarity now. That will help us to make a Better Capital projection Going Forward. Of ing, what you see is that if you take our current portfolio and keep that unchanged 10 years from now, then we would looking at we would be looking at about 815 inrease a 15 increase risk assets. It is a manageable amount. What that means is that for our current way of working, we are allocating our profit between growth as well as dividend. We dont need to make a change. We are not planning to take immediate, drastic steps. The cet1 ratio 14. 7 was aty. Ty me you expect that to change with the new rules . We dont know. We want to be very careful in studying how basel works, how procyclical it is. At least we are comfortable that the starting point for basel is fine. With also go for sure that if you look at our business for our clients or dividends as concurrence, we do not need to change it. Is there some extra capital in there . It is too early to know. Do Something Else, and it is to continue to invest in the future. We have like this quarter, we are paying money to improve our capabilities. We are rolling down merchant apps and we have to make sure that we stay on the ball for the future as well. Anna what were seeing in europe at the moment seems to be a fairly solid growth environment. What is your experience . Are there any mending segments that youre concerned about segments that are concerned about . The backup is good. The european economy is growing by 2. 4 . 3. 3 percentting a increase in the housing market. There is always things that we need to think about. If you look at the acquisition at makes us aand th bit careful, particularly in the u. S. Market. And some of the Real Estate Finance markets, you see valuations are quite high. We clearly look at a few of these markets where we say, this is where we have to be a bit more careful. Matt i have to ask you about bitcoin, because of the recent regulatory changes in the u. S. The stock answer is that we think blockchain is a good underlying technology. Can you really use this technology . Will you be able to put it to work at ing . I think overall if you look at blockchain, we are using it right now for some agricultural contracts. Trade finance as well. The interesting thing and also the complicating part for our clients, they dont want to have 10 different bitcoin solutions, so they are looking for some harmonization. R3, buton groups like we also do our own experimental stuff. Where quite confident and we like we are quite confident and we like blockchain. There is various applications for it. If you look at the bitcoin, there are some things that make it less interesting for us. Anna in terms of the performance in the Fourth Quarter, you described it as being good commercially. If anybody is comparing your numbers, theyre wondering what does not add up there. Is there anything that you can point to as to why analysts were so optimistic this quarter . Analysts areerall, a bit mixed. If i look at the commercial momentum at the margins, then it might be that we have done better than what analysts have said. On the other side, we have had a congestion of both our restructurings, our Investment Program, and there it was somewhat higher. I think that is the part where we have not performed according to the analysts estimates. Theink more importantly, commercial momentum is somewhat better. Matt we appreciate your time this morning. Spending so much for a few minutes with us. Lets get the bloomberg first word news from around the world. For that we go to hong kong and juliette saly. Juliette donald trump has delivered his first state of the union speech, telling congress and the rest of the world that new americane, moment. He promised to unify the country and hailed the tax cuts as helping the u. S. Compete globally. President trump we slashed the business tax rate all the way that American Companies can compete and win against anywhere else anywhere in the world. Theresa may has landed in china with a message to rebels back home that want to oust her. She will not quit. She is leading a delegation on a threeday trip. Asked if she would fight any challenge to her leadership, she dismissed the idea as a hypothetical situation. Chinas factory gauge has missed estimates. 51. 3. Pped to that is as efforts to rein in debt and reduce pollution dragged on activity. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Anna coming up, new american moment, donald trump delivers his first state of the union address, proclaiming that his nation has entered a fresh era of wealth and opportunity. We take a look at what that means, next. This is bloomberg. Is 6 20 a. M. Writer in london right here in london. The msci asiapacific down 0. 33 . Asian stocks did not take the beating that u. S. Stocks took. Now. A look at volvo right were seeing the swedish truck maker come out with an order intake and operating profit in the Fourth Quarter at 7. 3 3 billion. This is actually a picture of the carmaker, which is a completely Different Company owned by chinese. Anna lets lose that. Matt i guess some people would call those trucks, they are suvs. This is the volvo big truck maker adjusted operating profit in line with analysts estimates. Anna im sure donald trump would know exactly what youre talking about. Has deliveredrump his first state of the union address, largely dispensing with his trademark antagonism in a bid for bipartisanship. He also portrayed his administration as working to build a safe, strong, and proud america. President trump this in fact is our new american moment. There has never been a better time to start living the american dream. To every citizen watching at home tonight, no matter where you have been or where you have come from, this is your time. If you work hard, if you believe in yourself, if you believe in america, then you can trim anything dream anything. You can be anything. And together we can achieve absolutely anything. [applause] matt joining us now is head of this bank. Egy at trump has talked about all of these companies that are passing on these tax cuts. It is not an insignificant amount of money. A lot of employees in america are looking at an extra few thousand dollars of bonuses. To think it will make a difference do you think that it will make a difference . Of course it makes a difference. Were still trying to figure out the magnitude of it. Who benefits most . In some cases weve heard about ls tofalls windfal finance layoffs. There is a question about whether this benefits asset earners or income earners. Matt that is the debate. I dont know if we have an answer. Anna he also talked about where and that weading are seeing rising which is rising wages. That does not exactly seem to be the case. You can see wages falling over the most recent annual data. What matters is what happens from here and that is the part that we do not know. Whether the tax cut leads to this stronger wage picture. Thats right. Its hard to know if this will recover the full of scarves relationship between wages philips curve relationship between wages. The conditions are certainly there. Inflation expectations are rising, but a lot of that is down to commodity prices. It is hard to know how much direct impact this will have on wages. I am sure it will not hurt. Im sure that some of the numbers thrown around in the speech were exaggerated. Matt were seeing wage growth at 2 . Own stocks, certainly it has been a fantastic january, even with this correction. How much of that is attributable to donald trump . Look, the optimism that you see in sentiment surveys certainly is. The Small Business sentiment surveys that have hit record highs have come in the wake of the election. I dont think that is an accident. You have to give them credit for that. That we the wage gains are talking about started to improve in the previous presidency. The uptick in Financial Markets in trumps first year is still smaller than that of obama in his first year. You had the foundations of a strong economic recovery in place. I think sentiment definitely did improve around regulation and business spending. Anna what was the end of about . Wobble all i think it is down to the notion that Inflation Expectations have risen a little bit. Bond markets are starting to cope with the fact that were talking about central bankers moving away from less easy policies. Anna thank you. On daf stays with us aybreak. Meetingcatch the final between the fed and janet yellen. This is bloomberg. Season so lets get straight to the ericsson numbers. Fourth quarter in line with overall expectations according to the ceo. In terms of the numbers they reported, the sales number seems to be a touch lighter than the Fourth Quarter versus the estimate. Not a million miles away. Adjusted operating profit, 400 million. That was against an estimate that looked similar to that. 29. 9 ,d gross margin, that is exactly as expected by analysts. A mixed bag in terms of expectations from analysts. This is a company under fire from activists. 9 of this business. Ceo,to talk about with the relatively new ceo. Spent the first year running this business trying to revive this embattled company. Lots to talk about with him when he joins the Surveillance Team for the first interview of the day. You can see that after half past 10 00. Matt fun to say. This is another company that has warranted major headwinds from the euro. We saw that earlier this morning. Siemens has looked at pressure from fx. Talkingto the ceo of sp about that. Infineon looking at the fiscal year sales. 3 to 7 . It saw 11 . A reduction in its sales outlook. That is not something the market takes too kindly to. The full year segment result margin should be about 16. 5 . It did beat 70 . A bit of a profit warning when it comes to the outlook. As far as the backward looking numbers, the reporting numbers, First Quarter segment result margin was 16. 9 . Expecting an improvement in the fullyear. It saw firstquarter revenue up 1. 7 8 billion. Analysts had predicted. Firstquarter total segment profit of 283 million compared to an estimate of 260 million. Missing the profit estimate in the First Quarter and lowering expectations for margins and sales. It could be a rough start for infineon. Lets take a check with the markets. Sincebal equities and september 2016 come in the s p 500 dropping more than 1 . We are seeing a third day of weakness in their day of equities. Looking at the picture across the different areas. It is looking more mixed. You can see strength in australia and china. Earlier. Lower than 1 a little bit of a mixed picture but more of a negative bias. What can volatility tell us about where equities go . That is a great earlier. A little bit of a mixed chart sg the vic going above resistance levels, but this is looking at the inverted vix curve. The spot price going above the twomonth futures for the First Time Since august. Every time this has happened in the past year, it has coincided with a market bottom. Perhaps the recent two days of weakness not something to worry about if we look at this, but of course, is it cause or correlation is the question. When it comes to the dollar, we are seeing weakness in the bloomberg dollar index. The dollar weaker against most of its peers, perhaps the self congratulations and President Trumps state of the union was not enough to live the dollar. Perhaps looking for more details on infrastructure and perhaps trade. The alert indicator showing that trade is trading to mutual from bullish. That happened at the end of the chart. This coming as the 10 year treasury yield is moving lower as well. How much that has to do with the dojear following the regularly is another question. Just above 64 a barrel. We are seeing a third day of declines from a threeyear high. We have 10 weeks of stockpiles dropping. Is it going to happen for an 11th week . Some of the data suggesting perhaps not. We have api but also looking ahead to the ia. Anna thank you very much. Lets talk about some politics. U. K. Prime minister theresa may is in china talking to Labor Foundation for a postbrexit trade deal. She is accompanied by the largest business delegation her government as ever taking overseas. May is due in beijing later this morning. At the same time, the prime and if there has rejected suggestions she would resign. Joining us now is Tom Mackenzie. Good to have you on the program. What is may hoping to get out of this visit . Trade deals is always the banner that every Prime Minister wants visits. To one of these i guess that is what she is after. Yeah, you are right. The trade deals are certainly up there. Number one and two. Yeah, you aretrade deals and oe opening the door to potential future formal discussions with china on this fpa that will happen in 2019 when britain does finally leave the european union. Those are two main goals. She has come here with a delegation of 50 Business Leaders from the likes of hsbc, bp, small and Mediumsized Enterprises making up 60 of the mix. She is looking to open up the market, particularly the chinese consumer. That is why she has food and beverage companies. She has said she would not shy away from talking about things like human rights and an eroding of democracy in hong kong. She started her visit in the central city of wiluhan. She will be meeting with a premier at some point in the next few hours and will hold a press conference with a field signing. We will get some details. She will meet president xi tomorrow. Matt what kind of reception can she expect a warm reception when she meets with the president . Tom there was a commentary in the state run News Organization that said relations between china and the u. K. Could move to a new level, a higher level, but there are a couple of copavea ts. There is an acute Awareness Among the chinese officials and businesses that the Prime Minister is a weaker figure politically and a perception among many that britain is a Smaller Player on the International Stage as a result of brexit. They do want deals on their terms. Fpa with britain in the future, they will be happy to look at it but it would likely be on chinese terms. Theyre concerned around theresa may coming into power in 2016 suspending the Nuclear Project that china is invested in. We have been told that some of these deals have been put on the table that may have been expected, particularly the u. K. Getting details on the london to shanghai connect and the chinese having colder feet. Officially from the state media, they are welcoming the Prime Minister but brexit even here in china looms large over these meetings. Anna thank you so much for the update, Tom Mackenzie in beijing. We will keep tabs on theresa may and what she is up to with that vast delegation of Business Leaders. Thank you. Lets talk a little bit about the u. K. And what it is trying to do, because a Little League ofng that the government papers that suggested that even the governments own analysis does not support deals with other countries could compensate loss of access to eu markets. All of these foreign trips are designed to try to fill a hole. Tim certainly. An advocacy of free trade agreements and overtures to china have been part of the last couple of governments, the cameron government. The problem is it was easier to do that as part of a massive trading block. Now when you consider the u. K. On its own, not least because of negotiating experiences necessarily there, it is going to be that much more difficult. And chinas priorities will be with larger economies. When you look at the composition of its trade, the eus wants the contribution of that of the u. K. I think the last points made a really interesting in that it is fine to advocate for it but will their priorities be as aligned with the u. K. As they want them to be . Matt we have a great strain on the bloomberg. Trade relationships between a number of countries. I will put it up on the screen here. I have put the United Kingdom in the dropdown brought. You can see the biggest trading partner overall is germany, but then it is the u. S. And then it is china. Is the loss of europe going to be as catastrophic as everyone has been predicting . Tim for the u. K. . matt yeah. It is not like they are losing europe completely but the reduction in european trade likely after brexit will be catastrophic. Tim catastrophic, probably not, but it is the largest trading partner of the u. K. Putting up trade barriers, however that takes effect, will have some consequences on the negative side. I do think the reports that have been released a quite thatesting in this point other relationships that have been touted we are going to be on our own out and find out New Territory it is not going to be worth that much. I dont take that will be enough from the hit that is being taken from the trade barriers with what is the largest trading partner we happy anna we know. Anna we know the United States is more keen on bilateral. U. K. Inflation, 5. 39. Above the targets and we know why. That is because of the pound and the brexit vote. Mark carney says he is fully focused on the inflation challenge. The drag from brexit on investment and the economy is starting to receive. Is that the end of that story . Is it now he should be one track minded and focused on bringing down that inflation with hikes in Interest Rates . The market is coming around that they could come sooner than previously thought. Tim a lot depends on labor shortages. I dont think brexit will necessarily help in this regard. Shorterterm workers coming to the u. K. Those migration numbers seem to be tailing off and that creates potential labor storages. I think that is something they are quite worried about, even though as you notice, inflation is likely to roll over simply because the pounds worst days are more than a year behind us. That passed through affect will probably dwindle. The key will be a phenomenal wage pressures start to rise. They are starting to creep higher slowly. You do have high labor markets but you are not quite there at the point where they have to worry about tightening policy aggressively simply because of those pressures are not that cute enough for them to have to worry about that. The market is price for with the bank of england is saying they will do for the next couple of years. I am not sure there is much more they need to do in terms of encouraging anna they are just suggesting more rate risings are coming. Tim and the market, it certainly has. You are price for a hike this year. Matt that has been a gift to mark carney. Tim it will certainly have help in bringing the inflation pressures lower. It encompasses more of the european currencies is a little flatter over the last year. That massive component of it against the dollar is going to help. Matt we have a great index on the bloomberg. The bloomberg british pound index tracks the performance of the pound over leading currencies. You can see over the last year, it has really recovered obviously. Over the last month or so, there was a spike and a retracement, but we are planning out at a pretty decent level for mark carney. Tame theto help inflation concerns a little bit while they are trying to boost growth. Tim that is his hope. I think the concern now is the tame the inflation concerns a little bit productivity of the economy continues to be quite sluggish and lead to higher inflation as a consequence. That is going to be their main focus. The evidence is still quite mixed, as far as that being the case Going Forward, but at least now they can start thinking out Something Else and positive inflation shots as opposed to those that merely come by the currency channel. Tim graf will stay with us. We have a lot more to cover with him. While you are traveling to work, if you are in your home, going to get in your car to go to your office, you can tune in to Bloomberg Radio live on your mobile device or Digital Radio in the london area. That richardson is about to sit down to talk dollar weakness and rising treasury yields. Anna that is what is happening on radio. Coming up, crypto crackdown. The app to Digital Currency and regulators scrutinize one of the Worlds Largest exchanges. We will bring you the latest. Hodlarater, bernard joins us to discuss the banks earnings and plans for the future with manus cranny. This is bloomberg. Anna this is bloomberg daybreak europe. In new york. Lets get a Bloomberg Business flash with juliette saly. Juliette Samsung Electronics has search after showing record quarterly profits, more revenue than intel. The maker of screens also unveiled a 50 to one stock split. Those announcements draw the curtain on an eventful year where jail in corruption with the nations influence peddling scandal. Blackstone is buying 55 of unitsn reuters financial at a deal that values the business at 20 billion. Lp is the Parent Company of Bloomberg News and competes with Thomson Reuters in providing news and information to the financial industry. A nonexecutive director at blackstone. Apple is responding to u. S. Government queries about a Software Update that affected older iphones. The company says it would never do anything to intentionally shorten the life of any of its products. Wasier, the sec investigating if they violated disclosure laws. That is your Bloomberg Business flash. s a january to forget for cryptocurrency investors. Bitcoin is down about 30 almost on a onemonth basis and now trading just slightly below 10,000 per going. This comes as Virtual Currency exchanges are said to be subpoenaed by u. S. Regulators. Facebook is going to ban ads tied to digital currencies, warning that they are frequently associated with misleading or deceptive promotional practices. Eric lam joins us now from hong kong. Where does this leave cryptocurrency investors . Surely, they are used to bad news from regulators but this from facebook seems to be a difficult pill to swallow. Eric they really difficult month for cryptocurrency investors. I think for a lot of investors in cryptocurrency, they have been holding their ground for this month thinking this is not the first time bitcoin has seen drops. In the last couple of times we have seen a drop, we have seen a rebound. We have been seeing a rebound yet this time. What is turning out to be a dro. Bad start to the year is turning out to be a bad month for bitcoin. It is in track for the worst decline since september 2015. If investors are going to stand their ground, they are going to continue holding anyway even though we had a 30 drop. For some investors who have already been burnt, this might give them that added impetus to selloff from here. Talking to a strategist today, you might see continued selloff from here, especially if you see more regulatory action and not less Going Forward. Drop in thatth 30 one year chart we are showing, they still have a 942 gain over the past 12 months. What is next for bitcoin . Investors, hear from from the community . What is the development from here . Here, we willfrom continue to look from a regulatory action from governments and authorities around the world. I spoke to a strategist who pointed out the fact that with the latest move from u. S. Regulators, it is possible we might get less of a surface scratch and more of a deep dive into the books and white papers of these unregulated exchanges of industry. Up until now for a lot of investors, it is a little bit of buyer beware. You are hoping you will not get in exchange that gets hacked. Going from here with his added attention and scrutiny, it is much likely that a deeper dive into the actual mechanics of how these businesses are actually run. We found out there were some security lapses we have not known about until someone basically exploited it. Matt thank you very much for your reporting. I spoke to aeric lam in hong kog cryptocurrency. Anna lets take this conversation further with tim graf. Us, jerry fowler. Welcome to the program. Lets get your thoughts on bitcoin. Regulatoryof the threats. To what extent is that shaping your thinking around bitcoin as opposed to blockchain in which many Banking Sectors get very excited about . But bitcoin and cryptocurrency. Mark carney was talking about Money Laundering and the anonymity. That seems to be the direction on regulation. Jerry it is often referred to as the wild west. The regulation is going to advance the technology. I think a lot of these cryptocurrencies will become irrelevant. From bitcoinaway into other cryptocurrencies, there are more advanced because they are the sequel to bitcoin. They have other uses. Some for security, others for purchases. There are really interesting things happening in that space. In kodak, they say they are doing something in blockchain. Anna adding it to their name . Gerry it has this impact but it is actually one of the potential first uses for proper blockchain technology, for commercial purposes Digital Rights of photography and things like that. Blockchain should feel useful for authentication, but there are definitely uses. The focus is still on the original introductory technology. Matt you mentioned some of the other currencies. Are you interested . Cash, maybe it is easier to spend. Something like zeke cash is more synonymous. Are you interested . Gerry guilty pleasure of dabbling in it last year. Not to focus on it. There is a great podcast called blockchain insider and they go into the whole suite of cryptocurrencies and their uses. The currencies themselves are being created, but in reality, they will become the enabler. A lot of them will disappear and you will get more into what the technology is actually doing. A lot of the money is going into developing these technologies. It will be transformational in many ways. I think it is happening a lot becausehan we thought the bottlenecks because the bottlenecks of being able to authenticate across the entire network are being usurped in being able to authenticate in smaller groups. A lot of fascinating things that are happening will change a lot. That will become an irrelevance at some point. Maybe that is on the way at the moment. As we move on to the newer technologies, very exciting things happening. Anna im interested in these headlines. You have the facebook story and the inevitable clampdown of some kind by some regulators but south korea moved markets a couple of weeks ago, saying they are conducting studies on cryptocurrency taxation. A colleague of mine published a piece of this, looking at where the flows are coming from. It does seem to be were the regulators have not focused. You had a lot of them coming out of korea and then korea started to clampdown. That is a small part about what we think about. We are aligned with gerry that the actual coins themselves are not the relevant part of this. The technology underlying it is. People have interest in this so we are starting to look at where flows are coming from and why. Anna thank you both very much. We have to wrap it up. Tim graf, gerry fowler. He stays with us a little longer on the program. Donald trump and the state of the union is coming up next. This is bloomberg. Matt good morning from bloombergs new European Headquarters in london. Anna this is bloomberg daybreak europe and these are todays top stories. Matt new american moment President Trump seeks to connect his leadership with the nations prosperity in his first state of the union address. President trump there has never been a better time to start living the american dream. So to every citizen watching at home tonight, no matter where you have been or where you have come from, this is your time. Anna not a quitter. The u. K. Prime minister brushes off calls to resign as she lands in china on a threeday trade mission. Matt crypto crackdown. Bitcoin slides as facebook bans currencyting digital in the u. S. Clamps down on one of the worlds biggest exchanges. Anna welcome to the program. It is just past 7 00 in london which means we are getting a host of earnings coming through from some corporates around europe. Lets get to the retail sector. H m bringing us their members. Pretax numbers, 4. 8 7 billion swedish krona. That is well ahead of the estimate of 4. 4 4 billion. They are also giving the gross margin for the Fourth Quarter ahead of estimates. They are talking about december to january sales expected to increase by 1 . That is giving a little bit of something more forwardlooking. In light of questions hanging over this business. What are they going to do around their dividends . But they have to change their policy . Saying they may offer shareholders to reinvest their dividends in newly issued shares which is an interesting development. They have never cut their dividends at any point since listing in 1974. Any change to that policy would be a big story. How a re profits holding up, how much pressure is the ceo under . Saying they maythis is a busind about the worlds number two fashion chain by sales. They reported the biggest drop in Quarterly Sales on record for the final three months of the past fiscal year. We have already heard about the sales side of things and we are getting the profitability side. Plans to open another for markets in 2018. They have plans here for a new brand in 2018 as well. This is something of a fight back coming through from h m. Also planning some store closures and openings. Host of announcements coming through from the embattled fashion retailer. Matt big news from the makers of mario brothers. Nintendo is raising not only its fullyear forecast for switch sales if youve got children, i assume you know what these are, the portable gaming units sales of 15 Million Units and they have seen sales of 14 million. Also living there operating outlook from ¥160 billion to ¥120 billion. Nintendo coming out with a boost to its profit forecast, raising its fullyear net forecast to a pretty significant raise. Very interesting from nintendo. That is definitely going to be a stock to watch. Trading in japan, lifting its profit outlook and its outlook for salesforce which. I have to get one of those. The switch gaming unit. Anna we will get you want. Lets talk about what is going on with financials. 159. 1 billion yen. This is dividing the thirdquarter numbers from the ninemonth period. Which is what they have reported. They are telling us they still see fullyear net income at ¥550 billion. No change in their expectations. The ninemonth Group Earnings being reported by mizhuo financial. Ceo that laste week he expects the Japanese Monetary easing to continue for a couple of more years. This is something the Banking Sector in japan has had to deal with. Returns among the dojs nagging Interest Rate policy. They would be cutting thousands of jobs and closing returns amoe dojs branches in coming years as many branches after deal with the change to digital banking. That is the earnings reports wrapping up. Matt hardware making for adults. Electrolux, the maker of washing machines and refrigerators, coming up with net sales. 3 above the average analyst estimates. Fourth quarter sales, 32. 3 7 billion. We were looking for 31. 40 4 billion. A fullyear dividend pera fulle of 8. 3 krone. The estimate was 8. 81 krone. Electrolux is doing a little better as well. Not a bad day to be invested in hardware stocks from stockholm to tokyo. Very interesting stuff from electrolux. Lets take a look at the futures. We have got one hour to go, a little less until the start of trading in this market. We have had a greater in u. S. Markets. As np down more than what s p down more than 1 . The tech stocks down more than a third of a percent. Now we are seeing dax futures that are gaining. Cac futures that are gaining. Ftse futures that are still struggling but this is nothing compared to the blood on the screen you would have seen in new york yesterday. It looks like the global stock rout that we saw starting on monday in new york has come to an end to someit looks like thet for now. Anna perhaps. Lets take a look at what we have been missing in the asian sector. This is joining if you. Under a little bit of pressure as we listen to President Trump talking about the state of the union address. The new american moment was the talked about. We do expect to see a little bit of about, up 2 10 of 1 , offsetting those warnings from Goldman Sachs about these elevated stock market levels. Corporate profits, Global Growth story. That is what offsets those concerns. We do see s p futures suggesting they will be stronger. The dollar regions its downward drop. We see it is down by one quarter of 1 . The fed continues to meet and will give us their adjustment for the u. S. Economy. Matt Janet Yellens last meeting. You can watch that on t live starting at 7 p. M. We have a special on bloomberg television. 2 p. M. In new york. Here, you can see bund futures and trading as high as well. Bund future higher, u. S. Bond futures higher as well. We do see bund yields now at about 69 basis points. We see yields at 146. 55 right now. 2. 701. 10 year Still Holding at that 2. 7 level for treasury. That was a key spark to the selloff that started in equities on monday. Maybe also a little bit of a promise to investors who are looking for somewhere else to put their money in the meantime. Lets get the bloomberg first word news in hong kong with juliette saly. U. S. President donald trump his first state of the union speech, telling congress and the world this is a new american moment. In contrast with most americans, he promised to unify the country. He heldin contrast last years s helping the u. S. Compete globally. Theresa may has landed in china with a message to rebels back home who want to oust her. She will not quit. She faced questions aboard her plane to china when she is leading a strong trade delegation on a three day trip. Asked if she would fight any formal challenge, she dismissed the idea as a hypothetical. Officially factory gauge has missed estimates following an eight month low in january. With 61. 6 forecast. Thatthat is efforts to rein in t and reduce pollution drag on. Global news 24 hours a day powered on whether 2700 journalists and analysts. You can find more stories on the bloomberg app. Checking in on the markets in asia. It has been a really wild day. A couple of hours ago, this screen was mostly red so we have seen a lot of these markets fluctuate. China close out the session high by a quarter of 1 . Light afternoon buying in hong kong which is looking quite good. By did see the nikkei up around 8 10 of 1 . Overall, there has been a little bit of a resurgence in these tech shares. Looking at that stocks in detail, samsung in focus. It is pretty flat on the close in tokyo. It had been up as much as a. 7 after announcing a 50 to one stock split and record earnings. Holdings in japan looking very good, a 29 months high. We have seen a switch out of Development Stocks in hong kong today. Up 458 in 2017. Matt and anna. Anna thank you very much. Tries to connect his presidency with the americas prosperity in his first state of the union address. He argues the United States will rise to a new american moment. The president dispensing with his trademark antagonism. She was awake during the state of the union and tracking you for us in asia. Jodi, thank you for joining us. What were the specific themes that came out of this state of the union . Ive seen some analysis pointing to a lack of policy detail but what did he touch on that . Jodie there was not a lot of detail but most aided the union state of the unions dont have much tries detail, they are usually a laundry list of what the president wants to see happen. One, he was tried to be the bipartisan trump from the davos speech, making a president ial speech on a world stage. Not being antagonistic or trying not to be antagonistic. To take as trying, victory lap in a way. Go to his base and the thatlicans on capitol hill were standing right there and loudly that were standing right there and loudly cheering whenever he mentioned the economy and things going well. He was taking credit for the economy and was able to do so because of the tax bill that passed the end of last year. Those are the two main themes. He talked more specifically about immigration,economy aboute need for more spending on infrastructure. He talk to someone about trade and talk about national defense. When he talks about immigration, it got a little bit divisive. Matt it is hard not to get divisive. How would you not get divisive on this issue that so many people are so far apart on . What did he say about immigration . Things that were somewhat divisive he was asking the democrats to go along with him and his plan for the dreamers. To allow the dreamers, the young undocumented immigrants came to the u. S. As children, to allow them to stay in the country. In exchange for that, he wants a lot of money for border funding, including the wall with mexico. And he also wants and is really requiring there be a change in the way immigration policy is structured. Right now, you are allowed to have visas for extended family members. That would not be the case under his plan. The democrats were not going to like this to start with. And that he made a number of comments talking about gang members who had committed crimes and had some people in the audience. One was an agent who caught gang members and the other was family members of victimscommeng ofbers who had committed crimes Gang Violence and tried to connect that with immigration which made some people in the audience, particularly democrats and commentators uncomfortable that he was linking immigration yet again with crime. Matt thanks so much for your commentary. Jodie snyder joining us on donald trump state of the union address. Gerry fowler is with us, strategist at aberdeen standard investments. I feel like immigration, of Gang Violence and tried to theret that has to be no more divisive issue in the western world right now. There is no way to talk about that obviously without dividing the crowd democrats and commentators, who are likely democrats, will disagree. On the other hand, the economy has been strong. The question is does donald trump, does this Republican Congress get any credit . Gerry it is interesting. He actually said a lot of accurate things in his speech but the question is should they be taking credit . I think there were a lot of reasons we had such a synchronized recovery last year and it was like it is continuing or even improving this year. Orh was perhaps china driven weak dollar driven, which donald trump may take advantage. There are a variety of things. I would not that the u. S. Government cannot yet take credit. Having passed that tax bill, we will see fairly substantial growth and inflation a great for the u. S. Throughout this year which there has to be no more divisive issue in the western was the reverse. Inflation expectations were missed. That is part of the reason why money has been flooding offshore, chasing the surprisingly good growth in china and even more surprisingly growth in europe. Happen witht offshore versus u. S. Impacts. Anna does that add up to a stronger dollar in 2018 and higher fed rates than maybe the markets factoring in . Matt at this stage, probably not. We have been trying to think a few steps ahead. We have seen dollar weakness in the first part of this year. We are trying to think what could turn that around . It could be there are some growth surprises in the u. S. Than europe and japan but i dont think that is enough, because you have a very good Global Growth environment. A decade of people stashing as much of their money as possible in u. S. Assets because it was safe in the tumultuous period. And especially with fiscal stimulus, tax stimulus, and potential fiscal stimulus coming through in the u. S. , it is likely not to expand the current in the u. S. While europe and japan are expanding. If you look at history where the u. S. Was a highyielding currency as it is now, normally that than europe and japan but is dollar positive. S normally when the u. S. Is increasing its growth, that can be quite good as money invests in that growth, but this might be more a bit like the exception which was 2004 2007. Particularly because of the divergence in you still have dollar weakness. I say at this point to two things that i think that could turn the dollar around we have to keep in mind if it is so weak that it causes more significant Inflationary Pressure and the fed then saysfed then says eithe worried about financial stability, which is what they said two years ago when the dollar was too strong. Or they say we are moving from we are no longer seeking to remain accommodative. It may have to do something to do with protectionism which we are still in the early stages. More dramatic shift in the protectionist rhetoric that could cause inflation to rise. Matt if you look at the ther it,is planning, if you take the fed is planning three rate increases. I was at a Goldman Sachs conference in frankfurt a couple of weeks ago and everybody was saying we expect those are two four. Closer to two. What do you expect as far as fed increases . The yield, isnt that a draw to the dollar . Doesnt that make investors want to get in . Gerry it order narrowly would be and probably should be but there are other things going on impacting the dollar because the yield in the u. S. Is one component of what is driving currency. Having said that perhaps another three next year which is a lot more than what the market is pricing. By the time we get to march and june where we have had to rate hikes, things change because at that point the markets must be thinking about more hikes for 2019. And then you start seeing a much more significant yield differential between europe and japan. U. K. , where they would not have moved as much. The yield differential may come into play more throughout the year, but even just by the u. S. Doing more hikes, they are going to get very close even if they say they want to remain accommodative, not actually being accommodative. They will cross a threshold were rates will be in the late cycle. Anna where does where do you stand at the moment and before all of that comes to pass . I have this chart that has to do with the vix and it is a little complex, but the bottom screen shows the vix versus the two month fixed futures. We are seeing some panic selling in recent days. When we have seen panic selling on the vix, that has been at the market bottom. Suggesting that the model we saw the end of january may is not something to get overly excited about and onwards and upwards from here is the suggestion of the chart. What is your thoughts . Gerry we had an extremely strong start to the year and part of that is exacerbated by the dollar. It is so important in global trade that when it is weak it helps it actually accelerates offshore growth which contributes to further weakness of the dollar. The circularity at the moment it is hard to see reversing. Therefore, it is easy to see willcontinued momentum continue through the first part of the year. What i think we need to see is whether that starts to cause instability or whether it changes the inflation outlook in the u. S. For the moment, we are still very constructive. If Oil Prices Continue to rise, what does that do to the yield as a relative value of equities . That is why we own financials and some of the markets, essentially because it even if yields are rising which may affect valuation, that actually helps the relative key valuations of banks. Star parts of the markets that can give you protection of what might be the catalyst for week is this year. Matt i want to bring this back to the state of the union and Donald Trumps impact and show that we just pulled up. Up. Forecasts are they are still quite far away from trumps 4 . That is fine, he is aiming high. Could tax reform really move the needle as far as the u. S. Economy is concerned . He talked a lot about the money that is being funneled back from those cuts to employees and we see that happening. Gerry it is going to be a question on the multiplier in effect. We expect it will add several tenths of 1 . We are about to get a new continued resolution or a budget which is likely to include additional spending. The deficit expands even further. That might add more. Also military spending is going to be more domestically driven with a stronger multiplier. Even further stimulus coming through. As well as obviously the inflation upgrades that are likely to start coming through. And getting away from some of those one offs from last year. The longerterm strategy is always looking at what is the next penny to draw. We think it will reliably happen. U. S. E u. S. , we still do equities but whatever useful trades is owning u. S. Tips because essentially by receiving that real yield, it is a carrier position but we are protected. The treasury yield backing out. As long as it is because of changes in Inflation Expectations does not impact what is a very good diversifying position for our technical portfolios. Anna thank you very much, gerry fowler. Gerry will continue this conversation with Bloomberg Radio at 7 30 a. M. U. K. Time. Manus cranny joins us live with the ceo of the group to discuss the banks performance. Manus very good day to you. We have a new ceo. Welcome to bloomberg. Lets get it over and done with. The market wants to know are an here for the longterm or interim ceo . Good morning. Glad to be here. Manus i have been nominated by the board of directors as ceo. I feel very much supported by the board of directors and my colleagues. Manus have you had conversations with the shareholders . Installed what are the conversations like with the shareholders . Weeksrd the first four as ceo, i did nothing else but communication. Also the large shareholders and investors, very good discussions with them. I think the share price shows that everybody has calmed down. Manus i looked at the share price when he left, up 6 . The commodities settles in and takes assets away from julius baer. What is the thinking in terms of the risk to juliaus baer . Bernhard we feel very comfortable with the platform we have. We are not too much worried about that. By the way, we have competitors. Manus you are straight out of the door. Youre buying 95 of reliant. Is this the hodler trade . Re going to see more deals like this from you . Are you a supporter of buying businesses . Bernhard im a very strong supporter of growth and i will deliver growth. One way to deliver growth is acquisitions. It is a region where i see a lot of potential. This acquisition you saw this morning will help us to explore the brazilian market. It is a very substantial market with about 500 billion assets under management. We will try to show you more of them. Manus 5 billion the shape of the deal you would do on that size. Bernhard it depends what sort of deals. If it is a Market Industry try or consolidation in an emerging markets country, that is possible. Too small for the mid tier markets, but entry or consolidate in emergingmarket, it is a very nice side. Manus what youve got to do is convince the market you can sustain the money build. It beat the estimates. You are way above the target range. Should you be upgrading the target range . Or can you sustain this kind of level in excess of 6 this year . Bernhard i feel very comfortable that we will be within the range of 4 to 6 . We have not changed the midterm targets. The hiring we see, we plan to hire 80 managers. Going back to normal. We feel comfortable we can deliver that. Money the u. K. Added brought in ironic smile to my face. What are you going to hire their urms from . Bernhard we are very positive for the u. K. In two a rreas. U. K. Domestic and also the International Business and our Regional Team has presented us a convincing plan. We will continue to grow in the u. K. Manus we talk about brexit every day. There is this sense of negativity and slow malaise in bankers. What do you see on the other side of that trade . Bernhard we are optimistic for the Financial Center. Of course, we will lose a couple the bankers to other cities. I think differently from some of my colleagues and will continue to be the number one Financial Center of europe. Are cautiously optimistic for the u. K. Domestic business. We are very convinced it will work out. Manus one thing which strikes me, we are still in the world of negative rate. One thing i want to know from each of the bankers here is which clients are charging to have large excess of cash balances . Bernhard we only charge the clients that have very large cash balances. Regular clients, we dont do that. We have a little bit of an advantage that with our credit book, we are not charged negative Interest Rates from the Swiss National bank from the very first payment. Snb, no charges from the that is a relief. As you look at the position, we saw the newsbreak and what happens next to julius baer . Do you feel that the bank is as you lookexposed as a takeove . Because that is something the market is talking about. What is your message . Defend your plate to be open to a bid. Bernhard the best message is to have a strong stock price. If you see where we are, it is very high. We want to continue to even decrease that. We have a very Clear Strategy Going Forward where we want to land and im persuaded we will be able to continue to stand alone. Manus the chief risk officer will want to get your take. The longest run of gains in the s p. A little bit of a shakedown in the past couple of days. As a former risk officer, what is your take on the markets . Should a slowdown be expected . Bernhard let me correct you a little bit because i have been risk officer, but also chief operating officer, so i have worked with clients. With regard to the risks from here, the outlook for 2018 looks quite favorable. , Strong Company earnings, good balance sheets. Gdp growth, i think, is predicted for 3. 5 . It is very clear the markets are relatively high and it is possible we see a correction, hopefully a smaller one. And maybe that will be even healthy to have a smaller one. I think the risks are from the political side than the economic side. Maybe some trade barriers, maybe trade wars. That is what worries me more. Manus they are quite risk on. Clients have been converting cash into products, in two different products, which is selling the for them. You can see how the markets are developing. Currently we do not see kleins backtracking. Have held them with the outlook we currently see. I think it is good to state investing. Manus i wish you well with 2018 and welcome to bloomberg. I hope you come again. That is it from the new ceo here at julius baer he has sent his message very clear to the market. He is not here to be the interim ceo. He has more work to do come more deeds to put on the table, more regional managers to hire. If you are going to be a contrarian and have a bullish view on the u. K. , that is it from daybreak from anna, matt and myself in zurich. We will hand you back to guy johnson and the European Market open. Lets see what these markets make of the message we have had from the ceo here in zurich. Ill be back very shortly with a little more