Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20180206

Good morning, everybody. This is bloomberg daybreak europe. We will get into the big picture story in a moment. Breaking news. We are waiting for the Banking Sector to wake up with bnp numbers. Numbers coming through. Lets talk about what they have got to say this morning. They have decided to accelerate the pace of investment. Fourthquarter net interest income. That is ahead of the estimate of 6. 27. They have increased their mortgage volume income. This is a bank that is very exposed to the swedish Housing Market, of course. The impact of the slowdown we have seen in this Housing Market for this business is crucial. We have seen the biggest slump since the financial crisis, even as the economy has been growing faster than average for europe. Saying they see signs that pressure is easing on this Housing Market. Headlinerucial, the coming through. Manus we are officially in a correction. Falls by 2 from the high point. I said to you in the headline that the asian markets were careening to a correction. Market tion in the the hang seng down by over 6 . The biggest drop since 2011. We discuss that in the next hour. Bnp paribas, we have spoken to the cfo. Income,thquarter net 1. 43 billion, meeting the analysts estimate. Of 10 byn equity 2020. When it comes to trading revenue, 1. 07 billion versus equity in prime Services Sales up by 12 . In terms of core equity tier one capital, 11. 8 at the end of december. There is a stable number for them. That is above the analyst estimates. The largest lender in france. There is a host of redhead read headlines. Suv. Is your we have the numbers for your profit. That is ahead of the estimate. They took home the crown in the United States. Profit is a beat. That is above the estimate. They lift the operating guidance to ¥2 trillion. ¥2. 2 trillion from y2 trillion. ¥2 trillion was the top end. This is the third time that toyota have upped the gain. ¥2. 2 trillion for the fourthcoming year. Anna the breaking news keeps coming for the Banking Sector and car sector, and now the Mining Sector as well. Anglo american. Platinum giving us guidance for the basic eps. 193 to 212 higher. They are also talking about where the profit will be. Profit higher than a year ago. We will keep that in the Mining Sector. The risk radar shows you where we are on the overnight story. Asiapacific down 3. 2 percent, plunging for a second day. The biggest drop in more than two years. Than 1000 stocks in this index and nearly all of them are in negative territory. , japanese indices, really bearing the brunt of the selling. Part of that due to what is happening in the yen. We saw the nikkei down at 6 . We are seeing fairly ferocious waves coming through in the japanese market. We are down at 4. 7 on the nikkei. That would be an official correction. Havens are being bid this morning, and that is what we have seen in the dollar selling against the japanese currency. We have slightly comforting words from governor kuroda. Interesting that the treasury market should be doing what it is doing. We see these haven bids for yen and treasuries. Youll come down on the 10 year treasury down to 2. 67 or so. Irony given a lot of this selling was attributed to the rise we have seen in treasury yields at the back end of january. Wereis where some of them in mondays market. Dell by 1. 6 percent, down worse than that in the Asian Session. We come back just a little bit. We picked out just three here. We talked about bitcoin. Of whethersessment generally the Global Growth story, the earnings story, is enough. Manus there is a battle royale. Of 1989, 1999. This is a moderate correction and cash will not be put to work. What is all of this to the fed . Will we hear more from the central bankers . The market managed to get itself all the way up the hill with the Federal Reserve. This is what the traders have done. December 2019, slightly inside. Basically, reducing the risk of an aggressive Federal Reserve. Looking at the blueline for the rate hikes in the second quarter. Purple mine is your third quarter. Your fourthquarter is your orange line. Is repricing the ability of the Federal Reserve to do the rate hikes that it has promised, which is three this year and three last year. Tothe third mandate coming light and going to have to be priced by the Federal Reserve . Global equity market selloff, will it be factored into the decisionmaking . Neelll hear from later kashkari later. Volatility is up 50 on the day. You are looking at 30. 9. That is coming from a lower base, so the market is repricing the fed. Volatility is alive. Literally, quite frankly, raging. Also come. Not all of it is around equity markets. What does he think about the oil market and opec . Lets get to juliette saly. She is standing by. Mattis, bnp paribas says net income came in at 1. 4 3 billion euros in the Fourth Quarter, in line with analyst estimates. The french bank is coping well with low rates. You do see it when you look at volumes and all of that. Hs as a bit on weign bit on the top line. The cost of risk is lower than what you expect. Overall, domestic markets, it is up. Juliette the president of the minneapolis fed said he does not think a financial crisis is imminent despite the recent market turmoil. Neel kashkari made the comments in an exclusive interview with bloomberg. If the bond market and stock market are pricing in lower longterm yield, that also could be leading to higher valuations. I do not see a financial crisis on the horizon. We are paying very close attention to it. As u. S. Stock plunged yesterday, President Trump was hailing the economy, praising his recently passed tax overhaul and telling workers in ohio that america is once again open for business. Pres. Trump when i signed the tax cuts six weeks ago, it set off a tidal wave of good news that continues to grow every single day. Was dry,e Ink Companies were announcing thousands and thousands of new jobs and enormous investments to their workers. Socalled robo advisors struggled to deal with the market route. The glitches are a setback. It is comfortable making Investment Decisions without speaking to human beings. David davis said his government is very clear on what it wants out of talks with the european union. He met Michel Barnier in london for the first time this year. Mayier told the government have to make a decision over its future relationship with the bloc. , without our Customs Union outside the single market, barriers to trade and good and services are time has come to make a choice. News, 24 hoursl a day, powered by more than 2700 journalists and analysts in more than 120 countries. You can find more on the bloomberg at top. Terrible day of selling the regional index, having its worst fall since august 2015, but importantly, the index is only at levels they have in december. You have seen the nikkei fall quite substantially. It looks like it has entered correction territory around 10 . The hong kong hang seng index coming under pressure. Decision, iexit should say. It is these tech players coming under pressure. Taiwan semiconductor falling heavily in taiwan and jogging the taiex to its worst loss since 2011. , the momentumrn coming through in these cryptocurrency assets. Tencent was the worst performer when you look at the next moves on the regional benchmark index. Widespread. Ally no Rate Decision from the rba. The Commonwealth Bank is the largest listed stock in australia. There were very few stocks on the regional index to close in the green today. Anna thank you very much, juliette saly, with another update on those markets. Stocks have plunged for a second day. U. S. Futures continue to plunge. We are joined by bloomberg mliv strategist Marc Cranfield from singapore. Help us put perspective on this. How much further will equity indexes need to fall for investors to believe the bull market is dead. Is it still alive . Will it limp back to life . Or is it dead now . Mark good morning. It probably needs a few more people to say that this is not a healthy correction. We are hearing a lot of people say dont worry, this is the natural pullback you need. This is the natural thing that happens and everything is fine. It probably needs a few more significant voices to say actually, this is quite a serious correction and maybe you should be a bit more uncomfortable about whats going on. Until we hear that, we probably have not seen the right time for people to correct this move. To see some major markets drop as much as 20 . Youre talking about the nikkei falling 10 from its january highs. Before we say enough is enough, maybe we are back at more sensible valuations, anna. Manus i will pick it up from here. I suppose the question is ubs put out a note last night. What does it take to perhaps halt the speed with which these markets are correcting . To stop them,y but the speed . That is at the forefront of any bankers mind at the moment. A 10 correction in the nikkei. They are beginning to unfold. Mark we are on the verge of markets getting a little bit disorderly. As soon as that happens, you get central bank is interested and you get regulators interested as well. The first when we heard from was mr. Jay powell. He could easily take an opportunity to say some soothing thes to walk back some of Interest Rate expectations the market has priced in for the u. S. , and that could help to stabilize markets. We have heard mr. Kuroda speaking today. Calmeded the japanese the japanese market. Are people who would like to Say Something from the fed on what they see as the correct level of Interest Rates in america and whether they can go ahead with three hikes or would it be less . The markets have fallen so far. It anna would be interesting to see with having jay powell a little time to get comfortable. Whether there is any reassessment of that plan. Classes . Other asset thats having an impact on treasury, people getting into treasuries, and the yield coming down. Other commodities and bitcoin, which are the other Asset Classes on your radar . Mark certainly, commodities have been holding up quite well. Looking at wti crude futures, for example, they have been in a pretty tight range. They are getting to the bottom of the trading range. Crude inventories. They are usually considered to be the smart money. Crude oil could be the next want to take a tumble. There is a whole commodity complex. Over the next couple of days, people are watching what happens in the oil market pretty closely. Manus thank you very much. Our strategist looking at some of these. Oil down there, talking about the inventories. Over 1 . 6348. 6694. Lets bring in our guest post. Host. We can go through anyone of these markets. Volatility is alive and raging. If any central bank has the most to lose, the japanese these markets are looking perilously close to disorderly. How would you describe the past 24 hours . Markets are prone to major swings in sentiment. Nobody was complaining when the polls were running free when the Economic Data with strong and they were not really scaring markets. The question from the central banking point of view is how much do you pundits market when economic it is coming through at a strengthening rate . Much does the selloff change with the Central Banks are going to do . Markets were nervous. We see a selloff in markets partly to do with that nervousness. Does that stop the fed from hiking . We always have to be concerned about confidence affects, scary numbers on the front of the newspaper which stop me from spending today. Usually, that does not happen. Gearing up into this rally, you have to worry about down sheet effects, mainly cashdriven. The thing the market needs to remember is the policy rate by itself does not tell you anything about how tight or how loose Monetary Policy is. It is the fed funds rate relative to the equilibrium rate. Or forth three hikes hikes by the fed, the equilibrium rate is rising much faster. I am not that worried about the tightening when it comes to the economy, but clearly, markets are a little panicked. Manus that is the chart we started with at the start of the show. We have a fiveday chart of the treasury market. Volatility in the treasury market is the highest since 2016. This is the dog that want the tail. Back at havenre status for treasuries. There is no irony in that. The markets needed some kind of shake . It got it in the form of wages. Part ofthe good this new cycle. There is the irony. Treasuries back at 2. 69 . This is a temporary phenomenon . Kallum my big thing for this years we are going back to the old normal. The old normal is nominal gdp growth at 4 , 5 . That means all of the Government Bond yields are still far too low. If we are to go back to this old normal, the yield gradually have to go up over time. Given they were so low and driven so much by central bank stimulus, that change around is not going to be smooth. That is what we are mainly experiencing now. Anna do you think we need to hear from the fed and there is a reason for jay powell to come out and speak . Would Market Participants appreciate just hearing something . Would that suggest more panic . Inclined am naturally to be hawkish. The fed will up the brakes on the economy. Be enough for markets. If we get major swings, Central Banks succumb to it and pander to markets. I would not be encouraged by that. Anna lets turn our attention to the Banking Sector. Frances biggest lender sees an uptick for its 2020 targets despite the Challenging Market environment in the second half of last year. ,peaking to Caroline Connan discussed frances outlook and italian elections. Overall, if you look at the economic illusions, you will see a bigger demand for loans, pickup in demand for services, and that is what you see. On top of that, we are changing serviceting to customer to adopt all the changes, so that is why we believe we are off to a good start. Caroline in terms of french retail, you are seeing a strong 2017 . D in are you seeing a return to growth faster than expected for the french retail . When you do see a pickup you look at volumes, fees, and all of that. We have a low Interest Rate environment. That ways on the top line. Ghs on the top line. That is why overall domestic markets the bottom line is up 5 in 2017. Caroline is there a macro effect . Lars there is an illusion we see. He has made a plan and announced several things and is executing them. Caroline it is not only you to have recovery in general, but also due to the impact we are seeing in france . Lars overall, i will let you be the judge of that. We see this in the beginning of 2017. That is what we saw the whole year. Caroline we get the elections in italy. Bnp paribas has the unit. ,o you see any risk there reducing some exposure in italy . Lars in italy, we have repositioned ourselves to be really focus on the individuals. That is behind us. We are there to accompany our italian clients in their economy. Caroline hedge funds are reducing their Risk Appetite in italy. At bnl,we can say we are focused on specific clients we want to accompany. Manus that was the cfo, bars lars machenil. Thats part of the issue for the ecb because the bank still cannot claim success in its struggle to restore inflation. It also defended its policies widenomplaints that may inequality. Mario draghi was addressing the European Parliament and stronger. Mario well be can be more confident about the path of inflation, patience and persistence with regard to Monetary Policy are still warranted. For underlying inflation pressures to build up and inflation to converge durably towards our objective. And persistence. Not declaring victory as yet in terms of the fight against inflation. Mario draghi addressing the European Parliament. About he is talking inflation. In many ways, he is intimating what greta is saying. Now might be the wrong time what kuroda is saying. Now might be the wrong time to step back. It is far, far from done. Eurozone, the recovery is probably two years younger than the u. S. In terms of the cycle. They are still having spare capacity. Any signs of major wage inflation, price inflation, excess credit growth, which means the ecb will go much slower by virtue of the fact that it is still a long way away from where the fed is and the u. S. Economy is. Anna looking for signs is interesting though, isnt it . I have a chart here. European inflation headline inflation and euro area core inflation, subdued. Something to keep the hawks at bay perhaps. We have news overnight that the german metalworkers have reached a landmark labor deal in not across the country, but it raiseses 4. 2 percent pay being described as a landmark labor deal. It stretches over 27 months and could be adopted across germany. These are the green shoots of something that looks like solid wage inflation. Kallum of all the eurozone countries, germany is probably furthest ahead in the cycle, but this goes back to the old normal. Get 4. 2 wageo growth in germany. I shrug my shoulders like this. It is challenged by symmetries across the block. Germany is ahead. It will probably signal soon that it will stop its qe in september. It will go for three hikes in 2019. That should be enough to keep the german hawks at bay. Manus the whole argument has been that they have to absolutely unseats the market. Here we are in europe. How much does the periphery need as that largess from the ecb to continue verbally in terms of being there . It might end qe, but the policy would remain favorable for a long period time. Kallum global Monetary Policy will remain accommodative threats fire as i can see. From a Central Banks, the real rate is highly negative. Balance sheets are large by historical standards. No one of gdp growth nominal gdp growth has grown. We have had no major hikes. If my models are right, Monetary Policy is getting easier, not loser. That is hard to square what has taken place right now. Anna thank you. Kallum pickering stays with us. Up next, still bullish on brent. We hear from an exclusive interview with a guest. The Worlds Biggest Oil trader. Lots more to discuss in terms of that oil story. We will continue to bring you all the latest on the Global Equity market selloff and the u. S. Futures still pointing down down more than 1 . We use our phones and computers the same way these days. So why do we pay to have a phone connected when were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And now, get a 200 prepaid card when you buy an iphone. Its a new kind of network designed to save you money. Call, visit, or go to xfnitymobile. Com. Manus live shot of tokyo and the emperors palace. You have dollaryen. You have yen rising. The top is falling by. 2 . The nikkei is down by 4. 73 . Nearlyity is rising by 50 . The topix and the nikkei. The nikkei is in correction territory from its high at the start of january. This is not the time to think about raising the target on these. That is the first verbal intervention. Anna a little bit of reinsurance. The worlds biggest reinsurer, fourthquarter numbers coming out from them. Fourthquarter net missed estimates. The Fourth Quarter eliminate net income, 530 million euros, that is below the estimate. Unchanged, the dividend. The forecast for that was 890. We knew that this would be a tough period for this business. We have seen a year. The worst Hurricane Season in history. Harvey, irma, maria. 135 billion worth of natural 2017. Er claims made in that made it the most expensive year ever to such insurance payouts. Interesting to see that they are keeping this unchanged dividend. There were questions about that. Interesting to get any take on pricing as well. Bright spots is perhaps it reinforces pricing, firms are pricing for some of these reinsurance businesses. Conditions continue to be improving. Munich re cfo will be joining the Bloomberg Team at 7 30 a. M. U. K. Time. Lots to talk about there. Manus guy johnson standing by. Lets delve deeper into these markets. Where to find a piece of green from bitcoin. Maybe gold shows a bit of upside. High. Good morning. That. Ets talk about the fair values are interesting. They point to a negative start here and in europe. The ftse futures, the calculation brings us to around 3. 3. That is the downside move. That was a lot worse. Wellnt to highlight as that the s p has called down 2. 26 at the beginning of trade. The dow, another 3 lower after 4 drops for both of this market. The average and indices dropping pretty hard yesterday. That is the clue in terms of what the european and u. S. Sessions are going to look like later on. I will give you context as to what is happening around the world with the nikkei down by 4. 73. We have an Australian Market down by 3. 2 . Just a sea of red. The Chinese Markets have fallen a little less than maybe some of the other markets, which makes you wonder whether the chinese authorities are doing things to make things a little less worse than investors there. That is something to Pay Attention to. I want to highlight over here on corner, copper down by 1. 3 three. Brent is down by. 95. The vti by. 98. The bloomberg wti down by. 98. We have yet to see it spread to some of the other Asset Classes. There are banks saying that now is the moment to go in and buy metals. Jpmorgan out with a similar call as well. Lets wrap it up with context, shall we . This is the s p, going back to 2013. This channel here i want to focus on. This has been the of channel since 2016. We broke out to the topside not long ago. We are back right in the middle of that channel right now. From a technical point of view, and this is very basic, maybe we are not all doom and gloom this morning. Back to you. Anna guy, thank you very much for it a little light in all of that sea of red. Lets look at the Earnings Reports. The insurance and banking giant over in italy. A was always going to be focus on strategy, growth, and insurance. The focusng to be here, but we are getting the number as well. Fourthquarter revenue coming in at 4. 71 billion. Net income coming in nicely ahead of the estimates. A nice beat from the italian income sector. Ahead of a 1. 0 9 billion estimate. In terms of that dividend, they are giving us the fullyear dividend per share. 203 euros per share. Comment around the net profit, expecting higher 2018 that. It was a strategy that was always going to be of interest here. Not all that different from others focusing on Wealth Management at that time. Italy accounts for one third of europes bad debt. This is a company that has managed to deliver for shareholders. The stock up 30 since the announcement of the previous fullyear pram plan. An performer in a number outperform for a number of levels. Manus youre looking at corrections on the nikkei, one of the line cometh run mliv that traders may want to one of the traders on mliv. Lets get to mark cudmore. Good to see you. The adjectives being thrown around are full and plentiful. Panic ensuing, etc. The one thing that strikes me is we have had kuroda reassuring the market that now is not the time to adjust policies. The question we debate here and our guest host, we put this to him is that a fair estimate . Are we really in panic mode . Mark i do not think we are in panic mode. That is one of the things that is slightly worrying me. You find a bottom in these situations. The ultimate capitulation comes when there is panic. The stories from many commentators is going that this to worry. , great, not that may be true structurally. It does worry me, the lack of panic. The reason i shifted bearish a week ago was the first time i could remember since before the crisis, there was no bears out there. Pullback in many stock markets, and yet the bears are dominating the chorus of voices out there. I want to see more bears before i can be comfortable. Anna in terms of where we are then on fundamentals versus what we are seeing in the markets at the moment, has there been a shift in market fundamentals . People try to pin the start of this on the wages data from the United States on friday, but what about the fundamentals for markets . Mark there has been a massive shift in market fundamentals. It started happening in january but really accelerated last week. One of that is the move higher in u. S. Yields. By 90 basisher points. We have not seen that scale of tightening in the u. S. Since the first half of 2008. This is a massive amount of tightening we have seen. It also reduces the net present value. That makes it look slightly more expensive. January was like breaking records across many equity markets. Again, thats a reduction of liquidity because it means there buy in. Cash to finally, what we see in the last 48 hours as an extra blow is the fact that volatility has intoded and that will feed measures across bangs and hedge funds and it means the rest of this year, they are going to be more limited in their ability to take leverage. We have had a reduction of liquidity. Hasany ways, liquidity been hurt in the short term. Earnings are so good. They will matter again, but we need to see yield come lower first and we need to see a little more deleveraging from investors. Well keep you abreast of everything happening. It is one of those days we need to do that. The red headline across the bloomberg. They see their Cash Dividend payoff ratio. Dimensions that there was a lot of focus on the dividend payout as part of the strategy that is evolving. Lets get back to Kallum Pickering. We are talking about a lot of Earnings Report that of european corporate. We just heard from mark that growth and earnings will matter again. They have become rather divorced on days like today. Kallum the market is prone to swings in sentiment. What we are seeing is, unfortunately, the reoccurrence of that unhealthy relationship, where the market fell off a little and looks to be central bank to do something. In normal times, the economy drives the central bank action, not financial markets. If we are to get back to anything that resembles normality, Central Banks have to hold their nerve, let markets come down a little. The market is within the range come over bought a little heading into last week. If Central Banks dont do anything and settle out by themselves, we will be in a much healthier environment by the end of this week. Manus hold our breath. Never get your heart had out to get yourself through to the end. Stay with us. Kallum pickering, senior economist. There are notes about citigroup saying to buy metals and not bonds. Commodities got dragged into this global selloff as well. Wti heading for its longest losing streak in nearly two months. The Biggest Energy trader is still optimistic. I spoke with the ceo and he said this is due to strong fundamentals. He remained bullish on the price of oil. The last time you and i caught up, you were a little bit more bearish. Walked away with a view that you were a little more bearish. We didnt quite get there. As you look at the market today, help bullish or bearish are you . In classical trader style, that was wrong. The markets have done remarkably well in terms of the runup. It has been stronger. Lots of factors, lots of reasons, which obviously, we can talk about. Weak dollar, good performance from opec, not fantastic performance. Think we are having a bit of a pullback right now. Manus one of the notes that are right at the end of last weeks Goldman Sachs talking about 82. 50. They are saying we are making as much money as we did at 100. How far can the run go . Good question because actually, there were lots of different drivers. We really isolate one particular factor. You see the whole macro environment, the reason behind the backdrop, a weak dollar. Obviously, a big pulldown and stocks on the end of last week. That dampened sentiment. For us, we always look at the oil fundamentals, and that is the big thing for us. They are absolutely fine. Perhaps the Oil Production that we expected from the u. S. Is a bit late in coming than we anticipated. Perhaps not quite as rampant as we thought. We are very solid. They had to sell something, dont they . Manus your estimates of the size and the scale of shale . Ian its difficult to put a number on it. One thing i would highlight, which i think is quite significant, is that lots of companies, you know, will be working and have begun to show a lot more as a plinth than was previously the case or previously recognized. They will continue to be really focused on creating cash flow for a dividends. I think there is going to be a little bit of cost inflation coming through as well. Shale ismeans is that unquestionably the potential for the next 10 years, but it will be done. Manus do you think shell will hale will goe s for volume . Ian they did not deliver it. The focus is on delivering it. Manus they said goldmans are a bit bullish. They are selling higher. You are the man with a finger on the pulse. Surprised tot be see this flirting with 60 and flirting with 70. I am pretty comfortable. We are pretty comfortable in this upper range. We will see a bit. I would not be surprised. Into the low 70s. It is in the mid60s. Manus that was a very confident ceo. If i could sit like that. Anna i like that. Because the markets are moving so fast, we have to start not just baitstamping, but time datestamping, but time stamping. Thinking. Changes he was talking about flirting with 60, 30 with 70. That is the kind of range using, isnt it . Manus as he said, he supplies by the unanimity. It is that symbiotic relationship that continues after bit. We had a tax cut from oil. Where are we now this morning . Down 1 . How do you look at oil now . Threat or canary in the Global Recovery mine . Kallum it is a canary in the Global Recovery mine. The reason oil came down in the first place was because u. S. Shale drove up supply. That was good for the economy at the time. The increase in the price since then reflects the building global momentum, so we dont have reasons for the price changes. The economy is strong. It is partly because opec have had a handle on the market. They dont quite have the handle they had before. The Global Market is more elastic than it was 15 years ago, 20 years ago. More oil supply comes on. I would be broadly comfortable with the view that oil sticks it around these 60 mark to 70 mark. Say we had a few guests that we talked too much about the Global Supply story. It was very bullish when they talk to you. Back at you. Good morning. Anna thank you very much. He stays with us. We will get more from him shortly. We will focus on the u. K. Investors are raising the bar. Manus throughout the show, we give you the latest breaking news on the markets. The equity selloff. Is a is in correction territory. Bitcoin getting battered. At money is flowing back to bonds. The dog that want the tale of ged theket that wag tale of the market. This is bloomberg. Representsselloff what is very likely simply the ebb and flow of our stock markets. And we recognize that. The most important members to focus on are the fundamentals. The fundamentals of this economy continue to be very strong. Anna mike pence of course, u. S. Vice president , commenting on that u. S. Market selloff. Lets give you a picture of what that selloff looks like. We saw the big move in the dow yesterday. The worst point loss ever. The biggest intraday point decline in history. Knocked offpoints at one point in the trading day. This is what this translates to an japan. Down threeacific point 4 . The nikkei 225 down for. 7 . Made a little bit worse by the pile into the yen. The nikkei futures down. They do not point as low as they did yesterday. Or as low as they did earlier on. We made the point yesterday and things only got worse. Manus i am going to be a lot more tempered with smiling which. There is a new addition of daybreak. I am a saying the word panic. They used that on mliv and then backtracked. This is have you get it. It is on your mobile, your desktop. The top story is the Global Market plunge. We have this spin the ball spinning ball. We have met joining matt joining us. Matt thank you. Manus it is nice to have you specifically in situ. Market in him of a 1989 or the u. S. 1999 versus ray ray who saysays otherwise. They waited before the markets decided to fall apart and they are weighing in again. Paul jones thinks inflation is going to come back with a vengeance. We have had near zero Interest Rates. He is warning that these markets are going to be painful for some time. While the selloff is ugly in bull market, usually around 10 . Morgan stanley, their chief of equities yesterday said this is not the dip to buy into. We should be monitoring that. Anna when do you buy the dip if that is your intention the dip if that is your intention . We have seen so many parts of the ecosystem blamed. A lot to do with technical the course. Goldman sachs talking about markets future funds. Volatility targeting programs. Somebody has to write them all down. There is a Big Conversation about automation. Matt there is a huge conversation about all of these things. Everywhere was looking for the party to end. They say it is finally here. Everybody is going to be opining about it and trying to predict exactly where the bottom is or how this question plays out, but if you read between the lines, this has been going on for weeks, not just one or two days. Manus we will bring you into the conversation. There is a plethora of different views. At 536. S for they turns terrible worst point plunge ever. Just how difficult is this for Jerome Powell . We touched on this earlier. The blue sky would be no central banker needs a common voice. Voicedhas come out and his position. How difficult is it for Jerome Powell to keep the market on his side . The market is repricing the possibility of hikes. It sets the tone for his term. Remember, this is a market profit is as important as loss. Fundamentals, economic fundamentals look good. The fed does not have a batch of data which suggests it needs to tighten aggressively. All Jerome Powell should do today is wait, hope this settles it bottoms out, remind markets that economic fundamentals point to a gradual tightening of Monetary Policy. The first 20 days, i came in here, they all marched in here and how to tax plan. They demanded strong. It is not driven by a credit. Investment is picking up. It will improve productivity estimates. The fed will find it has to raise potential growth later this year. The ecb will do the same. Central banks need not rekindle the healthy relationship. Anna thank you very much for bringing us the daybreak line. Matthew miller, executive editor , joining us today. Lets talk to kallum about what is going on in the u. K. The bank of england meeting this week. Do you expect that we are going to see the groundwork laid for him a hike from them . Kallum you may have guessed it, but i am a bit of a hawk. I am expecting the bank of england to signal a may hike. They could do that in three ways. Some mpc members could vote for a hike. They could raise the economic forecast. Or they could speak directly to the shape of market pricing. It is very hard for the bank of england to justify its policy stands. It is going slightly above the potential rate. A may hike seems to be on the cards. The market seems to be moving forward. Manus thank you so much for being with anna and i this morning. There are a number of ways mark carney can to medicate with the market. Continues theng conversation on bloomberg radio. A quick look at some of the markets. We have got one man who is going to have a conversation with us. I wonder if he is just as bullish as measured . Ubs wealthl cio and management. He will be joining us in the next half hour of the program. We will get his thoughts on what has been going on in markets. Has it shaken his resolve at all . Has it made him any less committed to stocks . We will ask about that when we come back. Manus futures down through three point 4 . It was down 5 at one juncture, but the dow jones down. Technology just as battered. Anna the u. S. Futures have come down negative. We will have more details on this global selloff. This is bloomberg. Manus good morning from bloombergs new european headquarters. I am manus cranny. Anna and i am anna edwards. Manus asian equities plunge as the global route deepens. The nikkei 225 fights into correction. U. S. Stock futures continue to tank. Anna haven demands as stocks fall. Investors flee to u. S. Treasury. Robbie to kuroda weigh in on inflation. Manus bnp paribas sees an uptick of its 2020 target. We hear from the banks. We are off to a good start. We hear from the banks cfo. We are off to a good start. We are expecting to beat our target of 10 . Anna good morning, everybody. Got plenty of coverage. We will get to that in just a moment. Manufacturing orders up. Up 7. 2 factory orders year on year. The estimate for an increase of 3. 1 . This is a positive set of data coming out of the German Economy. The German Economy in the midst of a real upturn because of the domestic demand and growth story. As we digest what has been happening in markets over the last few days, really fascinating. At this moment, we get reminded of the solid Economic Performance coming through from the heart of the eurozone. Manus that is the point that Kallum Pickering was made. Theot to underestimate markets or the drops or correction in the nikkei, but the economic fundamentals are solid, according to call in triggering. Kallum pickering. He is walking into the building as we speak. Fourthquarter net profit. 2. 11 billion. The estimate was for 1. 95 billion. This was the company that lost it to total. The debt numbers are what the market is going to be focused on. 2018, organic capex in the range of 15 to 16 billion. That is what the market wants to hear, about capital discipline, news in terms of a return to perhaps the old normal. They are going to continue to target a range of 20 of 30 . Organic fourthquarter. A bead on the Fourth Quarter net adjusted profit. 2. 11. That is above what the market expected. Who has theman answers in terms of futures. Has been through some pretty tight times. Lets get going in these markets. The ftse 100 was down 5 at one juncture. Bounced . We bounced from the lows of the day in london, but we are still down negative territory. The dax is down given the hard data that anna has just given to you. Still, these markets are in turmoil. Of course, the s p wiped out this 2018 gain. Stage. Dropped at one the most in over 1500 points. You are looking at the debate in markets. The current market temperament feels like japan in 1989. The United States in 1999. Versus bridgwater, who says this is minor corrections and real money will come in from the sidelines. We are looking on the downside for the futures. You just did not know what once a pick. Anna only three spaces on the board. You have to hone in on just three. It makes it in there because this sums up where we are in the Asian Session, down by 3. 4 . Users dropping 4. 2 . Futures dropping four point 2 . Plunging them for a second day. All of the stocks on the msci asiapacific, there are more than 1000 of them. Nearly all of them in negative territory at some stage. The nikkei 225 taking the brunt of the selling. Some of that has to do with what has been happening in currency markets. We have seen more appetite for the yen. There have been more appetites for some of those perceived safe avens off the japanese stocks little bit in the overnight session. Last hour about some of the irony about how we have seen interesting treasuries ramping up. We see yields coming down, when arguably, it was a spike up in yields in january and before that set off the markets nervousness around high valuation in stock markets. Interesting to see the moves in stocks versus treasuries at this point. We need to focus in on the futures. This is the unite what we are looking at for the moment. We have seen the s p futures down 12 from the record highs in january, giving you the size and scope of what is going on in these markets. Tliv on the go for anyone focused on one individual name. The cfo making comments with strong delivery. This is all on tliv for you. Bob dudley arrives very shortly on set. This is data play on the bond markets. It has gone from right to fully fledged rally. Of she goes. You are seeing money going to bonds. They yields come back down. The dog wagging the tail. Down. 5 . You are looking at treasury yields coming back from a fouryear high at over 2. 88 . Quite a zero length swing. That is the problem here. It is the trajectory, the movement, the speed at which the markets have moved. Gone from right to rally. The bulls found that worth salvage. You are seeing money go back into the bond market. Bots andertake the say the yield is moderately appealing. Lets get to juliette solly. Juliette. Paribas says net income came in at 1. 4 3 billion euros in the Fourth Quarter. The cfo told bloomberg the french bank is coping well with low rates in its home market. If you look at the domestic markets, you do see it when you look at volumes and fees and all of that. We have a low Interest Rate environment. However, the low Interest Rate environments also have the cost of risk which are lower than what you expect. In bottom line is up 5 2017. The president of the minneapolis fed said he does not think the financial crisis is imminent despite the recent market turmoil. Neel kashkari made the comments in an exclusive interview with bloomberg. If the bond market and stock market are pricing in the lower longterm yields, that could be leading to higher valuations. I do not see a financial crisis on the horizon. We are paying close attention to it. Juliette even as u. S. Stocks plunged, President Trump was hailing the economy, praising his recently passed tax overhaul and telling voters in ohio that the u. S. Is one thing and open for business. Pres. Trump when i signed the tax cut six weeks ago, it started a tidal wave of good news that continue to go every single day. Before the ink was dry, companies were announcing thousands and thousands of new and enormous investments in their workers. Juliette powered by more than 2700 journalists and analysts in one and 120 countries. You can find more stories on the bloomberg at top. The picture paints a thousand words. How dire the selling has been across asia. The msci asiapacific index giving up all of its 2018 gains. Atth noting that it is december 27 highs. We do have to put it into perspective. The nikkei closed by 4. 7 . 10 from its january 23 pick. There was a Rate Decision in australia. The Australian Market down. A big seller coming through in the big stocks in china. The csi 300 down by 2. 9 on the close. Hong kong and hang seng having the worse sessions of the brexit vote. It was a rout in tech players. Morgan stanley downgrading the asia textbased today. Taiwan semiconductor falling and dragging the taiex to my having its worst session. Tencent was the worst performer when you look at them mov function on the bloomberg the mov function on the bloomberg. There were a couple of bright spots. Only a couple. And they were coming through in the korea pharma sector. 6. 3 . A little bit of defensive buying coming through in a couple of the health care players today. Anna. Manus. Manus great round up, juliette saly, with the latest on the equity market selloff. Itiette said the nikkei looks set to follow in europe. Futures at the moment are down nearly 4 . For ubs Wealth Management joins us. Very good day to you, sir. You will be glad to know that i read your linkedin articles. You rogue one at the start of the weekend. Global risk radar for now, the bear still sleeps. Is the bear still asleep . Is this a tantrum or a moment of terror . Think a moment of something is what we have here. The last hour watching the u. S. Indexes was a bracing moment we have not seen in a long time. So volatility is back. When we look at that longerterm do see the synchronized Global Growth still in place. You mentioned the german factory orders. We had strong nonmanufacturing isams in the United States. One of the things that we were concerned about that we think helped precipitate a selloff was that spike up in the 10 year bond yields close to 2. 9. We had said that we think the rally will stay intact this year. As long as those yields a stable of 3 . We have seen it fall back again. We see strong fundamentals in place. The market is not super cheap. Complacency is superhigh. The selloff looks like its in order. Its off with one day or two days. Anna we are keeping an eye on the u. S. Futures and they are now in positive territory on a number of counts. We will keep an eye on those. A bit of real turnaround from the middle of the Asian Session where we saw the u. S. Futures down another 2 or so overnight. Do you see the bull market for stocks than still intact . Would you write the same again . Mark we would write the same again. There are very few signs that there is anything close to a recession. That picture has not changed. For us, a key measure before we would start to change our view is what is going on with the bond market, and we think that is contained. Just before coming on, i had the pleasure of talking with colleagues in asia, and i think what is different this time is andhan previous selloffs periods that get reference is the tremendous growth out of and how that is kind of a counterweight to what happens in the United States in europe. He saw a sharp selloff there. Asia, theybase in are not panicking, and the selloff has been relatively orderly. Manus ok, so the clients in asia are not panicking. There are lots of various voices out there that we can turn to for reference. And the United States in 1999. I mean, try and square that away with ubs. Is inflation as you say, if the issue started in the bond markets, do you believe inflation will show a vengeance in 2018, first of all . Mark no. You know, the preferred measures that the fed looks at our about 1. 5 . That is well below the 2 . For inflation to pick up to get within the comfort zone. Indeed, mario draghi has said they cannot declare victory yet returning to their target level. I think that there is still a note of caution, even from the Central Banks year. Anna when you look at the amount of volatility we had in markets, we are showing a chart of the dow. We saw the vix with the largest oneday move on record. What kind of volatility do you think that suggests for the future . Do you see these conditions continuing . That normali think ,olatility for equity markets even in bull markets, you do see 10 corrections from time to time. Just a return to normal volatility for the market, the kind of volatility that put the gray hair on my head over the past 20 years. It feels like a shock. It is very painful. Normal as Central Banks begin to normalize their policy should be expected. I think people need to be prepared for that, but also realize that even in a more , equities cant continue to move higher. As long as fundamentals remain in place. Manus the market is beginning of theice the ability Federal Reserve to do three rate hikes this year. Does he need to speak to the market or would it be folly to harried into it because of an equity markets are down . Of an equity market drawdown . Mark anything he says will be immediately put in the context of what the president is saying about the stock market, so i ford say it would be folly him to comment on shortterm moves of the market. Thosesly, the fed watches and we heard some comments about that. He would do better particularly at the start. He would really try to establish his voice in the next year or so on how the fed is going to think about its inflation target moving forward here. Anna is this the kind of move in markets that could stop three hikes from happening in 2018 . Been well, the fed has datadependent. Them atwe have to take their word. It is very early in the year. Is it too hikes, three hikes, for hikes four hikes . As we saw last week, as yields started to rise, they began to price in three hikes. That is where we were, and that precipitated the selloff. I think some of the selling we see looks more classic risk off, looks like complacency being shaken out of the market. Upre they ultimately end will have to do with what they progress ofith the inflation and the progress of the economy. Tore are too many unknowns see where they end up. For example, the fiscal stimulus that results from the tax cuts and the deregulation measures taking place in the United States. It is another variable which the fed cannot control and cannot price and today, where they will be six months from now. Anna stay with us. Marcuwe will be back to him shortly. Here is juliette saly. Toyota motor has raised its profit forecast for the third time this fiscal year. Saysiggest automaker profit is rising in the year ending in march, beating analyst estimates, helped by demand. The u. S. Is its biggest market. German employers reached a deal. The agreement will grant workers a 4. 3 pay increase, alerting more disruption. Drawnout struggle has stoked concerns about the broader economic fallout from stagnating wages in europes largest economy. The oil market looks quite solid after opec and its allies demonstrated better than expected compliance with their production cuts and cold weather has helped to boost demand, according to the ceo of the worlds top independent Energy Trader in an exclusive interview with manus cranny. He said he remains optimistic about crude. I think the markets have done remarkably well in terms of the run up. Therit has been strong. Lots of factors, lots of reasons. Performance from u. S. Crude. We are having a bit of a pullback. Overall, slightly more bullish. Manus the ceo of lululemon has resigned abruptly from the seller, which said his behavior did not live up to its standards. The company said he will resign from the board without being specific about his alleged misconduct. He has already begun a search for a new leader. That is your Bloomberg Business flash. Manus thank you very much. Irk haefele joins anna and for this mornings 30 minutes. The reason the people pay the big bucks is because you are supposed to tell them what to do in these moments of perhaps bunnies. You said perhaps unease. We are in correction territory and some of the asian equity indices. It is strong. The fundamentals are strong in asia, arent they . Abenomics has worked. Where are the opportunities in these moments of hurlyburly . Well, i think that not just what to do, but what not to do, is something that is important to communicate to clients. I think the first opportunity is not to panic, before you have a at that economic picture, and perhaps start to rebalance your portfolio. As these markets settle down. We went into the year and saw the strength of the Global Economic picture. We started to price in the effects of the tax cuts in the United States. To increase our allocation to equities, but said many clients probably did not need to do anything because the run up that we saw in january is probably enough to rebalance for them. Pullback, itss an opportunity to see if you are underweight in equities. We have taken a broad view of Global Equities being interesting. That market is more expensive. The central bank is further along. Therefore, it is later in the cycle in much of the rest of the world. An overweight in emergingmarket equities versus australian equities. The emergingmarket is doing well, not suffering from date has and to handled the Federal Reserve hikes relatively well. Anna how positive a story is wage growth in the United States. If markets were spooked by that jobs report and the strength of the wages component of it on friday, is there a positive in terms of the political threats and the rise of populism if we are seeing higher wages and some of these western economies . Mark you are right. It is a rubiks cube all positives and negatives for investors for people. One of the things that came out kind of was this positive story. I mean, last year at davos, the abominable snowman of populism was outside the main street sure this year, it felt a lot different because to some degree, some of the rising tide is lifting some of the boats. Whether it is politics or not, after the signing of the tax bill, we did see companies coming forward, boosting minimum wages, and people in the United States will start to see that in their paycheck. People. A positive for the can argue it is too late. A an absolute level, it is positive. What Market Participants and ceos were reading into an davos in the republican agenda davos is the publi the republicn agenda has a chance to get traction. They have a chance to be better in the 2018 election if this starts to bear fruit. This part, we up are seeing a number of different people come out with opportunities. Citigroup has a big one. Volatility, the rise in volatility, you talked about the relative players. They are talking about commodities. Invest in time to commodities. Perhaps on drawdowns. If you believe the view from davos, which is growth, is now the time to step in a little bit further on drawdowns in commodities briefly. For us, commodities are not the first place that we would go. European equities over u. K. Equities, emergingmarket equities. Look at tech hard as these earnings have been coming through, and we like tech and we like financials, and will stay think you have to whil i think we have to pick through the energy companies, they have low valuation. Anna thank you very much for joining us today. We really appreciate it. Mark haefele at ubs Wealth Management. Great to have him on the program with us. The big selloff, the big equity selloff. The selloff across the various host of Asset Classes. 30 minutes ago until the start of European Equity trade. A number of stocks we are watching this morning. Manus he said what not to do. What not to do. Simply, dont panic at this stage. A couple of stocks to watch. Bob dudley is in the building. They have a nice set of numbers. Debtdebt increases net increases. That will be one of the questions when he sits down with guy. One of the bright spots is the rapid rebound in projects according to the tliv blog on the at the moment. Season kicksne that company. We are mentioning these individual stocks. The overriding theme is futures are weaker. The ftse 100 futures down by 2. 8 right now. Manus we have managed to turn a bit of green on the screen. The u. S. Equity futures down. The s p indicating a lower opening. Mliv said if there is a hard hat to be bought, go and buy it. Do not panic. Guy tuesday, the sixth of february. Welcome to Bloomberg Markets european open. I am guy johnson, alongside matt miller. He is over in berlin. Cash trade less than 30 minutes away. Guy stocks are smashed. Equities traded lower in the United States and asia. European features pointing to an ugly start. S p and futures pushing higher. Volatility spikes