Credit for the rally. Does he own the drop . Sell share his views later on bloomberg. By the dip. Goldman sachs is bullish on stocks. We will hear from the copresident. We are less than a half hour away from the start of cash trading. Real seesaw trading happening overseas. In the u. S. , we had a big down day and then a pretty good update. In asia every recovered off losses from the day before and dropped down from the session high. Take a look at where retreated now. We do have gains across the board. We are looking at decent gains here. Dax and cacs gains are up. The yields are coming back down. They dropped about 20 basis points in a flash jump in bonds on monday. Then they rose again yesterday. Another coming back down a little bit. It will be very interesting to see where we open. Everything is a moving target. It will be interesting to see how long this rally lasts. Thats this kind of story. The close, u. S. Markets continue to rally. Thats what were pricing in in europe. You can see was been going on in japan and china. Quite a strong fix in terms of the currency, sending a message that they are not happy to have their assets dragged into this maelstrom. Lets move that off and show you whats going on elsewhere. The Commodity Index remains big. Gold is up half of a percent. Lets get a bloomberg first world news update. Thank you. The u. S. House of representatives has passed a stopgap spending bill. Some information may be added before the senate votes. President trump says hed theome another shutdown if democrats continue to refuse demands for a border wall. If we dont change the , there are many gang members. If we dont change it, lets have a shutdown. We will do a shutdown and its worth it for our country. I would love to see a shutdown. German lees Angela Merkel and the social Democratic Party has negotiated through the night for a packed on the governments next countries next government. Officials are hold up. There is no sign of a deal after more than 20 hours of discussion. A final decision is not expected until a larger group negotiates. South african president jacob duma seems a close a step closer to resigning. Thats after the National Crisis delayed on a meeting to force him from office. Duma had zuma had been scheduled to do a speech tomorrow but has canceled that. This is bloomberg. Guy thank you very much, sophie. Raw materials are set to perform well. Industrial matters are up on average 50 per annum. We did 30 last year. In this type of environment, this is where they were intended to perform well. Guy lets focus in on oil. Statoils profit beating expectations as it took advantage of crudes recovery than many of its bigger rivals. The gain rose to 1. 3 billion compared to the loss of 400 million a year earlier. The ceo. E now is lets talk about price. You have taken advantage of arise we have seen in the price of crude. Is the current price sustainable . Theres a lot of uncertainty in the markets. There is Strong Demand and i am not doubting that will continue. On the supply side, we will see more supply from the u. S. Theres a lot of targets that have been sanctioned that will come into production on the supply side. , i expect the price will be lower than 70. Above 17. Y below that we do have a good view in the mediumterm. We still havent seen the impacts of the low investment levels. Guy the sense seems to be that the very difficult. Over the last two or three years is over. The deepest part of the downturn is over. Still facing a lot of uncertainty. For us its about building resilience into our business. There will be more downturns. Its a cyclical industry. There will be things down the road. Are going to have to take very good care of it. We will have to continue to improve. Weve seen it before. Costs might come back. For us to improve, its extremely important. You were able to keep down last year compared to expectations. Cash generation was a touch weaker than expected. What do you attribute that to . Weve seen cash generation miss the expectations. We had a very strong cash generation. More than 3 billion on the year as a whole. We will be below 50 for the next few years. We see a strong picture on cash generation based on a high quality portfolio. Projects have an average breakeven around 20. That gives us a good view of volatility ahead of us. Guy as a company with shale about, we are looking for a Million Barrels a day for overall output growth this year. See that forecast and how are your breakevens in that area . We expect that the shale output will increase. We have seen Higher Oil Prices so the lot but will increase. Tot is probably not enough support on its own the growing demand. We do see additional volumes coming in from the conventional part. We will keep some sort of pressure on the price this year. Longerterm, we expect to see impacts from the low investment levels. I dont expect shale to be able to compensate for that. Guy how does it compare and share right now to the other parts of the business . The heat may return. The you expect cost pressure to come from the supply chain . We all remember the days in the super cycle and under cost pressure from the guys you make the shovels was extraordinary. Do we get back to that picture . We have seen some cost pressure and expect that to continue. More on the see productivity of the subsurface. We have indicated 20 cost from water, fracking kroos, and so on. There is still a lot of capacity in many segments of supply. We will see more balance. Do you expect regulations to ease in the United States more than they are to have . Be noxpect there will further easing. I think there is room for significant simplification. That doesnt necessarily serve industry. We still need good, high quality regulations. There will be some meaningful regulatory adjustments and we are prepared to take part in discussions on how to shape that. Smile on your face is an interesting indicator. How do you see your Investor Base changing Going Forward from here . There is a sense within the Asset Management community and at a sovereign level, that the needs to be a downgrading of investments within the hydrocarbon space. How do see this playing out . Theres a lot of work going with Climate Risks and how to embed that into the strategies. We have done that extensively. We are introducing ambitions for our renewable business. There will be more pressure on transparency. We are prepared to join those efforts. Can see what the Climate Risks are embedded into our portfolio. We will be part of shaping that. Matt you are able to make money at 50 a barrel now. You are lowering the costs of breakeven to 21. You ask backed shale output to gross the production side. About theu think demand side . It also continues to rise. So much talk about electric cars and going green. Is there any point in the new future that you expect the demand to turn over and had down . I think theres a definitely lot of focus on what is peaked demand. Peek mayhere will be a be in the late 20s. That is a reasonable assumption. I think the men will continue for some time but we will see a decline at some point. Its very sticky. This is much more than electric cars. The talking about whole transportation segments. Journey toally long fight Climate Change in relation to all production. Is importanteak what happens after may be even more important. We engage ourselves and in alternatives and renewable energy. Guy thank you. The ceo of statoil. Up next, another day of heavy trading in asia. We will look at what to expect from the european open. This is bloomberg. Guy market turbulence continues but is it time to buy the debt . What promised to be recovery in asian markets has been faltering in asian trading. European futures pointing higher. The pacific is a must back to where it started. Nice roundtrip. Says people are looking for buying opportunities. They are struggling with the fact that they have lots of liquidity. They feel violations have been stretched. Not surprising when the s p was up north of 20 . There were people looking for buying opportunities. When you see a big spike in volatility and might make people cautious. Maybe they are looking for a second or third effect. Buyings also a opportunity which is why he saw the Market Reaction on tuesday. Guy the view from mr. Swartz. Lets get the view from our team. Goldman says you should be looking for opportunities here. Is it too early at this point . I do get is probably too early. I think he is right that overall this will be seen as a buying opportunity in a month or two time but i think it is too early. The measures are hitting some bank desk today but it wont hit many until monday. That will be a reduction in liquidity. The fact that rates are headed back again will put a little pressure on the equity move. Thats what started the pressure in the first place. I think you can see that in the price action. Tradedened bullishly but disappointingly to the close. Risk aversion you see the most violent bounces. Dont read it much into a bounce. I think we have more pain this week. Are we waiting to hear from Central Banks . Are starting to turn to how the Central Banks might react. I dont think we will get any coordinated centralbank action. Said, weeople have have been looking for this correction for a long bit of time. About the term healthy correction given the speed and the pace. Markets were overdue. Is a lot of money out there that was looking for a pullback or theres been exceptionally strong pullback. That means fault of he will stay elevated. For the next few months, we will have more volatility that we saw for the last few months. Thats going to change Risk Appetite and leverage levels. I think overall, this is not to worrying a problem. I just think its a little bit. Oo early to rush back in its like people are finally discovering what volatility us. What is going on . All the sudden, everyone feels sorry for the losers. I do think that is slightly strange. Weve had a market with very little volatility. There was a decade of traders who had never experienced a rate hike. Now we have had traders that havent experienced sustained volatility. I think suddenly, we have so much of the market and it does seem like we are very forgiving of Retail Investors when they look to gamble beyond their measures. Matt thank you very much, indeed. European fair values off to a positive start. Wall street pointing to a negative start. Up next, stocks to watch. Open, nowlk about the eight minutes away. This is bloomberg. Guy five minutes until the start of trading in europe. What do any need to know about individual names . We had massive deals last month. Years Profit Growth will be fueled by more and more deals. We will see more of that. Matt i was going to ask about the beer. What stood deal with carlsberg . Looks like theyre making a lot of changes. They are looking for growth in the east. Exiting some slower markets like finland. It are sitting in a stake in a japanese brewer. We will see what happens. Never a day goes by that man doesnt want to talk about u. K. Supermarkets. They they are facing are facing the uks biggest ever eagle pay claim. Gmail workers are saying theyre getting less pay than male workers. We are talking about 4 billion pounds of this moment. Its not positive. Guy we will see how that opens. First go on your bloomberg. Available now on the mobile app. Coming up, its the market open. Four minutes to go. We are basically feeling in the gap between the finish of trading in europe and the u. S. U. S. Futures pointing negatives. European futures pointing positive. The european open is four minutes away. This is bloomberg. To the start of trading in europe. How will european equities perform . The indications are that we will see a positive start. Remember that wall street continued to climb after the european close yesterday. Up byoxx 50 is called around 1 this morning. Similar across all of europe. Terms of the major forces. The expectation is for a higher europe. Pointing to the states, we expect a lower open. The mist price for the dow, 1 . For the s p 500 index,. 7 . It will be interesting to see once we get the arbitrage out of wall street trades later. The indication is at the moment that europe will at least come out of the gate in reasonably positive form. The question is, how long does that last this wednesday morning . Lets talk about the numbers we expect. You should get a pop this morning. Lets wait for the Market Makers to get going. Climbing already. 1 ected to climb to around higher. Similar story for most of the other markets in europe. We are expecting a positive picture to slowly emerge. We will see exactly what it looks like. The cat up. 9 , ibex up by 1. 2 . Positive picture come through as anticipated in europe. How long do we start to see that continue through the morning . Asia didnt have a strong close. We definitely faded into the close in asia. And in the United States, already pricing a negative start of the session. He will be interesting to see what the european picture ends up looking like. Need to talk about the individual stocks story and what is going to be happening in individual names. Sectors that have underperformed the last few days. It will be interesting to see how the financials trade through this. What are we seeing in individual names . Matt lets take a look. Lets see what is going on as far as individual names. What is going on as far as movers in the market. It will be an open where everything is a moving target. We saw changes in the overnight markets in asia. We could see those changes today, considering the cash trade right now with gains for the most part, and what we see in futures. Kind of a wild ride in the u. S. Screen and weov will look at what stocks are putting up the biggest gains and biggest losses this morning. We see the pound and other currencies really shifting right now. Look at the movers here. We have seen for the most part, it looks like gainers. I think we need to reset this data because we have 577 stocks unchanged. It looks like that screen needs to refresh. The markets are slow to open this morning. Typically, we see the dax slow to open. ,e are seeing gains in the cac the ftse and on the ibex down the board with the exception of the dax. We stillg is open, but need to get a lot of these markets up. Out. Guy we will come back to these markets. I have to say, the cac opened up around. 4 percent at this point. Good morning, what are your thoughts on the last few days . What we are going through right now is a regime change in markets. Bank bondl Central Market lead. We have a Strong Economy, inflation set to rise and Central Banks need to hike. Get used to hire bond yields and volatility in the market. That is not going away. Guy the last couple of days, some of the sessions have been different in how the market has reacted. There was this feeling that at some point, you need to flip out of equities and into bonds. You are telling me yet we are going into a higher regime and that trade doesnt work. Mark absolutely, right now you have to be careful. What is interesting about the recent events in markets, you have a lot of products that were designed for the old regime, and they are very much yield enhancing, return enhancing products, shortfall products which dont survive in the highyield, highball high vol environment. But the market can get through this. If you look at the market, growth is good. Be more of these blowups to come down the line. Matt mark, should we feel sorry for people who were all in short vol . Isnt this a good thing to remind people that markets go both ways . That volatility can flareup . We have banks around the world for giving short vol notes so seasoned investors understand why the vix exists. What is going on . Mark we certainly dont forgive them. The market has been talking a long time about these short volatility products. The market new it would come eventually, but these products still grew and had investors in them. We are not talking about a crisis situation. We are not getting aaa mortgage bonds half the value they were. These were products that were meant to be risky. We can move on. What the central bank should be looking at is if this damages the underlying economy and there is no sign of that. The declines have actually been pretty small. Note, we have people worrying about the s p valuation, fairly frothy at 23 times earnings. On the other hand, earnings forecasts were lifted at almost a faster rate them we have ever seen. Dont you expect u. S. Companies to earn a lot more money this year than last . Isk absolutely, and this why equities will find a floor eventually. Volatilityhave more the next couple of days, but investors will look toward asities in a Strong Economy a good investment. Especially when bonds are starting to have a bad time. As i said, you have to be very cautious. Selloff, there will be volatility in all risk assets. Be careful, d risk, but bonds will do well. If you look at the backdrop, equities impact growth via wealth hits to consumers. We are nowhere near that yet. The Central Banks will be looking at that, seeing no problems occurring, carry on their path of hiking rates. About the products that were built for the previous regime, risk parity trade, a lot of money flowing into those structures. Looking forward at what will be affecting the market, will we see liquidity mismatches between Asset Classes if volatility picks up . Mark all the excitement during the financial crisis was the banks, now they are delivered. Delevered. Volatility will be in the fun sector. Adaptione difficulty adapting. Areliquidity mismatches something the bank of england is looking into because as you get a bonds selloff, they may have problems serving that liquidity if underlying investments cant be sold. If that is the case, you might get some funds shutting their doors, which could cause a panic. Another source of stress for the market as we move into this higher rate regime. Mutualrk nash, from old Global Investors. Up next, the stocks on the move this morning. Tesco is an interesting story. We will come down back to that, the stock is down 1. 2 . This is bloomberg. Guy 10 minutes into the equity market session. We are seeing a reasonable european start. On theup by around. 9 ftse 100, the cac is trading up around. 4 . By and large, european markets are trading positively, but the position of the moment is the u. S. Futures are poised to a negative start. Around 1 down on the dow,. 7 . N the announcer s p we did see a fading on the rally in asia. Interesting to see if we see the same in asia europe. Old mutual Global Investors is still with us. Good morning ian. Ian we would say buyer beware. This is a distorted environment and there is a perception that when you get at these levels, it comes down and equities that normally rally decline. We havent seen the normal selloff that you get with this kind of spike in volatility normally. We havent seen the type of scale that would set up the next rally. I think what we are looking for is signs that markets will recognize the volatility genie is out of the bottle. Economic ability volatility will be higher Going Forward than they have. That will challenge the funding models in these markets. The qe driven, liquidity driven markets will be challenged. When we look at risks coming down the line, economic and valuation, we say sell any rallies you get. Mark, what do you see on the credit side of this . When weial thought was see yields rising, investors will switch over. On friday, we saw selling of bonds and equities. Have you seen that relationship develop . Mark absolutely. Government bond yields rise even in a Strong Economy. You will get a technical selling of credit at the same time and so you will see credit spreads widening because Government Bond yields rise, investors hold this credit for not much extra yield and i could switch into a more less risky alternative like Government Bond yields. Expect credit to widen, even if volatility comes. Bond market leads the way, we expect widening on credit too. I was just going to point out we are looking at the s p was yielding about 1. 8 percent dividend yield on friday. That is a full hundred basis points then what you get out of treasuries, but what will that rise . Expect thatld arise. Our models are looking at the relationship between equity valuations and bond valuations. We are at the point where that switch, which occurred in february of last year, that kicked in around these 270 type levels. Our worry is that if this spreads into the credit space, then you start to see the funding of some of the Economic Activity expectations, the expectations about capex. Those things are going to be challenged and in the past, it has been credit that is hit more than equities by these volatility events. Guy that is an interesting point. The ecb has a buyer of credit, needs the credit story to continue to keep the transmission mechanism working. At the moment, this feels nonsystemic, but if we see and as going wider blowup happening, those central bankers buying credit need to respond. Itk it depends how far goes. The ecb is aware inflation is not at target. It needs to keep monetary stimulus going in, so if markets get to adverse and credit sells off too much, they will need to step in. Right now, the Central Banks are sitting back and looking at markets. They are wary the fundamentals are still strong and they dont have to do more stimulus just yet. We are not in the world we were in before where whenever we got of volatility markets, the Central Banks would step in and worry about inflation falling lower. Now, inflation is actually rising. They can sit back and let the markets unwind and do their thing. Ian our view would be there will be a challenge for Central Banks. Will they want to put inflation stability a head of Financial Stability . Ist we are worried about with a new administration with Jerome Powell in the United States, we have a lack of visibility about what the policy response will be and that is the challenge. In the past, with a new fed chairman, remember when bernanke came in, we were starting from high valuation levels. Is a you are starting from very important factor in terms of thinking about how these markets will respond. Im actually in frankfurt and ito talk to struck me when i was prepping the interview that npls are the fundamental issue that we are forconcerned about equities. The German Government negotiations are dragging on pass the second deadline now and no one is freaking out right now because everyone is focused on the technicals of equities. You mentioned the risks, are you worried about fundamentals here . Ian absolutely. What we have been emphasizing for six months or so is that Economic Activity at a global level is close to peaking. This is potentially the peak of the economic cycle, pmis are at and we arels particularly worried that chinese growth is already decelerating in response to these higher bond yields in the last 12 months. Europe and germany are very highly geared into that china cycle and if that starts to decelerate, the economic volatility increases and makes some pretty decisions for the ecb in the year ahead. Guy we will come back to the conversation in a minute. Thanks to ian harnett at absolute Strategy Research and old mutual. We will carry on the conversation and figure out what to do with these markets. If you are a bloomberg customer, you can use tv or pick up the radio steam. Stream. Is a and anna, there little blue buttondown there. If you want to send us a thought on the markets, that ib is a button way to the team. This is bloomberg. 20 minutes into the station, european stocks well bid. Lets talk about volatility. Until last week, volatility was a hot trade on wall street. Betting on the vix was a sure thing. Everyone getting in on the action. The last part of that equation quite interesting. They were betting on the vix going down and staying down, but volatility is back. Dani burger joins us on set. We are joined by mark nash from Global Investors and ian harnett from absolute Strategy Research. Lets talk about this chart. This is Exchange Traded popularity we have been talking about so much. We have reached a peak, we are falling pretty hard. Where does that lead once it disappears . Dani a lot of managers have replaced the risk portions of their portfolios with short volatility products. It has been popular because it has been minting money. Of people, at least on the retail side, start to get in. There is a notorious New York Times story where a retailer in the u. S. Decides to quit his job and short volatility. This became extremely popular, but i spoke to one of the people launch one or helped of these products and said people have been using this wrong. When we first launched these at barclays, we thought this was something people would use as a shortterm hedge to get in, get out and you think a big event is coming, you get into a long vol product, but people have been over again using these. The fact these can be liquidated, you have to read the per spec if. Credit showed us that can happen. Perspective. Credit showed us that can happen. That chart was striking. From 5 billion to under 3 billion, people will think twice about what they are holding and hopefully read the perspective. Thingsd how they use the Going Forward. What are the implications of the liquidations . Is this simply a nonsystemic product that was being misused and as a result, doesnt have anything meaningful for the rest of the market or longterm economic story . Dani every time Something Like this happens, everyone says oh my gosh. There are these forces we werent aware of in the market. Perhaps, shortterm minded quants. Andave the whole same song dance, but one thing that is apparent from the trading going into these funds, may be sinking seeking redemption, people are front running help and helping lift up the vix before they redeemed the notes. Unwinding, is done perhaps the biggest spike in the vix is over. Maybe the damage has been done and we are seeing in the u. S. , people wanting to come in and by the dip. May be at the end of the day, this wasnt fundamental, just driven by two fund is that went haywire and are finished. Talkingwonder, we were with mark about this earlier. There are a number of banks for giving short vix notes they were selling after so many retail been wiped out. We had explained hers about what the vix and volatility were and veteran professionals were clicking into this. Are you worried people have no idea what they are doing in this market . Do we need regulators to clamp down a bit . Ian i was interested in reading the small print. Story, butrd this last time it was about clos. This is a replay of the subprime, where you offload that Due Diligence responsibility to other people and make these investment mistakes. Our concern is there is always a link between these technical events and fundamental events. Normally, we see people try to explain one from a technical perspective or macro reason. What we always find is they are linked and you are seeing these stressors coming through. Know is, these be usednts tend to inappropriately for the wrong type of process and we dont know how those have spread into the system. We are worried about this contagion or if the initial selloff comes through, you get some clearing of the air, but start to see where the real damage has been done. Have you seen this in fixed income and credit where all the investors pile into one product or one direction thinking nothing is going to change ever and get burned as a giant heard . Herd . Mark absolutely, and we will see a lot of this in fixed income. In the new link regime, it is going to be all those other products where investors have gone down the yield curve and chase riskier spectrum to risk yield in a low yield environment, there is going to be panic and a reassessment across the board. We have more of this to come as Central Banks tighten. Ian the worry we have is people have viewed volatility as an asset in itself. You have had split between the derivative and the underlying is the thing at heart here. What this is symptomatic of is we are seeing alternative assets being challenged. As mark was saying, that shift by holding bond yields down, you have pushed Asset Managers into an alternative form of generating revenue and this is being blown apart. That is sick when julie what we will see sequentially what we will see in 2018. Guy it will be interesting to see how long Central Banks keep doing that. Dani burger, bloombergs market and quantities. Mark and ian will stick around. This is bloomberg. 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. 30 minutes into the trading day. The stoxx 600 is up around. 5 . We started at around 1 , but asia faded into the close and a fair value in the states point to a negative start there. Oil and gas frontend center, oils bid, technology bid. A little weakness in basic resources, travel and leisure a little softer, but most of europe well bid this morning. How does this fare into the afternoon is the question. Matt we have mark nash, the old mutual Global Investors and from absolute Strategy Research, ian harnett on set. We were talking about how investors can pile on to one side of the trade or another and you were talking about investors who had been pushed into riskier and riskier credit to get yield. Marketsee places in the where we could expect a blowup anytime soon . I wouldnt say a blowup. What we are getting is, as markets go into this new regime, we have to find a new equilibrium. We dont have impaired assets this time around. We have a Strong Economy, so there will be price discovery at highyield levels. For investors, cash rates are still low, we will look to see yields. Too much thatng will take down the Global Economy or be too systemic. Risk models will change and that is something we will want to see as they start to shift, as markets look at this risk and reassess it. How will that feedthrough . Talk aboutk people buying the dips, but the risk has already gone up in your portfolios of these effects. Arerisk parity models suggesting equity weightings should be down 10 . Is the second round reappraisal, recognizing volatility will be much closer, it comes down, closer to 20 than 10, change the dynamic between bonds and equities. This is why it is difficult to get a substantial rally and i am concerned about this optimism about the corporate sector are, because that levels are high in u. S. Corporates and hyg for us looks very exposed. Matt well, go ahead. I want to hear what you had to say. I believe the markets, as i said, will find a new equilibrium. It might be painful, but we will get there. Undoubtedly as yields rise, there will be casualties. Mightof these corporates not have been using that money for productive use. As yields go up, that is capitalism. We can clear the deck. Beont think it will anything too systemic. If we get an aggressive bond selloff, if markets cant take highyield and we get tightening of financial conditions, yes, the Central Banks will be concerned about that, but we are nowhere near that concern. Economic growth theseand you have got high debt levels, both in governments and countries like sweden, canada, australia and at a corporate level in the second line where all the cash is concentrated in a few stocks in you get this very toxic combination that could unwind these markets more aggressively as we go through 2018. Guy thank you for both of your time. Ian harnett from absolute Strategy Research. Mark nash old mutual. Business leaders and investors are gathering in abu dhabi for the Milken Institute summit. Tracy alloway is there. Good morning. This is really a chance for people to discuss not what is going on in the regional economies alone, but globally. On that note, there has been a lot going on. , thewith tom barrick founder, chairman and ceo of colony north. Thank you for joining us. Tom great to be here. Owned theald trump rally on the way up, does he own it on the way down . Tom of course not. Sides, but nobody owns it. The market is the market. President has done a great job of stimulating the economy, theident obama started Aircraft Carrier moving slowly and did a good job. The market is the market. Thes always dangerous on way up because you will get accountability on the way down. We are in good shape. Tracy what actually sparked the volatility we have seen . Have you seen Something Like this before . Tom sure, im in the quantity is frightening but now, we are dealing in etfs and computer related programs. I think the nervousness in the market is in anticipation of Interest Rates rising. It is priced in the market. I think it is insignificant in the years as to what happens in the economy. The emotional transition of where are we, Jerome Powell coming into the fed, the world being maybe not as transparent as we had hoped, but i think economies all over the world are in good shape so i think it is a momentary pause for a longterm gain and i am not concerned about it. Tracy the other big news today down as wynn stepping ceo of his own company. Is trump going to ask you to become chairman of the rncs finance committee . Tom i dont think he would punish me that bad. It is a job i am not interested in. Steve did a great job at it, it is a very political job. I am not really political. I happen to be a friend of the president , that is why i support him, but i am not interested in spending my time doing steve and the others do raising money. Tracy who would be good at it . Rodriguez and other people who are really involved in the republican party, who have the and the accessty to powerful men and women who have the money and time to contribute to that cause. It takes. At i have a day job and really am really happy with my day job. Tracy a busy day job. We are in the middle east, talking about a lot of the political events in the gulf, particularly. Some say trump has stirred up sentiment around iran. How are you viewing his middle eastern policy . For i view it as brilliant a u. S. President in a very short period of time, to take on one of the most difficult historic tasks ever. As we all know, there is no arab middle east is a very whaticated region, but President Trump and Jerod Kushner have done is generate interest to expedite what has to happen in the region, which is a realignment out of a fossil fuel based economy to a more diverse economy, to give hope and confidence to a growing young population without which we are going to have real problems. So i think this return that started in the riyadh conference, countries coming together and maybe the president of the United States showing up, returned to the elegance of what it should be. A defiance of radicalism, but a realignment of how great countries like the emirates, saudi arabia, now with israel, to present a more powerful balance to the region. Tracy what about when it comes to u. S. Politics because of course, we have the republicans and democrats hashing it out over immigration. Trump is saying things like he would welcome a Government Shutdown on thursday if democrats dont meet his demands. Is that a divisive policy at this point or divisive statement . I think it is a negotiating tactic and the president has a negotiating style, which is to take things tothe extreme and allow them mediate backwards, which he has done effectively in the past but politics is boys and girls playing badly in the sandbox a lot of times. I think that is what is happening. They are all better than that and they will step up and do the right thing, but art of negotiation with so many constituencies is quite complicated. As president has given up rhetoric and the cadence of diplomacy for action and that is startling emotionally to a lot of people, and we are all getting used to that new vocabulary and cadence. Hopefully it has efficacy around the world. Tracy what is your take on if we get a Government Shutdown tomorrow . Tom i dont think it will happen. Tracy i would be remiss if i didnt ask you about your own company and real estate investments. How are you seeing those in the current environment . Market turmoil mostly on the equity side, meanwhile we have people in credit still talking about frothy evaluation. Tom it is quite complicated. Public companies, investors want everything, low leverage, yield, increased evaluation and growth. Those things in a zero Interest Rates environment are complicated to produce. Complicating to produce. What you see in the corporate world as a result of everything happening in the regulatory range, is consolidation and to recapturing cash from all over the world. What happens with that cash will not just be dividends and buybacks, but reinvestment. In the long term, i think it is fine. I think the market is sorting through the equity side or debt side. A public reader suffer from that Interest Rate fear. What happened this Interest Rates go up to real estate as cap rates may rise and fixedrate debt inflates. The longterm effect, real estate as a postage stamp, private equity as an asset class has alloys always outperformed over a 10year period. Tracy going back to the market volatility on the equity side, a lot of scrutiny of products and etfs, should that caused trump to rethink some of his rollbacks of Financial Regulation at all . Tom no, i think the president is above engineering his policies as a result of what happens in the market. Those policies will drive various market factors, so i think as he drives towards 4 growth and full employment, which is where we want it, the market freaks out saying, we wanted it, but not now. I think the job of the president be cheerleader interest in chief, which is what he is doing. It is good for america, is good for business, what is good for business is good for the globe. Tracy tom barrick, calling the north star, thank you for joining us. Matt, you will be discussing the market volatility in recent days further rest of the week. There is contention in what is happening in the shortterm and in the fundamental economy. We have signed seen signs it is strengthening and that was the catalyst for the selloff. Lots of moving parts. Matt . Matt absolutely. I will be talking about that a little later on. I am about to head over to the schragert with loudoun Banking Supervision Press conference. We will bring that exclusive interview later on today. This is bloomberg. Guy 46 minutes into the equity market session. What are we looking at in europe . A reasonable rally in place, equities higher but we keep cautioning we are still seeing u. S. Futures pointing to a mixed start and we saw the rally fading in asia. Gig heap economy is part of the narrative, lets talk more specifically about what is happening in this space. The food delivery market. Less than a year after its ipo, hero has outperformed guidance, raising its fullyear shares arearound trading higher this morning on the back of that news. Joining us now, delivery heros ceo. To you. Ning lets talk about scale. Do you have scale in the places you want to be . Absolutely. Platform andading 35 markets globally. We have scale, of course it is growing fast and we will continue to do so. Do you have to do m a to get to that kind of position . Nicklas i think it is very crucial to be number one. I think that is driving economics. I think in the past, we have had to do m a to get to the size we wanted to be. We were also very successful in equities through m a, meaning we and it acquired entities and that has remained true. It was crucial for us and is still crucial, but not as important as we now have the scale we need. Deal flow starts to slow down a little, where are you looking now . What is on the agenda . Is a merge and something merger, you would think about to get scale . Nicklas we are in a position to really focus our business. It is 100 focused on executing our core mission. Of course, we always keep an eye on m a, we have been successful doing it but not executing on it. We continued to do so, but there is nothing we have to do. We have the size, the capabilities that we wanted to have and therefore, it is not a necessity. Guy so interestingly enough, there are reports that we are looking like we have a coalition in germany, which will include the spd again and the fed seems to think we are looking for tighter regulations. Story, similar. Theresa may talking about the gig economy. What do you expect Going Forward in terms of the labor market regulations you will face in europe . We get fullope clarity on all aspects and we and to operate very fairly according to all regulations, but we also expect that everyone does so. Clear regulation would be andful in all markets, personally, i think we have to see or enable people to have more flexibility in the workforce. It is very oldschool to expect Everyone Wants to work on a 9 00 to 5 00, but i hope you will be more clarity. Guy that would be useful. Profitabilityp, targets 2019, give us a sense of whether that is realistic . Expect 20182019 to bring in terms of the bottom line . Nicklas so, we have said we will grow into a breakeven during the year of 2018. That means at the very end of the year, we will be breakeven into 2019. Given the size we have and the increment of growth across we remain very we fident in that and that is it does give us room to invest both 2018ery fast in and 2019, and probably increasing as we grow larger. Guy very nice to talk to you for thank you for spending time with us. Nicklas oestberg ceo and cofounder of delivery hero. The story out of berlin is what we need to talk about. The cdu, spd said to reach a coalition deal. For been waiting this this, we have clarity that has happened. We do look like we have a German Government. We need some details, though, as with all these things. What did the spd get . We still have to put this deal to the grassroots grassroots within the spd. We are not quite there. This is how german markets are reacting. That is what Government Bonds and eurodollar is doing, flat at 1. 2376. E this is bloomberg. Guy lets look at some of the top stock stories we are watching at bloomberg. Here are the details. Ofra the biggest maker industrial enzymes dropping the most since august and hitting its lowest since august. Fourth quarter ebit was in line but investors have said household cares have failed to deliver. There is comfort in food and beverage. Even though novozymes proposed dividends, the stock is still down 5. 7 , the worst performer on the stoxx 600. ,arlsberg dividend is going up but the russian business is going down. That has had a negative impact on the stock, down 3. 2 . Finally, abn amro, fourthquarter operating profit beat, but Morgan Stanley pointed to the mixed news on capital trumping that beat and the company said it will wait till later this year to decide on paying extra dividends and a buyback. We spoke to the cfo in earlier and here is what he had to say about volatility. Are cyclical, so they dont go up or down in one direction. We should all expect cycles, though we seem to be a bit surprised when markets moved sharply. Only aid, we have moderate amount of our business exposed to equity markets and we will work with our clients in these volatile conditions, but we are feeling relatively comfortable during this volatile period. Ok, we will pick it up there. Stock ofk about the the hour. We talked to delivery hero a little earlier on. I want to show you the gd of delivery hero because the stock is trading on decent volume, outperforming on the guidance front. Decent volume going through delivery hero this morning. We spoke to the boss of the business talking about the fact he needs to be number one in all of his markets. The stock up by around 4. 5 and trading up mid range, where are we trading now . At the 52 week high trading 59. Surveillance with Francine Lacqua for the first hour, joined by tom keene in the second and third hours. I am going to bloomberg radio, because matt is talking to he willautenschlaeger, not be on the team, but anna edwards will be joining me on the radio team and we will carry on about what is happening in these markets. This is bloomberg. Francine selloff takes a breath. The market moves both ways. We look at the eight dollar is there life on mars . There could be soon . Good morning. This is bloomberg surveillance. Im Francine Lacqua in london. Right now the stoxx 600 gaining