Transcripts For BLOOMBERG Bloomberg Markets 20180219

We are without the United States. President s day in the u. S. That means a lot of participants stateside but we also see reduced trading over the Asian Session as well. We saw the asian equities session with the nikkei moving higher, 1. 8 . A little higher a little harder to make any headway. More will get to more that. Our focus on what we are doing in europe because without the United States and the chinese and hong kong markets are closed. Thats get the first word news update. President trump spent the weekend criticizing everyone but russia for meddling. He tweeted 14 times over 24 hours criticizing the fbi, democrats and special counsel Robert Muellers investigation. They came after his sweeping indictment of 13 russians for allegedly leading social media efforts to attack trump rival, hillary clinton. In florida, students at the high school where 17 people were shot and killed are speaking out or gun control. They plan to organize antigun violence marches for next month. In the u. K. , Prime Minister theresa may is temporarily putting she will try to repair her image with young voters by calling for fair funding for education. , jeremy corbyn, has promised the adult education. Promised free adult education. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. I am jessica summers. This is bloomberg. Anna thanks very much. As we said in our headlines, theres a lot of focus on latvia. Caught up in a probe. We will get to an analysis. Lets throw the ecb into the spotlight. Lets put the specifics to let the at to one side. Specifics of the latvia to one side. Great to have you on the program, james. What is the focus . The strength of the euro something that you the ecb is going to have to talk about. James it is all about the evolution of communication. The key policy is on autopilot until september and then we are led to believe beyond their for a paper. Rate policy has been tied to the end of the key policy. There is a period. That feels the ordained and unlikely to change but they are still aspects decibel are still aspects of ecb to evolve over time. We got the issues around the replacement for the president Vice President positions will be of interest. Anna competition today around the Vice President. Conversation today around the Vice President. We get news of that later today. The bigger question is around mario draghi, when he goes and he steps into the issues. The survey that we have done said that the environment is up there but also others. Expectation . James it has the potential to make a lot of difference. While it is a very difficult job to craft a message which doesnt reflect the view of all council members, it does lead to tilt the message more toward Mario Draghis personal leanings. If we were to get a german president that does have the potential to be seen by market by markets as a hawkish shift. Survey, it does seem to be streaks ahead of the of will hexpectation take over from draghi. Well have the vote around the vice presidency. We dont really know. Does the vice presidency have the ability to shape the dovishness hawkishness . James the speech can move markets. We assume the market believes, extrapolates as having credibility. If we were to look at the previous Vice President , we havent had a lot of huge market moving rhetoric from him. I dont think the Vice President role is a significant from that perspective. Anna you mentioned rings on autopilot and that. You mentioned things are on autopilot quite a bit. How comfortable do you think they will be on a recovering story and growth terms for the eurozone . The extent of the qe plan . In general, how comfortable are they . James it is difficult because the biggest threat to the economy and in terms of the sanguine reaction to the markets is the success of their policy. Economy isthe growing, the fastest tightening the output gap. The pressure to have a policy stance which looks appropriate. This is going to be a very tricky period for the ecb and crafting that message. And crafting that message. Anna getting that communication entry communication and keeping it on track. Lets get back to the news on the eu governing council. He came under pressure to resign retention ofkend anticorruption authorities. Joining us now, alessandra speciality. Great to have you on. What is the latest here . As to whether all these we can develop its were linked. Guest it has been a very intense weekend. There has been a press conference by the anticorruption unit of the latvian government. They said that the Central Bank Governor is a suspect. He will be released under veiled later today according to the local press, the bail was 100,000 euros and there is under investigation for bribery. This case is a special case seven case from the u. S. Treasury deciding to cap dollar funding for a latvian bank which has been put under because of its liquidity situation. Apparently those are two separate stories, all in a small country like latvia over the weekend. Day all on a very quiet were a lot of markets are closed. What does the future hold for ablv. He the u. S. Treasury intervened because there were allegations. Ablv program. Ecb monday mandated debt. Did the moratorium on it that payment. People cannot take money out of ablv. Anna they will develop separately, getting your thoughts on the rest of this case. How unusual is it that we are talking here about an Ecb Governing Council member being caught up in Something Like this . Alessandro i dont want to be wrong. I think this may be the first that isncilmember arrested by that is arrested while being serving. There has been previous cases where Central Banks central bankers were under investigation. It is. From what i cannot stand it has been i direct arrest. The pressure on rim savage to rimsevics to resign. It is difficult to push him to do that unless there is a conviction. There is quite a long way off for that. He is just a suspect for now. Anna you have made the point very clear that these to develop its of the weekend cannot linked. Finance ministers st. Nick country does suffering a crisis of reputation. What happens at the ecb if rimsevics is not able to carry out his duties . Alessandro are now the central bank of latvia says rimsevics deputy the decisionmaking body of the ecb in the coming weeks. Whether there will be a conviction, whether they will be a charge by the ecb, on the one hand justice has to run its course and it is not in the ecbs interest to oppose this. The ecb is always vigilant in case there is infringement of the Central Banks independence. Anna thank you very much. Alessandra speciality joining us. James at the states of this. Up next, theresa mays exit vision is more clear but can she unite her government behind it . Where are the details . We will discuss. This is bloomberg. Anna welcome back. This is Bloomberg Markets. London. 14 here in this is a special edition of Bloomberg Markets. It is president s day over in the United States. Theresa mays speech to them units just to the Munich Security Council tests independence in some areas. Divided between levers and remain us. May is due to speak today about education. Lets bring in bloombergs brexit editor. Still with us is james. Is james agee. James athey. We had a really fascinating insight. It is not with the u. K. Government wants. A little bit of reaction about around what is cherry picking. What did you take away from that . Guest merkel said because the u. K. Is offered a great deal, that is not one of the offtheshelf models, that isnt necessary cherry picking. That does suggest a slightly different tone. Want according to the uks redline those eliminate possibilities that anything else is cherry picking. There was interesting. May spoke at a security conference. Which he said was really important. What she said was really important. Aligned and the eu are at the moment but we want to go further. What is further . The u. K. Was pretty instrumental in drafting the rules. They will like to continue to have some kind of role in the future setting out on how those rules develop. She wants to be and that does where that does raise questions about one of the fights about enforcement. How the future trade agreement will be placed. He come back to the role of ecb. Did talkay she about specific issues. There was a role for the ecj. You wonder how that is going to go down when the cabinet meets on an away day. Emma what they are trying to catch their time try to come to an agreement on what they are going to pitch to the eu. This is it about what the this isnt about what they are going to get. What we have seemed to end the scene the picture is becoming clear. In some areas u. K. Losses a very close to the eu and in other areas, like agriculture, they will be clean break. Boris johnson when he spoke less wednesday, one of the things he said is it might make sense for us they close to eu regulation. That does suggest they are starting to come to consensus that some areas it will make sense to stay close to the galatians. Just stay close to regulations. Stay close to regulations. Anna james, when you look at all of the politics, do you get involved in the weeds at the u. K. Political twists and turns . You try to stay out of the weeds and photo signal from noise. It is difficult and political space generally. You have multiple parties speaking across each other. Therefore, the information flow for the public headlines and stories tends to be quite difficult to filter through to. Try to put as much of that aside as possible. I am one of the more positive people people he will speak to because selfinterest is where you to look to see how people will be motivated to behave. Selfinterest leads us to a decent deal, something that is acceptable to both sides. Anna interested to see where the selfinterest texas on the island debate. Interest takes us on the island debate. Theres still a search going on for a legal work that will satisfy both sides around island. Right. Hat is whenever one talks about brexit, you think they are coming to solution. Transition, i dont imagine it will get in the way of a transition deal. The text remains. There cannot be a border on the island and i cannot be a border mainland gbm and ireland. Anna if the solution is all in technology, somebody needs to present some detail. Emma the irish would say you need to present some anna emma, thank you for your analysis. James athey stays with us. Lets get a Bloomberg Business flash. Heres jessica summers. Jessica the struggling commodities trader, noble group warns it will post another huge loss. It could be as high as 1. 9 billion. Last month the from announced an initial deal to restructure the . 5 billion in debt. There is a warning that is the end of a boom in London Housing. Home sellers need to be more realistic of the price demands. The firms february to move february report says it was down for a sixth consecutive fall. Anna . Anna coming up, we will talk about a big week for treasuries. We will break down the big u. S. Treasury auctions this week. Mighty quite today with president s day. We will have analysis next. This is bloomberg. Anna this is this is bloomberg. This is Bloomberg Markets. Andu. S. Treasury is packing dust circling 218 billion this week. The sales will signal how much will rise as americas that james athey. Your insight into this week. We see this large amount of bond issuance, treasury instruments. Treasury issuance. James a large portion of that number, the bills a very short dated. If you dont have the duration risks but what we saw from the option cycle last week was even after a roughly 25 basis point increase from the previous option, demand still is fairly weak. That didnt lead to a huge amount of negative price action. We know the treasury had more to issue to finance what we expect. To finance the underlying of the fed Balance Sheet. The treasury options, they are not there anymore. We may have good weeks and bad weeks but the drip, drip, drip. They need to take down response to the year. Anna i have this chart. It shows where we have been. Two years, five years in seven years. Show them picking up through 2017 and into 2018. Where does the start to sense into the u. K. Economy . To inch into the u. S. Economy . James you would expect to finish earlier. Companies with the largest credit rating. The Debt Maturity profile doesnt necessarily mean we have lots of we cocompanies with that the needs week companies that need debt. The are a lot of names on the credit index. Different parts of the curve are moving at different paces. I dont see where they are, even 50 basis points being an economic issue at all. Positive are pretty question mark james absolutely. The mets demand has been pretty consistent. And the the positives trump tax policy and spending policy. Anna james, thank you very much. James athey stays with us. He was confirms it will confirm its asset unit. He tries to reboot the industrial janet. Industrial giant. That is coming up next. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Anna this is a special edition of Bloomberg Markets. The u. S. Has residents they. We are without a United States siemens is planning and i feel of it health plan division. The new company will be called we will be joined by ruth david. Good to have you with us. This has been a long time coming. This is something ive spoken to joe caper about many times. Finally we get news. Ruth it is going on the largest ipos in europe. We are talking about a 40 billion valuation. This growth we have seen across europe of these really big complicated conglomerates with this is everywhere. Just with businesses everywhere with businesses everywhere. The ceo making the point saying this is about shifting siemens from being an Aircraft Carrier into a nimble fleet of ships. Perhaps what you are pointing out there. This is a complicated area away from health. This is a complicated business because it has all kinds of higherups. The train business. Ruth as well as trying to some five things. There is a complex partnership going on. One of the things we are hearing is this money that is raised from the ipo could give more power to do m a. Onis want to focus more energy and things. It is one thing that a lot of companies are doing. Not with siemens but in a lot of cases, they make the case that this is this doesnt fit with the overall structure, why do you still have it . Anna it is going to remain core to the parent company. It seems it is very much still going to be a part of the business. Ruth first float you are slowly seating a way that control. Out and control goes into them. We have seen it with a lot of German Companies where you do that and somebody may be comes in makes an acquisition offer. Plus he had hit markets are so busy this year. Anna this is interesting timing with the stumble that we saw in Global Markets at the start of this month. Interesting timing. It is about the confidence. Weak bigger deals, they feel like if the Company Stronger the Company Story is strong enough. Story, and you know that you are going to do this, why not go at first . Wait for others to come in. Anna ruth, thank you so much. With david, joining us for the latest. James athey is still with us. We were saying at the break how quickly this big deal come to the markets. Worthy to will follow. It is announced that james will would imagine pricing up the ipo. There is less than in percent daily volatility, you can feel confident a couple of weeks out. They are try to do so when it had volatility is a little more difficult. Personally im not sure we are entirely through the volatility of volatility aspects. Not justmuch changing, not just economically, system explaining overtime. Investors just rotate out. Anna you see this volatility linked to the change, the evolving picture in the usa, the inflation story, the changes that are coming from the fed. James it is great, isnt it . It is a number of things. It was never going to be sufficient for one pillar to be knocked down. It has been a number of things, not least the success of the economic recovery in the eurozone because previously that was a bit of an albatross around the markets in a. Markets. Markets net. Most important lead the assumption that inflation is dead and will never return has been challenged in a number of ways. Anna we are still in the past. It doesnt refer to the fed in its current cycle. Things that happened globally such as china rebounding its currency they really help the fed back. How much could trade and questions around global trade be one of those actions in 2018 . Markets are really underestimating the chance of a trade war. That is something the fed should be watching carefully. James they are watching it carefully. Overreacting is not a wise course of action for policy maker. It is difficult to look back at the previous month and extrapolate that as a part of your policy subscription policy prescription. There is the potential for retaliation but if i were to look out and see countries with just wanted to crank up the retaliation, there is a winner in the world. Anna what trump is doing paris, this will help the United States . James if you were to look at , we haventations seen those but i think theres an argument to say that some of the trade taxes have been somewhat selfserving. I can understand to some degree what u. S. Might want to look into that. Tariffs in various are not a way to go tariffs and barriers are not a way to go. It is quite specific in terms of sectors that we can get through without escalating. Anna the chinese have suggested that aluminum, they see the tariffs ground is a right to retaliate. James, thank you very much. He stays with us. Lets get the first word news. Here is just the summers. Jessica theres a report that former Trump Campaign aide has agreed to plead guilty and cooperate with special Counsel Robert Mueller. Reporting to the los angeles times, he will admit to fraud related chargers. He will also testify against Paul Manafort. Singapore is increasing taxes to cook with an aging population. Singapores goods and services tax will be increased by 2 to 9 . For millennials living in advanced economies, the boom is turned to bust. According to report, millennials in the early 30s with Household Incomes 4 lower. The think tanks of the financial crisis have held millennials back. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. I am jessica summers. This is bloomberg. Anna coming up, two weeks away from the italian election. We spoke with the former italian Prime Minister. We will bring you that interview. That is next. This is bloomberg. Anna this is a special edition of Bloomberg Markets. I am anna edwards from our European Headquarters. Two weeks until the italian general election on march 4. Francine lacqua spoke to mario monti. In an exclusive interview, they discussed the ecb, the euro and the upcoming election. Made an extremely smart Monetary Policy and president draghi has been very smart and mastering the support for cutie four qe and still has the support. I personally believe that the phasing out will be rather quicker than slower. Reasons that has been mentioned for the u. S. In european countries, italy for sure, a very accommodating Monetary Policy has on the perception on the need to act on economic policy, on real policies. I believe that the effect which explains why the electoral promises issued so liberally and so irresponsibly by all the political parties, one of the reasons is there is no feeling of pressure whatsoever. Francine what will we all to look like . Is there a real danger that reform will be slow . Also, theres a lot of parties offering tax cuts. How do you fund tax cuts . Party,a positive is no either populist or not, has any longer in their program the idea. F leaving the euro they of all calm down. Of promisesissuance is virtually limitless. What will happen . I am not too concerned that these promises will be honored. Luckily, they will not be honored. What will be the explanation of the parties which are promising so much that they have to cut down promises. The culprit would be europe because europe would not allow them to fully deliver on the promises. This is the Traditional Division of jobs between nation, politics. Except that at every round of this game, the gap between the domestic Public Opinion and europe grows. Havewe will have at the european elections for the european parliament, i would not ofe out the settling down the eclectic ideas about leaving the euro, etc. , might come up again with a populist party. Say six months from now. The european elections approach, because then of course the discussion will have to be about europe. Anna that is Francine Lacqua with her interview with mario monti. More on italys upcoming elections. James, lets talk a little bit about italy. Theres a lot of talk about political risks around the tight election. I have this around the italian election. I have this chart. If united from mars, you and i look at the arrow we see in the spread. You would not look at the arrow we see in the spread. James if you look at this streak in their forecast, the resurgence into the unlikely election outcomes, the consensus is there is a high probability we get a disturbing outcome. Once the aggressively antieu , im a are not empowered little more skeptical than that. I have to say what is being described as a centerright has policies on the left of the center. It looks like a populist ticket. It can lead to further elections if we do get a hold parliament. Way we have come a long from the height of the euro crisis. Questionedthat is in desk that isnt questioned by forces. James the question for me is can we judge the success or reparation of the eurozone at full cycle . That is very much an open question. I am very skeptical because there are a number of structural issues. I dont see any single one of those having been addressed. Italian election that we are about to have in march is one of those examples where structural reform there is no likelihood of a political mandate to do so. That is going to be a tricky issue. If the dow back of the stimulus, where we left in terms of prices . Anna you mentioned the structural challenges. There has been some activity to adjust that. Not enough . James the economic success to some degree helps with the nonperforming loans. Agreeablerice that is which is going to be less than par, you have to wear writedown. We saw some capital raising. There are more italian banks in a position where they dont have access to funding markets. There are plenty of skeletons in the closet. Anna elsewhere, the political risks is going to sweep. Little we do have this risk with germany, the spd still yet to confirm the mentorship. The membership. James it is interesting because when we talk but the u. K. , i am paid to ignore a lot of the noise. That is been true through the eurozone. Is with the difference regards to those structural issues. You need a little progress to solve structural issues. Structural issues, youre facing a problem. I think there are still problems ahead. You mentioned germany having an idea of what the germany policy description might be like would be incredibly useful. A united europe behind a reformed europe is very different to one that is fragmented and selfinterested. To whoe will go back wants the ecb . James athey stays with us. Next, undress alterman discusses yield, thats undress alterman discusses yield. Check out tv. You can access to all of the charts and graphics and functions that we are using. You can interact directly with the team that puts the team puts the function together. This is bloomberg. Anna this is a special edition of Bloomberg Markets. Will the increase volatilities spread from equities to credit is the question. Andreas utermann spoke with Francine Lacqua last hour. Andreas an interesting level at the 10year and what i find more interesting is the yield curve is flat to the extent it has. 255 of the last two weeks, that is been interesting move. I dont think the yield curve is going to steepen from here. Francine what does that mean echo does that mean . Could get messy . Andreas i think it is good messy. We have been saying for a while we need more volatility. We had a risk on trade for so many years. I think it has gotten a bit messy that it has corrected itself. We looking for more volatility in that means if youre an active investor, it means more opportunity for us. Francine where does the volatility come from . This is a very simple s p 500 chart. We brought it back from 2014. You can see him every time you see a circle, it is a 5 correction downward. You can see the s p 500 upward. Going up nicely into we had what happened a couple of weeks ago. Do you think there is more volatility to come in equities . Andreas whether this volatility spreads to the credit market is the 64 million question. It depends on the health of the underlying economy. Quite constructive on that. We have so to the goldilocks scenario. We have sort of a goldilocks scenario so i am not too worried at this stage. If we look at this chart, what that is telling you is we won up too fast. We went up too fast. Equity returns from start about 4 . We got a bit more to go from where we are. The 10 to 13 movie sign gemini was overdone. Guess we saw in january was overdone. We saw in january was overdone. Francine are you willing to take away your position . Be aas the signal would weakening. T would be quite healthy francine what does that mean for your investment . Are we going back to active investment . Andreas we never left it. We have seen it come through in the numbers. Active managers have done better in generating. That is really good news. What it means for us is we continue to take risks. Asset allocation risks and of course credit risks. We like asian markets. The firstyou one of wants to come on the show to talk about it. What does it mean for 2018 . Andreas inflation is sticking up. We are still just we still have Monetary Policy we still have Monetary Policy. How we secure the real income and purchasing power of the people invest with us. The e 2018 is not year. S it is the pivot as a mean we are going to have tight Monetary Policy and 2019 it doesnt mean we are going to have tight Monetary Policy in 2019. Anna there was Andreas Utermann speaking to francine. James athey still with us. Were still far away from high Interest Rate. James i am going to have to disagree. I do think the liquidity side of this policy unwinding at the moment, no real yield on any core Government Bond market. Maturation, the youre not being rewarded in any terms of real yield. It forces investors to make real choices. They are going to have to sell out of something. You have the countercyclical risks. Anna james athey joining us from the past hour. Up next, dollar doldrums. We speak to the goahead of ethics strategy about where the greenback is heading. What has been holding it back. This is bloomberg. Anna live from the European Headquarters of bloomberg in london, welcome to this special edition of Bloomberg Markets. Here are the top stories were watching this hour. The next Vice President of the e. C. B. Is set to be voted on today. We examine the top candidate. Plus the intrigue increases over the u. S. Special counsel Robert Muellers investigation in washington as a report says that rick gates, a former Trump Campaign aide, has agreed to plead guilty. Youre hear from the c. E. O. Of investments who says that ray will lose money on his big short on euro banks. Welcome to the program, everybody. We have breaking news coming from Deutsche Bank. The german lend circuiting 250 banks in the securities unit, according to people familiar with the matter. The reductions are said to continue and could rise to more than 500, so it looks as if that number could increase. The c. F. O. Has urged more cost discipline after the previous target had been abandoned. So further news coming to us from Deutsche Bank. Lets get more on the Deutsche Bank story, joined by steven arons in frankfurt. Steven, thank you very much for joining us. So, give us the topline story here and explain why this is happening. As you said, Deutsche Bank needs to cut costs. Its imperative on them. They still arent profitable. Theyve had three straight annual losses, so cost cutting is at the forefront of the priorities, the c. E. O. Just said as much at the beginning of this month when he presented last years numbers. But its a costcutting exercise. Anna and put it in some context, steven, in terms of the numbers, parts of the business were talking about at Deutsche Bank. Steven i mean, as you probably know, Deutsche Bank is still the biggest europian Investment Bank. It has about 17,000 employees. Were talking here of executives, toplevel directors, not exactly sure how much there are, but if they do cut 500, thats going to be a substantial amount, its going to decrease costs. However, Deutsche Banks Investment Bank also has a revenue problem. Its been declining for a long, long time, and people wont help them boost the top line, and theyre facing a big dilemma. He needs to cut costs. He also needs to increase revenue. The question is, will this cut help them achieve goals . Anna theyre talking more about cost cutting, as you say, steven, but they previously moved away from a target. What was the explanation there, as you say, revenues of a sevenyear low at this point. Steven exactly. Hes known as a cost cutter. Thats one of the top priorities. However, he has, as you mentioned, he has abandoned his 2018 cost cut at the beginning of this month. He said the initial target of 22 billion will not an chiefable anymore. Theyre now targeting 23 billion. That didnt go down too well with investors. They were concerned about this, and increasing the cost cuts now at the Investment Bank, which as you can imagine, eats up a lot of the costs. Thats certainly something that we can see as a reaction of how he wants to speed up cost cutting now that he has abandoned the 2018 target. Theyre still sticking to their 2020 target, so im pretty sure this measure is intended to help him achieve at least that goal. Anna thanks very much, steen arons with us. Breaking news story across the bloomberg at this hour. Lets turn our attention to the markets then with a quick check of whats going on in the f. X. Markets. Heres the picture for the dollar. The broad theme of the session has been a little bit of dollar resilience. The dollar index up by around. 1 . But the big move coming in the yen. That was something that helped asian equity markets, certainly ones that are open, and thats the japanese ones. The nikkei up by 19 at the close of business in the japanese equity session much lets talk about whats been going on with the dollar of late. Joining us now, r. B. C. Europes global head of f. X. Strategy. Elsa, good to see you. Fascinated by your note. You talk about how you visit hypotheses , many have been thrown up as to what explains the weakness of the dollar in 2017 and the start of 2018. What is your best assessment there on what it is specifically thats been driving that dollar weakness . I think a lot of times people look back and try to find reasons to rationalalize the move. Sometimes they have plausible. Weve heard a lot recently about twin deficits, lot about real Interest Rates perhaps, or even Interest Rates further out the curve things. No single fact can really do a great job of explaining dollar weakness. In that kind of situation, you have to be more cautious about jumping on the bandwagon. Anna hard to jump on the bandwagon of dollar weakness, but also hard to go against it. You cant pinpoint one specific factor thats been driving this juggernaut southward since 2017. Elsa exactly. For some people, its much more prudent to stick to relative value trades, stick to trades where you dont have to take on whether the dollar is going up and down. Equally, you can look at technicals for guidance. You know, our Technical Analyst has been bearish dollars pretty much since april 2017, and thats worked out very well. Well look for tactical corrections from time to time. But i think weve got to be cautious about scrambling around for fundamental reasons, which may not be there. Elsa let me attempt to scramble around. This is the bloomberg, basically just showing the euro gaining against the greenback. But interesting to look at whether euro has been strengthening. The weakness in the dollar, even as u. S. Inflation expectations have been rising. What explains that seeming mismatch to you . Elsa thats a really unusual combination, because for a long time, we saw Inflation Expectations really driving currencies, because inflation is not high enough to cause a real problem, the inflation we tend to see in argentina, zimbabwe, places like that. When you see higher inflation, that leads to expectation for higher Interest Rates. And thats actual what will weve seen. Anna shifted that way. Elsa we havent seen the dollar following through. So people have to come up with increasingly exotic explanations for why the dollar isnt following through. Like i mentioned earlier, twin deficits on one of these examples people have come up with, this idea that the government deficit is going to get increasingly wide in the u. S. , and that may well leave the deficit to deteriorate t. May well not happen the way it did back in the 2000s, but its a compelling story a lot of people. That positioning goes up. Thats really all that matters. Anna when we saw it at the start of february, the return of volatility to markets, and the yen did gain a little bit. It remains broadly an equity story. It didnt affect others too much, but we did see some yen strength as a result. Did the dollar play any kind of haven during that period . It came just after we heard from the u. S. Administration about perhaps changes in dollar policy from the white house. Else a i think in part because theres a lot of short dollar positioning out there. Not so much against the yen, but dollar yen has only just turned short. But certainly against the euro, against the emerging market occurrence sids, so when we did see the pullback in the first week of feb, we did see the dollar get a bit of a sigh of relief. But again, as risk markets have normalized, weave seen the dollar come under pressure once again. Anna that reprieve a little short lived. I suppose thats one of the other arguments, that the global synchronized growth story isnt pushing up other currencies, and really the dollar loses, but its actually a positive bet on other parts of the world and Global Growth rather than negative amounts about the u. S. Elsa thats actually a very compelling reason for why you might be seeing dollar weakness against other occurrence sizz. If you look at the Global Growth cycle, we really had in a synchronized global up swing, and that should in three sandri practice be very good for emerging markets. It doesnt explain why the dollars come under so much pressure against the swiss franc, even against the youre sandrow sterling. European growth is marginally stronger than the u. S. , but the u. S. Is actually outperforming a lot of other g10 economies, and so i think like i said earlier, its very difficult to point to any one single reason. Anna and is it very unusual during a hiking cycle at the fed for the dollar to come under pressure against other major currencies . Elsa historically weve got mixed data. Theres some cycles its underperformed, some cycles its outperformed. A lot of times it depends on whats happening in the rest of the world. Whats unusual about this one, if you look across a range of different rate dynamics, whether its real rates, front end, back end ark lot are pointing to the dollar significantly higher, and thats not what were seeing in practice. Thats why people come one this more obtuse reason for why the dollar is under pressure. Anna do any of this point to china and what they plan to do with their f. X. Reserves moving away from the dollar, perhaps, or away from treasuries . Do any of your clients point to that as being part of the explanation . Elsa absolutely. A lot of times when we cant identify the reason for something, theres a natural tendency to say, well, china must be behind it. And i think it would be rationale and plausible in the current environment where u. S. Chinese relations are getting a little bit more antagonistic to imagine that china may be pulling back a little bit from its dollar holdings. You know, certainly the size of the move weve seen and the fact that its been almost relentless dollar selling does suggest there is some significant underlying flow. Anna something structural happening there. Thank you for your thoughts so far. Elsa lignos, thanks. Shes staying with us on the program. Lets get you up to speed with first word news. Heres jessica in new york. Jessica a weekend blizzard of tweets over the investigation into russia meddling into the election. Trump attacked the f. B. I. , democrats, even his own narg security advisor. But he did not criticize russia, says even after special Counsel Robert Mueller came out with indictments of 13 russians for allegedly leading social media efforts to attack trump rival hillary clinton. In florida, students of a high school where 17 people were shot and killed are speaking out for gun control. They plan to organize nationwide antigun violence marches for next month. Some of the students will go to floridas capitol this week to demand immediate action. And in germany, chancellor Angela Merkel may be sending a signal about a possible successor. According to a party official, merkel has decided to name a Party Loyalist to the position of general secretary. Anna is the premier of the Western State of sa railroadland. Shes been on the shortlist of those considered to eventually replace merkel. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im jessica summers. This is bloomberg. Anna thanks very much, jessica. Coming occupant program, eyes on the e. C. B. Finance ministers meet today to cast their vote for the next Vice President. Well tell you whos up for the job, whos in the running. Thats next. Anna alexandra, your thoughts then on where this goes and where the voting goes for Vice President. Its going to be a very political decision f. Youre a finance minister who decide, of course the nominee has to go through some hurdles after that and vote the european parliament, which is nonbinding, an opinion of the e. C. B. Governing council, and final ratification from the euro government leaders. But at the same time, today is the key vote, and its going to be most of the politics that are going to decide the issue whether the e. C. B. Anna so the politics comes into this then in no small measurement what are the other facts . How much do we know about how hawkish or dovish these candidates would be if they were to move into this highprofile role . Well, the economy minister has tried to portray himself as a hawk. Of course, he doesnt have a strong record of Monetary Policy because its been an economy minister, finance minister. But what has led him to transpire is he would decide whether hawkish qualities want it as possible on the e. C. B. From its current extraordinary accommodative policies. On the other hand, the irish central banker is a clear record that he has been a close supporter of e. C. B. President mario draghi until now, so his line has been speaking with press penalty so far. On the other hand, he comes from spain, a country from the south of europe that has benefited, as the rest of the euro area, from the e. C. B. Quanttaverb easing program. So this is also a factor to weigh in when its going to come to decisions. Its important to remember that e. C. B. Governing council and executive Board Members dont represent their countries in the e. C. B. , but they are there in their personal capacity. Anna and we are standing on the verge of some fairly big changes at the e. C. B. We see the term ending on may 31, and thats what this vote is all about, replacing him. But then looking ahead, we also have Mario Draghis term coming to an end fairly shortly, and this will this debate comes before a much bigger debate about whos going to replace he man at the top. Yes, this is really the year of change. They plays a key role in setting the electric outlook and deciding the policy for e. C. B. , and the chief of affairs, one of the most widely regarded and highly praised. They both have come up for replacement in 2019, and so this is going to set up a whole jostle of trading on decisions when nationality, personal leanings in 2019 for the future of the e. C. B. Anna thank you. Lets go down to the euro a little more with elsa from r. B. C. , europes global head of f. X. Strategy. Else i cant, a big year in 2019 for the e. C. B. , because, of course, the questions around mario draghi, how much do you expect to change around the Vice President . Does that materially impact on your expectations of hawkishness, dovishness of the e. C. B. Governing council . Elsa i think markets are less focused on the Vice President s pick and more focused on whos going to succeed mario draghi. And i think if you rewind six or nine months ago, it was widely seen as the most likely successor to draghi. And then increasingly were hearing other names. Phillip lane in the running for Vice President , seen by many as more likely to take on the president s role, and clearly if you end up with lane rather than the head of the e. C. B. , Market Expectations would be for slightly more dovishness at the margin. Anna you mentioned other names in the mix, but the very most recent survey that weve done here at bloomberg suggests that five minutes at the top, isnt he, hes still the favorite, just trying to pull up the latest statistics here, and he seems to be still ahead. What kind of hawkishness would that lend . That could be a big change, couldnt it . Elsa ive heard several people taken over for being bull, euros. Im not sure it would lead to a radical transformation. Traditionally theyve governed by consensus, but clearly if you have a call that more hawkish, and by cory mean it would be the president , it would be the chief economist, as you mentioned, the term is coming to an end, the Vice President , you could end up with a slightly different decision outcome, particularly as regards to pace of tightening, which we expecting to see through 2019 and 2020. I wouldnt count on phillip lane just yet though. I know wideman is still very much in the lead and the favorite, but our economists have been looking at lanes candidacy in a lot of detail, and hes got a lot going for him. Anna well watch the vote today and into 2019, more important vote for markets. Elsa, in terms of where the e. C. B. Conversation goes in the meantime through 2018, march 8 is the next e. C. B. Meeting. We get new forecasts. How comfortable do you think the e. C. B. Will be with what the market assumes on q. E. , given the strength of the eurozone recovery story weve seen . Elsa like you mentioned, the data has been even better, but still lagging. Were beginning to see some of those, some price of price pressures, but thats really yet to materialize in headline or core inflation growth, and i think thats what the e. C. B. Is really looking for, signs that as draghi says, we need to see this sustainably back to target, and by sustained, what he means without relying on the support from the e. C. B. Until we have signs that were closer to that point, be very reluctant to get too aggressive on the language. Anna perhaps that keeps the hawks at bafmente elsa, thank you. Shes sticking with us here on the program. Lets go to business, jessica in new york. Jessica thanks, anna. Bounce back from its worst year ever. The u. K. Based maker of pain killers and other Consumer Products is forecasting a sales increase up to 3 in 2018. Reckitts revenues were sluggish last year. For the first time, a woman will lead one of russias largest commodities companies. According to people familiar with the matter, the finance chief will become c. E. O. , replacing billionaire oleg. Hes stepping down as part of a broader reshuffle. And thats your business business flash. Anna thank you. Coming up on the program the dollar on the down turn, but what about other currencies . Well focus in on more of the f. X. Calls that elsa has. Anna welcome to blarg markets. Theresa mays speech to the security conference this weekend shows the brexit tightrope the Prime Minister is trying to walk, independence in some areas, and choice cooperation with the e. U. In others. How are the brexit negotiations impacting sterling and what else is in the mix . Still with us through our conversation around currencies, the head of f. X. Strategy. When you look at the pound, are you most captivated by the politics or bank of england . Elsa we should be captivated by the politics. Its actually very interesting. Wove seen quite a few shifts lately. If you look at markets, for example, theyre actually now showing roughly even probability between victorious and labour winning the next election, and if you look at most likely next leader, next Prime Minister, its now actually smoke. So a lot going on in the background, but thats not affecting sterling at the moment. Like you said, the expectations and bank of england are far more important in driving the pound. Anna its not just the brexit politics, its the domestic policies that flow from that as well. Ive got this chart on the bloomberg. This is illustrating the pressure that were seeing in the housing story, particularly the London Housing story. This is just one element of the underlying u. K. Economy, but would hikes enter this kind of housing environment, what would that suggest to you about the strength of the u. K. Growth story . Elsa the bank of england, i was just talking about gradual hikes. The moment the question is the may hike. Markets are almost discounting a may hike, bigger question is, what the bank of england would follow that up with and whether or not theyd be able to really continue in a proper tightening path if at that moment we see more uncertainty around brexit negotiations or anything like that heading into the 2019 deadline. But for the moment, were selling more tactically. Weve got a long trade on this week, and part of the reason is going into the Employment Data this week, theres no symmetry around the results. We do get higher than expected earning results. Anna so you think the expectations of hikes could increase from here with the data that we get this week. Elsa exactly. I think people are very, very focused on the short term on what rate dynamic is. We spoke earlier about how the dollar has done its own rate dynamics. If you look at the correlation at the moment between sterling and rate dynamics, its very, very strong. Anna thank you very much. 1 26 here in london. Up next, shaken but not stirred, the c. I. O. Explains his views on the market. This is bloomberg. Show me the olympic winter games like ive never seen before. Xfinity x1, yeah, i always know the scor. Triple corks in 4k. Lookin so sick. Stream live on every screen, every win, every trick. 2000 hours of coverage, get your mind blown. 50 olympic channels, yup, youre in the zone. And if theres something that you want to see, pick up that voice remote and just say show me. Experience nbcuniversals coverage of the olympic winter games like never before with xfinity. Proud partner of team usa. Anna this is bloomberg market. Lets have a quick check on the markets. The markets reduced in scale and scope because weve got the new year in hong kong and china out of the mix. We also have a holiday in the United States, president s day, it being the third monday in february. And so as a result, we are without some of the guiding forces that we normal wool get. But the nikkei 225 did a food job, up by 2 , just shy of 2 partly to do with the f. X. Moves and the yen weakening in the session. Europe, the equity markets nearing europe finding it harder to make any headway. We see sturem stocks, some of the sectors that struggled a little bit. And worth mentioning that u. S. Speeches look a little directionless at this hour, not expecting to see a great deal of movement. In fact, entirely unchanged. Investors are shaken but not stirred after the recent selloff, its the c. I. O. Lets explore his source on that subject this president s day. Hello to you london time. If you will be at what we saw in the v. I. X. , shaken but not stirred, youre firmly back into the camp of buy the dips or i guess you should have bought the dips last week. Absolutely. You see what happened in the market, and we know by now it was all driven by weak, so you saw the v. I. X. Going up, but not the same level of vulnerability in other classes, i. E. Rate and f. X. Bond market. Its the biggest market that really drives all the bad things that people are used to happening in the market and a big selloff. With you didnt see Massive Movement there. What we have seen is really welcome back to twoway market, people were used to trading one way, s p going up in one direction, and now you see, well, there is something called volatility, and you have to be careful of that. Thats what we saw. Anna we talked in the last hour by how goldilocks has left the building, but thats not necessarily a bad thing, you think. Its not necessarily a bad thing, because i look at data, to lock at the data point of view, youre seeing that theyve nearly closed. Youre looking at Global Economy growing at a 3. 5 clip. Youre looking at Unemployment Rate at low level in the u. S. On top of that, you have fiscal coming through. So clearly, its not about in terms of where it should go. So that doesnt worry me as much. Are there risks . Of course there are, so things like trade war, what could happen in europe, you have the election, you have German Government formation going on, and now nearly one point behind eastern germany, so theres a lot of things underlying which could go wrong potentially. But i see that just as a normal correction. If you bought something, if not, then you just have to wait. Anna is 2018 a good year for managers then . I would say that, yes, because you had a really strong bull run in terms of the secular market going on. It gets harder if its a twoway market. Exactly. And it gets to a valuation where you start questioning, and when you have different opinion. So far people have very similar opinion, and people are going in oneway market. Now, there are many people who still think that there could be a deep correction. That is what makes the market different views, so clearly, we have opportunities of selloff and buy. In my view, that data is very strong. I think inflation will be a scare later on, because clearly, you know, weve had a huge amount of not just low unemployment, but also government putting more money, especially in the u. S. , and that has to show somewhere. But i dont see that as an immediate concern. What could happen is nominal rates could go down, but they could still hold on, and you would not see that squeeze coming in the market as some people expect. Anna how optimistic are you about European Growth management, and how do you play that . I always get this question about europe. Before i came here, i look at a chart. Theyre still down 10 from the april highs three years ago, like through 2015. Europe is always a story. Everyone has price, the growth story, things that are better. But there you go, in three years time, almost up from april in 2015, europe is down 10 . Why . Because a lot of things is driven by what is happening, which is beyond control of the market. Anna doesnt that show theres catchup to go in europe . Im saying we made the same year. Of course theres catchup. But how do you believe things are going to transpire . My personal view is that i do not like taking a strong trade where you can bring in a coupon. So you can pick single stocks. I quite like french names. These stocks have done well. Maybe euro stocks as an index has not done well. Anna are you still buying from those names, are you buying Global Growth . Absolutely. If you look at europe, germany is this great exporter, the surplus in go ahead, and theyre not selling anything themselves so. When things are not really good in europe or there are questions about europe, the Global Growth, emerging markets, i think one secular is emerging market will do well, and Market Growth will be robust, and theyll keep doing well so. There is a case to increase allocation and having a more clear on that, any company that provides that market. Anna and we heard earlier day, we heard from veteran investor talking about opening a fund of billions of dollars, from emerging markets. Its in luxembourg, but he did say he was cautious from a historical valuation evaluation. Are you cautious . Many years ago, he told me his mick name was dubious. He said its great and didnt perform, but i think that weve reached eye point before the growth is not there. We have these consumptions. We have future growth in terms of lefrpbling up and buying the debt. But it is emerging market, in china, india, vm, indonesia, you have a lot of growth companies. And you have a very stable market policy, and that is underpinning the very stable environment. I believe that turn is not going to change. Of course you will have you saw in india, we have the cam where theres a huge loss of potential loss of money coming from the banks. So you will have these things, but we look at the robust growth, you look at the robust growth in consumption, and if you look at a financial market, especially in india, a lot of financial money coming into the market is not domestically, not what Foreign Investors used to do. Sandoip that means its less at risk at a hiking cycle by the fed. Theres still some dollar. I think it will take a lot of time to be displaced, but theres a lot of underpinning, which is robust, given by policies and Central Banks being more dependent. You have people who are not driven by politics, but by economies, so you dont see Central Banks easing to a government, so those are very robust. Anna all right, stay tuned, but thank you, views on the markets from cross bridge capital. More thoughts from manish in just a few minutes. Now heres jessica in new york. Jessica thanks, anna. President trump is open to improving background checks for gun purchases. Thats according to npr, which cites a statement from the white house. The president has been criticized for not doing anything about gun control. Singapore is increasing taxes to shore up savings to cope with an aging population. The more expensive homes was raised, plus sipping afors goods and services tax will be increased by two Percentage Points to 9 . Some signs in 20 1 to 2025. And for millennials, the boom has turned to bust. According to a report from the resolution foundation, millennials in their early 30s have Household Incomes 4 lower than members of the preceding generation, generation x, at the same age. The financial crisis has held millennials back. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im jessica summers. This is wloorg. Anna . Anna thanks very much, jessica. Come up, a report of another guilty plea in robert mulers russia investigation, what it means for President Trumps policies. Anna welcome to Bloomberg Markets from london. Another development in the russia probe in the United States. The l. A. Times is reporting that rick gates, a longtime Business Partner of Paul Manafort, has agreed to plead guilty to charges of money plaundering and failing to register as a foreign agent. Gates cooperation could increase pressure manafort to plead guilty and cooperate with special counsel Robert Muellers investigation. Lets bring in to the conversation bloombergs Stephanie Baker whos been tracking the washington twist and turns as laid down by mueller and his investigation. Good to have you with us. What is the significance of gates cooperating here . This is about pressure on manafort, is it . Stephanie well, thats clear. He certainly is in a position, having worked with Paul Manafort, who was Trumps Campaign manager, he worked with him for a decade. The charges that mueller has levied against both manafort and gates are for actions that predated the Trump Campaign. But remember, gates was there throughout when manafort joined the Trump Campaign, and he stayed after manafort left the Trump Campaign in august 2016. He continued to work on the Trump Campaign until the election, and then joined trumps inaugural committee. And then he continued to work at a lobbying Organization Called America First policies until he was forced to resign in march 2017 because of all this noise that he might be in the line of fire with mueller. So what we dont know is how much he has on whatever possible collusion with the Trump Campaign and russia, if its there, people within his orbit say theres no there there. He has nothing to offer that is of value. And, you know, if you believe that, mueller is just trying to build a case against manafort o get manafort to provide some interesting evidence for the russia investigation. Anna yeah, interesting. Where does it leave the russia investigation . Weve had others, former National Security advisor mike flynn saying they will cooperate. Why is this different . Is it because of the breadth of the experience that he brings, gates, i guess . Stephanie yeah, he was there throughout that period. He stayed even beyond when Michael Flynn left. So i mean, the white house is at least, you know, showing a brave face, saying, you know, were not too worried about this. However, remember, wick gates worked with paul mart afort on private equity deal with a russian billionaire oligarch, and that has been examined, what was the relationship there. We know that Paul Manafort was trying to resolve the dispute that he owed money while he was Trump Campaign manager. Rick gates is central to that whole deals. He knows it chapter and verse. As we know, gates didnt have the money to fight a trial. And he had four young he has four young children, and, you know, he just really needed to do a plea deal in order to it looks like he needs to do a plea deal in order to survive the reduced potential sentencing from i think he was facing 10 years. It looks like hell be facing a reduced sentencing of a year to 18 months. I think it is potentially significant, certainly for Paul Manafort, unclear for the trump white house. Anna thank you very much, Stephanie Baker with the latest twists and turns. Looks like theres increased pressure on manafort and changes the conversation a little bit, moves it on perhaps around russia. Lets bring back into the conversation about u. S. Assets, manish. So when you listen to the politics here and you watch the i thought in the last halfhour, we twalked our guest from r. B. C. , talking about the weakness in the dollar, whats been driving it. Do you see evidence of this story in u. S. Assets . Or is it just a sideshow for you . Its not a sideshow. The president and everything with the white house is being dealt with. But i think that there has to be far more incriminating evidence before markets get worried. There have been questions about the chief of staff could go leaving. I think unless mueller leaving, a Mueller Investigation winding down or jim mattis leaving, i dont think markets really get as much worried, because theres just not enough detail. You could make an argument on both sides. You can say theres no collusion, so its not really clear. Its not good for america. If you look at how u. S. Has been perceived for many years, and i speak to my friends in markets, america is no longer seen as a beacon which Everyone Wants to copy. To my mind, thats a big change. There was an article this morning about how china is making a leap forward while the u. S. Is by we russia investigation, and europe is is with europe. Its not very good. Anna china certainly wanted to play that card that they are now the global force in global trade. Others question whether they actually walk exactly as they talk on global trade and how the markets as they profess to. But your case is positive on the u. S. Economy. What would it take to persuade you that we could be closer overheating on the u. S. Economy given what weve seen in the tax policy and at the time that were seeing that, with unemployment as low as it is . For me, it will be the inflation. That is one thing i look at. It seems a new bipartisanship in u. S. , everybody wants to spend money. So democrats want to spend money. Maybe on different topics, but they want to spend money, and that can be a good thing, so u. S. Is about to run up the fiscal deficit of 4. 5 on 5 on these times, and this is when you have the lowest record on unemployment levels. So i mean, things are fine, so why are you spending money . That will be the worrying part, when it comes to i am not seeing signs of inflation. Now, could it be that things are manufactured in china, mexico, vietnam and serk is not really what is . We dont know yet. I like to wait for evidence rather than jump on it. Anna many conversations about structural changes the way that this inflation cycle may be different from others. Thank you so much. Stay with us, manish singh stays with us on the program. If you have a bloomberg terminal, check out tv go. Its a great function. It gives you an opportunity to click on the charts we use, the graphics, and to interact with us directly. Just go to tv go on the terminal. You could also send the team a question by clicking on the button at the bottom of the screen. This is bloomberg. Anna this is a special edition of Bloomberg Markets. Im anna edwards from our European Headquarters in london. Just two weeks ahead of the eye italian elections, cracks are appearing. We spoke with bloombergs Francine Lacqua on surveillance earlier today about the vote. She asked how it impacts bond buying. Well, both, in a way, of only true issue is risk as part of the system is whether italy were to think about leaving the e. U. Now, in first of all, its unconstitutional, so you cannot even have, you know, you need to change the constitution first. Italy tried to change it and it failed. I think its impossible, even the political setup, remember to agree with each other. Secondly, if you were to take the multiply by seven, so that means about 9 , if you assume that the potential devaluation would be equal to 40, but gives the probability, its calculated of italy leaving the euro. Now, consider that the parties are saying we want to stay in the euro, that probability is very high, given that all the parties say we dont even want to discuss it, were 100 in it. I think the spread has, in my view, upside, meaning it could ghten further simply because its europe. Francine youre telling me this could tighten, even as theyre scaled back . Yes, so remember, i think bonds at 60e, 70 points can go higher. The same for italian. Here youre talking about the spreads. So the difference, the relative value of italian is the german bonds. I think that one can tighten further with both of them widening. Francine where do you need this to be for italian exports . Well, here the question is, italy went through a severe recession from 2008 to 2014. G. D. P. Collapsed by 10 , considered 50 of g. D. P. , but that means the italian sector collapsed, so you had almost a 29 crisis. Ll, this is a washout of 25 which is the reason why you have so many. But it survived, strong, able to compete. And so what youre seeing today, besides the export are the Fastest Growing outside germany, in the eurozone, and still the fifth largest export in the world is because whatever is left of the industrial capacity, its very strong. So i think italy can easily compete with the euro, no problem whatsoever. Francine is ray going to lose money on his big short of italian banks . I think hes going to lose money on the big short, and the reason is because were one of the largest investor in italian , were about 50 market share, and we see tremendous value in some of the asset class, so the market is overly worried about it, where we actually think theres value. And hence, i think as most banks are cleaning up the Balance Sheet and theyre oining the european level of laws, i think the banks will go up strongly as well as they negative from negative rate to zero rate. I think its very hard to have an economy growing at 1. 8 to in europe with inflation, so nominal g. D. P. Growth of 3, 3. 5, and keep our rate minus 40 business points, when in the u. S. , youre hedging towards the 2 level. So i think what theyre missing is the day the e. C. B. Goes from minus 40 to zero, italian banks could easily see earnings upgrade just in one day, and so i think short on italian banks over the next 12 to 18 months will be a losing strategy. Anna talking there about the Banking Sector in italy. Weve got breaking news. Phillip lane is withdrawing from the e. C. B. V. P. Post. The battle was taking place for that position between phillip lane and louis aof spain. Phillip lane has pulled out of that race. This is the irish finance minister saying that the irish Central Bank Governor, phillip lane, his name has been withdrawn from the e. C. B. And the irish will thraffer move to support the spanish economy minister. Well get further analysis of this, that has been expected in some quarters, because this is the faith, there had been an expectation that perhaps they would step away from the battle to enable a unanimous decision to be made by the finance ministers later on today. Still with us, manish, we see this battle for whos going to have the vicepresidency of the e. C. B. Whats your big source in 2018 around the e. C. B. . Are they doing their exit from q. E. Quickly enough for you . Well, i would say that you have to get this easy money policy. I mean, to prove that the economy is robust enough and can get on its own two feet and work. Now, it seems like the e. C. B. Is going to take the foot off the pedal come september, and then see what happens. I mean, how the economy reacts, able to take the pressure well enough. I mean, at the initial phase, i think the banks will do well when this happens, because as the rates go up, the banks will do well, so there is a trade to be done in that. It depends on whether the broader economy and others can sustain this high cost of borrowing, so well have to see what happens. Anna thank you very much, manish singh from cross bridge capital, joining us the last halfhour here on bloomberg. When we come back, well get further details of the battle for the vicepresidency over at the e. C. B. To some extent, mixed in with the bigger battle that lies ahead in 2019, the battle to run the e. C. B. As a whole. Of course, mario draghi very much in position at the moment, but set to decide next year, so that will be the battle that lies ahead. Anna i live from our European Headquarters in london. This is a special edition of Bloomberg Markets. Out as Vice President of the ecb. Commodity crunch. Noble group find a 5 million loss. And we preview the earnings season from the regions major lenders. Lets get a check on the markets for you. European equity markets trying without hongay kong and china. The nikkei 225 managed to make some headway, up just shy of 2 . Newfound weakness in the yen following japanese exporters. In europe, a little harder gunning, down 2 10 of a perc ent. That is where we are on this holiday trading day stateside. Lets get a first word news update. Isorter President Trump open to improving background checks for gun purchases according to npr, which cites a statement from the white house. The president has been criticized for not doing anything about gun control following last weeks school shooting. Meanwhile, President Trump spent the weekend criticizing everyone but russia for meddling during the president ial campaign. Over 24ed 14 times hours, criticizing the fbi, democrats, special counsel Robert Muellers investigation after sweeping indictments of 13 russians for allegedly leading social media efforts to attack trump rival hillary clinton. In the u. K. , a spokesman for Prime Minister theresa may says a political agreement with the European Union is not enough. James black says the u. K. Once a detailed trade deal more or less defined after brexit. He expressed there will be more clarity this week on what future relations the u. K. Wants with the eu. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. And jessica summers. This is bloomberg. Haidi thank you anna thank you. We just learned irelands is in for a Bank Governors withdrawing from the ecb Vice President. That leaves just the spanish economy minister in the race. Joining us with more on the future of the ecb and its maria is joined by a guest. I am sure he can be a good Vice President for the ecb. Not sosee new are you are not thinking you are crossing a red line getting politicians into a central bank . I think the ministers are the relevant people to choose whoever they want. They are legitimate and they do that on criteria which other is this person to really have good work. Reporter given that is a crucial time for the ecb, using he is crawled five you think he is qualified for this role . Reporter i think i answered that. Guest i think i answered that. Reporter he is saying he is a good candidate for this am a wellprepared for it. I do have to tell you there are people here who think this is a redline, getting politicians into a central bank is dangerous because it can compromise the independence of a bank. Head of the the european commission. He thinks it is a good decision. Vote is expected today. Anna i heard you saying earlier this could be something that would happen, that philip lane with step aside to make this a unanimous decision. , hisdo we know about him stance on qe . Coverage of spain kumal what have that led you to know about this man in the role he might play at the ecb . Reporter that is an excellent point, and it does go to show that this is someone who comes from the world of politics. We dont really have any references in terms of what you think the Monetary Policy. Last week he did give an interview to a french newspaper and did hint that while monetary Monetary Policy is not something that stands permanently. A wants to be presented as hog, but we might have a dove here. Catch thef we can head of the euro group live. [speaking in a foreign language] anna thank you very much. She was talking there to the european commissioner and getting some other thoughts, which we will find we have a translator. Lets follow that up with Neil Mackinnon, global macro strategist at bcb capital here on set in london. Lets talk a little bit. Good afternoon. Lets talk about the ecb and whether any of this change with the Vice President role, does this matter for market dispense . Guest i think markets arent going to get over exercised about this particular issue, but i think it is interesting how we will be perceived in the marketplace, as a dove or a hawk. It is a little way off yet, the mario draghi in october 2019 be stepping down, but in the interim i think what is , there is a big issue for market about when and how the ecb extricate itself from its qe program. Mario draghi and his team at the ecb have been unwilling to withdraw any stimulus because inflation is not a level yet consistent with the cyclical recovery we have seen. They have tapered from 60 billion euros to 30 billion euros in january. They will continue with that in september. At some stage the sequence the best the sequencing will be they will move away from the program the sequencing will be they will move away from the program. The other interesting point is and all of Southern Europe have been very dependent on the liquidity from the ecb, to resolve some of the problems we have seen, and of course it is not just spain, but italy. The banks have a high level of nonperforming loans. Draghi isat mr. Worried about and very alert to if there is still a possibility for a periodic crisis, a banking crisis, should there be a snap back in bond yields that would hurt Southern Europe. Anna do you see a snap back in bond yields coming . They produced bond buying, but it is still generous, i guess. You dont see them stepping away from that anytime soon. Inflation is perhaps keeping the hawks at bay. Guest i think that is right. There may well be a snap back in bond yields because we have seen this in the u. S. There are many commentators and nagersnown bond ma talking about how the markets are very sensitive to inflation risk. We seem bond yields had higher and have an attract on dragging up eurozone bond yields, clearly at a much lower level. There is a risk of a snapback come of broader volatility. I think over and above what has happened in europes bond markets, there is a wider risk that investors feel we could have an inflation induced bond market crash. The eurozone bond markets would not be immune from that. Guest when does that start to hurt european corporate . I spoke to one exporter recently suggested his business wasnt all that far away from where we start to raise a few eyebrows. Guest i think a few eyebrows have already been raised at the ecb. We had a couple of very senior officials over the past few weeks making passing comments about the appreciation of the euro. Mr. Draghi himself said it at a press conference in a very roundabout way, that the euro appreciation was a consequence of dollar weakness. Would very critical, it seem, of u. S. Policy on the dollar, which is all very unclear and are they peeling perhaps that the u. S. Administration wants perhaps a weaker dollar. What markets tend to do, istainly in my experience, they passed the strain the pain threshold of banks it may want to push it higher. The worst Case Scenario for the ecb is a much stronger euro that the rails the recovery and makes for deterioration in inflation. Is a higher euro from here on out make sense to you based on all the other factors guest the fundamental Equilibrium Exchange rate is about 120, so we are not that far away. ,ut as we seen in the markets there does seem to be this sensitivity, changes in yield curves, so that played into this currency market. Perhaps it doesnt take a great pressures, to create and of course mr. Draghi has said he might have to review it. Some of the colleagues have said they might have to review stronger on the exchanges. Anna thank you, new mechanic stays with us Neil Mackinnon stays with us here on Bloomberg Markets. This is bloomberg. Anna this is Bloomberg Markets. Earlier today, guy johnson spoke of he ceo during that year we made moves. We sold our business for a good right good price. Our business outcomes from higher growth categories. A look forward to 2018. I think it is going to be a better year, and that is how we are cutting the market. Rb is a better name now. Reporter i remember the merger, covered it was a great deal of diligence back in the day. You talk about the acquisitions made last year. Theres another big business out there that potentially could be on the Shopping List, the Consumer Health business. Its got a pretty punchy price tag come a bit like some of the press tags you paid last year. Can you give us guidance on your thoughts on that business . Would it fit well . Would it be something you are interested in . Is the price too high . Guest first of all i would like to say i would have a very disciplined approach because we apply our criteria really diligently. One of the first ones is it is compelling. Does is make does it make sense strategically . Does it create rally for shareholders . Number ofwe had a deals last year, but equally we walked away from a large number of deals, too. A few years very publicly because it did not fit. I cannot prejudge any other deal that come to the market and where we will be with these deals. We cannot comment on those. But when i can definitely confirm is that we will apply these criteria we have very diligently to anything we see. ,eporter as an aside on that the cost of capital is going up. How does that affect valuations . Guest the cost of capital is where it is, and we use our average cost of capital that we see is a common nation a combination of our equity and debt. Use that coste to of capital in anything we do. Not going to disclose with that is beginning to look like, but we have not just a disciplined approach, but a fantastic track record of making our deals work from a value point of view. Every deal we have done, every major deal has traded good value for shareholders. That was the ceo of ark the of rb. Anna that was the ceo of rb. This is bloomberg. Anna this is Bloomberg Markets. Lets get the Bloomberg Business flash. Heres jessica summers in new york. Reporter job cuts are on the way for Deutsche Bank, germanys largest lender, cutting at least 250 jobs globally in its corporate and Investment Bank according to people with knowledge of the matter. Deutsche bank is trying to contain expense in the midst of a slump in its securities unit. Siemens plans an ipo of its Health Care Division in the first half of this year. The new company will be called blackalth, using panther is a box office smash. The latest movie from disneys marvel superhero unit opened with sales of 190 2 million in north america, a record for a 192 millioning in north america, a record for a february opening. Anna american markets may be closed for president s day, but investors are still chewing over last weeks ecodata. Rising inflation and little growth could lead to a nasty scenario for the u. S. Economy according to our next guest, Neil Mackinnon. Give us your thoughts. In your notes you talk about the of inflation, but stagnation . Guest we had an interesting start to the year for the u. S. The recent numbers on retail sales and Industrial Production were not riproaring in any way, shape, or fashion. They were flat on the month. You might argue the u. S. Economy tends to have a soft start to to works whether due in seasonal adjustment factors, the Third Quarter gets strong. That is what happened last year. It is interesting to note with all the tax cuts and fiscal expansion, what is interesting is, whether it is the fed the pricesrveys, have been moving up sharply, that may reflect the dollar weakness on import costs. We saw it in the Small Business that prices were going up, compensation was being paid the highest in the few years in a few years. Terms of the stag, the ability of the economy to deliver growth, you mentioned Small Businesses which is timely. This on the bloomberg shows the optimum index of Small Businesses, the time to expand index of Small Businesses. A lot of the conversations i have with guests are not enough stagnation in the u. S. , but whether they have a chance we overheat given his level of optimism and a big tax dividends to come. Guest i think Small Businesses are crucial to Economic Growth and job hires and all the rest of it. The taxell be that once cuts come through we might see a revival in Consumer Spending. It is worth pointing out, as i have done in my notes, and it has been widely documented that the Household Savings rate has been dropping quite sharply. Credit card debt is at record levels, also loan debt at record levels, and housing debt has been rising. There is to be an Interest Rate sensitivity for sure. The u. S. Mortgage rate is at its highs level since 2014. What we really need to see his growth in personal disposable income to ensure Consumer Spending is sustainable. There is a question mark about that. Tax cuts will help for sure. I could see Consumer Spending bumping up a little. Think people are optimistic about what impact this will have on the u. S. Economy. Anna in the first hour of this program, that was one of the points. Guest i can see that argument, and i am perhaps sympathetic to it. I am sympathetic to the argument that the qb effects on the real economy have been reasonably effects on theqe real economy have been relatively minimal. It has been main street that has had the benefit of qe. That has had side effects in creating socalled political populism and all the rest of it. Theres other side effects as well. Having an emergency Monetary Policy to deal with emergency s is obviously going to have side effects on savings and investments, and may have an and may end up being counterproductive. Anna do you see how the markets withstanding the qb in the fed qe in the fed . Guest i think a lot of the equity strategists have made isd points that global qe gradually winding down. It is still in that positive at the moment. Later in the year it will start to become negative. Straight e into there is obviously the Interest Rate cycle to contend with. Equity markets can handle that. Are pricingarkets in a three rate point hikes this year. I think it does. We may have a pause for breath at the moment. You can see marketbased measures of Inflation Expectations have been going up, seem to be withstanding the increase in oil pricing. Athink the fiscal expansion the time of tight labor markets is inflationary, so yes, i think above three. Anna thanks very much. Coming up on Bloomberg Markets , Noble Group Flags a 5 billion loss. What that means for the companys supposed restructuring deal. Weve heard a lot from this business over the last couple of years. Where are we now . The latest in that story coming up. This is bloomberg. Anna this is a special edition of Bloomberg Markets. Markets areity closed. If you were expecting to tune in and see the start of the trading day in the u. S. , it is president s day, third monday of february. But stock about news that we were tracking carefully into europe. Hong kongbased commodities trader, reporting a vast 1. 9 billion dollars fourthquarter loss, potentially bringing the overall 2017 loss to 5 billion. The latest reporting on this story, we are joined by will kennedy, good afternoon. Lets get the size and scope of this and put these seemingly big numbers into context. For the whole year, losing as , which is notlion the most sustainable position to take the takeaway is they the these matters companys assets may well be worth its viability. Illustrates the company does go on to say the board on balance says they are satisfied the group continues. There have been talks with creditors to provide finance. In terms of what remains of the business, restructuring underway, banking on for the future, what do we know . Me, this is what should concern people the most. The part of the business which is supposed to support the restructured, focuses on i am iron or. E. If the business cannot make any money, they are not going to repay what remains after restructuring debt restructuring. Creditors focus on restructuring which will continue to pay big role, how management will make sure that business is profitable again. What is the rationale behind restructuring . Whetherre working out to extend a lifeline, what is the rationale for keeping it on the road . Commodities businesses are dependent on management. Of aluminumumber mines in jamaica. At the end of the day, trading distances by restructuring, theyre able to get restructuring for management, trying to create a business which can restructure and repay lower debt burden. Creditors, mostly hedge funds later in the day, is they will be able to retrieve more money then they would have done. Anna our most people on board . It looks like it. ,he committee of hedge funds they think they have commitments and it looks like they have a majority of on holders. In particular, people who bought those bonds created by equity are able to swallow over 95 and but as yout happy, can imagine, thinking about a management is that it is the best deal they were they would get. Anna thank you. Thoughts, what is your thinking between opec and rush on one hand and producers on the other hand that keeps up allens or not in 2018 . The outlook is crucial in all of this. As the in balance starts to shrink, it helps to keep prices up considerably in the past year. In the markets has bumped up. Expectations of where we get to, maybe 75, 60 five dollars now, a little more upside iup. Expectations think, and there is obviously local theion as well, always in background, especially relationships between israel and iran. For the time being, the old price seems well supported here we are in the late cycle stage for the Global Economy but there is no indication of anything to killer fall back. Going intoestion 2019 is whether these sorts of price levels can be sustained. Growtheakening economic in the United States, does that worry you . It is a late cycle. Havent really gone beyond 10 year spirit in the 19, the president s budget assumptions assume the economy will grow 3 in 2027. We shall see but for the time ng, the backdrop in the commodities space, whether you want to get exposure, is it all about the oil economy for you or commodities related to electric cars . There are all those technological factors. I think oil for the time being, he been i on the chinese economy, official members look ok but it is slowing down on the Slower Growth trajectory. Trying to manage the challenge of deleveraging debt. ,e see an element of expansion and offset to tightening, who knows. Im keeping an eye on steel. Rices there are indications we may see Slower Growth ahead here we may see commodities in Commodity Prices that you will want to keep an eye on. Anna neil with us on the program. There is jessica. Thanks. Report that a former Trump Campaign aide has agreed to plead guilty and cooperate with special Counsel Robert Mueller according to the los angeles times. Relatedlimit to fraud charges and will agree to testify against former Trump Campaign manager Paul Manafort. In germany, chancellor Angela Merkel may be sending a signal about a possible successor. To name a decided Party Loyalist the position of general secretary for the democratic union. The premier of she has been on the short list. O eventually replace merkel for millennials living in advanced economies, the boom has turned to bust. Early 30s in the have Household Income for percent lower than the preceding generation at the same age. The thing tank says the financial crisis held millennials back. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna thank you. Coming up, and earnings preview for the Financial Sector coming up next. Barclays, androm rbs. A lot more to come on the Banking Sector. Anna this is Bloomberg Markets in london. Investors are awaiting earnings from some of the regions top lenders. Hpsc reports tomorrow. Lets bring in stephen morris. Good to have you on the program. Lets start with the most immediate concern. What is the big picture and question going into the numbers . It is the final time he will these results. He has been going for six or seven years. He spent the majority trying to clean up after the financial crisis. , really getting more focused to prevent the recurrence of misconduct problems, which dog a top. F tenure at the john flynn, the incoming ceo who has been there for his entire career, is top. Actually growing again. Decent Revenue Growth in asia, and they have not had that. We should see shares continue in the upper directory. It is much more of a directed story. Expectation around strategy from this very u. K. Focused business . Quite heavily linked to the top job at hsbc, which he did not get. The threeyear plan outlining brexit,ill grow after with a completely competitive british banking landscape, more technology and savvy players coming to the marketplace. That will be interesting. New Investment Program digital, which, probably does mean more job cuts down the line but it is it is a way to continue to show profit. Anna another u. K. Focused business, but also it also with a big Investment Banking arm. That is barclays. We will get numbers from them. Will this be around legal headaches they have . It may be a case that top growth overshadows the legal lows, which are not attractive but it is a particularly interesting case. Have thats that they can turn barclays into the european champion of Investment Banking and compete with bigger players like Morgan Stanley and jpmorgan over it wall street. To be honest, we have not seen the capability to do it yet. Still early days, just over a a half, but really investors want to see barclays taking the market share. They want to see revenue growing. They want to see three Major International legal a half, buty investors want to changes in barclays which could result in final penalty results before weighing on a stock can actually getting an approach to where it is valued. Anna amongst the rest of the aam, he certainly has been champion of the idea that you can have a transatlantic Investment Bank with an angloamerican nature, which is what he has pushed. Jenkins was not a fan of the investment tank. Capital is increasingly cutting stock. He has, totally thrown that into reverse. Barclays will be judged by whether he can make this gamble on the Investment Bank work. We will see. He has been in charge for a while. He has people in place. He has hired people from hedge funds and a lot of Technology People from his former employer, jpmorgan. Be interesting thursday morning. Anna we get rbs as well, a busy week in store. Thank you so much. What we canis on expect. It is 2. 4 here in london. Up, the Dallas Mavericks owner hits stores on blockchain and cryptocurrencies. This is bloomberg. Anna this is Bloomberg Markets. I am anna edwards in london. We were hong kong and china because of the linear lunar year as well holding him nicely up by 2 or so p a lot of it is driven by what we are seeing in exchange markets. It is typically good for exporters. The european a queen market finding it harder going today. Dollaryen, that was one of the reasons we saw a substantial move in japanese stocks. The euro is a little weaker this afternoon. The pound down, flirting with 140 level. A lot of data at play when it comes to the pound. Thursday, we might get more details around brexit. Also the job front on wednesday counts for that. The session. From currencies to cryptocurrencies, mark cuban spoke exclusively to cory johnson at the nba Allstar Technology summit been discussed everything from bit going to blockchain. Given and hasis a been for a long time. In the day trading of cryptocurrency, a lot people a lot of people are interested here and nothing is dramatically different with what is going on with blockchain three years ago versus now. It will be a component in software development. A lot of improvements need to be made to bitcoin to improve transactions. They are taking 20 minutes they sped up considerably. They have got their own solution as well. Things are being tested that could speed up that. It really comes down to where will the adoption be and whether the blockchain utilization will utilize the blockchain with smart contracts or develop their own. All of these are patently ridiculous. Some are interesting. What you think about single use cases as opposed to using these. The first was licenses for football and basketball. Give you the right to do Something Else and effectively, that is what it is. You buy it because you are using the token. If you are buying it just because you think the token will go up, to store value, you are probably making a mistake and they could be very leaky. Mercury,vested in two, and i am hyping either. I will use unit unit coin to gamble when i am eligible to. I will use my gmt to invest for use for the social network. Ianing you cant gamble and cannot at all now because i own the mavericks. It is not legal in the United States. So where i have seen the value in owning the tokens and using it, then i have been a participant and i have not even considered i do not look to see the value and do not know where it is valued. That was the Dallas Mavericks owner speaking with cory johnson about pepco currency. Lets check in on the cryptocurrencies. Currently closing in on 11,000 on its fourth day of gains. He is at its highest level this month. Around thelar gains edge of december with strong gains coming on bitcoin. That story has changed somewhat. On thist your thoughts hour. Bitcoin firstly. It something you are exploring with interest . Talk to me about lock chain interest on where your lies. It is a distinction between technology and the cryptocurrencies. The Blockchain Technology is important. A similarhis place role in 1990. Blockchain technology will be with us, developed, important for other applications. Cryptocurrencies will be rather peculiar. I find it a little weird and wonderful. Characteristics, as we had as we have seen, spectacular volatility. It looks as though bitcoin is going back up again. Because it can. Risk wasnt a hedge to a off mentality in the market. When we saw equities selling, it was asking whether it was bitcoins chance to prove. And it would not because almost 100 of investors just would not do it. I think cryptocurrencies, without being drugged tory about it, is a currency made by video gamers for other video gamers and it is a simple as that. I am not that demographic. Countrieseing some proposing regulations on the training of it. In south korea and china, you have had a number of senior policy makers in the major economies. Also quite negative. I find it fascinating. There are bubble type characters. Lets see how it goes. Yes indeed. We leave the conversation this hour, if you look ahead to 20 18, what are you concerned about . Earlier today, he was saying markets are not concerned enough about the profit possibility of a real trade. With thelittle bit trump administrations tariffs on solar power, but a fullblown trade, it is not something is that something . It is on a Shopping List of potential tail risks for markets. m less concerned about that i think trade bond policy is more torque oh then action. Months, twost 18 years ever since President Trump. As elected all kinds of bad things are happening. China is the biggest foreign holder of the treasury. Guess whathappening. So, the u. S. Ear or Treasury Department has refrained as a currency so, the u. S. Treasury department has refrained as a currency manipulator, in the way of substantial trade. They maintained their right to respond on the tariffs. Of course and so, they will. They could respond by selling u. S. Treasury. It undermines President Trumps expansion. Markets andtand why the prospect of trade war and the currency war, theyre made more risk of a currency were about more. From Steve Mnuchin and President Trump, you think they wanted to move the dial on Market Expectations and the policy . Yes, it was all very confusing, requiring President Trump to clarify it. Im not sure they did in any way. I think the markets do feel there is a soft dollar policy. It is as simple as that. Until we hear otherwise, markets will be quite cynical about all of that. There can be stresses and strains. It is a risk and puts stresses on the monetary system, which the u. S. And china anna think you for joining us. Coming up in the next hour of Bloomberg Markets, the central bank showdown, live in frankfurt. Nomination forhe the ecbs next president. Up in the hot seat next, taking you through the twists of this at the ecb and talking about the latest and the market. Equity markets this morning into the afternoon, down on the stoxx 600 now. U. S. Futures looking a little more negative through the trading day. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. We use so why do we pay touters thave 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. Mayra live from london, i am nejra cehic. Markets. Loomberg here are the top stories were covering from the bloomberg around the world. Under pressure to resign, after weakened tension authority. Theresa may proposed keeping britain in total alignment with the eu data sharing rules. We discussed her next step in munich this weekend. Authority. Theresaoil across the field r of rapid market, above 60 per barrel. We are about 90 minutes to the close of trading here. Where equities are trading now, we have seen the european andion, sailing to build also failing to continue the rally we saw in asia. Close today for president s day. Happy president s day if youre watching in the u. S. Broadbased losses were seeing across the region. Where it comes to the Industry Groups as well. We seeing most of those declining coming from carmakers. Oil and gas stocks are the best performer. Were seeing a little bit of Dollar Strength come through now actually. 5. 4 , back below 140, 1 3970. Stronger euro, weaker sterling. Are seeing sturdily sterling slightly stronger against the yen and the euro on the back foot as well. It hit 125 around 123 now. Yields are moving higher premuch across the board. You can see both in the periphery. 10 year bond yield up three basis points, 74 basis points. Lets check in with jessica summers for more. Thanks. The president has been criticized for not doing anything on last weekshooting. President trump spent the weekend criticizing everyone but russia. Over 24ed 14 times hours, criticizing the fbi, democrats, im and and Robert Muellerss investigation. 13 russians were sleepy desolating we indicted. In germany, Angela Merkel may be sending a signal that a possible successor. According to a party official, merkel has decided to name a Party Loyalist the position of secretary for the democratic union. She has been on the short list of those considered to eventually replace Angela Merkel. Increasing taxes to shore up savings, to cover the population. The services tax will be toreased to 9 from 2021 2025. Global news global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im jessica summers. This is number. Nejra thank you. The euro and euro area to nominate to be the next Vice President of the European Central bank after island withdrew its sole candidate. It tops you at the helm at the helm of the bank for the First Time Since 2012. Joining us with a look at the eurozone in general is the chief here in the u. K. Before we get that good stuff to do with the economy, i just want your reaction. It is not a massive surprise spirit i will say im a little surprised that we are getting, a candidatee, straight from a finance ministry, straight from enacting government. He is all right, he will be , the but it is politicized process like that, and to not take someone from with in the youral banking group, but, know, overall, the market will be all right. Fine and is a matter middleoftheroad candidate i think. Nejra fundamentals. We are looking ahead this week. What are they likely to tell us . My expectations are that they will slow down but they are not. They have lost a little momentum but overall, i can tell you that the report we will get on thursday, pmi will show and confirmed that the eurozone will reform. They will be strong. We have this picture of the economy at the moment that is doing well. We are no longer in recovery, but expansion. How sustainable is the expansion . It is broadbased for sure. Speeds, in terms of sustainability, one thing i tried to point out this i think headline growth could get it bit. E overall, suspend the expansion is sustainable. If it is growing a little above 2 , it does not just and from one day to the other. It usually takes in the eurozone to kill the expansion and snuff out the recovery. It will not happen in any time soon. We will not see a big increase anytime soon. Anna at what point does inflation start to cause a risk, or are we a ways away . Know, i think were getting closer. The markets are flaccid in terms go. Ow fast the ecb will 1. 41. 5ut the number at. That is when the markets have to start pricing in something more. I think we will get their at q3 in the beginning at q4. Pay attention to the headline as well. Inflation in the eurozone, as high as 2 . Add to the market struggling to remain. It is now going up slowly and that is the change in dynamics. We have seen the 10 year bond yields rising. At the same time, at least, that rise has stayed subdued. Are we in a sort of sweet spot where investors have faith in growth with the on not worried about ec policy i think that is fair for now. Part of the reason is also what is happening with the u. S. I think the market is priced in a little bit in the eurozone as well. Supply. No 89 of gdp. It is difficult. Germany doesnt depend on external financing. So i think you will see that kind of volatility remains subdued. What impact could a widening u. S. Deficit have on the eurozone growth and the eurozone in general . Is that through higher bond yields or Something Else . Are all talking about this at the moment. The market cannot quite gauge what is happening. A letter u. S. Current account deficit is good for the eurozone and means that the economy increases more stuff from the euro area, and as mr. Trump passes stimulus kicks in, i doubt it will be fast enough to finance that. Mr. Trump will have to finance and some of that savings will come from the u. S. Bond yields in the u. S. , that is not good. Body is already bought u. S. Bonds and still lose. If they reinvest, we will see if that money comes back. Overall, if we have a blowout the euro, in the u. S. , four or 5 or something substantial, that will be good economy. Urozone that will tack on very quickly. Quick question on the Structural Reforms kick in earlier and then, a sustained upturn, which is where a lot of the upside is coming from at the moment. The eurozone, 3 . Those three things come in and we just get there. I do not expect all of the things to happen at the same time but it could happen this year. Nejra thank you so much for joining us. Coming up, politics from toys politics Donald Trumps minute criticism of the fbi next. This is bloomberg. To Donald Trumps minute criticism of the fbi next. This is bloomberg. Donald trumps minute criticism of the fbi next. This is bloomberg. Nejra this is Bloomberg Markets. The brexit tight rope that the ,rime ministers trying to walk in Close Corporation with the eu and others. Candidatein the bloombergs brexit editor is with me now. Great to see you. What have we learned in the past few days about brexit . The main thing we have learned is the u. K. Wants to deferred and certain key areas. Many talk about data. And what was set on that, the rules aligned already, and we want to go further on that are fully aligned. One area where they feel they have made great contributions to the way the rules are at the moment. Basically, we will have david davis tomorrow. I think he will speak about rules in alignment and all that kind of stuff. The question remains, the irish order. There is no easy way of solving it. The u. K. Has decided to leave the Single Market in the Customs Union and what we hear is within the cabinet now, there are no pro brexit crowd accusing the , they return to forence as an excuse wanting to keep the whole of the u. K. Aligned with the eu almost forever after. What about what we got from Angela Merkel as well . Cherry for picking may not be sn as cherry picking. And the way day on thursday as well. And the way day on thursday as well. All of the rhetoric has, this is the menu, not much room for something in between. It does not mean necessarily i think it does open the way. Obviously, the u. K. Is not going to get everything it asks for. It cannot have a cake and need it. But perhaps there is wiggle room beyond the options laid out. Perhaps this is a little more flexibility. We will watch it this week. Thank you so much. Turning to u. S. Politics, american President Donald Trump has opened a of attack against the fbi amid the investigation. Over the weekend, the u. S. Sadident tweeted, very meanwhile, grinning to an l. A. Times report, former campaign pled guilty to charges and cooperate with special Counsel Robert Mueller. , he is withor more us from washington, great to have you with us. The latest sot far. Any response from mueller or manafort . We have not heard much today but it is worth reminding people gates was the right hand man to Paul Manafort in the campaign when he was effectively Donald Trumpss campaign manager. Even after he left the campaign, he continued to be a senior official at the Republican National committee. He is not exactly a household name to a lot of people. Even people following this closely, but he is someone who knows quite a bit about how the Campaign Works and how the early months of the presidency were functioning. To plead guilty will put a lot more pressure on manafort, who was, of course, very close to the president elect and themselves. Decide tohe does plead guilty, i am wondering what the domino effect would be . Would it be prosecutors putting pressure on manafort and what would that mean for the administration and for President Trump off his inner circle . It would bring a lot of pressure on Paul Manafort to work very closely with the Mueller Investigation and perhaps plead guilty. Gates and manafort were really one of the first that the Mueller Investigation struck against the president s innermost circle. Ofre in the heady days march, 2016, when the campaign have a lot of sport but was not clear that it was very well organized. You could head and the convention without losing a lot of delegates needed for the nomination. They were brought on to make sure the delegates stayed with the campaign and donald trump when with the nomination and went on to win the election. It was crucial. The white house said it was a few months running the show there. It was probably the most crucial month p are we will look closely to see what kind of pressure this puts on manafort. He sat with the president every day. He spoke to the president even after leaving. Have a lot of inside knowledge this pestle special counsel would be interested to hear about. Nejra we have not heard anything from the president today . He just wished everyone a happy president s day. Headed out in maralago to the golf course. Thank you so much. It is time now for a look at some of the biggest business stories in the news right now. Job cuts are on the way at Deutsche Bank. Leasttarted cutting at 200 50 jobs globally at Investment Bank according to people with knowledge of the matter. Theyre trying to contain expenses with a slump in the security unit. Other Consumer Products forecasting about 60 of 2018. The first time. That is your business flash. Still ahead, on traders. We discussed 260 billion of auctions happening over three days this week. Why it will be a lot to chew on. That is next. Nejra it is a big week for bond traders with 250 billion traders of u. S. Auctions today so the latest debt ceiling drop, the floodgates are open to step up issuance. Lets bring in richard from. Erlin set minutes out on wednesday as well. Great to see you. Today but itclosed is a big week of issuance as we talked about. Exercise in price discovery will this be for the treasury . Class of think it will be interesting to look at. A strong market narrative or the seamen investors have focused on is with looser u. S. Fiscal and the bigcy, we will see increase in the supply of government debt. The rising yields, one contributing factor is increased supply. It will be interesting to see how the markets digest what we have on offer this week. An interesting test for price discovery. Nejra i have got a chart that shows different yields we have got to just to let our viewers know. Touched ther yield highest since 2010. As you have been pointing to, most highs across the curve in treasuries, we have got fed minutes this week. Markets will be focusing on that . Last minute from when janet areen was the fed chair, we interested in those minutes because it would be interesting to see the transmission from that. Really looking forward, we will get a fair bit of fed speakers in the coming days and weeks. Primary interest for investors. How will the fed be different from the yellen said. There will be a lot of continuity to start with but has as the fed composition changes and messaging changes, the key thing for the investors Going Forward now. Briefly, the 10 year yield has roque and its downward trend channel. Is the consensus that it is higher from here . People are coming around to p are with thinking the higher yields we are seeing, they become more attractive to investors. Over the past years in the g10 space, u. S. 10 year yields are very much in that same level. As the yields rise, you will get an increase in demand for those bonds. Nejra Richard Jones joining us from berlin. Having to big week in treasury issuance, though the treasury markets are closed. Thank you. Investors are reaching the benefits of Global Recovery estimate dense hit a record of 1. 2 trillion in dividends last year. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Nejra nejra live from a gray day in london. This is number. This is bloomberg. Jessica . Jessica a report that former Trump Campaign aide has agreed to plead guilty and cooperate with special Counsel Robert Mueller. According to the times, he admits to fraudulent agreed to charges and testify against former Trump Campaign manager Paul Manafort. In florida, 17 people were shot for guned, speaking out control. March is next month. They will go to florida passes capital to demand immediate action. In the u k, a make or break week for the pound. Driven by Economic Data that could determine whether the bank of england raises Interest Rates within three months. Traders will put the most weight on british unemployment figures out on wednesday. Millennials living in an advanced technology, the boom has turned to bust. Millennials in their early 30s, 4 lower than members of the preceding generation, generation x, of the same age. Financial price has held millennials back. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I am jessica summers. This is bloomberg. Nejra thank you so much. John henderson is out with his global dividend survey which i am jessica summers. This is bloomberg. Reveals that 2017 represents a new high. Tracking numbers across regions and sectors, global dividends rate inthe fastest 2014, a total 1. 2 trillion. Joining us is the head of Global Equity income, great to see you and thank you for joining us on the show. Is this to do with the story of synchronized Global Growth or is there more to it . There are a lot of stories. Most obvious is global synchronized growth. For the first time in many years, we have seen growth coming from economies and Dividend Growth, they increase dividends. Is also a story specifically around china and commodities and oil as well. Index, the at the thirdlargest country, to dividends around the world around oil. A two year yield, it has really helped oil companies. Some of them keep dividends and others are reinstating and Commodity Companies like Anglo American are probably faster than we all thought. Oils and miners are on the upside. Laggards . Some communications utilities. Both have got a lot of Regulatory Oversight lets put it that way. Definitely at a time where we see the increase inequality and people worrying. Governments are looking for Regulatory Oversight lets put it that way. Ways to try and make it seem fairer and keep costs down. Not many ways to do it it in one way is to control energy costs and the returns utilities can make and the prices of telecommunications. In terms of the telecom story, you look across regions less performing ways one. What was behind that . When you look at these companies, they are very large companies. They make a big part of the industries. Spain, that is where the dividend is over the last few years. The big one, this year, is utilities. Utilities, particularly the ones that kept high dividend payouts, probably a bit too much leverage, probably taking a long time for the energy world. The euro have anything to do with their relative on performance as well . Yes, in a funny way it did. They are paid in the first half of the year and in that, the euro was still weak. So the european dividends this year will do will benefit because year on year, there will be a big translation benefit. Overall, i would say, the large sectors that are not economically sensitive, have upset the gains in these barriers. The banks, quite strong. Industrials, quite strong. In low Dividend Growth for europe but not for the reasons you how might it if wein low dir europe but not for the reasons you might expect. See it through 2018 . If it carries on this year, it will help more. Particularly in the second half of the year, we saw the sterling depreciate. We saw a lot of countries appreciate against the dollar and we expect that to contribute. We have not put everything in the forecast, looking for 7 this year. It will be quite easy if the dollar stays this year. Sense that you might see more money return to shareholders in the form of dividends, or is it more in buybacks . We have not factored in sense that you might see more money return to specifically, but we expect dividends and buybacks. Last week, we had the first indication of that from cisco. The announced repatriate billion dollars overseas. 44 in return, half and dividend and half in buybacks. I expect the first to be in the tax they of and some have to pay extra tax because they are overseas. The tax rates have gone up on it. In the second step, you start to go up in line with the earnings. 2017 was a good year for dividends and we expect that to continue in 2018 on a headline level. What are things we should watch for below the surface . Do you expect it to be across most Industry Groups and regions or should we see a different picture . Think in the last few in china. Low area is of enterprises, dividends, banks, the Economic Growth, if it continues as it is, we expect to see quite a bit more Dividend Growth. In the same way, the growth of china will influence, if it grows or slows, it will significantly influence the commodities space and the confidence commodities have to pay out dividends or buybacks. Those will be the big areas. This tax area in the u. S. , we do expect companies to start. Ncreasing dividends the big thing to watch, would the pharmaceuticals and technology. Those areas have large amounts. Pharmaceuticals and technology are something to watch. Jenna henderson, head of Global Equity income. Thank you for joining us. Global investors ceo discusses yield volatility and the opportunity they pose. This is bloomberg. Nejra it is time for a look at some of the biggest business stories in the news right now. A group once it will report another huge loss. The company loss could be as high almost 5 billion. It announced an initial deal to restructure 3. 5 billion dollars in debt. Leave one of the Largest Companies according to people familiar with the matter, rico will become ceo, replacing the billionaire. Stepping down as part of a broader reshuffle. Hosting amazon and will show some interest in amazon bid could boost the amounts they get past 17 billion dollars they receive last time. There is speculation they could make it more attractive by gains to replay other soon after. That is your business flash. Set to. Treasury is offer 258 billion dollars worth of notes in a threeday time. It will be a lot to chew on especially as the rep pushed yields to highs last week. He can the same week as the minutes amid Political Drama and america. Just has steepened borrowing costs will arise. Lacqua spoke with the Global Investors ceo, one than 490 billion. We have reached a an interesting level. In five years, to 65, that has i do not think it will steepen from here in the shortterm. What does that mean . It has gotten messy already but i think it is good messy. We have been saying it for a while, we had such a risk on trade. That of course means, if you are an active investor in the markets, it means more opportunities. This is a simple s p 500 chart. We brought it back and without a doubt, my chart of the week a couple of weeks ago. It is a 5 correction downward. Upward trajectory going up nicely and then we had what happened a couple of weeks ago. D think there is more in equities or the credit market . It is the 64 million question. On shorttermends Interest Rates. We are constructive on that. Goldilocksort of scenario. Global aggregate demand is picking up quite a bit and investment is picking up here i am not too worried about it at this stage. If you look at the chart, it is telling you we went up too fast. Returns 4 . A burst at some point. The signal could spread to the credit market. You take away your position if it does spread to credit . Think it would be a significant weakening of global volatility which we dont see at the moment. It will be healthy for the majority of the year. Ask we going back to active investment . It has done much better in the preceding 35 years. That is good news. These markets. It is as relevant as ever. Faster than Interest Rates so far picked up on the short end. We still have Monetary Policy. It really means the key challenge of investment professionals is how do we secure the real income and purchasing power of people who invest with us. Nejra is 2018 not the pivot year where you see the end of the easy money . Yes, it is the pivot year. We have certainly seen a peak of policy but it does not mean we of 2019. Policy as up,nterest rates catch Interest Rates will be negative or barely at zero. We are far off from positive up, Interest Rates will be negative or barelyreal Interest Rates, particularly in europe and japan. Nejra will it take longer . A long time in japan. In the u. S. , i would say at least 15 months. Nejra i dont know if it is a crisis or something but it puts ive got to invest today. Least 15 months. On the contrary, we areon the cg as well. Nejra still ahead, oil rising at the highest level in almost two weeks. We breakdown what to expect next. This is bloomberg. Nejra european stocks struggle to rally, the highest in almost two weeks. The next guest says back near where opec says they want them, prices have not recovered. More, to get this thoughts, i want to talk about the rally of more than 4 last week. We see it continue today. Is dollarf that weakness . Across the equity space last acrossupply and demand the market . I think most of this is down. We saw the big selloff that went hand in hand. Think it was part of that general risk off sentiment. We are seeing that dissipate now and the prices are rising as a result. Thatwe had monthly reports froe International Agency last week. Both of those still showing robust demand growth Going Forward. That feeds into the narrative force forcing oil at the. Yes. When we heard from the oil minister last week as well, there was a than seen the longest teams to be the voice of moderation within opec. That impression you had . Those who had been looking at opec for decades sort of programmed to seeing saudi that impression you had . Arabia and the other arab states, as being what we call the countries, with relatively small populations, huge oil reserves, the samearabia and thr economic lifeblood for decades if not centuries ahead, being the ones who are always arguing for moderate prices because they traditionally havent wanted to undermine the demand for oil longterm and we saw countries with larger populations in smaller reserves like venezuela, who are always calling for higher prices. What we have seen in the last couple of days is saudi arabia come or perhaps, is saying, we do not mind if prices go up a bit here. Hadhe other hand, we have iranian oil say 60 is high enough. It is a bit of a turnaround iranian oil say 60 is high at one thing we always see is whatever the level of oil prices currently, opec always wants them to be a little higher and that little bit higher is always somehow the right price of oil or a fair price for oil. Higher the price goes, the more risk there is. Could opec actually move away from targeting these altogether . It is possible. They have a real problem because the way they cobbled together a to group of 24 countries find something they could all congregate around. Price ambitions to find something they could all congregate around. , every country needs a different price. Is mushroomed and is much too high. To move away, what they might do the targets they are pursuing. The targets they are pursuing. At the moment, five years, or how theyre going to mention those inventories, is it folly volumes or days of demand,thosey volumes or days of demand, there is plenty and we might see the change. As i look forward to 2018, i think it will be a better year and that is how we are cutting the market. It our be. D call it is a better name now because a lot of people find t i remember covering the merger with a great deal of diligence back in the day. You talk about the acquisitions he made last year. Business could be on a Shopping List and that is Consumer Health is next. A punchy price tag. Can you give us guidance on your thoughts . Is the price too high . First of all, i would like to say we have a very disciplined approach to m a. Veryply our criteria diligently. One of the first ones is compelling. Senset make strategically . Are we sure we could be better owners . Sense strategically . Are we sure we could be better owners . Obviously, we made the one i talked about last year, but equally, we walked away. A few might remember we walked away a few years ago at a public away a few years ago at a public event because it did not fit. I cannot prejudge any other deal it comes into the market. We cannot comment on those periodic can confirm that we apply this very diligently to anything we see. As an aside on that, the cost of capital is going up. How you affect valuations . Ofwe use the average cost capital. Combination of equity, and have that coste combination of capital and anything we do in a short time. Again, i will not disclose what it looks like, but we have not just a disciplined approach but a fantastic track record of making our deals have that cost of capital and anything we work. Every deal, every major deal we have done, has created good value in a defined time. The ceo with bloombergs guy johnson. Coming up, we are following equities. 35 minutes until the end of trading. Stocks are carrying on the rally in japan and the u. S. Having its best week in five futures are pointing lower. Stock markets closed for president s day. European equities you can see are on the downside as the stoxx 600 is down. Losses we are seeing across the region. We have been starting to see a little bit of the Dollar Strength come through. Cable meanwhile is weaker by. 2 . This is bloomberg. Nejra it is 11 00 a. M. In new york and 4 00 p. M. In london and midnight and hong kong. There are 30 minutes left in the trading day in europe. I nejra cehic in london and this is the european close on Bloomberg Markets. Nejra here is a top stories were covering from the bloomberg and around the world. Deutsche bank has started cutting 250 jobs globally and germanys largest lender may accelerate cuts. That next vote in the ecb is voted on today. We examined the top candidate. Ahead of the italian election, you will hear from the countrys former Prime Minister, mary of io monte. Lets see where european equities are trading right after yo now. You can look at this on wm go. Overall we are seeing the stoxx 600 lower after it had its best week since 201 w