Transcripts For BLOOMBERG Bloomberg Best 20180220

With the shares now lower. Setting out the postbrexit lets for next week and have a look across the markets. Hong kong is coming online today. There wasike this and the overall index. This is bloomberg. Coming up, the stories that shaped the week around the world with the white house pushing out a budget, but there is pushback. I hate to say that it is irrelevant. Jacob gives up his grip in africa. All of the conditions are in place and it is a countercyclical view. Ages explain why volatility is making them smile. For our much better franchise. History does not always tell you this is the right answer. You rebalance and stay away from things. I think about what should happen at the end of the day. Earningsthe bonanza of reports. Growth engine. A it is well spread. This is all coming up on bloomberg best. I am nejra cehic and this is bloomberg best. Your weekly review of analysis and interviews from Bloomberg Television around the world. On monday, with equities coming off their worst week in two years, u. S. President donald trump made two major announcements, unveiling his 2019 Budget Proposal and a longawaited infrastructure plan. 2019 Budget Proposal cutting 1 trillion from entitlement programs like medicare. Is there anything that will emerge from this proposal . Maybe if you little things. I have been doing this for 40 years and every president s budget is always dead on arrival on capitol hill. Because the president proposes, congress disposes. They decide how to spend the money. He wants 23 billion for border security, 18 billion for the wall. Republicans will probably push that. The budget calls for cutting medicare significantly, 237 million and 1. 7 trillion in entitlement spending cuts. Those wont be adopted. I hate to say it but it is irrelevant as the omb, the office of management and budget says, because it does not incorporate the agreement the president signed into law just last week, so they will have to come up with brandnew numbers during the next four to five weeks. Very little of this will see the light of day, except for the defense increases. Nejra after campaigning on a promise to rebuild america, President Trump released his longawaited infrastructure plan earlier today, pledging at least 1. 5 trillion in new investment. The president called the proposal bipartisan and common sense, but upgrading public works is still looking like a tough sell to a skeptical congress. It is tough to say how they get infrastructure done ahead of midterm elections. This is a policy proposal that has eluded both democrats and republicans in the past. It is something they say they want, but they have yet to reach their goals on this. It is looking to make a permanent fix to what it sees as a broken system for funding and Building Infrastructure in the United States. On one hand, they think there has been an overreliance on federal funding that states and localities need to be encouraged to spend more, find more of their own revenue sources. But also the permitting process takes way too long and prevents projects from getting built. The Worlds Largest hedge fund led by ray dalio has disclosed a 682 million short bet against unilever. The stock has dropped in a final disclosure. It is part of new and larger wagers against shares of european companies. When this first started, we had bets against italian banks that seemed very specific. As you said, we have been seeing this really large buildup quietly building up against european companies, some of the largest. Unilever, adidas, across industries, but one thing to keep in mind is that when you look at these company shorts, at least at the very Largest Companies, this is a recreation of the european index. These short positions are built based on the larger the company, the bigger the weight in the index, the larger short position they are expressing. Inflation making a comeback. U. S. Consumer prices rising more than estimated in january, adding more fuel potentially to the feds fire. It is clear that inflation is moving higher, especially the last six months. On a sixmonth basis, inflation is now moving at 2. 6 per year. That said, january is a month where you often get upside surprises at the discounts we saw in december and november, taking out of the markets. I would not read too much into one print, but there is a clear acceleration in inflation going on, and people should start rethinking traditional relationships between stocks, bonds, how the portfolios are allocated, whether they should have real assets. There should be a big rethink in markets. The data today is largely in line with what the fed has been telling or hoping for. If anything, it takes in that 75 basis points people are looking for the year. When you look at futures, that is what traders are saying. They are bringing themselves up to the 2. 7 , three quarterpoint rate hikes for the year. We could see it go a little bit higher than that, but you are not seeing any real panic. South africa is changing Leadership Today after jacob zuma who has ruled the country for nine years had announced he has resigned effective immediately. Parliament is meeting to elect ramaphosa until elections are held next year. There was mounting pressure on a former president jacob zuma to resign, this coming from the ranks of the Ruling African National congress. Many members of the Ruling African National congress say they want their president to really come in and steer government into a new direction. We know that former president zumas tenure was marred with allegations of corruption and scandal. It seemed as though the ruling party wanted to regain some of the support it lost ahead of the 2019 elections. Which the party will contest. It seems as though ramaphosa will be sworn in today as the new interim president of the republic of south africa. It is really a new era in south africa. There is a huge amount of confidence and hope about where south africa is headed with a decade ahead that will look very unlike the decade we have been through. Regulatory filings revealing a bet against some of europes Largest Companies has grown to 18 billion at bridgewater. One of the rationales i have heard around this is that all the conditions are in place to start getting short. Which is essentially a countercyclical view. We had raging Interest Rates, growth on all cylinders, so perhaps that is the rationale, and that makes sense. The senate hitting a wall in the search for 60 votes, failing to advance any immigration plan today. The motion is not agreed to. It is far from clear what happens next. I think President Trump is the key to getting anything signed. He has to support a proposal that can get more than 39 votes in the senate. The sweet spot in the senate seems to be as we have seen with these other proposals, a majority short of 60. A daca six combined with border security. The reason these failed is that President Trump wanted additional cuts to legal, familybased immigration that democrats were not willing to give. President trump once Legal Immigration cuts, democrats do not want Legal Immigration cuts. We are stuck. Robert mueller announcing an indictment of 13 russian nationals. The defendants conducted what they called Information Warfare against the United States with the stated goal of spreading distrust towards the candidates candidates and the political system in general. I was truly expecting mueller to do something to the heart of his inquiry, which was russian collusion, and he delivered on a grand scale with credible details that go beyond the social media efforts to divide this country. It talks about unwitting members of the Trump Campaign who were approached. It points to something that may go well beyond the pages of this indictment. There are references in here to a conspiracy with people known to the grand jury and unknown to us who were also involved in this effort. We dont necessarily think it ends here. Nejra still ahead as we review the week on bloomberg best, insights into market swings with Lloyd Blankfein, Steve Schwarzman, and others, plus a barrage of earnings reports. Up next, the weeks top business headlines. This may have been the moment when global diplomacy became an olympic sport. Clearly whatever the Charm Offensive or Propaganda Machine they instituted over the olympics, it has worked. Nejra this is bloomberg. Nejra this is bloomberg best. Im nejra cehic. Lets continue our global tour of the weeks most important business stories with a shuffle at americas largest private equity group. Another management takeover on wall street. This time it is alternative asset manager blackstone, as the Investment Firm named john gray as chief operating officer. And as he starts his new role, tony james will transition to another fulltime role as executive vice chairman. This has probably been one of the worstkept secrets in the world of private equity. John gray has long been considered the likely successor to tony james and eventually to Steve Schwarzman, founder and ceo and chairman of blackstone. Gray has really distinguished himself as one of the worlds leading real estate investors, so this really completes the puzzle for the private equity business as an industry transitions to a new generation of leadership. Barclays has said the Serious Fraud office, the sfo, has brought charges against its Barclays Bank operating unit in a case linked to a 2008 fundraising at the peak of the financial crisis. We thought barclays had faced charges on this. Explain this second leg we are seeing here. In june last year, the Serious Fraud office in the u. K. Charged the Holding Company and four of its top executives, former executives, including the former chief executive officer. So what has come up now is that the operating company here is being charged as well. All banks receive their operating licenses based on the operating units, so that is why people really care about what is happening to the operating company here. On to the fight for fox now. Comcast mulling another bid after its initial offer was turned down for a deal with disney. If comcast doesnt want to come back they will be a credible bidder. They have a tremendous track record, tremendous support on the street. I think Rupert Murdoch and 20th century fox prefer the disney deal for two reasons. One, they believe it has less regulatory risks than a comcast deal. Comcast is not the most well loved company in washington, d. C. Maybe even more importantly, i think Rupert Murdoch would prefer to own disney shares. He and his family will be the largest owner of the walt disney company, and i think he likes his position in that Company Better than he would at comcast. North Korean Leader kim jong un has invited south korean president moon to meet, a dramatic gesture that may raise prospects for easing tensions on the korean peninsula. The invitation was delivered by kims sister, kim yojong. Will this Charm Offensive work . Obviously, i think it has, considering that there are calls for talks with kim jongun. Clearly the local media here was all over her visit. She overshadowed the olympics. Forget about the opening ceremony. Today, there were Significant Developments a few hours ago, when Vice President pence in an interview said the u. S. Is willing to engage in talks with north korea without the precondition that there were before, that the u. S. Would not talk with north korea until they had started dismantling their Nuclear Weapons program. Clearly whatever the Charm Offensive or Propaganda Machine that they instituted over the olympics, it has worked in a practical sense because there is diplomacy now. A record bet on i. T. That could shake up the defense industry. General dynamics, the maker of tanks and nuclear submarines, has agreed to buy csra for 6. 8 billion, the largest ever acquisition for the defense contractor which is looking to expand its i. T. Offerings. They are in i. T. Spaces where General Dynamics is not. In other words, it has a big footprint in dod, Homeland Security and other federal agencies. Gd has some footprint in those agencies, but it is concentrated in the defense sector. It broadens things for gd. The other thing that may be going on is the federal government is about to announce a huge cloud contract. Before the end of the fiscal year. This could be 10 billion for 10 years and it may be is looking to position itself to get that. There is an important story to be told around Economic Growth in japan. That slowed sharply in the Fourth Quarter. Official figures show expansion at 0. 5 for the previous three months, half of the 1 economists had estimated, and down from 2. 2 growth in the Third Quarter. Where does that leave the boj . In terms of what it has to do . I think these numbers show that even with the conditions there and the labor market as tight as it is, they are nowhere near their inflation target. There is no evidence that inflation there will accelerate anytime soon like the boj wanted. I think all the indications are that they will stick to the course. Committed to the stimulus. Dont forget, we have the expected appointment of governor kuroda coming up, which is expected to double down on the sentiment and no sign it will change materially anytime soon. The Prime Minister of japan, shinzo abe, nominated governor kuroda to lead the bank of japan for another fiveyear term. Abe also appointed to deputy governors. We should see monetary stimulus here in japan continue aggressively for at least the next few months. We have another meeting coming up in march. Nobody expects any change. There will be a great deal of interest when we get to april. That is the first meeting we get with the new leadership in place with the two deputies alongside kuroda. Perhaps moving into this new term will give him a chance to rethink, to recalibrate, and we will be watching with a lot of interest, especially the april meeting. The cleveland fed president is said to be among the contenders for vice chair. You have got a fresh fed chair. Would it be best to surround him with established figures to be able to guide him through the first year . I think loretta is an excellent person and would be an excellent choice. She is someone who has a very good grounding in Economic Research on the regulatory side and the Monetary Policy side. She has been in the Federal Reserve system for a long time and then president in the cleveland fed and knows the system well, so i think that is it a good power duo. The tories began their roadmap to brexit this week in a series of public speeches outlining their views on how britain should leave the eu. Foreign secretary Boris Johnson gave the inaugural address titled a United Kingdom attempting to reach out to britons who voted to remain. It is not an economic threat, but a considerable opportunity. A few things became clear, he might still be interested in the job of Prime Minister. On the transition, he says fine, everything can stay as it is. He does have red lines. And he is sticking to them. He wants divergence. He doesnt want he says we are leaving for a reason and this has to happen. He has shied away, an implicit way, we need to be chilly toward brexit and we are not as positive about it. Some of the biggest Fund Managers in the u. S. Are reporting what they bought as well as sold last quarter in their 13f filings. I see that the fangs have been souring. It looks like investors are slowly selling out of the fangs, and this has been a really important area for stock pickers because they have lamented the rise in growth stocks, while values just meandered up higher with the stock market. We saw a lot of managers sell out of some of their fang holdings. Warren buffett has just about had it with ibm. Berkshire hathaway reports it has cut its stake in the company by 94 in the Fourth Quarter. We dont know to what extent it is warren himself, the influence of his investing deputies, but it is a different tact. You saw in this quarter he boosted his apple stake while reducing ibm. It raises the question of maybe Warren Buffett is trying to figure out how the world is changing as he is adjusting his businesses. He is adjusting towards teva as well. Definitely. That was kind of the big news last night. He invested in teva. That was the first time we have seen that stake disclose. You are wondering if he is betting on the turnaround or if there are other things drawing him in. No deal. Qualcomm rejected broadcoms latest offer to buy the company for 82 a share saying it materially undervalues the company. This is an ongoing saga. But is this the last chapter . Is there more to be written . It depends on how firm the last and final is. This is oldschool negotiation. If you look at what qualcomm and broadcom are saying is qualcomm is interested in keeping its company together, Licensing Company together, and feels 82 a share is unequivocally low. Broadcom on the other hand believes that this stock is trading at 65, earnings fell, 2019 will be very weak. This will be a long, drawnout process. Qualcomm investors, take your money and run. Nejra you are watching bloomberg best. Im nejra cehic. This week, bloombergs david westin spoke with Lloyd Blankfein at the 10,000 Small Businesses summit in washington dc. They discussed the sudden return of volatility to Financial Markets and what it has meant for the banks trading business. Things are going to happen. There will be something that happens in the world. Someone will get elected that shouldnt happen. There will be a natural disaster. A company will go under. There will be a cyber event. War, pestilence. Something will happen that will cause the relationships of one asset to another to readjust against each other. It has been an unusual period where that has not happened. People are not sure the reason why is. My own best guess is that when i look to assets people will say that because of qe and Central Banks around the world buying risky assets, as much as they could get almost as fast as debt was issued, they bought them, that tends to be a little blanket over spikes in asset prices and that probably kept things low. As the market and people anticipate that coming off, i think we will see more volatility. If you were planning this. This is your job. Contingency, you are planning for the possibility. Is it fair to infer that goldman is doing pretty well right now in trading, commodities, fixed income given what has happened with volatility . We have heard for a few quarters from goldman and others, the problem with trading was a lack of volatility. This is a much better environment. Even if this is a much better environment. Look, we sell insurance to people. We take risk away from each other. If there had not been a hurricane on the east coast for years, people stop buying insurance, and those that buy insurance dont want to pay a lot. If you have four hurricanes, like the year of katrina, the next year everybody buys insurance and they pay whatever you ask them to pay. Not that the risks have changed that much because anything can happen anytime, but their sentiment has changed and anxiety has changed so it is a better environment for our client franchise, and the answer is a better environment on any given day we could be positioned wrong and have to position inventory based on our best guess as to what our clients will want the next day, week, or month because we deal in liquidity. So it may not work right every day, but the environment is good and gives us a chance and makes us valuable to our clients. Nejra coming up, another view on volatility from the head of another leading investment bank, the Credit Suisse ceo. And how much do computers have to do with sharp selloffs in the markets . Luke ellis says machines should not take the blame. Did they start the selloff . No. Did they cause the selloff . No. Are they part of the volumes going to the market . Yes, absolutely. Nejra this is bloomberg. It is 1 30 here. This is your first word news. There is disappointing earnings of 21 net income andion with these results this potential. This could race 20 million that nothing has been decided at this point. The offer is to become the biggest ae bank of japan is planning talks. Iling venture and this would provide a mobile payment. Creation of the world starkest building covered by a and it is the universe of positive opportunities. News powered by in 20 countries. Underlying profit volume quitethe earnings are in focus because the look of the currency at thend we have a look visuals with this slowdown of 1. 5 and a quick look at the bank on the back of this decline. Will be back at the top of the hour for daybreak. How worried are you about how the brexit negotiations are going at this point . What is your biggest concern as we move forward . I have been an open book as far as brexit is concerned. I felt it was a disaster for the u. K. And sad for europe. I think the facts are beginning to be clear, what brexit is what a disaster brexit is going to be. Sadly, it is the very people that voted for brexit out in the rural areas of britain that the latest research has shown will be hardest hit by brexit. I am still hopeful that when all of the facts are on the table in front of the house of commons and people realize how damaging it is going to be for great britain, that britain does what ireland did and they change their mind at the last minute. Nejra that was Virgin Group Founder Richard Branson expressing his hopes that the u. K. Can reverse its brexit course in a conversation at the Goldman Sachs 10,000 businesses summit. Another European Business leader sat down with bloomberg in zurich of this week. The Credit Suisse leader saw resurgence of market volatility give a direct to boost to the bottom line. He talked about how it affected the banks outlook. Volatility means that people see it as a negative. It creates opportunity. On the right track . Yes. But the people we work for will see that as a key part of the strategy and that it is really working. Their participation went from 50 to 75 . It is really working. They are sophisticated investors. They understand markets. And recognize volatility as a part of trade. We are trading more, which is increasing our trade revenues. If you take asset management, which has more than doubled, 16 billion of inflows. Two thirds of that come from our national connections. That connection is strong. Are their parts in the market where people are saying, i do not want to transact at the moment . It is hurting the primary market. We see a lot of activity in the secondary market. But the primary market issuers are reluctant to issue when volatility is high. Things seem to be settling down now. We do not believe that what we have seen is a major disruption. The correction was unavoidable in equities. Everybody expected it. We look closely at the credit market and the spreads. Investment grade has held up very well. You have not seen a contagion which means the fundamental economy is healthy. You see the growth in the u. S. , unemployment is at a historic low. Growth in europe is coming back. Growth in emerging markets is very strong. Company earnings are going up. Impacts from the tax reform in the u. S. , we do not see a downside scenario in this economy. Did you expect a contagion . To the credit market . We dont expect one. We believe credit markets will hold because the underlying economy is so strong. There is no prospect of defaults. Or unemployment, an event that slows down consumption. You do not see any indications of such negative developments. Nejra our conversations about market volatility brought out quite a range of opinion. Let us start with jason kellys interview with stephen schwarzman. Is this volatility we have been seeing normal . Is it a new normal . How do you look at it . I think it is like pretty normal. If you look at the world the developed world will probably grow around 3 this year. Could be wrong. It could be 3. 25 or less. The stock market was up about 7. 5 8 . One month. Multiply that by 12 months. What do you get . Stock Market Performance if you just annualized that somewhere in the 80 to 90 with 3 growth. That is simply ridiculous. You had to stop that kind of compounding or else you have almost a whole years performance in one month. What is going to happen in that scenario . It has got to go down. And then it will go up and then down. It will be a more volatile world. I look at what should happen at the end of the day. Not hour to hour. The Way Television works or traders work or day to day or week to week. I think with the economy looking so good around the world, that we will have an up year. It cannot be hugely up because we already did huge last year. It will find its way. Do you think more dealmaking or less in terms of private equities . Generally, you have more deals when markets feel good and people are confident in prospects for their own business. You seldom buy someone elses business if your business is having trouble. As Business Confidence remains high, you will probably see more activity. People are playing a psychological game. It is not just patterns of earnings. They are wondering, when are other people going to sell . That is hard to model or predict. What you do as an investor . Diversified, rebalancing, stay away from faddish things. Fair enough. But what i found striking last week, what investors might rotate to for a safety trade might not hold off. You did not really want to own treasuries because they cap selling off. Gold sold off, as well. Utilities were hit because of higher yields. If you need to rebalance, how do you do that . You will rebalance across sectors, stocks, and countries. The u. S. Has been recently the most expensive stock market in the world. And i think that is not a reason to avoid the u. S. But i think it is very much time to consider whether your investments in u. S. Stocks have become overbalanced. Last week, the default response from so many people before even looking at the numbers and the data was blame the machines. Blame the machines. Why can we not blame the machines on the actions of last week . Was there selling by ctas last week . Absolutely. They came in long risk. Long equities, short volumes, short the dollar. That was the wrong positioning last week. Were they doing some reshuffling of positions . Yes. Did they cause the selloff . No. Are they part of volumes going through the market . Absolutely. Did the narrative exacerbate the selloff . Can you say they exacerbate the selloff, the downdraft . If you buy when markets are going down, you decrease the selloff. If you sell when theyre going down, you technically increase it. Why shouldnt you sell positions when the market moves . They are not doing it indiscriminately. The same as humans would do it. It is the thought process of whether you should be, everyone should buy a dip, folklore in the markets. I would say history does not tell you that buying dips is the right answer. When volatility in the market increases, you should run less positions. When volatility is low, you can run bigger positions. It is about taking the same amount of risk all of the time. Some of what happened last week was related to volatility funds, being overly aggressive. I think there is more of a regime change going on. From monetary stimulus to fiscal stimulus. Starting with the u. S. , we think that ultimately will transcend and go global. We were talking to Steve Schwarzman earlier this morning and he said this level of volatility feels pretty normal. Do you agree or is this an aberration . Later cycle, i agree, you have more volatility in the equity market. What is changing is you are losing the cover of the Federal Reserve around Interest Rates. We have had the fed protecting us for quite some time and now they are clearly changing interestrate policy. We have not seen that in europe. We are hearing a hint of that in japan, we had the opposite where they are still very accommodative. I have a slight difference in that there is a shift in Monetary Policy leading to more volatility. We are seeing it in Interest Rates right now, not necessarily in credit. That makes sense. This is more about changing the risk rate than the conditions of corporates around the world. A lower tax rate in the u. S. Probably makes corporate profits stronger this year. Nejra youre watching bloomberg best. I am nejra cehic. It has been another whirlwind week for corporate earnings report. Our roundup, starts with the Worlds Largest food and beverage company. Nestle posted fullyear sales that rose to the slowest pace in more than two decades. Revenue was up 2. 4 . Missing estimates. The Swiss Food Company was aiming for a 2 4 increase this year. Confidence last year, how broadbased the growth is. All categories contributed to growth. We expect the same thing to happen this year. It is one of the strongholds of nestle. The focus is broadbased and not just resting on one or two product groups. That will remain the same. Within that framework, geographically speaking, asia will be one of the growth engines. And we have categories such as coffee and pet care. The water business should also recover. Is this going to be still challenging in 2018 in terms of a pricing environment . Both volume and pricing we were somewhat soft last year. We are optimistic in terms of 2018 and beyond. Credit suisse shares trading over 3 higher after a narrow loss reported in the Fourth Quarter. The market swings in the past week have a negative impact on the banks advisory unit. But he could not be more pleased in the performance of the trading businesses. My biggest satisfaction, q4, the start of the year has been very strong. We indicated numbers. Global market revenue is up 10 . Q1 last year was very strong for us. Up more than 10 . The french bank posted a Fourth Quarter revenue that beat estimates. Field by tax cuts. Especially in the u. S. The lender reported a 7 trading decline in terms of equity and fixed income. Smaller compared to the drop of some of their big european peers. How do you describe the first six weeks of 2018 . Markets have been much more volatile for the beginning of the year compared to the end of 2017. We say that volatilitywise, one of the reasons for the slowness and the return of volatility is offering opportunities for banks like ourselves to help our clients. We see good activity since the beginning of the year. Better than expected increase in new money for clients in 2017. The swiss asset manager saw inflows of almost 6 billion francs beating estimates. Total assets, 26 . The total assets under management, the results one part of your business in particular what has been driving that . Net new money. Clearly, the demand for a strong risk oversight product that can navigate an environment where everyone is afraid of rising Interest Rates. We delivered. Recurring income, stable, foreseeable performance patterns in an environment that becomes ever more choppy for investors to navigate. Let us get straight on to airbus and shares there have jumped the most in almost six years after the company promised an Earnings Growth of 20 in the current year. This comes despite engine issues slowing the production and a 1. 3 billion euro charge against its military transport plane. Given the fact we only just found out last week about the latest problem with the whitney turbo fan, do you have the visibility to have confidence in those targets . Yes, you are right. The guidance we have given the market in 2018 is dependent on amongst other things, that our engine partners deliver the requisite engines. But that was not different in 2017. We have had more teething problems with the new engines, very fuel efficient engines. Bright side. Yes, there is a new glitch that was discovered roughly a week ago. We are assessing the implications. This happens early in the year and i am quite confident that we can work through this and recover whatever needs to be recovered in terms of deliveries throughout the year. Shares of cisco surging to its highest level in more than 17 years following stronger than expected earnings including its first revenue increase following a one time charge related to a tax overhaul plan. The company is revealing some big plans increasing its dividend by 14 and a 25 billion stock buyback. We are not a capital intensive business. We do not spend a lot of capex on an annual basis. We had said the three areas that we would focus on as we got tax reform would be to reduce our share count through the buyback which you saw us announce yesterday. As well as continue our Capital Strategies of returning cash to our shareholders. We increased our dividend yesterday by 14 and we also left ourselves plenty of dry powder for ongoing m a activity that lines up with our strategies. Heineken is the worlds secondlargest brewer. It has reported an adjusted output that beat analysts expectations. The dutch firm a forecast profitability of this year will be a below its mediumterm target after integrating a brazilian business in bought from japanese rival, kirin. Is this the case where you will try to invest a lot, expand the business, take market share away from the number one contender in brazil . The acquisition in brazil is putting our strategy into action. Winning in the premium segment which we have been doing in brazil with the heineken brand. Rebuilt to a 2 million brand. And then, if we want to play with a full portfolio, having a number one or a strong number two position in the market. Together, now, we are covering the full territory and we are ready to deploy the strategy. Let us have a look at shares of rising. We were up 3 . 2. 6 now. After company, cut 2018 guidance, improving competition. Heading prices across contracts. Underlying, 485 million aussie. The math tells me we should expect slight moderation in earnings. I will talk about earnings over a full 12 month period. What i am saying is, the Earnings Guidance range is sound. We have to recognize some of the things we have to implement as part of the regulators decision will cost a few million tons as well. Profits rising 50 in the Third Quarter beating estimates and earnings show a strong operating performance. The company is going ahead with its corporate transformation program. Are you sticking with the previous timeline of the joint venture with tata at the beginning of 2018. I can confirm that. At the end of last year, we could not reach an agreement with our union. Having said that, what we are still working on is the Due Diligence and on the other side, on the tata side, agreements with their unions and workers representatives. It needs to come to a signing. We will stick to the timeline. Signing early 2018 and closing expected by the end of 2018. Gucci saw comparable sales rise 43 in the Third Quarter of 2017. Surging past rival, hermes. Growth is well spread across all of the categories and all of the geographies and over all of the clienteles. It is very strong. What we have put in place in terms of supply chains will help us cope with growth and production. Without any lack of being demanding for quality. This is all in place. It is very efficient growth. I am very confident that we will be able to continue at that momentum of 44 . But to grow significantly above the growth of the market. Could gucci become bigger than Louis Vuitton in terms of sales . I hope. Why not . Acceleration in the cloud. French i. T. Giant says the demand for digital and Cloud Services show growth in the Fourth Quarter. Now accounting for 40 of its business. Business seems to be ok. What do you think the biggest risks are in the next 12 months . I would underline that in the Fourth Quarter we accelerated growth, notably in the u. S. The u. S. Was the weak point at the end of 2016. We committed other turnaround, now, we have fully accomplished growth there. 5 growth in north america alone. We ended in the Fourth Quarter with more than 12 growth. For us, digital is the engine. And it now accounts for 40 as you just said. When you speak of risk, maybe protection is something we had been handling for a while. I have got inspiration this morning. This is your 3d yield curve. I knew you would like this. Especially for you. If i turn it around, you see the steepening off the curve. Nejra there are about 30,000 functions on the bloomberg. We enjoy showing you our favorites on Bloomberg Television. Maybe they will become your favorites. Here is another one you may find useful. Quic. It will lead you to quick takes. Here is a quick take from this week. There is a global trend taking place. A lower percentage of people are smoking cigarettes. This has forced Tobacco Companies to create products that can keep them profitable. Their answer may come in the form of an increasingly popular alternative to smoking, vaping. But does that come with its own issues . Here is the situation a chinese pharmacist and smoker developed the ecigarette in 2003. The device uses no tobacco at all. A battery heats nicotine liquid. Which the puffer inhales and then exhales vapor. There is another product. A much lower temperature than a regular cigarette. They are said to have a taste and nicotine boost comparable to a traditional cigarette. A boost that is better than an ecigarette. In both devices, no burning tobacco and thus, no smoke or tar. The u. S. Food and Drug Administration in mid2017 essentially embracing vaping, as a way for smokers to quit. The market is estimated at 7 billion a year and growing rapidly. Here is the argument. Some Health Groups believe that this may be a gateway to make kids start smoking cigarettes. The increase however, the rise was counterbalanced by a drop in use of conventional tobacco products. According to a 2013 survey, vaping may be as effective as nicotine patches in helping smokers trying to quit. The practice is too new. However, a 2015 independent review of the evidence concluded that vaping is 95 less harmful than smoking. It is still early to say for sure, but they being may be the breath of fresh air that smokers have been looking for. Nejra that was just one of the many quick takes you can find on bloomberg. You can also find them on bloomberg. Com along with all of the latest Business News and analysis 24 hours a day. That will be all for bloomberg best this week. Thank you for watching. I am nejra cehic. This is bloomberg. Anna good morning from london, im anna edwards. Manus im manus cranny. This is bloomberg daybreak europe. Anna asias fourthquarter earnings fell short with no share buyback. The stock takes a hit in asia. We spake with the banks finance director. Fourth quarter from our perspective in the industrys was a little weaker with respect to global bacon market revenues, space. Larly the ficc we also took corporate exposures in the Fourth Quarter. Manus asian equities snap a sixday rally as hong kong comes back online following the new ye