Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240714

The eu stop job top job and gives her take on european relations. We should never forget that we are allies and friends. We sit on the same side of the table. Manus warm welcome to daybreak europe. The company that makes the machine that makes the chips, asm beat on their sales number in the Second Quarter. Its their guidance for the Third Quarter where the market will take some umbrage. Of 2. 6liver net sales billion. Thats the top line for them. The estimate was 2. 57. Slippage in the Third Quarter. It will come at 3 billion below the 3. 24 that was estimated. Margins will dissipate to 43 from an estimate of 46 . Unchangedales will be going into the rest of 2019. It is all about the extreme ultraviolet light machines orders. We are waiting to see what those numbers are. Capexms of the industries that come through. You have a little bit of banking. Good morning. Nejra good morning. Numbers coming through from swedbank. The new dividend policy is ofnging from 75 to 50 annual profits. It was one of the things that analysts and investors were looking out for. The dividend payout policy, adjusted to 50 of profits. They are still battling these investigations in terms of Money Laundering. We have secondquarter net income. 5. 3 4 billion swedish krona. Thats a bead on the estimate of 4. 89. It has set new financial targets. It has increased its consulting expenses due to investigations there. Its cutting the payout policy to 50 of annual profit from 75 . It says its cost efficiency and return on equity targets remain. The Second Quarter cet1 ratio, 16. 1 . Theres a little bit of a beat on that. Second quarter Net Interest Income comes in at a beat. 6. 6 one billion. The estimate was 6. 58. In terms of the antimoney investigation, swedbank is saying the Ongoing Investigation continues his plans as planned. The focus is on cutting its payout policy to 50 of annual profit. [inaudible] nejra exactly. We are speaking to swedbanks acting ceo. Dont it miss that interview. That will be a big one for us both. Manus it is indeed. Constitutes 51 of revenue. China constitutes 31 . Thats why this is an important story. Yesterday was about burberry. Profit is 547 million swiss francs. The overall positive annual growth for the group is expected. They see a healthy growth. Thats the phrase they are using. To that end, get it gives you a taster of where we are across the geography. Lets get into some of the rest of the market. Its a crowded trade. 10 year Government Bond yields, battered by the data, bolstered by the verbiage from powell. Thats what you can take away from 10 year Government Bonds. Is the most crowded trade in the world, according to bank of america. Worstually has been the time for treasury since famine defeat. We go from the heroes of the bond traders to the harried hunters for yield. Data improved yesterday. Keeps aevans conversation running on a 50 basis point cut. Twohad its biggest lost in weeks listed a. Will around begin to talk with the United States of america . The dollar slips as well this morning. Bruised by the data from the new york fed survey. The strongest retail sales of the First Quarter of 2017. It was briefly interrupted. The question becomes whether President Trump can have a strong dollar along with a strong economy. The dollar gained yesterday. Can the u. S. Consumer offset any risks from trade . Can President Trump have gains in stocks and trade war . He said he could oppose more tariffs on chinese yuan it. Yesterday0 closing after five sessions of gains. Futures flat. Cable took a hit yesterday. Got rhetoric from jeremy hunt and Boris Johnson talking about scrapping the backstop when it comes to brexit. That cause concern. You can see risk off coming off out in the markets as well in terms of emerging markets. The banks have been suffering from a low rate environment in the u. S. Lets check on the markets in asia. Juliette saly has more. Juliette certainly risk off on the back of that trump tweet about more tariffs. If you want to see how much the trade war has affected other economies in asia, look no further than singapore where we saw nonoil domestic esports fall 17. 3 in june from a year earlier. Electronic exports down by 31 . Singapores Market Holding up well. You are seeing weakness in the nikkei today. Similar weakness in hong kong today. A bit of a turnaround in the Chinese Markets in late trade. Australias asx 200 held up well by bht. Saw that surgeon iron ore surge in iron or prices. It could ratchet further due to output supply. Indias market looking quite good amongst the earnings season. At some ofave a look the hong kong stocks were watching, particularly in the retail space. This is on the back of those protests weve seen over the past month or so. Bloomberg intelligence suggesting that Hong Kong Retail sales are likely to fall due to the protests keeping the tourists away. We had giordano yesterday issuing that warning, it fell the most, around 11 . You are seeing the likes of look book also falling. The Hong Kong Retail Management Association says they could see july and august retail sales in the city fall by double digits. Certainly one sector to watch. It has been underperforming of late. Nejra thank you so much. Jay powell says the central bank is monitoring threats to growth, adding that he will act as appropriate to sustain the expansion. Rising,uncertainty is particularly in trade and global growth. Hise comments echo testimony to congress, cementing expectations for a rate cut later this month. Uncertainties around this outlook have increased, particularly regarding global growth. In addition, issues such as the u. S. Federal debt ceiling and brexit remain unresolved. Fomc participants have rates raise concerns about a prolonged shortfall in inflation. Sales the u. S. Are retail come in stronger than forecast. Joining us now to discuss this is the senior multiasset strategist at state street. Great to have you with us. If you assume the u. S. Consumer is not dead, can the u. S. Consumer offset the impact of the manufacturing slowdown and make you want to keep buying u. S. Equities . We are positive. Consumer is a big part of that story. We dont generally think that u. S. Economy is in crisis. U. S. Economy is slowing but not collapsing. You have a backdrop of supportive central banks. Thats where can support the background. You. good morning to you like u. S. Stocks. The consumer is alive and well. The consumer is usually the last person to know when things are going wrong. I want to ask you about banks. Weve had city and others. Take a look at this. This is the provisioning by banks. Leastid banks our favorite sector in europe. Also in the u. S. I want to get your take on this. Thanks in the United States of america have the least loanloss provisions since the financial crisis. Thats in part to do with accounting. I was quite surprised. The power of positive thinking is the title of the chart. Does this play into any of your thought processes of why are you so anxious against the banks . Is it yield or things like this . Absolutely. Its very very difficult to run a bank now. Thats the conclusion. We are increasingly seeing it in u. S. And europe. Makevery difficult to interesting. Thats a big challenge. Are a lot healthier than european banks. We know that. Provisioning in u. S. Is lower than anywhere else. If there is very little interest margin, it is very difficult. Business. Boring yes, it is going. Maybe not as fast as some banks would like to have. It is going. It is fairly healthy. Thats probably a bigger point to take out of banks earning season. Banks are finding it difficult to make money in trading. Volatility is very low. Its difficult to make money and banking. What it says about the underlying economy, we still see consumer and corporate demand. That is more important take away from banks earnings. Underlying Economic Activity is still ok. Sayingnt go into everything is fantastic. Its not as bad as a lot of people fear. Manages to onfed invert the yield curve and steepen the yield curve in other areas with one cutter more, would that make you more positive on banks or would it change your view in anyway if you see the fed managing to steepen the yield curve sustainably . Thats a good point. We do believe that banks need a steeper yield curve and higher Interest Rates. Is one cut enough . I would question that. I think banks need a lot higher interest rate. You talk about financial repression. In on this amounts of negative yielding assets. It forces investors to add risk to get return. Have a look at this. This is gold versus the stock of negative yielding data. A friend ofced by the show. Tore is a correlation back 2016. Negative yielding debts, up goes gold. Is this one of those force correlations . This flies against your view which is take more risk. This is about protection. This is very interesting. We see this investors taking this very diverse barbell approach. On one hand, we know that gold and bitcoin will trend similarly. We know investors put an amount of money in cash. Cas pushes ands or the highest we have seen in a decade. That is one side of the thread. The other side, investors are trying to get into the risk trade as well. You see this kind of very strong convergence. About equity markets. They are at a alltime high. You have bond markets pressing the session. I think its a most correct quite natural for investors to, you can either see two calves. I believe recession is coming. Of futured indicator growth. You going to cash chemical, ego very defensive. On the other hand, if you are more constructive, you think, economy is slowing but not collapsing. We have very supportive policy. Trade disputes are always going going to be the star cloud. Dark cloud. Its not resolved but a little bit to the side. You get slightly more positive yields. That forces you to take risk. Interest rates, the amount of negative yielding is enormous. Now you see it in credit. Companies are paid tomorrow. What you do . You have to take risk somewhere to find returns. It forces people to take more and more risk. Manus hold those. We will dig into that more. Maybe you need chinese stocks. You can come on the show every day of the week. You brighten up the show. You bring a ray of sunshine. We have more to do. Keeping it plain and simple from state street. Result season. Theres only two major banks left to report this week. For the ones that have come a lower Interest Rates. More trading revenue. Citigroup set the tone. Heavy cost cuts. Blooming consumer business has listed shares. Nejra it did. Goldman but the trend and investor surprised investors thanks to a jump in equities trading. Wells fargo posted its mauling lending and since 2016. Jpmorgan slapdash snapped a threeyear streak. Bank of america reporting later today. For now, the question remains. How will the lenders postal tradingwhen wall street desks . Bryce love will underline has been confirmed of the new president of the European Commission. Shes the first woman to hold the job in the first german in over 50 years. She told lawmakers the most pressing issue is Climate Change. She would say to bolster relations with the United States. We do have issues. We should never forget that we are allies and friends. We sit on the same side of the table. We have to negotiate hard about the different topics that have to be fought. In the very end, we do know that its better to be in a healthy way trading with each other. President trump has confirmed that turkey wont be able to buy the usf 25 fighter after it began taking deliveries this week of a Russian Missile defense system. Trump says they are working through a tough situation. The white house is still weighing economic sanctions. The u. S. House has voted to condemn comments from President Trump that have been dubbed racist. He tweeted that several congresswoman should go back to where they came from. Trump says that he wasnt racist and doesnt have a racist bone in his body. Lawmakers, in my opinion, they hate our country. Global news 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Manus thank you. Ayrton is set to strike a positive note as they unveil secondquarter results. That will be at 6 30 a. M. London. How will the Swedish Telecom benefit from the 5g rollout . Anspeak to the ceo in over hour. Dont miss that discussion. This is bloomberg. We do have issues. We should never forget that we are allies and we are friends. We sit on the same side of the table. We will negotiate hard about the different topics that have to be fought. In the very end, we do know that its better to be in an intensive, healthy way trading with each other. That was ursula von der leyen. She was confirmed as the first female president of the European Commission. Fell from a record. The offshore yuan weakened after President Trump reminded us all that the trade war is far from over. Go ashave a long way to far as tariffs with china are concerned, if we want. We have another three hundred 25 billion that we can put a tariff on if we want. We are talking to china about a deal. I wish they didnt break the deal that we had. Threat comes ast day after the treasury secretary mnuchin said he will go to beijing for more facetoface talks. There is an mliv question. How will the markets reactive trump announces increased tariffs on china . Join the debate. Its fairly straightforward. Risk on or risk off. Join the conversation. We are all there on tv. Guest is still with nejra and myself. When you look at this daily saber rattling from trunk, its either bull or bear. Preparedness for a steadystate of angst, which is what many of our guests have suggested to us, i know you want to take risk. How much are you prepared to take in china and asia in a steadystate of angst on trade . You say its a gray cloud. Think the underlying point is in u. S. , President Trump unilaterally has not very much control of the policy. He needs support from congress and senate to implement quite a lot of his election misses and priorities. Trade is really one point where he can issue executive order and get his way. Without forcing congress to agree with him, without forcing senate to agree with him. Trade will always be the tool he will be using to get his supporters. Mexican tariff socket is a perfect example of that. We want to controller integration policy. We want to control our borders. How can we do it . We threaten the mexicans with tariffs. They implement some policies and control the borders. I think thats probably the dynamic we are going to see through the next year for elections. The president will be using trade policy to get his political agenda. I think its very interesting. Talking about negotiations between europe and u. S. She was very wise. Works better for us to negotiate and be on the same side of the table. The same logic applies to the conversation between china and america. Yes, they have the competing points of interest. Ultimately, they do want to trade. They want to negotiate. This idea that the deal is mutually beneficial, we need to come to some sort of agreement. Its beginning to sink in. Its a political negotiation. Ultimately they need to trade. We will expect that to happen. That should support. Nejra perhaps in the long term. If you are staying invested in stocks, lets look below the surface. Jpmorgan sees a once in a decade trade in value stocks. Youou look at the chart, can see how value and low volatility have been going in hassite directions, laval been outperforming here. He says that gap needs to close. Is this the moment to be buying value stocks . Stocks have been underperforming for the last 12 years. During that time, we had enormous amounts of onceinalifetime opportunities. I do not think that. We live in a world of low Interest Rates low growth, low volatility environment. That is not the time to buy. Thats the time to buy growth stocks. They should benefit from this underlying environment. If you think that we are going to get into a different paradigm where growth is faster, Interest Rates are higher, yes. Absolutely. I dont dig we are going there. Nejra all right. Our guest is with us. Great to have you. Door handles. A 2. 1 million price tag. Lotus unveils its first all electric supercar. We will discuss. This is bloomberg. Manus this is bloomberg daybreak europe. Now yesterday bloomberg spoke with ursula vendor line after she was confirmed as first female president of the European Commission. We asked her about the threat of tariffs on european cars. A lot of things are interdependent. To can fence our friends from the United States that its better we find a compromise and Work Together because way more issues and problems that concern the two of us together. It will be my way to address it. Think there are a lot of good arguments for working together. Manus problems that bind us together. The European Commission president elect speaking to bloomberg. We will bring you that interview throughout the morning. Gear making and 5g, this is the personification of whats going on. Net sales, 54. 8 billion. Its a beat. Momentum is increasing. Where huawei stumbled, its a boon for nokia. The adjusted margin in the Second Quarter is slightly lighter. 36. 7 . The market estimated 37. 7 . The market itself ran to an increase of 3 this year. You will see the overall market increased by around 3 . The net profit, 1. 7 billion in the Second Quarter. Thats the headline. Operating profit, 3. 9 billion. Thats below the estimate of 4. 4 billion. The guidance on the margin is going to be quickly important. The size of market. Wheres the low hanging fruit . We will have that conversation with the ceo. Stay with us for that interview. Trendk this is a break of in terms of the profitability numbers. We will dig deeper into those. The margin is a beat and thats what the market might look at versus the operating profit side of the numbers. Nejra looking forward to that interview. Lets turn to another story we are both very excited about. No door handles, 2000 horsepower, and a 2. 1 million price tag. Vehicle is the first allnew car from lotus and 11 years and will be the halo for the next generation of the range. Joining us now is the ceo of lotus cars. Welcome to the show. Who do you see buying an electric supercar costing 1. 7 Million Pounds . Mclaren is avoiding the market. They say their customers want the rumble of an internal combustion engine. We are building up to 130 of these cars. Obviously selling to a limited affluent base. This car is doing more than just spelling 130 cars. It is showing the capability that lotus has got. We are investing in a longterm plan. Im curious to know, where are the geographies that are going to buy this . Its absolutely stunning. You showed it last night. How many orders have you got . We are a Global Company selling all of the world. We only show the car for the first time last night. There has been news and speculation since we teased it and shanghai in april. A lot of expressions of interest. This week, we sold the first of these cars. They are coming from different areas of the globe. The United States, the middle east, and china already. Ofra you said this is part a longterm plan. Tell us more about that in terms of who you are trying to compete with and what else is in the lineup. We are a 70yearold company. We have a proud heritage. We have developed our vision 80, a tenure plan which is a massive investment. Very ambitious Business Plan supported and funded by our shareholder. The fastestgrowing Automotive Company in the world. That replaces the cars we got and takes us into new segments, Huge Investment in new product in facilities in the u. K. Significanting a producer of sports cars around the world. Manus what do you envisage the relationship with gd would be . Where you go with ev . If i said to you, what is the ambition of your brand, what defines that . Doese support really highlight the rebirth of the brand. The investment that we could put into a relatively Small Company to have an ambitious tenure plan. We get access to a huge amount of technology and resources from geely. They are leaders in many areas of technology. What we can offer is quite come them entry as well. Our histories about aerodynamics, performance. We consummate what she we can actually provide. It gives us an a museum it immediate step up in a as a Small Company. Up on that point of the global stage and your relationship with geely, could you make cars out of the u. K. . Would you start doing that . Our focus is investing in our facilities in the u. K. 100 Million Pound investment going into that. Time, we will outgrow. We will grow that facility and need to expand in the u. K. , potentially overseas as well. Is a sense that this will have a halo effect. Do you anticipate that or will we see a much more dynamic and revamped version in the lineup . This is a statement of intent from lotus in terms of the Business Plan we have, the investment, the capability weve got. Actually building and designing the most powerful hyper car in the world, illustrating that keep ability. Its just the start of a big investment that will introduce a lot of new cars and take us into new segments. Nejra you say the car has the worlds fastest charging battery. Can it actually be charged . Are there stations available . I asked this question on the viability of this car itself. How viable a product is it beyond the halo effect and relaunching lotus on this tenure plan . It has the capability to fully charge in less than 10 seconds. You need the rate of restructured to do that. On standard charging, it would be like 70 minutes which is still very fast. Infrastructure in terms of charging is growing around the world. China leads the way in that respect. We expect the rest of the world to catch up. Sometimesare debating in the world of macroeconomics on the show. China slowing down, recession risk, u. K. Recession. You are selling pretty fascinating cars with highpriced tax. Is there any slowdown in momentum at all . I know its a beautiful trophy to have. In your perception, is there any bumps in the road . Theres always bonds in the road as a Global Company. Our aspiration is to be a significant Global Company. There will be economic instability across the markets around the world at any point in time. We have to take a longterm view. We are very focused on delivering that. There will be headwinds on the way. We will have to be agile and reactive. We are really focused on the long term and will not get distracted by daytoday issues. You are very welcome to bring that car down here and all see you in the passenger seat. We can let it rip. The producer is salivating at the thought of that. Eric doesnt like to go fast. Nejra i love going fast. Manus she loves going fast. We keep you on your toes here. Great to have you with us. Thats the ceo of lotus bringing you a tantalizing 1. 7 Million Pound car. Lets talk about politics now. U. S. Senators sharply questioned facebooks plan to trade its own digital money at a hearing yesterday. Today, is the return of the g7 finance ministers. They turn their attention to that very same subject. On the agenda is libra and the impact of the socalled stable coins. As well as green finance. Our bloomberg reporter is an shoddily. Good to see you this morning. What can we expect from todays meeting . Good morning. I think you nailed it. The big talker here is libra, a safer cryptocurrency. Central bankers from the g7 nations will tell you the problem here is that you dont actually know what libra is. Most crucially, they dont know what the goal is when it comes to this new currency. They will tell you, this is just coulds of payment that meet our criteria. If this was anything that looks like the First Step Towards creating a currency that could compete with the euro, the dollar, of course thats a nonstarter. Theres many questions regarding that issue. Playing in the background is that 301 investigation the United States has launched into the french tax. It has to do with digital tax. The french will tell you they do feel this tax is completely compliant with all standards and regulations. That ultimately it could serve to get an oecd agreement between all these nations which is ultimately what they want. Unilateralfrench one. Nejra we spoke with the European Commission president elect. What kind of expectations are there around her now . We spoke to her yesterday. It was a very tight vote. I was always told, anything below 400 votes is not a good look. Its not a good start to a commission term. She got weigh less than that. It could be a problem. It was a very tight vote. She did say, this is going to be good for europe. I want to own this concept of being european. She talked about trade and brexit. Ultimately, deal no deal. We have very close ties. Its not an end of something. It determines the beginning of the future relationship. Between the United Kingdom and the european union. We want to be partners. They are our neighbor. We have common interests. I will put a lot of emphasis that we will have come if necessary, a brexit in a good way, knowing that we have a common future. She was able to log that nomination. Shes always said she would be in favor of a brexit extension if that led to a different outcome. That is notcision up to her. It depends on european leaders. We know that patience is running thin, especially in france. Manus great work. Some european corporate results we have ready. Things will ramp up tomorrow. Moneylaundering scandals rumble on. We will get numbers from danske bank. Standard who missed. Sap, tilia. Up is to make modest progress towards its 2019 cash flow target. Our guest host is still with us. A lot of sectors to get through. We are just beginning the european earnings season. When you looking out for . The key for us is to look where we can avoid earnings at this point. Its very interesting. Earnings expectations is extremely low. To q1say, its similar earnings season. We see lots and lots of headwinds. The Global Economy is slowing. Some would say its going into crisis. Trade is a big issue. We have been slashing expectations. Actually, when earnings expectations have come down so much, its the best time to buy stocks. Oftentimes this pessimism is overdone. Thats number one. Overall, we suspect that pessimism is overdone. We dont see economies collapsing. Weve seen encouraging numbers from retail activity, particularly in the u. S. Chinese numbers, they are weak but they seem to show signs of improvement. First of all, overall extreme pessimism is potentially creating opportunities. Second thing to look at, if you look below the surface, where are those expectations coming down too much . Ome Technology Sectors earning expectations are about one third of what they used to be. That creates opportunities. Sectors like health care, materials, that is where we see a massive reduction in earnings forecast. The bar is very low in those sectors. We will be looking there. Have been a little bit too generous towards. Ees are you could s appointment. Say,ther thing i would very similar expectations have come down a lot now. Think about what happened the first half of the year. In terms of factory performance, it delivered earnings a lot more than expected. Numbers a lot stronger than expected now. Thinking about where we see this kind of margin of safety, a point you towards sectors like i. T. And away from sectors like telecoms where we have this stronger growth. Not be able to comment specifically on swedbank. They are cutting their dividend ratio and 75 to 50 . Its about the principle. I want to deal with the principle. We will talk to the ceo in a moment. That kind of move is a very shocking move. That has to do with idiosyncratic factors. Where are you seeing on the around . Atios you have the barclays play. You have julius baer. Is there a differential in the story of banks or is it all pretty awful because of a negative slope in europe and cutting rates in the u. S. . I think you are right. Wealth managers are in a better position than the rest of us, the rest of the banking sector. They have positive spreads, higher returns on equities. Is higher than the cost of investment capital. Wealth managers are in a better position than the banks themselves. Thats probably the area where we will be looking at. Thinking about slashing the evidence. Dividends. I know the market is going to hate it. Is quite controversial. I applaud them for having the courage to do that. Its against the trend. Its against general logic. Returning a lot of capital to shareholders. That has not helped. Its looking at underlying activity, thats far more important than give money back to shareholders. Thank you very much. Great contribution this morning. Keeping us fresh on day bricker. Coming back, the stunning headline is the cut in the dividend pledge. The moneylaundering probe continues. Ceo, next. K to the this is bloomberg. Nejra this is bloomberg daybreak europe. Swedbank has been the streak in terms of net income. The big headline is it slashes play out policy to 50 of annual profit. Moneylaundering probes continue. The group confirmed its own internal review will end in early 2020 and says the shortcomings have been fine. Swedbank has been investigated by authorities in sweden following allegations that its baltic operations were used for money. Joining us now is the acting president and ceo of swedbank. Its great to have you with us this morning. Swedens biggest Mortgage Lender and the main bank in the baltic region. This is a dramatic headline. You are cutting the payout ratio from 75 to 50 . Is that tied to your concerns about moneylaundering investigations and what you might end up having to face in charges . You, manus, for the question. The change in dividend policy is on the backdrop that swedbank will continue to be a low risk bank. Its also the fact that we have seen that longterm interest fx, together with increased Capital Requirements coming for swedish banks in september, pushing down the buffers to levels which we do not find acceptable. That is the importance. To befor us important viewed as a safe bank by our customers, the authorities, the bondholders, and shareholders. You have to recognize the fact that we are in a very special situation at the same time. You have to take that into consideration. Build asponsible and safety buffer. Nejra yes. Buffer,safety busser will you set aside extra capital to do with the potential fallout of the moneylaundering scandal . No. If theres a fine when theres a and, we will pay that fine exactly how that will pan out, its too early to say. I think its important to build a safety buffer in the environment that we are in. Of, if i look at dense cap, many of those former executives are now facing preliminary criminal charges. Are you worried about similar developments at said Bank Swedbank . Nothing that i can comment on specifically. As you know, the Economic Crime authority in sweden has an investigation ongoing and that will continue. Im not sure when it will end. Its not something im worrying about. Would investors, the public, the authorities feel more reassured if swedbank appointed a ceo from outside of its own ranks . I do not have a personal view on that. That is a question for the board to evaluate. Theres one thing which is pervasive for every bank ceo. Negative Interest Rates. Every guess that we speak to really tried to ram home the point, get ready for a much more enduring, lower, prolonged time in terms of negative rates. How low will that be . What will the consequences for swedbank be for customers . I think it will continue the Economic Uncertainty in the world is quite significant. You have the trade wars, you have brexit, you have a couple of big things that create some certainty. You see that the ecb and the fed is more dovish. The Swedish Central Bank is hesitating. I expect this to continue for quite some time. Banks,as the impact on we have actually successfully situation handle the with negative rates. Nejra weve discussed the impact on the dividend policy of the antimoneylaundering scandal. To what extent have you lost business and clients in the wake of the scandal . We have had issues. It has been very limited. You need to be humble on those things. Of course, there are customers that are leaving us. In some cases, i think its related to this. In some cases, its related to the competition in the market. Having said that, that was one of my Top Priorities when i took over, to secure but the organization is intensifying the work. So far, it has progressed. Nejra thank you so much for joining us. Acting president and ceo of swedbank. Great to have you on the show. Coming up, ericsson misses the mark on center it secondquarter operating present. We speak to the ceo. Hey im bill slowsky jr. , i live on my own now ive got xfinity, because i like to live life in the fast lane. Unlike my parents. You rambling about xfinity again . Youre so cute when you get excited. Anyways. Ive got their app right here, i can troubleshoot. I can schedule a time for them to call me back, its great you have our number programmed in . Ya i dont even know your phone anymore. Excuse me . what . I dont know your phone number. Aw well. He doesnt know our phone number you have our fax number, obviously. Todays xfinity service. Simple. Easy. Awesome. Ill pass. Nejra good morning from Bloomberg European headquarters. This is bloomberg daybreak europe. Reiterates hep could put additional tariffs on chinese imports as jay powell sticks with the script on downside risks. Rebounding on crisp, rounding on cryptos. Facebooks libra plans labeled delusional. Meanwhile, ursula clinches the eus top job. We do have issues, but we should never forget we are allies and we are friends. We sit on the same side of the table. Manus swedbank beats the street on net income. The Money Laundering investigation continues. Nejra welcome to daybreak europe. Falling 7. 9 to 1. 4 9 million vehicles. The market down by 20 point 1 in the first months of the year. That is the context. We are resuming a downward spiral. Also a division loss at bmw. There is your car sales. Yes, to the bond market. Im talking about the u. S. Treasury market. The rhetoric, dont worry everybody. Evans kept the debate alive in terms of the prudence move. The possibility of a 50 basis point cut. You are seeing a rise in bonds. That backup in yield. It was the worst month since october in the market. You are just seeing a move up there in terms of the market. 11 bund market, italy is up pips. Neera, you have futures. Like we areoks playing catchup to what happened in the u. S. Ftse 100, dax, cac 40 futures lower as we saw the s p 500 drop after five days of gains. Dropping from a record high after we had comments from President Trump saying he could impose more tariffs on china if he wanted. Can he have this trade war and high stocks at the same time . Can he have strong data in the u. S. And a weak dollar . We saw Dollar Strength following betterthanexpected retail sales. Lots to discuss. Lets check on the markets in asia. Juliette saly has more. Theette when you look at world map function, it is looking a little bit gray because a lot of these countries are in the black. Chinese stocks also flattening by about 0. 1 . We are seeing a lot of cautiousness on the back of that thought there could be more tariffs. You see that reflected in the korean market. The cost be done by 1 . The nikkei under pressure, weaker by 0. 3 . We happen watching Retail Stocks in hong kong, which is also in negative territory. Sayingrg intelligence retail sales could be hurt in the past month or so. Australia buoyant was iron ore prices, which yesterday got to the fiveyear high. If you want to look at how much the trade war has had an impact on southeast asia, look no further than my chart, which shows the impact in terms of exports. We saw singapore, nonoil optimistic exports fell in june. That is the yellow line. Kong as also seen hong well. We saw china exports fall by 1. 3 in june from a year ago. Certainly starting to show the impact this trade dispute is starting to have. Also in the data out of singapore today, electronic exports down by over 31 . All of this adding to analysts saying singapore could be facing a recession. Manus thank you very much. This is one of the worlds big producers on gold and silver. They are full years overproduction is going to be 55 to 58 million ounces, but it is the gold, fullyear output of gold is going to be 880,000. That is cutting their fullyear production of both of those products. That is certainly something which will perhaps irk the market later in the day. That his performance year to date. Lets talk about the fed. Jay powell says the central bank is monitoring threats, adding appropriate act as to sustain the expansion. Speaking at the bank of france event in paris, he said uncertainty is rising, particularly in trade and global growth. These comments echo his testimony in congress on expectations for a rate cut later this month. Uncertainties have increased, particularly regarding trade developments. Issues such as the u. S. Federal debt ceiling at brexit remain unresolved. Fomc participants have raised concerns about a more prolonged shortfall in inflation below our target. Meanwhile, u. S. Retail sales and factory output figures come in stronger than the market forecast. Chris, good to see you this morning. The battle is not between the data, which causes a backup in yields, versus powell, which is the bid and the offer in terms of shortterm rates. Do you think we should focus more on what Charlie Evans was saying . He is comfortable with that, a proportion or a cut, but he keeps the door open to 50 basis points. Why is he keeping that alive . I was personally looking at the minutes of the june fed meeting. I thought they were really dovish. Slowdown in light of the year to come, but i was not expecting the minutes to be quite that dovish. Probably that period when the fed first turned dovish in the first half of june, there were calls for 50 basis points out, retail dataa came in strongerthanexpected. Your point about the data and powell, you have to separate what is going on. Retail sale consumption doing very well, but on the concern side, in terms of the services sector, the Manufacturing Sector , i think that is what the fed is worried about. Jay powell really identifying the fact it is the trade, it is the environment weighing on the economy right now. Nejra you have the strong u. S. Consumer on the one hand. Other parts of the economy not doing so well. Local economy soft and at the same time you have President Trump calling for a weaker dollar. What winds out . Where does the dollar go from here . It is fair to say the dollar upside should be limited. Quite a few people agree. Going to have another 10 depreciation. You see that in currency minute elation. Work, it percent is kind of undervalued. The catalyst for a much weaker dollar, perhaps is either going to come from the fed to be more aggressive than what is priced at the moment, the market is comfortable about two cuts, or does surprisingly good news out of europe with the ecb about to cut rates . Eurodollar, it could be a range bound euro. Unless we see outrageous remarks from the president about the need for a weaker dollar or perhaps instructing the treasury to look at the size of the u. S. Treasury reserves and whether they need to be increased. How real a risks intervention in your eyes . Yeah, i think 12 to 24 months ago you would have said virtually zero. The probability has increased. Perhaps you could say you could u. S. At the size of fx, the is the largest issuer of the world. They do not need large fx reserves. Perhaps they could use that as a rationale to increase the size of euro and yet holdings en holdings yen holdings. The expectation the dollars and play a role in weaker conditions, that is a problem for the u. S. Administration. Straightawayknown and the dollar weakness is not coming through. That is the thing where they are going to get frustrated. Nejra if you dont see a huge move in eurodollar, would you be choosing to see dollar weakness against the yen, for example, particularly with all these ongoing trade or comments . We got more from President Trump saying he can impose more tariffs if he wants. Exactly. We think there could be escalation in trade tensions this summer. You probably think we are talking about earnings results, stock markets at highs with trade tension, you probably think dollaryen is the best bid to express the weaker dollar view. Also at the same time, the boj is so much more interesting. They are trying to steepen the yield curve. , the treasury,d jgb spreads, that should narrow inside of 200 basis points. Steepen that yield curve for the japanese. What is the risk to that . We have a sale tax possibly coming down the pipe. What are the risks in the japanese story . If they are successful in steeping the yield curve, perhaps dollaryen falls too quickly. Given the intense focus on currency manipulation, the bank of japan cannot go near in terms of back in the 1990s or 2000, they would be buying hundreds of billions of dollars to hold dollaryen above 100. They just cannot do that today. Nejra let me ask you about the pound. One of the guests i spoke to said you need to be trading the pound or at least looking at it like an emergingmarket currency. Levels are you watching toward the end of the year on the pound in terms of entry point or where you would want to sell . 92 tobably we could see 93 for the end of the year. Cable can go down to below 120. The reason we have not got cable down to one tennis because we think the dollar will come off a little as well. That to the shortterm, if you look at the risk premium whether eurosterling should be trading based on factors that normally determine where it should trade, we think that is a 3 risk premium in sterling right now. That could move out to 6 . There is a lot of bad news. If something were to happen to make no deal brexit more likely, perhaps eurosterling could push closer to 94 or so. Great to have you with us on the show. Chris turner, head of foreignexchange strategy at ing. Has been von der leyen confirmed as the new president of the European Commission, the first woman to hold the job and the first german in over 50 years. She told lawmakers the most pressing issue is Climate Change and that she would seek to bolster relationships with the United States. Issues, but we should never forget we are allies and we are friends. We sit on the same side of the table. , we have to negotiate the different topics that have to be fought, but in the very end, we know it is better to be trading with each other. Confirmednt trump has turkey will not be able to buy the usf 25 fighter after it russianrchasing a Missile Defense system. The white house is still waiting economic sanctions. Sufferinga is likely its worst downturn since the 1990s. Thats when it was battling floods, drought, and famine. It may have lost 10 of its population. The bank of korea estimates it contracted by 3. 5 in 2017, leaving north koreas economy roughly the same size as the u. S. State of vermont. Gates has never ranked lower than number two in the history of the bloomberg billionaires index, until now. He has been overtaken by bernard are no. Company shares rose to a record yesterday, pushing his net worth to 107. 6 billion. That is more than 200 million head of gates. Ahead of gates. Global news, 24 hours a day on air and tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. 39 billion this year. Coming up on the show, we are going to get into gear. Erickson misses the marks. It says its rollout of 5g mobile we speak toa the ceo next. This is bloomberg. A. M. In london. We are 40 minutes away from the start of the european trading day. Nejra lets get a check on your markets. The dollar steady after we saw gains yesterday following strong retail sales and factory output data in the u. S. Even though fed chair powell stayed on message with the dovish signal. Euro stoxx 50 futures on the back foot. We could see futures followed what we saw, u. S. Stocks fall following comments about tariffs and Cable Holding onto losses. A twoyear low on comments from jeremy hunt and Boris Johnson the back stop being dead as part of the brexit deal. Manus it might be dead in their mind. One of the biggest banks in the region, profits up on the back of their sale. Their network sale. Core operating profit held by low growth, foreignexchange. Asian stocks just prevaricating at the moment. I would be is up a couple of pips. Dhabi is up a couple of pips. Thats the state of play on the markets. Lets get to debra mao with the business flash. Fullblown eus a as a finale to a crackdown on tech giants. Formalived investigation within days. Againstare competing those businesses in the very trade they do. We are looking into their use of data to see, is this done in a fair way . Or will there be a case for us . Bill ackman now has an activist of his own. Asset Value Investors owns 3 of his holding company. It is pushing back against the decision to issue 400 million twentyyear debt without consulting shareholders. It wants him to halt the plan and pursue a more aggressive buyback program. And first half profits jumped 49 as dubais biggest bank gains on a sale of its processing unit. Results were helped by loan growth, higher fx incomes, and increased activity in investment banking. That is your Bloomberg Business flash. Ericksons earnings have missed estimates for the first time in six quarters. It says the rollout of ig mobile networks was weighing on profitability. Adjusted operating profit rose to 3. 9 billion krona from 2 billion a year earlier. Joining us is the ceo of erickson. Great to have you with us. Units ericksons business except networks posted results below estimates. How far away are you from completing the turnaround plan . It is great to be with you. We continue to execute on the plan we put out. In compared to the progress and core structure. We are delivering according to that plan. We are putting ourselves on plan for the target we put out for 2020 and 2022. That is really what we manage. That withtrack for another solid quarter under the belt. Manus good morning to you. Keen to dig into these numbers. Theyre going to begin to ask questions. One of those is around the strategic contest on the asian 5g. What we want to know is, what is the magnitude and how long is that going to last in terms of the negative impact on contracts . Taking the increased market share. We are trying to strengthen our footprint in front of the 5g rollout. We have said that is what we are going to do. We are delivering on that. Of course, that is going to impact the margins. As you see on networks, if we can manage that within the say for us i would it is to continue to execute on that plan. The meats you see on digital services, i sometimes like to because we have said the improvement in services will not be linear. They will vary by quarter, and of course in the turnaround, it is very important to predict how that improvement is going to go. We are on track for the plan that would be low singledigit margins in 2020. We are confident it will be that. 5g, youn the theme of have said the uncertainty around huawei has led more customers to approach you. Are those approaches translating into contract wins . How many contract wins have you had as a result of the uncertainty around huawei . Cracks we have not seen any wins yet. A continued high activity level. And of course i concern, what is going to happen, Development Continues of the next round. So far, we do not see any thing material. Do you see yourself as a person to lead the Group Going Forward . Can you give us guidance on your intentions in that plan . That is a hard question. I have no intention of doing anything else. I came here to help work with the group. It is a great company. I have 100,000 colleagues here. For me, we have a lot to accomplish. You called this a solid quarter despite the misses versus expectations we discussed. You have also said you are on track for 2020 targets. Is it time to rethink your targets . Get that question often. Revising,work on instead lets make sure we can show we execute on them. Lets talk about that idea at the end of 2020 or 2021. Then we may have reason to do something different. Manus thank you so much. Keeping those analysts on their toes. The ceo of erickson confirming his intentions. A little bit of blip in terms of those numbers, but they are all in in terms of guidance. Due tono contract wins huawei. The european open up next. Anna good morning. Welcome to Bloomberg Markets european open. Today the markets say get ready for a world of hurt. Than arer fed cuts currently forecast could send treasury yields tumbling to negative real rates, joining the rest of the developed world. Europe points lower ahead of the cash trade. We are just 30 minutes away. Anna