Welcome to bloomberg daybreak europe. Earnings season, here we go. To this, crossing the bloomberg. It is raising its fullyear 3. 5 to 3. 55ld to euros. That is the headline at the moment. It is also announcing clearance for metadata, so that is that deal that was announced not that long ago and it is announcing clearance for that, so thats another headline coming through and its also reaffirming its revenue target. Those are the numbers coming through. Coming up on bloomberg, the ceo joins us for his first interview of the day. We will get into a lot more details and talk about the industry as well. Do not miss that conversation. Speaking of industry, lets take a look at basf. Third quarter adjusted ebitda, that is the red headline. 1. 1 2 billion euros. Estimate, 1. 06. There was an expectation that in be Third Quarter, basf could hit by slowing industrial demand. That is the story we are getting for other companies in this earnings season as well. Third quarter adjusted ebit is a beach. The outlook for 2019 is confirmed. Third Quarter Sales come in at 15. 2 3 billion euros. Estimate, 14. 9. A beach on third Quarter Sales as well as the Third Quarter adjusted two. Way,rade conflict, by the important, between the u. S. And china is weighing on operations. We have that headline in terms ishow the trade conflict impacting basf. Third quarter you been, Third Quarter ebit. A beat for Third Quarter ebit for daimler. Third Quarter Sales better than expected. Estimate was 43 point 13. Third quarter industrial free cash flow, the number we have here is 2. 8 2 billion euros versus 1. 86. By the way, there was some improvement expected for the Third Quarter for daimler even though we have had we had a mixed picture in terms of the carmaker so far. A little bit better than expected numbers. For daimler, Third Quarter you bit comes in at a beat. Ebit comes in at a beach. Hits took a 1. 5 billion last quarter. Its much touted technology overhaul. The biggest Bank Reported a thirdquarter operating loss of 421 Million Euros. It set a new dividend policy goal of 60 to 70 from 2020, which is part of a plan to significantly improve operating performance. Joining us on the phone is the ceo. Frank, great to have you with us on the show. What the market was focusing on going into this and what it will focus on is what you set about the dividend policy and the payout ratio, so talk to me about that. Why did you settle on this payout ratio, 60 percent to 70 from 2020 . What message are you trying to send . The 2019 dividend is a bit lower than expected. Frank thank you for that. We have decided on the yield. We have 60 to 70 . The reason for that is that the dividend policy now reflects the current environment. No clear targets. Dividends to our shareholders in the future. We feel this level is the right one. Our we have also have to our shareholders through buybacks. And that leaves, in total, room for drive growth initiatives. Forlso have the readiness those acquisitions. Assessing share buybacks continuously and it leaves room for tactical mna. Talk to me about the tactical mna and what you might be looking for. To do andt we want want to be seen as it is a very stable and very strong results. Thats what we return to our shareholders. We do see that we have a potential for growing the business. Organically, we are seeing a big up in our main businesses thats positive. Continue to develop that part. Of course, when possibilities arise for doing mna acquisitions , we are positive to do that within the core segments of our business. Nejra so thats the growth side of things, frank, but what about costcutting . You have announced ambitious costcutting targets. Shareholders have to some degree criticized mounting costs. Will this be enough . Frank we have launched a new target today for the company for the coming three years. Financial targets. First of all, we target a return in 2022. At 10 cost income ratio of 50 in 22. That will bring us down from 58 to 50 in the next three years. Seen, in lighte of deciding on new financial targets, maybe you find the business plans, and that has led to significant one offs for this quarter, so the quarter is special. Nejra to push you on the cost cuts a little bit, frank, how many jobs will you need to cut . Frank we do not have that ready yet. We have good dialogues with the unions. Cost income. That is really the important part. We have the income side and we have the cost side. What we target now is the totality of what we will be doing for the next three years. That will lead to a cost income of 50. It is quite competitive. Nejra where will the cuts be weighted . Frank you can say what it is about now is to increase our maketional efficiency and two more simple, more easy, and therefore, the main cost reductions will be in those functions. In order to deliver on our strategy, we will try to do as little as possible, what is needed in those units. Nejra what more can you say about growing the top line . Going the top line, having been in the business for 200 years next year, we fundamentally are here helping people with basic needs. Needs for household or grinning about the mortgage, and we will help with mortgages to a Large Company that are doing investments in the last company, in a different country. And we do see good Growth Opportunities in all of our segments. Nejra on the wholesale banking side, it has been very vocal about the need to have the wholesale banking unit. You are implementing a new strategy now which some might say is a wholesale rejection of the previous strategy. Frank we have Capital Markets. Our plans andase more details and explain how we look at different Business Units and what will be the levers to bring us to the next level. Forward to that Capital Market stay. Thank you so much for joining us, president and group ceo of nordea bank. We appreciate your time. The wave of thirdquarter results out this week are giving us an insight into the health of the Global Economy. Just breaking, basf saying a trade war is weighing on operations. Also that the u. S. Is experiencing a slow down. Joining us now is the group chief economist at Societe Generale. Welcome to the show. Great to have you with us. We are seeing moves like this coming through yesterday. Caterpillar, some might say it just confirms what we already knew about the manufacturing slowdown, but we are seeing the global slowdown show up in earnings. What are you seeing in terms of the profit cycle and what that tells you about the pulse of the Global Economy . It is important we distinguish between different factors weighing on the Global Economy here. Trade tensions between the u. S. And china are grabbing a lot of the headlines but beyond that, there are other things going on as well. The chinese economy was slowing independently of the trade tensions as well, partly linked to past policy tightening in china but also on crackdowns in terms of p or lending platforms. Lending platforms. Both sides of the atlantic, we are seeing that we are getting into that more late cycle stage of the profit cycle. We are beginning to see the margins come under pressure. We are getting into the late cycle. To me, it is not just about the political uncertainties. There are underlying reasons why we should expect the Global Economy to be slowing and i think thats exactly what we see showing up in the Earnings Data at the moment. Nejra are we at the point where what you are seeing is going to start impacting the labor market . Michala yes, i think we are getting very much to that stage. The forwardlooking surveys, it is not just about the Manufacturing Center any longer. We do see the slowdown spreading into services. Our expectation is that we will see a more substantial slowdown in the Global Economy coming into 20 20 and even into 2021. This is where the policy debate becomes absolutely critical. Nejra we will talk about that through the hour. Michala marcussen with Societe Generale stays with us. Mario draghi. We will be in frankfurt to look back at his legacy and preview the presidency. That is next. And when you are traveling to work, Bloomberg Radio is with you all the way. We are live on your mobile device and dab Digital Radio in the london area. This is bloomberg. Nejra this is bloomberg daybreak europe. I am nejra cehic in london. Bloomberg first word news and hong kong. Good morning. E. U. Ambassadors have agreed they should except the u. K. s request for a third extension to the Brexit Process but are said to be split over how long to grant. The french are pushing for a tight deadline of november 15 while many other countries want to permit the three months in u. K. Officially asked for. Johnson was forced to request an extension after he failed to win the backing of lawmakers in time for the october 31 deadline. President trump is lifting sanctions against turkey after they complied with the ceasefire agreement with Kurdish Forces in syria. Tom says it shows his decision to withdraw u. S. Forces has paid dividends. The senior republican of the House Foreign Affairs committee criticized the move. The representative says russia, solid, and iran are going to feel the vacuum left by the u. S. Withdrawal. Mark zuckerberg has warned that Congress Said if they dont take a lead in tech innovation, china will step in. Zuckerberg face are grilling for lawmakers on the House Financial Services committee over backchecking medical ads, and online child exploitation. He also defended plans for Facebooks Libra cryptocurrency. This project is too big for any one company to do on its own which is why we set up this independently with other companies and nonprofits. Project. Ry complex as you say, its risky. Parts of Northern California have gone dark in the first stage of a mass blackout that could eventually leave more than 1. 5 Million People without power. Utility pg e has been Cutting Service to customers in an attempt to keep its power line from sparking wildfires amid high winds. The blackout is set to spread overnight to other parts of the San Francisco bay area. South koreas economy is on track for a closed expansion since the Global Financial crisis. Gdp increased 0. 4 from the previous quarter, lower than forecast as trade uncertainties wait on investments. While, shinzo anbang met south korean premier in tokyo today. It is the highest level toxins historical disputes flared last year. 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. Ha. Oahn nejra thank you. Mario draghi will preside over in his meeting. In almost eight years in charge, he lived up to his pledge to do whatever it takes to save the euro. Draghi oversaw trillions in bond buying, negative rates, and he hands over to Christine Lagarde with the governing council split over the direction of european Monetary Policy. We are asking the question on mliv. Reach out to us and the mliv team. Matt miller miller, coanchor of Bloomberg Markets the european open is standing by in frankfurt. I am expecting from Mario Draghis final press conference is perhaps more pushing of the fiscal policy issue but also the classic draghi humor. What about you . Matt absolutely. I love going to these press conferences because of his very dry sense of humor. Its always a lot of fun to attend them. Hes probably going to be able to use his last press conference as a chance to call out governments. Maybe even call out some governments specifically in terms of his longstanding request for a little bit of fiscal help. Ithas been careful about over his tenure, but there is no more reason to be that careful feels the need to ask berlin directly to inject some kind of fiscal stimulus into the economy, today would be the day. The best day i guess for him to do it. It would be very interesting to watch also because of the divisions that you mentioned. Surely, he will get questions about that, but he seems to have held firm on his pledge to be whatever it takes and come through with another bout of bond purchases. 20 million a month since last for aner or last month unending period. It is not clear exactly how long thats going to last, but we dont expect, according to our survey, them to raise rates from the 50 basis points we are now until the end of 2022. Nejra what question would you want to ask him in the News Conference . One big question still remains, whether all the policies he put in place actually worked given that inflation is nowhere near the target and that is the main mandate. Matt you are right. There is that criticism. The ecb has not gotten near its target in any Sustainable Way of close but close to buffalo to percent. On the other hand, i think most Market Participants would declare his tenure a great success. There were moments when it looks like the euro area was going to disintegrate when the resolve for the common currency had theened really, even in core countries, especially in germany. But mario draghi took it upon himself almost in a religious way to support the common currency and a european project, and he has done very well at that and certainly has to be declared a success. Sora matt miller, thank you much, and we look forward to your coverage for the rest of the day. Joining us now is the group chief economist at Societe Generale, michala marcussen. Michala we have heard that mario draghi has shown fantastic results to keep the euro area together, to be whatever it takes, and i think we can absolutely congratulate him for that. When we look at every press conference he has given, he has told the european government, please use this window of opportunity to complete the European Architecture, to have better mated fiscal policies, and to pursue the structural reform agenda. If there is a criticism to be had, it is less on the ecb and more on the governments for not having done more, and i am very much hoping that as Christine Lagarde comes in, that she will be able to convince the government that its a good thing she told us last year at the imf that we should fix the roof while the sun is shining. It is getting more cloudy but we still need to fix that roof in europe and im hoping she will push on that. Nejra i understand the argument that fiscal needs to step up. You expect that looking ahead, the ecb might implement further easing. In what form and why, if it is pushing on it . Michala the ecb would look to cut rates again coming into next year, so i think its more about relying on building the European Architecture so theres both the European Architecture and the fiscal policy. The euro area remains very fragmented. This has been one of the issues for the ecb to conduct Monetary Policy in a fragmented area, so to my mind, its about completing the banking union, developing a safe asset for europe, and working on the Capital Markets union. That is more important now that we see brexit is coming to a materialization. It becomes even more important for europe to focus on how well it how will that finance its economy for the future . Nejra we have had some signals from germany that they might be a little bit more open to fiscal stimulus. Come andpect that to in what timeframe and in what form . Michala i think germany is open to some more fiscal stimulus. The biggest question is what does it mean for the rest of europe . Theres this really been focus on germany should do more, germany should do more. Even if germany were to do a very large Fiscal Stimulus Program, it would help Germany First and then it would help a number of smaller economies that are closely tied to germany. It would not be bad news for everyone else, but i do not think we should expect a german Fiscal Stimulus Program to relaunch the growth engines of france, italy, or some of the other big economies in our region here, so i really think the focus should be on having a more coordinated policy and perhaps i am getting a common fiscal tool. That is what i would really like to see here. Panaceaot really the for problems then. In terms of the slow down we are seeing, how quickly might we reverse if the u. S. China trade war were to look a little bit more positive . You also pointed to the impact on the european profit cycle as well as the u. S. Michala we talked about a number of different factors slowing the u. S. Economy. If they get to a trade deal, that certainly takes away Downside Risks for my scenario, but it does not really give much of an upside boost in a big way because if we think about it, to really get to a situation where we can reengineer a big lift to trade, everybody has to be confident that match a deal is permanent and that it is also a trade deal that fosters a continued integration into the Global Supply chains, continuing to building that out, and unfortunately, i think confidence has taken a more permanent hit here which will take significant time to rebuild, so yes, trade deal is helpful, but i do not think its going to be the fix to global trade here. Nejra michala marcussen, from Societe Generale, stays with us. Profits soaring. We will break down those results, next. When you are traveling to work, liveinto Bloomberg Radio , on your mobile device and dab Digital Radio in the london area. This is bloomberg. Nejra this is bloomberg daybreak europe im nejra cehic in london. Lets get the first word news in hong kong. Eu ambassadors have agreed they should accept the u. K. s request for a third extension but are said to be split over how long to grant. The french are pushing for a tight deadline of november 15 while many in other countries want to approve the three months originally asked for. Theson failed to win backing of lawmakers in time for the october 31 deadline. President trump is lifting sanctions against turkey after it complied with a ceasefire agreement with Kurdish Forces in syria. Trump says it shows his decision to withdraw u. S. Forces has paid dividends. The senior republican on the House Foreign Affairs committee criticized the move. Representative mccaul says russia and iran will fill the void left by the u. S. Withdraw. Microsoft saw a boost for demand for its Cloud Computing programs. To 10. 7 billion dollars with Productivity Software results coming above analyst forecasts. Services roseloud 59 in the latest period, though this was slower than the 64 gain in the previous quarter. Parts of Northern California have gone dark in the first stage of a mass blackout that could eventually lead to 1. 5 Million People without power. Is Cutting Service to customers in an attempt to keep power lines from sparking wildfires amid high winds. The blackout is set to spread to other parts of the sacramento bay area San Francisco bay area. Tesla shares jumped after a surprise profit exceeding estimates by a wide margin. The carmaker earned 1. 86 a share. The consensus estimate was for . 24. Musk also told investors the new plant in china has started production and the model y crossover will launch earlier than planned next year. Factoryot aware of any being constructed in such a short period of time of 10 months. This progress is unprecedented. Shanghai will become a template for future growth. Oanh global news 24 hours a day, onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im oanh ha. This is bloomberg. Lets pick up on the tesla story. The share price surged after hours. This was a report that broke the or elon musk but revenue dropped, so how did he pull this off . Oanh tesla said they were able to curb costs and be able to add gross profit margin. This was an afterhours earnings surprise. We saw the stock climb 20 so investors were surprised and pleased about the results. Took to twitter right away to highlight the positive news and most notably, as we mentioned, the shanghai factory is slated to open this year ahead of schedule. He said trial production is underway. Nejra the factory in shanghai ahead of schedule, good news and an important market for tesla. This report was packed with positivity. What should we still be concerned about because there have been moments in the past when the company has posted the occasional profit, but it has been a unable to sustain. Is the profitability going to be sustainable this time . Oanh i think that is always the question with tesla this time, right . Thelways likes to push envelope in proclamations and deadlines, but sustainability and momentum is always a factor. There were challenges. The first timer since 2012, so there are concerns that are there. As tesla shifts to lowerpriced cars but the news analysts are looking at is the news of the shanghai factory. They have been able to pull back together in record time, six months, really from getting permits to essentially getting the electricity up. They are having trial cars roll and elon musk himself says they expect me rolling about 1000 cars off of that shanghai line by the end of this year. If that is the case, that beats with they were able to do in california at their original factory. China is a huge market for tesla, the secondbiggest market and it will be increasingly becoming important as demand cools in the u. S. Because you are seeing a lot of federal tax credits fall off in the next coming months. China is a huge market if they are able to open the factory in still to be seen but investors are really hoping it will give them a lot of momentum. Nejra oanh ha in hong kong, thank you. Lets turn to brexit and the eu johnson hanging last night as officials in brussels debated when the deadline should be. Pushing fort to be november 15 while other nations prefer january 31. Lets go to brussels and maria tadeo. There is no consensus on the extension, it seems. What happens next . Macroneryone believe will continue to push forward with this sort of shorter deadline he called for . Maria he is certainly pushing and pushing hard to get a very short technical extension that would essentially city the United Kingdom leave the European Union on november 13. Shorter than the extension requested by the United Kingdom and pushed forward by donald tusk, which would see the u. K. Stay until at least january 31, 2020. The thinking behind macron and other countries is if you keep the short deadline, that would keep everyone focused on focusring brexit and minds in the u. K. And would keep the eu out of a political game in the u. K. We dont know if this will lead to a general election or not. This is something that worries the europeans. They do not want to get trapped in more Political Drama in the u. K. Is aer part of the debate longer flexible extension that would see the u. K. Leave before that and there is momentum when it comes to that, so they agree they need more time but debate how much time. Maybe tomorrow we get an answer but if not, we will wait until monday. Nejra in terms of the flex tension and even longer primeion, bulgarias minister talking about going on like this for another 90 to 100 years, surely not. Maria thats right. It is never ending, that is how it feels here. The reality is, the europeans ultimately believe a no deal is not in anyones interest, and the United Kingdom needs to leave with a deal. They have come to terms with the idea that they leave, they leave with this deal. He is hinting that ultimately, whenever they need more time, the eu will never push the duke it out. The u. K. Out. They will never push the country into a chaotic and fit exit. They see Boris Johnson is very close to delivering this deal, so they want to stick with him and believe if anything, he is. He man to deliver brexit hes the only one who can do this at this point and if he needs more time, they are willing to give him more. Nejra bloombergs maria tadeo in brussels, thank you. Our guest from Societe Generale is still with us. Isr baseline scenario consistent with a cooperative no deal brexit or something else. Tell me what your baseline is. As we were preparing our forecast, there was uncertainty about what happened on brexit, so we look to understand what are the most likely scenarios . What we have said is we are looking for 0. 2 growth for the u. K. Next year under the exception assumption of a no deal brexit happening at the time when we were writing on the 31st of october but with the idea everyone would Work Together to make it as smooth as possible or a prolonged. Bank of brexit uncertainty because keep in mind that even if we do manage to have a deal 15th of november, later on, we still dont know what the next steps, next future relationship will be between the u. K. And eu 27. That still needs to be negotiated. Declarationolitical that sets the stage for those negotiations, but there is more to be negotiated over the coming months and quarters, even assuming this deal comes into place. That uncertainty is something that will continue to weigh on businesses and that is why we have this scenario. More negativemuch scenario of a no deal brexit, and it becomes uncooperative, so to speak, we could imagine a much worse outcome for the u. K. , but that is not our baseline scenario here. Nejra even in the better scenario you outline, there is still going to be a lot of uncertainty weighing on business investment. What does that mean for the bank of england . Are we on hold . Do we turn to rate cuts . What happens . Dave remsen has been talking about the potential for rate hikes. Michala we are more looking rather thaneasing more tightening at this stage, but it depends tremendously on what happens to the currency in the scenario we are working toward. There is still a lot of uncertainty as to where we go. I think maria in brussels pointed out very well that the idea of a short extension could potentially give us clarity with the johnson deal going through. Get that, there is a risk the u. K. Goes into a general election, so there is still a lot of shortterm uncertainty on what actually happens, but as we look forward, depending on the currency am i think we are looking at a slowing economy and that opens the path for potential easing from the bank of england. Nejra lets talk about the currency, then. How much more potential upside is there for the pound now, depending on where you see fair value . Michala i dont see a huge there will probably be some relief pounds once we get some clarity if a deal comes through that will take away some of the shortterm uncertainty, but it is important to emphasize that this longerterm uncertainty is very, very important. Futurell the relationship between the u. K. And the eu 27 . What kind of trade arrangement . Trade arrangements will the u. K. Vehicle able to put into place with its other trading partners . Uncertaintyterm will continue to weigh both on the economy and on sterling. Nejra great to have you with us. Michala marcussen, group chief economist at Societe Generale. A star stock picker is closing his hedge fund after eight months of trading. He rose to fame as the manager of a Fidelity Fund wrote in an investor letter he is having difficulty raising capital. Disclosure illustrates the growing scrutiny amid the rise of cheap index trackers. With more is dani burger. Take it away. Dani the industry has felt the pain of cheap index funds that have gotten assets for some time. Veterans whoeing survived multiple Business Cycles throw in the towel. Jeffrey bennett during his four years at magellan fund, he beat the s p 500 by a fair margin so he did receive some scrutiny during the time. From tech stocks into bond, meaning he underperformed peers, but thats at magellan up to completely or nearly avoid the tech bubble and capture the record rally in bond markets. To give you an idea of how much his skill was valued, he raised 800 million after 19 96 to open a fund which was a record startup at the time. Since 1996, we have come a far way. It is a different world and around the world, we are seeing customers pullback from hedge funds after poor for performance that failed to justify relatively high costs. You can see we have seen some less launches, increasing closures, closures on the bottom yankedestors 56 billion , 50 more than 2018 according to a data provider. These cheap funds capture every cell you could imagine, making it difficult for managers and Equity Managers to justify when they historically cant beat the benchmark. Not even vinik, this legendary manager, is immune. Bottomup stockpicking and in a letter to investors, he said it has become harder to raise money over the last several months and he anticipated. He says he very much doubts he will go back into the hedge fund business. Nejra bloombergs dani burger. Fantastic roundup, and coming up, the ceo joins us in the studio for the first interview of the day after the Third Quarter results. When traveling to work, tune into Bloomberg Radio, live on your mobile device or dab digital in the london area. This is bloomberg. Nejra this is bloomberg daybreak europe. Im nejra cehic in london. Lets get the business flash with oanh ha in hong kong. Oanh tesla shares jumped after a surprise profit, exceeding the most optimistic estimate by a wide margin. Earned 1. 86 aer share in the Third Quarter. Consensus was for a . 26 loss. Point in china is already starting production and the model y crossover will start earlier than planned next year. Not aware of any factory of this magnitude in history being construct to do in such a short. Time of approximately 10 months. And theunprecedented factory in shanghai will become a template for future growth. Ys inbuilding model shanghai, and a factory in europe. Oanh a 1. 5 billion hit last quarter as the bank booked losses across key projects including its technology upgrade. That contributed to an operating loss of 421 Million Euros in the Third Quarter. The biggest lender in the Nordic Region is pushing through a wholesale overhaul and slashing its dividend policy. Earnings saw a boost for demand for its Cloud Computing programs. Roset in the First Quarter to 10. 7 billion with office Productivity Software results helping results come in above analyst forecasts. Revenue from Cloud Services rose 59 in the latest period, though this was slower than the 64 gain in the previous quarter. Employees dismissed claims it is developing an internal surveillance tool to monitor workers attempts to organize protests and discuss labor rights. Employees said it discovered a new tool for the custom Google Chrome browser installed on all workers computers. Google says the claims are and thecally false, tool is a popup reminder about how to use the calendar. Im oanh ha and that is your Bloomberg Business flash. Nejra so much. French Engineering Software maker Dassault Systemes reported results this hour with revenue beating expectations after Dassault Systemes bought metadata solutions, a Trial Technology company. They expect completion of the acquisition in the coming days. Joining us for the first interview of the day is the ceo of Dassault Systemes, bernard charles. The clearanceut for metadata. Congratulations, but what does this mean for the broader strategy in acquisitions . Bernard it is a significant acquisition, 6 billion is a lot of money. It is a world leader, Clinical Trial. Planes and cars have been done using between experience. You manage the real world to produce a design. Same with the human body. The intent is to create a system for the digital between of the cells,ody organs, human connecting, manufacturing on Clinical Trial is a significant game changer. In the Health Care Industry. Theink people are realizing Health Care Industry will change with that platformbased set of practices. Nejra lots of opportunities in the Health Care Industry, but your business touches many sectors and one thing we can to think is an generic normally gets hurt with a macro slowdown, which is what we are seeing at the moment. That being reflected in your business . Bernard when you think about your dominant sector, a big decision was toyota adopting our platform. The players bringing program you will see on the market five years from now. Usually, we are counter cycle because we are not related to production volume, but product. Electrical cars and smart mobility, like what hes doing being done with autonomy of cars, are very significant programs. Sector is going through significant transition, which makes a good dynamic for us. Are good for longterm. The resiliency of our company is very strong. Lockheed martins decision for sophisticated equipment. With high revenue recognition, very strong for us. Nejra interesting what you say about the auto sector and the the you are going against cycle because they are planning five years ahead and that is where your work comes ahead. When we worry about the auto sector, do you have faith carmakers are going to weather the storm at the moment . Bernard it is an interesting moment for this industry, because the profile of what they produce is very different. Is simpler, but the value is coming in the software side. When you have to do electronics on smart systems, connected systems, like new engineering world, like what we have done for years with tesla and other players. A new contract with amazon delivery, the system is always there. With all startup companies, doing new mobility whether it is in the air, on the road, or connected vehicle because it is complex. You need to manage the complexity, and because it is something you need to satisfy. The certification process is going to be a new game because you have to automate the way you test the service to reduce risk. Nejra you mentioned tesla. I understand you are friends with elon musk and he pulled it out of the bag with the latest earnings report, cap with positivity. Positivelyreacted but is the prophet, the surprise profit they reported going to be sustainable, in your view . Bernard difficult for me to say. It is a customer so we are delighted to see a customer being successful. I think they do products good products, too. We will continue to work with all of them in this area. The automotive sector is a very hard sector. Performance and production, it is hard to produce with highquality. Nicenk they have done a job to improve their capacity to deliver and i wish them the best. Nejra the production target, do they seem realistic to you . Is that something that fills you with optimism as they are a customer of yours . Bernard the market today, and china was very strong for us this quarter and will be for the the hybrid vehicles, electric vehicles, and the balance is still being decided consumers, and also by the speed at which the infrastructure can be developed. Visible elsewhere. In northern europe, the infrastructure is developing and the adaptation of the adoption of the vehicles is good. In china, you will see a good mix. In europe, it is questionable based on the speed of states to develop the infrastructures. One thing which is important for us, the Battery Technology is evolving very quickly and we provide sciencebased platforms for Battery Technology, so plenty of opportunities. Nejra we dont have a lot of time left, but i want to ask about the Consumer Sector because that is the one point that seems to be holding up, particularly in the in the u. S. , but if the consumer buckles, there are worries about a global slowdown. What are you seeing in u. S. Consumer packaged goods . Bernard this is a new sector for us. Unilever or procter gamble, this quarter, what do we do for them . Packaging, capacity to create new formulation of products, we have lori l as a customer. And capacity to produce quickly. It is a market where digitization will accelerate. Nejra bernard charles, ceo of Dassault Systemes. Thank you so much. Coming up, ecuador cost profit drops by half in the Third Quarter as oil and gas output tumbles to threeyear low. We speak to the ceo. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Nejra good morning, this is bloomberg daybreak europe. The script, asian stocks cling to gains after results from microsoft boost sentiment. Daimler beat estimates. Takes the stage for the final time as ecb president. We are live in frankfurt as he leaves behind a divided governing council. Boris johnson hanging over third brexit extension. The french president will demand any delay last 15 days. Welcome to bloomberg daybreak europe. We are in earnings season. To rbs, thirdquarter operating pretax loss of 8 Million Pounds. This is a surprise loss. 720mate was a prophet of million pounthirdquarter totals in at 2. 9 billion pounds. The estimate was 3. 5. The thirdquarter total income is coming in softer than expected. Helm,is a new ceo at the not being met with fantastic numbers right now for the Third Quarter. Rbs says income was impacted by a challenging quarter. That is the guidance we are getting for the numbers coming through. ,etaining the outlook provided and says it is on track to achieve a 300 Million Pound target for 2019. The 2019 and 2020 outlook are unchanged. Coming in, the red headline saying thirdQuarter Sales 1. 7 billion euros, that is a beat for thirdQuarter Sales, and the to therowth accelerating fastest pace in six years. No change in mainland chinan Growth Trends since the Third Quarter. Thirdquarter asia sales rising 21. 8 . The estimate was 16. 8 . Coming iner sales at a beat. Yesterday we did see green on the screen, but with muted gains. , but with muted gains. But the 100 are flat. Dax futures are on the front foot. A lot of earnings to get through. Yesterday better than expected earnings for microsoft, pushing the s p 500 above 3000. 0. 3 . Muted on u. S. Futures. Bond investors were concerned because we were seeing yields falling on the 10 year treasury and in europe. The bond futures is reflecting what is happening on the cash trade. There might not be a lot of we look aheadnds. To mario draghi, not expecting changes to policy. It will be a fascinating farewell with the emphasis on fiscal. As corporate earnings system continues, a warning that the affecting earnings. Bernard charles, vice chairman ceo, Dassault Systemes laura frost, investment specialist, m g. Are in fixed income, what is your take on the slowdown we are seeing, and what it means for the bond market. Laura thinking about the global slowdown, you have trade wars impacting the earnings we have been looking at. There are Companies Using that as a lever in terms of supply or customers. Perspective,arket it is to be expected. We had yields at record lows across the world as trade was a big worry. A little bit with a selloff, but we have come from extreme levels, and fixed income is about relative value positioning. On relative value and i hear this a lot from managers like yourself what are your key relative value trades . Laura you have to think about the mandates. We have fixable mandates, some of them are well invested, but still supportive of credit. Some of those earnings coming through supports that come up because the consumer in the u. S. Is robust. We can see that from the earnings we have seen recently. Mandatesipside we have that are flexible which would take risk in the currency markets, and currency is an extension. We have relative value even within credit. About that theed u. S. Consumer is holding up, and that is feeding into your strategy. You are underweight utilities. How is this potentially going to change with the outlook for brexit . Laura this is really interesting, particularly in the u. K. Portfolios we have been underweight utilities that have less chance of growth. Ultimately, something we have if athinking about is corbyn government comes in, one thing he has said is about nationalization. We have not done anything about that yet mom but it is one to watch because some of those credits will end up as gilts with an underweight position relative to the index. That could leave us a little bit of a drag. Nothing has changed, but it is something we are watching. Nejra have you changed any positioning in gilts . Gilt market is an interesting one. If you look at the short end u. K. Your yielding 17 basis points, and you have to go out like years to get anything 70 basis points. We have a barbell, and not much between one and nine years, and in the rest of the Duration Risk taken further out along the curve. Sort of overweight underweightoverweight. Nejra with the moves in cable, is it time to fade that trade . Laura break evens has been smart, we have gone from 3. 3 to 2. 9. That is an enormous move. 3 price impact there and more. At the moment that as a result. F sterling, sterling strength how much higher can sterling go . We have a break. Untilt be sustained november or january, that prolongs the uncertainty. The market is reacting to the currency. Nejra what is your expectation of the currency . We have taken a little bit of a pause. A lot of rehashing of views of where sterling goes from here. Do we go all the way to 1. 40 . Seen, that remains to be and it depends on the outcome. Very low on 1. 22 is a relative basis. We added 5 sterling to some of our portfolios, but on weakness on. Relative value. There is a technical around 1. 35. Essentially, can we break through there . We would need some good news and a good outcome. A resistance level, and it is not that far away looking at 1. 30. Nejra that good news would be what . Laura a deal which keeps the consumer consuming. A deal which means the bank of england is not forced into cutting, creating stimulus. We have a slowing economy, part of that is from the trade war and the rest is coming from brexit. And we get as deal, that is where we will see that currency rallied. Nejra lets circle back to the u. S. Consumer. I wonder given that we keep having conversations where we are in the cycle, and some say we are in late cycle and that is what they are positioning for. If you are doing that, what credit do you overweight and underweight . Laura there are sectors doing. Ell, and in the credit market we were overweight telcos for a number of years, and we started to real that back in. We have taken profits in some of the financials and reducing risk out of some of the portfolios. Ultimately, the place to be on relative value trading credit is the u. S. , and it is a long end of the u. S. And ae media, technology, lot of those companies have done reasonably well. That is proof the consumer is still consuming. We are late cycle that the fed is trying to orchestrate some sort of soft landing. Tora some people say stick the short end of credit, less risky and late cycle. Why the longer end . Laura you have a steeper ucurve. You have a steeper curve. Financials in the short rated space, particularly new issues, there is reasonable value there. Certainly further out along the curve, relative value versus the short. Other sectors where we are currently. Nejra briefly on treasuries, how would you play that curve . Laura treasuries are interesting, you would argue it is reasonably expensive. Into the u. S. Arket because of real yield it is not that compelling, but more compelling than anywhere else. I think the market is pricing in one more cut. That is what it is looking like. The fed does not want to disappoint the market. Treasuries will probably continue to selloff. Watch this space for the trade war. Nejra laura frost, investment great to haveg, you with us. Lets get the bloomberg first word news. Trump is lifting sanctions against turkey after it complied with the ceasefire agreement with Kurdish Forces in syria. Trump says this has paid dividends. The senior republican on the House Foreign Affairs committee criticized the move. Michael mccaul says russia, assad and iran will fill the vacuum left by u. S. Withdraw. Facebook Ceo Mark Zuckerberg zuckerberg has warned congress that if u. S. Does not take a lead in innovation, china will step in. Zuckerberg faced a grilling from the House Financial Services committee over Fact Checking political ads, manipulated videos, and online child exploitation. He defended plans for Facebooks Libra cryptocurrency. Big forproject is too anyone company, which is why we set up an independent association with other companies and nonprofit. It is a complex project, and risky. Singapores economy may be a few quarters away from a recovery, that is the view of the central bank chief. In an exclusive interview, the monetary authorities said his baseline view is the current cycle should be bottoming out toward the end of the year into next year. He says that the client trade and manufacturing has not spread to other sectors. Be that every slowdown , every risk or threat on the horizon leads to losing Monetary Policy. Fiscal policy has a strong role to play, and that has not been sufficiently addressed. Parts of no the california have gone dark in the first stage of a massive blackout that could leave 1. 5 Million People without power. Pg e is Cutting Service to customers to keep its power lines from sparking wildfires among high winds. The blackout will spread to other parts of the San Francisco a area. South koreas economy is on track for the slowest expansion since the Global Financial crisis. 0. 4 gdp from the previous quarter as trade uncertainty weighed on investment. Shinzo abe met south korean premier in tokyo, the highest level talks sense the historical dispute flared last year. Global news, 24 hours a day on air and at tictoc on twitter, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. You. thank coming up, mario draghi will decide over his final policy meeting as president of the ecb. We will look back at his legacy and preview Christine Lagarde. Nejra 7 19 in london, 40 minutes from the cash equity market open. This is bloomberg daybreak europe. I am nejra cehic. Lets get the Bloomberg Business flash. Surprise profits exceeding the most optimistic estimates by a wide margin, the electric carmaker had a consensus estimate for a loss. Elon musk said his plans in china have started reduction and the crossover will launch earlier than planned. Boostoft earnings saw a for demand from its Cloud Computing program. Profit in the First Quarter rose to 10. 7 billion with software also helping results come in above analyst forecasts. Revenue from Cloud Services rose 59 , slower than the gain in the previous quarter. Bookedbillion hit, losses across key projects including a touted technology upgrade. That contributed to an operating loss. The biggest lender in the Nordic Region is pushing through a wholesale overhaul and flashing its dividend policy. That is your Bloomberg Business flash. Nejra mario draghi leads his last Council Meeting today. How has the region fared under draghi . Dani it was three words, whatever it takes that defines Mario Draghis time as ecb president. There is another number he is more proud of, a letter million jobs. Implement growth in the eurozone, the justification for the stimulus 2011. Hed through since the prime reason for the low rates and other measures is to overcome week inflation, but that has not gone well. Consumer price growth has averaged 1. 2 , short of the goal of under or near 2 . Another key indicator to gauge the success of lending to banks and households has responded better to stimulus. Just under 4 , credit expanding a three times the rate of gdp. Banks have said that is threatened by negative interest rates. Maybe draghis ultimate legacy is never sit to the concern to the Currency Union despite the eurocrisis and the greek crisis and the brexit referendum, you can see the probability of a breakup is near a record low. Is stefanning us now schneider. Great to speak to you. Tenure been ahis success . An that depends on the counterfactual evidence. You would imagine if he had not done what he had done for some he is the rescue of europe. At the later stage of his tenure, you could argue maybe he missed the timing to get the super expansionary policy to add to that. That is what critics will blame him for. Nejra there is a lot of talk about the super expansionary policy hitting its limit. When Christine Lagarde takes the helm, do you expect that to continue under her leadership . Draghi first of all, last month of the council basically saying the path is state dependent, and it takes a pickup in inflation to sustain for the ecb to change its course. That is not within the next three years. In this regard, Christine Lagarde has to continue the course and assume there will be most likely another 10 basis point cut in the december meeting when lagarde takes over. Draghi will be remembered for those three words, whatever it takes. One thing you were hinting at that he might be criticized for is the fact the official mandate in terms of inflation has not been reached. Will be ank there policy review under Christine Lagarde, and if so, what should he changed . Stefan there will certainly be a policy review. How wide will it be . My perspective, the ecb should consider having an inflation target because what mario draghi has shown, and other central banks, is that currently we have some deflationary sources that play. That cannot be overcome by Monetary Policy alone. We even see the Monetary Policy to get inflation back to 2 is creating more negative side effects of bubbles and things like that. On consumerfocused price inflation, it is probably too narrow. Will Christine Lagarde be able to convince germany to open the fiscal tax . That. i do not see as a german economist, if you talk to german politicians, they are saying the economy is slowing, but we are far from any crisis. And we have built in stabilizers in the system which help. Facing as germany is not a proper recession, something forecast falling into negative territory for 2020, i do not think germany is prepared to open the fiscal coffers beyond what is already in place. The german fiscal stance has eased, and will continue to ease next year. That is facing capacity constraints. Lagarde willk convince germanys finance to open up. Nejra mario draghi might tried it convince them in his News Conference today. Thank you for joining us, stefan schneider, chief economist from deutsche bank. We will bring you coverage of Mario Draghis last press conference. That is it for bloomberg daybreak europe. The european open is next. This is bloomberg. Devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. Anna good morning and welcome to Bloomberg Markets european open. We are live from our European Headquarters in london. I am anna edwards alongside matt miller in frankfurt. Manus good morning matt good morning. , his last meeting as ecb president , and this divided European Central bank will be asking a lot of questions about how policy goes forward under madame lagarde. The cash trade is less than 30 minutes away