Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

Expected to remain in place until after novembers election. Steve mnuchin says there are no side agreements ahead of the phase one China Signing today. Equities fall on concern that trade tensions arent over yet. That is a report suggests the u. S. Is drafting rules to block. Ore sales to huawei ubs embarks on a sweeping round of job cuts as Morgan Stanley promotes the fewest number of people to its top ranks since 2002. Goldman sachs reports later today. Just under an hour away from the start of cash trading. Lets take a look at what features are showing us. They are red arrows across the board. Not big in terms of side size. A few drops in dax and ftse futures. Futures, there. Are red arrows. Early on in the game, 7. 5 hours to go until the nys be brings its opening bell. We see s p, nasdaq, and down jones features down. What do you see . Anna something negative on the asian equity session. Asian equity markets headed to their first job in five sessions. Drop in five sessions. We see that signing of the trade deal, phase one trade deal in washington set to take place later today. The markets as they have price that in. There have been a couple of reminders that this is absolutely not the end of the trade discussions between the u. S. And china. One of those is ongoing headlines around huawei and tensions there. Some of these tariffs that have been put in place on both sides will be sustained. On the west side, they will be sustained a little bit longer into 2020 and after the election. All of that in investors minds as we see selling coming through on equity markets in asia. Disappointment about what we heard from the pboc. Maybe some expected a little bit more. We are going to be talking about bank profitability, u. S. Banking, reporting their numbers. Fixed income coming through. That is part of the story we will be dealing with. The data looms large on the agenda is well. The gdp numbern do out of china at the end of this week. Lets get to the market conversation now. Lets get to mark kudlow who joins us from singapore. There he good to have you with us. The market is down for the first time in five sessions in the asian equity trading day. Is that a substantial change of heart from Equity Investors in asia or is this a positive or thought . Mark i think it is a cause for thought. It emphasized the concerns we have Going Forward. It is very hard to see the signing of the deal today as a positive catalyst. We are getting hyped up about the signing of the deal. What deal . We have not seen the text. How can we be sure that it has the concrete details and specifics we need . How can we be sure that the english and chinese versions are the same . The most likely, rather than heralding the end of 18 months of uncertainty and a whole new paradigm in a trade relationship, we will raise more questions. We have been talking about the concern around of limitation. I think that concern will be heightened when we get this deal and people start asking secondary questions. The questions they werent able to ask in advance because they had been given so few details. Im pretty constructive on risk assets for the rest of the first quarter. Central banks continue to support the market. The growth situation is not slowing down rapidly enough. Earnings have started off well enough. I am worried in the shortterm, how the next few days go in the wake of this straight bill shining. Signing. Matt do you see a selloff when people are disappointed that the trade deal doesnt encompass what they thought it might . On further concerns about valuations, about huawei, about brexit, about everything. Is it going to be the start of a bear market, a major correction . Very unlikely. We need Something Else to derail the market. I think overall, the next 5 is still likely to be higher for. He s p 500 markets and asia could continue. , i think it is hard to get an extra impulsive trade deal. It wont necessarily derail the bigger bull market we are in. Anna what do you make of the central banking response coming out of china . Some voices, underwhelmed from what we saw from the pboc. Failingour colleagues to revive animal spirits. Is that the role of the pboc . Is that something they should be doing more than they are . Mark there is definitely a sense of disappointment today. I know it came after those headlines that the tariffs remained. That was already expected. That was the base case. I think we got this disappointment in the market when the pboc measured a liquidity injection and did not adjust the mls rate ahead of the chinese to your holiday. At of this deal signing tonight. To take incentive profit from chinese assets which have done well recently. The result bit of disappointment. The overall picture from the pboc is the same. Look, we will continue to provide steady support for this market, consistent and gradual. We will not pump it up. We want to slowly deflate the excesses in certain areas. It goes back to the longrunning theme of the pboc. They are providing targeted easing. No blanketing extreme stimulus at any point. Shortterm disappointment but nothing to get worried about. Matt thanks very much for joining us. The bloomberg mliv managing editor out of singapore. Up next, a look at the stocks to watch at the open this morning including airlines after the u. K. Government rescues troubled carrier fly be. Bloomberg radio, live on your mobile device on Digital Radio if youre in the london area. Tune in. This is bloomberg. Anna welcome back to the european open. Nine minutes past 7 00 in london. 50 minutes to go until the start of the European Equity day. Weakness seems to be permeating through the asian equity session ahead of the signing of that trade deal. Lets get the bloomberg first word news update from hong kong. Thanks. The company minister asian plans to restrict the medias ability to prepare economic stories. The u. S. Hosts a lockup were journalists conceded end of time in a secure room. They can publish the stories right on schedule. Now the administration is looking at removing computers from the room, making it more difficult to get the stories out on time. Europe is turning up the heat on a ron in a bid to save the nuclear deal. Germany has triggered formal action against tehran for breaching restrictions on uranium enrichment. Iran says the decision is a strategic mistake. The eu has been struggling to hold the deal together since the u. S. Pulled out. The u. S. House is set to vote today on sending trumps articles of impeachment to the senate. House Speaker Nancy Pelosi will hold a News Conference at 10 00 washington time with more details. The next that is his trial in the senate. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna thanks very much. Lets talk about the stocks we are watching this morning. Newsroom, weve gathered joe eastern who is covering the air sector. Dani burger is focused on asm. Joe they got a governmentbacked loan. The government was adamant that they would not bailout thomas cook. It is the biggest domestic airline. It is worth noting that the read across to other airlines might not be that big given that the likes of ryanair tends to focus more on international routes. You can see that in the comments from British Airways. The British Airways boss calling it a blatant misuse of public funds, subsidizing mismanagement of the airline. You can see it is possibly not a positive for the rivals. Airlines had a good start to the reportven the strong from reiner last week. Morgan stanley upgraded the sector yesterday. There is one other stock to know. One of the parent companies, owning a stake in flybe. Maybe providing extra funding as well. Matt all right. We are watching that in the u. K. Dani, you are watching asm. Dani Asm International out with a Fourth Quarter trading update. Orders are going to surpass what they had previously estimated. Their prior estimate was between 290 million to 300 290 euros. They say that the orders will be just about around 370 million euros. That is an upgrade from asm. We dont get their phone numbers until february 25. That will be for the fiscal year and for the Fourth Quarter. This stacks onto previous earnings we got. Semis beat on sales as well. It is an optimistic viewpoint for the chipmaker. Expect shares to rise today. Matt thanks very much for joining us. You can get all of your stock news by typing first go on the bloomberg terminal. You can get first word news on your mobile device. In terms of macro news come a gdp reading from germany later on. Economists see growth at 0. 6 . That is down from 1. 5 in the previous year. Joining us now is carson jet ski, chief economist for ing germany. Why dont we start with ecoexpectations. What will we get in gdp . 0. 5 . We dont have any Fourth Quarter data. All the analysts will try to start to derive what could be the Fourth Quarter like. We dont have any hard data for december. Matt i remember when we thought it would be a recession. At least we are showing growth for the year, right . It is not that. Weve had tenures years of consecutive growth in germany. This is a stabilization, a consolidation. We have two different wealth in the Global Economy German Economy right now. Strong domestic demand. Lots of private consumption. On the other hand, a Manufacturing Sector which is in a recession already. Anna good morning to you. Lets dive into those details a little bit further. Your thoughts on the labor market . A lot of people suggest the politics dont change and less unless they affect peoples implement prospects. They look to be very strong. You see weak spots. Carsten there are some weak spots under the surface. When you start looking at regional data, we see that the Unemployment Rate compared with a year ago has started to increase in strong regions like a very are and gutenberg. These other regions where main Car Manufacturers are located. This is starting to crumble. This was something used in the 2009 crisis. But people on shorter working hours. This has started to increase. We are still far away from 2008 levels. We do see that the labor market has started to turn under the surface. Matt is it going to be even more of a concern if donald trump turns his gaze to europe after the phase one trade deal is signed with china . Carsten that is one of the biggest risks for 2020 for the eurozone, especially for germany. I doubt that this would be a war that you could win before the elections. Who knows what donald trump actually is planning to do . Anna on the story about global trade, there is a sense that perhaps what is at the moment a clearly u. S. China tension turns into a transatlantic tension after this has been resolved or dealt with in some way. The european trade commissioner is in washington this week. What are your fears around trade and what that could mean to europe . Carsten in 2019, we saw that this trade conflict, due to the uncertainty it created, was already hitting hard the eurozone, especially germany. These export oriented economies, it hurt them more than the chinese economy. Obviously, it is in europes interest to avoid a new trade war come a new trade conflict. I think that the european politicians will try to talk to the white house, to the was administration, europe has more retaliation power which could hurt the u. S. Economy more than the chinese had. Matt what do you think of this beautiful monster that donald trump calls the phase one trade deal . Should we be excited about it . Is it just symbolic . It is only 86 pages. Carsten we have been excited since middecember when it was announced. Should we be excited . Some think we should. Throughouten pending 2019. The fact that there is something , whatever it is, there is something. When you take a longterm perspective, there is conflict between the u. S. And china. It will continue be a trade be it trade, who was leading the Global Economy in the years to come. This conflict will continue. More on what is going on here in berlin, here in europe. We will talk as well about preemptive measures in the banking industry. Morgan stanley promotes the fewest executives since 2002. Ubs Wealth Management is beginning sweeping job cuts around the world. We will catch you up on the when you are traveling to work, listen to Bloomberg Radio. You can get it live on your mobile device or on digital in the london area. This is bloomberg. Anna welcome back to the european open. 40 minutes until the start of cash Equities Trading for this wednesday morning. Lookean equities markets sluggish as we await the signing of the trade deal later. On one of the stories and the Banking Sector that you need to know about. Ubs Wealth Management has 20rted its job cull with percent of roles being cut. Lets bring in manus cranny to discuss the Banking Sector and the ubs story. What is the plan . We talked about how they were dividing things up and Wealth Management. What is the latest . Roadmap, thes the important thing. Job cuts will be across the board in asia and europe. 20 job cuts. We understand coming from asia and europe. How deep are these cuts into the layers of management fat . Do you bring clients closer to the top decisionmakers . I want to reflect back to 2019. Jobs o put these 500 500 jobs are to go. Bringing the clients closer to the top decisionmakers. That high chart on the screen shows you 2018, 2019. There was 75,000 jobs, 83 of those were in europe. In context at ubs. You need credit time you say it thousand. Deutsche bank, matt miller will say 18,000. While the whole number of 500 at ubs is not staggering, it is about where and who was taken out of the system. It doesnt seem as if any strata is spared. Matt 1 5 of some teens is a striking number. Morgan stanley has promoted less executives than any year than 20 2002. Is this part of a broader trend that we should we watching be watching . Manus getting a promotion, getting to ratchet up to partner at some other banks, is more prized than ever. We look at Morgan Stanley. The number has been declining over the past number of years. You are looking at 130 this year. That is the least since 2002. That is a trend. 150 33 years ago. 145 last year. Promotedose have been are women. When mean women constitute 21 at that echelon in the bank. Goldman sachs pullback as well in terms of the promotions that they made. The whole substance of this job dipping within banking comes back to, who do you need for the future . Look at the story, it is about those institutions that are hiring coders. Citigroup said, we might be changing the complexion of the we have. It is about tech. It is about closing the management cap and having the right people for the purpose for the future. Anna thank you very much. Thats the latest on the Wealth Management story at ubs and the broader story around jobs in baking. We returned to the banking theme later on. Full analysis of the results we have seen from the u. S. Banking sector. Look ahead to some others later on today. There are plenty of the plot. Muska to our conversation about the european economy. Weve talked a little bit about the German Economy and we will continue to that. I want to talk about the broader eurozone economy. We talked a lot about how boeing has lost its crown to airbus in terms of the number of deliveries, the troubles from the 737 max are wellpublicized. Economists think this as a material event for the u. S. Economy. It is the business that shows up a national statistic. Positiveoing to be a for European Growth . Carsten that should be. It is clearly also an extremely important engine for the european economy. I dont know the numbers by heart. It is slightly less important for the total economy than boeing is for the u. S. Economy. It shows, we just had the discussion yesterday in European Parliament about this new green deal. There is also positive stories to tell out of europe. , where theyal story try to put lots of money on the table to invest in the european economy. It could be one of these positives that leads to a higher than expected growth in the coming years. Is all of this spending going to be what Christine Lagarde wants . You have the green deal, you have germany spending 86 billion euros on the door to bond. Surely that is not enough. Will she get the fiscal help she wants in europe . Carsten i think she will get the hell. Look at the discussions in berlin. The German Coalition is finally moving. We will get another record high fiscal surplus for the year 2019. The last time germany saw a fiscal deficit was eight years ago. Udc the Coalition Partners here proposing, one part is proposing tax cuts. The other part is proposing more investment. It is moving. Whether it will be enough for Christine Lagarde, hard to tell. It should be enough for the ecb not to act again. Matt thanks for coming to join us. The chief economist for ing germany, happy to have you are or in the berlin studio. We will talk about the phase one china deal, the big beautiful monster. This is bloomberg. Matt welcome back to Bloomberg Markets european open. 30 minutes from the start of cash equity trading. We are looking at futures down across the board. We had drops in asian equity indexes. There was a mixed close in the u. S. , but now we see red arrows for u. S. Futures as well. What you should be looking out for today, you should get that initial trade deal signing with the u. S. And china. In russia we can expect vladimir unions state of the address in 9 00 a. M. U. K. Time. We should get a sense of how the european economy is doing with german gdp coming up in about half an hour. Anna and hour and a half. Matt exactly. Then after that, we will get u. K. Inflation. Anna how will that change thinking around the bank of england meeting this month . That will be crucial. At 11 00 a. M. We have blackrock, that will be interesting. Earnings. Re u. S. Bank bank of america and 45 minutes later Goldman Sachs. A busy lunchtime. On china are staying put. The Trump Administration is not likely to remove levees until after the president ial election. And he moved to do so will be contingent on beijings compliance with the paid one trade agreement. Selina wang has more, she joins us from beijing. How long will it be until we see a rollback of existing tariffs . What is the timeframe . Selina it looks like we will have to wait at least 10 months before we see a significant rollback in tariffs. Are sources are telling us the u. S. And china have reached a tacit agreement that the u. S. After the president ial election will review and consider pulling back tariffs depending on progress on the phase one trade deal. This is separate from the tariff s on 120 billion dollars of goods, that will be in place, it was announced in december. The maintaining of the tariffs is the way of the Trump Administrations way of enforcement. It also allows trump to go on the campaign trail and says he has been tough on china and has struck a deal. It does provide a drag on the economy, that will continue until the election. I want to emphasize even though trump is calling this a monstrous deal, you could call it a trade truce at best. It is not to escalate things further, the not touching chinas industrial policy or any rollback on tariffs. Matt it is more like a thin and crispy oreo. Pages long. 6 what is the view in china on this deal . Selina you have heard xi come out with a strong response at the start of 2020, saying china is showing symbols of strength. Also positive rhetoric from Chinese State media saying china should continue on the path a prosperous, peaceful coexistence. Also a welcome response of china taken off of the currency manipulator list. China is starting to get multilateral pressure on issues i talked about. The u. S. , eu, and japan have struck an agreement to expand the subsidies prohibited by the World Trade Organization that is targeting china. Enacted, it would be the most significant upgrade to the trading rulebook in at least a decade. Even though we are seeing bilateral progress on the front of chinas economic model on state subsidies, we are seeing progress on the multilateral front. Matt thank you very much, selina wang talking to us about the phase one trade deal. We expect it signed today. The Trump Administration is considering a new system for key economic reports to the public. Thechanges would restrict ability of the press to put together plan stories. It would take computers from lockups where journalists receive data ahead of the general release. Joining us now is chris anstey. What is the significance of this post change . Not getmean we will things under embargo, or we will not have computers send out headlines . Chris it is not immediately clear the details. This reporting from washington, what we are getting from our colleagues is signs the Trump Administration is unhappy with decadelong practice of the media getting advanced look at sensitive u. S. Economic data. It comes through the labor department. This has a lot of advantages from a public standpoint. And from a media standpoint. If you take the example of the u. S. Farm payrolls report, the most important indicator in the world arguably. Reporters get this a halfhour before it is released to the public. They can look through the report and prepare headlines and stories hugh hugh that have all of the context for that number. Is jobsy the number created is well off the expectations. There could be reasons for that that the reporters find out in that embargoed lockup period. Process, ifia data it had a computer glitch, that is context reporters can embed in their headlines from the getgo. ,t is clear this administration as the Obama Administration for it does not like the idea of reporters getting advanced embargoed access to this data. Transitioning to potentially throwing it up on the internet would be a different practice. This when i first read story, i said this is interesting, i worked in the and in Financial Markets reporting. I wondered if clients would be that interested, but it is a well read story this morning. What is the significance for investors from this kind of move . Would we see more chaos around data releases . Possible. S certainly when the Agricultural Department abandoned lockups, there was an occasion recently where its website was down for six minutes. There was no access to information at all. If the information, the sensitive figures are dumped on the website in one go, you could imagine the enormous amount of volume, the attempts to get that data. Thoseld potentially leave with more powerful computers, more powerful bandwidth, and other rhythms that can pull the data out more quickly, it would potentially create an unlevel playing field. This is a reason why the Obama Administration did not proceed with its own plan to abandon the lockups. Potentially, it creates a more volatile environment, but we will have to see what the trump s proposals are. Anna thank you very much, chris anstey reporting. Up next, investors expect wall trading biggest bond debt to bounce back. Details. You the Bloomberg Radio is live on your mobile device or dab Digital Radio in the london area. This is bloomberg. Anna welcome back to the european open. It 20 minutes until the start of equity trading. Start sluggishness at the suggested by futures, but losses on those futures lets get a Bloomberg Business flash. Boeings lost the title of the Worlds Largest plane maker. Hasgrounding of the 737 max caused deliveries to tumble, less than half of airbus. The european plane makers victory was his first since 2011, and only its 10th since 1974. U. K. Has agreed to back a plan to rescue europes largest airline. It is an unusual rescue for a country that has been skeptical of state bailouts. The collapse would have left the challenging parts with fewer transport links. A loan as offered a 575ors amazon led Million Investment in the company in may, but the u. K. Says it may hurt competition in the country. That is your Bloomberg Business flash. Thank you very much. Ittreets biggest ended 2019 on a high note. J. P. Morgan be revenue expectations by 1 billion. Dani burger has the details. Dani it was the best year ever for j. P. Morgan, the best that any bank has seen. This was helped by their fixed income trading, and we expect to the numbers to be stronger given the week 2018 comparable. You would be hardpressed to find an analyst who expected j. P. Morgan to be by 1 billion. Citi the case is they had for trading. Lookedthe reasons this so strong was thanks to a trade deal between the u. S. And china in the Fourth Quarter that restored confidence in the market. And we had a steepening u. S. Yield curve that helped investors dry in investors to their fixed income products. Hese numbers set a high bar bank of america and Goldman Sachs we get today before the u. S. Open followed by Morgan Stanley on thursday. Goldman gets more profit share from fixed than the other banks. That will be important for them. According to bloomberg intelligence, the competitive whether keeper goldman, they are able to return their current market share. For the other job cuts, those will be of interest. The Morgan Stanley promoted the fewest number of employees to their elite level since 2002. Oldman is gearing up to go on a hiring spree in china. Anna thank you very much. Lets turn to something of interest for those in banking. The u. S. And china are due to sign a phase one trade deal in washington. Former Federal Reserve governor says it is a small potato for the u. S. Economy. He spoke about trade and the fed with Haslinda Amin earlier. It is pretty lean. First of all, the tariffs are not that big for the u. S. Economy. It is more important for china because trade is a percentage of the gdp is greater for china than the u. S. This is only affecting chinese trade. You have a fraction of a fraction of a fraction. Overall Economic Activity for the u. S. , it is small potatoes. Important for particular sectors. It is painful for those sectors, but the overall perspective, it does not matter much for the u. S. Economic activity. What do we need for sustained manufacturing rebound . Keye key thing is productivity growth. One of the challenges in the recovery despite incredible improvements in labor markets around the world, we have seen little investment. More investment in the Manufacturing Sector. To maintain that, we will need more investment. Haslinda the fed will be on hold, so it will be a yawn for 12 months. It may seem so now, but my guess is some things will change that. If inflation does not come back up, and the employment rate is at 50 year record lows, and we have seen relatively modest wage pressure as well as overall inflation pressure, and i think the fed is haunted by the example of japan. That is why they pulled back this past year, because despite low unemployment and reasonable Economic Activity, the inflation rate is not getting to the 2 goal, and they are worried if long,tay below that too people will lose faith in the fed for trying to get there, and it will be difficult to get to it. I could see another cut this year even if inflation does not get to 2 . Matt that was former Federal Reserve governor rendell kroszner. L managers merge. Jeffries says m a for some of europes prominent Asset Managers, that is next in your morning call. This is bloomberg. Matt welcome back to Bloomberg Markets european open. Some breaking lines out of iran, the president says he does not understand what the u. K. Premier Boris Johnson is thinking, and rejects the idea of a trump deal on the nuclear program, but he does call on europe to return to the nuclear deal compliant. And he is calling for National Reconciliation after iran shot down a passenger airliner with 176 people on board, all of whom died. Lets get the bloomberg first word news. S on china are staying put for now. Trump administration is likely to keep them in place until after the president ial election. Any release is contingent on beijings compliance. Steven mnuchin says removing tariffs is contingent on the next phase of a trade deal. Will stay ins place until there is a phase two. If we get that quickly, we will consider releasing tariffs. If not there will be no tariff relief. The u. S. And china are to sign the phase one trade deal today. The Trump Administration plans to restrict the media where journalists cant receive data ahead of time in a secure room so they can publish their stories on schedule. The administration is looking at removing computers from the room to make it more difficult to get the stories out on time. President trump is adding pressure on apple to unlock an iphone that belonged to a terrorist. He said the u. S. Helped apple so apple should help the u. S. Apple says it has provided gigabytes of data from cloud backup. Europe is turning up the heat on ran in a bid to save the nuclear deal. It is a strategic mistake and the eu has been struggling to hold the deal together since the u. S. Pulled out. Send. S. Is set to impeachment articles to the senate today. Nancy pelosi will hold a News Conference with more details. The next step is the trial in the senate. The qualifying rounds begin today for the Australian Open tennis tournament. The host city melbourne is enduring some of the worst air quality in the world. Have led to some questioning playing tennis in such bad conditions. Tournament organizers are monitoring the situation. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Anna thank you very much. Time to look at buying European Asset managers, here are the details. Jeffries initiating it gave a price target that values 21 above where the company is currently trading. It says it is one to three times and their main point is you should be buying continental european managers and not the u. K. They say this space is more strong, and m a is possible. There are tieups they are looking at, and they had the cash level to return 5 of a special dividend. Stock at thes moment, not bearish or bullish, but there was some m a chatter lockup, but its has gone quiet since last spring. In the meantime, jeffries says to buy amundi. With thingsstick that could be influential at the start of the trading day. Six minutes away. Revenue declining with a firm revenue cameity, in above estimates. Earnings are in line. International topped the midpoint in terms of analyst estimates. The chemical business in denmark is cutting their revenue outlook. Att we are looking following the Frankfurt Airport operator. Important to watch the shares. Today is a down day. For are preparing a bid expansion in turkey. Coming up, it is the market open. We are looking at futures pointing lower this morning after headlines that the tariffs on china will not be reduced until after the november elections. We do see bluechip stocks showing slight gains in terms of futures. You can see the biggest stocks in europe rise as the rest fall. Minutes. In just four this is bloomberg. Anna we are minutes from the open of cash equity trading. On china are expected to remain in place until after novembers election. Steve mnuchin says there are no side agreements i had of the phase one signing today. The phase one signing today. The u. S. Is dropping rules to block more sales to huawei. Ubs embarks on a round of job cuts. Morgan stanley promotes the fewest number of people to its top ranks since 2002. Matt we are looking at futures that are for the most part down. We are starting to see blue chip stocks rise, or equity indexes rise into the euro stoxx 50 index which is in the green now. We have regional indexes down as well as u. S. Equity indexes after the news that the tariffs will be extended until after the november elections. At how the look european markets are opening, flat. The ftse 100, pretty flat. The hero stocks also pretty flat. The hero euros stocks flat. Yields coming down. Money going into bond products. We have a move to the upside from dutch products. Ibex is down by a similar margin. A number of risk off moves on news lines coming through. One is regarding the longevity of tariffs between the u. S. And china. Interesting to get that mentioned before the signing of the phase one trade deal. Lets look at what is going on from a sector perspective, things looking mixed. Financials are in focus this as wen the United States see a number of u. S. Banks reporting numbers. Red for the financial sector. Health care is looking more positive. A little weakness on basic materials and energy names. We have a little corporate reporting, but not a great deal. Forre waiting later today the trade signing, then we will move on to talking about the underlying details such as chinese gdp at the end of the week. Matt we are looking at individual corporate stories that are moving in markets. We were talking about Asm International saying fourthquarter earnings were substantially above their outlook. We see those shares soaring. Also shares of asml gaining. Their holdings are rising more than 1 on the stoxx 600. They are concerned about a dutch ban onit dutch exports. If you look at the losers, one of the Biggest Companies weighing on the index, nestle down 0. 3 . Down as well as hsbc. European markets in general, we are looking at red arrows on futures, a mixed trade ahead of todays expected signing of the u. S. China phase one trade deal. Sentiment was shaken because of levees that would not be lifted until after u. S. Elections in november, but Steve Mnuchin denies the link between tariff relief and the election cycle. Will stay inffs place until there is a phase two. If we get that quickly, we will release tariffs, if not, we will not. Has nothing to do with the election. Matt joining us now is hugh gimber, Global Market strategist emea, jp morgan Asset Management. In thewe have priced phase one trade deal, is there any other reason to rally between now and phase two. Hugh i think what we are seeing is in december the rally was driven by Downside Risks for 2020 being priced out of the market. Now we wait to see to the extent the macro can bounce. I am looking at Business Sentiment and the extent to which the phase one deal helps corporates feel confident about the outlook for investment. From a market perspective we have seen the moves reflect already, and it is the macro that needs to drive is higher. The way markets have priced this in already, i have a chart showing chinese exposed world stocks, and the extent they had outperformed. You see the out performers in december. Are we looking elsewhere for exposure to other markets for a continuation of this equity rally . Hugh i think we need to, because what we have learned overnight is that this is a truce not a resolution. The pause in escalation that we have for at least several months while the u. S. And china work through the extent to which the phase one deal will work, it is helpful for the Global Economy, but you cannot rely on just trade news to drive markets higher. It is about the highest Quality Companies with strong Balance Sheets going back to fundamentals, the best position to drive markets higher from here. Matt you are looking at a bottomup strategy. You look at companies, the Balance Sheet and try to figure out who will increase earnings in the future. Hugh i think the Balance Sheets is the main focus for me, absolutely. We have seen examples in recent months of Companies Taking on too much leverage. We need to bear in mind from a macro perspective we are not in a roaring part of the economy, we are in a cyclical phase, and outlook for 2020 would be to trend growth at best, maybe slightly below that. In that scenario i am looking for it slightly more defense of companies and a slightly defensive tilts. We talked this week about is narrative, the cliche that cycles die of old age, but somebody with his experience points out how mature this cycle is. How much does this cycle have to give . Hugh it is a tricky one, because traditional indicators are not proving helpful. If you are looking at labor markets and low Unemployment Rates, they have been telling us we have been late cycle for a long time. The differences normally you look at Central Banks as the assassins of the cycle. They are typically hiking rates aggressively. Really we do not have inflation anywhere in the world other than a couple of idiosyncratic stories in emerging markets. That is why your macro indicators are not helping you gauge where we are in the cycle. Much, hugh you very gimber, Global Market strategist emea, jp morgan Asset Management. He stays with us on the program. Up next, stocks on the move, including Asm International. Fourthquarter orders coming in substantially above their outlook. This is bloomberg. Matt welcome back to Bloomberg Markets european open. 10 minutes into the session you seen mixed trading across the session. Dax and ftse are down. The cac and ftse 100 in london are showing gains. Ubs has started a sweeping round of job cuts at its Wealth Management business in europe and asia. It has cut up to 20 from some european teams, and is reducing management players in asia. Job losses are taking place at every level. Offered a loan while regulators probe an investment in the food delivery company. They say the risk of running low. N capital without the backing amazon led a 500 75 Million Investment in may, but it was frozen with the u. K. Thanks it may hurt competition in the country. The u. K. Has agreed to a backup plan to rescue flybe. It may include a state back loan. It is unusual rescue for a company that is a country skeptical of state bailouts. That is your Bloomberg Business flash. Thank you very much. We get a gdp reading from germany later on. Economists expect growth of 0. 6 in the entire year of 2019, down from 1. 9 percent the previous year. Hugh gimber, Global Market strategist emea, jp morgan Asset Management is still with us. There is a time when we expected a recession. Manufacturing has been a weakness. Do you expect a recovery . Recovery, itee a is likely to come from a fiscal boost. We have seen germany talking for some time about the need to go back to spending if the economy weakens significantly, but they felt that bar had not been reached. The news about a pickup in particularly on the green projects side is encouraging. We had news from the German Government yesterday talking about more spending to upgrade the train networks. Those are the projects we could see getting traction this year as the German Government looks to find ways to turn to fiscal stimulus, but doing so in a way that is palatable for the electorate. Anna many guess we have spoken to on the german side of this. Let me get your thoughts on where this leaves the bund market. Pushing back up toward zero, we dropped further than this, it has been weaker by more than 0. 5 . What is the trajectory for these negative interests . Takeawaysof my big from last year is that government bonds can do well regardless of your starting point in yields if you see the macro we can. In january, choi 19, looking at the gap between treasuries and treasuries have extra room to fall, it ended up in a reasonable place. It has an important place in portfolios. Fixed income is no longer an income play, but we think core bonds have a way to go. If that macro weakens, the yield will go further. That is the way we see things. Matt they are only at 20 basis points, not that bad. Trading at 1. 8 right now. Do you like treasuries as well and how low do you see that you going . Hugh the base case for this year for treasuries is that it is the confidence from the trade deal starts to feed through an economy, you can see treasuries higher, but we like them because of their diversification fo role. I would expected to be offset by gains in risky assets. Treasuryt calling for yields to go lower, but it is about being confident they would in a downside scenario. Anna thank you so much hugh gimber, Global Market strategist emea, jp morgan Asset Management. Lets get the stock movers. The biggest movers in the stoxx 600 is christian hanson, the ingredients maker that deals with agricultural firms. They cut their organic revenue outlook. Too that new outlook is ambitious for the company. They are facing headwinds, trading challenges, and they continue to do so. We see them trading at a november low. Asm is the biggest gainer on the stoxx 600 trading at a record high. They gave an update for the Fourth Quarter sales, saying it will beat their expectations, euros,in at 370 million more than 20 where they sell their midpoint in their prior estimate. Those shares are up more than 7 . One of the other big gainers, the retail operators sees a positive environment Going Forward in terms of earnings, saying their full year will rise poland. Nks to sales in they say consumer demand is healthy there. It did rise in Food Products more than expected. They are having a hard time opening new stores, pointing out the difficulty in finding new space. Att thank you very much up next, investors expect wall bounce backgest from the 2018 disastrous end. Top banks more than delivered. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 20 minutes into the trading day, negative session. Bank earnings are also a focus for markets. Trading endednd on a high. Jp morgan beat revenue expectations by 1 billion. Dani not only did they beat by 1 billion, but it is the best year or jp morgan for any u. S. Bank, trumping what we have seen through history. Text income propelled these earnings for j. P. Morgan and citi. Expectations and analysts expected it to be a better quarter. You can see how dismal it was in 2018. This is a huge beat. According to jamie dimon, this has to do with improved trade relations between the u. S. And china, that gave investors confidence to trade these products. Results set a high bar for the Bank Earnings we have on deck. Before the u. S. Open we will get bank of america and goldman, and later in the week we get Morgan Stanley. Will goldman see the same trade as citi and jp morgan . For goldman, revenue is a bigger portion of earnings than most of the other banks. According to bloomberg intelligence, how they retain their Competitive Edge will be important for these earnings. ,ob cuts is also a question though it is unclear if we will get any commentary on that. Morgan stanley promoted the least amount of employees to their elite level since 2002. Goldman is readying a hiring spree in china. Anna thank you very much. Hugh gimber, Global Market strategist emea, jp morgan Asset Management is still with us. Nice to get the good news on jp linger but we will not on individual banks. I want to talk to you about your expectations for the sector. We look at u. S. Banks and the story is about the yield curve. What do you expect to see from the u. S. Yield curve, and from the way the banks perform in the u. S. . Hugh there is a steepening and the u. S. Curve that has helped Bank Performance over the past few months, but we could be in an environment of the yield curve is flat or some time, particularly with the fed trying to be on hold for as much of 2020 as they can get away with. This dynamic will persist through this year. We cannot draw much from the yield curve, because when you think about net interest income, you are looking at margins and by easings created monetary conditions. It is not a totally clearcut case that a flat yield curve will harm the Banking Sector. Matt do you favor u. S. Financials over their european counterparts . And when will europe catch up . Up, for europe to catch the key would be consolidation in the sector. 2000though we have seen close since the financial crisis, we have over 6000 vying for business in europe today. That competition is hurting bring profitability in europe. Bank that ability in europe. Left the u. S. Banks in a better position. Another catalyst for the european Banking Sector could be a melt up in markets, and people in the value sectors. Given the ongoing concerns we the u. S. Around trade, Banking Sector does look better positioned. Anna if politically acrosstheboard in m a is unpopular or difficult to sell in europe, do you see a time when value stocks pick up in europe . Hugh it is tricky in europe. We have been talking about the completion of the banking uni on, and there seems to be so many hurdles to getting that through. For european companies, the merge is proving to be really hard. For European Value to outperform, you need to see a cyclical upswing in global growth, and pushing back into 2017 type of scenario where inflation takes hold. Matt what do you make of blackrocks commitment to sustainable investment, and esd general . L esg in is this a move that will help . Hugh it absolutely has to be. The esg investment focus will be at the forefront of 2020. There has been a shift over the last 12 to 18 months, where a couple of years ago it felt like my client whereas now conversations are about the need to focus on esg aggressively. That is the case of the underlying investment preferences. Their clients are demanding more options, but also the changes we are seeing in consumer demand. Take a single use plastic producer as an example. Five years ago that could have been profitable, but when now we understand that dynamic has changed. Anna the investors themselves andasking for change businesses to do things differently, or are they getting pressure from elsewhere . Think both. We are seeing a demand from clients, but at the same time you see the increase in legislation, it has been exponential. Ebenezer feeling like the Regulatory Environment is changing and the climate environment is changing, so it has to be a focus for this year. Anna hugh gimber, Global Market strategist emea, jp morgan Asset Management, and he will continue the conversation with us on Bloomberg Radio. Next, a cash injection. The u. S. And china to become the worlds fastestgrowing tech hub. Bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Anna welcome back to the european open. Dayinutes into the trading and things looking pretty negative as we wait for details around trade. I am anna edwards alongside matt miller. Matt we are seeing slight losses, not huge, and there are some sectors gaining. You can see from the grr, the group ranked return screen on the stoxx 600. Healthcare stocks, gaining because some of them are very heavy like roche and novartis. Personal and household goods, also gaining as well as retail, so you are seeing food and a beverage, Consumer Staples basically up also very heavy like nestle. On the downside, automakers and parts makers as well as insurance and banks. Financials in terms of banks are falling, as well, today as we get the raft of earnings out of the u. S. And news of job cuts here in europe, speaking specifically about ubs. That is your sector breakdown. Anna lets return to global things and u. K. Politics. Britain has beaten the u. S. And china to become the worlds fastestgrowing tech hub. Than 13 pumped more billion into startups last year, one third of all European Tech investment according to a government release. The secretary of state for Digital Culture and media and conservative member of the house of lords joins us in london. Good to see you and thanks for joining us. And go talk about tech on to other things that are newsworthy right now from a u. K. Political perspective. The tech news, creating a lot of unicorns, producing more than germany and france last year. How do you stop or do you intend to stop these unicorns being bought out by other money . That is a question from those in the Tech Industry. We should all be clear on a unicorn, a billiondollar turnover company, a real Success Story for the u. K. We are seeing investors want to put money in. People wanting to sell out because these companies are ambitious, they started from small entities and want to scale out there employing, more people, and outstripping investment in the u. S. And china to have more billiondollar Tech Companies here in germany and france. It is a huge Success Story for the u. K. And we want the government to support them. Anna outstripping other countries in growth numbers. Theme ask about brexit and opportunities it might present. Opportunity to divert from the rules around immigration or data to support the Tech Industry . Nicky i think there will be. Obviously, we have to get through january and trade negotiations will start. The eu and colleagues are looking at trade deals with other countries around the world. This is an exciting chapter for the u. K. And you are right. One of the reasons people wanted brexit to happen was the u. K. Got to choose the rules we were going to follow and in some cases, we will be able to have world leading rules by the u. K. And that will help in terms of the investment environment making it more attractive. Without getting into the politics of it at all, baroness, i cant understand why any start up or anyone who is wanting to create a business would want to do it in an economy that is about to break away from the biggest free trading bloc in the world. What Financial Sense does that make . Nicky the point is there are a number of reasons why people will set up in the u. K. Weve got lots of homegrown talent. Eight of the best top 20 universities in the world, people are coming and studying, setting up and wanting to expand. Weve got great digital skills. Weve got a very active world developed vc investment market. Weve got a government that wants to support innovation, support for the changes. Citing almost factors, and many of these companies are not just talking about trading relationships with the eu, but with the world. Anna let me talk about something that is topical and surrounding huawei and the use of huawei product in u. K. Telecom systems. A lot of pressure from the u. S. To not allow huawei into systems, so when will we see news on this . Nicky i cant put a timetable on it because it is an important decision but we need to make that decision. We know people are looking for guidance about the involvement of huawei in our networks. I want to make it clear, huawei will not be involved in Critical National infrastructure. Safety of that infrastructure is paramount when the government is making that decision, but equally, going back to 5g and text, 5g is important and the rollout is important to be based or. Carrere number of there are a number of factors. U. S. Are you able to face pressure . Nicky we are very conscious of what our allies have been saying, but other country what other countries around the world are saying and we will take all factors into account. Matt what do you think on another matter, what do you think about Boris Johnsons decision to go in and save this private company . With taxpayer money . To me, it doesnt follow conservative values. Hazard, burdens other investors. Pay foraxpayers have to someone elses bad Business Planning . Precisee should be about what is happening. The government will review passenger duty, double for domestic compared to international. The lesson for politicians the last couple of years has been the importance of regional connectivity. The parts of our country that rely on fly be. I think people would expect the government to take a step and to see what we can do potentially to support flybe. Matt we are also talking about a state backed loan. You are just giving money to this private company. Doesnt that create moral hazard . Why not save other companies that need loans . Nicky the decisions are to be taken, we are looking at data. The whole picture of regional connectivity in this country and very conscious of commitments around Climate Change. What the u. K. Government has shown is it is possible to grow the economy but also cut carbon emissions. All those factors have to be in play but a lot of people would expect the government the lessons of the last couple of years have been people want their government to listen to not justgetting making decisions right for london and southeast but the whole country is important. Anna is there anything being done with flybe that go against state rules . Perhaps that doesnt matter. Nicky it does matter with transition period rules so we will be very conscious of decisions to make sure they are stateant with the eu, the table, we have to be compliant with them. Going toyou see brexit claim here . Plan here . When we hear from people from they say negotiating this kind of trade pact in such a short amount of time in the next 12 months is an impossible task. Nicky we think it is possible and the important thing is to start and to make rapid progress. Working government is on its negotiating position, looking at the negotiating mandate and rather than talking about whether something is possible or not possible, saying it is not possible before we start, people expect their government to get into the process, which would be discussing this with the eu. What Boris Johnson has shown is when people said it wasnt impossible possible to negotiate a withdrawal bill, that is what he did. Anna are you ready for a battle over fish . Nicky obviously whether there are battles were strong negotiations over a number of different areas, something close to viewers hearts will be financial services. It is another area my department will be involved with. They will be tough negotiations because these things matter and that is what we expect. , secretary ofrgan state for Digital Culture, media, and sport. Lets get the first word update. Tariffs on china are staying put for now. The Trump Administration is likely to keep them in place until after the president ial elections. Any relief is contingent on beijings compliance. Steven mnuchin and says removing the tariffs is contingent on the next stage of a trade deal. The Trump Administration plans to restrict the medias ability to prepare economic stories. At the moment, the u. S. Posts a lockup where journalists can receive data ahead of time in a secure room. Ont way, they can publish schedule but now, the administration is looking at removing computers from the room, making it more difficult to get the stories out on time. Boeing has lost the title of the Worlds Largest playmaker. The grounding of the 737 max has led to the companys biggest defeat in its 45yearold rivalry with airbus. Deliveries tumbled to 380 jets last year, less than half of airbuss 863. Makers victory was the first since 2011 and only its 10th since 1984. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im oanh ha. This is bloomberg. Matt thank you very much. Greenthe trend toward finance is growing as blackrock says it active funds will do best coders. Passive funds will go greener. We will discuss with a veteran of 10 years. This is bloomberg. Matt welcome back to bloomberg market the european open. Into the minutes session and looking at, for the most part, red arrows. You see the ftse gaining. 1 , but other european indexes are down. Yesterday, blackrock added its heft to the bsg ship saying it will shun polluters when it comes to active investors. The change affects those active a tinyirectly impacting percentage of its overall assets, but the chairman of a says it is part of a trend. He spoke to bloomberg in paris. It is a powerful longterm trend, which is demonstrated by the last move and i have to welcome it because i think it will give steam to this movement, which is largely unavoidable. Joining us is the global head. F bsg investment and research he has been managing esg funds for decades and a visiting professor in brussels. What do you think of this move . It is a money manager that oversees more than 7 trillion in assets. It turned around a record that wasnt particularly good to begin with. Positive iously a when you see one of the largest Asset Managers in the world change course and commit to sustainability, able raise the bar for everyone in the industry but it was about time they lived up to their rhetoric in the past. It was more important, the fact blackrock doesnt live in a country where legislative policy is moving in the other direction. That is a positive simple. Given twostion is, thirds of the business is linked to index products, they dont have control over capital pricing, so they will need to see how big that impact will be. Comments is, if this is just about active and not passive, how could we do this in passant passive investment, but one thought piece i read on the bloomberg overnight that i thought added another dimension was even if you are talking about passive investors, if you are adding options for investors you can follow this fund excluding the bits of the economy we dont like very much, but maybe nudge effect because blackrock is so huge, that can have a substantial impact. Wim it is definitely a big shift, the largest asset manager in the world but sustainability, if you look at passive and how markets are pricing things, we still need to accept at this stage we have a very fossil fuel intensive industry. It means we are still financing these kind of companies. Given lack rock is passive management, it doesnt allow you to reallocate capital to finance assets that might become sustainability is at this stage very about active than it ,anagement, Financing Companies and it is not really about taking a very positive stance on the way the market is assessing things. Matt why do we see them so often . Companies that are the Biggest Oil Producers in the world listed among very Sustainable Investments . It is kind of like the fox telling you he is for hens rig hts. I just cant buy it. Wim it is a very different call. At some point, if we need to move from our fossil fuel addiction to a carbon economy, that is what the European Commission has set out as a target, i find it difficult to see what kind of role the companies will play. Look backs, we might and have a different view of our Energy Sector and at some point, that will lead to the collapse of the fossil fuel industry. Direction, it will have a direct impact on those companies so energy is an issue. Wishing more opportunities popping up. A lot of companies have made quite a bit of progress toward more Renewable Energy and in other sectors like consumer we seey, there technology becoming more important and addressing these environmental challenges headon. Anna what is the role of Central Banks here, if any . There seems to be a debate going on. Maybe it is just a different the former leader of the ecb warning Central Banks not to overpromise to be able to tackle Climate Change and not deliver that for european citizens. This goes to the heart of something that seems to split community. Banking some say they need to be involved here and some say stick to the inflation mandate. Wim we should not derail Monetary Policy from their Main Objective but we have unemployment and growth, and Economic Growth is not neutral. That program, that corporate sector purchase program, they have an impact. Billion being0 directed into securities and the fossil fuel export has been substantial. Anna you could see them buying death from sectors and not others . That seems quite political debt from some sectors and not others . Cut scenes political. Wim it is not. What do we mean with Sustainable Growth . I think for Central Banks, it is the perfect in a way that finance purchase the way they finance, they can steer capital to more sustainable activities and we are not only talking about green. We are talking about a broad range of activities across sectors. Matt wim van hyfte, thank you for your time. He is the global head of esg investment and research at candriam global. Trend andout the esg possible benefits we can reap. Coming up, no signs of a slowdown. Bets of a recession in the u. S. And in europe are falling. We will preview german gdp data with the mliv blogs Richard Jones next. This is bloomberg. Matt welcome back to the european open. We are 54 minutes into the session and looking at weak trading with the dax down. 1 . The ftse, up. 1 . Little change going on. The odds of a recession in europe in 2020 are sorisk can a. Thats according to the bank of france governor. But it wasnt so long ago markets were predicting a 33 chance of a downturn, and its biggest economy here in germany. Are due out numbers in a few minutes, could compound the reversal in sentiment. Lets look at what is moving markets with Richard Jones from our mliv team. Hes the fx rate strategist in berlin. What are you expecting and how does the economy looks now . Richard consumer consensus is a reading of 0. 6 . In prior years, it is not the direction of travel anybody wants. D 2017. in 2016 and 2 you are right to say germany avoided recession at the end of last year, but weve talked about the data. The pmis are still hugging the 50 on a composite basis. Manufacturing is very weak. In hard data, manufacturing and factory data, it is not great yet. Germany avoided recession. People are hoping the worst is behind us, but it is too soon to sign the all clear for the economy. There is reason to be optimistic across europe, but germany is still struggling. Anna good to have you once again, richard. On the pound, it has been a busy week for those interested in cable. A touch of wickedness, still around the 1. 30 level. Hearing from the bank of englands sanders this morning, given lines on the uks economy being sluggish, little or no growth and u. K. Economy, he says. His comments come with the disclaimer he is pushing for rate cuts. Richard i think there is no prizes from saunders given over the past mpc meetings, hes voted for an immediate 25 basis point rate cut. What is interesting as he is joined by some colleagues including the governors. Andad Governor Carney others all sounding very similar to what saunders has been saying for a few months now. Is the latest voice in what is turning into a strong chorus, if i could put it that way, for the bank to act very decisively to cut rates because of the problems with the data. It is still about 5050 possibility this month, but it could move higher. Anna Richard Jones from our mliv team. The russian president Vladimir Putin is beginning his annual state of the Union Address in moscow. We will keep across that for you. This is bloomberg. Francine dutybound. Washington and beijing are set to sign their phase one a trade deal, but u. S. Tariffs will stay in place until the november election. Banks and focus as Goldman Sachs, blackrock, and bank of america report earnings today. 3 trillion of deals after a bumper 2019. We will focus on the future of a. Obal m francine welcome, everyone to bbg surveillance. Im Francine Lacqua in london. We are getting some german growth