Nissan scrapped its payout entirely. Changes at the top. Ubs begins its search for a successor to ceo Sergio Ermotti. They are said to be seeking internal and external candidates. Good morning, just under an hour away from the start of the cash equity trading day in europe. Lets take a look at the futures picture. The picture around the asian equity session was one that was flat and negative, and this is the picture we have for european futures. European futures showing a bit of upside to the start of the trading day, as our u. S. Futures. We are expecting to see more movement, but coronavirus remains a big topic of discussion. And expectations about what Central Banks can do is at the forefront of investors minds, when we look at the resilient futures. Lets get to the breaking data. We have german Economic Data for the German Economy, stagnating in the Fourth Quarter. That is our red headline across the board. The quarter on quarter number, unchanged. There is the stagnation for you. Q4 gdp unchanged. If you look on the year on year number, it is growing. If you look at the adjusted by 4 . It grew this unchanged quarter by quarter looks to be lower than the market had been anticipating. Just looking o at the year, the year has fallen a lot. We are seeing weakness on the back of lower industrial numbers at the beginning part of this week. There is a lot of negativity priced into the year already. We will continue to look for any response. Lets get to the banking sector. Rbs numbers coming through. 1. 5 5 billion pounds. The estimate was for 1. 16 million pounds. This business owned by the u. K. Government, delivering better than anticipated profits for the Fourth Quarter. They are also talking about strategic changes coming through at this minute. They continue to see challenges on income. They are talking about the costs they are going to incur, strategic costs on their markets group. The Parent Company is intending to be renamed. They see markets costing 0. 6 billion pounds in 2020. They do want to achieve a return of 9 to 11 in the medium to longterm. And a lot of other headlines coming through from rbs this morning. We will be speaking to the management of rbs. Usra cehic will be bringing that conversation later on this morning. We will get that for you. Back to our top story, the coronavirus, which has led to more than 1300 deaths, have investors nervously monitoring it spread. There are 64,000 confirmed cases worldwide. At the munich security conference, where matt miller is this morning, chinas foreign minister will deliver a keynote speech. He has already spoken about the outbreak during the fifth round of Strategic Dialogue with germany, saying he is confident his country can overcome the epidemic. Theks in asia were mixed as latest figures were considered. U. S. Futures showed resilience. Lets speak about the markets, how the markets are dealing with what is first and foremost a human story and human tragedy. We have the chief strategist at merck. Amidst thisthough concerning data and picture concerning the fatalities and infections around coronavirus, the markets expectation is the Central Banks can do a lot to offset the negativity for the Global Growth story. Is that faith in Central Banks misplaced . Guest i think this is already happening. You can see this by the fact we are continuing simply buying 60 billion each month. Expect thekets public bank of china and the Chinese Authority to react to support the economy in china. This is a big hope and is driving markets already now. Anna what are you expecting from the pboc . We have seen basic movements already, but your assessment is they have a lot more they can do in the months ahead. Guest yes. They will most likely increase their rates, possibly deposit rates as their first step, really to push up growth a little bit and set the ground for more supporting measures there. It is a question of time, how they react, but i expect them to react relatively quickly, within the next week. They want to see how corona continues to develop. Markets are already at this point in time looking through it and hoping this will be priced in already. Anna is it difficult to have conviction in your strategy at the moment . Can you look through this . The economy of china will bounce back in a v shape, therefore we do not need to change strategy . Or is it making you fundamentally reassess where you are putting money . Guest we really look through it because you have in the end no choice. You have to see that the World Economy is stable. This is a drag for the you want and in china. It is a chinese thing. 99 of all corona cases are in china. It is not a big thing in europe and the u. S. Of course it has implications because of the growing importance, 70 , 80 of the worlds economy is now in china. But if you take it to the full year, chinese growth will slow perhaps to 5. 3 or something. Recovery. Ve some and weuld look through, think our strategy is neutral, slightly positive on equities, and continuing on the equity side in the u. S. Anna i suppose the risk to the eurozone economy, is it to the downside here . We are just sitting here digesting the new figures on german gdp, the German Economy stagnating in the Fourth Quarter. That was before we saw the coronavirus take hold in china. China a big Business Partner of germany. What extent do you see risk to the downside for the eurozone . Guest for us, the german gdp figure is no surprise. If you saw the latest industrial figures and the trend and order intake on the industrial side, it is really weak. In germany, private consumption is holding up well. This continues in the first quarter, and i think this will not change materially if you look to consumers. I think you will have a drag on the industrial side. Could be a slight minus on a quarter by quarter basis. But will it lead to a technical recession . No, i dont think so. Be aurse, germany will headwind for the European Growth overall. We are on a half percentage growth path, and europe and the eurozone is more in the direction of 1 . But it is no catastrophe. We had 44 cases of corona confirmed here in europe, and some here in germany, especially with the conference taking place. It is a big topic. I think yes, regarding china. Regarding europe, i dont think so. Chiefthank, robert greil, strategist at merck. On the munich security conference, where matt miller is present and will be joining us shortly. A few more lines on rbs. We will be taking a look at your stocks at the opening, including rbs as it is currently known, because the business and announced it will be known as Natwest Group after this. Rbs will be renamed Natwest Group. How things come back from the past, and rbs saying it continues to see challenges as it reports pretax reports that beat estimates. This is bloomberg. Welcome back to the european open. 11 minutes past seven, so 60 minutes to go to the start of the cash trading equities day. There are modest gains for the equity markets at the start of trade. Renault has slashed its annual dividend and reported a fullyear profit that missed estimates, after partner nissan cut its outlook for the seventh time and scrapped its year end payoff to shareholders. For more, we join our editor from tokyo. Give us the lowdown on what is behind nissans worsening outlook. We know the difficulties that the entire sector is facing, and you add in coronavirus and the large investments in the sector, it is a fairly well told story. Reporter it is. It is quite a train wreck. Much worse than ris expected. The shares tanked. They were not selling their cars in any region. North america the key zone, profits down by a quarter. That has to come back, and it underscores this idea they have been cutting incentive, cutting sales incentives to cut costs, and that is eating into their sales. Even at a time when Overall Vehicle demand is declining, they are declining even faster because they dont have those incentives to help them sell cars, move cars along. It takes quite a while to bring that cycle around and start selling cars again. China was not much better. Sales were down domestically in japan as well. Nowhere in the world are they doing good. All this is taking place at the same time the company has yet to come up with its revival plan. That will not be out until may. There is some confusion about how exactly the company is going to cope with this. They have talked about job cuts already, but there could be production cuts as well coming down the pipe. Side ofat is nissans things. How big of a blow is this to partner renault, who we also heard from today . Reporter as we saw, renault cut their dividends. Nissan eliminated their dividends. That is a big direct blow to renault, which year after year has relied on that big dividend payment. They have a 43 stake. That is a big contribution to their income at renault, keeping them going year after year. Now that is gone they have to rethink how good this alliance is for them. They are headed in the same direction as nissan, which is survival mode. How can they become the biggest car making alliance, but just survive as carmakers . That will bring new scrutiny to this alliance and how it is been a fading renault how it is benefiting renault or not. There seems to be pressure from shareholders on whether or not it is paying offer them. This adds to a lot of building tensions already around that auto making alliance, and makes it harder for them to come up with that midterm plan as to how they will revive nissan, and after that, renault. Anna thank you for the update. Bloombergs Asia Business editor in tokyo. Now, matt miller joins us from the munich security conference. Coronavirus a part of the conversation there. We will be hearing from our guest at the top of the hour. Not the only thing being discussed. Absolutely, coronavirus is something a lot of participants here will touch on, as well as the issue of trade. They talked about that a lot last year. Maybe the ball has been moved forward this year. There are a number of conflicts that look like the world is ready for a resolution. Afghanistan, they want to reduce the violence there. The u. S. Defense secretary will be here in a little bit. The conflict in yemen, they want to reduce the violence there. Mike pompeo was just talking in saudi arabia with government officials about trying to do that. We will speak with the Yemeni Foreign minister later today. You have got the issues, of course, continuing issues of syria, what to do about the u. S. Stepping back from power. Does it give up a little space to russia and to turkey, or is the u. S. Actually recommitting to a position in the middle east . There is so much to talk about around Security Energy security as well. We will talk to the u. S. Energy secretary as well. We have a lot on the docket today, and the security conference is always a busy place with incredibly important people, especially for germans. The defense secretary in germany, the defense minister stepped down as the head of the cru. We will give that to you over the next few days. We need to got to the first word news. For that we go to laura wright. The province at the center of the coronavirus update has reported more than 5000 more cases. The reports yesterday was a oneoff situation due to a new method for counting infections, but it is difficult to gauge the true scope of the outbreak. The death toll was lowered by more than 102 account for some double counting, putting it at 1380. One of Donald Trumps most trusted cabinet members lashes out at the president. Attorney general william barr says tweets about the ongoing cases make his job impossible. He spoke to abc news. Job here atdo my the department with a constant background commentary that undercuts me. Reporter the u. S. Government releases its first year bond sales with a record low yield. They are borrowing at 0. 261 after a debt rally spurned by the growth of the coronavirus helped drive the growth. 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, matt . Anna laura right here in london with your first word news update. Lets get the stocks to watch. Joe eason is with us from our equities team, and he is looking at rbs, as it is known for the moment, and dani burger is looking at Credit Agricole. Are plenty of positives. Notably, the return on tangibles at a range of 9 to 11 . We saw barclays yesterday saying they may not get above . 10. The most important thing is cost. That is what everyone is looking out today. They will cut costs across markets, which is expected. That will cost them between 800 million to 1 billion in 2020, they say. They do not give many details on how that will come. They said in the last quarter, they reduced headcounts across staff. Up by 1700 that is one thing they are expecting to see. Will be asking for more details on exactly where the cost cutting is going to come from. It is a bit of an end of an era with them dropping their name, taking the natwest name. That is a big change for the ceo, who has just joined to make her mark on the company. Anna time to turn another page in the long story around rbs. Lets get to you, dani. How about the numbers for Credit Agricole . Dani one of the items was a record inflow to the Asset Management unit, among the biggest Asset Managers in europe. Also Investment Bank profit looking strong. Capital markets posting a 50 increase in their resume. That means that overall, both revenue and net income beating estimates. That means that for the time, they are able to offset low Interest Rates and Rising Capital requirements. We will speak to the cfo later, so it will be interesting to hear if the good times can keep on rolling. Anna thank you dani and joe. You can get all the stock stories on your bloomberg and via the mobile app. Coming up, we will speak to the Credit Agricole ceo. That exclusive interview at 8 30 and u. K. Time. We will talk about the Asset Management unit and the strength in Investment Banking and beyond. Tune into Bloomberg Radio live on your mobile device or dab Digital Radio in the london area. This is bloomberg. Majority of these plants have reopened earlier this week. Products are essential, so it is in everyones interest. It is a risk that could come from the supply chain. We have a lot of presence in china, and i am very happy we have started operations beginning of this week. The question on everybodys mind is how long this will last. Our cfo asked week said the impact could be in the region to 5000 euros a day. Time will tell as to how this plays out . Matt there were the ceos of some of the top European Companies telling bloomberg this week about the impact of the coronavirus on their supply chains and on business in the global economy. It is day two of chinas new method for spotting infection. Hubei province reported 5000 additional cases. The latest figures are double what the province was reporting daily. With the old counting system. The death toll has risen to nearly 1400. U. S. Officials escalated criticism of chinas response to the outbreak. Our chief north asia correspondent Stephen Engle joins us for more on this subject. Stephen, what does the new death toll, the new number of cases today, tell us about the containment effort . Stephen the bigger question china being forthright and forthcoming about all the information . It adds a lot of confusion to the global tally that we have been running through every day. There was some optimism a couple days ago that the number of new cases each day was starting to plateau a bit, or at least the climb from previous weeks. Now that we had the big jump yesterday, and still a sizable jump overnight, another 5000 cases, including 4800 and hubei. It does add more confusion. And trying to read the tea leaves from the government statements, and we have the World Health Organization coming out and saying that revision. As you mentioned, the United States and the white house raising concerns. Is china being fully transparent in its data . Anna interesting to see in the light of what we heard from larry kudlow. It is interesting to see that the China Foreign ministry saying today that china would welcome u. S. Experts to join the World Health Organization group on the virus. Interesting to see if we see more cooperation coming down the line. Engle joiningphen us from hong kong. Coming up, we will speak to the outgoing ceo about the latest earnings and her Succession Plan at the phone carrier. Interesting to talk about how they were done beating estimates. That news overshadowed by the personnel changes. This is bloomberg. Sometimes your small screen is your big screen. And with the Xfinity Stream app, which is free with your service, you can take a spin through on demand shows, or stream live tv. Download your dvrd shows and movies on the fly. Even record from right where you are. Whether youre travelling around the country or around the house, keep what you watch with you. Download the Xfinity Stream app and watch all the shows you love. Anna welcome back to the open. From the minutes away opening of your cash equity trading day. Back to the earnings story. Succession plans for a ceo. As the Company Reports its fourthquarter earnings. Beating estimates. Joining us now for an exclusive interview is the now outgoing ceo but still chair, ursula burns. Good to have you on set. You were brought in in 2017 by the russian billionaire back er. The fact that you are stepping do you feel a lot of progress has been made in that area . Ursula it is always great to make changes when you have had positive results. We have strong results and we can build on that going forward. I was brought in as chairman originally and it was not only for Corporate Governance but also for overlooking and seeking operational excellence. If you recall that that time, we had a monitor in the company. And we wanted a deferred prosecution agreement. That has been cleaned up and done and we have stabilized ourness across all 10 of markets. Anna talking about the coronavirus and the threat to emerging markets from that but do you feel the valuation story is it on the right track . Ursula i think it is getting on the right track. I think we are still severely undervalued. We have a growth and performance story that has shown in 2019 that still requires a little more of a valuation kick but i am willing to wait. E will keep plugging along i learned are late that you have to say what youre going to do and then do it and then you become a Boring Company which is my goal. Anna boring is not always so bad. , jump in here. Fantastic to it is have you on here. Industry, what you are focused on right now, what do you think of the fx of the effects of the coronavirus . Has definitely been in the news. Ursula anything that impacts Global Growth is not good for business. We prefer to have buoyant markets everywhere. Even for our 10 markets, the coronavirus has not had a significant direct effect and i dont think it will have one if it is managed by the Health Organizations around the world, well. The services we provide will not be directly impacted. We do get a lot of our kids from chinese suppliers so we have to be careful of that in terms of supply chain. I am hoping we can get this under control likely. Matt in terms of the supply , a lotnetwork equipment of it obviously comes from china. China is the biggest maker in the world of mobile phones themselves. How much of a supplying chain problem has this caused from your Vantage Point . Ursula for us and the Telecom Industry in general and veon specifically, not a lot yet. The way we deployed the kids that we get and the technology that we get does not require a significant amount of Global Travel from china to my markets. It does require some. It is very specialized and easily planned. And wellplanned so we can get in front of this but as i said, i dont think the world has dealt with Something Like this if it goes to full scale so i cannot project what will happen. Our markets are so far not really that significantly impacted. Anna so far. Watching to see what that watching to see what happens. What are the steps you are taking to address the weakness in the russian part of your business . Have 50 of our business in russia. In 2019, we were stabilizing and preparing for investment in growth. We are focused on the network and Network Quality and focusing in as manyg up places as possible. The second thing is distribution. Russia still has a significant amount of stores. We want to make sure that we move those two upscale and become more efficient and move more and more to digital distribution. And the third is pricing. If you think about packages and plans and the things you can buy, being transparent and efficient in communications about our service and how customers can engage are really important. We have announced a change in leadership in russia as well. The leaders did a really good ,ob and we have two new ceos one of which is a telecom expert. Anna that is a russian side of things. What about the green agenda . Many investors are focused on business, there is a lot of data and you have to store it. What can you do to reduce the impact on the environment . Ursula our partnerships are placed with providers and that is really important. We have some of our own data centers in moving towards green, Renewable Power sources for these data centers is really important. We have done all that we have partnered with providers around the world to make sure we are on the leading edge of using technology and driving technology to be more effective and to be more globally conscious. Matt what is the next step, ursula, for carriers like veon that run data down pipes but do not cash in on other businesses that they could be financing, loans what is the next step for carriers like years . Movies, finance, loans. Exactly. Came from facebook and he managed at the payments platform for facebook and we did not bring him on by accident. We brought him for that level of expertise. , we are a leader in Global Financial services with our offer through jazz cash. We expect that to continue to grow. We want to expand that to other relevant markets in our 10 markets set. Datant services, big services, all kinds of services that can wrap around this pipe as you described it are important to us. That is part of our base strategy. Part of our value proposition. Understandestors to that and we will make them smart on that. And increase the valuation of the company as well. Matt is it more difficult in markets like russia and pakistan to focus on improving Corporate Governance . Delivering diversity in business . Many steps behind the western world in that respect . Ursula i do not think they are that many steps behind. With strong board and strong local leaders and the right tone at the top come a Good Management structure, i have found it to be invigorating actually. The learning curve is pretty steep but they are really Good Learners and a teacher is a lot as well about great practices for inclusion and diversity and serving a broad set of population. They have a little ways to go especially because the standard is set in western europe and the u. S. But i have been very pleased with the up tick in my ability to feel at home from a compliance and ethics standpoint in the markets that we do business in. Anna first let come at really great to see you this morning. Please come to see us again on bloomberg tv. Joining us from london. Let us get a Bloomberg Business flash. Here is lara right. Laura renault has slashed its dividend on reports that it missed its estimate. This comes a day after his itsner, nissan scrapped numbers entirely. A strong investment in performance has boosted Credit Agricoles numbers. Jumping more than 50 in the Fourth Quarter helping revenue beat estimates. The bank also recorded record inflows. Tesla is raising money of again. It sold at least 2 billion in shares just weeks after elon investors diding not make sense. He seems to have changed to his mind. To fund the proceeds his seemingly and less aspirations. That is your Bloomberg Business flash. Matt thank you, laura wright. Up next, more Succession Planning and banking. Ubs becomes the latest European Bank to look for its next ceo. We will discuss. This is bloomberg. Anna welcome back to the european open. To go to the start of the equity trading day and we are expecting flat to positive picture despite all of the ongoing concerns around the coronavirus and what the death toll there and the infection rate. Let us talk about something entirely different. Ubs has begun searching for it new ceo, its replacement for Sergio Ermotti. The chairman said last month that succession was not at the forefront of his concerns but this is what he had to say a year ago. For us, Succession Planning is part and parcel of what we do. The ceo and i are now in our eighth year at the bank and that is a time to think about what youre going to do and how you were and how you will pass the bank over to your successors. Anna good to see you again. You brought us this story around succession at ubs. And looking back at Sergio Ermottis tenure come he is still there. That theya surprise are looking at continuity and planning . The surprise of the story is timing. We expected him to stay for another year or so. Now, we understand he will cap down this year. Wrote inin our we our story yesterday that he has been at the helm for a decade. It has been a tough time. When he started, ubs got a bailout from the government. Investment banks. That was a key project. The bank has evolved from that and at some point, you have to think about succession. A more it is probably ordered process than what we saw at Credit Suisse. I think ubs has a lot of challenges. Did not havemotti all of the answers recently. They are still an underperforming Asset Management group. Management of wealth are lowered. It is a capitalized business. If you think about the types of successors, ubs is an asset gathering model. Anna let us get out to matt. Matt look, there is still almost a year left in the year so he still has a while to go. Of theuld go to the end Credit Suisse ceos gardening leave. Qbal khan . It bulk why is he not in the running . I knew that question was coming. I think he is still in the running. He just started at ubs. He needs to prove that he can do the same things as what he did at Credit Suisse. I think he is still a potential successor for Sergio Ermotti but there are other internal candidates and ubs is looking externally. It is an asset gathering model. Insurance companies do that as well. They manage assets. They have a wide range of possible candidates. They could approach someone from an asset manager or another wealth manager. Is a widea there range of possible candidates. We need to see they are working on this now both internally and externally. Thank you so much for joining us. Always great to have you on. Our intrepid european Financial Services reporter all over this story. Rbs on to another bank in reporting fourthquarter operating profits that beat estimates. The u. K. Lender saying it will change its name to reflect alignment with a brand that delivers a majority of its business. Ticeng us now is jonathan to talk more about this. Reportld you rate rbs compared to a lot of other European Banks that have reported in the last couple of weeks . Jonathan in isolation, the outlook is as expected. The revenue horrible. And the focus today will be less on the change of brand but more on how uninspiring the new targets are because they are looking to take 250 million in cost. They have had a lot of costcutting. Change to theo Capital Management strategy, it proves the new ceo recognizes they have a tough time ahead and there is little they can do to turn the dial. Anna and we have seen today that the ceo is saying our performance does not match the potential that exists in the bank. What is in a name though . And what difference does the name make . His days of going still and buying banks is resonating with the name of royal bank of scotland. This is not an all conquering banking takeover. It is a corporate and retail bank. They are shrinking the market by 50 which we suspect is not enough. Let us take a step back. We are a simple bank and we want to be a straightforward bank focused on retail and corporate and not be associated with the sins of the past. Anna interesting. Going down memory lane with you. And what the rbs brand means in the u. K. Thank you. Minutes away from the open. The last trading day of the week. 10 minutes to go until equity trading. One strategist says the fallout from the coronavirus will be manageable. We have your morning call, next. This is bloomberg. Matt welcome back to bloomberg markets. This is the european open. We are about five minutes away from the start of cash Equities Trading across europe. Six minutes and 46 seconds. In the sector that has already auto sales,weak the industry is grappling with the results of the coronavirus. We have already had some tough auto numbers out from renault and nissan. The fallout from the outbreak is going to be manageable by these automakers. Hubei is the fourth largest producer in china of cars which is hurting sentiment but february already tends to be a weak month in terms of car sales. Automakers already had a high level of inventory. Factories are shut for the time being, that will be ok as long as they open soon because they have the inventory to weather the storm for now. In terms of who will be hardest impacted, it will be there producers concentrated in hubei. On a wider level, carmakers can withstand this but those in the hope a province are honda, gm, and the alliance between renault , mitsubishi and nissan. Going forward, we are likely to see the auto traders diversify their supply chain even more to avoid further disruptions. Anna thank you, dani burger. Interesting morning call. Let us get to some info about other stocks. Saying it is tice beating estimates. But facing challenges and renaming the business. An interesting story and pat to the history even if not market moving itself. That stock nissan has been tanking in japan. Dividendsashed its coming in below estimates. As to how much weakness we will see and the share price. How forgiving is the market . Astrazeneca, they say the corona Virus Outbreak will hit their 2020 performance. Making specific reference to china. Are they get about a fifth of their sales. It will be interesting to see how that one performs. This video will face questions on that as we go through the day and we have those numbers 55 minutes ago. Coming up, it is the market open. Flat to positive. U. S. Futures also flat to positive. This is bloomberg. Anna a minute to go until the start of cash equities treading on this friday morning. Here are your headlines. Europes largest economy avoids contractions in the Fourth Quarter, capping a poor year of growth even before that coronavirus. When all cuts dividend by run after nissandends scratches payouts entirely. Ubs begins its search for a successor to the ceo. In the u. K. , rbs is changing its name. Matt . Oh, in fact, no. Matt is at the munich security conference. How can i forget . On the European Equity markets this morning, european futures will go higher by a little bit. Coronavirus and human tragedy there very much at the forefront. From an investor perspective, that seems to be of setting concerns on the chinese economy right now. European equity markets opening up this morning. What do they have in store . We saw a flat session through the asian day, a divergent session, with japanese market going one way, hong kong and shanghai going another direction. We are seeing flat. 100urprise there, the ftse and spanish ibex looking pretty flat at this early stage. The british pound looking calmer than it did yesterday. Late morning yesterday, getting the news about the chancellors departure. Number 11. That pushed the pen higher, expectations of pound higher. Bloombergs direct, european equities markets opening in muted fashion. Was look at the sectors perspective. Health care once again being sold off. It is not a day we are flying into havens, despite concerns around the Health Care Sector. We have had news from the Health Care Sector. We will look for movement in regards to that. Financials look to be benefitin g. Oil stocks up to tens of 1 . Lets get to individual movers and see what we can see on the individual stocks were focused on. Weve had a number of corporates reporting earnings. Risk,run coronavirus, run weve also got the underlying earnings story. 7. 4 . We see some stocks in the Health Care Sector doing quite well, including nmc, a volatile one. Center cut bouncing after losses of yesterday. Another day of strength coming through for that particular business. Lets have a look the ed of earnings story, up this morning on for your earnings, seeing growth in 2020, as 29 profit beat estimate. Astrazeneca the biggest follower on the stocks faller on the stoxx 600 after they raise concern about what the coronavirus will do to their business in china, where they get a fifth of sales. We also see retinal renault to the downside. All of those following by the most on the stoxx 600 this morning. European markets opening slightly to the upside after a heavy upset. Joining us is the head of u. K. Equity research. Good to get you on the program. Numbers out from some interesting individual stories. From a sector perspective, how are you playing the u. K. . Is it all about infrastructure spend for you . General, we tend to. Lookat longterm Growth Perspective from a sector point of view, were sort of agnostic. We look at longterm stocks in terms of growth. Astrazeneca is under the cusp of the coronavirus. We think their growth trajectory is really good. Does me we like all Health Care Stocks. Doesnt mean we like all Health Care Stocks. Anna tell us why the coronavirus will have a negative impact on this business. Guest well, astrazeneca has been one of the first pharmaceutical companies to have a strong presence in china from major european pharmaceutical companies that make most of the highest percentage of sales in china. More importantly, gets a lot of growth from china. Its not a surprise that if you have your distribution in china, some of your manufacturing in china,your sales reps in if you have your doctors who prescribed edison in china, that there will be who prescribed medicine in china, that there will be news. What ive been assured is that there will be guards for 2020. D foring a tough perio china, months of disruption. They regarding total sales growth to high Single Digits to load the digits. Anna we will see if that gives markets some comfort later in the session. Thank you. She stays with us on the program. More later on. , rbs announced it will be coming out west group later this year. Dont miss our conversation with the cfo. That is coming up right here on bloomberg. Matt welcome back to the european open. We are currently about 10 minutes into the trading day right now and we are looking at indexes around europe that are currently a little bit mixed right now. In terms of oil, it is heading for its first weekly gain since early january. Thats after prices found a floor amid uncertainty over the impact of the coronavirus and weather opec plus would respond with any additional production cuts. Goldman sachs global head of commodities research, jeff curry, described the situation in stark terms. The current environment is pretty dire, what is going on in china. The baltic freight index is negative, which is an indication on how negative the demand picture is. Matt joining us now is reiners ala, he is the ceo of omd. Whatet me first ask you your view is on the impact of the coronavirus. Clearly, it has hit demand hard in china. Guest well, i would say its a mixed picture. On the one hand, we see it in china. Its something. But on the other hand, i do see libya, which is the same order of magnitude, about a Million Barrels per day. That is stabilizing as libya. That is stabilizing. The different picture is in downstream. We do see a stabilizing of the refining markets, not only here in europe, also in asia. Some refineries are offline in china, stabilizing it. Goode do have a pretty refining margins. The same pictures also in the margins, pretty good picture stabilizing the margins because of low nafta prices. The markets, because of lower demand, are under pressure. Thats clearly one of the questions you get a lot lately, rainer, how is the impact of coronavirus being felt . Im sure the other question you get on a regular basis, what is the outlook for nord stream 2 . What are you going to be able to use that pipeline . Pipe the picture is clear. The pipeline activities, the nord stream 2 company is looking to find a plan b. View, they will find a solution and they are highly committed to constructing the line, and finishing the line as early as possible. Dont ask me when. Nobody knows. I havent heard the concept from them. Therefore, it will take time. Anna it will take time. Good morning to you. What about the sanctions environment . \ are you expecting further sanctions activity from the u. S. . Well, i just called for a better voice from europe. Europe is not protecting the industry. I dont know how much sanctions we need to have. Europe is standing up and fighting for the industry. Anna why do you think europe is not speaking more on this front . Is europe speaking, but quietly maybe . Rainer i think at the end of the day, you can talk a lot, but you need some actions. I cant see actions that were helpful to protect the industry, and i can see the same in nord stream 2. What should be next . I think they are not targeting the energy ministry, maybe next year they dont like imports of aluminum. So we have to be more careful. They should have a stronger voice. Matt i mean, so the concern im going to speak with the Energy Secretary in just a moment, and their concern is in the energy isnt the energy. It wouldnt be aluminum. Its about whos selling it. Would you feel comfortable buying things from russia . From iran . From north korea . This is the problem here, rainer. Youre paying money to a government that does things like move into crimea area crimea and simply take it. Does that feel ok to you . All, i well, first of only have experience with deliveries from russia. On the one hand side, it doesnt matter what circumstances weve seen from the past. We have all we need for the market. From my point of view, the market needs this addition. We do have a track record of more than 50 years of Good Partnership in the energy sector. Weully agree with you that have sanctions in place because of the next stage of crimea. These are european sanctions that i support. What i dont support our sanctions that are not backed by the european union. And from my point of view, i think we should see whats really behind the initiative, yeah . If we have to substitute just gas from russia from more expensive gas from other sources, we are risking competitiveness in europe. Anna you mentioned to libya. Give me your thoughts on what happens to libyan production. Youve got a joint production that have taken control of the key pipeline. Rainer well, in libya, all ports are blocked. Its not being exported. Thats a situation where have to say the berlin agreement wasnt helpful so far. We hope that the discussions we see now in switzerland taking place are helpful to bring back piece into the country, but right now i cannot say when the production will come back. Anna just briefly, romania a difficult market for you. Under what circumstances would you consider retreating from that market . Well, i wouldnt retreat from that market. We do have stable production. We do have stable market. Ever question mark is, where kimiko further can we go for the development . The government is moving into the right direction, but we need to have a stable consortium. Anna great to speak with you. The omd ceo dish on the ceo. C colleague near careish omv ceo. Cehic,league, nejra spoke to someone. Targeting lower profits over the nearterm as the u. K. Economy sags and the stock currently trades lower. Currencylook at the financing lines, a lot of our we know we are the biggest lender in the u. K. The product lines we have in that market are really important for us to maintain that suspicion, and also for customers to do the business they need to do. But we need to reshape it for the business of the future. Nejra does reshaping mean job cuts . We always have a policy talking about job cuts. But as we shrink it, it will be in the west market. Nejra what about crosscutting more broadly . Weve had a great year of crosscutting. We have such a strong history of that. That next year will be one of the same to do 50 million target for next year, just below the 4 . The percentages are going to get smaller, but challenging targets as we move into next year. We need to continue that for a number of years in terms of continuing to reshape the space, as our customers change. Much more investment in the Digital Technology were all using. Nejra what levers do you have to pull to work on the net interest market . Is something i talk a lot about. The reality is much to do with the yield curve. Were in such a low rate environment such a low rate environment. This book used to be much more valuable, 1. 6 in terms of what you trading at. Its repressing down to these lower levels. Frustrated because what is really important is the return on equity we get. Today, its above 20 . The new inflation we see coming through, theyre comfortably above 15 . We really managed to act top volume without impacting risk. Volume is replacing the lost income margins. While the margin reduction is a feature, the strong volume growth and r. O. E. Makes great business for us to be participating in. Nejra lets talk about those things. You said you continue to see challenges for income in 2020. How far up the risk curve are you willing to go . Clear we dont want to go up the risk curve to get margin. We had 10. 4 billion new mortgages in q4. That is a staggering number, 15 Mortgage Market share. Were actually able to process and make sure we have the right customer engagement. Its because of the what the team has done in making it more digitally. The mortgage peace and the risk curve, i wouldnt look at it like that. When i look at 2020 challenges nejra how do you look at it . Its less about mortgages. People go there. Its very much about the regulatory changes coming. We think they will have impact on our numbers. Were clearly going to incur losses. The yield curve is going in this direction. We, in our own economics, participating we will have other yield curve cuts. Those things make me it harder. Nejra the bank of england . Our model, the coming in from q2. Anna that was katie murray speaking to nejra cehic, that conversation on rate cut expectations in the u. K. What did the markets make of this announcement from rbs . Well bring you stocks on the roof on the move. Currently, the stock known as rbs down by just over 4 in session. This is bloomberg. Matt welcome back to bloomberg markets. This is the european open. We are currently 22 minutes into the trading day right now. We take a look at markets, we are seeing equity indexes that are moving slightly down, i believe flat to negative is how anna described it. Lets get to the top stocks stories. We go to dani burger in london. Dani looking at the biggest losers so far, one of them rbs. Some of the highlights of their earnings, the Fourth Quarter did t and they announced however, a lot of disappointment from analysts, including morgan stanley, who said the cost cuts werent as much as previously expected. This cost cuts dont seem like they will be able to help the company until further down the road. Those shares falling the most weve seen this year. Also falling the most is astrazeneca, the biggest loser on the stoxx 600, earnings also painful for the company. Analysts were hoping 2020 would be the year for turnaround, however the coronavirus throwing that into question with a fifth of their countrys value coming out of china. Now they seem it to high teens revenue growth. Alt, this ishn something from the profit plunge. Theyve seen a lot of demand issues. Theyve had to cut their dividend and therefore youre missing, as well. They are saying one of the hardest hit form carmakers when it comes to the Coronavirus Impact on the supply chain. Anna the Cabinet Reshuffle service big scout with jabbing. The pound gained, sending stocks lower as investors considered whether this might mean rater fiscal easing from next months budget. Tineke. Th us is lets start with that as a theme, and, can come onto other corporates. Your thoughts on the opportunity for fiscal spending in the u. K. , or your expectations that kicks in, in earnest, from now . Tineke we think it will kick off in earnest. The timing might be slower than people think, but we are hopeful that the low confidence and the level of activity weve had in the u. K. Will pick up. Then its obviously, how do you play that in stocks . There are different ways you can do that. Anna weve seen rbs trading down to less than 5 today. The market is looking a little negatively at what weve heard today. But playing it through domestic inking could be one way to play banking could be one way to play. Do you not buy it that way . Tineke correct. Typically, we Like Companies we invest into be as much in charge of their own destiny as possible. And a banks are heavily regulated. If anything, that will get worse. So it makes it very difficult for them to predict, you know, where they can make money and were not. And obviously, the price they can chart. We would rather look for companies, the banks benefit if consumers and corporate borrow more. Anna and i noticed that shell is also one of the companies youre interested in, that you cover. This is a sector in deep transition, isnt it . Also facing, at a time they need the cash for investment, a slightly weaker oil price, although its at this week and up this day. What are your expectations for show . Tineke in the shortterm, its going to be tough because oil price is very low. And more importantly for shall, because its one of the biggest positions and guess around the world gas around the rope. The gas price doesnt get much notice. But this is a level where, if youre a fundamentalist, you think it cant go much lower. This is a tough background indeed. Anna thanks for joining us, tineke. Coming up, we will pick up on the conversation. We talk to the cfo. That company reporting numbers, up. 5 . Equities today, this is bloomberg. Matt welcome back to bloomberg markets. This is the european open. We are 30 minutes into the trading day. Im matt miller. Today, im at the munich security conference, alongside anna edwards, still in london. Anna absolutely. The security brief, were pretty flat across equity markets, dealing with the coronavirus and a busy earnings season. The sector picture looks fairly mixed as you can see there from the grr function on the bloomberg. We see Health Care Stocks are the most sold off, astrazeneca under pressure. Lets get a bloomberg first word news update. We stay with lauren right. The chinese province at the epicenter of the coronaVirus Outbreak reported almost 5000 more cases. That confirms the nearly 15,000 reported yesterday, the situation due to a new method for getting infections. Chinas revisions are making it more difficult to gauge the scope of the outbreak. The death toll in the country was lowered by more than 100 to account for double counting, putting it at 1,380. The white houses top Economic Advisor wrapped up the coronavirus. The recovers concern echoed the accuracy of new cases and death. Health disappointed experts have not been allowed into the country. He spoke to reporters earlier. Without there was going to be more transparency, but were a bit disappointed. Were more than willing to work with who on this and they wont let us. I dont know what their motives are. I do know more and more people are suffering over there and thats not a good thing. Latestu. S. Governments 30 year bond sale has drawn a record low yield. Is borrowing at 2. 061 after a debt rally spread by the coronavirus helped drive rates to lows. Global news, 24 hours a day on air and on quicktake by bloomberg, powered by more than 2,700 journalists and analysts in more than 120 countries. This is bloomberg. Anna, matt . Anna thank you very much. A strong Investment Bank performance has boosted numbers. Jumped more than 50 in the Fourth Quarter, helping revenues beat estimates. The Bank Reported record inflows as its astro management unit. Were joint with an exclusive interview of the cfo. Jerome, welcome to the program. Thanks for joining us. Talk to me about the Capital Markets business and the strength there. What is it that has driven this Strong Performance in Capital Markets . Ll, actually, it is proven by customer demand. Its been the case that in 2019, all of copperhead customers were indeed asking us to organize their financing operations, be it on our Balance Sheet on the Capital Market situation and bond issuances. And those activities drive the rest of our Capital Market activities, hedging currencies and so on and so forth. The level of activity has proven to be good across the full year, especially in the Fourth Quarter, but across the foyer. Anna if you had to attribute it to the full path of Capital Markets . Guest we do mostly securitization, bond issuance, hedge, rate hedging, and currency. All of these worked very well in 2019. Anna they were allstars in your eyes. Of such strength, what is the outlook . Guest clearly, we are driven by customer demand. We depend on the appetite of our customers to enter into transactions. It means that if the customer demand is not here, if the confidence is falling, we are going to succumb from a lack of further news. Anna why do you think customers were demanding so much of your last year . Jerome because they wanted to take advantage of good market, positive market conditions, in order to secure their financing for the longterm. And so we were there to organize the financing operations. Anna is this thanks to low Interest Rates . Jerome clearly this plays a role. Selina and they are still here. Maybe this sets us up for a strong 2020, as well . Jerome this is the prospect has of now. Anna as time passes by, things can change. What about french retail . Are there signs of recovery . Jerome im not talking about recovery because the french Retail Operations work well. We are getting customers. Weve gained two do 50,000 new customers 250,000 new customers in 2019, more than 50,000. Customers are also are alsour customers engaging into investing money for their retirement schemes. So the activity is working well in the french market. What is under pressure is the level of hate, by definition, but on the scope, globally, of the essay, the Net Interest Margin represents one third of our revenues. Anna so thats the context. Other things you can do to offset the negative in terms of low Interest Rate and what that does to your margins . Benefit on a20, we fullyear basis on the tools the ecb has put in place, the mechanism thats going to help our Net Interest Margin. And also one of the tools we can use to refinance the loan but we have. Anna are you interested in expanding m a in the french retail space . Areme no, actually we considering transactions like we did in 2019, to divvy up our financial busy up business lines, like Asset Management, Security Services businesses. But in french retail, we have such a big market share, its not really useful to consider those transactions. Anna not interested in hsbcs french retail production, for example . What about bolstering the ratio . The Balance Sheet . Is that something youre planning to do . Jerome we are planning to do it at the level of the group were we have, by the end of last year, have a high 15. 9 ratio. But when it comes to the identity of the group, we are far above, actually, our target, in terms of cet1. We ended last year with 12. 1 ratio, when the target is 11 . We know the beginning of 2020, we are going to consume as much as 40 bits in terms of dismantling a mechanism we had put in place. This is going to boost profits. But to reduce a little bit the cet1 ratio, which is perfectly ok. Anna you put in place new targets last summer, an increase in net profits of over 600 Million Euros over three years, cutting costs. How are you progressing . Jerome actually, we are progressing well because it improved in 2019 by more than 4 . Is now close to 4. 6 billion euros. We are targeting more in 2002. We are proposing above 11 . And we were at 11. 9 . Anna you seem to be benefiting you seem to be telling a positive story in various parts of the business right now, jerome. Do you benefit from the diversity of your model of the bank . Jerome clearly, the model is based on a Solid Customer base in retail in bank and italy. All the Financial Services and financial profits that we can imagine in Asset Management insurance, credit financing and so forth, is working very well. Anna thank you very much. Thanks for joining us, the cfo. Out up, as a run renault slashes dividend, we speak to the ceo. Thats after 11 00 a. M. U. K. Time this is bloomberg. Anna welcome back to the european open, 42 minutes into the trading day, pretty mixed. We are flat overall, but london and paris move lower. The dax is flat. The ibex and ftse mid in spain and italy make modest gains to the update upside. Heres lower right in london. Ubs is searching for his next ceo. The bank is seeking internal and external candidates after the ceo told his plans to step down this year. A star higher who joined in october from Credit Suisse main not be among the front runners given his relatively brief tenure. Dividends after profits that didnt meet expectations. The sale declines comes after up evils that began the departure of the cfo following his arrest in japan overcharges of financial wrongdoing. Rbs is going for a rebrand. The bank is slashing market business and changing its name. Thats as the statecontrolled lender seeks to put its past behind it. The new ceo is also embarking on more costcutting in her first earnings since taking over from russ mcewen last september. Katie murray told bloomberg there are more challenges ahead. Were clearly going to incur some losses in terms of the market. The yield curve is going in this direction, and we, in our own economics, anticipating another yield curve cut. Those things are make income harder, particularly for banks. That your Bloomberg Business flash. Matt, anna . Anna thank you. A frenzy of bullish bets are swirling around the biggest tech names and breaking records, sending waves through the markets. Here with the analysis, dani burger. Dani frenzy is an understatement. Weve seen option volumes skyrocket, this from goldman sachs. From the start of the year, weve seen volumes search, and that was coming from a record. This is showing just as many options trade as the underlying stock itself. Its the highest on record. Dominating this by far is call options, bullish options. Most of it is in the highflying tech names, and tesla of course. Tesla still has the bigs increase. Besides them, the next biggest increase comes from microsoft. The call options has exploded. We saw some of the biggest amounts of bull options. Were seeing they are crossing more than puts. A lot of this is likely from a. Investors are wary about high valuations, but they do not want to miss the rally. There also seems to be a retail component to this. As an example, here are the mentions of microsoft on a popular subreddit. You can see it went from barely any options to adjust within a mentions, andred of lot of them revolve around Trading Options themselves. Rather than buying call options, they recommend you should be selling them. Matt, anna . Thanks very much. Geopolitical tensions are being addressed here at the conference. A good test countries who have rocky relationships. North korea sent its first eller ever delegation. Mike pompeo will be here the Iranian Foreign minister is also attending, of course. And joining us here right now to talk about what to expect is wawrinka franca, at the council of foreign relations, and also runs a very popular German Security podcast. Thanks for joining us. Let me ask what you think is the most important announcement decision meeting to watch for at this we can long conference . Guest honestly this year, there is somebody topics. Any kind of things can happen. What i watch out for most is the chance of the relationship. We have the biggest congressional delegation, longtime, all the biggest. Shows where Congress Wants to show its support. As you mentioned, you have the secretary of state, secretary of defense, the relationship between u. S. And germany for something i watch out for. I will be watching his panel debate and what he says about European Defense, which is high on the agenda. Matt macron made the point that they have to start strengthening its will to ash military forces. You have donald trump its military forces. You have donald trump stepping back. Is that because of the history . Do they not want to spend the money . Ulrike i think that changed slightly. The election of donald trump, brexit, the crimean annexation by russia, all of this has influenced the german debate. There is more willingness in germany to do more in the sense to get more engaged. I think youre right. The german public is more aggressive to do more, militarily. The motto is still, lets do things in a civilian weighing rather than a military way. Theres a long way to go. The people here, these are the ones who have been arguing for higher defense spending and more engagement. Matt do you expect more spending in europe on things like planes . On things like ships . On arms . Is europe going to start stocking up on weapons . Ulrike it already has started. Since 2014, the defense expenditures have gone up. There definitely is a change happening. I think were going to see a continue of this increase, but is not a massive increase in the way somewhat hope for. But gradually, i think europeans are more willing to do more, or rather they think they have to do more and dont have a choice. Matt youre german, but you live in london, work in the capital of foreign relations. How do you expect brexit to play out in terms of defense, share intelligence . Are those two Different Things . Ulrike its a big topic and we dont know yet. Brexit is going to pose problems for the kind of engagement or initiatives that macron, merkel, etc. Are envisioning. They are thinking of the eu component. Brexit is leading leaving the eu. The u. K. Still remains in europe. It still remains part of the European Security infrastructure, and it remains part of nato. Overall, the u. K. Will still be involved. With regard to intelligence, at this point we dont know yet. I would argue honestly, intelligence sharing between europe, continental europe, and the u. K. , is a winwin situation. Unfortunatebe trends, unfortunate interactions that leak to a less Good Relationship between the u. K. And continental europe. That would be problematic. We will have to see. Matt you mentioned nato every year, at least the last for years ive been coming. The u. S. Complains germany doesnt spend the 2 of its budget it promised it would on nato. Do you think thats going to be resolved at some point . Or do we have to wait for a new German Government . Ulrike i think well have to wait for a while. As a total sum, its quite a lot because german has a big economy, the biggest a rep. In europe. Its going to take a while. Whether we reach 2 is another question. Were well into 2020 by that time. Theres no reason to expect a big announcement here or any big change anytime soon. Also because its hard to spend a lot of new money, suddenly. We do have programs that are going to take up a lot of funding and were going to spend on that. We wont reach 2 in the next two or three years. Matt thank you for joining us. Talking to us about the European Defense and what were going to hear over the weekend at this conference. Next the mliv question of the day, which asset will benefit from a weaker euros . Well find out more when we bring in Richard Johns from the mliv team. This is bloomberg. Matt welcome back to the european open. Right now, were almost an hour into the session. We have a mixed trade there, flat to down because the dax isnt moving much. Although the ftse made in italy getting 2 10 of 1 . Right now, we want to look at whats moving markets with richard jones. He is in berlin, par usual. Off, what kind of response do you have to the mliv question of the daytoday, which assets will benefit most from a weaker your . Euro . Good morning richard . One thing i will say, one of the beneficiaries will be the swiss franc. As a result, i think we will probably see swiss franc yields cap lower. Come lower, prices coming higher for swiss Interest Rate futures, with bonds. Because one of the big beneficiaries from any euros downdrafts will be the swiss franc. I also think the dollar will be a beneficiary. Well see euros was lower, dollars was lower, especially on the short rate, will benefit on the downside. Anna what kind of your downside do we expect as a result of the German Economy . In the Fourth Quarter . Richard i think for euros swiss, were probably heading back to levels we saw in 2015. Were near the 1 05. Once we get there, well get close to the hundred five handle. You have to be closer to the same targets. The levels that we saw in 2017. You remember that time, there was a lot of anxiety in the market about french politics and marine le pens popularity. At that stage, we were down 105 in your dollars. Those levels are what investors should be looking out for. Richard, thank you so much for joining us, joining us out of berlin. Remember, you can take part in the debate in todays question of the day. Just type ib tv and reach out to the team and tell us which assets you think will benefit the most from a weaker your. Nn weaker euro our reporters are strumming around mike pompeo as he leaves his hotel and has here. Were going to surely have a lot of news breaking throughout the weekend. Anna indeed, met continuing to be across the news flow as we go into the weekend. Here in london, keep it on equity markets that are over or flat this morning. This is bloomberg. Francine revisions cloud the picture. 0 additionals 40 coronavirus. Germany avoids contraction. Economists worry it is illprepared for continued trade uncertainty in the virus threat. And changes at the top. Ubs begins its search for a successor for the chief executive. This west bank is said to be considering internal and store i external candidates. welcome to bloomberg surveillance