Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

The road to hold. Fatah minutes is suggested the central bank will keep rates suggestd fed minutes the central bank will keep rates unchanged. Ubs names its new boss. The worlds biggest wealth manager pouches ings ralph hamers to succeed Sergio Ermotti as ceo. Just under an hour away from the start of cash equity trading in europe. I want to take a quick look first off that ap mollermaersk coming out with earnings this morning. We are looking at a shipping company that posted earnings a little bit ahead of schedule. Let me just pull up the ticker here. Inmollermaersk in denmark, copenhagen of course, right now putting at earnings out earnings. Tda at about 5. 5 million. 5. 5 billion. Ap mollermaersk missing with da. Forecast for 2020 ebit we see the previous years earnings. Previous year and a on the forecast as well. We are getting a lot more here across the wire. Anglo american coming out with earnings. That may go ahead and pull those up as well. Angloamerican fullyear adjusted eps, 2. 75. The eps estimate was 2. 79. Angloamerican missing the eps estimate by 4 pennies. They did name a little bit earlier a new ceo. That is something we will talk to the ceo about. We will talk to the ceos of both angloamerican and ap mollermaersk we are getting lloyds as well. Withs coming out fourthquarter statutory pretax earnings of 1. 4 5 billion pounds. A lot of messes this morning in terms of earnings, in terms of forecasts. We will keep fleshing out those numbers throughout the program. We start trading in about 57 minutes. Lets look at the futures here. As you just saw briefly, we are looking at for the most part red arrows across European Equity Index Futures. You see ftse futures treading water and little bit. Dax futures and cac futures are down this morning. Take a look at u. S. Futures. We have u. S. Futures pointing lower a little bit earlier and they are still off, but just fractionally. It does seem risk sentiment is lower this morning, both on the backs of the coronavirus news for the day and also after we get a slew of earnings that disappoint the streets estimate. Go ahead and take a look at what is going on across different Asset Classes this morning. , incan see that we have terms of equity indexes on the gmm, a mixed picture in terms of forex. You can see that we see the Singapore Dollar moving. Singapore has been in the news lately. You see a big move in bonds this morning. Whenever you see a black box like that, for example, those are swedish two years. Standardhree deviations away from the 90 day score. A big move in swedish debt. Lets get in the markets now with laura cooper. I am going to kick it off with the question of the day. Good morning. I am going to talk about a couple of interesting risk indicators that i always look into moving in different directions. We have seen the yen loses strength against the dollar. Why is that . Yesterday, we saw the yen plunged by the most since august. This came rather suddenly. This largely reflects domestic concerns occurring there. We saw the japanese economy sharply contract in the Fourth Quarter. There are indications that given the coronavirus fear, that will spill over into the First Quarter. Yesterdays move specifically, it looked to be a significant increase in short positioning coming onto the market, just reflective of these concerns around the virus. It is not really as much of a safe haven play at this stage, just given that in addition to these domestic factors, it is deeply negative there. Matt so which assets will benefit . What we are seeing in terms of gold, so gold is climbing at a sevenyear high. I think there is room for it to run further. What we are seeing in u. S. Treasuries, so the 10 year trading above that 1. 55 mark. We are seeing more demand for those traditional type of asset. Matt gold is one that has been on a tear come about 1600. I saw some forecasts for the run to continue. What is your view . I certainly think that is the case. When we look at the backdrop right now, we do not have a lot of clarity in terms of how the coronavirus outbreak ultimately the out, in terms of economic data, whether that will have a more meaningful hit than markets are currently expecting with that vshaped recovery. When we look to the u. S. , real rates are still deeply negative. Market is pricing in for further cuts this year. All that does bolster well for gold to be supported and probably go a little bit higher over the coming weeks. Matt you mentioned the coronavirus. We continue to get a drip feed of stimulus measures from china, lower rates, more cash into the market, and expectations for that to continue. What does that do . Overnight, we saw the loan array on the one year b by 10 by 10points be slashed basis points. More. S really expected i think a given the fact that we are going to see more of an Economic Impact in china, we are going to have to see the pboc step up and further inject liquidity. I think that will help propel sentiment. By how, it is determined markets will react likely in further sessions on the back of the news. Overnight, we did see chinese equities actually bounceback quite sharply, up about 1. 7 . That does bolster well that ultimately that there is this space in the market that the pboc will continue to step up and provide the support needed. Matt thank you so much for joining us. Laura cooper there. You can join the debate on todays question of the day on day onv the mliv blog, which is, which assets benefit from the yens slide . Up next, we are going to take a look at your stocks to watch this morning, including telefonica. It sees sales growth even, as efforts to streamline the Company Created a drag on profit in the Fourth Quarter. This is bloomberg. Welcome back to Bloomberg Markets european open. About 50 minutes away from the start of cash Equities Trading across europe and in the u. K. Lets get your stocks to watch around the newsroom. Dani burger is looking at julius baer. Andre covering telefonica focusing on Anglo American earnings. Whats the story with julius baer . Switzerlands market watchdog has put criticism on julius baer, saying that they failed with some of their Money Laundering checks. They are pointing out a Venezuelan Oil company and their between 2009 fifa and 2018. They are demanding julius baer we look at some of their practices and momentarily put a hold on any large acquisitions. Julius baer acknowledging the shortcomings, saying it regrets it and plans to cooperate with the watchdog. Matt . Matt thanks very much for that. Weve got telefonica out. What do you see . Well, we could see telefonica shares being pressured in todays session, especially after the results that we have from Deutsche Telekom yesterday, which led to a surge in the stock. From telefonica, what we know as of now is that revenue came in pretty much in line with what analysts were expecting at 12. 4 billion euros. When we look at the operating income before depreciation and amortization, which is a quite important metric for the company, that was below the lowest estimate by the end of this we had compiled by the compiled. Hat we investors will be closely looking for hints about the transfer it very competitive local market. What is the company doing to proving itsst in very complicated structure at the moment improving its very complicated structure at its veryt complicated structure at the moment . Matt angloamerican also misting estimates missing estimates. They are not doing share buybacks and investing money in a Copper Mining project in peru and u. K. Potash project. The diamond business i think has its worst results since in i think more than a decade. This company is getting out of thermal calls. That is something to watch. Matt thanks to all for joining us. You can get all of our latest stock stores from the Equities Team by typing first to go on your bloomberg terminal. You can also get the first word news on the mobile app. Coming up, Market Sentiment takes a hit. 2020ffshore yuan hits a low. More on the impact of the coronavirus up next. Be sure to turn into Bloomberg Radio live on your mobile device anywhere in the world. If you are in the city of london, you can listen on dab digital radio. This is bloomberg. Matt welcome back to Bloomberg Markets european open. Right now, we are about 45 minutes away from the start of cash Equities Trading across europe. I want to get to a big earnings interview that we have got. First, we will kick it off with ap mollermaersk. It says its 2020 outlook will be marred by considerable uncertainties due to the coronavirus outbreak. The Worlds Largest shipping Company Expects operating profit to be slightly lower than the estimate. Joining us now from copenhagen is soren skou, the ceo of ap mollermaersk. They control the Worlds Largest fleet of container vessels. It should not really be a surprise that the coronavirus has impacted your outlook. Can you tell us how severe it is going to be . Lot willll, i think a depend on what happens with the virus in the next few weeks. What we are looking at right now and a half last two weeks, we have seen a steady decline in the number of new cases. That is positive. It means very well we could be set for a peak within the next two weeks. If that were to be the case, a very weakd expect march and a rebound in april, a sharp rebound in april, may, but there is still a lot of uncertainties out there. Are there, is trade picking up elsewhere as you see this drop in china . Soren yes. We have seen a remarkable pickup in trade out of europe. Obviously, Many Companies are trying to restructure their supply chains. It is very difficult, though. Chinas impact on Global Supply chains is much bigger today than it was during the sars outbreak many years ago, especially for factories and southeast asia, where lots of Raw Materials and parts are coming out of china. The coronavirus is not just impacting the exports from china, it is also impacting the export of parts. Mean, would you consider removing capacity from china . Or do you expect in the rebound to be significant enough that you need to leave everything in place . Soren so we have actually canceled many, more than 50 departures from china in the last two weeks. A usually have quite Cancellation Program immediately after Chinese New Year because does take a few weeks for manufacturing to ramp up again. Obviously, this year, china has been closed for twice as long. We see much lower ramp up because workers returning to two weekies are put in quarantine before they can resume work. Matt how is this affecting container rates . Soren well, you know, container rates, they have quite a seasonable pattern. They will increase up to Chinese New Year, which they also dipped, and then they will decrease afterwards. We are seeing the natural pattern, nothing more than that. I believe their carriers acrosstheboard to have done what we have done in terms of canceling sailings. That has meant that we can keep the normal pattern. ,att away from the coronavirus the entire industry is switching to a low sulfur fuel under new regulations. That has caused the prices to see. , as far as we can do you expect that to translate into higher costs for the client or do you have to eat those costs . Soren so first of all, let me movingt we believe that too low so for a fuel is a very positive thing because it means we will definitely be polluting a lot less. It is a more costly fuel. We are mitigating that both on the cost side, doing whatever we can to mitigate the cost, but also by passing on higher costs to our customers. So far, we are moving in line with the plans that we have. Matt do you still see volatility continuing for the fuel prices . How do you see that market shaking out . Soren we had lots of volatility just around new year and january when this came into effect. Prices have come down a lot. They are still higher than the high sulfur fuel that we use to burn. The volatility has come down quite a lot. We hope that we are moving towards a more steady state on the new fuel prices. Know,you have been, you we have talked often in the past and you have always been a proponent of moving towards a greener fuel. You are looking to do what you can at ap mollermaersk to fight climate change, as well as possible. How do you see, from a longterm view, how do you see that affecting the business . As automakers a shift to electric cars, one example that pops up, they will need far fewer parts and will need to may be should be the last. Soren yes, possibly, yes. I think for our industry, we at a mollermaersk articulated desire to become net zero by 2050. We have spent significant amount of effort on working on that agenda. We believe that it looks like the solution for our industry could be to move to an internal fuel substance, alcohols or ammonia or bio methane, all of them being fuels that can be produced with a sustainable energy. Once we can define what kind of a fuel we should use in the future, we can also bring a globally being a regular industry, we can regulate that we need to use the fuel. Came off a huge consolidation wave in the industry. When do you see the next wave . Excess do you expect capacity to lead to more consolidation in the future . Soren i would assume we would expect that our industry will probably have one more round of consolidation to work through. We do notermaersk, have a strategic imperative to do more consolidation on the oceanside. We just have under 20 Global Market share. That means we have the scale to be competitive for many years. Ourfocus is on growing inside businesses, both in our ports business and landside logistics businesses and more end to end solution to our customers. Matt thanks very much for your time this morning. Soren skou there, the ceo of ap mollermaersk. The coronavirus, as you can see, affecting assets and businesses around the world. Actual virus continues to spread outside of china. Two people from a quarantine cruise ship in japan have died, while cases in south korea have more than doubled in oneday. Cases continue to emerge worldwide. It is fueling fears of significant slowdown in global growth. Joining us now from paris is the bnp paribas chief economist. William, thanks for joining us this morning. William good morning. Matt how difficult is it to gauge the effects of the coronavirus on the economy so far . William it is very difficult, because basically, we have theory, demand shock, supply shock, and center tutti, uncertainty. We have a lot of anecdotal evidence. We dont have survey data recorded since the virus broke out. That means the next couple of days will be crucially important. We will now have the first evidence of how it shows up in the data. This has an important implication. The next several weeks will see more clarity. It means that for economists, we will probably have bigger surprises, bigger deviations between consensus and what comes out. That will be something that markets will need to cope with, thther they will ignore ese disappointments. Matt which areas, which data points are you focused on specifically . , we havewell, clearly to understand what is really happening in china. The risk it of looking too much anecdotal data is that that could be company specific, for instance. Inferre too would negative a conclusion. How big of a hit do we have to the chinese economy . From that, we can use the typical analysis of spillover effects, which are pretty well imated based on previous if you have a 1 hit to chinese growth, you have a 0. 2 hit to european growth. The key point is what exactly is happening in china. Matt we will keep you with us, our guest cohost for the hour. The chief economist at bnp paribas. There is a lot to talk about, from the coronavirus to the fed. The fed looks firmly on hold for some time among a cocktail of risks. Weve got the minutes out. We will break them down with william when we come back. Bloomberg radio is always live on your mobile device. If you are in the london area, you can tune in on dab digital. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. We are 30 minutes away from the start of cash equity trading. Im matt miller at our london headquarters for the week. We have the minutes from the fomcs latest meeting. They could leave Interest Rates unchanged for several more months amid concerns about inflation. However they remain on gourd over global risks such as the coronavirus. William, what do you make of the fed minutes . What are the most important threads you pull out of it . The three important things is really whats happening on the Global Investment side. What is happening on the export side. It is the global slowdown hitting the willingness of companies to invest. There is evidence from different parts of the u. S. There is a decreased appetite to invest. This is put into question with the coronavirus outbreak. I would say these are the two things. And i have the impression that the conditions put forward to contemplate the change in policy often offer a lot of leeway. That is it could be because inflation is weakening. The labor market is weakening. Matt it is interesting, the m. F. Head has said she wants global Central Banks or global governments to act in concert but the fed seems to be saying in some ways, you know, we could cut but the Economic Situation now is so good that it brings us Financial Stability risks. What do you make of that . The repeated insistance on Financial Stability as a point, there is of course the well known phenomenon of highly everaged u. S. Companies. There was great insistance on ease of funding. Sometimes investors are simply too eager to buy anything, even if it is mispriced. I think the important point with respect to the i. M. F. Directors comments, present the issue is not about absense of liquidity or Interest Rates being too high. It is not even about bond spreads having widened. We are confronted with a demand shortfall. It is temporary. That is a big relief. It is temporary. Matt with respect to the to asset prices william, there is some debate about the effects of the feds Bond Buying Program. It is back in there doing more q. E. If the fed tapers off, if the fed stops, how do you expect that to affect asset prices . I was smiling because there is no q. E. Maker economic it looks like q. E. It has some impact on asset prices. I think all in all there is no comparison with the kind of bazooka approach under q. E. 1, 2 and 3. That would mean it is kind of the program and it should be easier to be taken onboard. Lets also keep in mind, when they were talking about stopping the program and reducing the Balance Sheet, it is like watching paint dry. It is perhaps again an issue like that. Lets also keep in mind the reason why we have tension in the market is not so much about the macro consequences of the Balance Sheet reduction. It is more about the combination between the Balance Sheet and Financial Regulation and the necessity of banks to have abund and excess reserves. Matt all right. Were going to keep you with us. The chief economist at b. N. P. Paribas our guest cohost for the hour. Coming up, this is what you need to know today. The European Unions one trillion budget has split the block into two camps. Those who want to spend more and those who can see they will get stuck with the bill if that happens. More on that story next. This is bloomberg. I cant think of a way that would make it easier to get donald trump elected than listening to this conversation. Ridiculous. Were not going to throw out capitalism. We tried that. Other countries tried that. It was called communism. It just didnt work. I believe in capitalism but i think the goal of someone in government and a president of the United States should be a check on that. Democrats take a huge risk. If we just substitute one air gand billionaire for another. If they have to choose between a socialist who thinks capitalism is the root of all evil and thinks a billionaire ith money ought to have power. If there are a few people who disowned remarks, i those people. They are not part of our movement. Im running because so many people are left behind. Matt those were just some of the highlights from last nights democratic debate. Well tell you Michael Bloomberg is the founder and majority owner of bloomberg news. Lets get to bloomberg flash. Thanks, matt. U. B. S. Has named a its next c. E. O. He spent nearly three decades at i. N. G. And is poised for a big pay raise. He was paid 2 million a year but at u. B. S. He got 40 million in 2018. The most dramatic step yet to con taken the deepening economic damage from the coronavirus. Learned that the move comes as they have not been able to ake commitments. Falling demand as the coronavirus scares travelers in the region. The size of the pullback reflects the scale of the challenge for airlines. They have a lot of to manage the situation for at least six months so we dont see the need to make were trying to protect as many jobs as we can. Thats your Bloomberg Business flash. Matt . Matt thank you very much. Now brexit is deepening the risk between richer and poorer e. U. Nations as they skirmish over the blocks trillion euro budget. They are fighting to keep the by cuts. M being filled is a us to discuss bloomberg reporter. What can we expect from these negotiations where the specter of brexit loom large . We know this is going to be a long summit. In fact, the entire transfers have been shut until saturday which is not a good omen. It means were in for a very long summit. We know it is going to be difficult. Ultimately this is the story about money. Who is going to pay for what. We see huge division. Were a Smaller Union now. We should have a smaller budget and those say we should be invest and a lot of this is about ambition. European leaders have to ask how much money are we willing to commit and what is our vision for the European Union . The fundamental question around it is who is going to pay for it. When we speak to officials, they will tell you the fact that the u. K. Has left, it is also another headache. There is a gap of 60 to 75 billion euros left on an annual basis. They will say they dont want to lose that aid. They dont want to see that translate into cuts. There is a transition between the north and the south and the west and the east countries in the summit. Matt who holds the most power . Who are the big Decision Makers . Is Angela Merkel still the queen of europe . Well, she used to be the queen of europe but it is interesting you are mentioning that. This will be her final summit when it comes to a future budget. This is the last well hear from Angela Merkel on a longterm basis. This will be her final one. She has taken an interesting position. Saying i hear what both sides a saying. She doesnt want to commit too much. Macron is an interesting one too. We dont really know what he is thinking at this point. Matt thanks very much. Our reporter on the ground in brussels. William is still with us, the chief economist at b. N. P. Paribas. How important is this issue . How closely will you be watching the e. U. Budget . Clearly it is an important issue. I would say for the european eople. Part of elements have been mentioned by your colleague. It is a green deal. It is energy. A digital economy. It is also security. Migration. There is a long list of projects on which funding is needed. There is a gap left by the u. K. Having left. At the same time, you have a very strong, i would say country specific underpinning what is going to be adopted. It is going to be strongly influenced by the complexity of the current Political Landscape of germany. I think that the people of europe they will be watching this and saying what is going to happen. And please take some initiative. Another thing that is a big challenge out there that you need to agree and show that the money is being put to good use. And to state the obvious, it is very complex. The Eastern European countries having benefits. Other countries are not ready to contribute more. What is also important is additional sources of revenues are going to be difficult and low to put in place. Matt germans often complain or feel they are getting stuck with the bill. But certainly germany has also been a huge beneficiary of the e. U. How do you see it Going Forward . Well, that is of course the big complexity. I contribute, what will i have in return . Am i in a position to relay this to my voters and abide to that view . It is very sad that we have to make that observation. I think this is not an virmente where we see a lot environment where we see a lot of solidarity. Saying lets do things together. Lets pool the money and im going to contribute. It is a good for the benefit of all. That is not exactly the environment were in this stage and it makes for instance deciding on a budget so difficult. Think of the council a few days ago. It is what do we do with the budget to stabilize the business cycle. Matt how is the health of the southern peripheral countries when you look at italy and spain. What do you make of their Economic Development . Well, the difference of continued to as grow very slowly. I think one thing that is very striking as well when you look across the eurozone, you look at investments, for the eurozone on average, companies have done very well. Very active. You look at spain, i would say that it has been a very successful story of maker economic adjustments following the sovereign crisis. The issue now is that we have our budget challenges because the budget deficit in spain is too big and politically speaking it is a minority government. That means it is fairly difficult to make significant progress in addressing the budget issue. Fortunately the country has been growing strongly. It means that it is a more comfortable situation. To go back to italy was also quite interesting. To keep an eye on what is happening on the banking side. All of a sudden there is traction building. You could argue this is also something that eventually will be beneficial for the economy. It seems very dynamic and very exposed to manufacturing. Suffering from the hit to manufacturing in the eurozone. Matt thanks, william. It has been a pleasure having you this morning. The chief economist at b. N. P. Paribas joining us out o of paris. Coming up, gold hits a sevenyear high on concerns that the coronavirus will continue continue to slow global growth. This is bloomberg. Bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. Less than 10 minutes to go until the start of trading. Were looking at a fairly mixed picture in terms of futures. Lets take a look at the individual stocks to watch at the hope. Lloyds gave a bullish outlook. Definitely Pay Attention to britains biggest mortgage lender. It did slightly miss analysts forecasts with a pretax profit of 1. 4 billion pounds in the ourth quarter. It is up from 7. 8 in the past year. Then you have a. P. Mollermaersk. It says its outlook has been hit by the uncertainty of the coronavirus. It is the Worlds Largest shipping container company. It said it will be marred by the uncertainties that the virus impact is having on global trade. U. B. S. Has named i. M. G. s c. E. O. As its new leader. He is succeeding one of europes longest serving bank c. E. O. S. It is a fairly surprising pick for the Worlds Largest wealth manager. Last month u. B. S. Cut financial targets for the second time in as many years. Joining us now is patrick winters. What do you think . You followed u. B. S. For a long time. What do you think of ralph hall of famers as the new hamers as the new boss . Tezz he is always the investment banker. I think it is definitely a shock. U. B. S. Always said they would Stay Together for at least one more year. So the timing of this is a surprise. Matt so we see this transition happening on november 1. What big changes do you think raffle hamers may make . They had a profit ralph hamers may make . They had a profit warning. It could be because he had a eputation for that at i. N. G. U. B. S. Needs to have some kind of swiss focus at the top. It is sort of a retirement home for some of the banking executives across europe because of the high pay. The expectations for someone like hall of famers are very high. Hamers is very high. Matt thank you. Talking about the change at the top of u. B. S. Later on well speak with the chairman of u. B. C. Gold prices continue to flirt with new highs trading above 1,600 an ounce. Strategists at u. B. S. Say the rally has more room to run. Lets get the morning call. A little bit of a different u. B. S. Story. This comes from strategist at u. B. S. Wealth management. They say it has further to run. So for that reason, they suggest being long gold. Thats what their positioning is right now. They say it could top 1050 in a few weeks. Why . Throughout the coronavirus outbreak investors have been treating gold as the haven of choice. Yields go lower. Stocks continue to trade higher. Gold consistently gaining ground. They say it is parts of that reason why gold looks attractive. When you have Equities Trading at such high evaluations any wobbles there create the attractiveness over the precious metal. They think this is going to be a First Quarter effect that was in a quarter some of the ramifications when the negative impact of the coronavirus should start to weaken and we will start to see yield prices rise and gold prices come under pressure. Matt currently trading at 1607 a troy ounce. Remarkable the yen continues to weaken. You can buy well over 111 yen for one u. S. Dollar. The u. S. 10year yield comes down. Interesting to look at the risk indicators heading into the open of live cash trading. That is coming up. The market open is next with futures pointing in different directions. Ftse futures are higher. Other equity Index Futures are falling although the drops are not substantial. The open is next. This is bloomberg. Erg. Matt we are less than a minute away from the start of cash Equities Trading in europe. Lets get your top headlines for you off the bloomberg terminal. Virus jitters. Japan reports two deaths and cases in south korea jump. Asian stocks dropped along sithe u. S. And European Equity futures amid concerns about the spread of the disease outside of china. The road to hold. Fed minutes suggest the central bank will keep rates unchanged amid a cocktail of risks. Policy makers there see the coronavirus keeping prices subdued. And u. B. S. Names a new poss. Succeeding the c. E. O. Not getting a lot of direction here from futures. Ou see the blue chips drops. The ftse trading higher now as the dax futures are unchanged. The ftse opening up stathe out of the gate. The ftse now, very little changed bouncing back and forth, gains and losses. That could be what we see on a number of indexes this morning as we just dont really get an indication from risk indicators or from the futures picture. You can see the ibex down. 4 . An actual move there as we see aex on the euro stoxx, the in amsterdam. You see a little bit of a tilt to the downside even though the moves are only fractional. Lets take a look at the industry breakdown in term o sectors on the move. We see red and green here, almost split up almost 5050 there. Healthcare is down. Staples are down the most right now. You see those sectors falling a little bit in terms of the gainers. Financials look to be doing all right as well as industrials. Lets take a look at the individual movers. You have a fairly even split on the stoxx 600. It is obviously very early in session. We have 263 stocks up. 308 stocks down now. In terms over the group adding points to the index, hsbc up 1 adding the most points. We also see i. N. G. As a gainer. That is interesting as the c. E. O. Ralph hamers leaves to go to u. B. S. U. B. S. Also a gainer this r onmorning. Glaxo smith kleine and telefonica down 3. 4 . We were talking about this stock earlier. After the bangup day, Deutsche Telekom, its competitor in germany had yesterday. Asian stocks dropped. U. S. Futures are under a little bit of pressure. The concern of course is the continued spread of the coronavirus outside of china. C. E. O. Of now is the let me get your take on the coronavirus so far. It feels like it has been very well contained. It is going to have an impact on the chinese g. D. P. Numbers which will come through in a few months. Some are saying trade is picking up in europe and there are positive effects but it seems unlikely. For me, i feel it is being quite well contained. Im hopeful the containment continues to improve and we see light at the end of the tunnel. Matt we did speak with the c. E. O. Of a. P. Mollermaersk. Their outlook has been damage bid the coronavirus. They had exposure. In terms of shipping there are some areas that are picking up while china drops. Europe was one region he name. Do you see a little bit of a tradeoff happening in that sense . A little bit. What you lose from the chinese trade, you wont regain back in europe. What we would hope is while inventories fall around the world as people use up their inventories instead of shipping in new good, you will see a pickup in that global trade. Companies like maersk can benefit from that. Matt you say and certainly a lot of experts have pointed out they have contained the virus fairly well. You hear tra from the World Health Organization officials. On the other hand that containment has led to a breakdown over the supply chain. How much does that concern you . It does concern me but most of the companies we have been talking to, the individual stocks have between three to six months of inventory onhand. There may be some components we cant get. Trade can pick back up and production can pick back up in china, it can have a restocking effect on the economy. To date in the short period it has been running, we havent seen meaningful impacts in most of our stocks. It will obviously a hit to their business model. Matt what do you think about gold . A lot of people looking at it as a good hedge. I have a chaurt up here showing the spot price over 1,600 rising to a sevenyear high. We owned gold until the middle of last year. What is going on with gold makes sense. It has a huge amount of momentum going behind it. There is a lot of momentum. I can see why it can carry on in the shortterm. Y theory is fear of rating falling more in america. Within the next few months. That will prove to be misguided and the second one, it protects an equity portfolio. Sometimes it when markets are highs, you can say over the next 12 months it will be a good hedge. When youre buying into gold at its high, there is a likelihood both assets could fall together. The correlation between gold and equities is something people are missing at the moment and if you get back to the underlying fundamentals i believe Interest Rates can be higher and gold can be lower. Matt i have a little work shed i look at every morning. I stole it from guy johnson. It is rare that i look down at my work sheet and am surprised but when i saw the yenu. S. Japanese n he is in en quote, i was shocked. 111. 6. Previously people would have used the yen as a safe haven trade. It hasnt played out that way. That is going on there . It is hard to tell but it is a big move the wrong way through a big level. It is very, very notable this morning. Obviously the japanese g. D. P. Number that came out last week was terrible. On an annualize basis. It was 6. 5 g. D. P. You have to start saying these conventions, buying gold as a hedge because it is low risk and buying yen because it is low risk. They are selffulfilling until they are not. I think i can see reasons why you would not want to invest in the yen as a safe haven. They have a bad trade deficit. Everything keeps pointing straight back to the dollar. If you had to choose between the yeands the dollar the next five to six years, youd probably pick the dollar. Matt here is my work sheets. May not be much to look at on tv but really helpful when you get up early if the morning. Freddy, were going to keep you with us. Our guest cohost. Right now Bloomberg Business flash. Maersk says 2020 will be marred by considerable uncertainties due the coronavirus. The Worlds Largest Container Shipping Company said it expects a weak start to the year and expects operating profit of about 5. 5 billion this year. Less than nearly 6 billion xpected by analysts. Julius baer has admitted short come information Money Laundering. They include alleged cases of corruption linked to venezuelas state oil company. They said they cooperated and it has been addressed. Qantas air ways is slashing flights to asia in response to falling demand as the coronavirus scares travelers in the region. It will be in place for some countries until the end of may. We have a lot of so we can have to manage this situation for at least six months. We dont see the need for redundancy. Were trying to protect as many jobs as we can. Airbus plans to restructure its workforce. The plan calls for the plane maker to eliminate over 2300 jobs by the end of 2021. He munichbased unit has about 75,000 staff. The most dramatic step yet to containing the deepening economic damage from the coronavirus. We have learned that the move comes as the outbreak hurt the countrys ability to make companys ability to meet its financial obligations. Victoria secret to private equity firm. 1. 1 billion. At they are expected to buy 65 of the company and take the struggling business private. Thats your Bloomberg Business flash. Matt . Matt thanks. Up next, we speak to the c. E. O. Of Anglo American. The Mining Company announced it would stop buying back shares. Dont miss that conversation. There is a lot going on at anglo. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. Right now 13 minutes into the trading day and were looking at a little bit of a mixed picture. Futures indicated that we would not a lot of movement in germany. No movement in paris in terms of the index and the ftse gaining. 2 . Meanwhile in the u. S. We have fresh clues on the feds stance. We have the minutes from the fomcs latest meeting last night. Policy make rs indicating they could leave Interest Rates unchanged for several more months amid concerns about inflation. That is no surprise but the fed is onguard against domestic and global risk. Of course the coronavirus is a big part of the conversation. The c. I. O. Of Investment Management is still with us. What are you expecting from the Federal Reserve . Are they still tilted dovish . I think they are. Something like the coronavirus coming up, there is a new risk in there. A very obvious one. It drives you to think there is a lid on Interest Rates for a while in america. I dont think they are likely to cut rates. The markets are pricing in a potential for a cut. They are about to sort of end their nonq. E. Bond buying program again. There is an argument what they are saying and how they are acting is slightly different and that the risk in asset markets and actually the bond yields rise again. That dont take a huge amount of inflationary pressure. I think it will take a little bit of clarity over the coronavirus. So my matt almost too good. One of the interesting things out of the minutes is there is a concern that if we reach full employment, go beyond full employment that yields start to have a little bit of financial instability. We have not seen it yet. The past, when the u. S. Economy has been they leverage too much. Easy refis and Everything Else in america. They are starting to fear the things we all thought was a worry 10 yearsd. Years ago. It probably buys you a few years of positive environment in america. I think the fed is dovish and well continue to be focused on this mythical inflation target. That is the greatest risk to markets that we start hitting that. There is lots of individual ways that you could argue why inflation may come back. In reality, none of them have had any effects. There are lots of arguments against incentive to drive deflation around the world. It might reprice the cost of borrowing thus driving inflation. I cant see inflation coming through. Matt there is an interesting you certainly see it in asset prices. There is a strange debate on twitter. I was surprised that there are people who dont think the feds Bond Buying Program and low Interest Rates inflate asset prices but there are people who dont think q. E. Drives prices higher. Where do you fall on that . Im not one of those people. I think it is very clear that when you have increased the stock of the money outstanding you have decreased the value of money, you have decreased the value of the asset. That has been the story for the last half generation. Inflation is only coming through in capital terms. C. P. I. Remains low. Equity markets are up. Bonds are up. Gold is up. House prices are probably up. Every asset continues to rally and rise and that is where it comes in this number. Matt everywhere else, central bankers are pushing on a string. Youre going to stick with us. Our guest cohost for the hour. P next, the stocks on the move there you go telefonica. Those shares down after missing estimates. Knocked the cover off the ball yesterday. Well talk about it next. This is bloomberg. Erg. Matt welcome back to the european open. We are 20 minutes into the trading day looking at really subdued trading for the most part. You have the ftse down half a percent. You dont see a lot going on in terms of the ftse, the dax. In terms of one of the Big Companies reporting today Anglo American stands out. It is going to stop buying back shares as it pumps money into two big growth projects. T is building a copper mine in peru and has agreed to buy a giant u. K. Potash project and that that goes through, it will cost about 3 billion. Mark, thanks very much for your time. Let me first ask about the serious feel. You have done such a good job refocusing the group around a few world class assets. Why the investment in sirius . Why the investment in potash . I think very succinctly put, our strategy is a focus on quality assets. By that we mean quality assets in the markets in which they operate. Our transformation, doubling productivity, being the best returning major Mining Company for the last six years has been all around that focus. We think sirius has the potential to fit into the same mold of the businesses that we have. There is still a lot of investment required. There are some risks. That is our intention if were that we will take the project forward. We still have a long ways to go obviously. Matt i talkt to a shareholder last night that is in some ways concerned that you could lose your focus on discipline, on shareholder value and in returns. And the top headline this morning may worry shareholders further if youre going to stop buying back shares. What would you say to sharltes that have those worries . Let me step back one since we recommenced the dividend back in 4 , we have returned billion to shareholders. We also then announced a buy back earlier or late last year which we announced a billion dollar buyback. What youre referring to is the end over the buyback that we currently have in place. Were returning about 80 in the form of dividends and 20 in form of buybacks. We have announced a dividend again today consistent with the policy. 40 return. I would like to make that point and also Anglo American sheryls have enjoyed a shareholders have enjoyed a 44 return. That is the average return over the last six years. We remain committed to making sure that we keep a balanced return policy against a really valuecreating strategy that is obviously delivered consistently over the last six years. When you put all of these pieces together, what were suggesting we could do with sirius is absolutely consistent with the strategy and as you know, we would expect to be commissioning in 2022. That would be a major project coming to finish. If were successful with sirius, its timing would fit that time frame along with the incremental projects. We have the best portfolio, the new opportunities in the industry. It is a balanced approach. The discipline is holding. No difference, not much of a story above and beyond what were already doing in the sirius conversation. Matt shareholders are not always happy. I pulled up the comp screen. Anglos return has been an annualized 15 . Doing very well on this screen. What about the shareholders at sirius . We have heard from a couple of those that say they dont support the offer. They vote on the deal next month. How confident are you that youre going to get the 745 support that you need . I think we made our position very clear. We think the offer takes into account all of the issues and is fair and reasonable. Clearly people that have recently bought in will have a view and they have expressed their view and we respect their view. Were doing a lot of work making sure shareholders understand and are aware of what the chairman and the board of directors from sirius have recommended. From our point of view, we will wait to see what happens through the process. We have been very consistent and certainly we dont see any reason as yet to change our view. Matt let me ask you about the coronavirus. Obviously it is impacting businesses around the world, mark. What has your experience been thus far and what can you do to work against problems . Clearly production out of china has dropped somewhat. The commodity most impacted is probably iron ore. I have some colleagues in the industry that are probably watching it a little closer than we are. We have high quality iron ore. Also we tend to get a bit of an expressed ticket into most markets. Were the least exposed to china. What we are hearing, things are starting to improve a bit. We are still probably expecting another month or two of being a bit mixed but generally were still selling our pruggets and moving prugget pretty products pretty well. We expect it to recover fairly quickly and it should be business as usual. The one area that we were hoping we would get a bit more of an earlier pull in diamonds might be impacted for another two or three months but the general indications in diamonds are encouraging. It might just push it back a couple of months. Matt thanks for your time. The c. E. O. Of Anglo American talking about earnings and plans to buy a giant u. K. Potash project. We want to just quickly bring you some breaking news. South korea has reported its first death from the coronavirus. This is 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. Wheneveryone is different. A, which is why Xfinity Mobile created a different kind of wireless network. One that saves you money by letting you design your own data giving you more choice and control compared to other top wireless carriers. Now you can choose unlimited, shared data, or mix lines of each and switch any line, anytime. No one else lets you do that. Design your own data with Xfinity Mobile. Its wireless reimagined. Simple. Easy. Awesome. Matt welcome back to Bloomberg Markets. This is the european open. 30 minutes into the trading day. Im matt miller at our European Headquarters in london. Lets take a look at our story in terms of equity indexes. The stoxx 600 is down but only. 2 . Not a huge indication as to what is going on there from the overall picture. If you look at the g. R. R. Screen which is right next to it there, you can see the Industry Groups that are moving and you really get a better picture of what is going on. Every Industry Group is down here today except for industrial good and services. Healthcare also as well as basic resources treading water but Everything Else is falling with insurance, telecoms and automakers leading the losers. Lets get the bloomberg first word news. Thanks, matt. B. S. Has named i. N. G. s ralph hamers as its next c. E. O. He has had a nearly three decade career at i. N. G. And is poised for a big raise. Paid him about 2 million a year. Concerns about a persistent undershoot of the Central Banks inflation goal and the coronavirus vout outbreak is not helping. It is likely to keep prices subdued and Global Demand weakens. Coronavirus. He south korea has reported its first death. Two people from the quarantined cruise ship in japan have died. The total death toll has risen to over 2100. More than 75,000 are now infected worldwide. In the latest democratic debate, former new york mayor Michael Bloomberg came under sustained attack. The focus deflected some of the heat that Bernie Sanders might have faced as the current fronts runner. Bloombergs recent rise in the polls have shaken up the democratic race. He is the majority owner of bloomberg l. P. , the Parent Company of bloomberg news. The white house is denying it offered Julian Assange a pardon. They said it is a qu total ie. He is facing u. S. Charges that he conspired to publish classified documents. His extradition hearing begins next week. 11 people have been killed after a shooting in germany. The attack occurred near frankfurt. The attack may have been right wing extremism. The suspect was found dead at his home alongside one other person. Global news 24 hours a day on air and on quick take by bloomberg powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Mauth . Matt thanks very much for that. I want to get to some of the top stock movers. Im looking at some of the biggest movers. They had Fourth Quarter earnings. It was overshadowed by a new rights issue. They are going to issue about 864 million worth of new shares. Jeffrey says the timing was a surprise to markets. It is a possible delusion. Klm, another Earnings Report saying they are going to take a 216 million hit from the virus. They have had to halt some of their flights to china. The c. E. O. Calling the impact on the coronavirus on their business severe. Telefonica falling more than 5 . It is on track for its biggest loss since the summer. It is showing the struggle they are undergoing as they try to implement a new strategy and also seeing weakness in their home country of spain. For now, telefonica down severely, matt. Matt thanks very much. A look at your movers. Thus far. 34 minutes in the session. Lets have a look at our cohosts favorite stock. You always bring with you a list of your kids as you refer to them, freddie. You have a few new addition. One i find interesting and i spoke with a c. E. O. Yesterday. I. H. G. , the Intercontinental Hotels group. Youd think they have and they do have a lot of properties in china. Major exposure to the coronavirus and yet they dont see terribly concerned. They dont seem terribly concerned and im not kerrbly concerned. The stock price fell on the reaction to china exposure but realistically the longterm story in china which is about 15 of their business at the moment remains fully intact in my opinion. The next five or 10 years of Growth Prospects out there is phenomenally positive. Because they have separated off the ownership of hotels and branding of the hotels they dont suffer the same swings people used to anticipate from otel businesses. I believe the chinese impact, while the occupy si in chain is down at the moment, it will have a limited impact on them longterm. The story for i. S. Y. Is it is a limited asset globally. They have a huge and profitable u. S. Business. It trades at a meaningful discount. We see a meaningful potential uplift over the next five years. Matt do you find other Companies Like that . I noticed that one of the other dditions that you have is e. A. They are the u. S. S. Video game publisher and there are european rivals that you could just as easily own. Area yes. In this instance the three largest once, european listed and activision in america. Their ve they have franchise which will be a recurring stream for them. They have done incredible work on their margins. Investors should and do pay a far higher premium. What they continue to miss and ve much lumpier earnings streams and a less likely cash conversion. They are managing that pipeline. Matt i look through the list of names that you own. To try and pull out some themes. I see with i. H. G. You have booking. Com. Shishedo. You have companies that benefit from people spending money. World seems to be awash with cash and the wealthy are out there spending. Booking is very much about the transition of people using, thomas cook and going online and the dominance booking has in that space and the continued double digit growth that they can see and the demand for travel that comes with an affluent middle class or upper class. S shnch ishedo has some china xposure. It has never successfully made money in america. I believe the longterm Global Expansion plans for shishedo could be phenomenal. It plays into that increased amount of cash in the market. Matt it is not just about buying stocks and staying places. You have visa. You have goldman sachs. Bank of america. Absolutely. I think the critical argument in , the which is often missed stocks that have been working for the last five to 10 years are the booking. Coms of the world. These high growth businesses. The stocks that have not been working are the value stocks. If you look into the value stocks, some of the best value stocks around are things like to u. S. Banks that are paying you more than double digit cash returns per year with some Economic Growth potential. I think having a barbell effect in your portfolio with some of these highly cash generating value stocks offsets risk. Matt it has been a pleasure having you here today. Thanks so much for coming in. I know youre going to go over to Bloomberg Radio. Viewers can tune in and get more from freddie lait from latitude. Up next were going to speak with the c. F. O. Of swiss re. Reporting 2. 3 billion in losses from natural disasters for the year. Well ask how that plays out. Dont miss that interview next. This is bloomberg. I cant think of the ways that would make it easier to get donald trump reelected than listening to this conversation. Ridiculous. Wore not going to throw out apitalism. We tried that. Other countries tried that. It was called communism. It just didnt work. I believe in capitalism but i think the goal of someone in government and a president of the United States should be a check on that. Democrats take a huge risk. If we just substitute one air arrogant billionaire for another. If they have to choose between a socialist who thinks apitalism is the root of all evil and a billionaire ought to be the root of all power. Lets put somebody who works and lives in a middle class neighborhood. If there are a few people who make ugly remarks, i disowned those people. They are not part of our movement. Im running because so many people are left behind. Matt those were just some of the highlights from last nights democratic debate. Michael bloomberg is the founder and majority owner of bloomberg news. Lets get to bloomberg flash. Thanks, matt. Maersk says 2020 will be marked by considerable uncertainties due to the coronavirus. The Worlds Largest Container Shipping Company says it expects a weak start to the year. Expects operating profit up 5. 5 billion this year, less than a 6 billion expected by analysts. Julius bar has admit short comings in Money Laundering. They include alleged cases of corruption linked to venezuelas state oil company and julius bar. Id it cooperated efficiencies have been addressed. The most dramatic step yet to contain the deepening economic damage from coronavirus. We learned that the move comes as the outbreak hurt the companys ability to meet its financial obligations. An official announcement could come today. Qantas air ways is slashing flights in asia and freezing recruitment in response to falling demands as the coronavirus scares travelers in the region. Reductions of 15 will be in place for some countries until at least the end of may. It reflects the scale of the challenge for airlines. That is your Bloomberg Business flash. Matt . Matt thanks. The business flash. Swiss res earnings took a hit rom major hits, typhoons and wildfires in australia. They reported 2. 3 billion in losses from natural catastrophes and manmade disasters for the year but it made a loot more money on the bottom line and it is also increasing its fullyear dividend and proposing another Share Buy Back to get money back to shareholders. The fall of the coronavirus is one focus for many insurers. Lets listen what the c. E. O. Of axa had to say about that. China is the second biggest Insurance Market in the world. With very good Growth Prospects, especially on the health side and it is true that the its effects nd currently is not helping. It is a longterm business. We are looking on the much longer term. China is a very important market for us and we will continue to invest there. Matt joining us now down the line is john dacey. The c. F. O. Of swiss re. John, let me first ask you before get to the earnings and the outlook of the dividend. Let me ask wlow what is your outlook of the impact of the coronavirus to your company . Thanks very much for the question. At the moment we dont believe it is going to have a Material Impact on swiss reor the Insurance Industry through what would be claims either in the life and health space or frankly in the Property Casualty Business Interruption space. That could change if the nature of the infections change. For now what we have seen, i think it needs to be put in perspective. If you think in an average year, there are between 3 million and 5 million cases of severe influenza worldwide and in that normal year, somewhere between 290,000 and 650,000 people actually die from influenza and seasonal illnesses. The numbers for covid 19 is a serious number. Were trying to get to the bottom with the company s that arepartners with us but at this point in time it is not a pandemic and it is not a major event for the Insurance Industry. Matt nonetheless, you do have a lot of flights canceled. We talked to the c. E. O. Of a. P. Mollermaersk. They have canceled a lot of container shipments out of china. You have hotel rooms that are not being occupied. Businesses and the economy have been substantially impacted. Youre right there. There are going to be very significant economic losses along the way. At the moment we dont see these as sources of significant insurance claims. On the other hand, we have two sides of our own Balance Sheet including the asset side and were taking a strong look at how we continue to invest money, our own money, to be sure that were not caught off guard by some of the specific impacts to specific companies. Matt you have had a really Strong Performance at your life and health businesses. But the property and casual business there, the combined ratio is i believe around 107 . You still have a target of 98 . What can you do about that and how is that going to affect your bottom line and returns to shareholders Going Forward . Yeah. A great question. 2019 was a tough year for our p. N. C. Reassurance business as you said. We saw natural catastrophes and large manmade losses of 2. 3 billion. Our property insurance book remains positive for the year in spite of these losses, we received large premiums from the primary Insurance Company to cover these risks but the profitability for p. N. C. Overall was limited down to a 4. 8 return on equity. We expect continued improvements on pricing. We saw that for the january renewals. We expect that when we renew policies in japan particularly around april. And specific parts of the u. S. , florida in june and july of this year. The major impact that were seeing is an opportunity for prices to go up to cover what risk, to be a larger especially on casualty claims but in some cases also on the property and natural catastrophe positions. Matt lets gets down to the bottom line. Your net income rose to 727 million. Rom 421 you proposed another Share Buy Back. Sf is 2020 looking to you such a banner year in 2019 . Youre exactly right. The profits were up. The management and the board are feeling very positive about the book we have renewed. Were seeing pricing increases not just in the re insurance sector but in the primary insurance space. The one business we have in the midst of a significant restructuring Corporate Solutions saw price increases for 2019 of 12 for the year and in january another 14 yearonyear for the businesses which were written in january. Were pretty optimistic about how this looks. We have lowered our estimate for the combined ratio of reassurance on a normalized basis in 2020 down to 97 and maintain our target for Corporate Solutions business through the restructuring. In 2021 we expect to get the combined ratio down to 98. Matt john, thanks so much for your time. John dacey, the chief Financial Officer at swiss re. Up next, well stay in switzerland via amsterdam. Were going to talk about the new boss at u. B. S. Ralph hamers has gotten that job. Sergio one of the longest serving European Bank coast. It may be an about face for if wealth manager. Well discuss next. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open. Almost an hour into the trading day right now and seeing a slight gain on the ftse. In switzerland though is where the action is today. U. B. S. Has named i. N. G. s c. E. O. Ralph hamers ats as its new c. E. O. Hamers will take over on november 1. It is a fascinating story. Patrick winters joins us now. Our banking reporter out of zurich. You were saying earlier this guy is quite a different leader than sergio. Explain. Well, the more i think about it, the weirder it actually gets. A lot of people woke up this morning and thought are they nuts . Is u. B. S. Nuts . What exactly have they done . This guy, ralph hamers is a retail banker. Not an International Man of mystery. He is basically a european who has been hired by europeans to run a European Bank. Maybe it is the sign of things to come. Matt absolutely. He has done an amazing job at i. N. G. You have to admire what he has done as far as the way consumers can interact with that bank, especially online. Were going to to hear a little bit later. Ill sure youll pay tonings that interview. Stay with bloomberg television. Next is surveillance with francine lacqua. Im headed over to Bloomberg Radio. Radi o. Francine successor to run the swiss bank. We will talk to the ubs chairman shortly. South korea confirms its first fatality from coronavirus as to people from the quarantined cruise ship in japan have also died. What happens in vegas . Democrats spar ahead of saturdays caucus in nevada. Michael bloomberg comes under fire from all sides in the debate