Fullyear guidance and blames restructuring costs. And Fiat Chrysler shares rally as the Company Promises company bonuses on the back of u. S. Tax reform and unveils a billion dollar investment in michigan now, on to one of our top stories, german lawmakers reached a break through in negotiations to form a Coalition Government according to reports. This allows them to move on to formal Coalition Talks a coalition paper says the cdu and spd want to strengthen the eurozone by partnering with france it says germany is prepared to boost contribution to the eu budget and germanys domestic budget will be balanced without new debt weve seen quite the reaction in euro dollar. We had a bounce in the currency pair following on from the hawkish ecb minutes. You can see again euro dollar is having a strong day today, up 0. 7 in trading. Breaking through the 1. 21 mark for the first time in a couple of years now, lets get out to annette in frankfurt. What can you tell us about the socalled break through we are just reading about in the talks . Actually, if you look into the details of that break through, when it comes to the talks in berlin, its a clear win for Angela Merkel. Theres no spd topic which was pushed through against the cdu Martin Schulzs spd wanted higher taxes, more refugees into germany and a commitment to a United States of europe. Nothing of that is in that blueprint which now serves as the basis for the Coalition Talks. So bottom line is that theres a commitment of no tax hikes also for the next four years. Theres a commitment of a refugee cap to no more than 180 to 22,000. And theres a commitment that those refugees with alimite limd asylum status are not allowed to bring family members to germany. Bottom line is all these voices who claimed that Angela Merkel is in a very big negotiation position may have been proven wrong. Because it looks like the cdu and csu clearly won that negotiation over so the big question now is how will Martin Schulz be able to actually convince his Party Members to vote in favor of Coalition Talks for a grand coalition. He needs to do that. He has a busy schedule ahead of him. January 21st is the next milestone. Thats when the spd delegates have to vote on whether to formally start Coalition Talks with Angela Merkels party back to you. Brilliant thank you. We have the global head of g10 rates research from citi joining us on the show thank you very much for joining us how significant are these developments in german politics . Its not like the markets have been reacting much, but the euro is also taking it quite well its a a working assumption from the market that something would come throughen the co een the Coalition Talks. Its slightly worrying that its cdu centric in terms of whats been achieved so far but its not really a big deal weve seen governments for a number of Different Countries do this and markets have not reacted badly. German growth is running at a solid clips. The ecb minutes yesterday said the markets perceived them to be hawkish. A change of language when it comes to forward guidance. Do you agree with the market guidance it is a smart move from the ecb to go down this path if you step back and think about what the ecb achieved, we have gone from the asset purchases of 80 billion a month now to 60 and halved to 30 billion volatility has been suppressed you have to ask yourself why is it the case that the ecb has been able to achieve this when the fed with its taper tantrum found deep problems. The answer to that question is they dialed down the asset purchases at the right time with regards to economic development. This is just the next staging post for the markets to reassess, decouple the inflation story to the asset purchases, and eventually in 2019 to raise Interest Rates do you think that because weve seen such low levels of volatility, because of the lack of other facts, that these decisions by the ecb and by the fed might have an outside influence on the rates market . I think its important to recognize that financial conditions are loose the rise in the melt up in equities, the fact that credit spreads are very low does open up space for policymakers to raise rates, to buy some sort of policy space really is what the term is for the next recession its positive youre seeing the likes of bank of canada, rix bank and others being revised up in terms of where they will go next year. The question is to whether this then begins to eat into equity market returns or into other volatility components, thats a question of the Tipping Point from when you go from a loose to eke lib br equilibrium policy into tightness. The bull markets are pricing this already the markets could be complacent about the fed reaching up towards 2 we consider that the tight range. Well get to the fed in a bit. Sticking with the ecb, do you think them moving from a bit more of a hawkish stance comes at a premature time . We are still far away from that target headline is 1. 4 core is at 0. 9 . If they start turning more hawkish, perhaps markets thinking about tightening, doesnt that lock those low inflation rates in thats what were thinking. When we do our projections for where the long end of the bond market in germany goes, its very difficult to get up to a high number if you think that inflation will remain low. Irrespective of potential hikes to come. The more philosophical question around this, is 2 the right number historically, since 1999 to date, average core inflation has been below 1. 2 , german inflation averaged 1 . So markets are doing nothing wrong in pricing the continuation of low inflation and ultimately Central Banks recognize we have had an inflation problem for quite some time and they will raise rates in any case. Where do you see core fixed income and periphery bonds trading . We expect tenyear bunds to get to 75 basis points thats another 30 od bd basis point pick up. We expect tightening expectations to lead to the marketreasoning that inflation risk compression is also a trade. So we do expect break evens to drop in terms of then the periphery, theres tension with regards to the italian election in the shortterm but ultimately we think its a favorable back wind in terms of the Growth Profile for periphery performance. So the right trade is to be long periphery and long credit spreads. Please stay with us lets look at markets and see what the picture is like this morning we had a strong handover from the u. S. With the major indices again posting new record highs s p closed up 0. 7 record close at seventh record close for the year. Same story for the other majors as well. You can see the picture in europe is pretty mixed pointing to quite a flat open while its been trading for an hour, but it has been trading around the flat line lets get into individual indices and see what the picture is like. No major moves in any of the major equities, barring ftse mib which is up 0. 4 xetra dax, of course, we had the talks about the german talking and the break through, but on the back of the somewhat more hawkish ecb minutes. If you want to get in touch with us, email the show the address is streetsignseurope cnbc. Com you can also follow us on twitter, streetsignseurope cnbc fresh news in terms of korea, we have been following these closely, the talks over the last few days between north and south korea, theyve been exploratory talks, theres a bit of news coming out of the Korean Peninsula ahead of the Winter Olympics next month. North and south korea agreed to try and form a united womens ice hockey team. May not sound like a huge, huge deal, but that is some news coming out of korea. Please feel free to stay with us coming up after this break welcome back to street signs. Shares in vivendi are trading sharply lower. The french media conglomerate lowered its profit outlook following a 14 million euro restructuring cost sticking with another firm, shares in puma are selling off after kering says it will sell off its shares in the sporting group. Kering said it would tellsel 70 of puma shares to investors leaving it a 16 stake puma ceo said there were few operational synergies with kering and that the company had no plans to take on any other brands for now Cedric Lecasble dials in now i want to ask as it pertains to puma, mr. Arnaud, the ceo of kering did step down from the board last april was there not some expectation as far as puma were concerned that kering were considering selling some of their stake . Yes, absolutely there was already some nervousness. Puma was off highs, but there were still hopes that a Global Solution would be found. So the share price still incorporated some speculation regarding apossible exit we sue thee that share pricen 6. 5 at the moment do you think based on the premium youre seeing against adidas that that premium will hold any time . We have to distinguish here technical and fundamental aspects. We come back on fundamentals but technically its normal that the share price is under pressure the main hurdle for puma shares is the agm of kering, which validated this transaction, is ending in april. Thats a long time to stay with puma shares. We dont expect the shares to do much in the meanwhile, kind of dead money in the shortterm period what do you think it means for puma in terms of other potential takeovers . It means that there hasnt been a Global Solution and a global acquirer for puma at 100 which would have been easier for kering with nike and adidas being the big two in the sector and that probably limited possibility for them to make a big acquisition due to antitrust we didnt see any Financial Investor acquiring puma at this time however we believe puma has a lot to do on a standalone basis. So far the ceo and cfo have been extremely successful in making the brand hot again. It lost a lot, it had bottomed in 2015, and over those two years we have seen the beginning of a convincing recovery before considering m a, puma was not acquired globally. On the standalone it has a lot to do. Margin used to be 16 in 2007, when kering bought the company and went to 3 in 2015 we believe it was 6 last year, but we are in the beginning stages of recovery if youre a buyer of kering, youre not looking for an exposure to sports wear. So how likely is it these kering shareholders having been given these puma shares will hold on to them . Thats precisely the point. Looking at what happened with kering and snap, the situation is slightly different. Puma is a Larger Company and closer to the core business of kering, but its not luxury. With this big rise in free flows going from 14 to 55 , many of the 55 wont be interested in holding to the puma position thats precisely why there is a technical issue here, and some pressure we might have a fantastic buying opportunity once the transaction starts just to catch on to that in terms of a fantastic buying opportunity, i see in your notes you have a forecast of 5. 9 ebit estimate for this year you think that theyll be able to get to an 8 ebit target. Where is that confidence coming from its coming from the operating levels they are starting to have we saw that when they launched putting much more into marketing and getting some famous people, i think they have been extremely smart with the Marketing Strategy the brand is getting some heat the top line has gone over the previous year. Organic growth was mid double digit which is good for puma we believe the operating levels will continue to play favorable. Cedric, thank you very much just bringing you news out of germanyseemingly related to the talks between Angela Merkels cdu, the csu and the spd. It seems the parties have agreed to end german arms exports to countries involved in the yemen conflict, something that may or may not have an impact on the uk and the u. S. The uk has been selling arms to saudi arabia which has been accused of causing a humanitarian crisis in yemen well watch those deal talks between Angela Merkels cdu and the spd of martin schultz. Shares in fast retailing surged on quarterly profit makiko utsuda has more on this good morning hi there. Uniglo shares finished 6 higher today helping the nikkei index the First Quarter earnings were reported and sales overseas overtook domestic sales for the first time sales in japan rose 8 on the year, overseas sales soared 32 . Today together with the more affordable line gu, the Group Net Profit through the three months through november climbed 13 setting a record for the quarter for two years in a row in japan cold weather drove customer traffic lifting the chains samestore sales 8 , and inner wear and light jackets became top sellers sales over the internet jumped 26 . Sales also increased in china while the moneylosing north american operation finally turned profitable. Even so fast retailing kept projections through august unchanged. The First Quarter outperformed forecast in both sales and profits, but the firm said it will stay cautious until the key Autumn Winter sales season is over thats all from the nikkei back to you. Thank you very much for that. Switching to the u. S. , new york fed president bill dudley warned that the u. S. Tax cuts will come at a cost. He says the legislation is putting the u. S. Economy on an unsustainable path because it will increase the countrys longterm fiscal burden. He raised concerns about the tax cuts overheating the economy and said theres a strong case for the fed to continue raising Interest Rates we have the global head of g10 rates from citi still here interesting comments from dudley, especially since most analysts think the Economic Impact from the tax reform is something to the tune of 30 basis points or so do you share his view that the tax reform may lead to an overheating . Yeah. I think they come at the wrong time unemployment at 4. 1 wages have started to pick up, but theres some things we can anticipate in the next couple of years. Its unhelpful at this time that fiscal policy is stepping on the accelerator. The curious point about the comments is the minutes from the last fomc suggested that many of the dots that we saw already factored in fiscal policy. That was in itself a bit difficult to swallow, even though the market or markets rallied on that. It was good for stock markets, too. Simply because we dont know the size of the overall fiscal deficit. This is one of the most poorly drafted tax bills in u. S. History. When it comes down to detail, deficits could be smaller or larger than the 1. 5 trillion medium term that everybody is working around so the impact on the bond market may still take several weeks to develop. Speaking of the bond market, we had a pronounced fattening towards the end of last year lots of poem were seople were ss was heralding the interpretation that a u. S. Recession may be coming since then the perception has turned around and weve seen the tenyear yield move higher again. So, my question to you is, with all of these things in mind, do you think we can finally see a situation where that tenyear yield does start significantly moving higher . No, were betting against that thats exactly the opposite of what were talking about we think that the stories around china not buying u. S. Bonds is a fade japan will continue to exert yield curve control. And bund yields are beginning to rise, but its difficult to get a number above 1 in tenyear rates if inflation is quite soft so Global Factors will presevent u. S. Interest rates from rising. And the flattening of the yield curve, why is that happening its because Interest Rates are exerting a much more pronounced impact now than they were lets say 10 to 15 years ago because theres so much more debt around thats why we spoke about the equilibrium rate, we calculated that as low as 1. 5 . So anything in the region of 2. 5 could see the curve revert and that would speak of some sort of Recession Risk in 2019, 2020 we heard a lot about wage stagnation, both in the uk and the u. S. I wonder in the u. S. Whether you see that changing any time soon. Were at 4. 1 . I wonder if that Unemployment Rate drops lower if you will see Wage Inflation pick up we think the phillips curve is not quite broken. Its very, very flat some modest upward movements in wages will be likely over the next several quarters. Were not looking for anything major to break out if you study the micro surveys that the Federal Reserve does, if you talk to corporates, they are very reluctant to add on to their cost base. They think that they cant pass on the price increases this is a Global Development so i think we have to think about if the economy is weak or if the economy is strong, you are behaving in the same way with regards to wages and what you think you can pass on. Thats a different phenomenon to what we experienced in the 80s and 90s. What have you pencilled in in terms of rate hikes . Youre saying the star assessment for the fed is at 1. 5 that doesnt mean much in terms of how much further they can go for hikes. What have you pencilled in thats a nominal number, when in 03 and 04 we were at similar levels spreads between twos and tens are five times where they are today. Our expectation is for three rate hikes this year we have not taken the bait of going to four as many banks have done the reason for that is the inflation back drop doesnt warrant a significant up move with regards to the size of the tightening cycle but three is not priced in its still bearish relative to war the markets are. Where do you see tens at year end . Current levels, 2. 6 . Brilliant thank you very much for that dont miss Steve Liesmans exclusive interview with dallas fed president Robert Kaplan at 13 10 cet. Details on that Fiat Chrysler headline, they are expecting to pay bonuses after u. S. Tax cuts or reforms the company will give 60,000 employees bonuses of 2,000 each thats quite a significant total. The carmaker also announced it will boost its investment in the u. S. By putting more than 1 billion into a plant in michigan i want to bring you more news coming out of germany. We had this fiveday media blackout over the spd, cdu talks, were getting a number of headlines coming out of the end of those talks the german conservatives and the spd saying they do not want to close chapters in turkeys eu access the spd aim to get 65 of energy from renewables by 2030. Thats another spd agenda top item they plan to invest 6 billion euros in digitalization and education and planning 4 billion euros to promote social housing and homeownership it seems that the spd are getting a lot of their wish list fulfilled by the cdu and the csu. Well get you more on that story coming up after this break for your heart. Your joints. Or your digestion. So why wouldnt you take something for the most important part of you. Your brain. With an ingredient originally found in jellyfish, prevagen is now the number one selling brain Health Supplement in drug stores nationwide. Prevagen. The name to remember. Welcome back to street signs. Im willem marx. Im Joumanna Bercetche. These are your headlines interesting news out of germany. A break through in berlin. Angela merkels conservatives reportedly reach a Coalition Agreement with the spd including a commitment to strengthen ties with france. This sent the euro to a threeyear high. Running in a different direction. Shares in puma crater after kering announces a spinoff to focus on luxury. Grim picture vivendi shares sink after the Media Company lowers its fullyear guidance and blames restructuring costs. And Fiat Chrysler shares rally as the Company Promises employee bonuses on the back o u. S. Tax reform and unveils a billion dollar investment in michigan all right. There is a lot of news flow this morning. The main story is the development of talks that were seeing going on in germany and as far as we can see in the market, the reaction has been luke warm at best. Stoxx 600 is slightly below the flat line. Slightly in the negative zone, but hovering around zero many different stories have been driving that space lets look at european indices and see what the individual picture is like. The euro dollar has been the main market attention. It has broken through 1. 21 it had been hovering around 1. 20 for a while. It broke through some key Technical Levels some say this sets the way up to 1. 23, 1. 24, and potentially 1. 30 so a technical break in that currency pair. You can see the picture across the board for cable is stronger as well. You can see that weakness in dollar is manifested and the exception, of course, being the dollar yen pair which has come down a bit but relative to the others, still hanging in there lets talk about a country thats had its share of currency problems south africa the anc party is meeting in the eastern cape to celebrate its 106th party. They are using the event to start around negotiations for an exit from president zuma the president will face another vote of no confidence on november 8th after losing to Cyril Ramaphosa last month i have to ask, how is mr. Ramaphosa going to try to engineer this exit for mr. Zuma . Well, he is known as a tough negotiator from his days in the unions, and he has a reputation for striking a deal. He is very much like donald trump in that sense, i guess but Cyril Ramaphosa has both trouble inside and outside the party. Theres pressure from citizenry as a whole to do something about the jacob zuma situation as i understand from speaking to someone inside, the anc is currently trying to work a deal for president jacob zuma they want it to be justified and a Pleasant Walk away rather than a forced walk off. What is happening right now, is that president jacob zuma wants terms of that deal to accommodate him. What we understand is that he would like his exwife, who would have been president had she won the elections in december, to be interim president. And he also wants to be involved in the state investigation something the ramaphosa camp is not happy at all with. Thats the situation there is jostling for what happens when jacob zuma steps down as president and who takes over then, and then there will be a gap left in the Deputy President position which is currently occupied by Cyril Ramaphosa. I wanted to ask one more question on this in terms of leverage, there is a significant pro zuma element inside the anc does mr. Zuma still have the leverage to cut the kind of deal he wants to cut . Mr. Zuma does have leverage if you look at the top six seats inside the anc, which is generally called the top six, they are split down the middle three zuma loyalists, and three ramaphosa followers. That has created a perpetual moment of indecision they cannot strike a deal based on that. There are some in the jacob zuma camp who believe that his wife should come in as deputy rather than interim president others are vying for her to become interim as a way of delaying what would be inevitable in the case of jacob zuma so ramaphosa has a lot of sections of the public to appease, let alone in the anc. But sooum mzumas head is the n one scalp he must deliver. It will be fascinating to see how mr. Ramaphosa threads that needle were joined in the studio by Anna Rosenberg from Frontier Strategy Group structurally, what are the challenges beyond the politics that mr. Ramaphosa faces when it comes to reform . There are many challenges that south africa faces at the moment and that ramaphosa has to address. But theyre big ones and they will take several years to address. The biggest one is a skills deficit in the economy the Education System does not produce the required skills at present. That causes a lot of challenges. At the same time you have high unemployment and also several huge infrastructure challenges, most importantly still lack of electricity, right now stillwater shortages affecting the cape still a lot of Political Uncertainty in the short and medium term. Should investors be getting excited about opportunity or is that looking too far ahead south africa is too important to ignore. It has to be taken seriously because its a large market. They have to look for opportunities despite the slow growth environment the ramaphosa appoint. Is good news the Market Sentiment picked up we expect it to remain that way over the next several months but the economy is not changing dramatically whatever ramaphosa does what opportunities do you think this presents . The country still is in quite a crisis across several different indices. That opens up opportunities in certain sectors. For example, in the mining sector, we have some mining sectors underperforming like platinum because of labor strikes, on the other hand Mining Companies in the coal sector are doing well because of a lot of money going into Electricity Generation when you sit down with potential clients looking to get involved in south africa, what are the headline warnings . Transparency, lack of contract enforcement . What do you say they should be worried about. Labor unrests, populism, policy shifts. I think the ramaphosa appointment mitigates from the populism, but theres still quite a lot of influence from major populists among the zuma camp in the anc, that influences the operating environment. In terms of consumer products, you talked about mining in terms of the south african consumer, where do you think the opportunities lie . Is it about presenting cheap products value for money . South africa was attractive for the middle class what were seeing now is that the middle class is increasingly squeezed because taxes are going up, utility costs are going up, healthcare costs are going up. Theres a lot of social spending on the lower income brackets and social policies that typically benefit the lower income segments i would say two big Opportunity Areas now, thats the lower income segments and also the elite because theyre resilient and they havea lot of diversified sets we say that, but theres a handful of companies doing well even with this environment what are they doing thats differentiating them from other companies . So they are they know the market well. Theyre very agile they can adapt whenever something changes in the market. They can provide building products, and for other businesses theyre a bit cash strapped so they have reduced the costs they bought a company that supplies Building Materials in rural areas. They increased the customer segment and reach as a result. So theyve become more efficient, cut costs and expanded into new customer segments that they werent previously thank you very much for that and bringing us the latest on south africa and Business Opportunities there. Now, switching to the u. S. , President Trump has used vulgar language to question why immigrants from certain countries are allowed to enter the u. S. Thats according to sources briefed on trumps remarks the president was speaking with two senators during a briefing over bipartisan Immigration Reform bill. Peter alexander has the story. A warning, the report contains the offensive language that the president has said to have used. Reporter the president tonight apparently uncorking another astonishing statement. Complaining to lawmakers in the oval office about protections for immigrants why do we want these people from, quote, all these shithole countries here according to a democratic aide familiar with the conversation, mr. Trump was referring to african nations and haiti before suggesting the u. S. Should have more people from norway, whose Prime Minister he met yesterday. A white house spokesman not denying the president s words but saying certain washington politicians choose to fight for foreign countries. But President Trump will always fight for the american people. It comes as lawmakers try to hammer out an immigration deal, with time running out for hundreds of thousands of young undocumented immigrants called d. R. E. A. M. Ers. The crass remark punctuating a wild day in washington with President Trump fiercely criticizing the controversial Foreign Surveillance intelligence act or fisa just hours before congress was set to vote the president resurrecting his unfounded attack on the Obama Administration claiming, this is the act that may have been used to so badly surveil and abuse the Trump Campaign by the Previous Administration and others the Intelligence Community immediately erupting. I thought the president s tweets, once again, were irresponsible and not thought through. Reporter even republicans frustrated. The tweet is a mistake. The president is supporting the vote today. If youre a member of the Intelligence Community and you woke up this morning and saw that tweet, its hard for me to describe the outrage and consternation. Reporter the president posted his tweet that contradicted the white houses public position after this direct appeal from a fox news analyst. Mr. President , this is not the way to go. Reporter President Trump later this morning appearing to reverse himself, get smart the white house in damage control with chief of staff john kelly hustling to the hill and paul ryan getting on the phone with the president if it goes down, we dont know what the terrorists are up to the consequences are really high reporter the program ultimately passed. Tonight, top democratic lawmakers are blasting the president s vulgar comment, one calling it unforgivable. Here at the white house an official tells nbc news President Trump felt particularly frustrated when todays immigration discussion turned to the visa lottery system, a program that he wants to end that was peter alexander. The Trump Administration is expected to impose new sanctions on iran that have nothing to do with the Nuclear Accord reached back in 2015 washington must make a decision today on extending sanctions relief that form part of the obama Era Nuclear Deal reuters is reporting that trump will maintain the current policy but will also give World Leaders a deadline to reform that deal Steve Mnuchin has spoken publicly on the issue. Im expecting new sanctions on iran. We continue to look at them. Weve rolled them out. I think you can expect there will be more sanctions coming. A scheduled trip by President Trump to the uk to open the new u. S. Embassy in london has been canceled the president gave the reason as im not a big fan of the Obama Administration having sold perhaps the best located and finest embassy in london for peanuts. The london mayor took to twitter to respond saying that trump seems to understand that hes not welcome in the uk capital. You can get involved in the conversation and the twitter spat that is going on by emailing the show the address is streetsignseurope cnbc. Com of course you can tweet us and follow u us streetsignseurope cnbc coming up, Bank Earnings are imminent several u. S. Lenders are about to kick off the Fourth Quarter earnings season. Well tell you what developments to look for after the break. Mark zuckerberg says facebook is making a major change to the social network so its better for peoples wellbeing users will see less content from businesses and more posts from friends. He says he expects engagement to drop but time spent on the site will be more valuable. Drop box has filed to go public in the first half of this year, thats according to a source who spoke to cnbc the company was last valued at 10 billion. Theresa may moved to reassure london Financial Firms theyre a priority during the upcoming trade negotiations. Speaking to bankers the Prime Minister attempted to allay fears that the Financial Services sector could suffer post brexit. The talks came amid reports of potentially massive job losses in Financial Services if britain fails to strike a deal with the eu barclays ceo jeff staley said britains tax regime was uncompetitive and urged the Prime Minister to do more to make the uk more attractive as brexit edges closer. The u. S. Banks are about to kick off the Fourth Quarter earnings season. Wilfred frost tells us what to look out for. Reporter the big banks begin reporting friday morning the big thing is earnings calls and how it relates to tax reform, the likelihood benefits are competed away and reinvested and the impact of more obscure elements of the bill, such as the b. E. A. T. Management will need to address the sudden spike in yields weve seen tax reform and rising rates should be bullis looking commentary Morgan Stanley said eps should be boosted by 6 but theres some things to watch out for. Tax reform is bad for this quarter due to oneoff write downs. Though theyve been well telegraphed in recent weeks. And trading will be down Consensus Forecast is about 16 yearonyear decline, Deutsche Bank guided down 22 last week loan growth has slowed driven by commercial and industrial, but overall, despite tough comps for the quarter, optimism about the future has supported Bank Share Prices so far this year. The kbw banks index up a few percent. That was wilfred frost tellingus what tell telling us to watch out for. Peter hahn joins us on the show this morning it seems a lot of this earnings season will be about tax reform and for this quarter there will be a drag on earnings because of some of the writedowns. Going forward it should boost the earnings potential where do you stand certainly a lower tax rate will mean a bigger bottom line if the numbers stay the same the real question now for the u. S. Business is trying to look through what i would call the fudge of the tax changes so bank also write off all losses they have been carrying forward. Its a noncash item to them. Some items mentioned, slow down in trading, that probably will pick up a bit with increased rates that have happened this quarter. Weve seen indications from banks on reduced loan demand in the u. S. So we focus sometimes too much on Investment Banking and not basic banking. Thats a big question. Asking about why loan growth has slowed down in the u. S. , that begs some important questions about banks traditionally have been a bit of a lagging indicator on what has happened in the economy are they now more of a leading indicator . Is it about the flip side is Business Optimism is at highs, you see small Business Optimism also increasing on a forward looking basis, that bodes well for lone growth, no it should be. But why did lone growan growth w down is that because of a blip . Is it a lag from a year and a half ago, when there was a slight downturn in the market . Is it that confidence is not as strong as we think one of the other things we observe the when it comes to the u. S. Banks, the passthrough rights have been around 30 , 40 . How much do you think the fed needs to hike before banks started raising their deposit rates . I dont think theres that much competition really in the deposit market now i question how much banks have to compete i think its whether they can raise loan rates, thats with a decrease in demand their ability to raise loan rates is also difficult. The expectation all along is that an increase in rates would bring more to the banks. I dont think thats a certainty. The demand, if its a modest increase or slowing growth, then that promise of a lot more money into the banks wont be there. Do you have a view on whether its the year of outperformance for retail banks versus investment banks weve seen bank of america, more retail exposure outperforming the Investment Banking blue chips. How do you think that plays out . If we have increasing long rates, that should create more volatility, more trading in fixed income thats the biggest business in invest banking. If we have more people trying to hedge, do more things, we should see a bump up. Your question is about the longterm of Investment Banking and does it have a longterm better return . Even if Investment Banking has a good year this year, its going to be tough to cover those bad years weve had. The model for Investment Banking, whether it has a good return basis to it anymore is weak retail is evolving retail has a good return on it going back to the subject of Investment Banking, regulation seems repealed or dialed down a bit when it comes to the u. S different story in europe. I think almost 21 out of the 22 main regulators have been replaced by the Trump Administration surely thats another boom for the sector and for investment banks. Investment banks may have more regulation rolled back i think it will be rolled back some what. Is tlt here the opportunity thee one thing that comes up is technology, things that have moved outside of Investment Banking. So Investment Banking is under pressure to provide a longterm r. O. E. Story for investors peter, thank you very much for sharing your story this morning. Blackrock releases Fourth Quarter earnings today as well well speak to larry fink at 12 15 cet. Tune in then just to bring you more details on the developments out of berlin. This brings us slightly closer to a new government. The spd and cdu agreed that merkel will lead the coalition 65 of energy will be from renewables by 2030 the two parties agreeing billions investing in digitalization, education, social housing, all spd wish list items that seem to be getting agreed to. Fresh tax relief, they will end arms exports to parties in the yemen conflict timid on the fiscal side. A little bit. There will be formal Coalition Talks, they reached a number of agreements, and weve seen a massive boost to euro dollar this morning as a consequence of that also a pact on ensuring no tax hikes and a deal on Renewable Energy lets take a very quick look at u. S. Futures. And in europe you can see thats positive euro dollar is the main focus. U. S. Futures pointing to a rosie en as well im Joumanna Bercetche im willem marx, Worldwide Exchange is coming up next. Some air fresheners are so overwhelming, they can. Send you and your family running. Introducing febreze one for fabric and air. No aerosols. No dyes. No heavy perfumes. It cleans away odors for a pure light freshness. So you can spray and stay. Febreze one, breathe happy. Breaking news. The euro soars to a threeyear high on Major Political headlines out of germany markets now. Stocks pointing to a higher open on wall street as investors await the first round of Bank Earnings and facebook gets a facelift the social media giant making major changes to its news feed its friday january 12, 2018 Worldwide Exchange begins right now. Good morning a warm welcome to Worldwide Exchange on cnbc. Im wilfred