Transcripts For BLOOMBERG Countdown 20160212

Welcome to countdown this friday morning. I am manus cranny. We are in london, keeping you up to speed with everything that is moving on markets. And we have a couple of Different Companies that are reporting this morning. We are going to quickly tell you what is going on, we have hans nichols standing by. This is one of europes biggest steelmakers, First Quarter estimates coming in at 9. 5 billion, that is below the estimate of 9. 9. What do they earn from continuing operations in the First Quarter . At 243 million, that is just slightly ahead of the estimate at 239 million. But the First Quarter net losses , and terms of profits, there is a net loss that actually beats the sales level, coming in just under the estimate. That is the net loss that comes versus3 million euros, profit obviously a year ago, at 50 million. This is as europe implements tariffs on the chinese imports. This is as they review the with the dealing prospect of a slowing global economy. Flowyear earnings and cash forecasts still in range. That is the message coming from them. We will be speaking to the cfo, he joins me at 6 45 u. K. Time right here on countdown. Lets get to the hot topic, of course with the bank. We have hans nichols standing by. one of the key things we will look for is the outlook did they expect a counting year and a slight increase on net profits . One thing we just got was the Tier One Capital ratio, coming in at 12 . Before the last quarter, we had 10. 8 . We are still waiting to see what they have learned about the non performing loans there, what is happening in that sector. But it looks like the top line number is to be, but they are warning about 2016 being a challenging year. Manus a challenging year for the banks is probably the understatement of 2016 so far. Hans nichols thank you very much. We see japanese stocks plunge, after they come back from holiday. What really interests me in terms of the markets this morning is the bank of japan has on theey rate check alls bank of japan. They actually do something that would shock markets, actually moving without sending 24 telegraph messages to the market about what they are up to. One thing you want to keep in mind, the bears abound. This is a graphical presentation of the bear market them all of the indices tumbling 20 from the hive. That was back in may of last year. Trillion from Global Equities from the high last year. 8 million has been done, 50 of that damage that value destruction has been executed in the first half of this year. The curve is the flattest since 2007. It is it forced margin . Buyingns jamie dimon confidence. That is what investors are telling the market. Let us give you the risk monitor. Where is the money flowing . We know the asian markets are up to speed. But in terms of the other markets, the biggest twoweek again since 1998, anybody that has been in these markets remembers 1998. The Asian Financial crisis, there is verbal intervention. The bank of japan talking about a rough market, gold rallying. You are looking at gold really moving there, just coming off week in of the best four years. We are seeing gold just come back ever so slightly. Crude up some 5 . We are seeing a bit of a turn in some of these markets as we go to the trading day. To a certain extent, noncrude rallies by 5 . But gold is where the money is flowing. Let us get you up to speed with caroline. Chairne Federal Reserve janet yellen says the central bank is not to blame for the Financial Market this year. It is unlikely to unroll back the Interest Rate, winding up two days on capitol hill, she argued that the first rate rise has been widely anticipated, despite little angst in the market. The bank of australia is keeping the bank doors open to further rate cuts. The companies economy as the flexibility for further easing. Comes with the recent job strength, but the key question is the financial president , which will not be noticed for some time. The u. S. , russia, and other powers have backed an accord calling for troops into the syrian civil war. Theyre also demanding immediate delivery of humanitarian assistance to the besieged areas. We are doing everything in the power of diplomacy to try and bring an and to this conflict. Waya way that results in a of unified, nonsectarian, minorityprotecting, secular, whole state. Caroline we will be speaking to the u. K. Defense secretary Michael Fallon here on countdown. , the chairman and chief executive of jpmorgan, spent 26. 6 million buying shares of his bank yesterday. That is after it tumbled to the lowest price in two years. Sources say he believes it is cheap, after the global route in equities. Assets are down almost 20 this year. Global news 24 hours a day, howard by 124 journalists around the world. Manus caroline, thank you. Lets get you up to speed in terms of the asian session. Eb difficult day certainly for stocks. Yenknow the eyes are on the and the bank of japan. We know that governor kuroda at a meeting today. Will they want additional firepower to deal with the currency . Three years of monetary stimulus in the nation, all riddling for the Asian Pacific today. You see the regional benchmark declining, as well. Mixed performance with Industry Groups, almost all of them declining. Utilities barely getting again as we look across the broad market. China remains, as you know, reopening on monday. There is some speculation and suggestion that japan and korea bearing the brunt of the market volatility today. With china unable to ease or perhaps absorb some of the pressure. Take a look at some of the movers we have been following the across the region today. Energy shares in hong kong and elsewhere, as we take a look at some of the big mining names. Australia andng hong kong doing quite well, new crest mining a bit of pressure in the city session. Let us take a look at the others, so this retracement others is upward come a continuing to have a list on oilrelated stocks. These oil majors in hong kong had precipitous declines yesterday. You are seeing buying there, down just about 1 . Ridley checking in on south Korean Defense names. As the north korean situation istinues to intensify, seoul now cut water and sewer to the industrial complex. Theyre sending in troops to occupy. Three defense names, missed performance in the market thats all Circuit Breakers triggered on the small drop cap index. We dont see that everyday in the premarket. Manus no, thankfully we do not. We certainly do not. Let us see what the next trading session brings us here in europe. Now, do not blame the fed. That was the message from the chairman, janet yellen, yesterday. As she told congress the central bank was not at fault for the market turmoil. Janet yellen around the turn of the year, we began to see more volatility in Financial Markets. Some of the precipitating factors seem to be the movement in chinese currency and the downward movement in oil prices. I think those things have been the drivers, been associated with broader fears that have developed in the market about potential for weakening global growth. Below low risk inflation, i dont think it is mainly let us go back. Manus lets bring in colin mclean from Asset Management, it is not our fault. And the oil. N we are doing our job just raising rates. Colin i think they had too much faith in the central bankers. And they are perhaps running out of instruments. But they have been banking on the wrong issue, worrying too much about inflation and not recognizing the deflation risk. And there are a lot of indicators now that deflation is what is worrying the world. Manus we have been talking about deflation for six months. And that is not new. The sharkwe look at moves, the implied inflation rates, germany and the u. S. , we are seeing a fiveyear forward quite a slump there. And that probably points to this flat curve that is hitting the bank profitability. But it also points to the bank is down in inflation. Manus this is something we have prepared. Let me to show you this. This 30year break even rate, and as you say, this is viewed as no inflation the 30 years, according to the market at the moment. And of course, a lot of that is driven around this is a representation of 30year inflation this is driven around by commodities and oil. Look at the whip around, oil up by 5 . I mean, this whole lack of focus, as you say, the wrong focus by Central Banks but that is what has been driving equity markets for the past number of years. Will it get much worse . We are in a bear market now on the index, 16 billion has been wiped off equity markets since the high last year. How much more downside is there, or do we have to have this paralysis of fear they are talking about . To lose think we have that fear. And we have to see the Central Bank Stay with some interventions, particularly to address the fears people have perhaps over banks, overstimulation. We need to see intervention. But the underlying pattern on deflation manus i have to interrupt you, negative bond rates. There is no doubt about it. The market seems rather unsettled, we will talk about that in a moment. Is that really the your . Lower rates, more quantitative easing . Ran outo, i think they of monetary policy. We need fiscal policy, general stimulation. To bes Central Banks need targeted on wage growth, or Something Else that will do some impact on the economy. Do some good. Is reallye qe era overcome in terms of what it can do. Manus and in terms of this string of guests we have had through the door, we had stephen talking about the ominous year in bonds, they were rocked. The money has flowed out of equities into bonds. Is it as ominous a start for you . I hear what you are saying about overdependence on central bank intervention, but maybe this is just markets really fundamentally repricing that you do not get free money forever. Colin i think a lot of the intervention we will get is still joined up and targeting stock markets. There is a barometer of economic variety of regions. So i think whatever politicians and Central Banks do is probably going to support markets and encourage equities. Manus well, that brings me very nicely to negative rates, in terms of what they are doing in the stock market. The ecb first moved to negative and the the second one, bank of japan starts negative rate. I am not so sure. Let me rephrase that, sorry. Nevermind what i think the markets are not convinced. Do not think they would do much good at all. That is partly what has worried the markets. As recently, i think we need to season for banks look at this focus more on this deflation, rather than worrying about the recovery of inflation. I think it needs to see that Central Banks actually looking at the danger area. Manus collin, you will be with us for the next five minutes. Just a quick check on u. S. Futures. We are seeing equity futures get himself up off the ground at the start of the session. Oil rallying by 5 , gold coming off a high, asian playing catchup. At the moment, let us see how the rest of the day actually looks. Here is the setup. You have euro area gdp at 10 a. M. London time. A little bit later in the day, we have u. S. Retail sales. That is probably the real sort of capitulation number four markets. Risemists expect to see a in january. Tonight in hamburg, u. K. Prime minister David Cameron will give a speech on why he is focused on britains role in the eu. Nkingg up next, ba blues, Credit Suisse drops the most in 27 years. We will break it all down for you. You saw the financials, will it remain . It is 6 18 here in london. Let us get the Bloomberg Business flash with Caroline Hyde. Caroline manus, thank you. Bloomberg sources say that boeing is the subject of an sec accounting review, set to focus on the 747 dreamliner. Investigators are apparently looking into costs and sales forecast, following a whistleblower complaint. Boeing fell almost 7 on the news to close for its lowest in almost two years. They declined to comment. Bloomberg sources say Goldman Sachs, after they reached internal guidelines, they are involved in a potential investment with kuwaiti food in the middle east. Google will take more steps to comply, by removing links from all of its search websites across the globe. That is according to a persons familiar with the matter. Embracing the landmark ruler in court, the european top asking the Search Engine to remove personal information about themselves. And a bigger than expected profit in the Fourth Quarter, that is as earnings out of the Consumer Banking unit almost double. They confirmed they planned to pay a dividend and will be its first payout since 2007. That is your Bloomberg Business flash. Manus caroline, thank you very much. Banks very much in focus, have been since the start of the trading year. On snake holes is standing by in berlin. Hans nichols is standing by in berlin. Just give us an estimation, swinging to proffered at commerce bank, how do they stand apart from the crowd . Ratio is at 12 , right . Last quarter, it was a 10. 8 Deutsche Bank is at 11. 5 . They appear to be better leveraged than Deutsche Bank. Stock is down 33 , commerzbank is. Deutsche bank is down almost 40 . We do the numbers, it looks like the big beat was on that income, coming in at 187 million for the Fourth Quarter. Estimates were for about 156 million. That dividend that caroline was talking about will be the first time they paid a . 20 per share dividend, the First Time Since 2008. And on that site, they do look optimistic. It looks good. One note of caution, though. He did say the 20 16th would be a challenging year. They are still trying to write down a lot of these loans in the shipping and commercial real estate industry. That is going to be a challenge for them. But it looks like the last quarter of 2015 was a solid quarter, and they are fairly optimistic heading forward with not much more room to operate, when you look at this low interest environment. Which is affecting all of the banks. Manus lets talk about one ceo that did an aboutface, it is jamie dimon. He spent almost 30 million. This is a big demonstration, isnt it . 699 u. S. Ceos that of the the same in the past 30 days. Hans yeah, not all of them are officers. And you look at that number, there have been sales as well. But when you look at the universe of officers that are buying versus selling, buying is weighing thet selling. The stock was up some two point 9 . He bought some common shares, about 26. 6 million he has about half a million shares. This is not unprecedented for jamie dimon. Weighed2012, he also in. At that point, he bought 17 million worth of shares common shares. But he also sold at that time 13. 5 million of preferred shares. This time, we do not have a sell order. One other note on this,. His compensation for last year . 27 million. But a lot of that was in stocks anyway. But he is clearly taking cash off the family account, putting it back into the stock, showing support trying to inject confidence and a bank that he, personally, feels is undervalued. Manus well, a vote of confidence from the ceo. Hans, thank you very much. Lets bring in colin mclean from Asset Management into the conversation. Hans breaking down the commerzbank story. We are journeying to frankfurt, paying the dividend, when you look at the european banks what i have here is actually a position that these are the european lenders. My question to you is this. We are more oversold and now, ok, then we are even going back to the height of the financial crisis back in 2008. You know, catch a falling knife, i suppose. We could use all of the cliches under the sun. There is no doubt about it. These banks have been righted. How do you look at the industry . Colin i think it will be much tougher to make money with the yield curve so much flatter now, and as you are talking about on the forward expectation in inflation. It is a tough background. The european banks have not quite that the Balance Sheets in order, in the way that the u. S. Has. And i think particularly for that applies to ones were the market is targeting now. So what we seeing now on the share price is a reflection of what is going on underlying the default swap market. And also in some of these unusual capital bonds, be coco bonds chilling off sharply. Manus a member ranked return, there is the stock index on your screen for viewers. The top 600 banks down 17 . If we did a little bit deeper on thember ranking banks stoxx 600, ok, it is the italians and the greeks. They seem to have the monopoly. Do you think it is reasonable to down 43 , suisse Deutsche Bank down 39 . Is the market worried about a lack of strategy, a lack of exposure to investment . Banking is that the credit low . Continue inthey terms of their Investment Banking . Colin i think theyre going to have to restructure. For both of these, particularly Deutsche Bank, they have been trying to grow the Investment Banking. No sign a can really overtake america in this. I dont think there is the Balance Sheet really to do that. They need a more radical change. Manus what is that, to radical looks like . Colin it probably looks like the royal bank of forced to deleverage. But of the banks that have the problems in the central crisis, we have not seen that same deleveraging really go on and Deutsche Bank. Manus thank you very much. We have a lot more to get through. We will talk a little bit of brexit. Up next, David Cameron has to hamburg to meet Angela Merkel. Dealn the drive for the eu , as it enters the home straight, as someone they. Inare seeing a turnaround these markets, 30 minutes into countdown, u. S. Equity markets indicated slightly higher. The dow is up and 60 is wary are there. You are seeing oil rally slightly, that is the understatement so far. But then these moves are quite precipitous. And the japanese bank, crude going up 4 , gold is shining metal this morning. Welcome back, it is 6 30 here in london. 7 30 in paris. Speaking of which, time to tell you the profitability rising by 4 at reynolds. That is the car that is driving the renault higher. That is a beat on the estimate, looking for 2. 0 percent. And theyre forecasting further growth. That is the point. For the revenue, those like the numbers, 45. 3 billion as the met was for 44. 9 billion. Achieving a 5 operating margin as early as 2015. That is one of the key numbers coming out here. Rises byerating cost 74 , margin comes in at 3. 5 , versus 2. 2 a year earlier. The margins are moving upgrade what is driving it, volume growth . They are also seeing a decent mix in terms of pricing. The dividend, if youre a stockholder, youre getting 2. 4 euros. Bloomberg Dividend Forecast was for 2. 3 per share. A year ago, you were earning 1. 9. The Global Market, the Global Market according to them, will grow and rally by 12 . The European Market by 2 . France by some 2 . In the meantime, lets get you the bloomberg first word with Caroline Hyde. Caroline Federal Reserve chair janet yellen said the central bank is not to blame for the Financial Market this year. It is unlikely to roll back Interest Rates in response from winding up two days on capitol hill, she argued that the first rise in nine years have been widely anticipated. So there was little angst in the market. Meanwhile, the reserve bank of australia is keeping the door open to further rate cuts. Governor Glenn Stevens told a Parliamentary Panel that they have less for further easing. He says the board is weighing sustainability of recent job strength. The u. S. , russia, and other powers have back and accord calling for a truce in serious civil war. Forooks at the demands immediate humanitarian assistance for the deceased areas. Secretary john kerry we are doing everything in the power of diplomacy to try to bring an end to this conflict. In a way that results in a nonsectarian, minorityprotecting, secular, whole state. Caroline and we will be speaking to the u. K. Defense secretary Michael Fallon about this right here on countdown. Jamie dimon the chairman and chief executive of jpmorgan spent 26 million buying shares of his bank yesterday. And that is ever they tumbled to the lowest price and more than two years. A source says he made the purchase on the cheap, after the global route and equities. U. S. Gan is the largest lender by assets, down almost 20 this year. Caroline, thank you very much. David cameron will hold talks with Angela Merkel and hamburg today. Pushart of his final for u. K. Membership terms. A needs approval for every nation in the block. 100 you might rely on is the czech republic. We spoke to the minister of european affairs. Going to make sure that we help David Cameron make the case for the u. K. To stay in the European Union. In. Eed them to stay europe needs to be much stronger than a few years ago. Manus meanwhile, australias finance minister the need for the u. K. To stay within the eu. It is very important that Great Britain will be a member in the European Union for the next 100 years. So that i think is most important question. The second is, we have written the letter that is like a letter of intent now, which will be presented at the summit. I think there are some very good ideas, and i think it is only necessary to clarify some wordings in this letter. How is the interpretation, from the point of view of Great Britain, and the interpretation from the European Union . I think it will be successful. And it is a good growth process that was started by david and the European Union. Therefore, i am hopeful that there will be a solution at the summit. Ark do you think this process David Cameron has begun will lead, if successful, to other countries digging out their own wish list . Probably, yes. But i think what is really a level playing field, equal for all the member states. Points,ou look at some pointed out by David Cameron like the process and the question of the social distance i think that would be accepted by every member state. That it is a good idea. Mclean is with us in the studio today. A man who hails from your part of the world, north of hadrians wall. From an investment perspective and political perspective, what happens . Change onstirrings of the campaign trail for David Cameron. How successful do you think he will be in delivering change . Colin i am not sure that were necessarily going to see markets get through this period. There will be some uncertainty really, about what sort of disruption and exit could cause. I dont think the market necessarily knows what is right for the European Union longterm. But it does know this will be pretty disruptive, and a real possibility that it will point to an exit at some stage. Manus we know what polls did for your country. Inare seeing record lows yield, is that more to do with global volatility . But i suppose with the dynamic of what is happening in europe, the 350, are you changing any positions, in terms of exposures . Colin we still like the 250 stock amid cap in particular. A lot of those had a pretty good year last year, they have given back a good chunk of that. They are actually still ahead of from the beginning of last year, so it has not been a bad environment overall. Midcapto now, for stocks that are quite domestically focused. Manus going if i look at sterling, i was reading a variety of reports from bergen hanley, and here we are talking about negative rates we started the conversation about negative rates around the world and the reception they have received 13 months until Interest Rate hike in the u. K. There is dollarsterling for you over the past year. What is your view in terms of we could even countenance a hike . Colin i dont think we will see that this year. I think what the bank of england is trying to focus on controlling particular areas of bubbles, so in fact more stability can happen elsewhere. It is probably fiscal stimulation as well. Manus good luck to you if you think that number industry is going to deliver any kind of physical easing for us in this country. But thank you. Stranger things have happened. Colin, stay there. I want to get our next story under the bell. President mperiled some would say, who saw his state of the nation address overshadowed by protests last night. The south leader faces mounting discontent over what is seen as his mismanagement of the economy. Bloomberg is in cape town. The rand under pressure again, gdp growth has all but halted in your country. Look, what does he have to say to do, that people are losing fairdence, is that a reflection his personal issues are encroaching so much into the politics of credibility . Good morning, manus. Yes, you are quite on that one. We saw the state of the nation being marred by protests, not only outside parliament but as well as inside the chamber. Opposition parties were calling on president zuma to resign. But the president did not seem phased at all by the drama happening inside parliament, as well as outside. Of his, the forecast address was mainly on the economic challenges the country is currently facing. He tried to reassure international investors, as well as agencies, that the government will embark on a series of costcutting programs. As well as that, he is going to be making sure that the Nuclear Program that is supposed to add about 9600 megawatts to the power grid will be at an affordable rate, and that is an affordable cost. That is facing a downgrade of rating toies credit junk status. Manus in terms of market reaction, im looking at dollarrand. Not exactly what you will call a spirited response, is it . Yes, not at all. Before the rand reversing earlier gains in the day, it was weakening slightly after address. Zumas but what we want to watch closely is exactly what he alluded to in his speech, that the finance minister will be announcing some costcutting measures that the government will be embarking on when he delivers his budget speech, later on this month. That is something that we definitely have to be watching. And the ratings agencies will be keeping an eye on quite closely, manus. Manus thank you very much. In cape town, wrapping up the president zuma state of the nation of address. Colin is still with us. One of the things that comes through, and i want your interpretation, at the start of the way, they said we do not have any commodity exposure. We dont have any metals or mining exposure in the portfolios. It is just too soon. You look at what is going on in south africa, the whole has goty complex political consequences, as well. No better manifested than in south africa. If you look at emerging markets, how do you view south africa, how do you view the basket . A lot of countries, not just in south africa, but south america and other parts of world are being hit by commodities, and i think western politicians may have to pay more attention to the political turmoil that i think may arise from it. So, i think commodities in markets have been hugely overrepresented, particularly in the london market. So, we do not see it as important for our economy, but it does matter for the rest of the world. Manus in terms of the shift we are seeing, i am looking at crude at the moment. Contractsng these were up 5 , rallying from 27 on the crude. Trading at 31, . 33. The commodity complex, it is nowhere near a turning point. And you are seeing real talk about capital expenditures, moving away from a progressive dividend. For you as a fund manager, how world . Readjust to that colin i think that is key, the real notice in dividend that we will see, particularly as this disinflation background we will see more cuts across the board. That makes it hard to value these things as investments. I dont think they have to be in portfolios, so i dont see a compelling need to go back particularly not into the metals companies. But i dont see it in oil, major oil either. I think they are looking to cut dividends. Manus what we saw with the oil dividend, the script dividend at that, bob in our conversation with Ryan Chilcote was making the point that they will be ok for bp, who is most at risk in terms of the dividend . Colin i think dividends in a is probablysks, bp the most sensitive at 60. That would be the most troubling for the shares. Manus he is looking for 100 rally. Them cuttingsee costs enough to survive on that. And for shell, this latest acquisition with bg does not make a lot of sense for people. I think we will see some worrying announcements at shell. Cuts, more job cuts, cap organizations . Colin they need to cut caps, but i dont think they can maintain dividends. Current oil prices even a 50. Manus before i let you go, disinflationary environments . Colin we like stocks like imperial brands, as it is now called. Some of the pharma stocks like glaxosmithkline and astrazeneca are coming off low basis. They have been beating up good results yesterday. I think pharma and tobacco are a safe place. Manus health and a smoke. Asset management, how to play a disinflation very environment. Up next, germanys largest steel maker as a loss. We speak to the latest results, that is next. 6 48 in london. Let us get you up to speed on these markets, Caroline Hyde has the details. Caroline, oil and futures are moving higher, what do you focus on . Caroline a bit of a reprieve, risk appetite. Look at what is happened this week. I want to focus in on this function, over on the topics im looking at the moment, the japanese benchmark. Check this out. 12. 6 lower on the week. This is the worst week we have had since 2008. Concern here. Sorry, i have just been trying to take my focus here. But we are seeing a phenomenal move in terms of topics 2008, the worst week. Let us look at whats happening in japan today. Theyre coming off holiday, looking at the selloff. Futurestarting to see in the u. S. And the u. K. , clearly we are 30 to see that verbal intervention coming from the bank of japan, perhaps turning the tide on oil and gold. But still, trading lower on the asia overall benchmark. Index, and it is your function, every single Industry Group is falling. The worst performers are health, by 4 . Everything is falling, so clearly, it is all risk aversion when it comes to japan. Maybe the tide turning for the rest of the market. Look at this, in terms of overall a bear market. I want to focus in, we are down 20. 5 from the peak. This is your overall global stock benchmark. Wd, if youremx looking at bloomberg. All falling into a bear market, we are in dire times. Manus caroline come a look, in terms of the timing that we see in terms of slowing demand, tell us about havens. Treasuries, he said he has nothing for his burns. Talking about 1 in terms of the level that he may see on scale, where ari with that trade . Caroline that is fascinating. We could see even further going. I wonder if we could see a yield turnaround in u. S. Treasurys. Why . The record buyer of last year, japan, many of us took the foot off the pedal when it came to buying u. S. Debt. This is a fascinating chart. This is how much you really get for your yield if you buy u. S. Treasurys in japan. The investors are only getting 4. 57 , all the way down here . Why . When yields are at 1. 7 . It is becoming so costly, and terms of hedging your yendollar at the moment. Surging in the cost, the difference is because of the dollaryen actually. We are seeing that overall benchmark move, we are seeing the spread between dollar and yen up at 6 . That is the highest since march of 2009. Overall, we see that rise getting far too expensive for japan to buy u. S. Treasur ies. Overall, we could see perhaps japan step back from buying u. S. Treasuries. Manasquan that certainly could rock the market. Caroline, thank you very much. One company that is not feeling the reprieve is th yssenkrupp. Germanys biggest steelmaker said it continues to cause concern. Let us get a little more with the ceo guido kerkhoff, speaking to us for the first interview of the day. Good to have you on the phone. A number of weeks ago, your cfo clearry ceo thats in a recovery was necessary to hit the numbers 1. 6 billion euros in terms of earning. You swung to a loss in the First Quarter. Longerit is darker is no i take it as target is no longer for this year . Guid no, i dont agree completely. Let me stress that our cap business has continued slowly performance, we continued year on year. Not only order intakes but revenue and even numbers. And therefore we think we are on the right track with the Industrial Group and our strategy. Markets are weak. You can see that in our results. Let me clearly highlight in europe, we were again positive. We lost a bit, but we were positive. And the quarter, itself, the thet quarter, for us december quarter is always one of the weakest because of volumes due to the christmas season. They are always lower than. But to reach our guidance going forward, clearly, multiplied iv fouryear that is about the same. But what we currently feel manus i think the market can read the numbers. We need from this conversation from you, sir, are you sticking to your fouryear guidance . 1. 9 . Do you need more tariffs based on chinese imports, sor . Guido we have a solid demand underlying great we have low inventory levels, and currently this is different to the last quarter stable prices. We do not see any more windfall losses currently, which have impacted our numbers significantly. Antidumping matters could be helpful. And we need to see price increases. The price increases to reach the 1. 6 makeup one third of all we need to get there. It is not only about price increases. Manus let us talk about the business. Some of the parts, the marketplace leaves your company some of the parts 70 relative to where it is now. You had some discussion in australia, do you have an update for us . Well, clearly, all stock prices have been under pressure in the recent past. Last year, we have been very much stronger in a discount, compared to that point in time, whereby we do not have any negative news overall from that coming. Therefore, the downturn in our stock is truly reflecting steel. And the cycle that we see currently, we are addressing this issue. What we have always clearly addressed is that the intelligence saying the steel mill and the resilience are not strategic assets. And what we see in the market in europe is overcapacity. And because of consolidation, if it were to attack an address this issue, we have always. Stated we are very happy to join in such a consolidation if it helps to reduce the overcapacity issue. And we still believe that our industrials and business are outperforming and supporting our strategy. And the most important issues in the industry are in the steel sector. And that is what we are addressing. Manus let us talk about one of the announcements in your report this morning. Cost cuts come 250 million euros. That you willify get above your target of 850 million euros, rather than last years 1. 1 billion . What is achievable . Ido if you take a look at recent years, we started at 2. 7 last year. We ended at 1. 1. The 250 gives you a run rate above 850, and that is definitely in the current times we are targeting for a bit more, we stick to the 850. The 250 shows we are on a contract to achieve it. Manus what do you say to detractors who say it is time for heinrich to go . Guido oh, he just started his new contract. Board take a look at our of management and the supervisory board, they have been supported by 99. 96 of the vote. I have not heard that anywhere. Guido, thank you very much. We wish you well for the financial year. Guido kerkhoff, cfo there. Joining us on the first interview of the day. Up next, we get german gdp. And the inflation data, as well. We will break all of those numbers down for you, as we see a small reprieve and european equities futures. Trading slightly higher. Deepenshe equities rout in asia. Japanese stocks suffer the worst week since 2008. Do not blame us. Janet yellen says the market turmoil is not the feds fall. Global powers back in accordance, calling for a truce in a civil war we speak to the u. K. Defense secretary later in the program. And on the cheap. Jpmorgan boss jp diamond find million when shares, to the lowest price in two years. We got there. It is friday. It was a bumpy ride since countdown. Lets tell you what is happening with rollsroyce. Items, excluding certain 1. 432 billion. In terms of the fullyear outlook, that is unchanged according to rollsroyce. 135 Million Pounds of cost savings expected by the end of 2017. The market expecting dividends were just trying to see what is happening with the dividend. So the underlying fullyear revenue of 13. 4 billion pounds. That is rollsroyce. On thekeep an eye dividend. In the meantime, breaking data from the german side. Hans. Hans german gdp coming in at. 3 for the Fourth Quarter. That is matching up with analyst estimates. The Fourth Quarter gdp for germany, they hinted at it when they gave the fullyear and they are just making an estimate on december. This number is not as important as some of the other gdp figures we will be getting later today. We get entire eurozone figures later this morning. I believe a 11 00 a. M. Local. The estimate is 4. 3 growth throughout the eurozone for the Fourth Quarter. These numbers are coming in as expected. We have to bear noting that these are not massive numbers. They are not showing robust growth. Take a look at the market turbulence that has been happening in the First Quarter of this year. Some fuzzy numbers coming from germany about what this means for growth. We will be looking at the export markets and the latest Inflation Numbers to see whether or not the doves on the ecb have more of an argument to increase the size and scope of quantitative easing. Manus fuzzy numbers. I love it. Fuzzy numbers from berlin. Thank you very much, hans. Lets remind our viewers. I broke the rollsroyce numbers, but the dividend is the critical point. It has been cut. It comes in at 16. 4 pence. That is a decline. The estimate was for 17. 3. There was speculation in the markets that this was going to happen. Lets get you into the markets. What you have got is a bounce for germany. The asian equity markets coming under such tremendous pressure, checking in on the european complex. London up. 75 . A great deal of this move has been driven by the ride that we see in oil. Paris up. 9 . This is a reprieve for the market. The Global Equity market has. Ost jamie dimon is avoiding the temptation to become paranoid. The question is, how do you see in the u. S. Equity markets . We are seeing some shifts between gains and losses in the u. S. Equity futures. The indication is just slightly lower. Moving. Dollaryen it has had its biggest twoweek gain since 1998. It is coming off its highs. Gold is the second one, down. 25 . The best week in four years. It is here friday. That is controlling the gold market. Do not forget, we have topped out on some of the big estimates. Those are your markets. A dividend cut for rollsroyce. Lets get your bloomberg first word news. Caroline hyde is here. Caroline janet yellen says the central bank is not to blame for engulfede that has Financial Markets this year. It is unlikely to roll back Interest Rates in response. She argued that the feds first rate rise has been widely anticipated and prompted little action in the market. The rba is keeping the door open to further rate cuts. Governor Glenn Stevens told a Parliamentary Panel that the economy has flexibility for further easing. He says the board is weighing the sustainability. The u. S. , russia, and other powers have backed an accord calling for a truce in serious in syrias civil war it demands the immediate delivery of humanitarian assistance to besieged areas. We are doing everything in the power of diplomacy to try to bring it in bring an end to this conflict. In a way that results in a unified, nonsectarian, minorityprotecting, secular, whole state. Caroline we will speak to the u. K. Defense secretary at about 7 15 u. K. Time. Jamie dimon, the chairman and was kind gan purchased shares of his bank because he believes the stock is cheap. Jpmorgan is the largest u. S. Lender by assets. Global news 24 hours a day powered by 2400 journalists. Manus that is what we like to see. Ceos and directors getting involved in their own stock. Voice of confidence. Lets check out the asian markets. The catchup game is afoot in asia, but it has been a fairly tough session to take. Zeb it certainly have. Investors in japan and south korea happy that friday is here. A weekend to take a breather from very different very difficult markets today. Indexci asiapacific registering a decline. Japan really seeing the difficult time we have had. The asiapacific index down 2. 25 . The nikkei has been falling. Longest d for its the worst week since 2008. This reflects the concern about the global economy. Korean market today saw Circuit Breakers triggered on the small caps. We have that down 8 . We need to watch this very closely. This is having a broad impact. ,inors as well as Oil Companies mixed performance around the region. Australiamining in rising. Look at new crest. Some pressure there. You have to look company by company with oil. You notice the increase in wti crude as well as brent crude. Any impact will be filtering through the oil stocks. The chinese oil majors doing well today in an otherwise difficult market. Here in hong kong, we are off the lows and still tough going. It will be interesting to see how the markets come back in china when shanghai returns from the Lunar New Year holiday. Lets hope all the good fortune wishes at up to a good start monday morning. Rest well. You could be in for a jumpy ride on monday morning. Have a great weekend. Lets bring in a global strata list strategist at lombard investment management. Great to have you with me. Look, the market cannot be clearer. 16 trillion has come off the highs from last year. We are repricing. This is the result of what has happened. Negative rates from the ecb. Ecb goes to negative rates a second time. The bank of japan starts negative rates. Markets are not convinced. The equity markets are not convinced that negative rates are the salvation. You are right. They are being seen as a symptom of a problem on the growth side. , that was two or three weeks ago. What has happened over the next three days the last three days is different. You have been greased risks you have increased risks that are not correlated with possibilities. That is a different beast, a different ballgame. That requires a different way of looking at what the banks should do and so on. Manus this is what i want to get. Ubs was talking about recession in manufacturing. They say the markets are discounting something much more significant. You concur with that. Salman if you look at here , but servicesdata are doing fine. Itever, the problem is that the Financial Sector remains under pressure, we will have a recession. That is why i am a bit more worried. At least in the short term. Now the market is saying to Central Banks words do not matter. You have to come back and give us a way to price this risk. Manus intervention today from the bank of japan. Is it time for the central bank to do something outside the mandate and the times in which they meet. I think it is time for another unorthodox intervention. Has the flexwhich ability to do it is the ecb, not the fed. The fed started the hiking cycle. We are doing this in a tricky situation. However, the ecb will have to remind the market that we are thehere to that of financial system, so do not touch senior debt. Manus what do you make of this . Asis nowhere near as tragic 2011, but we are under pressure in terms of economic surprises. You would say you do not necessarily agree that things are that bad. Sectors should remain under pressure. But those sectors which are doing well, like the consumer side of things, they have come under a lot of pressure because of rising risk premium. That interconnection is the dangerous part. Not that they yields or Energy Sector is under pressure. Manus salman stays with us for a little bit more. Up next, it is the u. K. Defense secretary, Michael Fallon. He is set to join us as the gathering in munich comes up. Ith a tentative plan we will have more details after the break. Manus it is 7 16 in london. Lets get the bloomberg is this flash with Caroline Hyde. Caroline a profit in the Fourth Quarter as ernie at its Consumer Banking unit almost doubled. The company confirmed that it plans to pay a dividend in what will be his first payout since 2007. Three bankers have left Goldman Sachs after the u. S. Firm determined they had reached the they had breached internal guidelines. There was a potential violation on investments in the middle east. Boeing has become the subject of an sec accounting of these. Abuse. Investigators are looking into sales forecasts following a whistleblower complaint. Boeing fell almost 7 on the news to close at its lowest in more than two years. Both the airline and the sec declined comment. Russiathe u. S. And slling for a truce in syria civil war. It also demands the immediate delivery of humanitarian. Ssistance to besieged areas we are doing everything in the power of diplomacy to try to ring in and to this conflict. End to thisan conflict. In a way that represents a unified, nonsectarian, minorityprotecting, secular, whole state. Manus Michael Fallon was at the summit, where this was discussed. He joins me now from munich. Mr. Secretary, thank you for joining us. John kerry admitted that the ceasefire was ambitious and said that the real test would come when all parties would honor their commitment. How would you describe the settlement . But it iselcome, tentative. It needs to be implemented in full. The russians, in particular, the to stop bombing the moderate Syrian Opposition and need to ,elp lift the siege of aleppo where innocent civilians are being killed and the population is being driven out towards the turkish border. So it is welcome progress, but it needs to be implemented fully if we are to bring an end to the civil war and the suffering in syria. There is no reason why russia should not start respecting the ceasefire from today. Manus understanding is that russias bombing of aleppo is not included in this. Is that correct . Do you think the selective ceasefires are the most helpful way forward . , well, they are progress clearly. John kerry has done well to get everybody around the table to see the way through to a new settlement for syria. But you are right. Aleppo is not included. Russia needs to stop its bombing, particularly its bombing of innocent civilians, and attempt to terrorize the local population in the north of syria. It needs to stop putting refugees towards the turkish border. That needs to happen and that can happen today. Can i ask you why nato members such as the u. K. Have not demanded that . Did you demand that . Were you vocal . How was that reacted to . Give us some context. Nato has not been doing a negotiation. They have been meeting for the last couple of days to send more troops, more ships to patrol its own borders. We certainly welcome this agreement as a tentative step forward to a new settlement. We want to focus on taking the in northeastdaesh syria. We cannot do that properly while the civil war continues. We are calling on russia to implement the ceasefire immediately, to stop bombing, particularly the civilian population. 70 80 of the russian airstrikes have not been against the daesh terrorists at all. They have been against the civilian population. That has got to stop. Manus what makes you think that they will . Russia has not done anything else in the last 18 months that the west has her rested of them. That the west has requested of them. If they want to see a ceasefire and bring this war to an end, then they have got to stop their own airstrikes on the civilian population. We have seen hundreds being killed by this indiscriminate bombing from the air by russian planes and we are seeing hundreds of thousands starving or being pushed out of their towns and villages and driven up to the turkish border. That has to come to an end now thatussia has to recognize if it wants any settlement in syria, the war must come to an end. Manus i hear what you are saying and we understand the humanitarian opportunity that this provides. My question to you is, do you think that this tentative peace deal can stymie the exodus of refugees, this new wave of refugees that we understand is exiting syria . Is it a substantial step towards the venting further refugees . I hope so because the exodus of refugees from syria will not stop until the bombing stops. People are fleeing their towns and villages. They are seeing their daily life shattered by these airstrikes. That will not stop until the bombing stops and the pressure on turkey and refugees being pushed through turkey into the European Union. Until the civil war is brought to an end. We have the start of that process that john kerry and his colleagues have managed to get agreement on. I am calling on russia to stop its bombing immediately and help us bring this civil war to an end so that people can return to their homes and we can start rebuilding a modern syria. Manus saudi arabia and turkey have obviously been included in this. Backers the key rebel who suggested they were ready to go on to the ground. What you discussions, understand, are they hugely supportive of this . Do you think it is a tenuous agreement . Are they ready to go hard into syria . One of the most encouraging signs in the last couple of days is that the regional partners are ready to do more to help bring this civil war to an end. To commit more to the fight against the dais terrorists, which are the scourge of iraq and syria, but also to bring the civil war to an end and prepared Ground Troops if they are needed to help deliver the peace settlement on the ground. In iraq, that is up to the Iraqi Government the to invite them to assist. In syria, we need the war to and and we need a new political framework which will involve troops on the ground. I certainly welcome the commitments that the regional partners are making to bring this conflict to an end. Manus secretary of state for defense Michael Fallon. Thank you very much for joining us on bloomberg television. Lman back into the conversation. The conversation ive just had with the defense secretary is very telling in terms of the geopolitical issues. And the humanitarian consequences which we see on our screen every day. It has huge implications for europe. When you absorb this information, how do you think . Thing is thisrst seems to be the first concrete step into accepting and dealing with the problem. Is creatingsyria the course within the eu. The devil is in the implementation of it. Is. S it obviously, we were talking about the geography. There is a slight jump. I do want to get it. A dramatic move and turnaround in the price of oil this morning. I am not correlating that in any way with the syrian ceasefire, but there are reports overnight on a number of News Agencies that everybody is ready to cooperate. This is according to the uae oil minister. I think he was speaking to sky arabia. We have seen these reports before. Do you think this is triggering the move in oil overnight . Is thathink there time,low, for the first you are seeing that they are talking with the same language. A couple of months ago, they were quite open and said there is no cooperation. It seems like we are entering the paince zones where is now universal and that is forcing some kind of cooperation to come on the table. I am not convinced it will happen overnight or in the next two days. I think we are entering those level in prices where the stress is not just financial. It is operating stress and has geopolitical implications. Everybody has their issues. Thank you for joining me this morning. Strategist at lombard oda investment management. Thank you for joining us. In terms of the markets, oil is driving these markets. For a slight relief on the futures, a little bit higher. Gu welcome to on the move. Were counting down the european open. Another interesting night for the markets. Jonathan what an interesting couple of weeks already. Msci asiapacific index down 20 . The rout continues around the globe. About what isk happening in japan to the worst week for the nikkeis 2008. The best twoweek run for the yen since 2008. What will kuroda do . Does he need to stable the equity markets first . All of that will be discussed on this program. Jonathan