Anna welcome everyone to bloomberg daybreak our flagship program. Bank profit one point eight 9 billion euros ahead of the 1. 5 billion that had been estimated. We spent a lot of time with the other banks in the sector talking about whether it is in the u. S. , here in europe. It is an area where europe has underperformed. Thick revenue in the First Quarter jumping 32 . Helped by commodity performance according to the business. Activelyny says it is and omitting remediation plan as part of a settlement with u. S. Authorities. An update coming with their political connections in the United States. Up by 32 , that compares favorably compared to what we saw divert and. American banks where we are seeing an average of the top five, 15 increase in revenue in the First Quarter. Perhaps it will be a pleasant surprise. Just like many in the Banking Sector, particularly in the bank the french Banking Sector, people waiting for a second round of the french elections even though we saw a big relief rally monday on the end of the first round. A chart in terms here. The public money into french equities pacing ahead at a record. Tire highnch up tieup. At 801usted operating Million Euros operating operating. Them it isnews from the ceo will exit the business july 15 around a pro in regards to syrian payments to keep the business running. That should have knocked the confidence a little bit because this is a business which, of course, has ripped it out of the business. 600 Million Euros taken us in terms of operational facilities. Say upback program they to one billion euros in 20172018. A very comfortable operating after it be 801 Million Euros. The estimate is 787. Lets talk about the car sector. All six biggest carmakers in the u. S. Porting a reduction in the delivery. What does this mean for the economy . Manus if you look at european auto sales are at the record. Chinese sales are moderates. Do you read a great deal into what happens with the u. S. . This is the s p 500. You can see that divergence just over there. The question me about to ask ourselves is are the car sales a litmus test, the kerry in the consumer coal mine . Summary has to close the gap. The s p 500 if it will follow in syncopation as it has done for seven years would potentially. Rop by near 10 they saw growth in terms of their numbers. Correct some kind of pullback. What this means for plant production, a plant closes over happenedr, it has not recently but could that be back on the radar . Manus will talk about the broader assets are this morning here in europe. Australia down by 1. 1 . Iron or prices, copper futures also weaker. Chinese markets doing ok in the face of the apple disappointment. Australia market in is shut. Really coming under pressure. Manus you can see the iron or trading at a little bit low. Nasdaq futures, it is all about apple. Are you waiting until the new iphone eight comes up . That is the justification from the ceo as to why the numbers are missed. 58le dropped by 2 after million iphones were sold. That is the justification. Dropped quite significantly to the lowest in a month. Comments suggesting they are better than people have thought with lower oil prices. The uti up a little bit. Here is juliette. Juliette thank you. President trump has tweeted the government needs a good shuts down and september after congress agreed to a budget bill denying him his wish list. No money for his Mexican Border wall, a small cuts to the epa and full funding for plant heritage. Democrats called his threat sour and shameful. And his pick for investors say there may be a sanction with chinese companies. The Senate Foreign relations committee, recent actions by the north including another failed missile test has been able to convince china to take the situation much more seriously. There are other things they can do double medically and economically to send a clear signal that they as well of the United States and other countries in the world do not tolerate this expansion of Nuclear Technology and missiles by the north korean leadership. The Prime Minister has vowed she will not be pushed around in brexit talks with the European Union as the war of words with brussels escalates. Said Jeanclaude Juncker is learning she can be quite bloody difficult after a dinner meeting between the two. Today she will be a really bloody woman negotiating with the European Union. I must say i fear for this. Juliette 9 global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries you can find more stories on the bloomberg at top. A pretty quite a day for trade here in asia. Rest of the for the week. Hong kong is close to today. Soul closed as well. Thosex 200 really leaves declines in the region down by 1 . Iron or lower. Those banking stocks coming under pressure. Very fluctuating but we have seen a good again coming through in consumer stocks. Having a look at stocks in particular, and apple supplier backing that trend despite what we saw from apple. Tim cook the same people are waiting for the iphone eight. In singapore 6 substantially. Ahead of its consolidation saying it remains in a challenging environment and you have focus group down by 25 , the most since 2001 after it profits and jpmorgan downgraded the stock to neutral. Singapore banks are doing very well. You can see this reflected on this chart. We have been we have seen very solid moves, the white line reported yesterday. Week, will report next the overall singapore finance highs as ise 2016 the overall straight index. Boosted by thats return we have seen coming through from singapore banks. Manus thank you very much. We have had the earnings from the biggest banks that reported firstquarter and being estimates. As to buy a 20 increase and Corporate Banking revenues climbed 1. 4 in the we tell banking revenues. The bestou sometimes sometimes see is the ecowas, things grinding to a halt waiting. It seems that in france things continue and we will have to see how the elections unfold sunday. You have not seen hedging on the bond insurance . We have not seen anything that would lead to political uncertainty. There is political risk. An impact onve Interest Rates. How do you plan for that and what do you see in terms of longterm impact on Interest Rates . For the moment Interest Rates are low. What we do in that situation, we stay close to our clients, help them in the project. If you look at firstquarter results over french retail you can see loans of 7 , deposits up 12 . If that trend will continue that would immediately help to offset overtime low Interest Rate. The Interest Rates would pick up and that would further boost the contribution. There with their numbers. The Business Community in france making its opinion known. Of 13 Companies Said that marine le pens policies would it really harm the country. They have openly supported Emmanuel Macron breaking from eight reluctance to speak probably on politics. Manus four days ago, the polls leadolding with the macron of 6040. The head of Market Strategy, he joins us now. The countdown to coronation, theresa mays coronation later. It looks like macron will. The ceos are breaking with tradition. Momentum behind macron. That is what we expected. Ofple shifts away from sort the more radical views of the left and right we saw a melenchon and le pen and go towards a centrist normal policy. Pretty much what we expected. Obviously the risk is extremely scary for the markets. I think everything we are seeing right now, micron is going to win heavily in the markets on monday morning. We will make up any market friendly type of the of. In the first round there was no hidden or shut about that came out of nowhere that surprised us. The numbers were really much in line. Higher thanked out expected. It was in his favor more than anything else. It is will have a difficult time justifying a le pen win. Anna i invited of the french at it which i wont read in france. It involves their skins. It roughly translates to dont count your chickens before they had. This chart says you are in good company. This is about allocating to french stocks. Seeing brisk inflows last week and this is only after round one. The recent history is littered with unexpected results , be italian referendum, brexit, trump, clearly the conspiracists are coming out and saying what about the Trump Victory surprise . You have to price in that there is some sort of probability. Extraordinary things happens if Financial Markets but we do not expect it at this time because we did not see anything in around one. Manus the populist touch. Is aism it turns out cracker for anybody in the markets. To what extent does this carry through to the market . Most the 21st centurys recognized populist leaders three years after the election, look like that is of by 155. Populism is a winner all around. That is one of the beauties of populism. It does excite people. Exactly. It is not such a market negative or negative growth story as people like to make it sound. We dont expect it to be negative. We saw trumps populist views and the reversal we saw in the analysts that came on prior to the Trump Victory that were expecting a collapse in the economy and equities and a risk aversion to a complete reversal of where we are today. That chart says just because le pen wins does not necessarily mean it is over for france and the european economy. Not even remotely. Saying, what we saw with micron, we expect him to win handily. Anna thank you very much. He stays with us here on daybreak europe. Highlights for your day. The gdp hits the tape at 10 00 a. M. U. K. Time. The fed policy decision has 7 00 p. M. U. K. Time. Earnings from facebook and tesla. The fed the sites, the u. S. Central bank sets rates the day investors await clues on the path and the Balance Sheets. Your roundup comes next. This is bloomberg. Anna welcome back. It Rate Decision from the u. S. Central bank today while markets are skeptical of any action on rates today. Investors will look for clear see not just on the cap but the fed plan to run off the Balance Sheet manus lets pretend kathleen. Good to see you, lets start it off with risks. Signal, what do you think the signaling is going to be in terms of the concerns . We know the signaling will be subtle but we know because it is all about the feds policy statement. Those words that they so carefully choose are going to carry potentially big weights. They are not expected to really signal they are deviating from the baseline. Another rate hike in june and at least one more later in the year. No press conference, another reason why no move expected. Everyone is betting on june. Step back. Look at the big picture. The feds dual mandate. What the twists and turns are in the economy we have employment down to 4. 5 . Inflation not quite at its 2 market but close enough for us to continue to move in that direction. Lets step back from the big picture, lets get back to the last Inflation Report out two days ago. You will see the inflation is number the fed borrows, further away from the 2 . A headline at 1. 8. The headline was just above just above 2. 1 . Why is the fed going to look past all of this . First quarter gb just ubs 017. Consumer spending at 0. 3. That is a transitional weakness in the First Quarter bounceback and the Second Quarter inflation. Look at the longterm, and you are going to see that the economy picks up and so does inflation. Bottom line, the odds of the rate hike in june are 70 . Nothing in may. Watching the policy statement is what is going to count. Thank you very much. One i as always on the fed, we will be speaking to the former fed chairman. We will be bringing the former fed germans take on where we are right now. He is still with us here on daybreak europe. What are your thoughts on the fed . How many do we get from here . Fed, three andke 2017, 5050. We are on the less rate hikes, a shallow curve. The numbers are not coming in. We saw a different from the upward rise in trends and it will make it difficult for the fed to step on the brakes. As they said earlier, the labor market in the u. S. Is strengthening well. On limits down to 4. 5. Earnings growth picking up. Participation ratio improving as well. The fed is going to look at that and say that is really important. Things are tight so we need to client base down. One in june, one in september and we are done for 2017. A battle to have got to eight, do not be fooled. The fed is more of a duck than a decoy. More duck them decoy. Basically you have a calm demeanor at this meeting. There is a vigorous paddling going on underneath. What they really want is to zero in on a conference of strategy to reduce the size of alex sheets. Develop balance between hike versus Balance Sheet. If there is anyone flying think i think that is what should market. If they shift away from Interest Rates and more toward Balance Sheet management that is a big thing for the markets especially fx traders who are expecting higher Interest Rates and the effect on the u. S. Dollar is one of the prime year primary reason for positioning in q2. Thehey shift, that means strong dollar positioning is going to be less likely. That is a big piece for fx traders. Anything they need to do is balance the softness that we have seen in a q1 and start saying this is transitory, we have conference confidence in the economy. Signaling they have faith in what is happening in the u. S. From a volatile standpoint is going to be extremely important. We will be watching the jobs report friday. How strongly positioned in the dollar is the markets . Thel they respond . Positioning has come off significantly. There was a buildup for three or four hikes early in the year. It has come down to 23 on the upside. People have pulled off the dollar positions on the iron and level. There is positioning or a possibility that there is positioning in the u. S. Dollar. If the fed comes out and says we have faith in you the u. S. Economy. U. S. Interest rates as the primary tool for managing monetary policy. Watch the dollar pop. We are expecting for the next few months, the dollar to start gaining the upper hand within the g10. What he think that is most . Obviously the sensitivity on the short end of the curve, dollaryen is prone for an excitement. One of our key movers. Obviously the fed has taken a poll. The treasury has gone out into the market and talked about what you would accept. If if they knew or what happened with the rest of the Central Banks around the world able to go to the 4050 year. Is that going to be important . This is a 10 year Government Bond yield which is inextricably linked to the dollar. How big a piece of news do you think that might be . From our positioning we dont think it will be particularly revolutionary. One of the most liquid most traded understood instruments out there. I do not think that is going to shift overnight because the ad duration to the curve. To me it is not going to really affect our forecasting. The underlying strength of the u. S. Economy, we started the program talking about this. Carmakersbiggest report delivery declines in april. We are not experts in the auto sector but you are watching this from a picture. What does it tell you about the u. S. Economy . Do you get worried or do you think there are big transitions going on . I do not think this time is different. What we are seeing is a natural correction and a very strong rally when it comes to the consumer as well as the auto sales. We think the u. S. Economy is externally healthy. The reliance on a strong labor market continues to boost sentiment. We see it in the surveys. We see it in the confidence. Not seen it so much any hard data. We saw manufacturing come up. We think it is a temporary cyclical pullback rather than a shift in the health of the u. S. For is a fundamental driver positioning in front of the feds and such. Head of Market Strategy. Manus bloomberg had a conversation with the secretary commerce secretary. 6 28 p. M. Tories are seen at making gains in local those tomorrow. How good it will they be for the general election . Things be talking all exit. Brexit. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Ways wins. Especially in my business. With slow internet from the phone company, you cant keep up. Youre stuck, watching spinning wheels and progress bars until someone else scoops your story. Switch to comcast business. With highspeed internet up to 10 gigabits per second. You wouldnt pick a slow race car. Then why settle for slow internet . Comcast business. Built for speed. Built for business. Matt it is 2 30 in the afternoon. Us guest this morning tells tolaryen could make it 1. 16. Good morning. I start with equities in asia we are seeing equity markets closed in japan and south korea and hong kong. Markets really generally marking time before we bit we get that decision from the fed as you look at the dollar index. Interesting things happening below the surface. This is the msci asia index excluding japan and the book value has risen to a twoyear high. Interesting things looking at valuations. In the chinese equity space we are seeing chinese equity decline but also Stock Traders have become the most defensive in eight years. Cfi 300 staples index it is outperforming the broader csi 300. It hit its highest since 2013 in recent days. About the crackdown on leverage trade by regulated but also doubt about growth. We are also looking at dollaryen, we could see it go after the fed decision. Four days of dollar gains, it is pretty flat today. 112. 08. Talking about how it is sitting on the 112 line. It has broken above the 55 date moving average but whether tuesday drops in a treasury yields is a precursor to another decline. Looking at commodities we are seeing oil rebounded from a sixweek low. 2016,ing an 11 surge in the Commodity Index more broadly has slipped since inauguration. Every sector except precious metal showing decline. Red a blend of technical indicators showing negative technical indicators flashing for the index. Numbers are getting First Quarter net profits 10. 2 billion. That is above the estimate of 9. 0 3 billion. This is danish krone of course. And very strong beating, the highest of those estimates. They see full gear ebit growth at plus 4 . On your bloomberg, on your mobile, talking about the cover story this morning. This is what is there. It is the logo with three arrows, were talking about apple. Apple traded lower after missing revenue and sales productions. Growth prospects beyond the iphone eight refresh according to the bloomberg analysis. Never a dull moment. That jpmorgan. She said that about herself. It was a colleague of hers but she quoted it herself. Expandingkers are their offices in dublin, franklin, and luxembourg as it prepares for the u. K. To lose easy access to the Single Market according to the Investment Banking head. Scene, leasing and on deutsche bank, the biggest shareholder. Boostedese conglomerate its state to 10 from 4. 8 marking the second raised since february. We will see if it stands as under 10. That can be something that john will make interesting. Lets talk about the u. K. Prime minister theresa may and the escalation in terms of war of words with the eu. She said she will not be pushed around. Head of tomorrows local those across many areas of england, scotland and wales. The run up to the june general election. The programe you on this morning. What we looking for tomorrow . Where are people voting and what are they voting about . Are voting in local councils in rural areas across new england. All of scotland, all of wales. The most interesting contests are the new regional mayor elections being held in places like manchester and West Midlands. The contest in West Midlands is particularly interesting. West midlands is a labor voting area but the conservative lewis managinghn director has been running a highprofile campaign with the backing of theresa may. Suggestions are that he must just he much he just might swing through matt those have been moving to use yesterday. These are the local elections. How will the conservatives do and to what extent can they extrapolate from local international . Analysis tends to indicate they are going to make gains. They will gain hundreds of seats in the local councils. There are more than 2000 seats up for election. The question is whether it is going to be 100, a good results, 400, as some people have suggested which would be a fantastic result for theresa may. It is difficult to extrapolate this because people are not always voting about brexit or scottish independence. They may be voting about parking restrictions or school around the corner. We can see the general direction of travel from tomorrows results. The editor a buckle. Bloomberg caught up with a former eu trade commissioner and peter mandelson. The impact on the british economy would be gradual. I do not believe that there is going to be some overnight disinvestment from the u. K. Economy. What youre going to see is a steady incremental cumulative effect over very many years and the price that britain pays will be in the future opportunities of investments and growth. We will not have reached the point of no return form of businesses but we will be perilously near that point. The price that britain will pay is in future investment opportunities. That is the longterm negative and Peter Mendelson campaigning against brexit as we know it. Pounds,ve view on the we try to put things in a historical perspective. We have tried shortterm forecasts, soandso said Something Else and we were jumping up the window. The u. K. Have always had a relationship up and down. We dont see that changing just because the rules of engagement have changed. We do believe that will be a relationship and that relationship will allow for a softer easier brexit. We are moving towards prenegotiation. The rhetoric is picking up and that is causing volatility. At the end we think the outcome will be softer. You some more confidence than Jeanclaude Juncker. We had a little bit in terms of my acquisition. The exact term was i was insane. I might have said diluted. It would be unfair if i called you insane. I get it a lot from my side. Are you surprised given the war of words, the more recent war of words. You surprised sterling held up . Pmis will be a fading history versus the uncut. Are you surprised we have held reasonably well . There was an expectation that brexit would trigger this consumer contraction. Savings would rampup and consumer spending. We have not send we have not seen that. The optimism is quite strong. There was not a spillover. We are seeing manufacturing pickup. Part of it is because of the depreciation of the sterling. Things are not as gloomy as people made it sounds and we will continue on that path until we see something significantly different. Make an. S. , not to analogy but trump goes into negotiations very hard. We have seen that. He puts all of the cards on the table, demand something and then retracts it. Maybe it is a more european dignified u. K. Way of a similar deal strategy but it is the same sort of thing. They ramp up the rhetoric and pull back slowly. Political negotiations looking less dramatic than 50 years ago. We are getting an insight in a different way. Media has changed very much. What is your perception of the financial a list to this . I ask this because the London Stock Exchange has jumped into euro clearing. What are your thoughts on whether the eu is able to put a barrier and say it has to happen here . They can do it. The one weakness in my kinder gentler brexit is europe will go after the financial sector. Of meat that is out there and they can grab it and it hurts. I think they will continue to move in that direction. I think a lot of the rhetoric we are hearing from the u. K. , i theseis a little are very smart people. I do not think they make decisions without all the information. Saying they will relocate 5000 jobs, i think it is a premature at this point. What did we learn from the greek crisis and what should theresa may learned from the europeans . Anna staying with us here on different europe. Lets talk about technology. Apple reported falling sales reporting blockbuster new features in the next features of the device. Manus Bloomberg Technology reporter has more. Reported earnings beaten on earnings per share. They missed on revenue and forecast revenue and iphone sales. Apple has a really successful year in terms of stock. It jumped 6 before today, far outperforming the 13 gain in the nasdaq. Some analysts looking for weakness in iphone sales. Possibly an opportunity to capitalize on the gains they have made this year and take profits. We sell that immediately after the numbers were released. The stock taking a hit, down a few percent. We will see how that pans out tomorrow and whether that trend continues. What is interesting here is the main thing people are looking forward to is the iphone eight. Likely to be released later this year. The apple executors on the court today saying that has encouraged customers to hold off from buying the current product and they even acknowledge that leaks in terms of reporting on the iphone eight have encouraged delays and hold off people not buying the iphone 7. What is quite interesting is the iphone 7 was not that significant an upgrade to the success. It occupied the same form factor. Differences in the camera and the processing speed but otherwise it was not a significant upgrade to the phone. That could change. Apple has typically changed the design every two years. Theyve done it every three years. That is the particularly vulnerable to people not wanting to buy the newest phone and holding off for the next one because they are far more well that the aware that the next phone is a significant upgrade. They really hope it will create a super cycle, reinvigorate apple sales. They will be looking to see quite housing and get the upgrade is. Whether the company can deliver on that. We will be watching what happens in u. S. Equities on that story of course. If youre a bloomberg customer you can watch the tv show. You can also follow the charts in the function. Everything we are discussing with our guest on the righthand side. You can get in touch with the producers and ask guests questions. Breaking up is so hard to do but not too hard for donald trump as he considers splitting up the banks. Find out what tom barrett has to say on the issue. This is bloomberg. Juliette bankruptcy can fileedings after voters the menstruation. During a Cabinet Meeting last night the Italian Government approved the specialinterest ration and appointed administrators. The survival of the flag carrier after it failed to send off budget. Jpmorgan plans to move hundreds of morgan londonbased bakers londonbased bankers. It comes as they prepare for the u. K. To lose easy access to be Single Market after brexit. Ceo warnseferendum u. K. In one ease that as many as 4000 could be relocated in the event of brexit. Thank you very much. Lets talk about the president of the United States. Donald trump has said he is actively contributing considering breaking up wall street banks and reviving the glasssteagall act. Sitting down with a trump supporter and tom derek. He asked if he has had conversations about breaking up the banks. I think the president has been looking at that for a long time. Respects, just looking as we talk about what the glasssteagall does. Is it wise to have investment inking and banking together or is it more prudent to separate conservative of investments by federally insured depository and scale the marketing. I think he is seeking advice from his advisers and make a good decision. What advice would you give . As a Bank Board Director which i have been for the last 15 years, i am not sure that breaking up the big banks is necessarily the answer. I absolutely do agree that separating the functions of banking Investment Banking is a good thing. Proprietary trading and sensible investment by a federally insured is probably not a great thing. Ive got the best person for him to concert with that consult with, Steve Mnuchin will do a good job. Seen,ay as you may have the president tweeted about the need afford the senate to get rid of the filibuster rule not just for Supreme Court justices but so that tax cuts can be passed with a simple majority of senators. Does that make sense to you . You know why that rule is there. That is there to prevent things like the budget from becoming fewer pieces of politics. What i can tell you is things that sometimes are interpreted in his tweets to be offthecuff are not. He thought through what he is saying. Underneath that the message is saying if we have an impediment to progress we have to attack it in one or two ways. He is being provocative and getting to a resolution. ,hether it is right or wrong this consensus among the congressional influences is becoming more fervent. In the past we would look at things we have said and say that seems to be somewhat strong. Impediments that you described, they are there for a reason. Those are the checks and balances into the american anytical system to prevent one party who may have control over multiple branches of government from going too far. Assume this worked pretty well until now. I am not sure your last statement is correct. A lot of people would disagree that that serves any function. Im talking about the breath of american history. The breath is not where we are asked. We are at this moment. The president has his hands across all of the pieces at the moment. Some of the things that have been taken for granted need to be challenged. This is one of them. He will make the right decision. All of those things needs to be reexamined. Consensus among competing factions does not serve anybody well. Sitting down with tom derek at the conference. Im so excited to talk about cats. Peter rosenberg still with us. We wanted to transition from that conversation about the Banking Sector and working on trade. The area of trade that the president has significant action your laterally unilaterally. President trump has decided to blame canada, that is clearly evident in what we are seeing in the Canadian Dollar and how it has underperformed the main it currencies. It is getting punished more than it should. This idea of gary and lumber has been a simmering issue in the u. S. For decades. Im sure it came across his desk and he stamped it and moved on. I do not think it is a sign of substantial increase in a trade war between the u. S. I think this is an over exaggeration for an economy that is, the pmi is not week. Oil prices are low but it is not devastating. Exaggeratinge are this particular issue to say ok, this will be the next mexico situation. I think one of the opportunities might be within the Canadian Dollar. Loonievely piece, the has absolutely no friends. The market is adding. Where do you think the dollar will be the strongest, you have the Ability Committee towards market proclivities against the yen. There is a lot of hype and rhetoric when on and people are reacting to it frequently. We do not think that traders need to react to every comments. What we see is a global backdrop that is significantly supported. Low Interest Rates, easy financial conditions, we are seeing traded pickup. We are seeing pullback in a manufacturing but things are going well. Olatility is also coming down things are very good for emerging markets and they should continue to pick up. We suspect japanese it investors with the effectiveness of the boj, are going to start fleeing and looking at Interest Rate traits. Us toe trump is making the. You said he threatens those. If you can see through the freudian slip. If you can see through the noise you have great opportunity. You realize trump is renegotiating nafta is not the end of canada or mexico. If you see through the noise and see macro conditions are right you have mexico, brazil, indonesia, india, all places with strong domestic demand, with good export economies that will benefit for the current draft. Anna we will see how they respond with the Balance Sheet as the fed. Head of Market Strategy at swiss code joins us for the past hour. Manus a slew of earnings for you but the numbers at the top the squeeze consumer is the essence of that story. We will be speaking with the cfo later on around 7 20 a. M. U. K. Stocks jesse smith lower. Tom, we will u. K. Be talking about brexit and what impact is happening having on businesses in the u. K. That is up next. Manus b b curve reports the bank beats estimates. At 4. 4 . Anna the tech giant sold fewer iphones last quarter as consumers await the next device. Apple shares down. Manus waiting for yellen. Traders looked for signals on what is to come from the federal reserve. Mass you are welcome to bloomberg deadly daybreak. I am manus cranny. Anna were waiting for it numbers to come from a number of companies around the u. K. They reported thirdquarter comparable sales up by 4 , Revenue Growth at 1. 3 and operating margin at 7. 3 . They say they are cautious on that second half of the year. We will have a few conversations about the u. K. Consumer overcoming days when and the u. K. Consumer is front and center. Manus fullyear adjusted profit, of 581 Million Pounds, pretty much bang in line with the range. 579 beat the consensus at. 6. The dividend is 6. 6 pence per share if you are a shareholder. Consumer infor the the u. K. Which is the drop in sterling, the rising inflation. The dissipation is in our is what is in our pocket. There is a desire to push all of a result ofikes as sterlings drop onto the u. K. Consumer. Hat is a bang and line number we will be speaking with the cfo a little bit later on. Joining anna and myself at 7 20 a. M. This morning to break down the numbers and talk about the great brexit squeeze. Getting numbers from sage group. We will speak to management. Giving us various metrics for the first half of that business. All of that coming up shortly. Manus lets talk about the futures, we got a little bit of a dip. There is the apple hangover. We did not buy enough iphones, were waiting for the 10th anniversary. I would like a new battery if anyone is listening. Futures are down as yet been london. You have that commodity thing coming through as well, iron or is lower. Oil got a bit of a bounce. The little bit of a waiver in terms of auto sales in the u. S. And missing the numbers. Anna we will see how that plays out in terms of sentiment among the u. S. Economy. With a make it over the summer months, that would be an interesting one waiting for the political environment. The asx 200, we put this in your because many in the asian equities session, many indices theclosed or many of markets are closed for the holidays. The s p and asx down by the time of close in sydney. Picking up some ground in the last hour of trade. Off ore is taking the edge trading. And the tech heavy index often does suffer as a result of tech business elsewhere. Manus undecided in terms of the bond market. Futures down, they have managed to bounce. We are going to the opening rotation. French ones are flat. As we see a wave of money, an unprecedented level of money flowing into french equities this week at a pace i do not think we have ever seen in history. You are saying that shift in terms of that bond market. Lets talk about one of the companies that has reported this morning. Companyis is the light reporting. Camcorder earnings. Shares rose after it out forth the expectations and raised its outlook for 2017. Manus we are joined by the companys cfo. Great to see you this morning. You see your Forward Guidance to market in terms of at the ebitda. Peers with american a little bit of a softer market. We were talking about the u. S. Auto sales coming under pressure. How are you seeing sales generally in pricing . Guest good morning. Thanks for having me. ,e had a Strong Quarter continuing the momentum we have created in the First Quarter with 10 comparable growth and of 7 . North we after guidance with the revenue and eps guidance up to what we said earlier. What we saw in the Second Quarter was still a very Strong Demand for our business in asiapacific. And interestingly also for us the business picked up, particularly the led business for the automotive business. We had some shadow in the theter and the u. S. Where markets slow down compared to the First Quarter we had. That is our december quarter. We saw some some of our aftermarket customers have to work through and we saw selloff of a lot of small companies. We saw some uncertainties there and decisions being postponed and uncertainties related to tax reform in the u. S. That is the operating environment now. Anna what is the outlook for automotive in the u. S. And china, some people talking about a fallback. Expectation around auto . Against the tip the goal second half of our Business Year is weaker than the first because of the seasonality we have. In this business. We have seen a bit of a slowdown on the momentum we had in china in the Second Quarter because of the subsidies that were discussed in the First Quarter. The expectations are that the u. S. Will slow down and we see that happening right now. China will still be strong, it is forecast to grow somewhere between 6 and 8 and that has not changed. Thes lets talk about Lighting Solutions business, this is one of the areas where Revenue Growth has been under pressure. 290 job cuts announced a little bit earlier in april. What else are you going to have to do, have you any other plans in terms of improving the numbers in that division . Guest we had a disappointing quarter for that division, that is true. We saw some good numbers for the business in europe, the u. S. Business was affected by the things i explained earlier. Wereeasures we took announced earlier and they are part of a plan to get this business back to 8 profitability next are growing it again. This is an important step. We also have seen overhead cross in that business and we need to relax the growth for that business in the u. S. Anna we talked about pricing generally. Can you reference the pricing environment in the u. K. , a lot of people wondering to what putnt lebanese are able to up prices to compensate for the weakness in the pound. I asked Philips Lighting and they said they are not able to or have not put up prices. Have you put up prices, do you intend to . We are nole longer playing in the same arena as Philips Lighting is doing. Inhave very Small Business the u. K. So i do not think that is a very meaningful market for us at this time so i cannot really comment on that. Lets talk about the business areas where you are ramping up production. Can you give us an update in terms of any further ramp up production in malaysia . Ramp up thatn to facility for production in the octobernovember timeframe as we said before. We are installing that equipment and training engineers and other facilities. We are increasing our capacity and germany. Productsy our infrared that go into vehicles, smartphones, the demand is very strong. Assist the driver with the thomas driving. Security unlock by your iris, iris scans. That is coming that is Strong Demand helping us increase capacity elsewhere in the world, not just in malaysia. Anna thank you for being on the program. About sages talk group, they reported firsthalf grout earnings. 840 Million Pounds with an interim dividend of five point 62 pence per share. A nice set of numbers, you have a great breadth around the world. Are encouraged by what we see now. Our customers are the small to medium businesses. We are seeing the move and invest in their businesses in cloud, Mobility Solutions and Artificial Intelligence and that is reflected in one of the data points of 31 growth in subscriptions. The final point with seven out of nine geographies around the world which contribute to 95 of our revenue is growing faster. It is positive. Anna youre seeing small to mid side a size businesses investing. Teams ashe management having the confidence to invest. Yes. A lot of Small Business around the u. K. From the north of england and scotland got up at 5 00 this morning and carried on and they did the same on june 24. There is a the folks are ofnding on imports in terms core production having higher in court higher costs because of the currency. Ceo, they this by a never had such a strong order book. The currency advancing 50 . Are lickingustomers their lips seriously. In importer having a higher cost space. Manus there is a great deal of hype, expectation as we go back in time. We will read history in terms of correlation, tweets and confidence. What is going on there . We have the largest entrepreneurs conference next week. The pulse of the u. S. Economy is determined by the business people, they get two thirds of the jobs created by small and medium businesses. Manus are what you are saying as a cfo, are you prepared to invest more exposure in the u. S. Or are you hesitant . Guest the realities around the is that there is political noise across many different issues. But for our Investment Decisions the u. K. Is a significant market, it is 30 of our revenue and we will continue to invest. It is a great economy and we are seeing a lot of small and medium is mrs. Particularly in the cloud and some of the mobility situations. Anna you mentioned the u. K. Is biggest u. S. As the Software Development company. Many ask why there has not been interest in buying you, some American Business with deep pockets have not been knocking at the door. What are the prospects, do you see yourselves standalone, do you see yourself being interested in falling in with a bigger ship . Guest we announced a couple of our positions in the last half year. Growth, ors about dominantly organically and supplementing that with acquisitions. That is where we spend all our time. Manus what are you worrying about in terms of the noise of brexit, do you think that you are going to have trouble bill gates said i like what the Prime Minister has done. Our you secure in the future or do you have a real hankering doubt about the ramifications of brexit potentially for you . For the tech industry, this great cityondon, a and a huge talent base. There are more developers here than there are in cities like new york. We have a strong base in the northeast with the largest privatesector employer. I think we see the u. K. s prospects still very positive. Anna youre not worried about immigration and access to talent. I would love to fish in a eager pond, i would like to get chinese, indian, and american talent. Who knows what the future will hold . Businesses will carry on as they have carried on in the last nine months. Particularly the small and medium businesses. We are effectively their champion, theyre focused on the growth of their business. Anna good to speak to you. The sage ceo. Manus just delivering numbers, we will have that conversation breaking this down. Pound eba 160 million itda and they plan more stores. We will have that conversation shortly. Anna this is bloomberg daybreak europe. Are copinghat they with the brexit squeeze. Joining us from the London Stock Exchange, kevin obyrne joins us. I want to start by talking about pricing. You talked about the uncertainty around pricing was morning. Tell us where you see pricing developing from here, what are you assuming . Guest it is difficult to predict the future, is that question mark we have been working very hard over the last number of years particularly since the brexit vote to keep prices under control for our customers and reduce prices were we can and a challenging market. I think what we are seeing when you look across the marketplace data, that was issued yesterday, we have seen some inflation and food although last month that deflation decreased. It is a dynamic situation. That is a good morning to you. You have seen some reprieve in sterling since the election was called a couple of weeks ago. Where is the capitulation. 4 capitulation for sainsburys . Or to move more aggressively on pricing, what is the capitulation point . Guest there is not really one. When we are faced with the potential increase in cost that may result because of currency changes, what we have to do is work closely with our suppliers and we have to look at our supply base, we have where do we take costs out of our organization and our suppliers organization. Suppliers haved done a remarkable job to work on that since we can endeavor to keep prices as low as possible at this time. There is unfortunately not one simple answer. It is lot of hard yards and hard work. Anna what is your big concern brexit . Youre working with your suppliers to come to agreements on certain matters. Are you pushing for transition arrangement, is that the most important thing for your sector . Guest uncertainty in general is not great for business. Uncertainty is not great for our consumer. Less uncertainty is good but all workn do at sainsburys is closely with our suppliers to endeavor to run our business as well as possible for consumers. What matters to our consumers in our stores is that there is great availability and the prices are as low as we can manage. We have to play with what is in front of us, less uncertainty would be welcome. In the newsalked releases about 500 Million Pounds, half a billion pounds worth of cost savings to come over the next three years through 2018, 2019. Where did they come from, where did the reality of the costs come from, do the come from Human Resource side or from backoffice . Guest they inevitably come from everywhere in a business of our size, we have 195,000 employees and 25 billion in sales. What we are trying to do over the next three years is see how can we sympathize the simplify the business more. Ours,arge business like complexity creeps in over the years. The focus is on simplification at every level in the stores and our supply chain and warehousing and in our head office. Anna you do not want to much uncertainty in the business which we understand. In terms of a more specific message, what is the message that you want to give them, what is the priority, is it around the transition deal, is it around a future trade relationship, is it around immigration, what is the priority . Prioritieso not have for the government on that basis. It is helpful to have a stable government and helpful to have some clarity of where we go forward. We do understand this is a complex situation, the government needs to manage it as best they can. Our job is to focus in our business and what we can do daytoday. That is our main focus working closely with our suppliers, working closely with our colleagues and to run the business is missed we can. If you look at the last 12 months, who would have predicted what happened and then who would have predicted how are stable and resilient our business has , and we are time delighted in the last 12 months despite our challenges but we have had more customers coming into our stores in a challenging market. Manus a great deal has been written about inflation and squeeze on real met wages. Is there any change on what we do when we walk into your stores ands in terms of the weekly shop . Has it begun to show through a squeeze on behavior . Guest there has been a trend, all of us have changed our shopping habits. There is a trend where people are shopping more often and buying less. Average baskets have been decreasing across the industrys as well as sainsburys. If you look at the prices in our stores today, they are cheaper than they were two years ago. Up until now the last couple of years to my as you will know, wages have been growing. There is more uncertainty Going Forward which is what we came to in the announcement and people are predicting that real wages will get squeezed and we will have to work harder in that market to ensure that we keep those customers coming, the twice 6 million customers coming through our doors. You mentioned you are accelerating plans to open 250 stores. What exactly does the Digital Store bring to the mix . Thet we are pleased with argos acquisition. In the six months since the acquisition we have had strong like for likes. On the back of that we made the decision to accelerate putting argos stores inside sainsburys stores. Upload onclose the argo stores. By accelerating it, we will pull forward the 160 Million Pounds of synergies we commit to and we will deliver those six months early. Is a good story on argos argos all around. Manus talk about staffing. It is a balance between what you and out of the store and the consequences that had. Talk to me about your staffing consequencest the in terms of immigration and the concern that might have in terms of your staffing issue. Guest the most important element of the sainsburys offer is the offer in our stores which is led by our frontline colleagues on every measure. We have market Beating Customer Service in our stores and the execution across such a large estate is fantastic. As we face into challenging markets, one of the key things we have to balance is ensuring we retain the Frontline Service and thattomers value it is exceptional and we simple five the business and make it more economic. It is a challenge. Excuse me. Across anna thank you so much for your time. Kevin obyrne. The ceo of sainsburyss. Have the interviews throughout the day on bloomberg television. We have the former fed chairman, ben bernanke at 5 20 a. M. U. K. Time. Guy wednesday morning, good morning. Welcome to bloomberg markets. This is the european open. The first trade of the cash session coming out. I am guy johnson. What are we watching . Apple says customers are waiting for the next iphone upgrade. Is simply an income stock now. The market downgraded expectations of fed action. Frances top