Listening . We are going to speak to the banks chief global strategist, peter oppenheimer. Matt where a halfhour away from the european open. Take a look at where we see pictures we are a halfhour away from the european open. Take a look at where we see futures trading. As today, although today, the dax is underperforming. We will see what happens in the cash market. Take a look at bunds. I have a threeday trade up here. You can to the yield over the well, yesterday was a big drop. We dropped at one point, five basis points. When youre only looking at 45, there is a pretty big loss. You see an unchanged trade but really coming down. Just barely inching above that today. A lot of pressure on yields and a lot of pressure on the euro. Guy absolutely good yesterday, a risk obsession that was driven by north korea. You saw some the Technology Stocks getting battered. Today we wondered whether that is going to reverse. Janet yellen speaks later on. We have seen the dollar bounceback as we have seen european liquidity stocks coming into the market at what are we looking at . Overnight, in terms of fx trading, vrable bounced back a little bit. The ruble bounced back a little bit. The yen is treading higher, up by. 2 . The election story factors in their. Factors in there. Lets spend that off and talk about what else is going on, the commodity story is very interesting. You have the kurdish story in the oil market. You have what is happening in. 7 . R which is up by the number Commodity Index is trading up. The Bloomberg Monte index is trading up. Keep an i on what is happening with oil, the geopolitical story. N their in there a lot of people saying the curve is wrong when it comes to the oil market right now. Lets get a Bloomberg Business flash update with juliette saly. Juliette the us has discussed for a five ways to deal with north korea according to h. R. Mcmaster. He said some of the choices are uglier than others. While mcmaster says the threats of pyongyang is much further advanced than anticipated, officials dismissed ri yong hos comments. The bank of greeks bank of greece plans to start determining whether they will need fresh capital before the end of the bailout program. The results of the test may be ready in early may. That comes as mario draghi said yesterday the single supervisory mechanism may frontload stress tests. Holddent trump is set to dinner guest in washington that he expects the tax reform bill will pass next month pretty didnt offer any specifics on the bill but the schedule is seen as aggressive. Both chambers will have to adopt identical budget resolutions before the house can act on tax legislation. The president of the Federal Reserve bank of minneapolis has back janet yellen for a second term as the fed chair. His comments come as resident donald trump continues to wake you he will nominate for february of next year. Of think janet yellen is the next one job i think janet yellen is doing an excellent job. I cannot think of anybody who is better equipped to leave the Federal Reserve over the next four years better than her. She is a rare economists with excellent leadership skills. Juliette in iraq, millions of kurds have voted in a referendum on independence. Felt. Percussions will be more than 30 million kurds dispersed across the border between syria, iran and turkey. Brent crude climbed to a twoyear high. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. This is bloomberg. Guy. Matt. The mario draghi says European Central bank will keep as much stimulus as needed when policymakers decide to add just there 2. 3 trillion euro bond buying program. Speaking in brussels, the ecb president 22 uncertainty but the mediumterm outlook for inflation as he presented an upbeat picture. Our Monetary Policy has one mandate which is to ensure price stability. It is defined as an inflation rate which is close are below 2 . Today that means we are not there. Matt joining us is christian nolting. Christian, literally nothing christian, literally nothing surprising there from mario draghi. Seems to be all by the book. That is what should expect from a central bank president. Will we get any curveballs echo just curveballs . Are they going to do the perfect job of bringing no news to the Mark Christian scioscia blanks news to the market . Say jockeyedwould mark christi heed column in next meeting is saying what he is doing is tapering. I dont expect him to give us a surprise that the market reacts unexpectedly. Matt we see a little bit of pressure on the euro due to german elections. Socgen season going down to 117 in the nearterm. Does that help draghi out . Christian if you think through the weaker currency, it is better for inflation on the other side of the super euro this year was bringing down the inflation rate. A weaker currency certainly helps for the ecb to start tapering and exercise the tapering idea. Quite heavy with the euro result. Guy do you think december is going to be on . What is the fed going to do that go going to do . Christian i think the markets always underestimates central bankers to the upside and downside so i think the fed is moving in december. We probably get two more rate hikes next year. The Balance Sheet reduction is similar to a rate hike condition. If we get tax cuts come through this week, the president is going to talk about it tomorrow. Nevertheless, it is meant to be a big policy announcement tomorrow. How does that work with the mix in terms of the dollar . Christian i dont think it is happening so fast. It would take some time before it takes reforms to come in. It is a very important topic for the market. It is priced out somehow. If you look at the earnings we think the tax reform is coming. Look the earnings from we expect 8 , if you get tax reform in place, the starting next year, that means earnings are going up which is positive for the market. There would be a positive surprise and that would be strengthening the u. S. Dollar. Matt do you expect real substantial tax reform out of the u. S. . I mean, reagan, 1986 digit tax reform . Legit tax reform . Is obamacare being tough to be used for refinancing . Refinance, probably not for many years, maybe the safer one or two years to get the taxes lower and see if theres the positive effect that we expect. There is a big change probably but it would be positive for the markets. Positive. A positive effect on consumer spending. What kind of growth the expect . Christian up from this year. Positive. A positive effectnot a massive d increasing growth. Growth whichonized is not the worst environment so tax reform in the u. S. Would help bring growth further up. Guy a quick question about this chart to get your rate on it. European stock volumes are the lowest since 2000 and the tech bubble first. There is no trade going on. Is that because they think the Market Correction is coming . Why is this happening . Cyclesan normally late comes to some euphoria in the markets. Investors seem to be calm or cautious. Guy which one is it . Christian cycles i think both. GeoPolitical Risk keep people from investing. If you look into the sectors in the u. S. , you see a massive sector dispersion. It is showing quite low volatility, but if you look from tech energy, it is actually high and higher than recent years. Guy you can see this on this chart which we will talk later. Andical versus defensive that is what is providing the momentum. Pitching, very nice to seepitch. Christian, very nice to see you. Up next, we are live from the Goldman Sachs conference in london to discuss the outlook for stocks. Peter oppenheimer, the glee is going to be joining us. That is next. This is bloomberg. London. 4 in 15 minutes to go until cash starts trading here in europe. Lets talk about those equities now. If this continues until december, it will be the first year the benchmark has not had a monthly loss in total return terms since 1928. That is basically when the data started. Goldman sachs says u. S. Stock valuations and Profit Margins may have the cash may have peaked may have peaked. Joining us now, peter oppenheimer. You. Morning to you. If im getting worried about earning stocks, what am i looking to rotate into . Peter what are we looking to rotate into echo did you say . Guy where am i going . Peter two things i would say, first of all, in a world where weve got these extraordinarily low Interest Rates and high valuations across asset markets, equities are still the relatively best asset classes. In the context of the u. S. Equity market being relatively flat which is our view, given its higher valuations and peak margins, other equity markets are likely out to outperform e. M. Euro. We are not looking at very high return to their either but prospects are for continuation of catchup. We have been seeing that in recent months. Any tax you baking in reform into that 2600 target . Think our expectation is we would get some tax reform between next year but may need tax cuts, but we would be expecting relatively moderate moves around 25 . I think that could be supported. It is worth noting that we follow companies with high marginal tax rates. They surged after the elections with the expectation you get a substantial tax cut it since then, there reversed that outpouring quite sharply. There started to pick up again on a relative basis test they have started to pickup again on a relative basis. I dont think youre going to get major widespread tax reform of and in itself that would drive the markets a lot higher. We have high profits and Profit Margins. Relatively low returns. Is theow important actions of the president and congress to your model, to your outlook for u. S. Equities . If they did nothing, would that change the way you view the future for equities . Peter if they did nothing on tax reform, or there was no tax cut, i think that would be a modest is a modest negative. The most when thing is the economy, the Global Economy which with low Interest Rates continues to be pretty supported for equities. Of the 90 of the countries that we follow, they are growing above trend at the moment. This steve first time we are seeing Global Growth this is the first time we are seeing Global Growth around 4 . It is the real key driver for equities. The problem for the u. S. Is rates are likely to rise more than the market is pricing. Valuations steeper in the u. S. Than they are in other markets. It is a little bit more catchup in profits then you see in other equity markets which should give them a bit of an edge. Like . Peter, which do you im looking at a chart here on justoomberg, working 35 1435. 1435. The stoxx 50 is down at 18. The big european blue chips if you will. That combined with the fact that a lot of people expect the road to continue to gain strength expect the euro to continue to gain strength must mean the european stocks are better by. Peter i think they are it look again, the main thing that is driving all stock market is coordinated Global Growth. I dont think youre going to get stuck markets moving different directions. If the u. S. Were to have a major correction or people were start to scare, it would have a negative effect for all major markets including europe. But on a central forecast where forecast wheres. Equity you have the u. S. Equity Market Making relatively modest gains, i think europe can outperform. You are right that the evaluation is lower. That is quite typical. Even if you take account of that, there is more of a catchup in terms of profits, partlyeven if you take account e sectors which are very big in europe the banks in particular and also the commodity sectors are seeing something of a rebound. Guy do you not worried that the same drivers that are working in the United States are heavy focus on Technology Stocks and a relatively small group providing the heavy lifting . The same thing in the emerging markets. If i look at a broad e. M. Basket and i take out south korea and it bunch of other countries and a bunch of other countries, the picture doesnt look quite so rosy. Are you worried the Global Equities are being driven by technology, regardless of whether that e. M. Or to falter which would represent some called it a concern for equities. Test some correlated concern for equities. Peter that is true. Not in the same way as we saw in the late 1990s. Gap is less now. I think it is understandable that technology is doing well. We are positive of the sector because while we are getting this coordinated cyclical glut in Global Growth, this has been a long Economic Cycle but one of the weakest ones in history. Because inflation is very low, number growth nominal growth is very weak. That means people are prepared to pay a premium for things that are generating better growth. Technology fits into that category. We like your growth. We like counterbalancing it with the value. With peak value. The our companies we have high dividend yields but finally, a. Ecovery in cash flow prospects if you can find companies with a recentdividend yield, a thats a decent payout ratio, i think with a that drop of very low bond yields and Interest Rates, those look for the good guess those look like a pretty good investment area as well. Those look like a pretty good investment as well. We like the defensive stable blowing defensive, stable growing areas. Positivelittle less with general cyclicals which have benefited a lot from the synchronized global recovery. Matt when we have, peter, high valuation and returns start to come in a little bit, but you think these levels are going to hold steady, is that a good scenario for m a kicking off to kick off . Pickup inare seeing a m a come although the recovery that we have seen is much less than in other cycles. Broads partly because caution. Consolidation and a lot of dont make sense that italy because of disruption dont make sense particularly because of disruption. We are starting to see a pickup and i would expect that to continue so long as Global Growth remains reasonably robust. We do expect the weight of Global Growth to slow. Rates to pick up a little bit which would slow market return. M a is going to be an important theme. Question. Inal, quick european stock volumes are at a low. European stock volumes are at levels that we havent seen since the tech bubble. They are incredibly low. I have a vix that is nailed to the floor. What does this tell you about investment sentiment. Investment sentiment . Investors are cautious. They see a cycle that has been very long. They see a cycle that is been supported significantly from an asset market perspective by qe. We are finally started to see some graduate gets gradual exit of that. Gradual exit of that the low volatility in volumes also reflect the fact that you volatility,very low inflation at dictations. People dont seem dont to the catalyst for major change and without that you probably get low volatility, relatively low volumes. Relatively low returns as well. Guy peter, always great to talk to you. Matt . Matt i want to give you a couple of stocks to watch. A few minutes from the open. Ne of them is nestle that company is aiming to boost its profitability by boosting businesses like that care and coffee. Like that care and coffee. This is bloomberg. Guy minutes until cash equities open in europe. Not expecting fireworks at the getgo. See interesting stock moves, nestle for instance. Punched,es, box basically the fair value points to a slight slide in europe. Janet yellen speaks a little later on today. A risk off sentiment pervading markets yesterday. Today, we will wait and see what the fed chair has to say. Matt i just want to point out oil right now. Take a look at this chart. 504. Is g btv the 50day moving average crossing above the 200 day moving average. Supported by a lot of fundamental news. An oil trader saying they see the end of lower for longer, it is all over the mliv blog. As could move energy at the open. The ftse 100 opening a little flat. Exactly around for 73 level. Drifting a little south of it now, but not much. Someformance from a of the other stocks, but the sector inn is at a stock level. ,s anticipated, a marginally slightly softer open here in europe. Stock story is interesting, what is happening with gilts is interesting. Nejra cehic . We talk about the demand for the safe haven, the 10year treasury yield steady, but if you look at the 10year gilt yield, it is edging slightly higher. We are up one basis point, 1. 30 5 is where we are on the 10year gilt yield at the open. Money edging out of this rather than into the haven. Equities, we talked about risk off, marginally lower on the stoxx 600, down. 1 on the benchmark overall, digging into the industry group. A mixed picture here. Financial and tech stocks underperforming, materials underperforming. Interesting, given we are seeing metals on the rally. Outperforming on the upside, health care and energy, energy perhaps not a surprise given what we see with oil. I want to talk about the dax. Following theain german election yesterday. If we look at the relative strength index, we are at 67 on this. It is approaching the 70 mark, which signals the dax could be overbought. It last picked up on may 3. It has to drop below 70 for that to be a sell signal. Moment, still some legs higher to go for the dax index. On europeans chart stock volumes. This is stoxx 600 volumes at the lowest the tech bubble. Make of that what you will. Guy thank you. Lets talk about individual stock movers. Swiss drug makers look to be under a little pressure. Bfs ass softening up, well. A little softer, i think they have lowered their target to 1600. Stocks trading on big volume this morning. Wpp, that is a big cap stock, trading down. 2. 5 2. 25. Oil stocks seeming well bid. Tullow again on the move, to the upside. Weir trading higher and if i flip this over to index points, you can see Royal Dutch Shell bid, as well. Of the integrated and supply chain operating strongly in the energy space. Oil certainly making a run for the upside of the recent range. Matt . Matt i would say bloombergs mliv blog really helpful and they were all over oil this morning. They have been overnight. That is a great resource before you get set up for your trading day. What could be the other market catalyst today . At to a clock u. K. Time, a anuel the crown will make Emmanuel Macron will make a speech on reforming the eurozone. Then we hear from janet yellen at 5 45 u. K. Time. The market will be closed, but still important. Donald rajoy will meet trump in washington. You will want to watch that meeting and maybe stay on twitter late night, as well. Joining us, mark luck mark cudmore, bloomberg mliv strategist. The oil coverage overnight, congratulations. That is some great stuff there and we are seeing it today. What are you expecting for oil . Does this look like the turning point . Mark it is certainly a big change. We are seeing backwardation in the curve. Since then, we have had this shale gas revolution and an excess supply. In the last couple of years, it has been a supply driven market. It hasnt been a standard economic framework. Supply has been controlling it and hasnt mattered when demand picks up because we can meet demand very quickly. We are starting to see a little change in the environment, which suggests the market is coming slightly close to balance. Some oficane disrupted houston, but this is the first step of the market more on balance and trading more like it used to trade. Guy what is yellen going to do to the dollar today . I think yellens guidance is important today. We got a clear hawkish signal from the fed last week that it doesnt matter there is not inflation, as long as the economy stays strong, copes with the fed Balance Sheet unwind, they want to write kate hike rates again. She will likely tweak that message today, but it would be weird for her to counteract that message. I expect her to slightly reiterate that message, which should be positive for u. S. Rates and for the dollar. That might be another marginal tightening on emerging markets and other assets. Matt at the same time, we have macron set to lay out the reforms he wants to work on with the next German Government. It looks like it is going to be more difficult for merkel, since she has the liberals breathing down her neck. Does that mean we see more Euro Weakness against the dollar . Mark at the moment, we are definitely steppe set for a sustained. Bank of Euro Weakness. There are a lot of sustained period of Euro Weakness. There is some doubt about how much they will be able to integrate. It also passes the baton of power to macron, which is why his speeches so important today. We also have trump and roy meeting rajoy meeting. There is an unofficial referendum this sunday on independence for catalonia and that is providing a lot of unrest in the Northwest Region of spain and that will become more of an issue for europe. Overall, politics are becoming more of a negative for europe and that will probably weigh on the euro for the next couple of weeks. Will beuspect mr. Rajoy asked a lot about the referendum with donald trump standing next to him. Do you by mr. Cranfields argument that inconclusive is going to far, but means merkel has to focus on domestic politics right now, means macron is going to be setting the tone for the pound because he is going to be pretty clear in his objectives and what bridget will deliver, and that were removed some of the tail risk. Of the price out some more difficult scenarios and as a result, that is positive sterling. Do you go along with that . It is a kind of nice, neat little argument. Mark it is a controversial question because that post caused a lot of debate on the desk. Macronnt he makes is will take a harder line. There is a view that merkel is a pragmatist and while she might say she is taking a hardline, she ultimately wants to strike a deal with the u. K. And might let them get away with a little negotiation. The view of macron will be more definite and say, here is the deal. We want you here trading but you that would be more harsher on the u. K. Mark cranfields point is sooner we get clarity, the sooner Business Leaders can start making decisions, Investment Decisions and the market will like the fact that we have got theity, even if it isnt ideal brexit some of the hard brexiters might have hoped for. Matt thank you, mark cudmore, bloomberg mliv macro strategist. Find more Market Insights on mliv. Later on today, we bring you an italyse interview with finance minister. That is from the European Bank banking conference at 9 00 a. M. U. K. Time. Something you dont want to miss after this program. Coming up, macrons vision for europe as merkel deals with domestic politics, will he get the backing he so badly needs to push through his plan . We are live in paris next, this is bloomberg. Welcome back to bloomberg markets, the european open. I am matt miller in berlin alongside guy johnson in london. 12 minutes into the trading day, equity markets off again. Second day in a row after the german election gave Angela Merkel a victory that wasnt exactly really a prize. Lets cross to nejra cehic for your midcap movers. Ra i am starting with a manufactory. Dropping the most since 2014. First half adjusted he bits falling year on year. , do people to ask send cards anymore . Last time imber the sent a physical card. I wonder if that is playing into card factorys woes. Moving on to Financial Services. Looking at just group, synth and to sell about 93 million shares in just group. This seems to be pushing it down 4. 3 . Look at close brothers, as well. A Financial Services company hitting the lowest since february 2015, dropping the most since february november 2016. Some numbers through, im not sure they looked too bad, but what seems to be pushing the stock lower is what it said about the banking environment. Close brothers, even though their full year 2017 profit is up 13 , saying the banking market remains challenging. French president will outline his proposal to reform the European Union later today. Billed as a major speech, it isl work Angela Merkel somewhat preoccupied after a difficult election. The question really is, is mr. Macron trying to insert his views into the negotiating process around the creation of the German Government . Joining us, caroline out of paris. How important is it for macron to get these ideas out now . Does he need to insert them into the german debate at this critical junction . Caroline of course, he wants to have his ideas on the table so they can be discussed between Angela Merkel and the next Coalition Partners. He is going to have to be very sensitive today, putting Angela Merkel in a difficult position ause he is aware if the joins the coalition with merkel, there more tied to european integration than the cdu is. They are against the idea of a eurozone budget, they are afraid that germans will pay the bill for the french and italians. They are also not in favor of the european monetary fund. They would prefer to shut down havesm bailout fund and even proposed an exit option of the euro in exchange for debt relief, an idea that is not at all what macron wants in his ambitious plan to reform the eu. However, macron could have the greens on his side. They want an end to austerity in europe. This is something more along the lines ideologically of emmanuel and to say that without the eu reforms, we could see the rise of the extremes. Had to face Marine Le Pen and france and now Angela Merkel has to deal with the far rightwing in germany. What kind of proposals are we expecting from macron . Merkel going to have to take back to her Coalition Partners after this speech . Caroline you remember yesterday, merkel said it was too early to say what will work and what will not work, so macron in his speech today will have to tone it down and focus on the vision rather than specific proposals and focus on other subjects like immigration, defense, invasion. We expect about 10 proposals in the speech today, including European Agency for innovation, exchange program, more cooperation on terrorism and finally, one idea macron is attached to, this new tax on internet giants such as apple or google. One thing he could put forward is this idea of europe at two differentspeeds, two formats, those who want to go for deeper integration and those who dont. But again, this sounds complicated without germany on board. Thank you very much indeed. We are looking forward to that speech later on. Coverage coming up on bloomberg. Later, we will speak to the World Trade Organization director general. That conversation is coming up at 2 00 p. M. U. K. Time. Looking forward to hearing from him on what is happening with the Global Economy. Up next, why yesterdays referendum is pushing up euro oil prices. That is next. This is bloomberg. Guy welcome back, 20 minutes into the equity session. Equities going nowhere at a headline level. Lets get a business flash with juliette saly. Juliette siemens and ahlstrom agreeing on a framework to tie up the rail units. Their Supervisory Boards are preparing to meet to sign off the deal. They say siemens is likely to earn more than 50 of the combined entity and the agreement could be announced as early as today. Both companies declined to comment. This i. T. Is targeting a Public Offering as soon as next year. According to two familiar comedy offering could value chinas most popular Netflix Streaming Style Streaming Service at up to 10 billion. They say it wants to continue to control. Said set a profitability target for 20 20, saying its underlying Profit Margins should be 18. 5 . The announcement comes as the ceo is set to meet investors in london today. An activist investor, who stood to earn about 1 of nestle has pushed for a margin of up to 20 . Jugular land rover is scouting automakerstions in amid rising competition in the industry. According to people with knowledge of the matter, the luxury unit has been holding internal discussions on buying other brands to diversify the range of vehicles it sells, they declined to comment. That is your Bloomberg Business flash. Matt juliet, thank you for that. Millions of iraqi kurds have voted a historic referendum on independence. Crude climbed to a twoyear high amid fears it would disrupt oil supply. Yousef, how likely is it we are going to see turkey actually come through on this thread and shutdown kurdish export capacity . Theef you hit the nail on head. It was an explicit threat all the way from the turkish president erdogan. It is a very sensitive artery somet can ship up to 700,000 barrels a day of crude oil from the kurdish areas. Bear in mind at the moment, as we know from our sources, the flow is on the roof ,ninterrupted in the pipeline despite Turkish Forces hitting targets in northern iraq. 700,000 Barrels Per Day is not a drop in the barrel, that is more than qatar produces. More than one third of the opec, nonopec cuts. Is goingterms of if it to happen or not, there is no real precedent for switching off the valves. The have been sabotage attempts in the past, but ultimately, turkey is the consumer of that type of oil. It is not as easy as it would seem. Which is also why perhaps we havent seen prioritizing military over doing anything to the pipeline. Technicalave indicators that are looking interesting. Talk about what the charts are telling us and what the market price pros are saying where the price goes. Yousef with this trading just off the 60 mark. Very interesting technical indicator, the golden crosses back. Jump to the bloomberg with me. Your 50day moving average going above your 200day moving average, signaling the bullish momentum that is supporting futures as it stands. Also commentary coming out from the guys at citigroup. If you look at the five key they are, they say, already producing close to Maximum Capacity so as you go into 20, you could be looking at a squeeze on supplies. Out seeing oil around 60 a barrel. The supplysting how story is changing dramatically. You have just come back from opec. Is there a sense that if the price continues to rise, the pressure will be off to do a repeat of the deal we have seen done . Yousef it doesnt necessarily look like it. Clearonopec has made it they will react to realtime data. Picture changes so fundamentally, there is a real squeeze on supply and there is no need for the additional 1. 8 billion barrels to be out of the market, there is no reason it released gradually. That is something the russian minister made clear to me over the weekend. You wouldnt see an overnight turned back onto the market, it would happen over a period of months. You dont want any severe policy measures overnight that could shock the market. Matt all right, thank you yousef gamal eldin reporting on the oil story for us. Pay attention, those stocks are moving. Jaguar land rover, by the way, is scouting for acquisition target. Amid rising competition in the industry, according to people familiar with the matter. The luxury unit is said to be holding internal discussions on buying other brands. Is this because they have a different powertrain in mind . They have the five liter v8 and the Diesel Engine will probably not sell as much. Guy they are doing really well. The electric story for them is they are sold out on the auctions for their luxury vehicles. Yet, you are going to need to scale, arent you . A toant the scale to be monetize electrifying the powertrain. This is bloomberg. Market moves from north korea to yellen. The dollar bounces. Will the fed chair keep them going . Macrons message. The french president will outline his proposal to reform the European Union at 2 00 p. M. Today. That is berlin listening . Plus, we listened to goldmans head of leverage finance. And the cohead of americas Credit Finance in 15 minutes interviews you dont want to miss. Welcome to bloomberg markets, the european open. I am matt miller in berlin, alongside guy johnson in london. Waiting for janet yellen to speak later on but there are interesting things happening this morning as we have been talking about. Oil in big factor. The market back in backwardation. A close eye on what is happening in terms of the technicals. We are just drifting this morning. No clear sense of direction. The risk off sentiment generated by north korea yesterday. This morning, looking for direction. We are waiting for the macron speech, waiting for this trumprajoy conference. Lets catch up with juliette saly. Juliette thanks. The u. S. Has discussed four of northays to deal with korea according to h. R. Mcmasters, who says some of the choices are uglier than others. He said the threat from pyongyang is further advanced than anticipated, officials dismissed the north Korean Foreign ministers comment that Donald Trumps warning amounted to a declaration of war. The bank of greece plans to start stress tests in late february to determine if they will need fresh capital before the end of the great bailout program. Unofficial, the results of the test may be ready in early may. That comes as the ecb president mario draghi said yesterday that the advisory mechanism for greek banks. Havedent trump is said to told dinner guests in washington that he expects a cancer tax reform bill will pass the house by the end of next month and the senate by the end of the year. He did not offer any specifics on the bill he will rollout, that it is seen as aggressive. The president of the Federal Reserve bank of minneapolis has backed janet yellen for a second term as the fed chair. President ts come as trump ways through who he will pick next year. Janet yellen is doing a job and i hope she gets reappointed. I cannot think of anybody better equipped to lead the Federal Reserve the next four years than her. No one else that has 20 plus years of Monetary Policy experience, financial crisis experience. She is the rare economist with Exceptional Leadership skills. Juliette global news 24 hours a day, powered by more than 2600 journalists and analysts in more. Han 120 countries this is bloomberg. For that. Ks very much is the italian Banking Sector bouncing back . The Supervisory Board chairman said the worst is behind us and markedlymn is different than last years. For more on the second sector, lets get to francine lock while at the banking conference. She is joined by the thanks ceo. Francine we are here in milan and will shortly hear from the finance minister. Focusingight, we are on italian banks because if you look at what they have been through over the last 12 months, it is extraordinary that the systemic problems we were talking about seem to be out of the way. Lets get straight to our guest to kick off our day of coverage of italian banks. The ceo. As always, thank you for giving your time to bloomberg. You are the one spearheaded the Italian Movement are buying some of these phenytoin banks. How is the synergy going and you think we are over the worst for italian banks . If you look at the synergy from these banks, we are already results, especially in return back of deposits. Increase in deposits and Asset Management in just three months. Also, if you look at topside, we received 1000 applications from people who can lead the organization. Revenues cost side, we are perfectly on track on the plan of synergies on these two banks. Can exploit very good results from these two banks. Believe investors after focusing on the viability of these two Central Banks will move on to the other bank . Carlo italy is a country which in my view, more in estimation of the negative, nonperforming ofns, all the strains negative in italy. Today, we are out from the negative, arriving from the notion of systemic affecting the strength of the country. Reevaluation of equity, of italian banks can absolutely be there. Francine what about the Political Risk . , do youre an investor worry about the upcoming election . Carlo if you look at germany, they are now more like italy. Not in strength of the country, public italy, more saving, but more public debt. Stability, but it really is a country with a lot of rich people and rich people generally dont want to take risk. There will be some compromise at the end of the election. Not to worry for the italian situation. Francine in five months, you are unveiling a new plan for bucket is some pablo. Specificocusing on things . Carlo we have already consider the possibility to make a , considering the potential to be working on our portfolio business unit, especially on web management. Web management remains the main saner for some pablo pablo. Also, we want to become number one in the Insurance Business because in life insurance, we have demonstrated number one. Four years,ecome in number three and index for years, number one in italy. Will be a reduction of cost, so my expectation is we can have very good results for the group. Francine you wouldnt be looking at another Insurance Company . Generally point is, there is the possibility to create generally within the san the atork, making the end, it is better for my shareholders to create value to the generation. The power is distribution. We have distribution, we can put together a good factory and become number one. Francine would it be another European Countries . Carlo also in Central Eastern slovakia, serbia, these are countries in which we can exploit the business and reinforce our position. We have been investing in switzerland for private banking, and also china in the Financial Advisory could be the other area in which we have some positive results in the next years. Francine would you rival and become as big is june audi . Carlo it is clear that today we are number 10. We are not so big but at the end, it is the penetration with our clients that is low. Our clients and looking at life insurance, we are 30 penetration. If we reach the same penetration , insurance can easily become one of the first three companies in italy. Decide to do something, the strength of my Distribution Network is so high we can deliver results and im sure we can become one of the big players. How much will you focus on cost cuts and how much will you focus on growth . Carlo there is a combination, because you cannot say in the next food years, you can only work on growth. Digital, the new technology will have an impact on branch, network and so you a significanter reduction of branches and in the end, working on efficiency and synergy. Today, we are one of the best in are not belowwe 45 in the future, you cannot survive as a leader in the Banking Sector. Francine talk about dividends. This is one thing that your shareholders are you on track . Belo the point will remaining a strong dividend payer. On netus will move income and then on ability on generating an operation looking at dividend. This is the final part of the story. On february, we will have the final position. But working on growth and Cost Reduction and reduction, our expectation is a move on net income and then to pay significant dividends. Pablos on san dividend payer. Francine you have been focused on your shareholders, how much do you look at market cap . Carlo the point of market cap is something that is important for us, for italian bankers. Big layers inthe europe being italian, but because there is a lot of strength coming from italy. Increase will be to the market cap through generation of net income and idearation of new business , working on our strength. Insurance and other parts of growth we can deliver in the future. Francine Carlo Messina thank you. The ceo of bank san pablo. The italiank to finance minister, and kick off the panel to see where there are opportunities in the banking landscape. Guy thank you very much, Francine Lacqua with great coverage throughout the day. Socgens chairman joining us exclusively from the bloomberg European Banking conference. That happens at 11 30 u. K. Time. Up next, live at the Goldman Sachs conference in london. We will speak to Michael Marsh and of american Credit Finance. That is coming up, this is bloomberg. Welcome back to bloomberg markets, the european open. I am matt miller in berlin alongside guy johnson in london. We have markets that are losing a little ground right now. Lets get into the deke or stops stock stories with nejra cehic. Nejra i am looking at some of the biggest movers on the stoxx 600s. Llow oil, up 2 , upgraded to outperform at rbc. This is upgraded from sector perform. This following an upgrade at stifel yesterday. Rerate things happening on this stock. There was a lot of focus on oil today as we question whether barrel. Ll hit 60 a it has softened somewhat during the session. Looking at aa, the Company Naming simon break well as ceo. It also sees information on its ops review of the first half of next year. Noton i have shown it is only is it the worst performer on the stoxx 600, but analyst calls were anticipating some of this news and thought the stock would open flat or slightly higher. 10. 4 sting it is down right now. Hitting its lowest since 2014. Finally, carnival. There was a note yesterday from bernstein analyst david beckel cutting 18 yield estimates across the board for royal caribbean, carnival, to reflect a mild reduction in caribbean demand. A lot of this down to the storm season we have had but carnival still trading lower today. Down 2 . Perhaps still feeding through a little weakness in the stock in terms of investor sentiment, as well. Guy thank you very much. Up next, live at the Goldman Sachs high leverage conference in london. Manus cranny having a conversation with these two. You do not want to miss it. That is next. This is bloomberg. Matt welcome back to bloomberg markets, the european open. We want to go to the Goldman Sachs european leverage finance conference where manus cranny is standing by. Manus thank you very much. We have two for one today. The americans and the brits in town. Hael marsh joins us from and Christina Minnis, welcome to you both. Good luck with the conference. Michael, we catch up each year and last year, you were bullish. It has been a good year to be bullish. The close of this year, what is the complexion and what do we carry through to 2018 . ,ichael we have seen growth which has been great for the market. Volumes up almost 100 in 2016. Floatingrate products interesting given the potential moves in rates, investment driven product. High yield, goodyear, too. The interesting stat is the highyield is not in volume, but number of issuers. The number of issues in issuers in europe is double of 2016. Manus if i carry that over to me in part,d to this is about demand from the american side. Is that why you are in town . Christina absolutely, crossborder volumes are what up 100 yearoveryear and we are finding u. S. Issuers looking to tap into the European Market for a couple of reasons. The market is really developed, it is deep now and for him a cost of capital basis, very attractive. Manus we were running through is this, and about funding currency, funding price in europe versus the u. S. . Christina that particular company is very global, it has operations in europe. It wants to match fund its liabilities with this operation the bondsapital here, we priced friday priced here in europe thanks to my dear partner Michael Marsh at 4. 75 and u. S. Secured came threat 6 . Very effective cost to capital. Lets talk about what the driver is. Again, when it comes to merger and acquisition, i finished three days of talking about big etc. Ineals, siemens, the m a space. Nestle doing deals. What is the driver here in terms of m a in the highyield . Michael it is funny because m a hasnt been the driver this year. The driver has been the need for forit and largely refinancing, but also investing in corporates. M a is a function of the total percentage of the volume deal in europe. Volumes inlmost half 2014 and 2015. 20 17 should be remembered as the year of growth in europe, but not by m a, which is not like the u. S. We are bullish and i can see the volumes already picking up and m a driven in 2018. Manus what extent is this to which your geography comes into play . You said you have to think about what size is in the back pocket . Put that in reference of equity and potential leverage. Christina there are about 600 , about 2n dry powder trillion of buying power. Financial sponsors are becoming increasingly important and will be a big driver in 2018. They have been a relatively strong performer in 2017, but have a tremendous amount of buying power. Do the americans believe more in the growth story of europe we have seen the flow of money back into equities. The flow of money into equity is coming back into europe, the money is returning. But from a highyield side come is that were your markets see the growth propensity, as well . Itistina i think we see both ways. European private equity come into the u. S. Market and vice versa. There was a lot of focus on europe because of the understanding of the growth that is coming out of the european economy. I think there is a lot of upside here for private equity, a tremendous amount of focus. Manus we had toys r us go under. Was that idiosyncratic to retail . I am looking at 2. 9 , a record low in yield and yet we have this singular moment of toys r us, or is it singular . Is it a canary in the highyield coal mine . Christina retail is going through a tough time in history right now with the disruption of ecommerce and what is going on with that particular industry. I would not say that the filing of toys r us is a canary in the coal mine for the overall highyield market. I think there is some very strong technicals and very strong credit positives for the overall credit market. You looki agree and if at default rates globally, they are still low. Stay low. T rates to toys r us and Companies Like that hit with idiosyncratic issues, i dont think is systematic of a problem the canary in the socalled highyield coal mine. Manus final question, the league tables. How important are they, what do you see in the Fourth Quarter of the year . Who wants that hot potato . To bench partke benchmark performance versus market. They have market access, market share, we do focus on them but as always, tables can be directionally fair but sometimes unjust. The same boss says thing to me. Michael marsh and Christina Minnis both joining us at the Goldman Sachs leverage finance commerce conference. Thank you very much. Manus cranny, interesting coverage continuing out of that conference through the day. Up next, it is bloomberg surveillance. Some exclusive interviews coming up for you. First, italys finance minister will be joining Francine Lacqua at 11 30 a. M. We will be talking to socgens chairman. That is next. This is bloomberg. Is this a phone . 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