Bank of america, saying they expected benefit from higher Interest Rates and a lower Corporate Tax rate. Brian moynihan says that pretax earnings rose year on year. There is what it is doing, up by 3 10 of a percent. Not Much Movement either way. Allison is joining us. Surface this looks like a pretty solid report. Walk us through it. Allison still going through the numbers, but so far so good. Trading is a number we always look at, a little bit better. Fixed income is a little better, equities a little better, in banking they had a oneoff charge. David who do we think that might be . 880 million driven by a single name, nonus commercial chargeoff. David South African maybe . Alix steinhoff . Allison and i guess the surprising thing would be if you did not see it. Alix it is exposure i think. Allison we were joking the other day, the term episodic, but that is a better term than a oneoff or not occurring, because it is the cost of doing business. David the other thing we do not see is what they expect in terms of the effect of tax rate effective tax rate going for the forward. The havenots of is what they expect for next year. Allison that was one of the first things i look for and i did not see it in the documents either. On other banks have come in the bullish side of expectation, so people are expecting from bank of america, citi at the 25 , but they are more global than other peers. Jpmorgan, wells fargo, 19 . We will see if bank of america will good more information. Alix we have someone on the phone, Charles Walker through the initial take on the numbers. Charles yeah, the bottom line number looks good, the top line number was a small miss in terms of revenues. But what is surprising is how strong the Capital Market revenues were. They probably have the best investment quarter of any of the big banks and one of the better trading quarters. Alix does that mean that they still market share, or they are getting more clients . Charles i it is hard to tell at this point. Tends not tomerica have the big swings the other banks might have. They tend to be modest in how they manage that operation. David by moynihan is more concerned Brian Moynihan is more concerned about risk and profitability. Do we have any sense of what the margins are like coming out of these numbers . Charles the Net Interest Margin this quarter was much better than expected, it was 2. 39 . And they are one of the more asset sensitive banks that benefit from rising rates and a steepening yield curve. Going back to his responsible growth theme, what they are trying to do is create quarters of predictability, rather than swings from one quarter to the other, and that is what they are laying out now, the sequential quarters of steady or needs of steady earnings. David credit losses, does this surprise you . Does it indicate weakness . Allison i think we have to strip it out and really i think it is more important to go line by line and look at the core numbers for each of the businesses, because of the responsible Growth Strategy and they have not been as aggressive, we would expect credit to come in perhaps solid this quarter, we have seen the solid results from other banks. The other thing i would say in terms of fixed income trading and the business, bank of america has a more credit versus other banks, that is outperforming over the past year. Last year it was the currency in rates business that was stronger. Those are really the forte of jpmorgan and bank of america also strong in that. But more u. S. Focused and credit focused, so sometimes we talk about market share gains, but the Charles Point that is something you can see only over time, but quarter to quarter it could be the shift of what is performing and what is not. Alix what about Goldman Sachs in 25 minutes . Charles let me mention one thing on davids question. The billion dollar charge of provisions, pretty much in line with expectations, but it still probably is half of what a normalized provision will be once Corporate Credit starts to normalize. They are benefiting from benign creditthey are benefiting from n credit cost right now. In terms of goldman, the question on Goldman Sachs is really what is going on with their trading business, particularly commodities. My understanding is the commodity business was very weak on an annual basis in 2017, but probably bottomed in the Second Quarter and got better by the end of the year. Also theere is costcutting, there was the report that expenses were down. How are they doing on the annual target . Charles they have reiterated a target of 53 billion in cuts of expenses, so 2. 3 billion shows they are on track. Alix and more color as the numbers come through, on the loanloss provisions and other areas, so in terms of Consumer Banking provisions they actually fell to 886 million. You also saw the amount of consumer loans 30 days past due billion,ping to 8. 8 so that would seem to imply that the consumer is healthy versus stripping out the steinhoff, the chargeoff could have doubled because of steinhoff. Alison keep in mind mortgage, we see mortgage improvement, so that is on the core business, that is where we have seen the pickup and losses. And to the point of charles, investors are looking at the cycle in moving toward normalization. We are far away, but the one business that is improving where we see the reserve releases and improving credit at the bank is the Mortgage Business and my guess is that there will be another reserve release from bankamerica, but strong credit offsetting the other issues. David one thing i have not seen, do we have any sense of the lending . The has been a target for them. Charles i have not had a chance to look at that david, but i know that they have been culling some portfolios, derisking some portfolios, and a has been a drag on their overall loan growth, but in the thirdquarter you see revival of total loan growth and i suspect the Fourth Quarter showed additional improvements. I say that because while the Net Interest Income was the surprise in terms of total revenue, and there was a volume related component that caused the surprise. Alix to piggyback on that, Consumer Banking, we learned loans were up 9 , deposits up it percent, hitting a record thank you so much, alison for u. S. Bank, and charles peabody. Is sick withharles the flu, we appreciate it. Now an update on headlines. Here is first word news. Reporter on cover hokum has revoked can leaders trying to come up with a stopgap spending bill that would prevent a shutdown on friday. Lawmakers say the measure would delay obamacare taxes and provide money for Childrens Health insurance programs. They cannot pass unless it has been the credit but in the senate. Steve bannon now faces two subpoenas in the russian investigation. According to a person familiar with the matter, he was subpoenaed by robert mueller. The House Intelligence Committee has issued their own subpoena. He will appear he appeared before the panel yesterday. But they say he is far from answering many of the committees questions. And rebuking European CentralBank Mario Draghi for attending meetings of the group of 30. The eu says he has failed to demonstrate that taking part in the forum serves the public interest. The ecb says it will respond in due course. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im kailey leinz. This is bloomberg. Alix thank you. Coming up, the great yield curve steepening of 2008 has come and gone in like 24 hours. We will assess that next. And taking a look at bank of america as we go to break, up 3 10 of a percent, goldman is also up. Solid quarter for bank of america despite the 3 billion charge related to taxes. We will break it down more. This is bloomberg. Alix time for our first take, where we discuss top three stories. Getting the read on bank of america, Goldman Sachs is up in 15 minutes. The flattening curve takes the reins, 530 is a decade low, the euro is weak or for a second day and the ecb warns the fundamentals are not there to support it stronger euro. David joining us is days at a better executive editor Tracy Alloway. Michael, good to have you here. And the discussion of thanks. We banks. We are looking at the earnings. Bank of america does not rely on this as much as jpmorgan, but they come in really well across the board. Better than expected. Mike i think the explanation for fixed is a fairly easy to discern. If you look at this chart that brought, that i volatility in the bond market. The Fourth Quarter a year ago has a lot more volatility than this year, so you have a tough comparison for most of these banks, as well as lower volatility, so it will be hard for them to make money and to compared to last year, it could be a lot worse. Alix looking ahead to goldman was potentially 75 year low in total Commodity Trading and it seems like the Fourth Quarter was better, this quarter so far is better, but the headline will bite. It will hurt his legacy at j. Aaron, he will be looking at Morgan Stanley, their archrival, and going what the heck happened . That is an open question. You can look at volatility in the market, bearing in mind goldman does not break out the Commodity Trading revenue from the overall fixed. Volatility is low, but you have open question is about regulation, about whether customers and their behavior has changed. You have a huge question mark over the strategy itself. I am old enough to remember back in 2011 we were having a debate on whether the downturn in fixed was secular or cyclical, and the longer that we do not get the pick up in revenue, the more pressure there is going to be on the strategy, more questions over whether this is actually a lic oh event, which cyclical event, which goldman has been hanging onto. David you have heard about goldman, how long can they have the excuse of the customer . Tracy they are trying to hire, they had an internal review, but how do you measure success, because if you have overall low volatility you cannot measure success with a revenue number. Alix is it the people you hire, streamlining the business . I am not sure that we know it quite yet. Markets, market, consumer lending, look at that. David in the meantime, Morgan Stanley, is really doing pretty well, having cut back on staff. And they are doing better. Mike maybe it is a quest of how you trade, Smart Trading perhaps. It is a different strategy. The powert is it and the natural gas hedge goldman that got killed. We are watching the yield curve. Take a look at the bloomberg. This is to me, 530 under 50 basis points, and really broke below that. What . I do not even have a question. At what point will the fed be like, guys . Mike they will not worry about it until goes below zero and stays. This is what they expect. They have no inflation pressure out there. That may start to change. As we saw the reaction in the markets when we got the cpi number last week, so if we see a bill, yesterday the new york fed released Consumer Expectation survey and actually picked up for the first time in some time, some of the story will change. We have seen most of the action now at the long end, 530 as you mentioned moving much further than the shorter end, so it is really kind of an inflation and where does the bank go from here story. David we do not see the inflation pressure just yet, so why would they raise at all . Tracy i disagree on that point. Maybe not inflation in the hard data, but there is an uptick in the measures of expected of expectation. A lot of the flattening is soing from two year yields, clearly there is a growing sense of belief in the market that maybe we will see inflation that will shift the fed closer to their target, where tickets tricky is whether we start to get the inverted curve and many response from the fed. Mike at this point over the last couple days, even though we have seen narrowing, it has gone up and it is higher than it was at the close. David now europe, that is our third story. The ecb Vice President has warned overnight that the euro could be getting ahead of itself. I am concerned about sudden movements. It declined in september. Another member of the governing council said maybe we will stop buying bonds all together in september, so what is going on as we look toward their meeting next week . Mike it is trading relative Interest Rates and value at this point and the question is do they speed up the end of the qe bond buying, and there was a debate whether they would end in september,r go on to they have started to make bets on the euro that is worrisome to the central bank. I bought of i brought a chart. Here is the problem, if it continues to go up, the economy takes a hit. You start to see the job on a little bit, but nobody is job own a little bit, but nobody expects to change policy the next meeting. Alix we have verbal intervention from the ecb, two members saying something about the euro being overvalued today and we have not seen much reaction from the currency itself. It is still 1. 22 against the dollar. That is despite the verbal intervention, despite the wobbles over the german coalition, despite the italian election risks, spanish political upheaval, the euro is holding on. Pretty amazing. And again, toss in record long positions on the euro, according to the data, you may have thought maybe if everybody was bullish on the euro it would be vulnerable to downside pressure, but still hanging on. Do not expect them to make policy changes next week, but expect talk on whether mario draghi will join the people who are trying to talk down the euro. David we will see that next week. Doubtful. [laughter] david thank you very much Tracy Alloway and michael mckee. More on the concerns over the euro, coming up, it had a closer look at the eurozone economy. Alix bank of america, pretty solid quarter across the board, of 4 10 of a percent. We will break down what to Pay Attention to. Fixed coming in solid. This is bloomberg. Next the ecb meets thursday to review where it is going with Monetary Policy and we are hearing from some counselors about whether inflation hedges really that inflation is really returning and when they should end the bond buying program. Welcome, simon. Good to have you on the side of the atlantic. What are we looking at in terms of inflation that may influence what they say and not what they do . This is the backdrop of the debate, this spilling over into the public domain, whether they should continue the quantitative easing plan b on september plan be on september. We saw a group come out and say it should stop in september and in now increasingly we are seeing the doves starting to take flight and talk about inside the euro, signaling they are not keen on the stop in september. David henson over the weekend said maybe we will stop altogether in september, now we have others going, not so fast. Is that a real division or are we reading too much into it . Much bigger than the one at the fed. Traditionally it was the hawks that were the most vocal, being interviewed. Fromey thing is, we heard constancio today and we have not heard from mario draghi, obviously the president. Maybe we will next week, where they come down on the debate will be important to the economy. Alix when you talk about fundamentals, that is inflation, but the stock market, here is a chart of the cyclicals, you can see the outperformance throughout the whole year of cyclicals in particular, so are we seeing a stock market started a discount a strong european economy, is it moving ahead of other indicators . This is a good problem for the ecb. Long ago, we were talking about the future of the euro, worried about greece, remember the brexit discussions, it was argued by some of the british side, why would we want to be attached to a corpse . Now we have a strong euro area, we will look at the negotiations going on and whether the wages will pull up, but this is a good problem for the euro area. That we did not think would be underway this time after. Alix stock bond options across portugal into germany, is that reflecting worries about a german government, the italian election, or those fears percolating . Absolutely, politics will play a role in the economy this year like last year. There seems to be less of a concern that politics will kick the euro economy off track. David between italy and germany, what is the biggest concern . Italy will always be a longterm concern. Alix simon kennedy, love having you on the set. Coming up, we are minutes away from the Goldman Sachs fourthquarter earnings. Here is how they are trading in the free market. They are up 1 10 of a percent. Billion, that would be a decline for equities, one . 5 billion and 1. 5 billion, we will break on the numbers as they cross. This is bloomberg. Alix this is bloomberg daybreak. Im alix steel. Moments away from Goldman Sachs releasing their earnings, heres where we stand. Points inup by 143 premarket, recovering from the selloff in the close yesterday. European stocks are relatively flat. And the doves taking the new cycle by force when it comes to qe in europe. It is all about the flatter curve in the other asset classes. 46 basis points is how we trade steep selloff anywhere we look at the bond market, particularly the front end. Vix finally making it back onto my board. It was gone for months. It hit 15 yesterday, crazy, now back to 11 . Nymex crude down by 4 10 of a percent. Bank after bank upgrading the shortterm price target for oil, now 70, or 75,