Meanwhile, treasury yields climb ahead of a quarter trillion dollars of auction this week. Anna and a brexit backup plan. Theresa may is said to be preparing to withhold aliens and eu payments if the bloc doesnt play ball on trade. Anna good morning, this is bloomberg daybreak europe. Lets get straight into the market auction. We will have more from the finance director shortly. Msci being weighed down this morning, part of it is hsbc, where we see negative reaction coming through to that earnings statement, in particular the pretax profit numbers and shared by backstory. We will get a lot more detail in a moment. We are down by. 6 overall in the asian session. Remember that china and taiwan are still close, but most of the asian indexes are in negative territory. Hong kong had its head above water the earlier, that has come to the downside. One thing we are focusing on as we get closer to the u. S. Session is u. S. 10 year yields. And that ofove 2. 9, course throws into focus the big auctions late we have for this week. We have 151 billion of short dated bills just today. How high will those yields need to go to get this kind of borrowing away by the u. S. Treasury . And because it was president s day yesterday, and because we work in the United States, we put the dollar spot index, up by. 3 . Manus welcome back from president s day. Lets have a look at what all of that richness means in the bond market. Will they show up and buy the bonds . Is it getting rich enough . This could be the Battle Royale between the Asset Managers and hedge funds. Do we have gathered for you here is a difference of opinion. We have the Asset Managers and funds, the third widest in 10 years. Youve got 2017, middle of 2010. This is where the real money wagers were, they came out on top. So tonight we have three months and six months. The yield you are getting is the highest in a decade when it comes to the spread. 10year note in the United States are offering 1. 6 more than their g7 peers. That is the fattest, lobbyists spread you have had an 18 years. Is it enough to draw in the buyers . Twoyear papers offering more than the fed, three times the average over the past 20 years. A veteran of tutors saying more inflation could rock these bonds. Will they show up, will they rock up the fast money, the middle east money . Anna the Banking Sector hoping to benefit as we see Interest Rates go higher. One thing i asked about the each sbc finance director i asked of the hsbc finance director, why they couldnt do a share buyback. Thats coming up. Lets get the first word news update with yousef gamal eldin. Yousef lets talk about the u. K. Government, said to withhold billions of pounds of brexit payments if the eu doesnt give the country the trade deal it wants. While it is not the preferred option, some in the administration could believe it could be necessary as the eu tries to go back on the future commitment to a free trade deal, according to three people familiar with the matter. Meanwhile, in a speech later today, brexit secretary david davis will reassure the European Union that the u. K. Wont try to undercut the bloc by tearing up regulations as separation takes place. Angela merkel has sent a strong signal about her preferred successor as german chancellor by appointing a close ally to be general secretary. Of her on the right party have called for more conservative policies as a way to win back motors lost to the hard right alt. But the unexpected move is a signal that merkel intends to keep cdu in the center. Bank of England Governor Mark carney says he is already bracing for the u. K. s next financial crisis. While admitting no central bank cant eliminate risk, he says the boa is creating a more secure defense by preparing for bank failures, providing extra liquidity, and ensuring higher capital. Carney says expecting a crisis will happen is the best way to prepare for it. President donald trump has endorsed former republican president ial candidate mitt romney for a u. S. Senate seat in utah. The move sets aside longstanding differences with one of trump party criticss as the gop looks to preserve its narrow majority in the chamber. Romney, a former governor of massachusetts, announced on friday that he would run to succeed senator orrin hatch, a strong trump supporter who decided not to seek a third term. The latvian Prime Minister says he will try to prevent a councilmember from returning to his post when he was caught up in a bribery probe that rocked the nation. Hes also led the latvian centralbank from 2001, but faces suspension from his job as a security measure. He rejects the allegations and says he plans to hold a News Conference today. The leader of the u. K. Opposition labor party has vowed to make it harder for asset strippers to take over company. In a speech to manufacturers, Jeremy Corbyn will say that, is elected, labor will broaden the scope of public interests to allow the government to intervene. He will also send a warning to the city of london, with a call for a fundamental rethink of how finance should be regulated. The head of opec says the rebalancing of the oil market is gaining traction. Meanwhile, the uaes Energy Minister says the cartel, russia, and other producers are looking at ways to continue the corroboration beyond the end of their production later this year. The downturn that was experienced between 2014 and 2016. Global news, 24 hours a day, powered by over 2700 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. Lets check in on the markets in asia with david ingles in hong kong. David . David yousef, a quick pulse check across asia, some markets are already close, hong kong still up and running. Its essentially a down day. Ignore china, which is. 8 to the upside. Its still shut, along with vietnam and taiwan. Volumes are quite thin, not a lot of turnover. Japan closed 1 lower below 22,000, a negative correlation between where the currency is and where the strength is, its really kicking in. Markets, currency dollar strength, dollars were caught across asian assets, yields are on the way up, not just in the u. S. India, australias 10 year the 10 yearack up, was just last october. Have a look at some of the movers we are following here. Analysts are talking about hsbc, quite a miss, down about 2 on that stock. Providing is is about two points in hong kong. India is following this loan fraud over in japan. Thats a wrap of your markets. Anna thank you. David ingles in hong kong. Heard, fell as you in hong kong after the fouryear adjusted pretax profit missed estimates due to the governments last set of earnings, with john flinch replacing him. I spoke with the Group Finance director about the results. I dont think the analysts missed anything. Weaker, little particularly in the ficc space, and we also took a couple provisions for significant corporate exposures in the Fourth Quarter. That is really the future of the Fourth Quarter, a couple things on the unexpected front with respect to impairment charges coming to the markets business and lower revenues in that quarter from the same business. Anna you cite a couple clients in europe with regards to it. Is this going to continue to be a drag on earnings . Do you have any visibility around these impairments . No, we have always taken a somewhat conservative stance in dealing with troublesome credit, so weve dealt with this in the Fourth Quarter of the year. We expect to go into 2018 with a fairly clean slate with respect to those exposures. Expectede analysts nicely buyback today, above your target at 14. 5, targeted 12 to 13. Why did you decide today was not the day to do another buyback . You are absolutely right. We are in a great position, 14. 5 , well above the top end of the range of 12 to 13 we targeted. Its a really technical reason behind this. We are targeting some alternative tier one instrument issuance between 5 billion to 7 billion in the first half of the year. Our experience has been getting those kind of capital instruments into the market in the first half tends to attract more interest in the instrument, as well as better pricing overall. There is a regulation with respect to some authorities that you cannot put capital instruments in the marketplace and do buybacks at the same time. It is simply a phasing question. Our policy with respect to how do we manage our capital has not changed in any size, shape, or form. Buybacks are still part of the Capital Management toolkit. The decision is informed by a technical decision during the first half of the year. Anna ok. Can you update us on the u. S. Tax situation . Clearly things have changed a lot on the tax front in the United States. What impact has this had on your business, this year and looking ahead . Well, like so many others that have already reported, we took an impairment to deferred tax assets in the United States of 1. 3 billion. Obviously, the lower tax rate of 21 versus 35 Going Forward clearly ought to be beneficial to some future. We, like many others, are waiting for guidance from the u. S. Authorities with respect to how specifically the beat tax may be applied, and whether it would impact hsbc. But we continue to follow quite closely whats happening from regulatory perspective, and the guidance we will follow from the legislation that was passed in december. But obviously, Going Forward, we would expect the fact that Corporate Tax rates going from 35 to 21 would be beneficial in the longer term. Anna also in the United States, we see Interest Rates on the rise. What is your expectation for how this positively benefit your business . Well, we have certainly seen the benefits of this in 2017, when the fed moved rates. We obviously work in a number of markets where the currency is closely related to the u. S. Dollar. So we have seen improvement in spreads coming through our liquidity. Power plays on the deposit sign, liability side, balance sheet, has certainly been a tailwind for earnings in 2017. We expect to continue to realize the benefits of that through 2018, in clearly to the extent that the Federal Reserve may further pick up its rate policy over the course of the year, which is where the market tends to guide us. That would inform positive tailwinds for hsbc. Anna your chairman said in a statement this morning, it is about reasonable growth in 2018. What are the expectations . Are there areas of concern . Well, one of the things you have seen from our strategy over the last couple years is what we call the pivot to asia. We have obviously got incredibly strong business in asia, representing three quarters of the profits for the group on an adjusted basis. Continued to invest in building our business normally in hong kong, over delta and mainland china, and even further afield. These markets continue to be very attractive fields for us to invest in, with robust growth rates and good returns on investment. Where we are positioned in asia positive,to be very and when we look farther afield, at the continental european these, the u. S. Market, are all markets where we have strong presence, and with the nafta bloc, we have great presence certainly in mexico and canada. It is a pretty encouraging environment for us. We continue to see rates of growth that would not be inconsistent with 2017, where we generated Revenue Growth overall for the year of just under 5 . Ackay,that was iaian m speaking to me earlier. It wasnt my voice. Technicalakeaways buybacks, that was interesting. And the reason for the miss. But also the impairments in europe. But broadly speaking, a positive story around hsbc. Manus it is an unfortunate way for him to hand the baton. Lets bring in our guest from vanguard asset management, the chief european economist. Listening to mackay talk about asia, threeasi quarters of our profit there, you say no hard landing in china, its about the rebalancing story. That plays well to the hsbc pivot to china and asia. Yes, and i think Global Banking generally is benefiting from this incredibly good global backdrop, china and asia doing and the picture in europe is incredibly encouraging. The u. S. Is growing very nicely, buoyed by the tax effects. Overall, it is pretty difficult not to make money in the banking world at the moment. Ands you stay with anna myself. , no expense also spared in terms of location, we have nicholas petrovic. Good to see you. Lets hope its not too cold and windy. You are launching your route to amsterdam, good luck with that. Three hours, 40 minutes. Is it leisure route or Business Traveler . Who is going to take a trade three hours, 40 minutes to amsterdam . Good morning. Hi, good morning. Theres a lot of excitement. Minutes would be mostly leisure passengers. We have started to trains a day, but we are considering the possibility of roundtrip to get business markets. We are also going to rotterdam, which is a Good Business situation. Manus tell me this are you done expanding . Ive been to paris, bruges, where do you go next . I know you were leaving, but where does the company go next . Think generally a lot of people want to take highspeed rail, so its a question of finding opportunities where we can make money. Areas in thed at southwest of france, which is popular with british tourists. We have seen the future, lets balance faster. Anna good morning. Tell me a little about the logistics on this amsterdam route. I understand that on the way back, passengers going back to the u. K. Will have to return from the netherlands, changing for border checks in brussels. Is this still a work in progress . Will that be changed in the future . Solution,temporary because dutch and british governments still have to completely agree, just a put into place controls in the netherlands. Come, and i am hopeful it will end before that. On the way out from london direct and on the way back, you will have to change. Thewe are celebrating trains, everything in place, and we have the customers. Anna what is your latest expectation on brexit . In the past about how you dont think it will damage the business too much, people will still commute. What is your latest assessment of what impact this will have on your business . Well, we know brexit is difficult to forecast, but at the moment we are still seeing a strong year for business potential. 2018 looks really good. If you get to see much Downside Risk for us, as the operational eu, how we operate in the and Everyone Wants to work. Manus we certainly hope that doesnt happen. You have been with the Company Since 2003. You have been the ceo since 2010. You have witnessed a great deal of change and growth in this Company Since it began back in 1994. How do you think euro star has changed our lives, our travel habits, in europe . Think its a big part of my career, to develop and grow. As i have seen the Customer Base completely change throughout the year, from what was an adventure to this easy way to travel between cities. People dont think too much about hopping on a train, it has changed the mental map of People Living in london and paris completely and its interesting to see how mental you can be in london and paris is closer. It has been a big success i think. Anna thank you very much, as the noise builds behind you. Nicholas petrovic in london. Lets get the Bloomberg Business flash with yousef gamal eldin. Yousef thanks. Lets start off with hsbc. They reported fourthquarter pretax profit, 3. 6 billion, missing the lowest estimate among analysts surveyed. It is a rare failure to live up to analyst earning estimates. Reign chief executives comes to an end. Two clients reported narrowing lending margins. Speaking to bloomberg, the hsbc finance director says numbers were a factor. The Fourth Quarter, certainly from our perspective in the industrys, was a little bit weaker with respect to bank and market revenues, particularly in the ficc space. Group,on with our peer we took a couple provisions for significant corporate exposures in the Fourth Quarter. Billiton has protected a new activists call for a corporate overhaul and trying to boost investor returns. Firsthalf profits of the worlds biggest miner rose to a threeyear high. Bhp raised interim Dividend Payments 38 to Beat Estimates as underlying earnings rose by 25 of 4. 1 billion. That was your Bloomberg Business flash. Manus thank you. Westway is vanguards chief services cheap european economist. I will get your title right one day. A bit of a chat with the eurostar outgoing ceo. He talked about brexit. If we look at the bank, we want to get back to where you are. I am looking at how the market is repricing the gilt yield in we have the 10 year bond yield forecast, this is what the market is doing, in reaction in many ways to the global shift in yields. Do you think it would be pragmatic of carney to raise rates as early as may of this year . I think he will raise it, because i think the Inflationary Pressures are building as such that Global Demand is pushing the bonds in the u. K. , but also there is uncertainty about the underlying supply. Both of those things mean Inflationary Pressures are going to merge. If you look further out, though, there is so much uncertainty about which of the flavors of brexit we are g