Shells profit slides but the oil maker out maintains its outlook. Confidence signal [inaudible] we are talking to the ceo, the first here on bloomberg. And the fed. Sitting tight. Taking a waitandsee approach as it awaits clarity from the white house. Avp [inaudible] we are less than half an hour from the European Equity market. We will focus on all of the news as we work our way through. Weis start off with the screen. It is pointing to a negative stock. London looks like it will outperform a little bit. 4tinental markets down by of 1 . Lets show you what is going on around the world. The big story this morning is what is happening with the dollar, the dollar index, the bloomberg dollar index is softer and the and is trading at 112. 69. Up by around. 4 of 1 . This is what is happening with the bond yields. Have gotten more liquidity coming through. Yields climbing, prices are selling off. Lets get back to the real news, lets find out what is happening around the world. Deutsche bank said its fourthquarter loss narrowed as a rise in fixed income trading lifted europes largest Investment Bank. Point eight was one 9 billion euros larger than the 1. 3 2 billion analysts had expected. The ratio rose to 11. 9 . The ceo has been cutting bonuses and thousands of jobs to raise profitability and bolster capital. We will be talking about her to banks earnings with the lenders and ceo, marcus shank. Do not miss that conversation. Royal dutch shell reported fourthquarter reference that missed analyst estimates after to Main Business unit also short of the forecast. Adjusted profit advance to 1. 8 billion worth analyst had expected profits of one 2. 8 billion. The upstream and downstream and integrated businesses [inaudible] it is 7 45 a. M. London time. It will be speaking to the companys ceo in his First Television interview of the day. Senatelerson won confirmation. The former exxon mobil ceo was offirmed in a vote ofs 5643. He was sworn in shortly after. Aesident trump blasted potential 1000 Refugee Resettlement deal with australia. He tweeted do you believe it, the Obama Administration agreed to take thousands of Illegal Immigrants from australia. Why question mark i will study this dumb deal. Her overd the promised the deal and abruptly ended the phone call. The post cited unidentified u. S. Officials who were briefed about the conversation. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Matt the Federal Reserve is in wait and see mode as it tries to figure out what trumps policies and a flurry of executive orders main. They left the Bank Rate Unchanged and provided little direction on when it will raise rates next. Dumping bonds ahead of the central bank meeting. People are eager to sell as the fed prepares to raise rates. With us now is William Hobbs. Good morning. Selling off . Guest definitely less than what we would have argued six months ago. Data, the pc and the employment cost index it is clear inflationary pressures are not running out of control. 2. 5 has moved along way quite quickly. The other point to make is we have seen in terms of economic surprises, we have seen almost since the summer last year a continuous time of repeated [inaudible] that has to be running out. That could mean for short while you may find that markets are directionless. Year wely over the next see yields going up and upward pressure. They still materially undervalued the [inaudible] matt what kind of growth and inflation do you expect and is that from the missing tillers of the term policy we have not seen . Guest good question. We are Still Holding fire on how much this new administrations plans to incorporate into our economic forecast. If you think about the 10 year , over time, it is not always work exactly. It tends to broadly track or trend nominal gdp growth. The growth is roundabout 4 of 5 suggesting that treasuries are some way below where they should be. Stephen engle and was talking plans to dump a load of tax cuts, fiscal spending on to and ending cycle. Economy. That could change things in the shortterm and you may see some over shoot. For the moment i would say there is upward pressure on yields as [inaudible] gradually return. The private sector will want premiums. Had some outlier , stephen major things we will see yields at one point 35 . He expects some kind of grey swan event from the trump administration. There is good reason to expect that trump could throw a wrench in the works. This is always the difficulty. With politics in general. We have a cluttered lyrical calendar this year. We have had one last year. Certainly President Trump seems to be alarming some investors, some of the comments that are coming out. What we would urge investors to do is focus on the fundamentals. The thing that youre looking at is the economy. If you look at the economy, look at the isn manufacturing, look at the level and the new orders and production component. Both of those are above 60. That suggests the u. S. Economy is Getting Better and if you look at customer number one for global plc, the u. S. Consumer it suggests the consumers in good health. You can seent until stuff get through congress you can argue the World Economy will continue to do all right for the moment. Sort of watch this space, i guess. The economy good enough to do more, we talk about this yesterday. She is a labor market economist and we are seeing wages tightening up. There will be a fight over what for employment means and i expect donald trump had a different view of what that means to janet yellen. Number yesterday pretty strong and if you take a look at what the payroll number is expected to be on friday that is not always a correlation. What is it going to take to get over the hump . Yes good question again. Region whereut the they want to be on wages. We are getting there. No doubt about that. This is evidence that you can see. The labor market, most of the people who want work have worked. While this year you can see that the market is underestimating the potential in 2018, 2019. The policy is in the upside especially if you look at the various administrations plans. Those are the things to think about. Guy branch is trading at 56. We will speak to the ceo of shell after fourthquarter earnings missed expectations. We will break down Deutsche Banks figures. Posting a bigger loss than analysts estimated. It will be speaking to the ceo of novo nordisk. The president is talking a lot about drug pricing. All that coming up. The open is 19 minutes away. This is bloomberg. Guy welcome back. Heres juliette saly. Bank saiddeutsche its fourthquarter rise narrowed. Three months was 1. 89 billion euros larger than the 1. 3 billion analysts had expected. To 11 pointtio rose 9 . The seo has been cutting bonuses and thousands of jobs to raise profitability and bolster capital the has been hit by misconduct funds. We will be talking about Deutsche Banks earnings with the lenders ceo markus shang. Dont miss that conversation. Me johnsons to buy nutrition for 16. 7 billion. The company is discussing an offer of 90 a share in cash which would represent a 29 premium to me johnsons Closing Price on wednesday. The deal would be financed i [inaudible] facebooks fourthquarter revenue Beat Estimates driven by advertisers continued mobile push. Sales rose to 8. 8 billion. Increased 17 from a year earlier to 1. 8 6 Million People. But what ad revenue made up 84 of the companys total ad sales. That is your Bloomberg Business flash. Gyan matt. Thanks very much for that. I am standing here in front of Deutsche Bank in frankfurt. The bank release its earnings and the loss was bigger than investors expected. 1. 8 9 billion euros. One of the reasons is fixed income trading did not gain as much as their investors expected or as much not nearly as much as competitors have been showing. We have seen from the top five banks in the u. S. Again in the first quarter. Only 11 . If the question investors are asking is why didnt fixed income trading rise as much as we were looking for, more than a 30 gain and also why [inaudible] on the plus side, you do have ratioer one capital rising much higher than expected, 11. 9 was the ratio. We were looking for 11. 3 and the bank says it is set to reach a goal of 12. 5 at the years end. Guy i cant wait to hear what the cef cfo has to say. It is going to be interesting to talk to him about confidence. One of the things that has an affecting the numbers is confidence. At has a great morning lined up, great coverage coming up. We have the interview and plenty of great guests coming up giving analysis of what is coming out of Deutsche Bank. One of europes critical banks. Lets talk about another critical company and that is shell. Missing at a headline level. I would argue there are some positives below the surface. If you take a look at what is happening with, that is probably fairly good. The fact that the gearing is doing well, at least living in the right direction. Also the fact that the Disposal Program looks fairly good. We will talk to the ceo very shortly. Getting his take on exactly what is happening surrounding that Disposal Program and how price discovery is working on some of the assets they are trying to get rid of. Petrol shot of a these will be electric. Show will be installing electric charging points on some of its forecourts and that is an interesting indicator as the as to the direction of hydrocarbons. We will be talking about that a little bit later on. European equities, longtime underperformers. Some of them are not great. John gray coming through and are good numbers from the likeof vodafone. As europe from a negative point of view delivering on the top line and the bottom line . It is starting to. This has been one of the areas of serial disappointment in the last several years. People have looked at the gap that has been widening between u. S. And european earnings. People have been waiting and it is slowly starting to happen. One of the thing that is key is the Banking Sector. European banks are way behind the recovery story than their u. S. Brethren. Part of it is down to a rolling Balance Sheet crisis that europe has been suffering. Europe stocks may be an there was an interesting piece from one of our Investment Bank employees, talking about lack of Pricing Power. They tend to be price takers rather than price setters. As you see inflation return what you are finding now is you should find some Pricing Power return as inflation starts to pick up. Backdrop for corporate is looking better. Pmis, it isut the at a 5. 5 year high. Prices going up as well. You are finding this is a better environment. You have a more plausible European Equity story and the consensus is less. This is an area that we would like in terms of overweight and other assets. Matt i wonder if you are concerned about the global export market medium to longer term. You have the protectionist bent in the u. S. And the brexit and here in germany, if the economy has to rely on domestic consumers, then they could be in trouble. Movie i do not the arguing that the german consumers going to develop a neville may care street. Generally the global trade story is difficult to forecast on just politics alone. There does seem to be a greater protectionist slant to the politics were seeing at the moment. In a sense the story that we talked about earlier with regard to the u. S. Consumer, the fact that u. S. Consumer confidence is high and retail sales are going well and imports are picking up. Seem to be catalyzed by the u. S. Consumer forced first. Got to watch what happens with the various trade deals and so on. What we have seen so far in terms of that when we talk about tariffs and so on, we still have got some right to suspect that the bark will be worse than the bite. Show an appreciation of the damage that the tariffs did which is encouraging. There seem to be talks from a lot of the administration about finding equilibrium rather than doing some sort of trade war. To our mind the prospects for Global Trader ok. Thatve to remember also the fact is that a large proportion of global trade is being occupied or taken up by companies with lower import china. Ity such as that means automatically that if you compare global trade to global gdp that it will be on a softer trend just because of those countries playing a larger role. That does not have to be too sinister but it is something that is worth bearing in mind before we start writing off global trade altogether. Matt do you think that if there were, i do not want to see a trade war but if you see the u. S. Start to look more inward, that britain or europe may have chances to reach out, Angela Merkel may get together with the president of china and do a lot more trade. Guest it is difficult to say. One of the things i think is interesting is that if you look at china, china is the most protectionist by distance and we had in terms of Foreign Direct Investment data, there is a clear mismatch between the ability of european corporates investing in china versus chinese corporates ability to invest in europe and the u. S. In terms of what you may find is the u. S. Administration may stumble in to prying open the chinese economy a little bit. Maybe one positive. It is difficult to say how everyone else reacts to a more protectionist u. S. That is something that people will be thinking about and china seems to be talking about trying to be a bigger player in this. Guy we will leave it there. We will come back and talk to later in the program. Shell is missed estimates in the Fourth Quarter earnings belows as traffic came in analyst expectations. Joining us now from the london ofck exchange is the ceo royal dutch shell. Good morning to you, sir. I am going to start by asking you a question about u. S. Treasuries. The u. S. 10 year yields, 2. 5 . Capital employed as 2. 9 . Are you happy that the number is so close to 2. 5, where should it be . Guest thanks. Our return is not where it needs to be. If you look at where we think our return needs to be by the end of the decade, it should be a doubledigit return. While prices if oil prices are slightly higher. That is what our financial Transformation Program that are we at that we are in the middle of is aiming to achieve. It means strong returns on capital employed and a strong Free Cash Flow and a financial network. We are in the middle of that transformation. Guy are you on target . They are two different things. Think we are. 2016 was an important year, it was a transition year. Acquisition. The bg we had to deliver the synergy. If i look back on the year it deliverya worldclass of the deal, a worldclass integration that is behind us delivery aheady of plan. If i look at the last two quarters, our strategy is turning to pay off. In two quarters we have a cash our cash is well above dividend requirements. We have started to pay down debt in the Fourth Quarter, 4. 5 billion in a single quarter. I do think we are on track but we still have a long way to go. , nothas the oil price enough to make the upstream work and yet it has come up too much to make the downstream work you guys are you caught in the middle of little bit here . Guest no. This is always a dynamic picture. The oil price has to come up as a result of the market balancing actions. We do not know exactly where will go. If you look at upstream earnings a billioncome up from that is not nearly enough where we need to be. We have to continue to take a cost and invest in projects that are resilient. We need to ring a stronger return to our upstream businesses well. You will have seen that we are making a lot of progress over the last month or as well. That is going well. You have to lower that breakeven starting upat means projects that are resilient. And most of it is still ahead of us. Reduce the capital intensity of new projects. We cant say that we are done. There is still work ahead of us. We have to hold the gains that we have delivered. This needs to be a strong doubledigit return business and we have to demonstrate that we are there already. Matt refining made 77 million compared to 711 in 2015, why the dramatic drop in refining profit . Refining margins coming off quite a bit. We look at refining in the context of an integrated value ourn so we have refining trading business. But we saw in the Fourth Quarter margins globally but we have a much flatter trading environment. Pnl result the integrated was a little weaker. We see more liveliness coming back to the trading environment. Matt where do you see debt levels at the end of this year, with respect to we see rising rates, are you going to get as much new dead as you can right now or do you see the levels rising . Guest where we are at the moment is the position which is made up theyve of cash on the alan shoot. It is hard to predict where the oil price will go. We know where we want to be on capital and operating costs. My expectation is that there is not a high likelihood, we have to go back to markets for that. My expectation is that we will be able to drive down debt levels in the course of the year. Which is a very important aspect of our financial framework. To bring thatd back close to 20 on and i would expect the actions have taken out 20 billion of capital costs and to vestments that are picking up right now. And starting up new projects. I would expect that we will continue to drive down these debt levels toward a to any percent level. Them is all reach matter of where the oil price will go. That is a prediction than i am not able to make. In did you make money trading