♪ europeanre watching markets. the first trade of the cash session coming up. i am guy johnson, i in london. matt miller is in berlin. what are we watching this morning? why wait? the federal reserve chair says she does not need to hold off on hiking rates because of lack of clarity from president trump's economic team. do 1:30 p.m.n data the u.s. treasury secretary and philip hammond chat brexit and

strengthen economic ties. how important is a pivot toward america for the british economy? u.k. job stated due at 9:30 a.m. london time. watch the wage component. opel in discussion to sell . what willestion is tsa get out of that deal? are less than an hour from the european open. an exciting day across asset classes. futures pointing to a positive open across the continent and in the u.k. we do have a little bit of weakness in the pound as well. maybe that adds to some upside in the ftse although yesterday the pound was down and the ftse was down. here. look at bunds we have a brief dip down, bund yields are back up in positive territory at 0.369%.

but briefly dipping down. very interesting to watch, it will not be as interesting to watch as treasuries are the story in the u.s. but still, keep your eye on what is going on in european fixed income. guy: absolutely. banks, banks, banks. that is the story. it will be fascinating to see how the european space of his this morning. we have been watching what is happening with goldman sachs. have to focus on what happens here on our side of the pond. we will talk to credit agricole about what is happening here is well. dollar-yen has been an interesting trade overnight. down by .2 of is 1%. what i want to show you is a chart that the guys kicked out a little earlier. this is the dollar advances, going out, cap i will money accounts that have been selling into the story. we have seen that popping through. japanese exporters putting the dollar on offer. we just popped through that line. it will be interesting to see

once we get european liquidity what happens next. somethings talk about more important than banks. that is beer. heineken reported 2016 profit that beat estimates led by a sales gain in asia. the world's second-largest brewer seeing a further increase this year. 2017 shipping up to be a good year for beer as well. joining us now from amsterdam is the company's cfo. thank you so much for joining us. all,e ask you, first of where you expect the strongest growth, is it once again going to be in asia in 2017 and a story of tiger and vietnam? guest: good morning. growth,6 was a strong strong year of balanced growth because only [inaudible] bit ined a little volume. we have strong performance in europe. we have impressive performance in some emerging countries like next go and vietnam. definitely in my 17, what we see

is a number of those performance continuing and the benefit of having a footprint, the geographic spread on pretty much all continents. vietnam is onto a dynamic start. mexico is starting well as well. accepting europe to continue to be solid strong and going after its agenda. also on costs. ourly quite positive about footprint even if we know that the headwinds from currencies should still be strong in 2017. we not being blind on that. we are forecasting that we will have to face headwinds from currency comparable to the one in 16. matt: even at 7:30 a.m. in the morning there is nothing more than i enjoy more than a small batch ideate. -- ipa.

americans do not feel that way as much as they did before. are we seeing pressure on craft brew in the usa? craft has been going down in growth. ipa a little less so. we are happy about the performance of love and it is -- about that. we are starting to launch it outside the u.s. but as you know, when we came in to the partnership, it was really to learn and grow in the u.s. craft market. bit thatsee that the we took to invest in a real brand, a brand with consumer come back, that is what we like and that is what we understand. that is about brand and attracting and pleasing consumers and it is still doing that. i would say results, performance of -- is ahead of what you hear

on the craft market. guy: can i take you back to what is happening in asia, in particular, what are you going to do with tiger, tiger is performing for you very strongly at the moment. are there plans to take turgor -- tiger into new markets, are there plans to invest, either plants for a new blu-ray, give us a sense of what you world -- will do because it is working for you right now. guest: absolutely. tiger is an amazing brand, it is an amazing in vietnam and other countries in asia. continuing to grow volume. definitely you have seen we are expanding capacity in vietnam in 2016. and to cater also to the beautiful story of growth in vietnam. tiger is one we call an international brand. so next to heineken, it is a brand very come from entry to heineken. or red have tecate stripe or other brands that are able to travel. making travel -- tiger travel

more internationally and we are confident that this could be a great success. guy: i want to talk about what the analysts are saying about your business right now. at the moment you have 18 buys on the stock, 12 holds, and two sells. i want to talk about one of those lies. liberty is learnt that one of the brokers with a buy rating on your stock have clients telling him that the stock is not investable. because what is happening between the u.s. and mexico. sense, what clarity can you provide on what that relationship is going to look like and how you think it is going to impact some of your key brands there? guest: i wish i could provide clarity because what businesses like glass is volatility and uncertainty. what i can tell you is that our beautiful brands are working well on both sides of the frontier and whether in mexico states, andited

basically there are a number of things that could happen and of course, the relationship between mexico and the u.s. in terms of trade, we are looking at very carefully but that would be speculating. i would like to reassure the people and convinced the last two on the sell side to invest in heineken. we believe the markets are beautiful right in front of them. matt: is anyone running out and buying extra cases of to coffee equis to getdos them before the wall is built? guest: i hope people are running out and buying those and our beautiful beer. matt: can you give us more sale?ty on the civic oh -- guest: we do not comment on

potential speculative future m&a. there is a situation in vietnam which is pretty much in the newspaper and we are watching carefully that we make no specific comment on that. matt: thank you for joining us this morning. x, cfoce to bro -- debrou of heineken. let's get to bloomberg first word news with sammy emmert in -- sophie kamaruddin. sophie: aids have repeated contact with the russian intelligence officials according to the near times. the paper citing four current and former american officials said phone records and intercepted calls sure. contact with senior russian intelligence officials before the election for year. medications were not limited to campaign officials and included others. president trump has overturned and obama era corruption row that would have forced oil, gas,

and mining companies to disclose payments to foreign governments. the real put u.s. companies at a competitive disadvantage, oil company said. congress is overturning other obama rules protecting waterways from mining and preventing mentally ill people from buying guns. stephen mnuchin has expressed his desire to strengthen the deep economic bond with britain. that is according to a statement withs phone call yesterday u.k. chancellor philip hammond. the pair discussed opportunities to work together to support the so-called special relationship especially as britain prepares to leave the eu. malaysian investigators are continuing to search for clues after the fed -- sudden death of 's half-brother. he was targeted by two women with a chemical spray at kuala lumpur international airport. south korea's spy service said

north korea had been trying for five years to kill him. toshiba shares are trading theply again today as future is under question. yesterday saw the conglomerate flag a $6.3 billion write-down and it's a clear business and its chairman resigned. the company is considering selling a majority stake in its profitable memory chip unit. the president senate, saying a sale of the entire unit is possible. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. guy: thank you very much. we are talking markets and the 'sd after chair yellen testimony yesterday sent global stocks higher. banks were driving that. we will talk about what is going on and we will speak to the ceo of credit agricole. posting earnings that missed expectations. gm is in discussions about a

sale to ps oh -- psa group. people are calling it a win-win, is it really? we are waiting for the european markets to open. this is bloomberg. ♪

guy: equities open in 15 minutes. european futures are bid. let's talk about what happened

yesterday with the fed. going for spring hike? janet yellen says it would be unwise to wait to raise rates and the u.s. bank stocks, the dollar, bank stocks went higher. the dollar impacted by this but less so. treasury yields did not move as much as i would have thought. the march hike rose on the comments of a probability of a hike in may. let's begin to all of this with bloomberg macro strategist. let's talk about march. his may the new march? -- is may the new march? so in terms of pricing. we are earning enough is early enough in the cycle that they want to hike in a meeting where they explain their decision. every meeting is live and that is one of the takeaways from last night that march is still possible but in reality, march is unlikely still. is that because there is

no possible way that the fed would ever hike with work at 34% or anywhere below let's say 70? they have to tell us, right? definitely think they have to guide the market to a hike. that is not the reason i do nothing march as possible. there is body of time to guide from that march hike. it has happened that we have not priced in and they have managed to guide us there in time. they still want to see if you higher inflation before they start hiking. it seems a bit premature to tighten now when there is no core inflation you. we may get some evidence but there is the massive policy uncertainty. i think it is important to remember that last night while he yellen sounded positive and optimistic, she did not say anything particularly new. the market took away that she is saying march is live and saying let's not wait too long but march is unlikely. guy: i would think about

greenspan if you understood what i said and he didn't. i am butchering that quote. let's talk about the balance sheet. did she slammed the door on lowering the balance sheet, stopping the reinvestment in 2017? mark: i think she has made it clear that it is not an imminent issue. it is important because markets are aware that it is going to be a big issue. a massive issue for markets but at the moment, it is still theoretical. markets should not be trading off of it on -- because there's not happening till next year. if it even happens next year. what she was saying is let's not worry about this right now. but yes, it is an important thing to discuss and we continue to get advice and the markets contractiond that of the balance sheet eventually happen? matt: i think she went a step further. i will call her when she was asked about the balance sheet, i would anticipate a balance sheet

that is substantially smaller than at the current time. it is interesting to me to hear janet yellen say it is not possible the shoots will stay these size forever. she is going to eventually shrink it. mark: definitely she is and it will be a massive thing for the markets when it happens but there is still no clear process of exactly how that will happen. i think it is important to note that will not happen in the next couple of meetings. it is hard for markets to trade off that event. i am not saying we should ignore it, we should continue it -- to analyze how it will happen. the theories on how the balance sheets will be contracted will evolve over time and markets can shred the dollar rates off of that right now. guy: i think it is worth reading the right quote out. understandthink you what you thought i said, but i am not sure you realize that what you heard is not what i'm in. it is a fantastic quote and everyone should think about that every time they listen to a

central banker speaking. joining us. you can follow all the highlights of what goes on. i have it up and might bloomberg here morning. check it out. tli be is way can do for events like janet yellen's testimony. tlib for janet yellen's testimony. she speaks to the financial services committee happening at 3:00 p.m. u.k. time. make sure you tune in or look at your tlib. this get a first word update. --hie: abn has the create reported a increase. underlying net income was stripped out one time items close to 333 million euros. that was helped by higher net interest income and lower positions set aside for risky loans.

credit agricole has posted a slump in fourth-quarter profit. income dropped to 291 million euros after it bought a goodwill write-down at its french consumer banking unit. trading revenue fell comparing to a 350 million euro estimate. credit agricole's deputy ceo will be joining bloomberg for an exclusive interview at 10 past eight u.k. time. fortressis buying investment group 43 point $3 billion in cash. has agreed toiple continue leading the business which will remain based in new york. fortress will operate independently within softbank even as the japanese company establishes its own tech investments fund. general motors shares closed the most 5% higher in yesterday's new york trading. after bloomberg revealed that psa group is exporting and acquisition of the carmakers

european business. according to a person familiar with the matter, gm is seeking a multibillion dollar amount for opel which also operates u.k. sister brand [inaudible] that is your bloomberg business flash. matt: thank you very much. we are minutes away from the open. we will take a look at some of the possible movers in today's trading including credit agricole as the french inc. posted a slump in fourth-quarter profits. some feel it was better than expected. we will tell you all the details. this is bloomberg. ♪

matt: we are minutes away from the open. let's get some of the stocks to watch this morning. as guide put it, beer and banks set to rise. heineken is the beer we are talking about. the dutch brewer, the world's second-largest, putting out numbers that are better than analysts were looking for in 2016. $3.8 billion in operating profit and then forecasting growth in margins, in profit, in sales, all in 2017 as they expand into not losehopefully do too much ground in craft brews in the u.s. guy: that is certainly the story there. let's talk about what is happening with the banks.

talking about credit agricole's numbers. there is a note out from jeffries, performance was good on the commercial side and efficiency. it will be interesting to see how the stock trades this morning. there's a tailwind coming from the banking phenomenon. the other interesting thing as well. if you look at the retail business for agricole and it is suffering, this low rate environment is really tough for credit agricole. the ceo joining us, that conversation it a 10 p.m. -- 8:10 a.m. the markets have bid this morning, it is a bank story, a positive future story, fascinating to see how the brewers get going. we've seen some interesting numbers been posted. yellen think janet

sounded so hawkish yesterday and people are going to wake up and read that coverage i think there only one way to go for banks net interest margins and that is up. you will see them leading the indexes this morning. just four minutes away from the open. this is bloomberg. ♪

guy: welcome back. european cash about to open. what are we going to see? we are likely to see a pretty positive story. kicked the future's box, and it calculates everything you need to know for where cash is likely to open. it looks like we are going to see part of 1%. i'm intrigued to see how the banks open. we saw a really solid performance in the names like goldman sachs here. just looking'm here at u.s. treasuries because this is a three-day trade and you can see what happened yesterday during yellen's testimony. i think it is fascinating that she was talking about the dangers of the fed being behind the curve and also talking about

the inevitability of the balance sheet shrinking at some point. that is not something i would have considered inevitable before the last few weeks. that has got to be good for banks. that has got to be different equity indexes across the globe. let us see how stocks open. guy: let's take a look. we are taking a positive story. we are expecting a positive story. there you go. london up by .2%. we are expecting a little bit more to come out of the gate there. let us see how the cac opens. i do not have this brought up, but nevertheless, we will see exactly what happens. european equity look like they are pretty solidly bid. ftse approaching the level. 30 points, good. manus cranny, over to you. up on europe is picking the quintet of records set in

the united states. the euro-dollar on the longest losing streak since the back part of november. conversation i had. met interest income is up. that is something that is good news. aberdeen asset management, that is the driver of the european banking story. we'll talk banking later in the show. up 2.30ew loans, trillion. where is the money flowing? in.s slowing exactly back we are seeing net inflows. this is the biggest etf. first weekly inflows this year. $25 million. you may say it is small, but it sets the tone. do you want to be more exposed to europe? the valuations in the u.s. are heading higher. matt touched on the bonds.

the euro-dollar, rate of interest by the united states of america, record net short positions on the euro-dollar. they are being covered, picked higher. five-year government notes in the united states of america again, the short positions. they are seeing a little bit of short covering all over that yellen speech yesterday, so the interest rate markets are definitely light. larry fink says he is confused. if he is confused, that does not help anybody, especially me. let us handed over to matt. matt: thanks very much, manus. i am delving in to what is going on in the banks and i'm looking at the euro stocks, bank index here, so you can see all of the 25 stocks are up, including the success -- including this company. we had a red hot headline that it was involved in

subprime mortgages. biggestgricole, the gainer of the whole group, up 3.8% right now, even though the bank put out some operating tax profit before items number is that missed the estimates. the net number was better than street estimates and as a result , thatt and the tailwinds really pushing not only credit agricole, but all the banks and that is helping lift the indexes. an: the banks certainly interesting trade this morning, but in terms of the -- take a look at the pharma sector. this is where money is rotating into. up .6%. novartis, shire, really adding on the upside in

terms of the point performance. the banks like bbva, they are rising nicely, but on a point performance, it is the farm is that are really -- pharmas that are really helping out. janet yellen sees more rate hikes ahead if the economy stays on course. she spoke before the banking committee tuesday on capitol hill. here are the highlights. i noted on previous occasions, waiting too long to remove accommodations would be unwise. potentially, requiring the fomc to eventually raise rates rapidly. that could risk disrupting financial markets and pushing the economy into recession. plansnot know what fiscal the congress and administration will decide on. we are not basing our judgments onut current interest rates speculation about that. the economy has been making

solid progress toward achieving our objectives. the on employment rate is close to levels we regard as sustainable in the longer run, inflation has moved up, and it is those trends that are driving our policy decisions and not about fiscal policy. the fomc has enunciated that is longer run goal is to shrink our to levelseet consistent with the efficient and effective implementation of monetary policy. janet yellen, fed chair, speaking yesterday. go to your bloomberg, that is here you will follow testimony. let us get a sense of what she actually said, what she did not say. did she say as much as the market thought she said? bloua joins us now. good morning to you. i think the u.s. economy

is currently apple employment, so raising rates is becoming a matter of urgency. -- probably 2018-2019. guy: what struck me as the way janet yellen discuss what is not coming out of the white house in the form of a fiscal plan. she sounded a little bit cautious. my sense yesterday was what she delivered to the market was statement of, we do not actually have to worry about that at that stage. we have ticked enough talks is not to worry about the fiscal side and we need to go now. if the fiscal policy is stronger than kokou: we anticipated, we will do more. then wea crucial -- anticipated, we will do more. crucial point.a ultimately, the central bank has to react to things, inflation expectations, and also the data when it comes to unemployment

and economic activity. they are pushing to tighter monetary policy going forward. matt: yeah, the chief u.s. economist at morgan chase said you have to turn over a lot of stones to find the slack in labor markets. there is the risk of inflation getting higher than expected rather than not hitting targets. doesn't she sound pretty hawkish late positioned to you? kokou: yeah, she does, but i think, one thing to bear in mind is also where we are in the business cycle. before the election of donald trump, one of the things that was quite striking was the corporate profit margin that any earnings per share has been slowing down. the thing driving eps growth was the chair by back, so we are pretty much linked in the cycle, so if we had another source of nominal gdp growth to the fiscal

stimulus, then that is clearly very good news for corporate, but there is clearly a situation where inflation could go faster than what is expected, and the central bank needs to put enough ammunition on the site to be able to react where inflation -- ere inflation to go faster than expected. matt: are you concerned at all because a lot of the market seems to be -- seems to have been a little bit burned last year by the expectations before rate hikes and then only getting one. now they look at the fed as the boy who cried wolf. howdy you think of that situation? kokou: -- i think it is actually how do you think of that situation? kokou: i think that is positive. adaptfunds are trying to their reaction function based on the data. what is happening today is a great rotation so equities are making new record high and the bond market is probably going to be under pressure, but if the

data and economic activity were to slow down, we would have -- isultimately means the fed still pretty relevant at this stage. wise is the tragedy versus -- treasury versus jgb? it is going to remain very accommodative for really quite some time? the message from the u.s. is different. kokou: one of the things to look things is one of the that the bank of japan is doing is the yield curve control and that has been quite unprecedented when it comes to central bank monetary policy. this is ultimately capping jgb yields. as long as the rate differentials between 10 year treasuries and 10 year jgb's the yenhe pressure on will be a norma's and one of the things we for is dollar-yen to go much higher from here if that

pay is still in place. needplenty more we still to discuss with you. we will work our way to the morning. we have a lot of data today. u.s. inflation, u.k. jobs data as well, and u.s. retail sales. let us talk about what is happening with the banking sector this morning. it is on something of a tear. credit agricole has reported a slump. that is not a goodwill write-down. the french consumer banking , a declinean issue in trading revenues. the underlying performance and the stock is popping this morning is really quite impressive. the deputy ceo of credit agricole joins us now exclusively to talk through the numbers. good morning to you, sir. the market is looking through the big goodwill hit, understandably. the underlying performance is good, and we are seeing the shares rising. are you happy? which bit of this business do

you really feel you need to focus on given the underlying performance we are seeing? >> we are happy, because as you said, despite the difficulties which are experiencing some banks in the sector in france, the interest rates were able to maintain a very strong performance, and we are very happy to see that all of our business units are making huge progress in commercial terms and that is another background of a very strict monitoring of costs. the ratio is falling quite markedly, and also we maintained a very low and stable cost of risk, so you know i do not want to say aloud anything, out of business things. in france, a very strong commercial activity in all our parts, in all entrances.

the subsidiary has very good performances. a retail bank and france and italy obviously suffers from low interest rates, the commercial activity is strong and consumer finance is very good and posts strong results. like to talk about some of those units given what some of your rivals are doing, for instance socgen. let us talk about the low interest rate environment. do you see any light at the end of the tunnel on the low interest rate environment? do you expected to be with us through 2017-2018? when do you see light at the end of the tile on this front, because it is impacting the business. onwhen do you see light this front? it is impacting this business. kokou: we have been fries as example, for everyone in the

drop of interest rates. >> what is important for us is to see two things the first, we are able to adapt to these very unfavorable environments through the different measures i have mentioned, reducing cost, lines, all the business etc., etc., but also, we are confident in the very recent past during the past few months. xavier: we have seen also that for this movement on long-term interest rates, they are dropping and soft and even reversed, which is important for the banking activity. in france, there is a possibility to renegotiate your home loans and household are looking very cautiously and long-termy at interest rates. the fact that they are moving up is a good sign and will, and hope, stoke the position, which has had an impact on

profitability at least in retail banking activity. matt: matt miller in berlin, i would not want to ask a bank or a political question, but as someone who deals with french debt in euros and french companies that owe money in euros, how do you prepare for the possibility of a le pen win, and the front national trying to get out of the euro and redenominate debt? know, it ise, you very difficult for a banker to comment on that. . would make one remark i am absolutely convinced that my fellow citizens are very much willing to stay in europe, very much willing to stay in the euro, so i do not want to pencil in my anticipation in my provision any sort of even, like the one you mentioned. i think markets are exaggerating

these types of risks. they have been upset by the brexit. they are now always looking for the worst. i am convinced it will not happen, and i am convinced that france will stick to a reasonable -- sticks a reasonable policies. matt: i can perfectly understand that, and we are hearing from oddsmakers that the risk of a le pen win is only 5%, but don't you think even with a risk that small, you have a fight is sheer he duty to your shareholder -- a iduciary duty to your shareholders to even consider the possibility? have no- xavier: we contingency plan. what we do is to maintain a very strong capital position. as aroup credit agricole

ratio -- has a ratio. we are solid. we are prepared to face all of the evens, one that have been marketable the past. i mentioned brexit, but i can refer to others. the referendum in italy, and we remain extremely stable because we are a risk averse policy. we try to be extreme the cautious in the position we take, and we will maintain this position. picking up on match point by taking it in a different direction, the u.s. looks like it will grow reasonably strongly. they might have regulation on the road. do you look at the u.s. and think that is where i want to expand my business right now? xavier: do you think what? i'm sorry, could you repeat? guy: is the u.s. a priority for

expansion? yes, i have difficulties to hear. guy: let me speak more slowly. is america -- xavier: more loudly. guy: is america a priority for you right now? xavier: no, america is not a priority for us right now. we are very much concentrated on the european market. that is where the essential activities lie. anare obviously international community. we have strong activities abroad, notably in asia, but we are not planning to expand specifically in the u.s., even obviously, we have american clients, and some are european clients making business in the u.s.. matt: i'm going to just -- guy: underscore into test the

technology a little bit. socgen is going to sell off part of its business. auto business, auto leasing. his credit agricole looking at something similar? i don't think we can look at something similar different have activities as a socgen. they have subsidiaries which are making this business. we have not. we are obviously financing automotive's, so consumer finance in particular. we have a joint venture with fiat in this regard, posting very strong and positive results. we are not putting into question this. guy: thank you very much indeed for your time. we apologize for the poor line we have to paris. xavier musca.

frexitnuchin discusses and financial ties with the uk's philip hammond. what they discussed, next. ♪

matt: welcome back to the european market opened on bloomberg. i want to give you your highlights for the day ahead. at 9:30 u.k. time, we get jobs and wage data. mortgage application data out of the u.s.. 90 minutes later, and still on that side of the atlantic, we get inflation numbers, so new york time, that is 7:00, and at 8:30 a.m. is always difficult to deal with multiple times, but i think we can handle it. there is a function on the bloomberg which makes it very easy. i was surprised about that function, but it is there. always discovering. always discovering. matt: i will check it out. guy: i think you would be interested of all people. steve mnuchin has expressed his desire to strengthen economic ties with the u.k.. this is the phone call with the chancellor of the exchequer. till with us,

kokou agbo bloua from socgen. andu: a lot of the data information we are getting today seems to be more of a tedious pass to get a proper agreement and on the two, the likelihood of a proper hard recs it to be much lower today than it was a few months ago -- hard brexit seems to be much lower today than it was a few months ago. guy: let us talk about how the gilt market is going to play this one. how will it look at the inflation data which is softer than anticipated but still strengthening? you look at this out of the factory gate and it is definitely coming through. are we going to be in a situation where wages do not rise? rise, wedo start to get implemented at 9:30 this morning, then the bank will have to act? kokou: absolutely. that is where we get

interesting data, whether we get inflation and growth or inflation and no growth, because imports plus inflation hit consumer demand and cause a recession, or stagflation, but one of the things that will be interesting is to see the inflation data, because the sterling has fallen so much over the past 12 months, that it has to have some impact on corporate profit margins and their ability to past the higher costs to their consumer. matt: how do you invest in a stagnation situation? from a consumer standpoint, that is obviously scary. investoran look at that situation? sectorsook at banks and and that are exposed to consumer spending or you can just simply look at the bond market, and a , generally selloff speaking, but it is clearly going to be a highly volatile

environment, where equities, generally speaking, do not do well. matt: in the case of the european bond market, how would you play -- i mean, would you expect a rising rate environment qethe u.k. and a continued situation and europe to make it a difficult investing environment? kokou: i mean, one of the central scenarios from our economists is that inflation in the u.k. is likely to go faster than inflation in the e.u., so there is clearly a relative value trade between the inflation swaps in the u.k. versus european inflation swaps. one of the things that is very important is the world is completely interconnected, so there is a huge amount of influence on what is happening in the u.s., in terms of the fiscal policy, and the second point is the positioning from investors in terms of what they own today, the one of the key themes that is very clear is the great rotation out of fixed

income into equities, and that is something that is pretty much on the forefront of asset allocation and investor positioning and therefore investor pricing going forward. guy: let us think about how this all goes forward in investment portfolios. that is how you think about what is going on here. what is the bigger picture in terms of my investment? in terms of valuations? u.s. equity markets, european equity markets, where is the biggest spread differential you are seeing right now? kokou: today, the u.s. is making new highs, and one of the interesting -- from a valuation standpoint -- places to look at is european equities, and also japanese equities. because one of the things that is very clear is that the sector and style rotation has benefited value stocks or stock that trade

at a discount, and they are the most interesting equities right now. guy: plenty more still to come. what is happening with the riksbank as well. that story next, this is bloomberg. ♪

matt: we are back on the european market open with breaking news out of sweden's riksbank right now. we are looking for its interest rate and it will hold at negative half a percent, so the swedish central bank is going to keep it repo rate unchanged at a record low of minus .5% as it balances the risk of the over rapid appreciation of the and higher inflation expectations we have been discussing on the program today. here you see the riksbank interest-rate holding at -.5%. we will speak with the governor of the swedish central bank

later today on bloomberg television. don't want to miss that. here are some of the other stories we are following. why wait? the federal reserve chair says she does not need to hold off on rate hikes because of a lack of clarity on president trump economic policy. at. inflation data is due 1:30 p.m. gmt. u.s. treasury secretary steve mnuchin and the--uk's philip andond chat brexit -- -- and's philip hammond u.k.'s philip hammond discuss brexit. billionffering about $9 in european losses since 2009. what will he get out of the deal? an autospeak to analyst.

good morning and welcome to bloomberg markets, the european open. berlin.t miller in guy johnson alongside me at our european headquarters in london. want toouple things i mention. this is an interesting trend. the riksbank looking forward to that conversation later. , the riksbank probably capable and confident it can manage this process. the other thing i want to mention, we have movement on the south african rand big-time lira has beenish appreciating -- big-time. beenurkish lira has appreciating into february. that trend absolutely amazing considering the kinds of data we are getting. this is the turkish and employment number. it is now standing at 12.1% and it has been going up, up, up , and the data out of turkey

continues to deteriorate, yet the turkish lira continues to be bid. matt: yeah, very interesting, and we are going to continue to watch that. i mean, there are so many bilateral discussions going on right now with world leaders. of finance meeting ministers there, and then after that, i will be headed down to munich for a security conference. general mattis will be there, mike pence will be there, and then brussels, after that, focus on nato, so there are so many bilateral discussions that could affect not only the currency situation, but the global security situation as well. it is less than one month until, or exactly one month, until the dutch elections. the vote is getting global attention as it kicks off this year's busy political calendar in europe. traders stone i the outcomes of the brexit vote and the u.s. presidential election -- still with us is kokou agbo

bloua. do you rate the risk of dutch elections or are they just sort of a bookmark in the beginning of an exciting election season? kokou: well, i mean, we have the dutch elections, clearly, but you also have the french and german elections, and today, a lot of the positioning is clearly around the french election, around it 23rd for the first round and may 7 for the second round, so there is a lot of volatility and options around the first half of the year, because clearly, even though the polls have been arguing for the chances of the extreme right ,inning big, not as high as well, as the president we have seen with brexit and trump, no one wants to take any chances. matt: does it concern you when

you hear not only european leaders, but also corporate leaders saying they have no contingency plan for the possibility of a le pen win? as that something for what contingency plan is even possible? kokou: you have to remember one thing. banking systemve model, most national banks have to hold a big chunk of the because they are considered risk-free assets, so it is technically very difficult to set up a contingency plan as a result. our -- it 60% of i.t. in i.t.'s are owned externally? how you think they will treated over the next six months? kokou: if you look at the recent report by most rating agencies,

beingget the debt redenominated into the french franc, that can be considered as a technical default, so it would not be treated very well. guy: are people getting into the law, on french law, german where bond are written, how ultimately, we would end up dealing with this from a legal point of view? are people digging into that level of detail at this stage? kokou: i think clearly, some are already doing so, but today, it is more in terms of risk premium, where you see oag bundespread. today, there is more tell risk hedging, by productions on euro-dollar because the currency will, under a lot of pressure were that scenario to materialize. ranges areny trading

getting tighter. wouldn't you want more volatility? kokou: if you look at history as an example, volatility tends to get to increase as we get closer to the event, so i suspect the people to be around the 23rd of april, so one thing that is important to remember is if you go back to 2002 where you had le pen, the father, against she c, oned -- against chira thing that happened was that there was a massive rebound against the national front and to 80% as well. it is tough to make it clear production here. guy: stick around. plenty more to talk to you

about, joining us from socgen. if you want to join in the conversation, please do so. you can use tv , pick up on what is happening with the tv stream, radio stream, and also pull in some of the videos. you can ib the team directly. if you want to tell us whether we are doing a great job, you can do that. get involved in the conversation. that is what we would really like you to use that function for. there are so many opportunities to get involved, so many different subjects we want you to be participating in. which came api data out strongly yesterday. we have ep data coming out today . we will talk commodities after the break. ♪

matt: 40 minutes into trading, markets are up across -- equity markets are up across the board. this is the european market open. i am matt miller in berlin with guy johnson in london. i want to go to our top stories. nejra: starting with credit at a call, it was a slump in fourth-quarter -- credit agricole, it was a slump in fourth-quarter profits. they booked a write-down of their french consumer unit. that charge did not really have an impact on its solvency or

dividend policy. that is why we are seeing the stock gain and u.n. guy did speak -- and you and guy did talk about this. rating thisre judge type of risks. they have been impressed by previous episodes, notably the brexit, like i quoted a few minutes ago, and they are now .lways looking for the worst i am convinced it will not happen, and i am convinced france will stick to a reasonable policy. muska -- he was speaking exclusively to bloomberg. sinceares rose the most april 2016 at one point, and operating profit for 2016 was a

beat led by a sales gain in asia and it is about the forecast because heineken forecast further increases this year for both sales and earnings, and on the downside, i'm looking at one of the worst performers, down 3.7%. at the moment, the shares have dropped the most since july last year, so what we saw was a fourth-quarter revenue miss and down 4%. the company did say it is bracing for some increases in raw material costs. matt: thanks very much for that. nejra cehic with a look at your stocks. the bloomberg business flash with sebastian salek. sebastian: a 23% increase in fourth-quarter profits. the state-controlled dutch lender said underlying net the state-controlled dutch lender said underlying net income rose to 333 million euros. that was helped by higher net interest income and lower

provisions for risky loans. softbank is buying alternative asset manager fortress investment group for $3.3 billion in cash. fortress -- they have agreed to continue leading the business, which will remain based in new york. fortress will operate independently within softbank even at the japanese company develops its own investment fund your general motors shares closed 5% higher in yesterday's new york trading after bloomberg revealed the psa group is flying isuisition of the -- considering an acquisition of the business. a you casas ors brand. this is your bloomberg business flash, matt, guy. u.s. inventory data, it inventory data shows crude stockpiles expanding. more data today. bloomberg markets: middle east anger yousef gamal el-din -- anchor yousef gamal el-din joins

us. yousef: it gives us a bit of a health check on how the opec non-opec agreement has cut back on the industry overhang. in terms of the data, pull up the chart and take a closer look. the api is said to report a bill of 9.9 4 million barrels last week. your mina blue is a reference line. that is the price of wpi. that is the critical line. u.s. crude inventory. you can see toward the end of last year, take a look at that site. your inventories are building. the highest levels, highest level in three decades. the inventory dr drawdown not happening. what is interesting to point down is that we have comments from the vice-chairman of ihs market and he is saying the higher prices following the opec cut will help u.s. production

growth by 500,000 barrels per day is here and he is forecasting 50 to $60 per barrel by the end of 2017 he would also, the latest move from the obama era anticorruption role which force the oil and gas companies to disclose payments from foreign governments. that is arguably going to play as well into the cards of u.s. oil producers. guy. matt. matt: thanks very much. yousef gamal el-din, bloomberg markets middle east anger joining us with a look at oil. we see crude trading down today. wti below $53 per barrel. brent below $56 per barrel. joining us, kokou agbo bloua. do you expect jane real movement? do you expect any real movement? do you expect us to break out of it for any reason or does opec hold us in? kokou: i think we are likely to

stick in the range and that is consistent with our strategy because one thing to bear in mind is on the one hand side, you have a stronger pick up in the u.s. activity, which should be bullish for the oil price, but on the other hand, you have the expected supply coming from oilshale gas and shale drillers which should put a cap on the oil price, so that is going to be an interesting range trading environment for the oil price and clearly different from what we saw last year, where we saw a lot more volatility in the oil market. matt: are you think trump policies will have an effect on u.s. production? i mean, he does seem to be making a lot of rulings in this area, especially with regards to the pipeline. yes, this is clearly if it gets through and gets a proper approval, probably going to increase supply, but one other thing to bear in mind is the border tax adjustment, as well, which is getting a lot of

traction. this is a program where import into the u.s. could be taxed, and that could have quite a large proportion in that industry, particularly when it comes to profit margins, so i think the volatility around policies is also something that is likely to put a cap or at see the oil price trading and range before we get more clarity. guy: picking up on the border tax story, that is dollar positive, right? kokou: yes. guy: give us a sense of how dollar positive that would be. kokou: i think this is clearly going to increase inflation because import classes likely to go higher, and this has to be reflected to consumer spending to some extent, and therefore, stronger dollar. there is also an alternative plan, which is to potentially give companies the ability to capitalte their

spending in year one as opposed to the next four to five years, so that should create incentive createx and invest -- to capex an investment. wildly stay on the tax story, do you think we'll see any meaningful change in the deductibility of tax? of debt? kokou: i think this is precisely the point because they have to go hand in hand. one of the things that has been ongoing and you see this in japan, is financial engineering again where companies leverage their balance sheet, do share buyback, and increase earnings per share. that money is not reinvested in the real economy, so if they are able to change their reaction function and sort of kill the taxability of that, they are unlikely to leverage -- guy: do you think this will happen? this would be

colossal for various industries. kokou: i think it will happen only if you have something else upsetting the negative affect, because otherwise, it would be too detrimental and a single lot of sectors would have a lot of lobbyists lobbying against such a report. guy: pretty interesting. it would be interesting to get their thoughts on this. you are going to stay with us. you are going to join matt and i am a radio. we will be there very shortly. will be goingua to bloomberg dab digital radio. matt and i will be there in 10 minutes time to carry on the conversation. plenty more still to come. we have to talk about what is happening with the fed, the dollar, and this text stored. we probably have a very interesting break curve and that is telling us a lot of things. gm and happening with opal? i can see why they want this deal. eugeot get out

of this? ♪

welcome back to the european market open. general motors is discussing the possible sale of opal to

peugeot. ith us now is george galliers. why don't i start with guys question. in?does peugeot want werge: it is the question are asking as well. structurally, when we look at it, there are big questions. gm europe loses money, it burns exposure it has a big to germany, where 66% of its around 27% of its european production and as we know, germany is an expensive place to make cars, but it may see some near-term gains. firstly, opportunities for andrgies on capex white-collar jobs and in addition, as we look to the future and the investments

required in electrification, autonomous driving, mobility, you may believe incremental scale is what psa needs at this point in time. matt: does he get access to technology, because general motors has done an amazing job with electric cars. the volt was a breakthrough when it first came out. it looks to be an affordable breakthrough right now as well. does it get access to technology he did not get before the partnership? is the i do not know, answer. my suspicion is that gm would be very reluctant to hand over the technology and arguably the leadership they built around factory electe electric vehicled conductivity and onstar, so i'm not sure he would necessarily get back, but what he would get by having incremental units to the tune of around one million vehicles, of course, he has a larger number of units on which he can spread future r&d costs.

guy: how invested are these two companies in diesel? george: with respect to diesel, for gm, diesel has kind of been a bit of a sideshow. clearly, diesel is a very european thing historically. gm has been limited -- has a limited export opportunity on that. french centric. geisel was as high as 60% in the french market a couple of years ago, so they clearly are very exposed to diesel. the transitions for a lecture vocation, more importantly, just the gas engines in the near term is one which everyone is confronting. guy: is it a big problem for companies that have been exposed in france very briefly because of the high penetration rate? george: it is arguably may be a bigger challenge. they would have invested more in diesel historically given that that is where the european market was up until around two years ago. that being said, france, in

particular, psa, they fit the technology which essentially is the clean technology that volkswagen did not have. guy: george, thank you very much indeed. george galliers, matt and i will continue on radio. "surveillance" next. this is bloomberg. ♪

to wait. unwise janet yellen says the fed does not need to wait for a stimulus plan to raise rates. treasury yields, the dollar, and stocks climbed. strengthening the bond with britain -- steve mnuchin and stewart hammond talked. jobs data is due in half an hour. bosses from abn amro said they are not expecting their countries to leave the economic union. >> i am convinced it will not happen. i am convinc f