♪ markets,e to bloomberg the european open where we bring you the first trade of the day. i am anna edwards. rbs sees its ninth straight annual loss, but the cfo tells bloomberg he sees a return to profit next year. >> provided we can get through issues, particularly u.s. rbs, we think we will be firmly back making profits in 2018. mark: explaining brexit. we need depends team for answers on its economic plans.

is this a sign a national front victory is realistic. and a 60 billion euro brexit will, mp's strike back at the austrian chancellor's estimates at the cost of leaving the eu. program.o the this is "bloomberg markets: the european open." let's have a look at what the futures suggest we will be doing at the start of trade. looks pretty much unchanged at the start of the trading day. potential for some bigger markets, the ftse 100, the dax, negative. slighter not overwhelmed by positive earnings surprises this morning. a mixed back from a host of european conquerors. let's see the asian section. yes trillion sx 200 down by 8/10 of 1%. the asian session weighed down by moves in commodity related equity markets. that shouldn't take away from the fact we have seen the fifth

weekly gain in asian shares. global equities pushed over $70 trillion. a little bit risk off to what is happening over in the asian equities session. the commodities picture on the other side of this screen, iron ore down by 3.3%. we see a little bounce back in copper, but copper was weak yesterday in london and today we see weakness in iron ore in the asian session. a little reassessment taking place in those commodities. let's get the first word news with juliette saly. anna, thank you. u.k.'s ruling conservative party election in northwest england. it victory over the opposition labor party. last time a government won a state between -- between general election was in 1982. the labor party held the midlands constituency, which the anti-eu had hope and to take.

conservative party mps hit back at claims by the austrian chancellor that britain will be torged 60 billion euros leave the eu. in an interview with bloomberg yesterday, the first leader to put a value on the side of the brexit bill. while theresa may's office was muted in public comment, the warmings -- warming sparked senior parliament. top advisers to french presidential candidate are in the pen have met with strategists and analysts from several major financial institutions. barclays and ubs were among the companies that met the pen's --m as they asked blamed explained the plans to withdraw from the euro. this is the first time marine le pen's national plans have been approached. in the u.s., attorney general

jeff sessions has rescinded an obama administration order directing the federal bureau of prisons to phase out its use of private prisons. the move supports -- the impact of president trump's take on trying and deportations. malaysian police have set -- said a preliminary report that said a nerve agent was used in the murder of kim jong-un's half rather. -- half brother. the latet son of leader kim jong-il was murdered in a kuala lumpur airport. global news 24 hours a day, powered by more than 2600 journalists and analysts in more , this iscountries bloomberg. anna? juliet, thank you. rbs has laid out plans to cut costs by 2 billion pounds over the last -- next four years.

there will be job losses across the business. manus cranny just sat down with the rbs cfo. he started out by asking when the bank will turn a profit. richie: -- have been open that we have another tough year ahead of getor 2017, provided we can through issues. particularly u.s. rbs. we will be firmly back making profits in 2018. manus: which draws me to the question, will you settle? the first half of the year, have you any visibility for the market? ewen: nothing to report all relations to discussions with the department of justice, but we continue to cooperate and are hopeful that we can get through the issue this week. the other aspect of this set of numbers is additional cost cuts. mapped out over the next couple of years and an additional 2 billion pounds. where will that come? retail banking on investment

banking support services question mark -- support services? we have announced today that we are taking 2 billion out over the next four years. i think that is going to be broadly spread, but we have a very inefficient office infrastructure. of thegoing through all core processes seeing how we can simple find them, delivering better outcomes to customers. manus: well that involve outsourcing and job cuts? will probably not involve outsourcing. i think it means making our profits more efficient. manus: you came to market last week, the market rejoiced almost , the stock rallied. you won't have to sell williams england. is it a done deal with the eu, there is no way that this

potential deal can be undone? week it isw last clearly up to the european commission and treasury to talk about the proposal and see if they were supportive. we think it is a good outcome for williams and glenn. williamstcome for customers and employees in gets to a so -- solution much more than otherwise. what you say to those who say it could cost you dealing in terms of -- dearly in terms of businesses you may lose over the medium-term? accounts you might lose over the medium-term? what do you say to the market on understanding this deal. clearwe have a opportunity to improve competition out of the williams and glenn. we think this does deliver it in the best possible way.

we think working hard with treasury to develop that we would welcome support from this european -- european commission. thes: i'm interested in lending. i'm looking at 24 billion pounds. how strong is it? falters in january. what are you seeing on the front end of business lending over the past couple of months? robuste continue to see volume growth in our last year. 10% volume growth in our commercial bank, we continue to see good activity on the remortgaging side. on the business commercial side we are beginning to see signs of a slowdown. we are the biggest lender to the commercial sector in the u k. you can see a gradual slowdown consistent with the slowdown of

the u.k. economy. manus: the one reason that holds peoplef people back, the i talk 20 regular basis is they just don't feel they have got the visibility on the dividend. we talk about profits, where are we with visibility? you say, we will make a profit in 2018. we will settle our rbs, settle our william and glyn. yourou assure markets that intention is to pay dividends? we have four things to solve before we can talk about getting back to paying dividends. , we haveiam and glyn to pass the stress test and we have to make profits. we are on a path to get there with his statements today we are confident of making profits in 2018. that is a big part of getting there. we are confident we are back on a path of paying dividends. manus: finally, the bane of most u.k. bankers, ppi, payment

protection insurance. where are we on the latest numbers? am i correct to assume we are seeing the final moments of ppi doggedly hitting rbs? ewen: we took another 200 million pounds of provisions, that reflects a very conservative assumption about how long it may take until we have final guidance out of the sca. but i think we are getting towards the end of ppi provisioning now. anna: that was manus speaking to the rbs ceo. -- cfo. more lines coming out from the ceo. a reminder of what happens when things go wrong. also confirming there will be job cuts coming through in the introduction to the interview. there will be job losses around the business. will be fewerhere branches than the business has today. 7:40 in london. coming up, investors pour over

the u.s. treasury secretary's comments. we got reaction, next. les, the 60 billion euro brexit bill, that is what the austrian chancellor says written will be charged to leave the eu. we will have the reaction from mps. above bsf earnings coming expectations. of thek to the ceo company at 8:30 u.k. time. this is bloomberg.

anna: welcome back, this is the european open. that's have a look at the big business stories of the moment. here is juliette saly with your business flash. thank you. saudi arabia has said oil giant saudi aramco is worth more than $2 trillion. the industry executives, analysts and investors have told bloomberg their analysis suggests it is no more than half and maybe 1/5 of the amount. this means the kingdom would earn a fraction of the $100 billion implied by its valuation if it sells 5% to the public in 2018. and aramco spokesperson said the oil producer doesn't comment on rumors or speculation. unicredit has said shareholders have committed to 99.8% of its 13 billion euro rights offering. the bank pledged to buy 5.6

billion new shares and will seek buyers for the rest of the shares from february 27 two arts third. -- march 3. forecast 2017 earnings below analyst estimates as revenues slumped and losses widened in its french can now paid people -- tv unit in the final quarter of last year. this year, the media company predicts a more than 5% increase in sales and said it will rise by 25%. that would put the measure at euros -- million compared to the estimate of 968 million euros. china has reported financial sector -- as the new banking regulator. retiree.eplace the this appointment was announced

internally to staff earlier today. credit suisse a need to find new who to serve clients generate as much as $750 million of revenue as -- at its u.k. subsidiaries. it has been warned that losing access to european markets would , which have to 50% a revenue base of $5 million. banks struggle to quantify brexit risks to their business because so many -- so much is unknown. that is your bloomberg business flash. anna? juliet, thank you. investors have been pouring over steve mnuchin's comments. the details of the new administration's plans remain thin ahead of trump's address to congress next week. the french election rattles on with no clear outcome inside. joining us with some market

insights, mark, bloombergs macro strategist. it to see you this friday. what are the big takeaways from what munition was saying? important insight into the timing around fiscal stimulus. absolutely, a broad array of diverse comments. to --urrency manipulation the biggest takeaways were that stimulation -- stimulus won't economiesa -- u.s. and that will -- hopes of what trading has been since november. to haverm, he is hoping implemented by august. even that seems aggressive. tax reform is not coming imminently and stimulus is not going to boost the economy this year. two big takeaways that should be a surprise to the market. anna: interesting comments from steve mnuchin and import timing. was saying that one of the reasons the fed is not in

any hurry right now to raise rates is uncertainty around trump's fiscal plans. what you and steve mnuchin have said, that uncertainty could last a long time. absolutely, i think that is why there is very little chance of a hike in march. the debate around may or june is more important. we make it more uncertainty in the year that delays it further. i understand why most investors have this as the base case. but march is unlikely with the lack of core pce above inflation terms. anna: at least we will have heard from trump's team about the budget plan, even if we don't know about what they can get to congress. given the comments from minutiae are we seeing in markets? the dollar is a little sluggish this morning. mark: after the comments yesterday, we saw the dollar weakened and u.s. yields come off.

it has been quiet in the asia session. yields we saw -- it was commodities coming down, iron ore and copper coming off. , these thingsee have more to play out. steve mnuchin plays another blow to reflation trade. you will see dollar company lower, yields come lower, commodities trade lower end may even see -- may even feed into resilient equities. anna: how does the slowing to european assets? on the one hand, the trump stimulus and on the other hand, it is the risks around the european political calendar. mark: a big theme of the last week has been the rising political risk in france that has been wearing on european assets. the euro has been particularly week in the last week or so. and you are seeing steve mnuchin giving a fresh negative impulse to the dollar and yet the euro has been very weak. trendlineding up this

, around 106.15. not only is it the downward trendline, but the level we opened the week. all of this negative news in europe, if euro-dollar can close, that will be a bullish sign. euro-dollar is the best to watch in this transition from european tress -- stress to u.s. stress. we have seen researching commodities of late. price comingre off. copper under pressure yesterday. aestions around china, taking step back from conviction traits there? mark: i think it is less about china. it is a long-term story. are very large stockpiles there already. what we are seeing in commodities is a little tired theme of reflation trade and slowly the economy -- commodity complex is falling one by one. we saw bags get a little softer.

oil is still up there but failing to break through the high. byare seeing commodities one one slowly start to come off and the whole bloomberg commodity index is moving lower the whole last week. anna: mark, thank you. context around the week. thank you very much, mark cudmore joining us. you can follow inside from mark and the team on your bloomberg. are minutes away from the open. up next, a look at the movers in today's trading session, including rbs. thatcost cuts from business. this is bloomberg. ♪

♪ anna: welcome back to the european open. just minutes from the start of the trading day. stocks we had been watching today. thanking and chemicals in this condition of stocks to watch. let's look at the rbs story. they are planning to cut more, rbs planning to cut $2.5 billion of costs after a night straight loss. -- ninth straight loss. it posted its ninth straight annual loss. mired iness is still

past scandals. almost a decade after rbs was required -- acquired through a 45.5 billion pound bailout from the u.k. taxpayer. it has been battling to draw a line under charges tied to regulatory -- the bank william afteryn conceding units massive cuts in the boston line. the net loss widened to 6.9 billion pounds from 1.9 8 billion pounds a year earlier. the chemicals spacex back in profits to grow as the world's biggest chemicals expands into the fast-growing asian markets and benefit from that -- gripping the aggro industry. we've got at least three big mergers planned in the space. looking for regulatory approval. what is basf up to? we heard about their earnings and we are speaking to the cfo at 8:30 a.m. u.k. time.

opening calls suggest weakness from basf. we will see where those shed -- chairs head. this is bloomberg. ♪

anna: welcome back. this is the error up you know let us have a quick look at the futures, just a minute away from the start of the european equity trading day. thelast trading day of week. europe stopped pretty unchanged at the start of friday's session. a bit of downside the ftse 100 and the dax, weakness. theme, aof the overall handover from asia has been weak. the asian equities session down by half a percent by the close. to put it in the broader context, this is the fifth weekly gain that pushed the equities, so if we are seeing weakness at the end of this trading week, then the overall story of recent weeks has been of record highs

on u.s. equities and global benchmarks as well. weakness at the start of trade. we will be keeping at eye on rbs. european equity markets just opening up for the last trading day of this week. let us get to nejra cehic, watching equities and guilt. nejra: i'm starting with the gilt market, opening up right now alongside european equities. the 10 year treasury yield has been pretty unchanged this session. we have not seen a huge amount of movement and european bond market either. that 10-year gilts yield dropped some five basis points. we ended at 1.15%. we'll see how this opens up right now, yesterday's move that we are seeing. not quite seeing the shift. is it going to verge? the imap and see the distribution of how industry group that performing.

interestingly, taking the cue from asia with material thoughts leading the losses down .3% there. consumer staples also weaker on the upside. real estate seems to be leading the gains, so we are seeing a little bit of a mixed picture over on. -- overall. notfutures were indicating much change. weakness in asia. if you look at the broader picture, it has been quite a bullish one. the valuable equities pushing above $70 trillion. asian stocks with five weeks of gains through the stoxx 600 heading for a weekly gain as well. i wanted to highlight this chart which shows the stoxx 600 and investors in a bullish move with above itsmark trading 50 day and 200 day moving averages. interestingly, the msci pacific trading above 70 on the rows of strength index, suggesting it could perhaps be overbought. not the same for european

stocks. that rsi is below 70, so perhaps, this rally still has further to go. it does not look like we are moving at on the gilt yield, or perhaps we are down two basis points, 1.13%, finally moving. anna. you read opening moves off of friday's market. let us have a quick look at some of the movers in today's session. by .1%.down rbs outpacing those losses, 1.8% lower. pulling back, 1.3% as i speak. iag, up by from 2.6%. pearson out with numbers. that stock is up by 1.9%. basf down by 1.7%. we will speak to them later on. the royal bank of scotland has a plan to cut costs by 2 billion pounds as it posted its ninth

straight annual loss. .ere is richard partington also with us, patrick armstrong, at a company. when will rbs report a profit again? comments on the interview manus cranny gave earlier on. that by 2018, rbs should return to statutory profit, something they have not been able to do since the crisis . they have posted about 50 billion pounds in cumulative losses since that time, so this has been a real difficult, painful turnaround for the u.k. government, which owes 70% of the bank. light is there at the end of the title where we will see hopefully it managent corrects a profit best management corrects a profit in 2018.

see if management corrects a profit in 2018. >> they probably have got a sustainable return on equity, 5%, 6%. once they get more profitable, we are more attracted to the french banks, 3.5% dividend yields. we think very good value in france and you get paid to wait while nothing happens. no dividends. anna: not so impressed by the probability of the bank, but on the subject of the dividend, they still have hopes to return to paying them, don't they? >> the management has said previously they will return capital to shell hotels -- shareholders, a measure of financial strength which is key to the dividend. they are above that at the moment, but they cannot yet pay back any money to shareholders because they are blocked from doing so by a european commission mandate to sell this

business called williams and glenn. they have a new deal they are trying to put forward with the ecb, but no news on that until at least the fourth quarter, so i think investors are looking at that. settle a massive charge in the u.s. over mortgage-backed securities. that could loom into $10 billion or more. those two key items they must overcome, full clarity on when that will be, -- e&p, socgen, two of the french banks you like, and you like others in the eurozone. what is it that they do? a cost problem? richard: it is more profitable. >> the banks are incredibly profitable and france, but much more profitable than the u.k. banks, paying dividend yields. it is a function of interest rate margin and lower cost base. anna: i was and to sit comments

about the u.k. economy. the u.k. economy has been doing better than many people expected in the wake of the brexit vote, but there was downside to come. when you think about the problems this bank has faced even indecent times for the u.k. economy, that would be the last thing they need is weakness on their home turf. >> the bank of england is forecasting for a falling gdp next year. we do not know exactly how things are going to play out with article 50 being triggered by theresa may in the coming months. what happens to the uk's economy is a big uncertainty. we are entering into a relative position of strength. we come through the brexit vote in june much better than people thought that the u.k. economy royal bank in a reasonable position given that it is focusing on the u.k. economy and that is performing ok for now, that we'll see how it goes. thea: you look at

eye-watering -- >> one of the reasons they are taking huge provisions was so that 2017 would be a much cleaner year for them. they are trying to put these issues behind them but they do not seem to go away quite yet, but they are certainly, we hope, getting there. anna: with all of these issues surrounding the bank, some people are undoubtedly asking about the future of the management team and the ceo saying i hope to be with the bank and 2018. would like to see his strategy concluded. interesting comments coming through from the management there. richard partington and patrick .rmstrong he stays with us. his thoughts on other parts of the investment universe in the rest of the program. after bloomberg interviews u.s. treasury secretary steve mnuchin , we bring you the take away marketves the applications. that is next.

the 60 billion euro question. austria's president tells bloomberg the u.k. faces a huge brexit bill. how much of anything sure the you can expect to pay? ubs blackrock and barclays have met with the national front leader. how seriously should you be taking the policies? all of that is coming up on this program. this is bloomberg. ♪

anna: welcome back. this is the european open. 10 minutes past 8:00 this friday morning. this is the picture as we head towards the end of the week. the ftse 100 is pretty flat, as is the stoxx 600. let us get to nejra cehic with some of the members in today's session. -- movers in today's session. nejra: a big week for u.k. bank earnings. royal bank of scotland, a ninth straight annual loss for rbs. it also delayed its possibility target. twos however announcing a point 5 billion cost-cutting plan. we also spoke to rbs's cfo earlier this morning and he spoke to us about the bank's returned to profit. >> we have seen actually quite open today that we think we have got another tough year ahead of us for 2017, provided we can get through issues, particularly u.s., rbs.

we will be from the back making profits in 2018. shares down just over 2% at the moment. one of the biggest losers on the stoxx 600 is jupiter fund management. 4%.ax profit is up the total dividend increased by 7%, but what investors seem to be focusing on in terms of these losses this morning are the outflows, so some outflows numbers coming out along with most profit numbers, pushing the shares lower down 5% at the .oment, but also basf down 2.8% another one of the worst performers on the stoxx 600 at the moment. interestingly, declining despite the fourth quarter profit net analysts estimates and the company said when he 17 is -- company said 2017 is expected to be lower. anna: steve mnuchin says he is willing to wait for the result of an april treasury report,

before labeling china as a currency manipulator. what he said regarding china and currency manipulation is that no decision is coming at least until april, when of course, this is one of the two report the treasury department releases in april, and october, andy year regarding nations currency manipulation, so they are going to wait until at least april until that happens. two other points you mentioned was that he seemingly eased market concerns about the potential for a partial government shutdown at the end of april. obviously, the government needs to get some type of partial funding government bill passed by april 28. secretary mnuchin told me people use extraordinary measures to make sure that the government tends to be open, but he hopes that we have hurt any kind of showdown that we have seen in the previous administration, and then, the last point i would

make is i asked him about where this administration stands on the border adjustment tax. he was noncommittal. secretary mnuchin told me there are aspects to it the administration likes and aspects the administration does not like. another thing that secretary mnuchin told me is that they are still filling out this team. they will be naming over the course of the next month someone to chair the council of economic advisers. that is a key post that a lot of economists view as someone to look at economic indicators as they begin to craft policy that toldtary mnuchin me that after that person is named sometime over the next month, this administration views its economic team as being complete. dallas kevin cirilli, bloomberg's white house reporter on that conversation with secretary mnuchin. patrickth us, armstrong. we will have to wait and see. i have this great chart,

patrick, btv. it basically goes to underline the importance of china in the u.s. trade deficit story. that is what the yellow blocks are here, and really, this is why china matters so much and why they need to get it right this call. patrick: they are probably will think it went 5 trillion dollars in treasuries, so the trump administration will talk about the deficit, but they are largely funding u.s. spending and creating capital flowing into the united states, so it is a two-sided coin. it is offsetting benefits as well. anna: they also want to do at the structure spending as well. they will need someone to pay for that. patrick: issuing 50 and 100 your bombs on the horizon, china and japan looking to buy those, if anyone is. 100-year-old bonds on the horizon. china and japan looking to buy those, if anyone is. there will be billions of

capital outflows if they let it flow. you may not get what you want if you label them a manipulator. anna: lots of people sitting in the chair has told me china is manipulating its currency, but not in the direction trump thinks it is. we have a great chart which shows perhaps citation stating around a fed hike in march. ever since he got the minutes and before the mets, people seemed to be putting on bets in the futures markets, hawkish bets. of we are seeing covering those are to have that full screen graphic we can show. week, yellen was talking quite hawkish sleet, and then the minutes came out and showed more uncertainty. they are not likely to do anthing in march, with inflation number that will come out before the march meeting. may and june, much more likely. we do not think anything has changed too much. we expect three hikes this year, starting off in june, september, and december and that will pave

the way for a very strong dollar. expect three hikes this year, i have got eight dollar chart here that asks -- a dollar chart here that asks is the rally over for now? we are looking at what you say will be three hikes. patrick: two hikes priced in right now and we think it will be three. we think the dollar strength is going to peek out in june. why would you want to own the euro while going into a le pen potential victory, a fed hike coming in may or june most and quantitative easing in the united states is coming off the table. they will be discussing that through 2017 so you have the ecb negative and quantitative easing for the whole year. anna: political risk, but you don't think maybe that is overdone a little bit? patrick: it is not smart to say it is overdone. i was ron brexit, trump, and le pen, i do not expect her to get elected, but why would you

really want to make that bet until june? anna: everybody learns a lot about the forecast in 2016. cio.ck armstrong, up next, a 60 billion euro brexit bill. what the chancellor told bloomberg the u.k. will be charged to leave the e.u. that is coming up next. this is bloomberg. ♪

anna: welcome back. this is "bloomberg markets: european open." has said: saudi arabia saudi aramco has worked more than $2 trillion. it is worth no more than half. this means the kingdom would earn a fraction of the $100 billion implied by its valuation if it sells 5% to the public and 2018 ass -- planned. has said -- it secured 1.6 billion new shares and wealthy buyers for the rest of the shares. vital to the turnaround plan.

revenue slumped and losses analned as cannot loose -- c plus predicts more than 5% in sales. that would put it at one hundred 5 million euros compared with the estimate of 960 million euros. a financialpointed expert as a new head of the banking sector. that is according to people familiar with the matter. he is replacing a man who is retiring. it was announced internally to the staff later today. credit suisse may need to find new ways to serve clients to generate 750 million dollars revenue at its u.k. subsidiaries in the event of a hard brexit. chief financial officer has warned losing access to european markets would endanger 10 to 15% whichome at the two units

have a revenue base. banks have struggled to quantify exit risks to their business because so many unknowns surround britain's future relationship with the e.u. and that is your bloomberg business flash. anna. politicians have slapped down a claim that leaving the e.u. would cost 60 billion euros. the austrian chancellor became the first e.u. leader to put a value on the u.k. brexit bill. governing conservative party mpe duncan smith and the u.k. reacted strongly. he said, "this year is nonsense made up why officials acting like children." we paid so much into the e.u., we are pretty much bought -- would pretty much bought the restaurant. cio stillmstrong, with us. we have not seen article 50 triggered yet. can do any negotiating

around it because there is nothing to negotiate just yet, this horrible limbo. patrick: only one month away until we get article 50 triggered, but it will be months of posturing and setting out additional bargaining positions. i think the e.u. it's really incentivized to create some uncertainty because it will lead capital flows out of the united kingdom, maybe we don't of omiciling.may be red they are waiting for some uncertainty right now. the counter is if you take it to the wire, you risk financial uncertainty. the interconnected nature of financial markets. so those arguments on the -- arguments will know -- will no doubt be trotted out. patrick: i do not think there is any real impetus to create the need to get to something that will be agreed. a transition period will be

anticipated because nothing gets done in two years. also, you will not want to influence elections. frexit andluence a you have the german elections oming up, so we are q4 before you get to something. what happened that we start to get something that looks like certainty for u.k. businesses? patrick: sterling, i would look at. is where i'm concerned. i think we have seen sterling fall a lot. making near all-time highs. the ftse 100 has multinational companies. the ftse 250 much more , cyclical,y focused with the domestic slowdown that will come from a clean brexit. it will have economic uncertainty and the cost. the ftse 250 is honorable right

now. reasonhat is part of the to reconsider whether that can be maintained. we had comments on the rbs cfo talking about it in their business. they do see a gradual slowdown in the u k economy. -- the u.k. economy. ,atrick: interest rates are cut and the u.k. economy has been resilient because there has been no real consequences yet. it is about potential confidence is. i think there will be confidences and that is when you see a hit to the cyclical assets and the united kingdom. anna: worse than anticipated retail sales in the u.k.. is that the weakness coming through into the u.k. consumer story? patrick armstrong, cio your you stays with us on the program. it is 8:26 in london. we will stay to the ceo of basf about the fourth quarter results that that company has delivered. plenty of m&a happening around the afs isy, but

plowing a different borough, taking a different approach to the business. we will talk to the ceo and a moment. this is bloomberg. ♪ with x1 you get the best of the oscars.

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anna: rbs sees its ninth straight annual loss. the cfo tells bloomberg he sees a return to profit next year. >> provided we can get through issues, particularly u.s. rbs, we think we will be firmly back making profits in 2018. anna: explaining frexit, ubs, blackrock, and barclays, they need the pens team. is this a sign a national front victory is realistic? a 60 billion euro brexit bill. a strike back cost for leaving the e.u.. good morning, and welcome to bloomberg markets: european open. i'm anna edwards. let us have a look at how we are

trading across european equity markets. a bit of a negative picture for the end of the week, the stoxx 600 down by .8% or so. the ftse 100 fairly fat. dax and cacc -- down .5%. we will be looking for an update on that turnaround story. the moment, let us turn our attention to basf. said since 2017, it is expected to be another year of growth for earnings. joining us now from germany to dig deeper into the numbers and performance of the company, kurt bock. ray to have you on the program as always. i want to ask you about your asian expansion. the asian part of your business seems to have done well for you recently. how sustainable is that? what visibility do you have?

good you are right, very growth in asia in 2016 three good volume growth, in many important industries, particularly automotive industry is an particular in china, double digits. you have to be a little bit more careful for 2016 because there are some incentive programs of the automotive industry in china that continuing to 2017 that probably means that growth rates will come down a little bit, but more importantly, in our case, we have invested a lot over the last couple of years in asia to and i'm businesses quite confident we will continue to see good growth into 2017. anna: growth in asia is part of the story and cost-cutting it has been part of the story for your business. it looks like you have achieved the target you set yourself for this past year. how have you got about doing that, how have you delivered greater cost costs -- cost cuts than anticipated? kurt: these are very disciplined

starting early in 2016. this is really dish -- this has really hurt us a lot. most of our chemicals grew very likely. we knew oil and gas would be part difficult and even in oil and gas, oil price much lower than 2015. we ask for positive cash flow, meaning it could pay for all of its investments from its own cash flow, and i think this is a very strong sign for that particular business. anna: how sustainable is this approach to cost-cutting? because some analysts have suggested that your approach rather than the flashy m&a we the elsewhere in the chemicals and agrochemicals around your approach is cost-cutting. how much can you continue to deliver on cost from here? we get the same question all the time. this never stops. it is a little bit of a grind.

we all know this, but taking out cost is an underlying the society for our -- underlying necessity for our businesses. this continued going into 2017. toe importantly, surely, is grow the businesses. we had good momentum in q4 that continues into q1, so i'm quite optimistic about the first quarter. that would really fuel our earnings growth in 2017. agrochemicals business, you are going to face a very changed competitive environment, a host of deals being put together, looking for regulatory approval. do you think they will all go through and how will basf respond? first of all, the ag market in 2017, 2016 was quite difficult. the environment is not really a very benign one, however our business did quite well.

we have a good innovative business. would we like to make a bigger? sure, if there is an opportunity to apply or other businesses. we will look at it. we are confident with what we have today. anna: can you see yourself spung assets that might be off to meet competition regulations as dictated by gary is competition authorities as these deals to put together? kurt: that might be an opportunity to take a look at those assets if they come -- when they come to the market, but this is all in a very early stage. anna: let us hope about your oil and gas business then. falling 62% on lower oil prices. you have that part of the story in your portfolio at the asf. i think 2016 was a transition year. first of all, we filled our gas 20 business -- trading business

and we had steeply declining sales on top of the decline of the oil and gas prices. in 2017, most likely, we would see better prices. we have very good cost management in oil and gas, and we have slightly reduced our capex spending. with that, this should be a good earnings. levelr, at a much lower than we had just three of four years ago. nobody out this point in time that we have oil prices, where they will be three years from now. i think it is prudent to manage the business very consciously. anna: no plans to spin off the oil and gas business, then. kurt: nope, no plan. [laughter] that very short answer, question. the me talk to you about the

geopolitical backdrop to doing business in 2017. of course, we have president trump in the white house talking a lot about globalization. perhaps come up posing threats to companies such as basf. is that something that features in your boardroom conversations? kurt: it certainly is a hobbit of concern because we are a global company and we relied on global trade flows. our concern has been to where our customers are. this is an ongoing strategy. we are almost self-sufficient in north america. we export more than we import, so if president trump would tax, the netorder effect would not be negative for bsf, however, our customers might be exposed, and i think we have to make sure that protectionism does not grow around the world. we have seen some tendencies not just in north america, but also in asia. countries believe going it alone

is more successful, which from my point of view, is completely wrong. anna: great to get your thoughts today. thanks so much for joining us today at bloomberg television, kurt bock. breakingve a look at numbers we have got coming through. more news from the banking sector. $1.09 billion. that was against an estimate of $1.42 billion. they missed the estimate for adjusted pretax for the year. 2017 operating conditions remaining challenging. standard chartered under pressure as a result of the adjusted pretax misting estimate. -- missing estimate. $2.3 billion. that is better than previously. we had previously had a number of 4.0 one billion. a significant improvement in the financial business being required at the business. no ordinary share dividend is declared for 2016. that is another one of the

comments coming through from the company. bill winterstered, is the ceo there. he has been leading this effort to stem the banks losses and try to restore the dividends, so no such progress as yet, and standard chartered down by just shy of 1% now. actually, .8% in the london session. up next on the program, banks care for le pen's your ubs, -- banks prepare for le pen. this is bloomberg. ♪

anna: welcome back. this is the european open. it is 8:42 in london. stocks on the move today. narrative had has that for us. -- nejra cehic has that for us. we got numbers from standard chartered. royal bank of scotland posting its ninth straight annual loss. that loss was not necessarily the biggest surprise. the company also laid out a $2.5 billion cost-cutting plan, the other thing it said is it was delaying its profitability targets. overall, that has resulted in a loss 2.2% on rbs. manus cranny spoke to rbs's cfo earlier this morning and he asked him about the bank's into profit. >> we have seen quite open today

that we think we have got another tough year ahead of us we can getrovided through issues, particularly u.s. rbs. we think we will be firmly back making profits in 2018. nejra: moving onto one of the gainers this morning, iag, owner of british airways, boosted its earnings. it would return 500 million euros to shareholders. that was helped by fuel costs is falling, but also by limiting its capital spending in response to brexit, so iag up more than 2%. vivendi down 2%, the biggest drop in months for this stop. 2017 earnings forecast missed estimates. losses widened at cannot please -- ata canal plus. anna: those numbers out tonight. let us get the bloomberg

first word news. sebastian: the uk's ruling conservative party with a victory over the opposition labor party. the last time they won a seat was in 1982. jeremy corbyn's labour party helped the midlands constituency. meanwhile, u.k. conservative party mp's have hit back at claims by the austrian chancellor that britain will charge 60 billion euros. in an interview with bloomberg yesterday, christian kern became the first to put a value on the theresaxit bill while may's office was muted. it sparked a fury of response from senior members of cabinet. in the u.s., jeff sessions has and obama administration order phasing out the use of private prisons. prison operators

rose in after-hours trading. malaysian police has said a preliminary report shows a nerve agent was used in the murder of kim jong-nam. it was found on the victims face and eyes. he was murdered in a kuala lumpur airport. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. anna: let us turn our attention to french politics. marine le pen has laid out her foreign-policy vision in paris. she calls for a world based on nationstates. to ensure france's independence and the french people, there is no price too high. in this framework, it is clear the policies of france are to be decided in paris and no ally, no treaty, no alliance will decide

french policies in its place. anna: advisors to the french national front leader have met to claim their economic program and plans to withdraw france from the euro. us.line connan joins is it very unusual van for bankers to be meeting with le pen's team at this point? caroline: it is not that unusual for them to meet with mainstream parties, but so far, the national front was not considered a mainstream party, so this clearly signals a change that this strategist from blackrock, ubs, barclays, our meeting with the pen officials. this signals they consider the pen as aisk -- le risk. she has promised to leave the the independence of

the central bank and create money in order to finance the government spending. now, the interesting thing is pen advisers-- le confirmed they have been in contact with the foreign bank, but they say they have not met with any executives from french banks. french banks actually seem to be much more we lucked end to talk pent hedging the marine le risk. executives we had on bloomberg over the past two weeks from bmp, socgen,le, all seem to be dismissing the le pen victory. they have no contingency plans for euro exit. was: i thought it interesting, caroline, earlier 'sis week, theresa may spokesman says the u.k. government does not agree with the anti-immigrant national front. to what extent are leaders

in europe -- macron's affected the polls? caroline: it has affected him. theins popular among french are two thirds of the french think the support of him for macron will be an asset for his campaign. this support has actually in the firsthances round by three points. he is at 22 .5% in the first round, so this is clearly a help for emmanuel macron. anna: thank you. let us talk with patrick armstrong, cio. he said earlier on when we are talking about comparisons with other parts of the world, you said, why would we that

against populist parties in europe when people have come on unstuck? patrick: it is a very cheap hedge, 1% deals is what it cost. it is unstuck? anna: this shows the french advancing away in terms of yields from the german 10 year. because of the risks around the french political story. we have seen that oscillating a little bit around the news flow, really, and that is what we are coming down to. every day, the news flow is moving. patrick: french bond yielding just below 1%. .2, .3.yielding around

it is a good thing to be short right now if you are worried about these type of populist votes. anna: are you making any bets on the euro and were that heads amongst the political events on the calendar in 2017? patrick: better economic growth, said hikes, and the end of quantitative easing in the united states against political risk. there is a lot of fundamentals working to create dollar strength. anna: even without those questions, you are happy to be sure of the euro? patrick: you don't get paid anything to be in euro denominated assets. you get paid to put it on in the fundamentals, which should create the currency movements. anna: e.on think it will condense the a -- you do not think it would convince the ecb

to take their foot off the pedal? patrick: it is reversing the situation the united states would be in. anna: patrick armstrong stays with us. up next, worth more than twice more?t a slight the value of saudi aramco. that is next. this is bloomberg. ♪

anna: welcome back. this is "bloomberg markets: european open."

let us talk about the commodities sector. oil giant saudi aramco is worth more than $2 trillion, enough to consume apple twice and with less over to buy off of that as well. to settlem may has for, a lot less. investors have told bloomberg their analysis suggests aramco is worth no more than half of that amount. in will kennedy, managing editor for energy and commodities for bloomberg news and patrick armstrong is still with us on set. good morning to you, again. why the difference of opinion then? the saudi's say $2 trillion. you have got others saying a different number. came from$2 trillion a calculation that the total of saudi arabia's oil was 60 'd by eightrels times dollars a barrel. they would look at cash flow is an discounting it like you would most other companies. when people start looking at it, they are thinking, no, that does not seem quite right.

there are a number of other factors. no one knows how the company will be taxed after the ipo. it pays adenomatous amount of tax to support the saudi government. and also, really interestingly, this is based on the reserves lasting for 70 years, but nobody knows what sort of value oil reserves will have in a generation's time. anna: how attractive does this kind of deal seem to you? patrick: the biggest overhang for me is that the state run enterprises nine the business of maximizing shareholder welfare that is coming from saudi arabia. saudi arabia is doing a little bit more to make up for the other side of things. they have geopolitical concerns, maximizing the oil price to short-term interest. shareholderasing value. that is a big hurdle to get past. we spoke earlier about, you know, if you look at comparisons in the center, trades below where it could have

done based on that eight dollars, because of government intervention. will: aramco is a first-class company. it has some of the best oil and gas company in the world and it really does stand up against the exxons and bps in these operations. that said, they are only going to sell 5%, so minority shareholders have 95% of the government sitting there. that does not give you much say in how the company is run, and it has not been a terribly happy experience for a lot of investors investing in state-controlled oil companies. saudi arabia is not a country without political risk, you know. there are a lot of risks in a country. if you're trying to value this investment over the long-term, that have got to come into play. anna: a lot to be aware of their. will kennedy from bloomberg.

patrick armstrong, thank you very much for joining us to stay with us. our next, it is "surveillance," a special weekly program. this is bloomberg. ♪

francine: brexit battle. the u.k. government hits bac k after the chancellor tells bloomberg britain has a bill to settle. theresa may's ruling party scores a historic election victory. we have the latest. frexit fears. ubs, blackrock, and barclays meet marine le pen's team for answers on her economic plan. is a national front victory starting to look like a possible reality? obvious lays out a 2 billion pound plan.