tv Bloomberg Daybreak Europe Bloomberg March 7, 2019 1:00am-2:30am EST
♪ >> good morning it from bloomberg's european headquarters in the city of london. this is "bloomberg daybreak: europe." these are today's top stories. growth concerns mount. the fed it downgrain's the -- on the u.s. economy and the ecb is set to cut its outlook. deutsche bank is set to slash its bonus call to less than 2 billion euros. some bankers could receive nothing. upping the ante. sues the u.s. government for borrowing its equipment -- barring its equipment from certain networks. the company said the u.s. should not play judge, jury, and executioner. ♪
good morning, everyone. welcome to "bloomberg daybreak: europe." it has just gone 6:00 a.m. in london. let me get you some numbers from a deutsche post. deutsche post is confirming its targets for 2020. full-year revenue comes in at 61.50 5 billion euros. the estimate was 61.19. that was a little bit of a beat on the full-year revenue. full-year ebitda in line with what analysts -- ebit in line with what analysts were expecting. a little bit of a beat on the fourth quarter revenue. we see better than expected numbers for fourth-quarter revenue and full-year revenue as well. t comes in at ebir
2.1 6 billion euros. it is meet -- 3.1 6 billion euros. it is confirming his targets for 2020 -- it's targets for 2020 -- its targets for 2020. i will speak to frank appel, the ceo of deutsche post, on the company's earnings report. we will discuss the trade war, the future for their scooter business, and of course i will also talk about those postal prices. let me get you some numbers from standard bank. there with me as i get -- bear with me as i get this up for you. standard bank, the red headline come up full-year adjusted eps, a comfortable beat on the full-year adjusted eps.
that they are seeing 2019 adjusted earnings up in the low teens range. full-year adjusted earnings, 2.4% above estimates. one thing i am seeing is there dividend of eu per shares is $.58, up 3.6%. finally, one interesting thing is that they are going to pursue further m&a opportunities. this might not come as a surprise to many people on the street, because at the end of february they had pointed -- ds.ointed a few m&a hea they are going to pursue those opportunities. makes sense, given all those appointments. nejra: certainly something i will pick up with the co-ceo. coming up, i will discuss mohammed al-jadaan jc decaux earnings -- i will discuss jc decaux and brexit with jean-francois decaux. let's get to the markets. we have seen equity markets take a bit of a hit on global growth concerns. of course, the data on the trade deficit out of the u.s., also some hiring data. we have the oecd downgrading forecast. 0.2%.utures down the 10 year yields falling
yesterday, too. handle,ow on a 2.69 down a basis point. the bloomberg dollar index taking a little bit of a pause. we are holding onto those gains. it touched the highest since february 15 at one point. if we switch the board to take a look elsewhere at fx, the euro very much in focus today ahead of the ecb meeting. cutofficials are poised to their growth and inflation forecast by enough to justify --ther round of tell jurors another round of counters -- 10-year btp yields heading the lowest since january -- hitting the most since january. the lira one of the worst-performing currencies in the session. yesterday we got that hawkish hold from the central bank.
we continue its weakness. we are on eight days of weakness and a closed the 200 day moving average on a dollar-try. we had the api data, then the eai data pushing oil down. let's get a check on the markets in asia with juliette saly in singapore. a bit of weakness in these equity markets today. juliette: yes, that's right. it looks like the msci asia-pacific index on track for its biggest loss this week. you can see a lot of the weakness reflected in the nikkei . , as weff by about 0.7% have seen this yen strength ahead of the ecb and u.s. jobs numbers. australian stocks have outperformed despite another week read on the aussie economy, with retail sales only rising by 1.1% in january. hong kong and chinese stocks coming off the recent run today.
we have seen weakness coming through in the indian market, although holding up fairly flat there. let's have a look at the stocks in focus, because of course huawei very much in the news today, suing the u.s. over its equipment ban. well,s tech space as renaissance the worst performer. it has fallen as much as 15%, the daily limit, on news it's going to close down some of its plants. we see a lot of money coming into asian securities. saw 22 securities firms come through with some pretty positive numbers. even though that index is oversold, still in love money going into chinese brokerages. ejra? isra: while weight --huawei heading back on u.s. allegations.
the smartphone maker is suing rringngton for ba its equipments from certain networks, saying it's unconstitutional to punish huawei without a fair trial. tom mackenzie is outside the huawei headquarters. tell us what huawei is helping to achieve -- hoping to achieve? >> this is part of a coordinated fight back by huawei. they are suing the u.s. government, saying that a congressional bill that was signed off last year was unconstitutional, that they were not consulted, that it affects the u.s. businesses and u.s. customers. this was after they suited the canadian government over their treatment all there -- they sued the canadian government over their treatment of their cfo. there is also a pr campaign by huawei. they have invited journalists down here, have opened up some
of their labs. they are trying to show that they are a transparent company, a private company without links to the chinese government. been one, the u.s. has a campaign to paint them as a major u.s. national security risk. they are suing the u.s. government. i sat down with their chief whyl officer and asked him they were taking this action, what they hope to achieve, and if they could really convinced that if beijing and knocking, they would say no. take a listen to this exclusive interview. we hope the u.s. courts would declare the section ruling invalid, letting huawei participate in fair competition in the u.s. market and bringing art and technology into the u.s. legal expert a last night who said the chances of success for huawei were very slim indeed. where do you think the chances of success lige?
is this more about messaging, ultimately, for huawei? >> i don't think our chances of winning are slim. we think we have ample evidence. i think the chances of success are high. >> how much has the congressional ban on huawei equipment cost the company? >> this case has damaged many aspects of huawei's business. we could lose existing projects as well as further opportunities. our partners may stop working with us, as it damages huawei's global reputation. >> isn't there an argument for just cutting your losses in the u.s. and focusing on other markets? the u.s. accounts for 20%-30% of the global communications technology market so it's very important. we hope we will have a fair chance to compete in it.
leaving the u.s. market is only a last resort. we have not considered fully exiting the u.s.. we hope to keep partnerships with our clients and take part in market competition. we want to continue bringing value to the u.s.. a reminder that this is about the development of 5g, which many have described as a new arms race. huawei is seen by many as having a lead on their competitors. the company executives is saying today that they think the reason they face pushback is because they have simply outcompeted some of their western counterparts. the u.s. would say that one ultimately push comes to shove, toaging were to ask huawei open up its systems to spy on adversaries, that huawei would have to do that under chinese law. huawei denies that and those debates continue of course. the company is facing critical charges -- criminal charges in the u.s.
lobbying bytinued the u.s. trying to persuade countries like germany and u.k. to block huawei. nejra: thank you, tom mackenzie. joining us now is senior european equity strategist for bloomberg intelligence to talk us through the equity markets. great to have you with us. we side a dip in u.s. shows yesterday. futures are lower. we are seeing some losses in asia. as well on global growth concerns. stoxx 600 closed. flat yesterday. how vulnerable are european equities from this point? >> it's an interesting time we are in. it's always difficult to say the easy money has been made, because late last year when everything looked like it was going to hell in a handbasket, it took a lot of courage to make investments. at this point we have had a big relief rally, obviously with
trade progress between china and the u.s. being the major catalyst. we have not had the earnings on impending -- underpinning has we have gone through the fourth eriod inresults p europe. , are: for the catalyst european equities dependent on positive headlines from trade, what we might get from the fed, more than they are on the earnings? >> at this juncture, because valuation has come back from what we would argue oversold and very interesting levels late last year to really more of a fair value based on our quantitative fair value model. we really need earnings drivers from here. we need domestic growth drivers and we don't have that.
from ours perspective, we have had the bounce. . now comes the hard work yes, u.s.-china trade is a big deal. that is more of a valuation boost from the sentiment perspective to really drive the market sustainably further here. we do hold hopes later in the year from the standpoint of seeing an inflection, we need to have that happen. two,, weinto quarter think we have got a. of time -- period of time where we have to start to see some evidence. nejra: does the dax underperformance continue? >> that's the poster child of all of this come in a way. -- this, anyway. q4 results have been very disappointing. industrials, autos have
all had issues. the dax has underperformed within that context. if you look at the relationship between the dax and other i business sentiment indicators, there is a pretty direct performance relationship. indeed, it continues to fall. that's one of those indications that we need to see an inflection. when we do, that will be ahead of earnings and we are happy to go ahead of earnings, but we have to got to see that indication. nejra: i want to talk about the u.k., too, because we are taking away towards that deadline. many people have said the u.k. is undervalued, that's a reason to buy. would you sit on that side of the fence? >> clearly it's all going to depend, from a near-term trading perspective, on what transpires with brexit. thereay like today where
is negative headlines coming from the standpoint of how those negotiations went, that may be a time to lean into the wind and when everybody is quite positive it might be a time to go the other way. fundamentally, again, similar to the overall european market, the valuation has come back from the dead. it is now approaching fair value, to us. if we get a softer brexit, an orderly brexit, which we still very much hope for, in one form or another, that presents a lagging issue, in our mind. it has too much international exposure with a somewhat stronger pound to perform really well. nejra: right now theresa may has outlined a brexit plan to outline a hard order with ireland but the eu is said to be pessimistic. thank you, tim credit aid -- tim. the ceop, we speak to
♪ get the bloomberg first word news with debra mao in hong kong. >> huawei hasn't suited the u.s. government. the action it -- has sued the u.s. government. it ismpany argues unconstitutional to single out a person or group with a penalty without a fair trial. huawei's chief legal officer says the company has never been asked to spy for china. business.is a we have never received any
request from any government, including the chinese government, to install any backdoors for intelligence. to do that would be committing suicide for a business. in the future we will alwso refused to take a request from any government in the world. >> european officials are reportedly as a mystic chances of a breakthrough in brexit talks this week. they are increasingly concerned about whatever they offer will not be enough to get the deal through parliament. the eu is reluctant to shift its position without more certainty. -- certainty it would help get the agreement of the line. >> on it just -- an investment fund manager alleges that -- these allegations follow separate claims that tight swedbank to almost $6 billion in suspicious transactions. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.
kong, debra mao in hong thank you so much. let's get a check on the markets. we see you weakness -- we see weakness in global equities. msci asia index down. now. holding the losses we were seeing it higher earlier. it has dropped for two days. the dollar meanwhile has been on a tear. six days of gains, hitting its highest since february 15 and yesterday's session. u.s. futures on the back foot following the drop in u.s. equities yesterday. cable unchanged. necessarilyearing positive signs out of brussels in terms of an agreement with the u.k. ad.ning us now is tim craighe let's pick up there since we have cable on the make a wall and ask you up -- mega wall and
ask you about the ftse 100 versus the mid-caps. how dependent is it on brexit? >> it's quite independent. if you look since the brexit rep -- dependent. if you look since the brexit referendum, there have been five streetof prolonged pound at various points in -- strength at various points in time. each of those times we have had underperformance of the msci, or ftse. the mid-caps are much more domestically oriented. they do not have that dependency on foreign sales that have the negative translation. nejra: senior european equity strategist from bloomberg intelligence. we have to get to an interview with deutsche post. they have met earnings guidance for 2018 and confirmed 2020 targets. full-year revenue just ahead of estimates.
joining us now is the ceo of it deutsche post, frank appel. great to have you with us on the program. you have confirmed your targets for 2020. . me start by asking you about global trade -- let me start by asking you about global trade. with 2019 be any more difficult -- will 2019 be any more difficult? frank: 2019, of course we have significantly less visibility of what will happen. i am still optimistic that we will see growth globally. it is still a solid growth and far away from a recession. yes, there is uncertainty. it is too early to judge but we optimistic. what we always a say in turn of the is we have to make our own homework and we did a lot of homework last year. we created the right base for good growth this year. that's the reason we are confirming the 2020 guidance. nejra: makes sense.
you said this week you plan to invest in your german parcel network, adding 1000 pickup stations. you are also hiring 5000 extra staff. how much is this all going to cost? less: so, you know, it's a cost investment and more a quality investment. we have seen some challenges last year with parts of our quality. we have seen already in the second half a significant improvement. we have seen tremendous growth. we still expect growth from 5%-70% on an annual basis -- 5%-7% on an annual basis. we invest in infrastructure like depots, outlets, and other kind of stuff. we are a premium provider in all what we are doing and we want to be the best in the industry with quality. i think we can do better. nejra: let me ask you about
street scooter as well and the future of that. would you consider outright selling it? frank: so we are always open for that consideration. we are very happy. we have increased our sales last year externally. we are using more and more internally. we had a very successful winter period now where we used 9 thousand st scooters in our own operations -- 9000 street scooters in our own operation already. if we can find partners to fuel the growth even further, we would definitely consider it. nejra: frank, i need a one-word answer. how much will is standard letter in germany cost want to hear back from the authorities? we are expecting a decision of some sort mid-march. frank: so i do not know yet. i would hope to know that as well right now but i do not. nejra: thank you so much.
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♪ let's bring you an exclusive interview now from the blackrock wealth symposium. eric, great to see you. take it away. >> good morning from zurich. rachel lord, the head of europe, middle east, and africa from blackrock and overseas is some 1.7 trillion -- $1.7 trillion in assets. it has been your job to prepare blackrock pre-brexit -- four brexit.- for
what if it does not happen? rachel: i will be absolutely delighted. i don't care, it's an insurance policy. everything we have done this to prepare for it to happen but i would be very happy if all that would be completely unnecessary. >> is that the likely outcome, given what's been going on in parliament? that the u.k. after all does not end up leaving the eu? rachel: i would love for the answer to that to the yes, but i don't think it is. i think we are heading for some kind of deal. i think the u.k. government has not managed to get any movement on the backstop, which is the real issue. i think we will inevitably have a delay and they will make a deal. i do not think that any of the parties will really put their weight he had a second referendum among which is the only way we actually do not leave. >> let's say hypothetically
speaking that there is a second referendum and the u.k. does not end up leaving the eu. how long do you think it would take for the british economy and financial markets to recover from the process? rachel: that's a really good question. if you think about what the process has done, it has slowed down everything that is happening in britain. very few decisions on jobs, the japanese pulling out, and so on. a lot of things have happened. i do think it would take a couple of years, at least. the question would be would people trust us again as a country? will the japanese still use britain as a conduit to europe? with the chinese eu's britain as a -- will the chinese use britain as a conduit? >> your feeling on that? >> they will come back or will not leave in the way they were currently planning to leave.
the u.k. economy, the tax system is very favorable. the worker laws are favorable and of course the english language makes it easier. >> well all this has been going on, fine -- while all this has been going on, financial markets in europe were supposed to be undergoing the biggest transformation. we are now almost 15 months into the new regime. how would you evaluate the impact so far? rachel: a lot of scrutiny at the beginning was about what does this do to training, market structure. the scrutiny today is what does this do to cost transparency. that we have not seen yet, because the statements that will hit investors doormats or a mailboxes that tell them -- whereboxes that tell them
to invest in all different kinds of products, they have not been released yet. the park around research entry -- part around research and trading has been relatively benign. i think as an industry we did a good job in preparing and regulators across europe have been very helpful in making sure that as we go through reporting, -- mifid ii reporting, the rules are unbelievably complex. that actually how those get implemented. there has been some forbearance to make sure the industry, there was an agreed standard, they were given time to come up with whatever it needs -- whatever needs to be done. >> is blackrock have an idea of what it would like to see changed about mifid? rachel: it's not necessarily what needs to change. it's the customer side of the mifid ii regulations. is it going to be effectively
regulated in the same weight across all of europe -- way across all of your? they cap -- all of europe? dowhat else could regulators to make european financial markets more competitive? rachel: well, you know, making union, continuation of capital -- banking union, continuation .f capital markets union enables companies to raise capital more efficiently and for investors to put their savings to work more efficiently. pan-european pensions, which is something that is coming. that will be very important. those kinds of things. >> it is international women's day tomorrow. i know you have been deeply involved in blackrock's efforts towards more diversity and inclusion.
what about what's going on at blackrock's portfolio companies, the companies in which blackrock invests? to what degree do you feel it's your responsibility or the firm's responsibility to apply pressure on those companies to take more action on diversity and inclusion? rachel: pressure is an interesting word. i think what you can do is encourage. you cannot create women that do not exist and in certain countries women simply are not at the level in terms of their professional experience to have a deeply -- to deeply penetrate senior levels of executive management. in other countries, that is not true. in america and britain there is a lot more women at senior levels been one would usually one would usually see. you can encourage by sharing best practices, coming up with
things like an inclusion and diversity etf, which we think will outperform the benchmark index you would otherwise invest in. mary has spoken a lot about the need for -- larry has spoken a lot about the need for women on board. we are trying to use advocacy as opposed to pressure. >> on issue that often gets lumped in with the diversity and inclusion is sustainability, fairly or unfairly, but it happens. sustainability is one of blackrock spire is in europe -- blackrock's priorities in europe. how big of an opportunity is that? how big is that here? rachel: you have to think of it in two ways. one is as an asset class, and the other way of looking at it is, what are the things that go into sustainability?
things like environmental factors, social governance, impacts that altogether get bundled up with sustainability, including inclusion and diversity. step back for a second and think, what is it that an asset manager does? we assess the risks in companies and make decisions in investing based on those risks. how could you not assess the risk around if a company is sustainable? does it have a social purpose, does it have good governance practices? does it pollute the environment? if you think about it in that way, it's also about helping portfolio managers and investors to come up with better ways of accessing and being able to predict -- assessing and "to predict the sustainable value -- being able to predict the sustainable value of the company. >> that new way is not being applied formally across the continent. rachel: it is not.
just the way that traditional stock pickers do not all pick the same stock, because that would not make any sense. everybody has a different view. you have to have research, data, the technology that enables you to extract the data that has not been reported in a standardized way. that's the interesting thing, the intersection of technology, let's call it, around asset management and the rise of data, machine learning, artificial intelligence that enables you to extract things from unstructured data sets to come up with better insights. whether it's applied across europe, that's not really the point. that's about regulatory status. the fundamental principle of looking at what are the risk factors that will drive a company's performance, well, why would you not do that? >> sounds to me like there is more to come from blackrock. rachel, thank you. rachel: thank you very much. >> that is rachel lord, the head
of europe, the middle east, and africa for blackrock. there is more to come from zurich over the course of the state. nejra: absolutely more to come. only erik schatzker can cover brexit, mifid ii, international women's day, and sustainability in one interview. joining us from our partner in is our guest. the sensex heading for its ingest stretch of gains months. >> interesting. to both of you of course, because i will not be in office tomorrow, happy women's date in advance. i think what indian markets are doing is a continuation of the last couple of days. today is a flattish day. i don't know if it's a
de-escalation of tensions and a movie change at what's happening -- a mood change about what's happening. a confluence of factors which are doing this. yesterday week were -- we were talking about how the mid-cap and small-cap in the market have done very well. another interesting thing is what's happening to small-cap funds. they are getting money and deploying money in all these the endowments -- all of these be in down names -- beaten down names. maybe people are wanting to pay their dividend yield because the garment companies tend to release fat dividends around march. maybe that's a factor. the psu stocks, that index has been on a roll the last few days , probably indicating that some bottom-up buying is happening in india. the large caps are a bit muted
in the session today. back to you. nejra: i referenced the broader picture in equity markets. a little softer day on global growth concerns. what are you looking at? >> we are seeing asian equities broadly speaking to the downside. japanese equities are really .earing the brunt foreign exchange, am very excited about the australian dollar. it's gaining against all of its major peers, except the kiwi. they are dealing with a slowing domestic economy and growing calls for interest rates cut. look at what's been happening over the past year. march 2018 through 2019 we have these short positions. the city affects pain index in first position in. it is not all doom and gloom yet
for the aussie dollar. jpmorgan asset management recently took a long position. they are citing things like the dovish fed, possibly recovering growth in the second half of the year as well as softening u.s.-china trade tensions. nejra: you take the aussie, i will take the cad. yesterday we saw both of those currencies take a bit of a hit. westpac saying at the moment that neither currency is appealing. thank you. let's get the bloomberg first word news with debra mao in hong kong. debra? >> the u.s. economy cold in the first two months of 2019. the fed says growth was slight to moderate. consumer spending was held back by harsh winter weather and the higher cost of credit. new york fed president john williams assess the central bank can still afford to be patient
-- says the central bank can still afford to be patient. >> again, suggesting somewhat better that we do not need to tie in the monetary policy may be as much as previously thought. >> brexit uncertainty continues as talks in brussels yield few developments. the telegraph is reporting the cabinet expects its brexit deal to be succeeded by up to 100 votes at a parliamentary vote next week. tour yoda is warning it -- toyota is warning it may and manufacturing in the u.k. -- end manufacturing in the u.k. the european central bank will cut its forecast. there are extensive downgrades for inflation and growth in 2019. april full announcement on new loans may not come today. the policy -- a full announcement on new loans may not come out today.
the news conference is at 1:30. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. bloomberg. nejra: debra mao in hong kong, thank you. as french advertising company jc decaux reports for your numbers, we speak to the co-ceo, jean-francois decaux. that is next. this is bloomberg. ♪
. thank you so much for joining us. i want to pick up on this point of pursuing further m&a opportunities. you said in january we will probably have an opportunity this year on clear channel and we are ready. are you about to make a bid for clear channel? were, and is: if we would not certainly answer the question like this, we have been that lead company for the consolidation of our sector in the last couple of years. last november we completed the acquisition of one of the largest out of home of media companies in australia, which is the seventh largest advertising market in the world, called a.p. n. now we are in a very strong position in australia. clear channel is about to come out of chapter 11. it will present an opportunity.
given the fact that we are all meet deriving 8% of our global -- only from the u.s. deriving 8% of our global revenues from the u.s. we haven't been there disciplined -- we have been there disciplined in terms of acquisitions -- very disciplined in terms of acquisitions. now a company that is a spinoff the number twos company in the sector in the u.s., which could also be an opportunity for an m&a transaction. it is clearly a market that we are reviewing on an ongoing basis. in the past, the evaluation was in our opinion too strong. it's a matter of time.
being the natural consolidator of our industry, we will take the opportunity if it comes along. nejra: thank you so much for that comprehensive answer, jean-francois decaux. i am hearing loud and clear that you are looking for those opportunities in the u.s. how much do you have in the coffers that you are willing to spend on m&a this year? jean-francois: we are by far the -- in terms of leverage -- we ebitda ratiobt to of 1.4, which is one of the lowest in the industry, compared to clear channel at 8.7, and the cbs spinoff at about nearly 4.5. so clearly, we have room for acquisition. the family still is in control of 65% of jc decaux and we have
made it clear in the past that if a significant transaction comes along at a price which we feel creates value for all of our shareholders, the family would be prepared to be dubbed -- diluted. we have room for making a transaction. credit linestted of nearly one billion euros where we pay very low interest rate. so we are financially in a very strong position to be able to make such an acquisition. nejra: ok. you are looking for opportunities elsewhere other than the u.s. as well? jean-francois: yes, we have done a couple of acquisitions in latin america. nowrest of the world is representing 12% of our global revenues. we like this kind of
acquisitions because they create value almost instantly, given the synergies that can be extracted very quickly compared to larger transactions, where it takes a bit more time. we are looking at, again, also in the middle east. we derive about 37% of our revenues from fast-growing markets, which is a very strong characteristic of our equity story, because we are one of the very few media companies that can expand globally based on the business model that we pioneered 54 years ago when we invented model which is about providing state-of-the-art infrastructure at no cost to the cities.-- when now cover about 30% of air
passenger traffic around the world -- we now cover about 30% of air passenger traffic around the world. we are also looking at china. china is our biggest market today. asia-pacific is one of our biggest regions. we have plenty of opportunities around the world but are very selective. given that if we can build our advertising panels, we prefer to build rather than buy. if we are not in a position to be able to bid to build, we are looking at m&a opportunities. nejra: great to speak with you this morning. jean-francois decaux, the co-ceo of jc decaux. let's check in with what's trending across the bloomberg universe. where are the best places for women to work? new zealand and slovenia among the top five. take a look at the story ahead of international women's day. china's huawei may be suing the
u.s. government, but it's offensive is also in the world of beverages. expects togroup reach around $20 billion when it completes the first phase of capital raising for its flagship fund. expansion.ufj's deutsche bank employs are facing deep cuts -- employees are facing deep cuts to the bonuses. many are facing deep cuts. joining us from frankfurt is jp barnett. is anyone still getting paid bonuses? >> yes, it looks like that some people are still getting a little bit of money. deutsche bank cut bonuses by 10%-15%. they are still paying out 2 million, which is not much for deutsche bank. we learned in january that the bank is making more selective payouts to keep the talent
they really care about. certainly some people will get a nice paycheck. nejra: is deutsche bank going to lose any talent as a result of this? i would say you can bet on that, that some people are going to be annoyed and will leave. i personally think that is not the biggest problem, because you do not pay them because they did not perform, and if they leave, that's just a logical consequence. what is the bigger problem is the people staying, because then they are demotivated and probably not good for morale. deutsche bank has to find a way to keep people motivated and to keep them doing good work even if they do not get a bonus. nejra: jb barnett, thank you so much for joining us. up next, lower real returns for treasuries and a weaker dollar
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nejra: good morning from bloomberg's european had orders. -- headquarters. growth concerns mount. to ecb is said to be ready cut its economic outlook. we are live in frankfurt. deutsche bank is said to/it's -- for less than 2 billion euros. some bankers could receive nothing. and huawei sues the u.s. government for barring its equipment from certain networks. the tech giant's chair says the u.s. government should not play judge, jury, and executioner.
good morning, everyone. we are just under an hour from the start of cash equity trading. equity markets globally coming under pressure on global growth concerns. the trade deficit in hiring data out of the u.s. yesterday. we have the oecd downloading -- downgrading growth forecasts globally. the expectation the central bank is going to cut its forecast. we have a bloomberg scoop we will get to. futures under pressure here in europe. i want to mention the bond markets. the scoopon the ecb, inflation forecast would be lowered enough to talk about a s, 10-yearof tltro gilt yields dropped.
that was more to do with comments from michael saunders of the boe. let's check on the markets in asia. juliette saly has more. what can you tell us? juliette: it is a lower day-to-day. risk off movement. a lot of money going into the yen and jgb's ahead of the boj. you had one company in japan saying citing a slowdown in china which saw its shares limit. 1%.can see the csi 300 on the shanghai compass it looks like it is closing in positive territory in shenzhen. they continue to outperform. india flat. australia's market did well despite disappointing economic data. retail sales missing the mark. let's have a look at currency moves. the yen has seen a one-week high
ahead of the ecb meeting, awaiting that jobs report. still fairly flat. that is a one-week high. tearupee on an absolute after breaking through the 200 day moving average. inflows going into that currency. up by 0.3 percent, making it the best performing asian currency today. the aussie dollar holding up quite well despite that week data. and the facts rate cut bids are increasing. yesterday we were talking about the chance at 50%. it is now at 63%. nejra: thank you so much. juliette saly in singapore. the fed's latest beige book has down graded the view of u.s. growth. growth characterized as slight to moderate. the government shutdown was a key factor. the report comes as policymakers have backed away from their december projection of two rate hikes in 2019.
john williams says the central bank can afford to wait and watch incoming data. goldman sachs has weighed in, saying the fed's potential change to a new inflation targeting policy may lower real treasury returns and weaken the dollar. joining us now, a economist at hsbc. thank you for joining us. we are seeing equity markets globally take a hit on global growth concerns. is it going to get worse for global economies? >> probably from now it could actually get better. we are more optimistic about the second half of the year. there are fiscal stimulus measures coming through in china, and yes, it is true in the first quarter we are going to see low growth in the u.s.. we also expect less than 1% in the first quarter. we expect to bounce back in the second. there are signs of green shoots if you want emerging.
a little bit of resilience on the services sector. a big boost to real incomes. seeingk we are probably the worst, or we may be passed the worst. we should see more support coming through in the second half of the year. >> does that mean a fed rate hike, at least one, might be back in play? >> we do see a good chance there might be one last fed hike in september. that is when we think the stimulus should come through and we should see enough momentum for the fed to do one last hike. that will be the last of the cycle. nejra: what does that mean for 10 year treasury yields and the curve? our view, hsbc, in terms of yields has always been lower for longer. that is a change the fundamental views. when you go forward to 2020, when we expect already a couple
of rate cuts, because by then, unemployment might start creeping higher in the fed might have to cut rates, it does not change our fundamental view in terms of lower for longer yields in the treasury space. the same applies to europe as well. nejra: absolutely. we saw yields drop yesterday on a bloomberg scoop we will discuss later. the dollar should be interesting. we saw six straight days of gains. i am wondering if we do get that rate hike later in the year. after that, we might get cuts. what does that mean for the dollar overall? >> our view has been the dollar in this part of the world stands to gain the most. because this is a relative world when you look at currencies, and it is true the fed might not be able to hike rates many more has no room.b
it is not there is a slowdown of global growth. the other central bank's are in a much better place than the fed. this world has always been a world where you should be buying the dollar. that is why our target for the euro-dollar has been 1.10 and we have not changed in a long while . >> you have talked about lower for longer elsewhere as well. does it leave central banks with no ammunition to deal with the next downturn? >> this is absolutely the case. more so in the euro zone where you're going to enter the next recession with negative rates. to cut., you have some rates. that will be at the forefront of mario draghi's concerns. the ecb has been telling markets we can do all sorts of things, but when it comes down to it, the reason many think they can do, play around with the forward guidance, they can keep rates
negative for longer, they can do ltro, that is keeping the same level of support. there is not much more they consume. certainly that could be a problem for the ecb. that is why the ecb is starting to look elsewhere, starting to ask for support from fiscal policies to try to get some help in terms of reigniting the growth cycle in the euro zone. nejra: i know you are itching to talk about the ecb. i am, too. . our mliv question of the day focuses on the ecb. would a shift from the ecb to fresh stimulus, and i know your expectations have nuance, but will a shift from the ecb to fresh stimulus revise euro volatility? we did not see the euro move much yesterday. volatility has dropped write-down. ecb has been able to surprise markets with their --
for example, i recall when they announced the first tltro. that was a surprise for the market. the potential for them thinking creatively. but in my opinion, where we are now in terms of mario draghi, it doesn't seem to be a state of the world where the ecb would want to think very creatively. i think we want the fed to edge on the side of caution. we want them to think they can do. i'm not expecting a major shift. certainly not before mario draghi's curve at the ecb. nejra: we will discuss more. the european economist at hsbc stays with us. now we get the first word news. officials are pessimistic about the chances of a breakthrough in brexit talks
this week. bloomberg understands they are increasingly concerned that whatever they offer won't be enough to get the deal through parliament. to shift itsuctant position without more certainty would help get the agreement over the line. u.s. regulars are ready proposals for revising rules on bank trading. bloomberg understands this comes after a provision drew fire from wall street lobbyist. regulators originally called for a standard for transactions that should be banned as proprietary trading. they are backing off after bankers complained. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. you so much. now to while away. the group is heading back against allegations it was involved in bank fraud, technology theft, and spying. the smartphone maker is suing washington for borrowing equipment from certain networks,
saying it is unconstitutional to punish huawei without a fair trial. tom mackenzie sat down for an exclusive interview with huawei's chief legal officer. he is confident they can win the case. >> we hope the u.s. courts will declare the section ruling invalid. bringing our advanced technology into the u.s.. >> i spoke to a legal expert last night who said the chances of success of huawei were very slim indeed. where do you think the chances of success lie? is this more about messaging, ultimately, for huawei? our chances ofk winning are slim. every case depends on detailed facts. we think we have ample evidence and the chances of success are high. >> how much has the congressional ban on huawei equipment cost the company?
>> this case has damaged many aspects of huawei's business. we could lose existing projects as well as future opportunities. our partners may stop working with us as it damages huawei's global reputation. >> given the opposition to huawei in the u.s., isn't there an argument for cutting your losses in the u.s. and focusing on other markets? >> the u.s. accounts for 20% to 30% of the global communications technology market, so it is very important. we will have a fair chance to compete in it, leaving the u.s. market is only a last resort. >> we have not considered exiting the u.s.. we hope to keep partnerships with our clients and take part in competition. we want to bring value to the u.s.. mackenziet was tom speaking with huawei's chief
legal officer. coming up, as mario draghi readies his response to the euro area slowdown, we are live in frankfurt ahead of today's ecb meeting. that is next. when you're traveling to work, tuned into bluebird radio live on your mobile device or dab digital radio in the london area. i will be there to anchor at 8:00 a.m. london time. ♪
are going to be moving lower again on those tenured btp's. we are seeing yields down one basis point. hitting a low after a scoop from bloomberg which we will discuss in just a second. moving into bunds, that 10 year yield staying around that 12 basis point handle. of the u.s. has been pushing the dollar higher. underperformance from the g10 feeding into that, including cable to some extent. s&p futures on the back foot. losses on equities in the u.s. yesterday. global equities down on concerns. we have had a decent run for european equities the past few days. that looks to be snapped today. debra mao in hong kong. a: blackstone expects to reach $20 billion when they complete the first phase of
capital raising for its flagship fund. the firm has get to success -- the firsta limit, but clues may come in march and april. the private equity sector outperforms other asset classes and hedge funds. deutsche bank has reportedly bonuses. cuts to 2018 bloomberg understands some bankers may be getting nothing while the overall pool has been cut to less than 2 billion euros. the bank is making more selective payouts in an attempt to keep top earners. deutsche bank will disclose the final size of bonuses when it publishes its annual report later this month. alan howard is having a rough start to 2019. the master fund has declined over 8% in the first two months of the year. howard is the sole manager of the fund, which the industry veteran launched two years ago. that is your bloomberg business flash. nejra: here is a look at what
you should be watching today. ecb2:45 u.k. time, the released its latest policy decision. watch for downgrades and any comments on long-term loans for banks. 1:30 u.k. time, mario draghi gives his news conference. stay with bloomberg for life coverage. let's get more from frankfurt. maria tadeo is outside the european central bank. great to have you with us. the scoop yesterday on the bloomberg, ecb officials are poised to cut their forecast by enough to justify another round -- it moved bund yields, didn't it? >> that's right. all knew the european central bank would have to cut gdp and inflation forecasts. everyone in the market has done that. the big question was by how much? we understand it will be
significant enough to trigger more stimulus. that is a need for banks. the market is very divided on this. whether we get a full announcement today or if it's just a sketch of a plan. that was enough to set back shares rallying yesterday. another focus would be the forward guidance. we know the european central bank will tell you we will keep rates low until the summer. any changes to that have big market implications. during the news conference, keep an eye on negative rates. there is a debate as to whether that deposit rate, -40 basis points right now, is actually good for the transmission channel. banks have caught the eye of a lot of people in the market. we will keep a very close eye on it today. nejra: thank you so much. fabio, i want to pick up on tltros.
you are well aware of the divided views. yesterday, whor impaire rates further monetary transition, causing a tightening of financial conditions. the ecb needs to hike to loosen financial conditions. on the other side, saying the overall impact of the negative rate policy has been positive so far. where do you stand on negative rates and the impact on the transmission mechanism? >> it is hard to say it has been positive for the banks. obviously, the stimulus measure you have seen from the ecb has helped boost credit growth to some extent. credit growth has already peaked, if you want, in terms of the credit cycle. if we are in for a much longer period negative rates, we think the ecb over time should consider some measure to offset the negative impact on banks.
that is effective having to do that, the negative rate is almost a tax on the banks, but also the banks on the periphery, which tend to lend on very short rates. rates negative, that is a hit on their net profit margins. the question is, when do you act? if you really need to act, because at the moment the ecb is trying to tell the markets, i'm going to hike rates. unless they are willing to capitulate, which we don't think they are, they probably don't feel a need to do something to help the banks. on top of that, there is the element which mario draghi made it clear last time. he is not convinced negative rates are the only problem for the banks. excessive cost. the ecb does not seem to be there yet in terms of just doing
a cap on rate hikes to help the banks. nejra: we might come back to transmission mechanisms. guidance on rates, this is important as well. you expect the ecb to wait until june to drop through the summer. why wait to give forward guidance? have --roblem is they in a weird fashion. we are not going to do anything unless inflation is a target. the market is not buying that. the market is pricing in the first hike until 2020. if the ecb were to change the forward guidance, either they drop through the summer altogether and that would be a very dovish signal to the market , and as i said before, it would be capitulation. the ecb would be telling markets , i'm not going to hike rates for a long period. that's not something they want to do now. the other option is to change the time to say something for
example, we are not going to change rates until the end of the year. that could be an option. it could be something where you could build consensus around the ecb, but it would be meaningless from a market perspective. the market is not pricing in a rate hike until 2020. it might be a situation where the ecb does something to show the ability to do something but that does not change much in the way the market is. nejra: what a one amped on rate hike be a mistake? and done rate hike be a mistake? >> it would be contradicting forward guidance. the ecb is saying first and foremost we need to be credible. we need a consistent message. we think it would be hard to sell to the market that you are just going to do one and done. the risk is the market brings forward the expectation for the rate hike, and that could put pressure on the euro, which is the last thing the ecb would want to do. the marketn the past
has a window to do rate hikes before the end of qe, but now that is closed. given current circumstances, it's going to be hard to justify one or two rate hikes without the banks. you were saying earlier you do expect they are going to wait until april for a full cultural announcement -- tltro announcement. . how should the ecb deal with it? >> it has always been strange the market that worried about rolling over the tltro. rolling over the tltro has always been a necessity. there are no alternatives. the last thing the ecb would want to see is a credit crunch in the periphery. in terms of the announcement, we may have to wait until april to get details, which obviously are important from our market perspective. are we going to get slightly
shorted? all of these matter from a bond perspective. in terms of compensating the banks in the core, one thing the ecb might want to explore is a reserve system. this has been discussed recently. we don't think the ecb is there yet. that means you no longer charge the negative rates. that is something the ecb could explore later on in a scenario which they accept probably we are going to be in the negative rate environment for a longer period of time than what they are willing to expect right now. nejra: where does the 10 year bund yield and the year? >> a little bit of an upside in terms of the yield. there are many conditions. lack of debt. fabio at hsbc, great to have you with us.