tv Bloomberg Markets European Open Bloomberg July 8, 2019 2:30am-4:00am EDT
cfo says growth will come from a new unit. be theorate banking will greatest growth driver in the franchise as we see it going forward. anna: erdogan derails the rally. the turkish president fires central bank governor, sending the currency 3.5% lower. plus, new democracy prevails. the snap election in greece turn around he will the financial crisis. >> i will deliver on my agenda, an agenda to grow the economy, to create more jobs, but also to make sure the greek people feel safe again. anna: welcome to the market open program this monday morning, less than a half-hour to the start of equity trading. let's look at the features. the good news is bad news mantra
is dominating. the end of the rally in everything, ftse futures, tax lookses, and cac futures like it will be weaker in trade. we got the jobs report. stocks stateside and europe falling on that, building in lower expectations for fed rate cuts. that's the big picture story. let's look at how that's gone down in asia. that's part of the asian session. the losses have come through convincingly. the hong kong market, chinese market moving to the downside. there are specific geographic political factors to consider. japaneseade, the putting limits on tech exports on south korea, hitting the south korean market. moon jae-in of korea calling on japan to change course. the chinese market also weighed down. maybe that's going to detract from stocks present.
there's a host of factors to consider in the asian session. to affects, the turkish lira moving down, as much as 3.5%, this on the surprise ousting of the central bank governor in turkey. we'll get more on that and what that means. equities coming out of for a host of reasons, geopolitical and asian. also the jobs report. that's what we're seeing here. keep an eye on the german five-year. iron bouncing after a couple days of decline. deutsche bank revealed a radical overhaul, cutting jobs in a bid to boost profitability. they have long seen the valuation on both sides of the atlantic. joining us now is guy johnson, who's been speaking to the cfo.
what stands out for you as the new information the market needs to wake up to this morning? guy: i think the new information is we have seen a radical overhaul of deutsche bank. this was expected, but i think it goes further than maybe the market was anticipating. i think that is the new information. the key question the market needs to focus on now is what is deutsche bank going to become, and what are going to be the key growth drivers taking this business from where it is now, which looks very depressed, into a new era where it is generating some cat of growth? that was the question i put to the cfo of this business. >> corporate banking would probably be the greatest growth driver in the franchise as we go forward, especially in today's interest rate environment. that may change, but for now we see great growth opportunities that have existed for several
years and maybe we have not been able to participate. in theiree growth private bank, the german consumer banking franchise we have, as well as italy and spain. asset management recovered after a difficult year and is back on a growth trajectory. we see growth in our franchises. we're taking the decision to retrench and step back from our global markets franchise, in particular equity sales in trading. that is significant step in reorienting the bank. guy: if i am a german client or a global client, are you still going to be able to serve my needs? >> these clients expect us to be present around the world and service their needs. those needs may be cash management, risk management, affects. -- fx> those are areas we excel. guy: how will the retrenchment equity effect that?
>> one of the concerns we've always had about retrenching away from equity sales and trading was the franchise impact and the potential it would have a knock on impact in other businesses. obviously, making the decision we've made, with had to grasp that and need to manage through that. we are retaining a targeted capital markets franchise, as well as research and distribution in order to serve our clients needs. but the sales and trading decision has been difficult for us, of course recognizing that there are likely to be some knock on franchise implications of that decision. anna: talking about the equity and sales trading, clearly a difficult one, a big headline for those following the banking sector. i see the stock prices are higher at the start of the trading day. there is going to be positive
reception to the news today. what is it that investors are saying, analysts are saying in response to radical changes at deutsche bank? guy: two things to say. let's deal with the share price pump. i think there will be an expectation that shares will go up. however, also worth noting the shares have gone up previously when we saw news that the head of the equity business would be leaving. we did see a pop-up, so you may have already seen the reaction to the news in the prior few trading sessions. that's worth noting. analysts are focusing on a couple of things. the first one is whether or not the business is going to be able to deliver on this plan and whether or not it will generate growth. what are those growth drivers, and are they going to deliver? the second question is, is this business going to require
further capital? they are shifting a lot of the risk-weighted assets into this bank. that should lower the tier one capital ratios the business requires. however, we do find ourselves in a situation where the german economy is also contracting itself. it will be interesting to see whether or not that contraction has an impact on this business' --lity to have moderat money going forward, or whether they will put more capital into it. that capital question remains a key one. the market will give the bank the benefit of the doubt. we will wait and see. i expect the share price to go up. if you need to see the context of the last few days, and see it in the round and some of the gains been made. anna: point is well-made for the stock rally well. guy johnson in frankfurt for us giving track of that big story for us around deutsche bank.
let's get a bloomberg first word news update with annabelle droulers in hong kong. annabelle: thanks, anna. greece's new democracy leader is set to take over as prime minister after yesterday's election handed -- a mandate to handle the load. they are set to get a parliamentary majority. didn't dong premier as badly as some expected. >> i feel i have a strong mandate to deliver on my agenda, which is an agenda to grow the economy, to create more jobs, but also to make sure the greek people feel safe again. annabelle: french finance minister bruno le maire called for compromise on the managing director of the imf. that you government reportedly considered the bank of england governor for the role. outgoing chief christine lagarde was picked to be the next president of the ecb. >> a lot of experience at the
highest level. she has been a great director for the imf, and i'm deeply convinced she will be a great president for the ecb. annabelle: hong kong police arrested five people while dispersing the latest protest against an extradition law. police made repeated warnings to protesters that they were taking part in an unlawful ceremony. protesters worn it will withdraw entirely. the u.s. soccer team has won the women's world cup, beating the netherlands, 2-0 in the final. it's a back to back trying just triumph for team usa. they will fly back for a parade in new york city wednesday. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. anna? anna:. thanks very much.
european open. other cash equity trading week. turkish president erdogan delivered another reminder of his power over monetary policy firing the central bank governor. the lira slid after the announcement. he made his deputy comforter -- governor the replacement. joining us now from dubai is our markets reporter, paul wallace. we have seen the turkish news flow moving to the back winner and turkish assets staging a rally. is that rally now done? paul: hi, anna. yes, it seems that way. the lira had been the best performing currency in the past two months, getting a percent against the dollar since the start of may. that now seems it is all but over. it has been rallying for many reasons, one was the risk on
appetites thanks to endeavor still by the ecb and the fed -- tilt by the fed and these be. -- the ecb. following -- slowing quicker than expected. and present erdogan's acceptance of the opposition's victory of the election in istanbul made investors turn bullish on turkish assets. of, seems as if we'r ate the end of that point seems as if we're at the end of that point. anna: we'll keep an eye out for that. turning a page in the turkish story. what does this mean for monetary policies?
it seems we are heading for a rate cut in turkey, something erdogan wanted. does this put those rate cuts in doubt because there are credibility questions around the central bank? paul: yes, it does. some are saying president erdogan wanted lower interest rates in turkey. the dismissal of the central bank governor wasn't the best white to go about it. most analysts and traders were -- the key with the rates at 24%. the central bank is going to make a decision in late july. seemed as ifkets they wouldn't have been satisfied with a rate cut. governorissal of the over the weekend puts that in
doubt and the selloff suggests investors are going to be a lot less tolerant of looser monetary policy from the turkish central bank now that it's independent. anna: thanks for the update. paul wallace in dubai. iran says it will pursue nuclear talks with european nations. we see the iranians saying mark crone diplomat -- macron diplomatic advisor will visit this week after iran abandoned restrictions. we spoke to the cdu head about the next move at the economic forum. she also described the appointment to the ecb and deutsche bank. guest: we are currently seeing a spiral of escalation and iran has to know if it introduces the next step and consciously decides to ignore the definition of the agreement, it will endanger the agreement and force
europeans to consider other steps, such as sanctions. >> christine lagarde is going to become the new ecb president. in germany, obviously, the buns chief -- brenda chief was favored -- bund chief was favored. we now see a politician will be running the ecb, who was not a central banker. is this a concern in germany, particularly in your party? i am concerned that maybe you're kind of easing of monetary is going to go on. and do you expect lagarde is going to get there was -- the support of the germans? --st: this mandate remains means remaining an independent central bank and close 2% of the inflation. we have a rate low that. this had negative consequences
for assets and savings. unconvinced certain changes -- i'm convinced certain changes need to be made. setg with the board, we'll us on the right track here. >> is deutsche bank taking the right steps here? guest: it's a difficult process within deutsche bank. we know that. all those responsible are trying with much focus and responsibility to move along and i hope the process leads to success. anna: that was the cdu leader speaking on a range of topics with birgit jennen. minutes away from the open. samsung suffers. japanese voters back stricter measures on south korean -- exports. we'll talk about this and reactions. also talk about reaction
tensions between south korea and japan. weighing on korean assets. >> yes. it's kind of come a little bit out of left field. everybody was dying in relief that xi and trump had met in those tensions might ease of, we got this -- he's off, we got these tensions in korea and china, who people think are on the same side. it's been a countries positional -- confrontational history, japan occupied korea and performed what has been called war crimes, and the koreans don't like to forget about that. so some court cases brought that up have been led, although japan denies it, to these retaliations. that's weighing heavily on a korean stock market already basing a lot of headwinds from
difficulties its own economy is ---- is anna: that ways on the kospi. investors getting their first chance to react to the strength of the jobs data. reminders where the market is going. in the aftermath of that report, we saw investors saying maybe the fed will cut. there still an expectation the fed will cut, isn't there? >> rates markets are showing pre-much 100% the fed will cut in july. but there will be 25 basis point cut. the uncertainty is more about how many cuts will come this year. two is priced in, and a third one is 50-50, or less than a 50-50 chance. there's been less certainty about how rapidly the fed would cut, and how deeply, but that is
playing a role. there hasn'tat, been any real progress on trade or other tensions we're talking about. there's a lot of reasons for gloom. one of the potential reasons for optimism, three fed cuts as a likely scenario has been shifted away. so, that's enough to create a gloomy start to this week. anna: thanks very much for the update, garfield, head of asia in sydney for us. coming up, they european market open for this monday. we'll keep an turkish assets and what is going on in turkey, the surprise firing of the turkish governor. it's already moving the lira. they european session is expected to be sluggish, down .03%. will that left others in the banking sector? will there be more optimism and banks?
anna: a minute to go until the start of cash equity trading. let's look at how we are positioned as we head to the start of another trading week. down nearly 2% on the msci asian-pacific. kospi and aged equity markets coming under pressure, geopolitics on the four. we've got some weakness after the president of the central -- president fired the central bank governor. we sell the istanbul stock exchange, weakness there. the banking sector under pressure. we saw the 10 year fighting, tracking up 2%. s&p 500, features suggest we
will be negative at the start of trade. european futures also suggest we'll be negative in europe. the big picture story is around what moves this u.s. 10 year. it's around the jobs report friday. it was strong, the markets are reassessing how much generosity, how much of a punch bowl we're going to get from the federal reserve. we hear from garfield reynolds. see,about which cuts we how many cuts we see coming through later on. let's have a look where the markets opened up. downstanbul markets open, .17%. the firing of the central bank governor there. the spanish market, french market, dutch all in negative territory. the thinking good news in the united states is bad news for equity because meet celeste --erosity, that seems to be
less generosity, that seems to be dominating. let's have a look at things from a sector perspective. do we get clues as to market thinking from this way of dissecting the data? we've got a mixed bag, health care and utilities moving lower, suggesting more risk on. when we look at the breakdown of stoxx up and down, not exactly what we get. we've got telecoms, an area of red, financials a big area of red, but there is green on that screen. we don't have an opening price for deutsche bank. we'll have a look at what is going on in financials in a moment. let's move on the mliv screen to show us what is going on on individual stocks. a host of names to the upside, starting by percentage, we have opec up by points, rio tinto moving higher, some of the money
groups, bhp moving higher. the k-swiss names like nestle moving higher -- big swiss names moving higher like nestle. in a move to the downside, and aghast. fromve renewed guidance the losing side of the screen on the bloomberg. we put up the losers. no, losers not forthcoming. less dynamic on granite growth in the fourth quarter, what they are talking about at that business. julius baer down. they named a new ceo. those are highlights to the down flow. still waiting on an opening price. we'll bring that to you as soon as we get. they unveiled a radical overhaul, cutting jobs in the bid to boost profitability. the ceo told bloomberg where the lender is focusing its efforts.
>> corporate banking will be the greatest growth driver in the franchise as we see it growing forward -- going forward. that may change in the future. for now, we see growth opportunities that existed for several years and perhaps not been able to produce pay as much as we could or should have. we see growth in the private bank. anna: joining us from frankfurt, guy johnson. you were making and adjusting point about the share price react -- making an interesting point about the share point reaction. it is something, up 2.5% right now. there might be disappointment such radical moves have not sparked more of a share price gain. guy: yeah, that's probably fair enough. it was up over 25% on friday. overbear that in mind --
.25% on friday. just bear that in mind. 7.5%. trading just shy of the rly indications were we could see more than this. the early indications, we could see a 5% pop. we are not getting that. let's see how things settle down. as you say, after radical surgery, maybe you would've expected more on the upside. there was that pop on friday and that gain. we need to see that in the round. anna: just a reminder heretical the surgery is at deutsche bank, based on the announcements over the weekend. anna: --guy: its massive. this is a bank moving away from serving hedge funds and asset managers. it is slashing its equity unit, basically exiting that business.
this has never been tried before. this is a huge retreat deutsche bank is undergoing. there have been many previous attempts to reshape this business. they were far too timid. as a result, the current ceo has taken an ax to the business. they were serving those customers coming back, focusing on the corporate client. it is a shift from focusing on the i.b. and cip in the sea in ciba. it is the corporate and investment bank focused on that. it is a huge withdrawal. they are going to lose some clients. it would be expected, as a result of that. but the expectation is they will have a lower tier one ratio because they will shift a bunch of highly weighted assets into a effectively, which will be sold or spun off. that will lower their whisk waiting around at business.
they will become a business focusing on serving big, industrial, corporate clients germany has so many of. it is a retreat? it is a retreat that starts with bankers trust. it is a huge piece of surgery happening here, 2.23% gain on the share price. it doesn't necessarily reflect that. and how that leaves them able to services requirements, still have requirements. thank you very much, guy johnson in frankfurt with the latest. broad european markets opening lower, stocks in asia retreating. u.s. futures edge lower. investors focus increasingly on the fed and share -- and the chairman jerome powell. he has testimonies to give in washington. joining us now is peter at capital markets.
good to have you with us. as we look ahead to jerome powell, speaking this week, what is going to be crucial is if he tries to push against market expectations of rates cuts. peter: absolutely. it's worth reflecting on what is pricing in still. we've got 25 basis point rate hike for july. haslinda: of --anna: i've got a chart that shows. peter: we've got more than 64 for december. we still got more than two rate cuts for the rest of the year. that's against the backdrop of relatively decent data. the market is way ahead of where the data is. that follows what powell or the rhetoric, and his colleagues have done before hand. if he scaling that back, the market is at risk of further setback. he has to feed the market, to some degree. anna: does it make sense to you to be cutting rates?
i saw them describing this as an opportunist reflation cuts. they are focused on wage data. and that's been more static than they wanted. peter: if you take analysis on the u.s. economy, it's still very strong. there's very little precedent for a central bank cutting rates in an environment where data is relatively strong. why are these guys going out there? the fed is not alone. the ecb is there. kearney is speaking. anna: but they move under the safety of the fed umbrella. peter: i wouldn't necessarily say so. they are seeing a lot of risks other. the question is whether these risks do crystallize, and therefore endanger them getting back to the target or staying at their target. that's why it's an insurance cut. the question is whether powell is going to contemplate that. i'm pretty sure some of the others will, but whether the fed
will do so, that's a different question. anna: president trump keeps his pressure up on jerome powell. peter: he would like to be present everyone. -- president erdogan. anna: we've been talking about how trump says the fed is the biggest problem. does this raise the question of whether jerome powell lasts after 2022? you have to know who's going to be president first, don't you? peter: yes. i guess the here and now, the fed is still independent. i don't believe for a second they will given. i really don't believe the u.s. will follow the example of turkey in that case. that's not the question. that's just a question whether or not the fed sees, genuinely sees any risks. i don't think they will be pressured into cutting rates by the president. be asthis isn't going to
a result of political moves? this will be a genuine insurance cut. is that something this interbank is supposed to do -- the central bank is supposed to do? peter: i'm not 100% sure i agree with that. the central bank is data-driven, but they are also supposed to be forward-looking. the central bank has said there is this and that coming up, or we see the data turning, and going forward. if they are genuinely worried, i can see the arguments. currently, we have quite a long period of time that they haven't crystallized. what has changed in the fed's mind that they will personalize in the next three to six months? anna: thank you very much. peter stays with us. up next, we bring you the stocks on the move, including jupiter funds management, who has been
let's look at the individual stock movers. dani burger has that. dani: the big story on the day, deutsche bank has been covering this. here's where shares are moving after this restructuring. three before percent higher, the highest price since april. analysts are saying this is bigger than the market expected. that's why we're seeing this pop. but they say gains are temporary from here. iag coming back from losses, as much as 2%. gettingiving a fine, warnings they u.k. commissioner's office of information is going to find them 183 million pounds over a data breach. that is sending nerves into the market, but not too much as the open. jupiter fund management getting a downgrade from jeffrey, their price target targets a 15% drop, not as bad as today, but still
last week, one of the fund management's star money management is -- managers have left. that has been weighing on them. anna: thank you very much. present everyone delivered -- president erdogan delivered another reminder of his power by firing the fed manager. everyone named the deputy governor as the replacement, but made it clear he expected rate cuts in the near future. still with us, peter shaffer he. i know you are focused more on dm rather than em, but this turkish story gripped many people because of the influence the president is having over monetary policy and is expectations. some people suggested his credibility, and other said it already has those. still say that
credibility is a big issue. when you go back a year, year and a half ago, we have been at the point interest rate needs to be raised for the currency. everyone was against it -- erdogan was against it. others would say it's the right step. here we are again in a situation where the central bank governor tries to assert this interbank's independence -- the central bank's independent, and he has to go. market's part of the currency to be down because he's going to put somebody in place to be more willing to play ball. we've seen this before. credibility is a big issue, particularly in the markets. speaking of greece, on the weaker side. anna: let me ask you about the emerging-market space on the whole. the fed moving into rate cutting
territory, some anticipating weakness in the dollar. does this set the story for something more positive? peter: they have been doing reasonably well ever since the fed's rate cut has been preston. interesting -- have been priced in. interesting to see how they have been. relatively strong greater from the u.s. given the probability of a rate cut reduced, some of the risky assets have not been doing well. you have the answer there. anna: thanks very much. peter stays with us. let's look at sectors on the move this morning. overall, european equities not as weak as anticipated. pretty flat on the stoxx 600. the first 17 minutes of trade have proceeded. we've seen more moves to the upside. basic resources, oil and gas and technology stocks get the best of the gains in the wake of u.s.
the trading day, looking more positive than at the. start of the trading session u.s. futures still point onwards. bruno le maire called for compromise on the next managing director of the imf. the outgoing chief was picked last week to be the next president of the ecb. here's lemaire and other leaders talking about ecb appointment. >> i think that she is great. she has a lot of experience at the highest level. she has been a great general director for the imf. and i'm deeply convinced that she will be a great president for the ecb. >> i am convinced that certain changes need to be made here, and christine lagarde, along with the board, she doesn't decide this on, along with the board, will set us on the right track here. perfecttine lagarde is ecbontinue in the role the
had in previous years with mario draghi. attack --ally in the in the task of easing the economy. >> i don't think she's political. together, with her colleagues at the board, i'm sure she can do an amazing job to take the monetary policy of the euro zone to the next level. europet should get -- should get more incarnation. and christine lagarde sends a very good signal. anna: some thousand and christine lagarde's appointment at the ecb. still with us, peter. your thoughts on the ecb under christine lagarde. which policy tools remain open to be used to stimulate growth? peter: first of all, i would agree with most of the speakers. she has a tremendous amount of
experience. she's been deeply involved at a time when ecb conducted bailouts. some people are saying she doesn't have central bank experience, which obviously is true. by the way, if with the spotlight on philip, but that's a different question. it's going to be fine. the market's perception of her is leaning on the dovish side. anna: will she do what use adjusted, which is perhaps buy bank debt, as opposed to corporate and sovereign debt? peter: i think the ecb will go down the path of central rate cuts. if they buy more bonds, they will try to make it broader than last time. bank bonds is one of the key topics they will be looking at. when you look at what the ecb has done, trying to support banks, we know the vast majority of lending to the real economy is conducted by banks rather than the capital market, particularly of sme's.
we also know the research is suggesting lower interest rates and more money leads to more lending. there you have it. the ecb suggests it will help. anna: they believe in the length between funding to the banks and lending into the economy. while others like at the lending rate, saying customers want demanding loans, and that's the problem. peter: the ecb's analysis, they put two pieces of research out. blaine give a speech last week. the ecb believes, rightly or wrongly, that if you believe, take out ecb support, it results in the interest rates to the customers and hire loans than otherwise the case. it doesn't really matter whether i believe that or not. because they do, i think they will be looking at bank bonds. the only counterargument i really see, you obviously have
two arms of the ecb. one is regulating the banks, other is conducting monetary policy. armhave a dilemma, one wants something different than the other. from a monetary point of view, i think it will definitely consider that. anna: a wall needs to go up between the two parts. the greek bonds have been cramming -- climbing. 2.04% at the start of the early hours, post the election that we've seen over the election. it's amazing to see a 10 year greek yields down 2% or so given where they were at the time. the ecb doesn't by greek debt. peter: they don't. anna: there are others, i suppose. peter: all little bit without tongue-in-cheek, if you look at the sovereign sector in general, in the market talking about this, without changing the
guidelines, there's not much to do. you can't say we by greek debts or greek and italian debt. they have to adhere to the p, particularly when it comes -- to the capital key, particularly when it comes to the larger debt. we know there's little space. they have indicated they will be considering changing the rules more broadly. we don't know what that means in data. who knows? they might go there. anna: thank you very much, peter. peter will be joining me on do -- bloomberg daybreak radio to carry on the conversation. that none :00 london time -- 9:00 london time. u.s. futures point onwards. we've seen a bounce on european markets. nothing too exciting. the ftse 100 up .25%. if, you look at the sectors you see why.
anna: deutsche bank exits equities. the cfo says growth will come from a new unit. bankingg will be dissed will be the biggest -- banking will be the biggest growth driver. anna: erdogan derails the labor rally, sending the currency 3% lower. new democracy prevails. they win the stamp election increase. he tells bloomberg he will turn around the financial crisis. >> if i have a strong mandate to deliver on my agenda, which is
an agenda to grow the economy, to create more jobs, but also to make sure the greek people feel safe again. anna: good morning. welcome to bloomberg markets, they repeat an open. i'm anna edwards in london, 30 minutes into your trading day. this is how the session is shaping up. we do have a bias to the upside, slight bias to where we are trading on the stoxx 600. interesting to see oil and resource-related stocks moving to the upside, benefiting the london market. willervices company, related company -- oil related companies to the numbers beating estimates in the second quarter. deutsche bank a beginner, up this on the back of radical restructuring plan we heard from guy johnson earlier. interesting to see imperial brands of moving higher. they talked about dividends
going forward. city world got an interesting world -- note, up by 2.7%. let's have a look at the other side. the moves generally are upwards today. this is an honors related business, that stock down 4.3%, downgrade by one of the brokers. downgrade by a broker story. kleppe you is an ex-dividend story, down three performers for the catering business in paris. they guarded the market lower in terms of where they see their business heading. let's get a bloomberg first word news update with annabelle droulers in hong kong. annabelle: thanks, anna. hong kong police arrested five people while dispersing the latest protest against a controversial extradition law. they made repeating warnings they were taking part in a unlawful assembly. withdrawn want it
entirely. the white house are laying the groundwork to replace jay powell. judy shelton and christopher waller and the president's current pick for the central bank board, told they may succeed powell in the top job. boris johnson looks for a landside victory in the race to become britain's next prime minister. according to a poll, it will get 24% of the vote. former secretary-general he hunt getting only 20's -- jeremy hunt getting only 20 per six -- 26%. boeing 737 max's losses -- saudi arabia budget fly deal reversed the complaint to buy 50 jets. it will operate an airbus fleet. that's a setback for boeing, under pressure to prove the max is safe again after two crashes killed people. the u.s. soccer team won the
world cup, beating the netherlands 2-0 in the final. it's a back to back trying just triumph for team usa. they will fly back for a parade in new york city wednesday. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. anna? anna: thanks very much, annabelle droulers in hong kong. vucevic unveiled a radical overhaul, cutting 18,000 jobs and exiting the equities business to boost profitability. there follows a turbulent period for the bank, which follows several ceo's fail to turn a profit. guy johnson spoke to the ceo of where deutsche bank is focusing his efforts. >> corporate banking will be the greatest growth driver in the franchise going forward,
especially in today's interest rate environment. that may change in the future. for now, we see great growth opportunities that have existed for several years and have not been able to put dissipate as much as we should or could have. we see growth in private banks, the german consumer banking franchises we have, as well as italy and spain. asset management has recovered after a difficult year and is back on a growth trajectory. we see underlying growth in our franchises. we're taking the decision to step back on our global markets equityse, particular sales. guy: if i am a german china -- client, or global client, are you still going to be able to serve my needs? >> that's part of the core question, right? many of our clients, the nation of the german economy, a significant portion of the revenues earned are international revenues,
something like 80% of the revenues are earned outside of germany. 40% of german organizations, smes, have activities outside germany. these clients expect us to be present around the world. those needs may be cash management, risk management, or fx. those are areas we excel. it's around those strengths we are. guy: how will the retrenchment and equity effect that? >> one of the concerns we've always had about retrenching away from equity sales and trading was the franchise impact, and the potential it would have a knock on impact in other businesses. in making the decision we've made, we've had to grasp that and we need to manage through that. we are retaining a targeted equity capital markets franchise, as well as research and limited distribution in
order to serve our clients needs around equity financing. the sales entering decision has been a difficult one for us, recognizing, as you say, there are likely to be some knock on franchise implications. interestingly, as we look client by client at the overlap between equity sales and trading business and other businesses, frankly, we will keep a fair number of clients and continued to serve their needs. we will reduce our client franchise as we attempt to focus on those core clients, where we want to devote our resources. but the impact of clients that are uniquely served by us in equity sales and trading is surprisingly small. guy: the tier one, let's talk about that. you'll be operating with a smaller cushion when it comes to capital. our regulators comfortable with that? you say they are now, but it's a
slim margin. >> i wouldn't call it slim. even 12.5%, even the business makes we'll be orienting towards, it will be the highly capitalized of our global and european peers. anna: let's stick with the story, deutsche bank cfo speaking to guy johnson. guy joins us now introvert. interesting to see where they have taken the night to the equity business. that's the business that seems to be going. he acknowledged your question about how you'd served global clients. you do need to hold onto global equities, capital markets and research to enable them to serve global clients that germany has so many of. guy: absolutely. so they are, as you say, flushing this division, but you do need to maintain a core of that business in order to give the clients that they are so desperate to hang onto,
particularly in the corporate market, some of the access they need. let's not beat around the bush. this is a massive retreat from equities. it has never been tried before on this scale. i think one of the questions we need to ask ourselves are underage a bank, what are the unintended consequences of that retreat? i don't think we know yet what effect it will have. it will be interesting to see how clients react, how the decision is going to expand from this decision. it is a radical overhaul. they are shifting from serving financial clients to corporate clients. there is some degree of overlap. you do need to maintain a core of equity business to maintain to carry on corporate clients. there is the possibility of unintended consequences here return onl a targeted equity of a percent, something they haven't reached -- 8%,
something they haven't reached since 22012. weise -- 2012. we see share prices on the rise. what has the reaction been from investors and analysts who follow the story? guy: i think caution is probably the word i would use, maybe cautious optimism. can i stretch that far? i don't know. there are a number of questions analyst community is grappling with answering. the reaction of clients is critical. the action of regulators is critical, as well. they are trying to read -- de-risk the business. the risk-weighted assets is this bad bank. the regulators are allowing them to go with this 12.5 tier one ratio. a lot of people are questioning the decision to do that. if there is any hiccup along the profitability,
that issue will be looked at again. then we come back to the issue of another capital raise. the bank is willing that out. for how long is the question the analyst community is asking itself. i would say a cautious response this morning. anna: thanks very much, guy johnson tracking the story in freeport. let's still something that will be of interest. that is to do with the level of china car sales. they rise for the first time in 13 months, according to authorities in china. just to give you some reaction in the market and context around that, we see a move higher in auto shares in europe, not entirely attached to chinese auto sales. we see the stoxx 600 out of sales up point 02%. we have seen a turnaround in the chinese picture. this is a stunning graphic, 12 months of declines.
anna: welcome back to the european open, 44 minutes into the trading day and markets are trading fairly flat we wait for european we markets, which suggest will be weaker. the victory has sent yields on the greek tenure tumbling. they are holding as an all-time intraday low. he feels there is a mandate to tackle the chronic was following the-- woes following financial crisis. >> we've made our plan very clear. there are no surprises here involved. we want to drive a reform agenda for the country that is ambitious, very bold, and very detailed. was him speaking to maria tadeo, maria tadeo in
athens with a guest to shed insight on this story. maria? maria: good morning, anna. well-known figure here in greece, now the new permit is to, joined by -- prime minister, now joined by a professor. good morning. thank you for joining us. i want to talk to you about today, because the feeling on the ground is that it is a return to politics. yes, this isng and a return to normality. systemic return to political forces and the greek have expressed a clear opinion that they went greece to have a strong government for the next four years.
this is the message of the current elections held yesterday. get more doesn't establishment than that, some pro-business, pro-investment. he says he wants to renegotiate the targets. is this something that can theen because it is european commission that will have to play ball. >> the interesting thing is the sfs rank i. they have -- establishment guy. they are not radical anti-establishment political force. i think it has given the go-ahead voice from the greek public and it has a very pragmatic but the new authority has a very pragmatic economic program but it's feasible. it can be done.
the effect is that it has a good knowledge of global finance. he knows how international negotiations happen. negotiate able to over the surplus and other issues, and his main concern are on job creations and bringing unemployment down, and on helping the private sector and especially on lowering the taxes and assisting the middle class. the middle class was the ones bill ined -- paid the the adjustment. maria: he wants to cut tax for corporations, for income too. josh josh --60?
why would he succeed? that he has a great opportunity to succeed because the eu site and the creditors are also changing. we have the results of the headsons and also the new in the european institutions on one hand. on the other hand, a great team of experts with them who know how to negotiate. respects, both domestic and international, he would have the respect to move ahead. also, the greek economy entered a new phase. growth rates around 2%. for investments, this effect will have a lot of success to succeed.
he wants to get started from a net one. what is the honeymoon going to look like? a year, a month? >> i think the public is ready to give him all four years ahead. the public has the patience to wait and see the results. think, here,d, i is the opposition is going to react and what kind of dynamic opposition we are going to see remain in is going to dynamic opposition. historically, they have supported a position that could create social unrest. the is the main problem package will have to face. be a hope there will consensus found. that, theyerms of were against changing the name.
do you think that's done? but itink that's done benefited from the discontent of people from north macedonia agreements. i think the deal is done, a new democracy is going the agreement and we are done with that. there are commercial issues related to the trade relations of the country, but i think this is something that can be managed. maria: thank you very much for your time. that was the assistant professor of international finance and economics. things move quickly. we expect him to be sworn in at
conversation wish -- let's wrap up the conversation. the markets moved this morning. features suggested things would be worse, but u.s. futures point onwards. the market reassessing. what that means for the fed. >> absolutely. there is distraction from the idiosyncratic issues versus the overall equities story, which would have seen from asia, pretty risk off after the jobs report. traders are trying to reassert the global theory. where is the fed going to go next? we have deutsche bank, what's going on in turkey, of course, and some minors gaining, as well, all of those weighing on equity traders minds and why we've seen little at the moment. anna: deutsche bank is a development that masses for which a bank investors. your team has been working at does it work out for investment
classes by the big cuts we're seeing at deutsche bank? >> absolutely. in terms of asset classes, something that affects all asset classes is liquidity. torture is still a big player in the banking sector. there will be implications for liquidity and asset classes depending on their positions and all that. off the top of my head, torture is a big player in fx markets. this could be action deutsche is -- deutsche is a big player in fx markets. volatility is so low. anna: that would make a trained -- a change. christine, thank you so much. this brings to a close this hour of programming. that's it for the european open. surveillance is up next. equity markets fairly flat. u.s. futures point down, london
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