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tv   Bloomberg Daybreak Europe  Bloomberg  January 31, 2020 1:00am-2:00am EST

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every day, comcast business is helping businesses go beyond the expected. to do the extraordinary. take your business beyond. nejra: good morning from bloomberg's european headquarters. these are today's top stories. a global health emergency. the u.s. warns citizens to avoid traveling to china after the world health organization declares coronavirus a crisis. yearin ends its 47 membership of the european union tonight. and amazon's spending splurge pays off. shares surging. ibm shares also rally after changes in the c suite with the company's first female ceo set
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to retire. it is a global emergency. the world health organization has declared. markets jumping on the positive note that there may be greater efforts to contain the virus, hasalso the w.h.o. recommended no need for travel restrictions. it is a mixed picture below the surface. u.s. futures looked to have given up gains from earlier. perhaps positive sentiment was short-lived as markets try to assess this. the s&p 500 is still in the green year to date and yesterday it did eke out gains late in session. euro stoxx 50 futures in the positive. yield curveeferred
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briefly inverted yesterday. we are back in positive territory. oil jumping, perhaps on the risk on sentiment. you can see that is faded and equities still holding up in oil. cable 13096 after gaining yesterday. some of the risks have been taken out for the pound. the coronavirus is what markets are trained on today. the world health organization has finally made the designation of a world health emergency as it coordinated global response. the death toll has risen to 213. the u.s. government has advised americans not to travel to china. japan has told its citizens to avoid unnecessary travel to china. .h.o. says the declaration a declaration of no confidence in china. reason for this
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declaration is not because of what is happening in china. happeninge of what is in other countries. is theatest concern potential for the virus to spread to countries with weaker health systems. nejra: let us bring in our chief north asia correspondent stephen engle. we just have a line breaking that south korea is reporting four more new coronavirus cases. with what we have learned over the past 24 hours, should investors feel reassured by the containment efforts on the virus? abating, right? i am not an alarmist and i do not to invoke panic, but obviously companies and governments are proceeding with caution. yesterday at this time, the number of confirmed deaths and the number of confirmed cases had jumped 29% from the day
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before. the numbers we are getting today are about 25% up. 213 deaths in china. an increase of 25% from yesterday's 170. confirmed cases nearing 10,000. the numbers keep going up at a double-digit rate. there should be alarm. we are seeing from the spread of the virus it is perhaps more contagious than sars, but less deadly. we draw these comparisons because i remember fully well 17 years ago what happened here. again, the impact on the economy is something we have to consider as well. 17 years ago, the chinese economy was just 4% of gdp, global growth. now it is more. the ramifications on a global health level and economic level -- we have to take these into consideration. think youphen engle,
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so much. let us talk more about the economic told of the outbreak. bloomberg economics as it could drag chinese gdp growth to this lowest since 1992. joining us now is stephen gallo. let's talk about the market reaction. we did see positivity because investors saw serious efforts to contain the virus. what is the market telling us? it has quickly faded. >> the market is waiting to see how the spread of the virus progresses and whether or not this threat becomes more ferocious were not. from a macroeconomic perspective, for the time being, other than the link between financial markets and economies in the western part of the world, the main focus should be on china. the narrative for china, when you break it down by various different players, whether it is
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the global trade situation, whether it is the financials in ,hina, the debt level in china the situation in hong kong, now of course this latest situation with the wuhan virus, the picture does not look rosy for china. if you are an investor, it is important because prior to this, generally there was a view that on a medium-term basis, a officialprivate and investors need to up their share of investment in china. pmia: the nonmanufacturing increased, but that does not capture what has happened with the coronavirus. more people coming out with calls we are going to see stimulus from the pboc and the government. how do you trade the yuan in the environment that we get more stimulus if that is what you expect? stephen: if we get more
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stimulus, and the virus is not getting worse, the spread is not picking up tremendously, pboc would be happy for dollar r&b -- renminbi to trade in a seven give or take range. i do not think it is also, given the get downside risk to the economy, i do not think it is r&b tradingollar below seven. china manages its currency, so it will move it in an orderly fashion. if it gets out of control, it will take steps. >> if you look at volatility since the outbreak of coronavirus, we have seen a spike in equities, but ethics volatility globally has remained subdued. why has the fx market not moved others?h as
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stephen: the same reason it has not moved much because of the trade war. fxthe exit of a sideshow -- is sort of a sideshow. globalhanges in the economy are big medium-term issues. it is not something fx has a clear picture on so far. nejra: what does a brief inversion of the three month yield curve tell us? it tells us premiums under the surface of what we had, which is a risk on start to the year. lingering concerns. i also think from an investor perspective, it tells you that when we see levels like 185, 190, possibly two, u.s. tends, there are going to be a lot of buyers out there. central bank sovereign bond funds are going to be snatching up those bonds on those
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relatively attractive levels. a lot of demand for high-quality relatively positive yielding debt. nejra: stephen gallo stays with us. be sure to keep up with the coronavirus story. figures see the latest from the cdc at the bloomberg news room and how specific companies may be exposed to the areas affected. check it out on virus go. senate majority leader mitch mcconnell likely has the votes needed to block witnesses in president trump's impeachment trial. it makes it increasingly like he -- likely proceedings can wrap up today. amazon's results propelled jeff bezos's fortune. the world's richest man is now worth around $130 billion. buoyed by- stock was the news of amazon subscribers.
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india will release its budget to support an economy on a downward spiral. it may include higher spending in rural areas. the government is set to miss its deficit target for a third straight year. it is also expected to widen the deficit target for next year. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. bloomberg. ♪
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nejra: this is "bloomberg daybreak: europe." let's get bbva numbers. less thanur losses expected. that is the red headline to trade your -- train your eyes on. proposing a 16 euro cents per share final dividend.
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after years of uncertainty, the 11:00s leaving the eu at u.k. time. from the referendum, we have seen article 50 triggered, and by march 2019, parliament had rejected theresa may's withdrawal agreement three times. orest johnson took over in july 2019, and by december, with a parliamentary majority, the eu and u.k. reached an agreement. now attention turns to what's next on the agenda. anna edwards joins us now. what can we expect? after 47 years and one month, the u.k. set to leave the european union this evening. boris johnson will deliver a speech around 10:00 u.k. time. there will be a countdown clock at downing street, then the u.k. is set to leave the european union at 11:00 in the evening u.k. time, which of course is midnight in brussels. there will be a rally in parliament square.
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there will be vigils, that's what they are calling gatherings from the remained side in oxford, edinburgh, and places beyond. what will be different when we wake up in the united kingdom tomorrow? from a business perspective, not a great deal. we are in a transition phase until the end of december at least, and that means people, products, data will flow just as they did. the u.k. will not be attending any european council meetings, so in that sense, things change. the u.k. loses its seat at that table. passport, younew might notice the word european union are now missing. the color of that passport will change as well. commemorative coins are being issued. those go into circulation today. levers might celebrate. remainers might complain. , in the 11ahead
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months of negotiation that lie ahead, what can be achieved? how much alignment will there be between the u.k. and the eu after brexit has been completed? what kind of difference with trade deals with the u.s. and with china can't really make as the u.k. leaves the european union at the end of this evening? nejra: thank you so much. the bank of england kept interest rates on hold and governor mark carney's final meeting as the central bank waits for economic rebound before supporting it. easing may be needed soon. they cut gdp forecast for the u.k. to the lowest level since the global financial crisis. officials also predict inflation will return to target by the end of 2021 if rates are cut to 0.5% in the next year. capitalgallo from bmo markets is still with us. it suggests investors saw this as a neutral to hawkish hold. you saw it as dovish. why?
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look, they left the option open to pretty much anything. toney what the wishy-washy of the statement and the press conference indicated was that the bank of england is really sidelined now by the forthcoming brexit negotiations. there is going to be a change in which policy in the u.k., i don't think the outgoing insider at the boe wanted any clarity on. that was notnejra: factored into the decision. was it right to take out the prospect of fully pricing in a rate cut? or should the market still be pricing in a rate cut? for 2020. stephen: it is 50-50. the rate cut depends more on the global scenario. if the fed cuts again, if the ecb eases again, the bank of japan eases, the boe could join them.
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there are going to be some reasonably significant idiosyncratic forces affecting the pound and the u.k. economy over the coming 12 to 18 months stemming from the fact there is going to be more economic and fiscal policy dynamism in the u.k.. that is supportive for the currency. levels below 130 in cable, we see eurosterling can still go 80.r toward a -- toward on my mindstions are, what will the timing of the fiscal stimulus be? there is a case to be made the march budget will be medium in terms of its scope, in terms of the fiscal impulse, because the government will want to hold back some ammunition until early 2021, when the transition -- just after the transition ends. hs2, is also this issue of now going through. that may free up cash for the
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government to spend over the near-term. on the whole, the fiscal and economic policy dynamic in the u.k. is going to be currency supportive. nejra: does that mean you think downside risk for the pound has been removed until we start to approach the uncertainty at the end of 2020 with the trade deal? large, i think if anything, into the end of the year, the pound is likely to trade weaker than stronger. know, the difference between this government and prior governments, the government has a plan. the government is planning to strategically over time diverge from the eu. in terms of rules and regulation. it knows at least in the short term there are going to be costs associated with that. it's going to take steps strategically to try and smooth out those costs. you have a government with a plan and a government with a plan to counteract some of the from-term downside risks
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divergence with the eu. maybe the scale is a bit smaller. it's not much different from what the u.s. and china are doing. the u.s. is decoupling its trading relationship with china. it is decoupling. there have been some negative impacts on the u.s. manufacturing sector as a result of that, but not the broader economy. consumers are still in healthy shape. my point is that it is a decoupling process that takes strategy, it takes time. it is not going to happen in six months or a year. it is going to happen and five years -- in five years. mark carneyked to and i did not get a clear answer. stephen: really?, what i wanted to know is now that extreme uncertainty has been removed, because he said in the past pmi's can be misleading
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when there is politics influencing the pmi's, i asked if there would be more focus on those surveys the rest of this year. when those surveys came out, that is when the markets pull back the rate cut bet. should they put more focus on those surveys? will they? overwhelmingink perspective, and one of the good things the boe has done overall recent leadership, is to speak to local business leaders and use its regional contact basis to find out what is going on in the local economy. i don't think one of matters more than the other. this decision we had yesterday will hold because the boe is sidelined. nejra: median estimate is 135 for cable end of the year. your year-end call for sterling? stephen: our profile for the pound is up, then down. nejra: so year-end? a little bit different
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than six months, but not significantly. you have to look at policy, which i think will be pound supportive. nejra: now to the bloomberg business flash. an offer to buy the rest of outl stock, a bid to carve part of the market. reviewid they will the proposal but there is no guarantee. has named its new chief executive, currently head of the company's cloud software unit, also a principal architect of the purchase of red hat completed last year. will continuety as chair for the rest of the year and then retire. $30 billion into juul, but now the investment has been marked
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down for a second time. 35% leaves the value of its stake at just $4.2 billion, a third of its initial value. that is your business flash. next, a look at the global oil markets reaction after the w.h.o. said there is no need for travel bands after coronavirus. ♪
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nejra: this is "bloomberg daybreak: europe." oil on the front foot as the world health organization said there is no need for travel and trade bans due to the coronavirus. opec worried about consumption. a bit,ee oil rebounding but opec and partners have a lot to be worried about. china of course is the economic engine of growth, especially for the oil market. last year, china imported more crude than any other country. two thirds of new oil demand
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came from china. look at this chart. the virus might end up meaning they are going to import the lowest since 2001. this paints the picture of the worries surrounding opec and its partners. we could see china continue to suffer. opec is worried. what they are doing is having these discussions about moving the march meeting forward to february, as soon as next week. we noticed the push from the kingdom of saudi arabia was meeting russian resistance. if they were to convene an emergency meeting, the markets would expect them to act. nejra: stephen gallo is still with us. is oil going to find a floor soon? picture isthink the particularly rosy for various reasons. clear is they amount of non-opec production
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relative to opec production. it does not seem like that's going to change dramatically anytime soon. trading oil on the whole, rallies in the oil price, you want to look for selling opportunities. nejra: we are rallying, but we are still heading for the worst month since may when we had the trade war worries. how does oil but also other factors figure into how you would trade india right now? >> india right now, i think asset prices will do well in india. we are talking about this regarding the u.k.. you are in an environment of economic fiscal and monetary policy reform activism. support from the r.b.i., encouragement of private sector investment, all these things are positive for indian asset prices in the short term. the way to play india, i am not confident i would want to take the currency risk if i am a foreign investor. i don't think i want the currency risk.
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i don't think the environment is bullish for the rupee, but i think you want to be long-duration because of the r.b.i.'s operation choice programs, they are going to continue to hold down long-term rates. they are trying to strengthen the balance of payments, trying to reduce their dependency on fossil fuel imports. that should be a longer-term positive thing for the currency. not so much a short-term one. long-duration, lung the equity market, that is how you want to play india now. the budget is going to open up opportunities on sector by though.pecific bases it is mainly going to be an equity market event. nejra: where would you see the buying opportunity in the rupee? 70, 7050.oward we are in a low volatility environment and it costs you to be long. you have to pick your levels carefully.
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nejra: coming up, the ceo of signify joins us after the manufacturer reported fourth quarter sales growth that missed estimates. ♪ mates. ♪
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nejra: good morning from bloomberg's european headquarters in the city of london. these are today's top stories. a global health emergency. the u.s. and japan warns citizens to avoid traveling to china hours after the w.h.o. declares coronavirus an international crisis. boris johnson urges the u.k. to come together after years of brexit division. britain ends its membership of the european union tonight. amazon spending splurge pays off. the e-commerce giant's earnings. across wall street estimates. surge with the company's first female ceo set to retire.
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welcome to "daybreak europe." let get to french gdp numbers. the french economy shrank 0.1% in the fourth quarter. the estimate was for 0.2% growth. that might raise questions about the bottoming some have been expecting in the european economy. also, deep in corporate earnings season, let's get to numbers petroleum. beat onvery clear fourth quarter. in terms of what else we are looking for, $749.7 million in revenue. we are looking at production, fourth quarter production is 135
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million barrels per day, the number i think i'm looking at. in terms of the dividend, this is going to be some thing to focus on. lundin petroleum reckitt -- recommending raising the dividend. ceoill be speaking to the later in the program. do not miss that interview. another interview first. dutch manufacturer signify has raised its dividend after reporting sales growth in a fourth quarter that missed analyst estimates. joining me is eric rondolat, ceo of signify. why the raise in the dividend? talk us through your thinking an behind that. about thes talk quarter before i come to the dividend. we increased from 12 million to
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56 million. we also continue to increase for h consecutive year our profitability. when we look at the composition of our business, six years ago, we are 26%. now we are 80%. the transformation is really happening. when it comes to cash, we have the highest free cash flow since the ipo at 529 million for the full year, about 8.5% of sales. then we are proposing a dividend which is increasing by 3.8%. on the year, $.35 per share. capacitynfident on our to generate free capital. an industry which is
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transforming, signify is also transforming. one thing i want to ask you about is the potential impact of coronavirus. devon percent of your revenue is generated in china. you have manufacturing sites in the country as well. do you expect a negative impact on earnings from the coronavirus spread? it is early to say. china is our country number two. we have 8000 people in the country. people in the province. our priority has been the health of our people. we are monitoring on a daily basis. we know where they are. we know how they feel. we have sent predictive equipment and gel for the hands. none of our people have been infected.
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the holidays have been prolonged in china, so we are following this. people will go back to work, whether it is in factories or offices. we are at this point in time analyzing what effect this could have on the business, but it is early days. nejra: are you putting any projects on hold? for example, street lighting projects in cities are locked down. are there other ways you are impacted? it is a very grim exercise we have to do. we have inventories we eventually prepare for chinese new year. we need to see where we are from an inventory standpoint and what are the projects we would deliver as a priority? as i tell you, it is very early days. we do not know when factories are going to resume work. -- from theetting
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chinese government that we can go back to protection. if it is down a few days we will have no impact. if it is weeks, we will have impact. nejra: can you give us an update on europe and india? you did issue a profit warning on the weakening economic growth in both of those regions. how are those geographies performing? how do you expect them to perform? been weak foras the full year 2019. the has also been the case in q4. when it comes to india, it is a very specific situation. india has not been strong in q4, as expected when you listen to what is being said by the economists in that region of the world. they expect the market to be mid-2020 anduntil
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possibly going back up after that time. , we were quite effective. we acted extremely quickly. nejra: where is the growth going to come from if you are potentially expecting any kind of slowdown in china, which you have talked about previously on the program, regionally and in terms of products, where are you expecting growth? let me tell you that the world has not been an easy place to do business in the past quarters. see the challenges but i also want to see the opportunities. 2020 is the europe neutrality. -- the year of neutrality. we are going to end up being 2020. neutral in
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germany, it is using in q4 a global system we use for the industry space which is going to kill all the lights on the shop floor. shaving --gy energy-saving. time, it makes the environment safer, more productive, and we give an indication on how the space is used for further improvement. nejra: thank you so much for joining us. coming up, spending splurge. amazon's decision pays off. plus, we will be speaking to the ceo of petroleum -- lundin petroleum. ♪
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nejra: this is "bloomberg daybreak: europe." showingesults came in the online giant's spending splurge paid off. annmarie hordern has the details. crushed-commerce giant estimates, posting a 21% jump in sales to $87.4 billion while consensus was for under $87 billion. the street was shocked because amazon has been spending big in key parts of its business. the main concern was the cost, especially on one-day delivery. but the investment paid off and did not dent profits. adding to enthusiasm as well, jeff bezos announced the company has 150 million time -- prime subscribers. these customers pay monthly or annual fees for shipping discounts and other perks. key for amazon because these
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members spend twice as much as any other customer. jeff bezos added just over $13 billion to his fortune in 15 minutes. $880 million in one minute and nearly $15 billion for every single second -- $15 million for every single second. nejra: an offer to buy the rest out a shareto carve of the truck market. they have offered $35 in cash per share. navistar say they will review the offer but there is no guarantee. ibm has named a new chief d krishna. arvin the long-time ceo will continue as executive chairman through the year, then retire after almost 40 years with ibm.
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facebook is battling this information about the coronavirus. it is starting to remove fake news and theories. that includes false claims of a cure and racist explanations about the origins. the company has a policy of removing content deemed harmful to users. let's get back to earnings. lundin petroleum has reported ebit offer the fourth quarter that beat estimates. the swedish company announced its pledge to achieve carbon neutral operations by 2030. joining us now is the ceo of lundin petroleum. before we get to the numbers and your strategy, i want to ask about the potential impact on coronavirus. you have a lot from your field going to china. are you concerned about a drop off in oil demand as a result of coronavirus? >> that is correct. i think in the short term, there with demand,ssue
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but in the long term, i don't see things changing fundamentally. we will have to see also how things go with corona. in the long term, i don't think so. nejra: have you had conversations with your customers or are you reevaluating markets where you would export to based on any shifts because of a drop in demand? >> we have a daily conversation with traders. so far we don't seem. we have been able to shift exports. it is obviously something we are monitoring closely. right now it is more watching see.-- watch and nejra: do you expect significant drop off prices from here? alex: we have seen quite a drop the last few days.
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in the short-term has reduced and the price has reduced. we have seen some recovery. athink it is really short-term impact. in the long term, i don't think the fundamental will change. nejra: do you expect the field to reach production cap before the summer? we are going to reach plateau. we will need two extra wells. we are drilling our first of the two remaining wells to reach plateau, so we will have to see how performance on drilling is going. we are saying this summer, but if performance is good, there is an opportunity before. nejra: possibility of before. alex: a possibility but we will have to see how drilling is performing. nejra: what about phase two? what is the status?
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is there potential for an early start up like we saw from phase one? alex: phase one was a great success. it came a month earlier than expected. phase two is doing well. we are pleased with progress. overall, very pleased with progress. the project is going very well. will you be able to raise the reserve estimate for the field? expectation.lot of the oil field has been a fantastic journey so far. we have to see productivity from the wells and we need another year of production were so, then we can reassess the situations. there is sentiment that there is quite a lot of growth potential. it is early days. nejra: in terms of something a
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little more disappointing, it's the exploration of results in the baron seeing. is this going to be make or break? alex: it is a long-term game. quite significant fields have been discovered. half a billion barrels of oil. there are other fields. , but the realy -- it's secret of the going to take time. active.oing to be exxon will be very active. it is an important year, but it is not make or break. it will take time. the area is so large. four wellsrling there this year, but if the muted exploration trend continues and you are not able to grow substantially, i understand it is long-term gain,
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but will you be more active on mna? alex: any growth is the main strategy of the company. we still strongly believe in the potential in the region. when it comes to m&a, it will be more opportunistic. that would be a catalyst. a strategyannounced to become carbon neutral by 2030. do you expect the portfolio to shift in the near term as part of that strategy? alex: strategy fundamentally does not change. the strategy started back in 2010 when we started to make the first decision to prepare for electrification. one of the most important parts of the process is the fact 90% of our assets will be electrified, reducing the emission of co2.
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one of the lowest in the world. that allows us to be very competitive. then we get more guidance in terms of how close we get to carbon neutrality by 2030. it is very much driven by electrification of the platforms, but strategy will not change. nejra: you are seeing strategy will not change. you have also said the strategy is still organic growth. decarbonization growth, could that be an area of m&a? alex: i think organic growth fits very well with decarbonization. you drill new prospects where you apply new technologies. it allows you to use the state-of-the-art technology and be very competitive in the marketplace, not only in terms of growth, but efficiency. that is what we have shown today . we have one of the lowest co2 emissions for offshore. we want to continue to be competitive on that front. nejra: thank you for joining us.
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eric rondolat. coming up --alex schneiter. why the top 1% will be buying stocks. ♪
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>> there is no doubt this is a bubble. tesla cars are amazing. he is delivering all kinds of technology. the story is so powerful. it does not mean the company is worth that much. mike novogratz on shorting tesla. goldman sachs says the top 1% are done buying stocks or they will buy significantly less than they have in 2019. >> goldman here specifically
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concentrating on american top 1%, saying they will buy less stocks, it is not because they find stocks less attractive. it is that they already own so much. which means they can't buy much more from here. in 2020, demand is going to be weaker from this class of investors that has near-record allocations to u.s. stocks. goldman does see this across the board. everyone from pension funds to mutual funds are in the 95th percentile of allocation to markets. they have set their price target for the s&p 500 at only 3.5% higher from its current level. the question remains. if stocks are not going to be attractive, what will they be buying? nejra: thank you so much. is still with us. how much buying of the dollar do you expect in 2020? we are up for the best month since july so far.
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>> the dollar will face very limited pressure. that is our core view. when you look across the , therem of em currencies is not a lot of upside to be exposed to the currency if you are a foreign investor, a dollar-based investor. why take the currency risk? that does not mean there are not opportunities in equities or sovereign debt or credit markets. talker in the show we will -- we were talking about india. from the perspective of u.s. dollars yields, geopolitical shifts much rated, you have a president of the united states that wants to limit the size of the deficit, is now an oil exporter, this is not a bearish market for the u.s. dollar. ist you will see into 2021
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what the fed will be doing as a consequence of monetary policy will be resisting dollar strength, but not a sustained move lower. the big risk would be an upset in the u.s. elections if we get an unexpected result. nejra: what about the fact that when we heard from jerome powell, a lot of people saw that as dovish because of what they were saying about average inflation targeting? situationhe inflation is an excuse for them to keep accommodative monetary policy, to keep financial conditions favorable. nejra: it does not mean more cuts this year? stephen: i would not say that. i would say the next move is going to be a fed. i don't think it is going to be based on u.s. economic headwinds. it may be more global factors and a strong dollar. the upside in the dollar figures into that picture. if anything, what we have seen over the last year or so in the
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u.s. economy is a very robust consumer, the housing market is doing phenomenally well, consumer confidence is near record highs. fed cuts were probably more than what the economy actually needed. what the fed cuts are triggering is more growth dynamism in the united states. in europe, low rates are a symptom of economic malaise. nejra: if you would be buying the dollar this year, what would be your preferred currency to have the dollar long against? stephen: that is a difficult call. it is going to be incrementally -- there's going to be a decent floor underneath the dollar. if you are looking to invest in em, i would not necessarily agree you should prolong currency risk. you should hedge most of the currency risk.
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gallo, great to have you with us. "the european open" is next. european futures on positive footing, but u.s. futures have given up against. -- given up gains. ♪ ♪
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>> good morning. welcome to "bloomberg markets: european open." we are live from london. i'm anna edwards alongside matt miller in berlin. matt: it is brexit day and european futures are on the rise as investors shake off a surprise contraction in france and the u.k.'s imminent departure from the european union. the cash trade is an hour away.


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