Been working hard on cost has been creating this leverage. It the perfect storm of volatility that helped you in the Third Quarter . Sergio it has been coming down to a more normalized level that may be sought before 2018 and 2019. I think it is a combination is a more stable market environment, but the effect of all the new initiatives that we could set for growing, and which are starting to pay off. Manus youve got a strong message in the dividend. There has been an accrual of cash and buy back. When can we realistically expect the regulator to let you and ubs pay those dividends in 2021 . Sergio what it seems for investors is, basically, our message that we are very determined and committed in implementing our capital return policy. We are flashing our intentions to have a good solid Cash Dividend, but also complemented with share buybacks, and the fact that we are highlighting what we have done so far this year by creating this 1. 5 billion reserve is a testament to our commitments. Think itt to timing, i is not realistic at this stage, considering the overall regulatory environment, and the restrictions worldwide until the early parts of 2021. Manus early 2021. The other message, you talk about markets leap low and lost provisions. Jamie dimon says he is 1030 over provisions and 20 billion under provisions. Risk to loan provisioning skewed going into 2021 with the covid backdrop . Exposure toink our credit markets is contain. This is the future of our strategy, which has been paying off over the years and giving us a very high returns on regulatory capital. But particularly, the issue taking consideration the last few months, we have been demonstrating that. Going forward, i do not expect a meaningful increase of the provisions, unless there is a huge dramatic downturn in the economy. In any case, all those provisions will be as you could see an hour thirdquarter results, we have a very modest level stage three provisions. We are very confident about the quality of our trade. Manus i listen to commentary. All are worried about rights recessions in japan. You concerned about a w narrative . A deep will be deeper narrative on the back of the covid narrative . Sergio we have to be concerned about many items that are out there. The situation from an geopolitical standpoint is still very uncertain to. We are prepared for any scenario. We believe that we have been demonstrating over the years, and we will go forward with our ability to navigate those challenges and still deliver results. Manus you said that what an individual bank does, but also what it is supposed to do in regards to mergers and acquisitions, its not what an individual bank does, but its what the competitors do. Ubs inleave ubs, is prime position to take part in m a if it comes . Do they have the license to do a deal if they need it . I think its always inappropriate to talk about m a. For somebodyand about to leave the firm, i will not enter into that debate. In general, i think it is a scale that can offset the headwinds of regulatory costs, Technology Costs and crude. I think as far as ubs is concerned, we have plenty of room to grow organically. Of course, we the Competitive Landscape is very intense. Therefore we will need to watch exactly whats going on. Anna that was the outgoing ubs ceo speaking to bloombergs manus cranny. And manus cranny joins us now. Very good to have you with us. He says its not polite to talk about your own m a story that you all and over. Let me ask you about buybacks. That seems to be part of the headline, part of the story. He is going to leave this business is lining up a big return of cash. Manus he will be leaving some litigation risk, but they will be making 1 billion in cash. This is about, i suppose, pushing back against the regulation, or the regulators, which have forced all banks across the spectrum to reserve more money. We dont know when the end of covid is going to be. To the comment of load off provisioning, which was 89 million. They had expected 225 million, so again, there is no huge preparedness for low loss provision in the numbers. I went on in the interview, shameless stuff. You dont miss that do you. . . Matt im sure that will be one of the most watched and moshe interviews on the website. Everyone is fascinated with the story, especially because of the m a question you asked at the end. At first, and you heard him say it would be inappropriate, but then gave you a great answers saying, if you have the scale, it makes a lot of sense to do a transaction in this climate. To overweight or outweigh regulatory costs and a number of other things. Thismeone who has followed bank so closely, do you see any possibility that they do a transaction . Tous the question i put him, which was very politely declined to answer, which was, who has the license and the capacity to do a deal . At the gi said last week or the week before for the german bank ceo. The personwant to be in the relationship. They are bold former german bank leaders. Back at some of the staff, he took the risk wave of the Investment Bank down to a third of what they were when he joined in 2011. So is that the fit . Want to take out dancing . Is it Deutsche Bank . The management dont want to dance at the moment, do they . Anna manus cranny checking the m a story. We keep doing that no matter who is leading the business is in the Banking Sector across europe. Manus cranny with that great interview for ubs. Weve got breaking news coming through here in terms of whats going on in the u k corporate space. Seems tolike revenue be in the low single digits. Coming through from the makers of various cleaning products. Point 3 . 3 the estimate with an increase of 8. 6 . Not a bad performance versus the estimates from this business. And to the rest of london. Up next we will talk about the various lockdown measures. Site taking shape across europe. In particular, islands sweeping with the pandemic restrictions. And the viruses expected to spiral out of control. This is bloomberg. Anna welcome back to Bloomberg Markets european open. Will have aif we sluggish start to the european trading session. Perhaps this reflects the u. S. Sentiment as yesterday. U. S. Features are pointing to the outside. We are up by three to five cents of a percent. The u. S. Major indexes. Thats get the bloomberg first word news update. Betweenhe spat democrats and the white house to be stimulus deal seems narrowing. Nancy pelosi says she has to have an idea whether a bill might pass by and of day tuesday. The public and lawmakers are but if a deal is reached, President Donald Trump was lobby them to come on board. The uks holding out for concessions from the eu before restarting brexit talks. The chief negotiator said he is willing to intensify and begin of ann the legal part accord. Thats more than enough for Prime MinisterBoris Johnson, who says a trade deal is unlikely. His office feels the talks were instructive. India has seen a peak in the number of new Coronavirus Infection according to a Government Panel of scientists thinks the nation may be able to contain the worlds secondlargest outbreak by february. Indias lockdown at the end of march was the worlds largest, causing the economy to contract nearly 24 . Global news, 24 hours a day, on air and on quicktake. Than 2700 more journalists and analysts in more than 120 countries. This is bloomberg. Matt laura wright there with your first word news. Hedge higher. Investors hold out some hope of a deal on stimulus talks. European futures are slipping after the week session on wall street overnight. Global coronavirus cases exceeded 40 million with the pandemic showing no signs of slowing down, and irelands government impose some of the most sweeping pandemic restrictions in europe as the virus threatened to spiral out of control again. Thats get into the markets with marco low, our bloomberg mliv managing editor. He is singapore, but he is irish as well. What do you think, aside from the fact that you come from there, of this incredibly oconee weeks where six nonessential stores will be closed. I think a lot of people were expecting two weeks, this is a lot more serious than one may have hoped. Way that youthe mention my nationality. It is very important. Extremequite an measure, but some countries have to be the most extreme in europe and ireland is taking the position. There will be increasing stricture ands in europe. And the fact that more and more countries have to tighten down because we are seeing an aggressive rise in pandemic numbers and colder and colder weather. We are not in the Northern Hemisphere winter. That is worrying because it looks like the race between winter and the vaccine, winter is winning. This is a very, very negative message. Peopleaking clear to that the consumer is going to continue to be constrained and that will hold back economic recovery. All those holds have a vshaped recovery and they will be crossed and it will get tough the couple of months ahead. Whatare we going anna will we be looking for when it comes to getting guidance about the resilience of economies with this virus . Is just likeent the rest of us, hoping that we managed to make it through the , but also keeping an eye on what that does to the expectations they get their debts paid back. What are we looking for in the Bank Earnings seasons . A couple ofare different aspects. For many banks of trade. Remaining volatility and the turnover is generally good for market makers. Its whether those kind of trading profits can make up for the fact that increasingly banks are having to allow for the facts that many more companies are going to go bankrupt. Those low loss provisions people will look at closely. It will be particularly interesting because as you go off with the new iris positions, the gains are changing quickly. So how these banks may have got the economy might have gone, even two weeks ago, is changing across the continent and even on the islands west of the continent. We are seeing increased restrictions come in and make it more likely that more companies will survive and create a profit. More people will be laid off. There will be more unemployment and this will mean that low loss provision across both Consumer Sector and the corporate sector have to be raised higher. I think people will check those numbers closely and what they are based on and how recent an update of a forecast is made on. Matt you point out in your beyond thethat uncertainty over the u. S. Election, markets are incredibly complacent. I love the headline, you know who the sucker is at the markets table. If it is not softbank, then its you. Is that your point . I did not highlight any specific company, that i do like the interpretation you have given to that. Be part of this bullish cohort. I am someone who is saying, next year should be fine, we will get this big stimulus package with loads of money on the sideline. Once we get a vaccine it will all look good. But i am slightly worried. Everyone i talked to is slightly bullish next year. Will be badlike it into the election and bad until we get clarity. But once the election is out of the way, everyone who is we arey bullish seeing more people get laid off, we are seeing increasing Consumer Debt problems. We are seeing more Companies Going bankrupt, which will make it harder to get earnings. We will see profits fall, and yet we still seem to be bullish. I is making me wonder whether am the sucker. Anna it could be a long winter. Mark cudmore, bloombergs market live managing editor. Up on the program, bmw matches the high bar set. We will talk sectors and earnings in focus on the auto sector and the resilience. This is bloomberg. Matt welcome back to Bloomberg Markets european open. We are currently 40 minutes away from cash trading. You can see futures right now pointing down. 4 10 of 1 . Dax futures down 6 10 of 1 . Although we have had some positive news here in germany, in fact, bmw has joined its arrival in painting a rosy picture, very rosy picture in its preliminary earnings report. The carmaker said its auto business generated more cash than expected last quarter by commenters, since we are here on the continent kilometers, since we are here on the continent, with the autobahn recovery in sales. With the head of European Equity strategy at bank of america to discuss. I want to put this down to the success of the new three series. But that car. They Just Announced the m3, which has a grill that is way too big. But obviously this has a lot more to do with macro trends than just the stylings of one vehicle. That, i would agree with you. Highly sensitive item to strengthen the economy. We have seen the largest pmi. It is up by 20 points. Up by 40 points compared to march. That is the kind of environment that you should expect orders to do well. It has outperformed the markets by 30 since march and given our projections that we have, the economy will be consistent with another 10 outperformance. Think theys that we should continue to do well, just as theyve done over the last couple of months. Anna i wonder what that tells us about the cyclical story as a whole. Is it one of rule 4 is it one rule for cyclicals or do you distinguish between them . Greatian that is a question. They have gone up by 30 and we think they will continue to do well, even though we are getting into the latest data. We have more cyclicals as a set. But i think that is where your question is aiming. There is a subset for cyclical has not formed yet. There is a lot of interest. What about banks and Energy Companies and airlines . Are, have theyns , is it thereact, or biggest opportunity in the market simply because they have good news. . We think the idiosyncratic factors have to do with banks and energy with the earnings. We think these headwinds will subside, allowing them finally to join their cyclical peers in rallying. That theyou think virus is going to be brought under control and that will finally release some pent up demand for airlines and cruises . Sebastian i think that is a good way of putting it. The markets are telling us that it has become more complicated. The stability is lower and uncertainty is higher. But we have seen a great career path the last couple of months. Spike, when people engage in irresponsible and high risk activities. The consumer becomes more cautious and more restrictions are being imposed, that allows the virus to fade. We have done a very rich timeline of additional tools to bring the virus under control. Vaccine. Ut the the vaccine will start to be rolled out in q1 of next year. And think about highspeed, quick turnaround for tech, which should allow us to determine everyones infection status. What we are positioned for is a situation that has a scary increase in virus numbers that we have seen. These tools will increasingly come online. This should allow those that are sensitive to this to do well. Anna i keep forgetting that we vaccine newse story at any time. We will stay alert for that. I want to ask you about the relationship between pmis and your stock market calls. Seem to come before the stock market moves. The stock market moves may come earlier. How important are the pmis to you at this point . Sebastian i think this is the key question. They have asked what is the best indicator to explain the market . If the rate of change in the pmi. That this correlation is this you look at the sixmonth rate of change and one versus the other. The pmi was so low six months ago, its a very intriguing new tool. At the market changes. It is a very accurate relationship. The market went down when q1 went down. The rebound with the pmi rising by 40 points. The 40 point jump we have already discussed. The last two months the pmi had been declining anna im so sorry. Thank you so much for joining us. Sebastian joining us from bank of america. Thank you. Anna 30 minutes to go into the start of the session. Are we just playing catch up with the u. S. , futures pointing upwards. 10 30 u. K. Ahead, time, a delivery of a speech on the Economic Outlook and three hours later, housing and Building Permits data out of the United States. Both are expected to pick up in september as record low Mortgage Rates support demand. New york fed president John Williams makes comments of the Webinar Series on culture hosted by his bank at 2 00 p. M. From, we get earnings netflix. It has been a good year to be a streaming giant, hasnt it . I yeah, what an amazing dont think ive spent more i have watched more netflix this year and probably all the combined years previously. Anna and other streaming services in my case. Matt prime, as well. Letse them all, hulu get back to european earnings. We had ubs results, which were really exciting. Friday, barclays reports, the banks coming out, next week, lenders like hsbc, Deutsche Bank, Credit Suisse all report loanloss provisions, potential m a, consolidation is always the talk. Joining us to discuss is dani burger. Could this earnings season be the catalyst i feel we have been asking the so long could this be the catalyst to turn around european bankshares . Dani maybe it is finally it. Maybe you can stop asking the question. Ubs, indicated higher by 3 this morning so shareholders seem receptive to what they are hearing from european banks and that is part of the reason you have been asking this question. It is such a low bar. Banks have lost 40 so far this year, so it is a really low base. Barkley strategists say european banks at this point are too cheap to ignore. The market is overly pricing in coronavirus threats of they are overly discounting banks, but investors are going to turn their attention to the numbers out of banks this week and it is always difficult the week after u. S. Earnings and you have these huge trading beats from the u. S. Banks. It is a much more fragmented picture and they have less of a market share than what is in the u. S. In these key segments, the u. S. Has all of the might. Especially global trading, ondit suisse, pulling back their trading business and it is the u. S. Banks that have filled in the gaps. This earnings season might increase calls for m a. Talking Sergio Ermotti about it, not saying ubs was looking for mergers, but the size helps them with regulatory and Technology Costs. M a, a potential merger, that could boost. In europe es banking shares along with Asset Management and dividends, plans to reinstate dividends. The marketget excited despite the fact european lenders arent giants like we see in the u. S. Anna thank you very much. Dani burger with the latest on the banking m a story and lets continue talking about m a. We are joined by the deputy head citi. Arch for india at thinking about the Banking Sector, what do you think it will be that will drive m a in the end in the Banking Sector . What is the overarching rationale for doing m a . Thanks for having me on the show. Taking a quick step back, we europe drivenp in by the fact that usually when you have a recovery, the market 40 up globally from the trough, we usually have a timeline of six months and we see m a picking up. In the Banking Sector, there are forces. Overall, oneat m a of the motivating forces is defensive where other sectors will be more growth driven. What is defensive, m a motivation in the Banking Sector , profitability, maybe challenging post covid19 and we see consolidation could be a way for european banks to improve profitability, which is something the regulator regulator would support and would also be a way of decreasing excess capacity in the sector but more broadly theking, looking at financial sector, you have some of the other motivating forces. For example, growth and that will be the maturing fintech sector. Primarilyks, i think trying to face decreasing profitability might be a reason. Gaining market share, for example. Is it too difficult right now for european banks to do crossborder mergers . Ays tell usw that but when i talk to regulators or European Union officials, they always say it is up to the ceo to pull the trigger. Broadlybviously, speaking, the one sector where that is a huge challenge is going to be pharma. In pharma, which cindy emergence of National Champions in the covid19 world. You have this strategic break definitely now with National Champion pharma. I dont think looking at the financial sector, that is much of a break, but in places that could be an issue. Certainly for tactical marketshare share grabbing, this is not necessarily an issue. Lower rates, that will be a question. Forurope, the potential reduction and the regulator and governments are aware of that, but that is not a block completely. Anna not a blocking pharma. What about the Banking Sector . Is it the case banking ceos need to ask to do deals and we will see what regulators think . Do we have a sense of what regulators will allow in terms of crossborder m a for banks . Saye i think all i would is obviously, this has been increasingly supportive. It is a challenge to say you just have to ask. Sometimes, economic drive is a seen weand weve continue to expect mainstream banks to increase market share in selected regions too small m a. Perhaps larger situations may be more of a challenge. That is what we would expect. Matt you know to european equities are trading at 15 times 2021 estimated earnings, whereas their u. S. Counterparts are trading at 21 times and we always hear broadly that is because there is not a huge sector tech sector over here, but what about the banks . Elise i think in terms of beuations, it is going to more of a question of value. Everyone expects cashless for the Broader Market so the european sector specifically, we would need essentially a bit investors. Ence with that is what we hear. On the show, you were looking at cyclicals. With the bank, it is needed and more support from the regulator, obviously. How is expected and then much liquidity may be injected into the market and whether we will see more or we are going to have more of the same. Question for bank allocation, but at the moment, they are remaining particularly low. Anna thanks very much for joining us. Elise badoy, deputy head of research for emea at citi. Position toin a secure a smooth market opening this morning after a threehour in the last trading session. Next, we discuss market architecture and the way we keep it functioning properly with our guest next. This is bloomberg. Anna welcome back to the European Market open. 20 minutes until the start of trading. For europe, we got to play catch up with the u. S. Lets get a business flash with laura wright. Up 1. 5bs is lining billion in share buybacks next year as Sergio Ermotti plans to hand the reins of the swiss ralphr to its next ceo t hamers. It expects provisions in the current period will remain lower than the first half. Remy cointreau is expecting a decline less than expected due to better than expected demand from the u. S. And china. Ofexpect a drop in profit 25 to 30 in the first half of the year. Remy raised its forecast in july when it predicted a drop of 40 . Goldman sachs is poised to pay more than 2 billion to settle the 1mdb probe. Sources tell bloomberg it has reached a packed with the u. S. Justice department. The accord will let the lender avoid a u. S. Criminal conviction. The settlement is broadly in line with estimates and could be announced in the next few days. No comment from goldman sachs. Gaps between democrats and the white house over a new stimulus deal seem to be narrowing. Nancy pelosior says she hopes to have an idea whether a bill might pass by the end of tuesday. Republican lawmakers are favoring a smaller package, but if a deal is reached, donald trump would lobby them to come on board. Thats your Bloomberg Business flash. Matt laura, thanks very much. Laura wright with your business flash. We are minutes from the open of cash trading. Next, your stocks to watch including swedbank, considering whether to resume dividends after handling the fallout of the covid crisis better than feared. It will be fascinating after what we have heard from ubs. This is bloomberg. Matt welcome back to bloomberg market the european open. We are 15 minutes away from the start of cash trading. Euronext says it is in a position to ensure a smooth market opening this morning after a threehour outage in the last trading session. More for some issues. The Technical Glitch halted stocks like loreal, lvmh, and a string ofing to issues that has be Global Stock Markets in recent months. We are joined by xavier rolet, nonexecutive chairman for Capital Markets at sure capital and the former ceo of the london stock exchange. What do you think about these technical issues . We were talking to investors yesterday who were getting frustrated and wondering why whye arent redundancies, these systems keep having issues and are worried about a bigger problem to come. Are you . Elise well, it is a good question. Most exchanges operate on the basis of i. T. Architecture that has been around for many years. First of all, they operate private networks. The banks, the pokers brokers that tiein to exchanges themselves have external connectivity with clients. That adds to a lot of the complexity of operating these platforms. Of course, something specific to the Exchange Industry, consolidation, creates an additional layer of integration of complexity, bringing these platforms built with different infrastructure it is very complex. Failures can come from hardware. They can come from software issues, quality control, but as you said and as clients said, there are redundancies. And dont always work sometimes you get the trifecta of software, configuration issues, and hardware failure together with Network Failures communication failures which make it very difficult to recover. That basically raises one question. Today Exchange Industry operating not only regional but Global Networks in need of a transformational set of course, i wantof to refer to quantum computing and quantum communications, which is knocking at the door for the Financial Services industry today. Anna i want to ask you about that, but also, you mentioned consolidation. Some people use consolidation as an argument they suggest consolidation will drive withce, will create increase resilience of networks. Is that not your experience . You think consolidation reduces resilience because i. D. Systems are not necessarily fully integrated . Xavier it is a good question. Ill try to keep my answer short, but consolidation on a global basis is only going to be open to three, maybe four Global Exchange groups. The rest will be operating locally and regionally. The answer to your question is yes, consolidation can be a factor of increased resiliency if you have the right i. T. Construct, if you have the right set of solutions and technology is progressing. Exchange industries and infrastructure industry is supposed to offer resilience, it tends to move more slowly. It tends to innovate less. I think now is probably the time to look at radically new solutions for the future and again, if youll forgive me to mention quantum communication and quantum computing. This is probably the next frontier. For those companies that are going to be glowing going global or have oregon global. Matt are you aware of anyone out there offering such solutions . Xavier no, not in the Exchange Industry. There are a number of farsighted Innovative Companies in the Financial Services industry, but also in the space industry, in retail that are looking actively at quantum computing. In general, most companies are very conservative, perhaps even skeptical, but i think we will in the coming years i am talking about the next 18 to 24 months we will see some pioneers, innovators taking the lead. I think most of these companies will the american. Probably not in the Exchange Industry. The Exchange Industry will probably be a laggard, but it is not just the compositional power compositional power of quantum computing. It is instant communications regardless of business distance through quantum communications, satellite networks. I think the Exchange Industry is going to have to start thinking about it. Anna when these exchanges go down, when we see exchanges not able to function for a few hours or in the case of japan, for a day, how much does that matter to most investors still . Because we care about the amount of Business Done in systemic internalizes, less transparent trading platforms. How is that evolving . Xavier it is a very good question. Historically, europe has not had a very developed equity markets. They are not very liquid. If you match them to the relative size of the economy, but historically, half of all Exchange Type or equity transactions have been done over the counter for a long time. Exchanges have seen in some cases the market share reduced, through encroachment by rivals, but where exchanges are relevant or in price formation. A lot of the peripheral platforms are not price forming. They trade around price formation happening in changes exchanges. A lot of pension funds, corporations, and other economic factors that are not Exchange Participants need a Closing Price so they need an option price, not just for equities but for a range of other securities to mark their portfolio. This will trigger derivative contracts, it will impact pensions. Thatll impact options could be involved in corporate transactions. The ramifications is why the Exchange Industry has been so strategic. The ratification of accurate, timely pricing to the real economy are really there. They are important, they are serious. Matt it has been great to get your unique perspective on this issue. I know you are very busy so i appreciate you taking a few minutes. Xavier rolet is the former lse ceo and the nonexecutive chair at sure capital. We are minutes away from the open unless there are any glitches. Lets get your stocks to watch with dani burger. Dani assuming there are no glitches, reckitt bank is one of the stocks we can expect to rally today, called up as much see likeer earnings for like sales coming in at 13 . The estimate was 8. 5 . A lot of this growth in sales has to do with their operational improvements and what they see for the four years, their sales growing in the fold of the digits doubledigits, an upgrade from the high single digits. Swedbank, called up a similar amount, 3 . Weve been talking a lot about ubs today but lets not forget the nordic banks are also starting to report. Some strong earnings numbers coming from in from them. Incomeuarter, net beating estimates and much like ubs, the ceo, expressing a desire to restart dividends and buybacks, saying they are in a Strong Financial position and we want to pay a dividend. Another remy cointreau, equity called higher this morning. People are back out and about and buying some cognac. Increased demand in china and u. S. Sales. They expect their earnings to be smaller than previous declines to be smaller than previously forecast. Operation profit, they seek declining 25 to 30 in the first half. Anna dani burger with your stocks to watch. , maybe at reckitt keeping everyones dishwashers going. They make detergent. Coming up, we will speak to the ceo of swedbank. The numbers from swedbank, we will keep an eye on that at the start of trade and talk to the ceo at 8 20 london time. This is bloomberg. Anna a minute until the start of cash equities trading. Here are your headlines. Betterthanexpected thirdquarter profits in Sergio Ermottis last laugh. It has set 1. 5 billion for share buybacks next year. Crisis measures. The islands government imposes some of the most tony and measures in europe draconian measures in europe. Sea. Ine day in the forecasters dont see a deal before the november 3 election. We will hear from the speaker of the house later. European equity futures are trading down about. 3 ,. 4 depending on where you are looking. The ftse, doing a little better than the continental equity indexes, but the cash trade starts now. Lets pull up the gmm, the global macro movers screen. The lefthand column will populate as each index opens up. Theibex is down. 3 at open, the ftse down. 1 at the open, and barring any glitches, aexshould start to see the open up as well as the cac and dax. All are priced to open lower. Up. 07 . He cac opening it was down, futures were down about 3 . Relatively good cac continues to climb. Global coronavirus cases have exceeded 40 million with the pandemic showing no sign of slowing. Irelands government imposed some of the most sweeping restrictions on the continent, even though it is not on the continent. Joining us, invescos emea director of model portfolio services. I guess the most sweeping restrictions in the European Union, on the island of ireland. What do you think about the pessimism . Markets have been relatively complacent considering how bad this seems to be getting. Well, i dont know if that is a leading question, but im not so sure the markets are being complacent. I think there is recognition the sing is researching resurfacing quite violently in europe, evidence of a third wave in the u. S. And of course, that isnt going to be great news for nominal growth numbers. We are hopeful, of course that can refer can reconfirm the commitments from Central Banks to supporting the economic recovery and maybe make sure fiscal plans get over the line. It is not a great for Economic Growth numbers. It is the the wretched virus the fatalities are the most concerning socially of course but the numbers would be troubling for markets. Overall, i think markets can take comfort from the positive increments it has on policy choices. Anna do you think markets are taking too much of a positive or giving too much of a positive spin, interpretation to the state of things at the moment as we head into a long winter . Do you think markets are fingers crossed, hoping for a vaccine and therefore, all of this makes sense . Ben i sort of think neither. I dont think markets are complacent. I think there is some optimism about a vaccine. That would certainly be helpful but even ifumbers, a vaccine comes, i think markets are onto the idea that there isnt going to be a universal available or takeup. Recovery is growth going to be stuttering and faltering, but policy will be there to support us along the way. A savage downturn in markets less likely and can allow markets to take a positive interpretation of quite a number of scenarios. What are the scenarios you think are most likely . You coree of view is we get a fiscal stimulus package out of the u. S. , whether it is a minute or we have to wait post the election. Ofget firmer action out europe on their fiscal stimulus program, so at an aggregate level, fiscal policy remains supportive. Centralbank policy remains supportive. The relative valuation argument encourages investors to lean into equities and overall, we get a positive albeit not euphoric economic recovery and all of that isnt a bad combination for equity markets. Thats our core view at the moment. Anna what are you expecting in the fiscal response in the u. S. . It seems the democrats set a deadline of today to get something done on fiscal stimulus if it is to come before the election. How much does it matter to the market, whether it comes before the election or wait until afterwards . Ben under danger of sounding bullish, i think the market can adjust to this outcome pretty rapidly. If we get a fiscal stimulus, that is it, the money in your hand. The market will be supportive, but if we dont get it, supported. If we dont get it, it could mean volatility. And themove quickly narrative is that is less helpful for republican reelection and would support the blue wave. If you get a blue sweep, you are onto a generous fiscal package. At the moment, it would be helpful to get an immediate fiscal package because youve got something tangible, and it falling away would create volatility but as i said, i think markets could move on quickly because of what that means for the u. S. Election outcome. Anna stay with us. Ben gutteridge, invesco emea director of services. Gilts, something interesting. It looks like it might have righted itself but out of the gate, we saw a substantial move in u. K. Tenyear note yields, advancing 65 basis points since the last close. It would be speculation at this point so we wont do that, but yield went basically back up to levels we havent seen since march. It looked incredible and seems it might be in the process of being righted, but it is worth mentioning this has happened in the first five minutes of the trading day for u. K. Gilt markets. Payback time. Ubs sets aside 1. 5 billion for share buybacks next year. We will bring our interview with Sergio Ermotti next. This is bloomberg. Matt welcome back to bloomberg market the european open. Eight minutes into the session and we are looking at equity indexes that are lower with the dax down one third of 1 . The ftse, off. 1 and the cac 40 unchanged. In switzerland, ubs posted thirdquarter profits that Beat Estimates and set aside 1. 5 billion for share buybacks next year. Manus cranny spoke to the outgoing ceo Sergio Ermotti, who reflected on his time in the role. Sergio if i could go back, i would probably propose to balance more capital returns between Cash Dividend and share buyback. Comes in and goes and the ones who have been staying around for nine years do remember they got five francs. If they didnt, less so. What is important is the fact send going forward, we will continue to deliver strong returns to our shareholders by executing our strategy. Manus part of that execution is , what is the truth of Wealth Management . Leveraging more, is the Division Lending more and taking more leverage . Ralph hamers actually actually, he has been a valid him and tom are the perfect couple. Lending, the at Strong Performance was coming from the americas and now it is the areas where he is more involved on a daytoday basis. Prioritys a strategic for ubs and not for a Single Person or segment of our business. Manus lovely interview with my ft, and you said expectation was to not follow consensus. What is your trade . What is the nonconsensus trade as you leave . Sergio thats quite difficult in thisbut i would say environment, although it is painful to hold cash, having being ready to invest if there is a downturn, i think it is very important. Manus and just give me a sense of global risk. Bank of americas narrative was we are getting a bit greedy. Do you think markets look greedy in terms of credit spreads, compression, equities rising . Is there a sense of greed in these markets . Sergio i dont think it is greediness. We all know liquidity and the money has to go somewhere, and it is almost inevitable that of liquidity in the market is creating asset inflation. We have been seeing that. While and we have to be rebalanced and diversify in the way we look at the market right now. There will be opportunities. There are opportunities, but one is to be selective and well diversified to navigate this kind of environment. That was the outgoing ubs ceo Sergio Ermotti speaking to manus cranny this morning. Ben gutteridge, invesco emea director of model portfolio and services is with us. When you look for reasons to invest in the Banking Sector, you have ubs setting themselves up for a buyback. It is not every bank that will return cash to shareholders. Some are restricted by regulations, certainly looking at the dividend story and what that means for income investors. How are you looking at banks at the moment . Ben it is a tricky one. There is certainly some we moves there and as through this next phase of the pandemic and get into next year, provided we get the fiscal support we are hoping and theeving should come, extent to which banks have to raise capital or havent, that could offer some level of comfort to investors and if we get a better than expected upside surprise for growth, banks could be a great trade. So we have some exposure there. Im not leaning heavily into it. It is difficult to get that level of enthusiasm. Yes, there is cheap and is, but the interest margin story is incredibly challenging to believe that could offer any filler to earnings. Cheapness is something, but not enough for us at this stage. Matt is there anything you are leaning heavily into . On the hoax of an economic recovery . Sebastian was saying he thinks cyclicals could benefit. For example, automakers. We saw bmws numbers out today, or better stellar than what we saw a daimler. And it is interesting, we dont know the extent to which it is wrapped up in the cyclical trade or the lockdown trade, as people seek to avoid public transport. Like financials, are wellplaced to perform well if we get better than expected Economic Growth outcomes. That isnt our core view. We are expecting positive growth , perhaps pent demand that allows this vshaped recovery to continue but it will be checkered as a result of the pandemic and the cautious disposition of businesses and consumers. That leaves a less impressive growth recovery and would inform us to lean into rather than swing the defenses on. Highquality growth businesses, where we expect the optics on the pricing isnt great, but the narrative is still supportive. Anna what is it that takes you into asian equities at the moment . That is one of your convictions as of late. Ben there is the growth piece. We recognize the internet giants as continuing to take market share and leave competition in their wake. The other element is the dollar that trade,ral in we see dollar weakness as. Ersisting as growth recovers that would allow investors to take flight to a degree from dollar assets, dollar safe haven assets. We also see Interest Rate differentials between the u. S. Has collapsed, converged on global Interest Rates. That is bearish for the dollar are a lot ofe bears out there, people like me talking about the bearish elements, there is momentum in this currency which means you dont necessarily need to be contrarian looking at currencies so the dollar weakness supports asian assets. Matt pleasure having you this morning. Ben gutteridge, invesco emea director of model portfolio and services. Hes going to continue the conversation with us on Bloomberg Radio shortly, about 45 minutes from now. In in the city on london dab digital. Anywhere else in the world, google Bloomberg Radio and you find us. Coming up, swedbanks ceo is considering bringing back dividends. He joins us next to discuss. This is bloomberg. Matt welcome back to bloomberg market the european open. There 20 minutes into session, seeing mild losses across europe with the dax down. 5 , the ftse down less than. 25 right now. There has been good news out, especially from banks. We talked about ubs this morning consideringbank is bringing back dividends after swedens biggest Mortgage Lender handled the fallout of the pandemic better than analysts had anticipated. Joining us to talk about that is jens henriksson, swedbank president and ceo. Talk first about how you handled it better and what your plans are for returns to investors. Jens good morning and thanks for having me on the show. Delivereddbank another Strong Quarter in uncertain times. That is very good. We have a return on equity of 14. 3 , and we also have a lot of in the board, there are discussions and we are bank a bank that is proud to give out dividends, but we are following the economic developments from the pandemic. You say that subject, you want to pay a dividend, but you have to Pay Attention to what the authorities say. Do you have any guidance, conversations with authorities that give you a sense of the timing as to when you might be able to pay one . Jens no, we have no such guidance. We are following the developments, we are also seeing what happened with the economic cycle. Do you think about the various liquidity programs, and i ask because you participated in some of those, but you didnt really need to, so what are you doing to go along with the program here in terms of Central Bank Liquidity programs . Jens thats correct. The programs by the government and the central bank because we felt it was the right have veryo, but we good liquidity situation. By how, im impressed not only the swedish authorities, but the authorities around the world have handled the economic consequences of the pandemic. Weve learned a lot from the financial recession. I just wanted to the reason i ask is because it seems you played very well by but at someus far, point, youve got to go ahead and reward investors who have stuck with you as it seems like you are past the worst of it. Why isnt now the time to start telling us about a dividend reward . Jens i think it is important. We are a bank that likes to give out dividends. We have to think about the stakeholders in society and people have invested in us, so we want to give back dividends, but there is still uncertainty and therefore, we are following what authorities are saying and following the economic elements from the pandemic. Anna let me ask you about the loanloss story and the evolution of that. Your loan losses in the quarter, 425 million krona, almost half of what analysts expected to be. You dont know why they came to their conclusions, but what has been better in the last quarter than many had anticipated . Tried to really follow the rules and the spirit. Provisions ofoss 2 billion in the First Quarter and in the second, one billion. When we look at the economic development, it looks better, so we are supposed to relieve some of the provisions, but we felt in these uncertain times, it would be the wrong thing to do so therefore, we ended up with 420 5 million in loanloss provisions for this quarter. Matt can you 425 million in loanloss provisions for this quarter. Matt can you tell us where you have seen better performance than expected . Jens when we look through our le portfolio, what struck me was the sort of number of affected sectors went down anmatically, but we have exposure to the oilproducing sector, mainly in norway and that has been a sector that has been hit a lot by the low oil prices. Anna are you concerned about the Housing Markets in the market you operate in . Weve heard from some analysts about a weakening Housing Market in your market and indeed perhaps mortgage lending could be hampered if consumers are nervous about the future. What is the story in housing . Jens the story of housing is we do not see it. On the opposite, we see a strong Housing Market and we are there mortgagee a strong supplier and we want to be in that space. Anna thanks very much for giving us your time. Jens henriksson, swedbank president and ceo. London, 25 minutes into the trading session and the stoxx 600, down. 4 . Inare seeing a negative move europe, but we are playing catchup with what we saw yesterday in the United States, when they closed heavily into the red. U. S. Futures do point to the upside. Matt u. S. Futures are pointing asher and it looks like mark cudmore was telling us earlier, investors are relatively complacent outside of the relative volatility of the that the u. S. Election provides. We are going to talk about that next. Is this the end of the special relationship if we go ahead and make the assumption, as it seems like Financial Markets have done, that the democrats, joe biden is going to win . What does that mean for the relationship between the u. S. And england, and it doesnt seem like he would get along particularly well with Boris Johnson. This is bloomberg. So youre a small business, or a big one. You were thriving, but then. Oh. Ah. Okay. Plan, pivot. How do you bounce back . You dont, you bounce forward, with serious and reliable internet. Powered by the largest gig Speed Network in america. But is it secure . Sure its secure. And even if the power goes down, your connection doesnt. So how do i do this . You dont do this. We do this, together. Bounce forward, with comcast business. Matt welcome back to bloomberg market the european open. We are 30 minutes into the trading session this morning. We are looking at the stoxx 600, the broader equity index down. 4 . Although we had better than expected earnings at , so the banksnk are doing better than expected. Nonetheless, the benchmark index down. I look at the grr to see what is going on. Banks are not winners in this market. Every Industry Group is down with the exception of health care. You can look at the grr on the bloomberg. I think it is still really helpful. Lets get the bloomberg first word news with laura wright in london. Thea the gap between republican lawmakers are still favoring a smaller package but if a deal is reached, donald trump would lobby them to come on board. India has seen a peak in the number of new infections according to a Government Panel of scientists who think they may contain the worlds second largest outbreak by february. The lockdown in march was the worlds largest, causing the economy to contract nearly 24 . President trump is hitting out at the governments top Infectious Disease expert anthony fauci, calling him an idiot. He criticized him repeatedly yesterday claiming without explanation that if he had followed his advice, hundreds of thousands more americans would have died. Polls show fauci is the most trusted government figure on coronavirus. Is vowing a proactive response to the oil market, a hint the alliance may change policy from next month. Under current agreements, the group is set at 2 Million Barrels a day to Global Supply from january, but traders are increasingly morning the market so much boil. Global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Anna laura wright in london. Americans head to the polls in two weeks. The event will be keenly watched everywhere, but also in downing with a u. S. U. K. Trade deal waiting to be signed, potentially hanging in the balance. Here is bloombergs opinion columnist. He says a biden win would bring many positives for Boris Johnson. You dont have to look far to see the negatives. Boris johnson has attracted the attention of joe biden for the wrong reasons, the good friday agreement. Joe biden, keen to emphasize his irish back round at this point. Ken borisson johnson . Boriswill be up to johnson to advance it in a way that is attractive to a biden presidency. I think on green ecological issues, the two sides will have a lot to say. The british are hosting the Climate Conference next year. The Biden Administration will take a different view from trump. Prime minister johnson has already in his Conference Speech put a positive spin on existing green policies that one of his predecessors established. There is a lot to play for. I also think the attitude to russia and china may be closer. President trump seemed to take a gentler view of putin than london. Ive listened to Vice President biden in london talking about with, the relationship allies in europe and particularly with britain, and he would see us as a natural ally in Standing Firm against russian aggression home and abroad. This what do you think will do to the possibility of a trade deal . This is key right now as britain eads toward either a no deal brexit or a deal that might as well be a no deal. The u. K. Really needs to find a good trading partner in washington, doesnt it . Martin i think it certainly would prefer it. Symbolically, it would be a great coup for the conservative government here but i dont think it is going to get it. Any trade deal is a prolonged, difficult process and this government was having problems with the Trump Administration long before the president ial election. I agree. I think for the longerterm, it is going to be difficult to seal a deal. Ew administration will get have to go back to congress for a new negotiating authority. That will take time. I think priorities of a Biden Administration will be somewhat different from the trump transactional agenda. Labor issues, Environmental Issues will become more important, so i would look toward the conclusion of any deal anytime soon. All went well, youd be looking at 2022, which i think will disappoint some in london, but i think realists will understand these things do take time. Anna do you think the u. S. Election is actually playing into the brexit negotiations . The trade gillman negotiation taking place over the channel at the moment, because with the democrats, every now and again popping up on twitter to express their opinion on the good friday agreement, it seems there is another party at the talks occasionally . Negotiation is a game of bluff and trial, and i helpful to they british negotiating team to be looking over their shoulder, but i think again, these things are inevitable. When we talk about the irish lobby in america, people must remember it is not just democrats. Some of its most prominent members are in the Republican Party as well and they will be as concerned as their democratic colleagues about any attempt to reopen the question of the border. It has always been one of the thorniest issues between brussels and london in negotiations and it will continue to be some. Matt what is the new world order . What is the new paradigm we should be watching out for . Russia has come back as a bad actor. China is the new power to deal with. Where does the u. K. And the u. S. Fit into that sort of post trump if there is a post trump how much longer can Boris Johnson last . Martin i mean, i think there is an agenda that does see the british and the americans can share and that is a return to multilateralism. A Biden Administration would have much more respect for what i call the alphabet organizations. It will engage with the united nations, the world health authority, and yes, probably the eu. British,ally suits the and the british want to cooperate at this level. The have often proved to be very uncomfortable with trumps unilateralism. Trumpeople speak about and johnson having identity of interests, and they forget the that thehuawei, british share a position closer to the french and british over the deal with iran. There is something that can be done. Traditional for the british to work with these institutions. With one reservation, we are not in the eu so we cant be as helpful as we might have been in the past. We cant be an explicit hinge with the European Union as we once were. Matt certainly a decision that biden would regret. , Bloomberg Opinion columnist, former editor of the sunday times. You can get his work on the terminal by typing opin go. Next, the return of the nasdaq whale . Softbank charges ahead with its new public stock trading arm, and massing a more than 20 billion position. This is bloomberg. Anna welcome back to the European Market open. 8 42 in london. The session started out negatively but is showing signs of coming to positive territory. The cac 40 in positive territory. U. S. Futures point to the upside. Softbank is charging ahead with its public stock trading arm. Theces tell bloomberg japanese conglomerate has increased its equity position to more than 20 billion. The news sent shares lower by nearly 1. 5 in session and for the Bigger Picture story, lets get to dani burger. Tell us more about this. Why has softbanks plan been met with a little set skepticism . Dani a lot of it has to do with risk tolerance of what softbank shareholders are willing to have by owning softbank. This is similar to what we saw in august when we first learned reports of softbank having an equity derivatives strategy. It was reported to be half of the size it currently is but at that time, it reached 9 billion worth of knife it market value off of softbank. Is a little concerned that softbank is acting more like a hedge fund with these traits. Is they areoncern causing more fraught in the equity markets, specifically in tech stocks, which much of their options bets have been surrounding. Softbank since those initial reports in august has made an effort to talk to shareholders, telling them these bets arent very risky. They are more conservative and saying publicly they are by no means a softbank whale, just them make up a tiny fraction of what is traded in the nasdaq 100 in the options market. They themselves cant have any huge impact in sending the shares higher. Matt what exactly is softbank doing here, because the market seems to vote with its feet on the idea of this equity trading arm buying derivatives . Dani it is called a call spread and it is a little more of a conservative strategy than outright buying. Calls. You buy one out of the money call option and that option if theit pays off underlying share gains, but the problem with buying that is there is a premium attached to buying one of these call options, so softbank is making a call spread strategy. They also sell a call. They earn some premium from a call they sell at a higher strict price. Make from the can strategy has a ceiling because they sold a call at a higher strike price but it also means their losses are capped, so again, a little more conservative and people familiar isl bloomberg the strategy the assumption volatility will come more to the fore as mr. Moore companys report. Matt dani burger as more companies report. Dani burger, talking about a 20 billion equity trading arm in softbank and the bets they are making. Lets get a Bloomberg Business flash with laura wright in london. Laura ubs is lining up 1. 5 billion for share buybacks next year as Sergio Ermotti prepares to hand the reins of the swiss lender over to its next ceo, ralph hamers. It posted betterthanexpected profit for the Third Quarter and expects the current period will be lower than the first half. Remy cointreau is expecting a smaller decline in earnings than previously forecast. Better than expected demand from the u. S. And china. It expects a drop in operating profit of 25 to 30 in the first half of the year. Remy raised its forecast in july when it predicted a drop of 40 . Goldman sachs is poised to pay more than 2 billion to settle the 1mdb probe. Sources tell bloomberg it has reached a longawaited pact with the u. S. Justice department. The accord will let the lender avoid a u. S. Criminal conviction. The settlement is broadly in line with estimates and could be announced in the next few days. No comment from goldman sachs. That is your Bloomberg Business flash. Matt thanks very much. Laura wright with your business flash. Of theal cases coronavirus past 40 million, ireland has returned to a lockdown. Has closed nonessential stores, bars, and restaurants for at least six weeks. People are being urged to stay within five kilometers of their homes. We will get more with our Dublin Bureau chief. How are the people of ireland reacting . It seems pretty aggressive. Six weeks is a long period of time. Like most places, they are subject to camp fear. One camp is looking at the economic cost, unemployment going over 20 , 150,000 jobs lost because of the measures introduced. People wonder is the economic path too hard to pay. Arecond group think cases rising, hospitalizations are going to increase so we need to get numbers down by december 1 thewe can, in the words of Prime Minister, try to save christmas. And april, when there was unity and everyone agreed, we have seen two camps now, prolockdown and people who are worried the cost might be higher. Sense of how a restrictive the measures are . I read they are for at least six weeks and could go further. How do they compare to march, april, springtime when we previously saw lockdown measures introduced . Dara thats a good question. In the european context, ireland is the first country in europe to go back into a national lockdown. But itthe headline here, is marginally less restrictive than it was in the spring. For example, construction closed down completely in the spring and now, one of the key things for parents is schools have remained open, unlike the spring. That is a huge issue for so many parents, for kids, for everybody. In a way, what the government are doing is putting this issue about schools staying open at the top of the agenda. We are prepared to sacrifice a lot if we can keep the schools open so everyone is delighted to hear schools are open now. Weve had teachers say hold on. We arent sure if the rest of the economy is going to close down, should teachers be in school . I think if the schools to close down because the teachers strike, that is going to be a massive political problem for the government. Many are prepared to live with the economic consequences of the next six weeks as long as we can keep schools open. That is a massive thing to watch, if the schools can stay open. Matt i cant understand what the point is of keeping everyone can find in their homes if they are allowed to send little virus spreaders to communities and welcome them back. What is the point of having a bubble if you send a vehicle to a school to get the virus and bring it back to you. That doesnt make much sense at all, does it . Thats my kids you are talking about, but the statistics show according to the government, transmissions in schools are far below what they are in the Wider Community so they made a contrarian argument yesterday saying it is proven kids are actually safer in schools at the moment. It does seem like a bizarre anomaly, but that is what they are saying, the kids are safer in schools than in the Wider Community. Tothey are home, it is hard tell your children they cant leave the house, they cant see their friends, especially in lockdown too. Is argument they are making it is safer for kids to be in school. Whether theyns, buy that will be a different issue and we will get more information in the coming weeks. Matt well that is very interesting and of course, im sure your kids are lovely. I didnt mean to offend anyone who has children. As of this week, i still do not have children, but ill be joining you probably by the end of the week. Dublin bureaur chief, thank you for commenting on this lockdown we are seeing, probably one of the most serious across europe as of right now. Next, grinding negotiations with selfimposed deadlines havent been enough to phase market expectations. Whether that is u. S. Stimulus talks or brexit sentiment, hasnt been roiled. With lauracuss more cooper, bloombergs mliv macro strategist that next. This is bloomberg. Anna welcome back to the European Market open. 54 minutes into your trading session and things are improving in london. The stoxx 600 is flat. There has been improvement in london. It is positive on the ftse 100 and the cac 40 is positive as well as the ibex. Laura cooper, bloombergs mliv macro strategist. What is the dominant narrative as we get through the first hour of trading in europe . With been playing catchup what went before us in the United States in the latter part of the u. S. Trading session, but as we move into the u. S. Trading day, is it about stimulus or is that a side story as we head toward the election . Laura it has certainly been the case markets are trading on stimulus on, stimulus off narrative and that is driving these bouts of volatility but overall, the direction for justts hasnt been phased, in the sense that we are seeing equities continue to drift sideways because there isnt this catalyst to the upside or to the downside. Markets are largely expecting some kind of fiscal package to come in, most likely postelection with todays selfimposed deadline, really not phasing markets at this point. Thats crucially keeping investors sideways trading as we await to see what will the election bring . What will the actual stimulus package unfold . Rising caseith counts, what it means, mitigation efforts remain contained to what they were in so at what point could that actually really impede economic recovery and at this point, it doesnt seem to be that impactful in terms of driving the overall broader risk off narrative. Laura, thanks. Laura cooper, bloombergs mliv macro strategist talking to us about the markets. It has been a fascinating first hour of trading here. On a come back to gains lot of European Equity indexes and we started off the session with some positive news out of banks. Ubs and swedbank, better than expected results. Ubs, talking about paying a lot of money back and we had an exciting misprint on gilts. We are going to go off to radio and our viewers can switch over and listen to us for the next hour. This is bloomberg. Nancy losey and Steve Mnuchin continue to narrow their differences but forecasters do not see a deal before the november 3 election. We will speak with the speaker of the house. Crisis measures. Irelands government imposes some of the most imposing restrictions in europe. The coronavirus hits a new record. And triumphant exit. Ubs posts better than expected fourthquarter profits