Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20161130

A very warm welcome to bloomberg daybreak europe, our flagship morning show. I am anna edwards. Thats a strong dollar. The bloomberg dollar index has sinceeen in existence 2004. No surprise when you look at the relative yields you are getting in u. S. Treasuries. To find a reason to explain the trends in the dollar, treasuries looking their most alluring. Wayef you have spent too much time with their bonds. The kind of movement we have seen is remarkable. That is your dollar spot index and you have the yield spread compared to the rest of the world and that is the highest level since 2007 and credit sweeps putting out a note saying the yield could go up to 2. 8 around mid2017. We are going to go, anna, are we taking a breather . Plenty ofill have analysis. It let us all about oil as well and bring up the risk radar. A lot going on in the anna. Here we have the price of a barrel of brent crude. Going on in vienna. Here we have the price of a barrel of brent crude. All of the saudis seem to want that. Yousef this is make or break. To make any going agreements like they had in algiers. We have a kind of followed trilogy in the last 24 hours a kind of volatility in the last 24 hours, incredible. Anna iron ore falling from its twoyear highs. 2016 quite good for the chinese commercial construction story and that was good for steel. Things looking different. Met trend. He concern about demand from china and the overall supply outlook. 2 5 of 1 . Up anna let us get the bloomberg first word news. Here is haidi lun. Former Goldman Sachs partners mnuchin is donald trump choice for treasury secretary. Trump plans to nominate wilbur and as commerce secretary, an announcement on the selections could come as soon as today. It donald trump lands to continue his auditions for secretary of state, according to a person familiar with the transition. He will bring back john kelly for a followup interview at trump tower in new york today. Romney,candidate, mitt had a second meeting with the president elect at a dinner last night. European Council President donald tusk has rejected a call from british lawmakers for him to act to protect the rights of compatriots after thats it. He hit back after being urged in that residents would not before to leave. He dismissed a claim that the European Commission is obstructing efforts to reach an agreement, causing uncertainty. The European Commission pot brexit negotiator commissions brexit negotiator for European Parliament approval means that any agreement must be concluded by the second half of 2018. That is according to a Government Official present. A spokesperson for the commission has declined to comment. Dei paschiy made the comment during it includes dropping debt and equity. An official from monte dei paschi declined to comment. The plan to create a Holding Company structure was presented as a way to improve shareholder value and address criticisms from activist investor elliott management. Benefitsould see big from such a split. Shares up around 38 percent this year. Global made, 24 hours a day. Stories on there top. This is bloomberg. Yousef there was not a lot of conviction in the u. S. Overnight still noticed check in with the markets in asia and see how sentiment is holding up. Juliette saly has the details. A little bit of a mixed picture coming through in asia. In your seeing good momentum coming through for most of the emerging markets. Singapore up 0. 8 . Sincengest winning streak 2014. Boasting weakness coming through in the shanghai composite today, down by 1 in late trade. This is in market. It has been in bull market. Weakness coming through from some of the electricity stocks today. Strength helping the kospi. The nikkei has closed flat and australias market closed by 0. 3 today. Juliette disappointing building approval numbers and australia but that commodity story weighing into that resource heavy market. Samsung hitting that record high. The highest level we have seen since 1975. Takata shares dropping in tokyo, 7. 5 . From a tweet from a japanese investor who is a player, very wellknown, and he says he had sold out of his big holding of takata. The Iron Ore Price at the top of the show, iron ore side from ant twoyear high, having impact on a number of those key iron or players. Ore players. On bit moreeeing a little momentum coming through in the currencies ahead of the crucial opec meeting. Thank you very much. Brent crude is hovering above 46 a barrel and differences between saudi arabia and iran weigh on prospects for a deal to cut production at todays opec meeting following talks with his algerian and venezuelan counterpart. The Iranian Oil Minister said his nation will not cut output. Set aaes ministers more positive tone. All options are on the table and will be discussed. Any decision we make it we make is inclusive. Yousef bloombergs annmarie theern joins us now on phone from indiana. We saw big moves overnight in brent and wti. Where is sentiment at the moment, especially given the ongoing rivalry and deadlock that appears to exist between saudi arabia and iran . Annmarie good morning. That is right. The rivalry continues. What is happening this morning is untraditional. Before the traditional opec meeting, ministers will be brexit,g for a working off the record, unofficial. They have not announced it. People close to the matter have told us. Meeting untraditional before a meeting. They want to see if they can come to any sort of agreement before they sit down officially to try to decide if they are going to be able to make these cuts or not. Just this morning, coming up, speaking to the nigerian ,etroleum minister, emmanuel who will be joining us exclusively. Anna thank you very much. Hordernrton annmarie indiana. Vienna. She will be speaking to the Nigerian Petroleum minister shortly on the program. Yousef let us bring up our lena komileva. A big day for opec. How likely are we going to see an agreement there . Lena for the market, having to drilling oil 2016 prices in the context of a Global Growth worries and financial repression, essential bank dominance in financial markets, essential bank bankance central dominance in financial markets, the three largest opec producers economics of the Energy Markets in the last 15 months of negotiations. Regardless of the outcome today, the markets are facing a fairly binary outcome. We are looking at failure to reach an agreement with oil prices pivoting towards 30 to 40 a barrel or whether we get some form of agreement which leads to cautious optimism with 40, 50nsolidated at or above. What is clear is that ultimately, todays meeting will determine how quickly the Energy Markets reach a balance in 2017, whether it happens through market forces, renewed price pressures on highcost Oil Producers globally, or whether it will happen through an agreement, hopefully the latter. It is clear this is down to Political Risk. We have seen that is quite difficult to predict. Anna it is interesting to put it like that. It we could reach balance in the oil market because the saudis were floating this idea that maybe there is not a need for a deal here. Maybe u. S. Growth means well actually see more demand on the demand side of the equation picking up from a u. S. Perspective. Saudis on the right track . Lena it has been nothing less than painful. Wouldreally quite it clearly caused distress running toward the end of the year if we were to see a shift in the economics of energy, which could force a repricing into the broader markets, just government d prices, so coming into coming out of todays decision, we are going to see volatility, but going ahead, the optimism is that whether it happens through law prices, all through concerted action, we are getting closer to the point where the Energy Market is getting to a balance, so that should be a good news for the Global Economy. Yousef for there to be a meaningful impact, in terms of a Production Cut, you need to go way beyond one Million Barrels per day, given how much opec is pumping at the moment. Whered you see oil prices ranging at 2017 sort of topline . Lena i am a columnist. Have clear that oil prices been very much at the heart of the Global Economic debate so i approach from the position of a Global Demand side imbalances oiln the demand side, prices underbid oil prices and we are somewhere below that at the moment because the market is lacking confidence about how quickly we are going to get to this point. The fact that we have had that markets have been a reflection of fears the central bank has not done much to stimulate growth and the structural supplyside glut in with negative volatility growth. To answer your question, i dont really know. What we really need in terms of Global Financial health anna that would mean a lot. Thank you very much. Here are some highlights for your day ahead. Yousef in less than an hour, the results of the bank of englands annual stress tests ed by mark carney. Bloomberg users can follow all top. There is gdp out of india. The Ecbs Mario Draghi speaks in madrid. Half an hour later, it is his last appearance before the governing council. Maybe we get some clues as to where Monetary Policy is going from here. Anna today would be the last chance. Coming up next. We will be live at the opec meeting that in the nm. In vienna. We look ahead to indian gdp figures out later today. What impacts will Prime Minister the Prime Minister have on growth . This is bloomberg. Yousef url metlife pictures of seoul where millions of people are at a rally you are looking at pictures of south where millions of people are at a rally. No doubt the Political Risk will be one of the factors to watch out for as the ongoing stalemate continues to play out. Let us get the Bloomberg Business flash with juliette saly. Juliette thank you. Air conditioning manufacturer carrier has agreed to keep about 1000 jobs in an indiana factory that had been set to move to mexico. The decision marks a victory for president elect donald trump. Trump tweeted that he will travel to indiana tomorrow to make the announcement. The worldsreate largest supplier of Industrial Gases could be revived. It is looking at a new proposal from usbased a usbased company. Provideclined to financial details. A deal would further fuel consolidation in the industry and attract scrutiny from regulators. A company has asked its traditional 1000 australia share bonus for stocks this year. It cited the need to cut expenses in an Internet Post seen my bloomberg news. Year,ad been challenging in an environment of lower growth and lower returns. That is your Bloomberg Business flash. Thank you very much, juliet. Former Goldman Sachs partner Steven Mnuchin is president elect Donald Trumps pick to be the treasury secretary. They say trump plans to nominate billionaire investor wilbur ross as commerce secretary. Let us talk about all things tradeand the reflation seems to be the talking point right now. The reflation trade seems to be something a lot of people are talking about in relation to president elect trump, but as you pointed out in your notes for us, this throws up lots of seemingly incompatible outcomes. What is the endpoint . Lena the remarkable thing is that for the past month, investors have been flocking into u. S. Equity yields at the expense of u. S. Bonds. Anna we have got the treasury chart here to illustrate that. Yousef again, that is over 50 basis point, isnt it . Lena which is extraordinary, indeed. To be fair, we expected a rise of bond yields to start all the way back in the end of the summer. It did happen, and it happened in the context of inflation risk premieres and with evidence that the major economies, the u. S. And u. K. And eurozone as well were holding up better in terms in theical figures it Third Quarter than anyone expected. When you combine this with expectations that Central Banks have reached the end of the road with the boj shifting away from quantitative easing to yield the targeting and the fed signaling they will raise Interest Rates and the bank of england facing its own limitations to more qe, it is quite clear bond yields were facing a onesided risk up. What is clear at the moment however is that the latest leg of this bond rally is basically driven by more of a u. S. Differential trade. That is important. Yousef is the worst over . You have said the bond market was looking for a catalyst. Donald trump offered to be the catalyst by winning that election. What direction does this bond market take from here . Lena i have not had enough because i have been behind the call that bond yields should be higher for a very long time. It has been a bit volatile. He has given the oppression of too much too fast. We are not nearly at the end. Ts our transition,re transition, term premier policyhe Central Banks of umbrella to a more normalized volatility, and the final is temperament or animal instinct. This is the most bizarre part of the arithmetic. On the one hand, the impossibility of the new economics that have completely defied financial gravity. Investors taking it negative yield and paying governments to hold their debt. On the other hand, the new new political economy which is basically political predictability and the fact that we have unpredictability. They have brought much higher future fiscal debt burdens. Anna you mentioned three ts, but you did not mention trump. It is more to do with yield differentials. Surely, some of that comes down to what trump might do and therefore, what the fed might do. It is hard to separate the fed from trump, isnt it . Lena the clearer picture for me is a new Global Financial location. Rates thefund Market Expectations of the policy rate have yet to meet the expectations or to price in the response to the debt pessimism that is priced into this spike in u. S. Treasury yields. We have a disconnect here. At one point, said fund futures they have embraced the possibility as was argued throughout the year, the markets have underpriced marketing this year. We have a conservative scenario rate hikes two priced and. That is two Percentage Points below where we were before the 2007. Yousef is the u. S. Economy healthy enough to handle higher yields . We got Additional Data overnight. To ther confidence grows highest level since july 2010, arguably encouraging. Are we where we need to be in light of where yields are heading at the moment . Lena there are two questions. One is, are the markets fairly priced . It is quite obvious that u. S. Yields have been passed for very long time repressed for a very long time. They have been hedging growth risks and set a policy normalization. The other aspect is, ultimately, the markets have been showing us yesterday, much better than expected revision to this q3 statistic, the u. S. Confidence figures you mentioned, the fact that all of the Economic Indicators have been consistent grinding down the u. S. Unemployment rate. That creates an incentive for the fed to start at least balancing the policy lever of the equation, otherwise we are looking at a scenario where we will ultimately usher in financial instability and bring forth the next crisis. It will respond to negative risk to growth. Anna thank you for your thoughts on a u. S. Plenty more from lena komileva. Yields up. Up next, more about oil. Differencesock as persist over a deal to cut production. Foro back live to vienna this exclusive conversation with the Nigerian Petroleum minister. We get his thoughts on whether iran and the saudis can get brought onto the same page. This is bloomberg. 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You are looking at a live shot of the imperial palace. The greenback is poised for it last month since 2009. Asian equities, mixed picture on the home. Let us take a look at the additional daybreak. It is available on your bloomberg and your mobile. With no surprise, starting oil. Opecs ongoing tussle. Failure looks set closer for the group as iran refuses to cut production while saudi insists itsit for operation corporation. Yousef the cover photo really its operation. The cover photo really showing the story. Why the seven leaders are expected to clearer the basic hurdle, the Autonomous Research group says rbs and barclays may earn soft fail for some of those tougher thresholds. Anna finally, daybreak focuses in on monte dei paschi. The troubled bank may have the resources to state funds if it fails to raise 5 billion euros privately. That is according to people familiar with the matter. Yousef let us check in on what can expect from the markets. Guy johnson. That is the story. We are waiting to see what is coming out of opec, the big scene today. We are waiting and seeing what the stress test will deliver out of the bank of england. European markets by and large heading towards an interesting few days with the italian referendum coming up. Guy let us talk a little bit about that. What the story was yesterday, the spread. You can see yesterday, a ergnificant tidying up aft this spread went out. Waiting for the ecb to take action. While ready, there is action very little preparation that can be done in advance of the referendum. No polling data can be published as we were bound way towards that. A little tidying up there. He saw that yesterday. You saw that yesterday. Other hasne up, the gone down. People are talking a lot about this chart. Let us pour a little bit of cold water on this. Let us take you back further. That is the oil price, as you can see, fairly volatile. That is the production. Im not sure those two are necessarily bad or related. There are other factors to think about such as the dollar. Back to you. Time horizon matters. The bank of england publishes the results of its annual stress test later this morning. Seven lenders are in the spotlight, facing a new second second requirement. Joining us now with analysis, michael moore. Komileva still with us on set. Michael, good morning to you. Help us make sense of what we are going to see. How do we expect the banks to perform this time around . This is not the first time we have seen these stress tests. Michael the bank of england has added another bar. Most banks architected to pass the stress test on the basic bar, and then that the second level at is the srp, which factors in their systemic importance, a couple of the are seeing risk at that. Barclays is starting from the lowest starting point, so they are at a risk of dropping below their rbs has litigation issues. Hsbc has big exposures in china and china is being severely stressed in this test. All of those banks have the potential to fall below that higher bar. Yousef a lot of this comes down to the cet one ratio. They were saying there was not such a requirement that they had to abide by. How did the ratios in the u. K. With these u. K. Banks that are in focus compare . Michael they tend to be higher that on the continent at least on average. Barclays is starting from the lowest starting point. Rbs is starting from a very high point, but that does not factor in their latest legal issues for them. That could bring that number down a bit. Certainly, they are all well above the requirement so far, but the question is, what would happen if something that looks roughly like 2008 were to happen again . Anna what about the drawbacks of this kind of test . Are you a fan of this kind of test as a way of measuring the health of a sector . Juliette michael it does give you a good idea michael it does give you a good idea of the health, but it is pretty backward looking. A lot of this is based on 2015 numbers. Barclays has talked about selling an offthecuff to boost selling in africa to boost its rating. It is fairly easy to say that these are old members, but look at what we have done so far. Old numbers, but look at what we have done so far. This test takes a long time to put together. There is no specific thing for that. There are some effects that would be perhaps similar to what you would see in brexit real estate prices falling, things like that, but no specific one. Yousef michael moore, head of bloombergs finance team. Think you for giving us additional context. Lena, that is bringing back in. Do you expect surprises from this report today . Lena broadly, it is clear that the profitability of european banks remains stressed and we have seen the last decade how interrelated Financial Sector ultimately is, so in addition to of course the policy has become an extraordinarily important part of the conversation about brexit because of the significance and importance of equivalence for u. K. Futures and Global Financial sector relies on the bank being even more stringent and other regulators globally in order to protect its reputation, but looking across the continent of course, the profitability of european banks is clearer because the Political Risk is now symmetric. It is not a oneway brexit so story. The french, the italian referendum, germany, it is pretty clear the financial environment can change so much. It is so different from just what we saw a month ago. Anna how much should investors worry about that . As we brought in the your page earlier onon, this week, we are becoming clear. I have got this chart of the market crossover index. This is the most liquid Investment Grade European Companies and a measure of the riskiness of their debt, if you like. Just making the point that this is where we are at the moment, but we are not back at levels he saw in 2012. When we talk about concerns around italy, political concerns around the italian banking sector, that is not reflected in these paneuropean measures of nervousness. Should they be . Lena i think the other looking. T a different dna of the risks it does not mean the risks are less important. Back in 2012, we were looking at the possibility of force credit event due to liquidity forces which could trigger a domino effect of systemic contagion. Of course, that could possibly be the end of the line, even pointing towards the possibility of a break given that we should have a feedback loop between systemic, sovereign, and bank risks. We are not looking at a sprint, we are looking at a marathon. We are looking at a slow burner of Political Risk. Just what that means to investors, of course there are those that say, look at the u. S. Election outcome the brexit outcome, u. S. Election outcome, the brexit outcome. They were quite benign. You look at what is priced in u. S. Or u. S. Equities u. S. Were u. K. Equities, it was quite benign. The result of the italian referendum at the weekend, whatever comes out at could well render europes thirdlargest economy ungovernable and that could stand in the way of the critical Economic Reforms and bank capital flows that are needed it to support growth and forestall populism. At stake. Enty a slow burn Political Capital is a good way to put it. What is at stake . Thirdquarter gdps expected to come in strong. Shortageof a cash overshadow. Englandsbank of stress test for the nations biggest lenders at 7 00 a. M. U. K. Time. Yousef market share might overshadow plans to curb output. We are on the ground with the very latest. Stay tuned. This is bloomberg. Anna welcome back. This is bloomberg daybreak europe. Brent crude at 46 a barrel this morning. Differences between saudi arabia and iran persists on the ground in vienna. Annemarie is on the ground in vienna. We are counting down the hours to the official topic meeting and i am very excited to say we are now joined by the Nigerian Petroleum minister. Thank you so much for joining us this morning. Tell us. Are we going to get a deal today . Everyone has been asking me that. It is a good question. We are optimistic. Consultations have been ok. I would like to go in believing we look at a deal. Lena with you attending this pre annmarie with you attending this premeeting with the secretary it is not unusual. Its a play shows it simply shows we need to taken before the time and hopefully, that will help everyone. We will converge on the need to have the cost. We are not crunching the numbers. It usually, we dont crunch the numbers in opec. Meetingy, the breakfast will get the last go at it before the meeting. Annmarie the big golf exporters are taking hardline fear. The saudis say they wont do a deal. The iranians say they will not accept. Where do you see a solution . I think it will come. I want to be optimistic. Everybody relies on this. If we do not do this, the price of oil it will be difficult for the economies to balance budgets and provide funds we need for development. I think that, what we usually going this way, everyone sticking to their guns and playing hardball, but at the end of the day, the unity will converge and if we need to have there will be a level of agreement. I think we will find a way around it. The issues at hand are really not as dramatic as they look. Who is the pressure more on, the saudis or the iranians . Everybody. Obviously, every member of opec wants some resolution and is looking to find a solution to the issue, so when there is not thesolution, it affects outcome is of opec who feel these individuals are holding to much to block. Whether we put a lot of pressure on everybody with iran and the saudi to converge on a solution. Annmarie if there is no deal or solution today, do you hold emergency meetings . In thenot planning ahead decision meeting. Im planning ahead of a positive decision meeting so i really have mentality for that. We will lock ourselves up as much as we can. That will take care of tomorrow. Annmarie what is a healthy oil price for nigeria . Mid 50s. 54, 55, 56. Made 50a little more mid 50s. Annmarie you are more worried about shale . If the prices are high, we will send the incentive for shale production into is also high. At the point we have modestly been able to set a cap, but is mid 60. He mid 50, im worried that if you fail to cut and the prices go down, the chances of production rising dramatically are less, but we will probably find the cut and normal price. We are beginning to see show production and how do we converge shale production, and how do we converge . We want russia to have some level of understanding. We are never going to have finance solutions that are disruptive. Annmarie what you see as the Biggest Challenges to this plan . I think it is within our reach. Whether it ising, issues of regulation, we are very aggressive advance. Problem because you simply cannot get a final handle on it until it is resolved. Is fully know when it resolved. We have made a lot of progress on that. Progress is up 1. 9 5 Million Barrels. 95 Million Barrels. Militancy. You still have sporadic attacks which means we still have not sufficiently addressed the issues that need to be addressed , the minister for nigeria and the ministers working feverishly to get a convergence it is very unpredictable. Annmarie no deal today, where do you see oil drop . I think it is already getting a bit of heat as it were. There is a level below which opec prices for now would not drop. This is winter. I would not imagine it a lot below where we are today. Imagine it more than a lot to where we are today. Thank you so much. Emmanuel,he manual the Nigerian Oil Minister. Yousef very interesting comments said. Great areas to patch up overall. Optimistic about reaching a deal. We are seeing brent trading 46. 78 a higher at barrel. Anna nothing unusual about a brexit meeting, apparently. Yousef optimism prevails as it stands. The hours are counted them to that critical meeting. Let us cross over to india. Very interesting story. Anna india released its gdp data. Todays figures will not impact the impact of the Prime Ministers decision to 1500 rupee banknotes from circulation. Yousef that is more than egypt. Has a coupled in you is fastpaced has its coupled indias fastpaced growth story . Let me explain. On the eighth of november, the Prime Minister announced control of the currency. The intent was to squeeze out to fake currency in the system in what is called black money. The intent was right but the execution has been flawed. You are seeing a massive cash crunch. Because running dry they have not been filled up with new notes. The impact has been cash crunch. More businesses no one knows the Economic Impact of this move on the broader economy and how the economy near bounce back in the term. Some estimates say gdp could be dragged down 0. 5 which is why analysts are dragging down there estimate. 4 . Ow as seven point watch out for the october december number. The story is how you have the attention of the economy has shifted away from jobs and growth to this disruptive event that has brought a limit of uncertainty. Anna thank you very much for your thoughts this morning. Dueeview of that gdp data out of india. The deep modularization of the economy is demonitors ization. Foreign banks pulling out of india and that amid this currency crisis. We see this happening to the 10 year yields. All of this happening at a time when many people were looking for india to be something of a growth driver for the Global Economy. Isnt that still on the card for you . Lena i think 2016 will go down in history as the year that brought about financial impossibilities on a home new scale. When you look at the developments in terms of valuation, the low income old economys valuations have the ighgrowth economies. The economies will have to learn to swear this as the months to square this as the months go by. It has been a u. S. Reflation story. The collapse of supply on Indian Government bonds reflected here goes in parallel with the emerging markets, what we are seeing against the euro dollar in the next month. This is the financial inconsistency of this new Global Financial map. As far as the u. S. Markets are benign growthy environment and reflation environment where emerging markets are priced for financial armageddon him a you cannot have both. This is a highly related Global Economy and i dont think we can really we have been talking about a healthy Global Economy without a chinese economy. Yousef india going through a very painful time at the moment. In terms of the positive stories in the em space, what has gotten your attention . Lena it is quite interesting. The russian ruble has stabilized somewhat in the past month. It is certainly encouraging. That will very much depend on the outcome of todays opec meeting given the strong correlation between russian reserves and the International Price of oil. That goes very well with the debate yousef anna pulled out this beautiful chart which shows you oil linked currencies. You can see how they are performing their. The white line is the wti crude. Correlations the between the russian ruble and what is happening in crude. No surprise there is a high correlation. Lena it is remarkable the markets have come full circle. The two currencies leading the idiosyncratic risk story which is the british pound and the russian ruble, in the last year have now become, have now emerged as the top of the pack. That tends to show how Political Risk has changed the markets understanding of global fundamentals in the past month, and when you look at currencies, it is difficult to delineate between fiscal fundamentals yousef we have to stop. Thank you very much for joining us. Anna up next, the bank of england stress test. This is bloomberg. Minister tellss us he is optimistic deals can be done at todays opec meeting. Irans oil minister says he too is helpful. Under stress. Hasannual bank of england released imminently and theres concern that not all of the biggest ranks will clear the bar. Banks will clear the bar. Trumps team. The president elect dined with mitt romney. He meets goldman goldmans [indiscernible] nuchin forosen steve m treasury secretary. Bloomberg daybreak. Our flagship morning show. All alongside anna edwards. Lets crossover to some of the lines hitting bloomberg. The Iranian Oil Minister underscore diaz expectations for todays meeting and this is off the back of comments we got from the Nigerian Petroleum minister. We are seeing a spike in oil prices. 1. 77 torently at 47. 20. This is very interesting. A lot more volume and conviction in these trades in terms of voln in these trades in terms of the average aggregate volume. A lot more conviction as it seems optimism is building. A word of caution and all of this. The Iranian Oil Minister saying he does not expect to be part of a freeze on the cut. Anna we are getting headlines crossing the bloomberg. The bank of england stress test. The big headline is that rbs fails to pass all stress test hurdles, updates its capital plan. The important thing to remember is the stress test varies from previous ones. There is the individual hurdle p,te and what is called the sr systemic reference points. Thanks need to pass these. It has announced plans to bolster its capital. Missing the bank of england stress test, the bank of england going on to say it does not require barclays to submit a revised capital plan. They also say risk to the u. K. Financial stability remain elevated. The bank of england sites risk from medical uncertainty and china credit growth. They say no Material Change to the ability to finance the current account. There is a couple of things coming through, various threads coming through from the bank of england but in terms of the stress test, the highest highlight is on rbs feeling the toughest ever bank of england stress test. Some quote capital and a inadequacys were revealed at barclays and Standard Chartered though neither was required to submit a revised capital plan. This is according to the bank of englands credential regulation authority. Yousef it was presumed that ubs would face that result. Toa barclays was also going be seen as up against something of a challenge. They have a plan in place to build on their capital with what they are planning in africa. Rbs said they have not moved all that far since the last time the stress tests were conducted. They had a lot more to do. Cio. Get to the poring over these details. Rbs feeling this toughest ever test. Not much of a surprise when you think about the difficulty they are having and selling some of their businesses and paying fines of the united states, a lot of unanswered questions. Guest it was not so much a surprise that one of the banks might fail or get very tight because this is the toughest stress test we have had. It basically simulates a repeat of the 2008 crisis more or less. There was an expectation that one of the banks would at least have difficulties. , very failing disappointing for the government as the majority shareowners, i suppose. Anna we are getting more details about what they plan to do about this. They have agreed a revised capital plan and execute an array of Capital Management actions, they are creating a stronger, simpler, safer bank. And actions that may be required. Looking for a little bit more detail as to the intention here. Are you a big fan of the stress tests, do they help in the postGlobal Financial crisis environment, that is when they to theyught in and perform useful tasks such as modeling a contraction in gdp at 1. I percent and a slower china, etc. Anything that can endorse is a good thing. Imf fan of these stress tests even though you sometimes when you read about them and read how they are set up your thinking, have they overdone it a little, is that a likely scenario is a. Imf fan of but maybe we are not having to look for the likely or the unlikely scenario. This has been a very tough stress test with this double way me of a severe u. K. Recession and the global recession as well with lots of stress in emerging markets and elsewhere. Includes land [inaudible] and taking costs out of these costs basis. This looks like it will be amplified even further. All the measures they have to take to improve their capital adequacy ratios and some of the key measurement metrics that this test is using. This is an Inflection Point for u. K. Banks even though you are saying the bar is high, perhaps way to hike impaired to the rest of the world, but it is still a point of change and it is going to bring on a lot of change. Guest what it highlights to my mind, particularly with rbs, is the debt book and what do they actually have on the book and those loans, how will performing are they and how well with a be performing under severe u. K. Stress . I think that is white rbs despite its very high, relatively high capital ratios, has come out so week. Anna that is why they have come out so weak. Just looking for details. In relation to their u. K. Business, just a reminder, there were seven banks being tested. The bigbranch headline story goes to a bs still. That is where the news is in terms of the failure of that business. Hank you our guest is staying with us. We will live bring you live coverage of mark carney at 7 30 a. M. U. K. Time. His comment on the u. K. Banking sector. To the lets get headlines. From plans to nominate billionaire investor wilbur ross as commerce secretary. An announcement on the selections can come as soon as today. Anna he will bring back retired marine core general john f kelly for a followup interview. Another candidate, Massachusetts Governor mitt romney had a second meeting with the president elect at his dinner last night. Yousef donald tusk has rejected a call from british lawmakers to act to protect the rights of expatriates after brexit. He was urged to brokerdeal guaranteeing that u. K. Nationals and european residents would not be forced to leave after britain exits the block. He claimed in the European Commission is obstructing efforts to reach an agreement causing anxiety and uncertainty. Commissionsopean brexit negotiations has suggested the reach of government will have 15 minutes months to seal a deal once britain triggers two years of talks in march next year. In a meeting in brussels, an official said the need for Parliament Approval means that any agreement must be concluded by the second half of 2018. According to a Government Official present. A spokesperson for the commission declined to comment. Yousef thousands of people are protest in seoul to parker and hey the presidency. She offered to resign over and influence peddling scandal. Parties said it would accept the resignation at the end of april. They have given her nine nine days to make a proposal. The korean won is on track for the second month in a row. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. Stories on there bloomberg. Yousef you can join us for a check on the markets in asia. Juliet has all the stories yousefs. Are seeing some constriction in singapore. The Straits Times higher for seven sessions in a row, the longest winning streak it has been on since december 2014, up by. 7 of 1 . It has been a pretty good day in hong kong. The hang seng up. 41 . We have seen x movement when it comes to the casino stocks, galaxy is higher but [indiscernible] in been under pressure and shanghai this is where you are seeing the weakness. The shanghai composite closing lower back closing lower by 1 . Months time, we saw some Strong Movement coming through from some of those infrastructure stocks again today in china. 1 , thanksup 5. 3 of strengthening against the dollar. And a concession coming from the nikkei. It eased from that strong rally it had been on. The weakness in the energy space, you saw the reflected in the australian market. Energy players and other basic material players coming under pressure and a flat session and new zealand. Looking at the currency markets. The korean won is wanted keep an eye on. It is flat against the dollar but it has been higher for four sessions against the greenback. All of this ahead of the allimportant opec meeting. Anna thank you. Up next, we will talk oil. Opec deadlock and differences persist over a deal to cut production. We will go live to vienna for the latest into can see the impact we have had on the oil price this morning from some of the comments that have been coming through. The breakfastor premeeting and the official meeting. We are training on a price of a barrel of oil. Up by 1. 4 . This is bloomberg. Anna welcome back. This is daybreak europe. Given us the release of stress tests. Failing and updating its capital plan. That is one of the headline stories coming out of this. Finds some capital in adequacys at rbs, barclays, and Standard Chartered. Toy do say that rbs failed clear the capital hurdles in the latest bank of england stress test. We got this updated capital plan from rbs and that has been accepted by the pra. Bank of the toughest ever of england stress tests. They were in two parts, it was not just the hurdle rate, but it was the srp. Yousef decreasing the cost space and a further run down and sale of noncore portfolios and reduction of commercial in 2017. S anna you will find all the details of the stress tests and the Financial Stability report on that from the committee, flagging five main risks to the u. K. Financial stability around real estate, current accounts, Household Indebtedness and the global environment. Lots to read. Lets get the Bloomberg Business flash. Juliette airconditioning manufacture carrier has agreed to keep about 1000 jobs at an indiana factory that had been set to move to mexico. The decision marks a victory for president elect donald trump on an issue that has become a rallying cry during his campaign. Trump tweeted that he will travel to indiana tomorrow to make the announcement. A deal to create the Worlds Largest supplier of Industrial Gases could be revised revived. It is looking at a new proposal from u. S. [indiscernible] to restart merger talks after they stalled. Said the potential transaction would be a merger of equals. A deal would further fuel consolidation in the industry and attract scrutiny from regulators. Samsung electronics has extended record highs after signaling a potential split next year. The plan to create a Holding Company structure was presented as a way to improve shareholder value and address criticisms from activist investor elliott management. Seeung and the family would big benefits. Shares up around 38 so far this year. Warned he may have to seek state aid if the struggling lender fails to raise 5 billion euros in capital privately. According to two people familiar with the matter. He made comments with investors about the plan which includes swapping debt into equities. An official declined to comment. That is your Bloomberg Business flash. To the cios go back the set. Ith us on the other big story is what is happening with opec. We heard from the Nigerian Petroleum minister earlier on in the program, we saw the spike in oil prices. Here are some of those gains. 45. 97. Was is going to be a facesaving agreement or do you expect anything meaningful to come out of it . Guest having followed it over the last days and weeks, i am not expecting a huge big breakthrough. It will be another muddling through. At best, we can expect a freeze of volumes, not much more than that. , is it the spike in oil prices . I read somewhere that if they had a breakthrough we could see as much as a six dollar rise in the price of oil. That tells me they are not really expecting a big breakthrough on the markets. Outlets will get some updates. We spoke with nigerias Petroleum Minister to get his view on prospects for the meeting. I think we are optimistic. Certainly [indiscernible] have been ok. There are some gray areas we need to patch of but i like to go on believing we are [indiscernible] talk us through what the sentiment is like over there on the ground after we heard from some of the Energy Ministers from iran and nigeria. Are we closer to a deal for us to market looks likely market got excited there for a few minutes. Still up a percent and a half. Oil is definitely trading higher. To the iranian said he is optimistic but he did cutthat iran still will not or freeze production. He said there could be a chance to work out a solution. The Nigerian Oil Minister as we just heard him there telling me that they had a few things to patch of and he is optimistic. Asked him how much the price of oil would fall , analysts are telling me we could see oil in the 20s, reaching that 30 mark we saw in january. He would only fall of dollar or two. Interesting to see what comes out of this meeting, how oil will react. The market is after mystic as ministers had to the meeting. That interesting he said but he also said he did not want to think what would happen if there were no deal. You point to some of the more bearish forecasts we see in the markets right now. X that is right. Analysts do think that oil could tank if we do not see a deal. So many meetings we have had algiers, doha times two, abu doha times two, abu dhabi, istanbul, they are constantly meeting and they have been talking, they have been getting the market hype that there will be a deal. Theyre going after the cartel is not going after market share. They all want to see a higher oil price. It is a matter of who can bear the brunt of the cuts. They are talking hardball but he thinks, he is saying that behind the seams scenes it is not as bad as it seems. Anna thank you. From theomments iranian ministers underscoring tot they have not been asked cut oil production. There is that relative conditionality and the oil negotiating. Where are willing to sign a deal but were not sure about freezing or cutting production. A reminder that there is a spectacular function, the opec go function that shows you that break down. Anna it points out the relative weight of the various opec producers, saudi arabia representing 31. 1 of total monthly estimated crude production. The irradiance trying to rebuild up their share, 10. 8 according to this latest data. Old debateame between iran or attention point between iran and saudi arabia that seems to be at the heart of what we are saying in these early hours indiana. Guest it is and it is not. Thebig story in oil for moment is we have not got new technology being shale production, which can come online very quickly if the Oil Price Rises. That has change the game. It has been a real game changer because opec knows that. If they let the Oil Price Rise too much then all of a sudden, they are going to get lots of new volume or more volume from the u. S. Again. That has made all those negotiations a lot harder because it is not so immediate that you get a return on any production. Anna i have a chart that illustrates the involvement of the Oil Producers and how well paced place they are. Some people suggest that what happens in the u. S. Places a lid on the oil price is no matter what happens in vienna. That is pretty much how it has been seen to this point but now we also have trump. Trump is a new wild card in this discussion because he has put some question marks around the ran deal. And if iran volumes are off the table than that would be a massive Production Cut which could send the oil price higher. Riskf that is a topline for you, isnt it . Donald trump will follow through with those pledges in terms of going back on to do with the rent. Is that even possible realistically in terms of where we think it is that . Anything isnk possible now or these days. I think it is unlikely. Donald trump is going to be advised to leave that one alone or maybe just to tighten up the conditions a little bit but not really reverse the whole deal. I think that is a lower likelihood risk but there is still that possibility in the room. Anna how much have you been focusing in on the details of his appointments and the commentaries he has given through twitter or interview for clues as to much he will stick to his campaigning rhetoric and how much he departs from it, what clues have you picked up on so far . Guest it is interesting if you follow him on twitter and follow the general news flow. On twitter he seems to have gone back to his prepresident elect contained style. Being pretty aggressive am a pretty hostile to the tech press, for example, and that so that makes me wonder and think, how far has he really moved on to now being more president ial because that did not sound very president ial so far. Yousef what about the candidates he has been teasing for positions . Iseasury secretary that something that is encouraging in terms of the band that is coming together . Appointments the are encouraging and the others a little bit worrying. From being the antiestablishment type president elect, he is selecting a lot of established people, players, lots of military in there, lots of generals that he really likes, which that is a bit concerning and Foreign Policy are particularly. They have not shown to be the sot negotiators or diplomats that would worry me. I would like to see him appointing john kerry and that mark a strong position for him because it would mean that he has moved beyond his Election Campaign team and has become a little bit more independent in what he actually does. Anna he calls these auditions for the job. Maybe the team is the cast. Maybe we have to start referring to them as the cast, the cast behind the president. I saw yesterday that the transatlantic trade deal was backed by what the negotiator in america and in europe but many people fearing this is dead on arrival with the u. S. Changing presidency. Alreadyt felt quite did just with the reception of the europeans. That deal will have to change massively in order to make any progress. In the short term, yes, there is at risk, i think the markets are telling us trade is not at the at risk at the moment. Thisf that is it for version of daybreak. The mixed picture ahead of the european open. We are seeing oil much higher. Stay tuned for that and much more. This is bloomberg. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. But behind that door, i need a private connection for my business. Wifi pro from comcast business. Public wifi for your customers. Private wifi for your business. Strong and secure. Good for a door. And a network. Comcast business. Built for security. Built for business. Hey, drop a beat. Flix . Show me orange is the new black wait, no, bloodline how about bojack, luke cage oh, dj tanner maybe show me lilyhammer stranger things, marseille, the fall in the same place as my basketball . Narcos, fearless, cooked the crown, marco polo, lost and found grace and frankie, hemlock grove, season one of. show me house of cards. Finally, you can now find all of netflix in the same place as all your other entertainment. On xfinity x1. Good morning. This is bloomberg markets, european open. I am guy johnson. Where watching rbf fails. Toughest of her stress test. The standoff in vienna. Demands terror and play a meaningful role. Who blinks of anyone . And a november to remember but not for bond markets