Come next year, we will probably have the ecb with a stable balance sheet, and we will talk about Interest Rate movement after that. Anna welcome to bloomberg daybreak europe, our flagship morning show from london. Manus another day, another set of Earnings Results coming for. Lets go to commerzbank, germanys secondlargest bank. Operating profits, 314 Million Euros. That is confirmation that the turnaround plan is indeed having a good start. They confirmed their fullyear outlook. Loanloss provisions just below where we would expect. 196. 5 million. When it comes to net income, this is the storm. 217 Million Euros. The market had penciled in 74 Million Euros. The bane of European Bank ceos lives, capital 12. 5 . The target is 12 million customers by 2022, shareholders gave them a d rating, but a good set of numbers. Just think back to september. Is validation of strategy 4. 0. Anna we will be speaking to the cfo later this morning. He will join the team on surveillance. Matt miller is on the ground for that interview after 11 00 a. M. We will speak to him shortly and get his analysis on those numbers and look ahead to the interview. Story, they have their finger in so many parts of the Global Economy. We will be speaking to them later on. Firstquarter net income, 176 Million Euros. Revenue, 217 million, up 5 to 6 . They said in march that the february revenue number was up, suggesting positive momentum compared to the First Quarter. Thats a positive sign from a deck of from adecco. Fascinating to get the perspective of the ceo, what he thinks about Emmanuel Macron and the labor market in france. We saw the temporary starting agencies as well. To what extent are we seeing clients on hold, or are they starting to say we cant wait for the rules . All of that will be coming up later today. Manus and their largest market is french, 3600 pages of labor law. Does that need to be rewritten . Lets have a look at the chart. We have a record of the s p 500 last night, but i thought this was interesting, this is the money flowing out of u. S. Equities. Last week, you saw one of the biggest outflows of money in 2017, nearly 8 billion dropped out of the s p 500. Btb, 84. 39. At the same time, this is a syncopated move. Global volatility is under pressure. We can see the vix index, havent been here since 1993. It is the longest losing streak on volatility since donald trump came to power. What you have is three weeks of gains in the s p 500, but the money. Where is the hot money going . It is more skeptical at the moment. Anna we were talking about shorting the s p. We will get to that analysis. Lets put up the risk radar and show you the asian equity session. This is the picture of the United States and the new records on the s p. Monday we closed at the highest level since june, 2015. Strong returns in the market for japan. China seems to have positive little bit, with those south korean stocks closed. Asx on the back foot because of financials. S p futures im underlining the holding pattern. Manus yeah. Lets see what comes next. Lets look at australia and south korea, both important today. Aussie, we are waiting on the budget numbers to come through. Scott morrison is expected to o deliver. Financials flagging the market lower, aussie dollardollar down, the lowest level since january. And of course iron ore, never far from mind, under pressure. South korea, lets see how the political results come in. Will the korean won look at the issues of trade rather than politics . Anna it seems pollution is a big issue. We will be on the ground there shortly. Lets get breaking news from akzonobel. They announced they rejected pbgs approach for the ppgs approach for the third time. This is one of the shareholding groups that have been active in trying to get akzonobel to take a more proactive approach, Elliott Advisers condemning the rejection of the offer. Rejectionhat this constitutes a breach of corporate law. The reason for the decline are unconvincing, according to elliott. Manus lets see if theres another swipe across the board of akzonobel. Meanwhile, lets get to Juliette Saly with the first word. Good morning. Juliette manus, thank you. Lodging is voting is underway in an election triggered by a scandal in south korea, with an increasingly aggressive northern neighbor. Allegations of corruption at the highest level of government have dominated the campaign, along with worries about youth unemployment and the feeling that economic revival isnt being seen on the ground. Former acting attorney general days passedsays 18 between a warning to the white house that Michael Flynn lied to Vice President mike pence and the administrations decision to fire him. She testified to the Senate Judiciary committee yesterday. Tweet, President Trump suggested any problems should have been flagged by the previous administration. Australias aaa Credit Rating is back under the microscope as Malcolm Turnbulls government prepares to deliver a government that appears long on spending and short on saving. The books are being, complicated with miner investments. Global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. You can find more stories on the bloomberg at top. That budget in australia weighing into the financial aspect of the asx 200 today, because there are reports there could be a 4. 4 billion levy put on the banks. The asx 200 is down. 5 in trade. Flat, but yesterday it traveled to that 17 month high. Hong kong stocks looking pretty good, but still seeing weakness for a seventh consecutive day in china. We do have some calls on the shanghai composite from Credit Suisse cutting the 12 month target to 3600 from 3800. Seoul on holiday today as investors and everybody else goes to the polls. Having a look at the stocks in the region, toshiba rising in hitting out at Western Digital with plans to sell memory chip business. Thirdquarter numbers hit my that report of a 4. 4 billion levy. Cbas thirdquarter profit was ok. This is a power stock in hong kong, up by almost 15 on reports of a mega power merger lifting coal generated stocks. The aussie budget is being handed down soon. We are actually seeing the bond bullish, outperforming the likes of norway. Purple is canada, pink is u. S. We are seeing quite a lot of steepening of these curves on concern there could be a fiscal budget spending blowout from the turnbull government, if australia tries to ramp up Infrastructure Spending. Anna juliette, thank you. Juliette saly from hong kong. We had earnings from comments earlier, lets break them down with matt miller, who joins us from frankfurt. Great to see you. Talk is the numbers. What are the key takeaways. The bottom line is one of them. Matt yeah, not just beating on the bottom line but reading the highest estimate in our survey of analysts. Beating on that income and operating income more than anybody expected, and also revenues doing better than anyone expected. The main reason for that, if you dig into the numbers and look at the big ones that pop out, firstquarter net fee and commission income, 887 Million Euros. More on higher volumes and securities trading. That has been the story on wall street, on the other side of the atlantic, and has been a story to some extent for European Banks as well. They are also able to cut costs further, and on track to cut their 9000 jobs they announced at the end of last year. That is part of their cost cutting operations that investors want to see, and Net Interest Income will be something people want to Pay Attention to as well. 1. 40 5 billion in Net Interest Income, this is a bank that analysts say will benefit most from an increase in Interest Rates, if or when that happens from the ecb. Manus yeah, the if and when are the critical issues. It strikes me when you talk about the security numbers, when we broke those Deutsche Bank numbers you were talking to management, and they said 50 of the business has returned, and the other 50 has floated to the likes of commerzbank and ubs. Will this be one of the things he will pick up with the cfo . You have a conversation a couple hours. Matt not as much. Didntbank, remember, lose a significant amount of clients like Deutsche Bank. Deutsche bank had a real scare, the confidence scare last year before that, and that is why they saw, especially Hedge Fund Traders fleeing their business. Commerzbank didnt have that problem. They are focused on the retail business. They are looking to add 2 million more clients. They have added i think 151,000 in the First Quarter. What i am going to be focusing on the cfo today is how will you go into get that other 1. 80 5 million new clients. One of the things they are talking about is consolidation, m a, buying those clients. Where are you going to get them . The market is a tough one. Anna matt, thank you. Matt miller in frankfurt. We will be speaking to the commerzbank ceo later this morning. Manus voting is underway in south korea after a campaign dominated by scandal, trade disruption with the u. S. , and growing worries about the unpredictable neighbor to the north. Anna shery ahn joins us from seoul. Good to see you. What are you seeing on the ground . What are the key issues . Shery this is a holiday in south korea, but when it comes to what i have seen on the ground it has been busy heading to the polls. From very early in the morning, standing in line in election polls. We are hearing for the National Election committee that voter turnout is around 56 . They are forecasting that it will be around 80 of eligible voters. Course, intense interest. It is unprecedented, coming off from an historic ousting of the president , being dubbed by the korean media as a rosy election, coming in spring when roses bloom, instead of the usual december president ial election. A lot is hanging on the line in dealing with north korea. When i talked to a few voters outside polling stations, young people are telling me that the economy is the priority. More conservative voters are thinking north korea is the most important task at hand. Ofus shery, just in terms the candidates, one of the big issues is trade, a lot of people saying they are trying to look through the current politics and talk about trade. Of course the u. S. Will be reviewing free trade deals with south korea. Where did the candidates stand on that question . Shery it has been interesting. The trade issue has been put on the back burner, given all these other things in south korea. But given that President Trump has called the koreanu. S. Deal horrible, theres a lot of focus on what the candidates are saying. Although they are all over the place, and there is little detail in terms of their trade policies. The leading candidate of the saysratic party of korea he was at first strongly opposed to the ratification, that has now changed his tune, saying that this is a pillar for strengthening ties of the u. S. About ist has talked suggested that it could be a Good Opportunity to look for more concerning parts, although his official statement is that they do not want to renegotiate the trade deal. Ahn, thank you very much. Lets bring our guest Simon Derrick in, chief strategist. South korea has its own idiosyncratic issues. When you look east, politics has traveled east, politics and trade. You mentioned the yuan. What is it that stands out as a key issue around the yuan . Heres a chart on the yuan. The thing that strikes a more than anything else is the attempt by authorities to punch it bubble. We have seen the impact with regards to the stark market, but i think more practically, it is slowing down demand. The thing that strikes most obviously as commodity prices. Imports fore lowest several months or more, and that is making, itself felt not just in terms of prices but also in terms of major export partners as well. Australia is a classic example. Anna manus pulled up this chart this is the yuan trade Weighted Exchange rate. This is where the pboc wanted to focus. This is yuan versus all trading partners, and it has been pretty stable. If we are looking at places to worry about where china contingent could come from, it is not this particular story. Thats exactly right. Ever since we introduced capital controls, the chinese have done an astonishingly good job of managing the currency. In fairness, if we move away from the basket and look at the dollar, pboc has managed it in an increasingly tight race. Anna it might not please those who want to see an act more like a global currency. Thats exactly right. From chinas perspective, keeping currencies stable is always the top issue, and it always works. Manus thank you very much. Simon derrick. He stays with us. Anna coming up, the Prime Minister of britain gives her partys branding a personal touch ahead of the election next month. Instilling discipline within party ranks. This is bloomberg. London,ust gone 6 21 in 1 21 in hong kong. Juliette saly standing by with the business flash. Juliette manus, thank you. Commerzbank has reported firstquarter net income ahead of all analyst estimates. Bankecondbiggest listed of germany says income was 217 Million Euros in the last three months, ahead of average forecast of 74 million. Commerce bank says it is still keeping 12 or above. Saudi arabia and russia have signaled they could extend production cuts into 2018, doubling down on efforts to eliminate the Global Oil Supply surplus. In separate statements hours apart, the largest crude producers said publicly for the first time they would consider prolonging output reduction beyond a sixmonth extension, widely expected to be agreed at this months meeting. And that is your Bloomberg Business flash. Anna juliette, thank you. Now its all about mary. Thats the message from the british Prime Minister, as the hoping fornister is popularity over jeremy corbyn, uniting lawmakers when it comes to votes on the brexit deal. Ubss chairman axel weber said brexit would be both painful for britain and the rest of europe. I think there will be a pretty hard exit at the end, and that will have a very negative repercussions on europe, on the continent in the u. K. , and it will spillover continuously over the next two years into market volatility. Anna Simon Derrick, chief currency strategist at bny mellon, is still with us. What is moving the pound . Where are we . Dollar,gainst the u. S. We see the campaign by the weour party at full steam, see branded theresa under which conservatives are campaigning. What is going to shift the pound through this campaign . I think what we are seeing is a shift. The first three months was very much about domestic u. K. Politics. May,s about brand theresa and whenever she gave a speech that painted herself as being a strong leader, it would do well, and we did extremely well on the back of the general election. However, if you look at the performance over the course of the last few weeks, there has been a subtle shift, because it seems to move back toward considering the negotiations. When you have those announcements from the European Commission about their negotiating staff, they didnt like it that much. I cant help feeling that we are quietly moving back to considering the details. As a result, i suspect that the election results, unless there is a shock, relatively speaking it is factored in. I thought what was surprising was the results in france over the weekend might have had more of a negative impact for sterling, purely given the fact that mr. Macron would push towards anna yeah. Manus yeah, he has already called brexit a crime. Clearly. Is side we had the bank of england meeting in a couple days. Lets have a look at the inflation, whats happening, and the longterm expectations, rolling over. Kristin forbes defended at the last meeting, and i think the notes said it was relatively little upside to consider. What does it take to garner more dissent from the bank of england, or given that inflation picture, are they deluded . [laughter] historically, the bank has always been prepared to turn a lot over. Remember, we were running well above 4 , and then we stopped every month but not doing anything about it. You will remember earlier this year they said they made it clear, they expected inflation to overshoot during the summer months. They clearly think we are going to get towards 3 or 4 on inflation, and they are prepared to look through that. There, whostays up knows. I think its unlikely youll see anything dramatic this week, or that we will see anything dramatic in the inflation report. Anna are we interested in what happens to wages and the u. K. . A British Company finding it harder to find the right staff, a report from the recruitment and employment federation, talking about a shortage of suitable applicants across a whole range of industries. This seems to be a story gathering momentum. Does this put upward pressure on wages years ahead . That could be a structural shift, and it could change the way the bank of england looks at these things. The issue is that, for the moment, we simply see this with the shortterm perspective. They have said they believe its a shortterm spike in inflation. But it could become structural because we struggle with labor, and the levels of start to change the story. Manus it will become a structural issue. Simon derrick, bny mellon. Up next, we will push for an increase on rates to the states. Is the economy ready . We will hear from loretta mester, who tells us why its gradual and they dont want to be left behind the curve. Anna welcome back, everybody. 2 30 inture of tokyo, the afternoon there, 6 30 in london, 7 30 in germany. Nubbers breaking from germany right now. Numbers through from eon, one of germanys biggest utilities and now their biggest renewables generator. First quarter adjusted net income, 525 Million Euros. The estimate was for 548 million. Looks as if the profit has fallen more than expected due to an atomic outage great feet grid feed. Grid feespay higher and keep the Nuclear Reactor offline for longer than anticipated. All of that of interest for this business. We are at what they were planning in terms of it and in terms of dividends. That is their story. We are going to be hearing from the management later on today. Manus lets talk about munich. This is the worlds biggest Reinsurance Company three years after a funk for the ceo. Firstquarter growth comes in at 12. 9 billion euros. The full year of that lower at 2 billion to 2. 4 billion, moderately reassuring. The first order that income misses 554 million after penciling in 552. 1 million. No dramatic turnaround in terms of the overall performance there for munich re in the First Quarter. They have low rates, low pricing, they just havent come through. Is thebined ratio, which benchmark a lot of people use in the insurance industry, comes in at 97. 1 . Less investment income, 2. 1 5 billion euros. Its getting harder to earn a crust in a world of negative rates and low returns. Those are one of the questions we will put to the cfo, who will join matt miller in myself at 7 40 a. M. Anna lets check in on the markets. Nejra cehic has the details about whats been happening overnight. Nejra good morning. Were seeing some losses and asian equity markets, japanese stocks down after hitting a december, 2015 high yesterday. Investors looking ahead to earnings, 800 companies scheduled to release earnings this week in japan. Is this about profit taking . I have the nikkei here, the relative strength index has moved into overbought territory. We are seeing equity markets slipping across asia. Theres a lack of immediate catalyst to push the markets higher after we saw the msci at a twoyear high. Meanwhile, volatility is coming down. The vix tumbling to its lowest level since 1993. We are below 10. Here i am showing turbulence across Asset Classes fading. You can see currency volatility down and also treasury volatility as well. Speaking of treasuries, you have the 10 year yield fairly steady today after gaining four basis points on monday. The is bloombergs treasury three year note yield. This turned green for the first time in almost six weeks. That signals the beginning of an uptrend that will be bearish for bond prices, egging the question whether the increase in yield is not yet overstretched. We had questions from fed policymakers talking about a gradual increase, perhaps of a hawkish tone that could push yields ever slightly higher. In the fx space, fairly quiet. Aussie dollar dropping to a fourmonth low after disappointing retail sales data. Manus thank you very much. Just a couple lines not the most prosthetic from governor kuroda not the most prophetic from governor kuroda, there is no future in the movement turning back on globalization. Companies must overcome self interest and cooperate. Globalization may have reached a a turning point of sorts. Kuroda, coming out with a couple lines. Lets talk about daybreak. Anna he is speaking at the iif spring meeting. Lets get to the top stories, the next volatility index the fix volatility index. It closed at its lowest since 1993. Advice that sake just short it that suggests shorting the s p 500. Itss next up, the u. S. And softening position in talks on global bank capital, breaking the deadlock with the eu. Is this a capitulation . Has anyone told donald trump they are capitulating . Anna this is something that has been keeping the two sides far apart. It has been keeping them so far apart that they are trying to get to an agreement on this. Economy,ly, germanys looking ahead to industrial outputs and trade data. We get those at the top of the next hour, 25 minutes or so. Just monthly data. Interesting to get a snapshot of the german economy. As we increasingly talk about the ecb being front and center. Manus lets do it mario draghi says. European central bank will be front and center. Theres another central bank at the front and center, the Federal Reserve, and the fed bank chief in cleveland is urging colleagues to deliver on gradual tightening of policy. She spoke to Bloomberg News about moves that need to be made to ensure the economy doesnt fall behind. Anna her comments came after a speech in chicago. It is important to the fomc to remain very vigilant against falling behind as we continue to make progress on our goals, especially given the low level Interest Rates and the large size of our balance sheet. We know that Monetary Policy affects the economy with long and variable lags, so policy actions have to be taken before goals are fully met. Anna Simon Derrick, chief currency strategist at bny mellon. Bad things happen when the u. S. Interest rates are held too low for too long. But she says i dont think we are way behind the curve. Thingsink one of the that ultralow Monetary Policy does is drive a search for yield. Its not actually load u. S. Monetary policy driving yield, its low Monetary Policy in japan doing that. The u. S. Is actually the target for that. Ishink the fed obviously going to go in june. The question is about whether they go later in the year. We will always be cautious, but in the absence of any major issues for the markets right now, we take the story out of it looks, greece like a relatively clear run to the end of the year. It doesnt appear as if any of those stories will come along and bite that could cause the fed to pull. It looks relatively straightforward, two hikes this year, i doubt it will be pretty. Manus price that all in. This is the bloombergs chameleon trend indicator. This is what i do at halfthree in the morning. Yields, its a beautiful chameleon. It has gone green for the first time in six weeks. The point about this is the bond market has now begun to really begin to come out of its slumber. The position of the dollar is low. Does this sell the coalition for a stronger dollar . I think it does help. I think it depends on where you look at with regard to whether you been talking about speculative players and i think a lot of that has been played out. I dont think this particularly long position i think there is a decent chance over the summer months that you get dollar strength. I think the reality is that over the course of the last five years, that is where the market has gone more than anywhere else. We have only had three dollar rallies since 1971, and the previous two lasted five to six years. My suspicion is that yes, we have dollar strength, but i dont think we have the kind of rally that some would like to see. I dont think we can talk about dollar has an yen at 1. 30 or. 90. R trade act anna that ties in a bit with what jeffrey good lack is saying, that its a myth that the Federal Reserve raising rates necessarily leads to a stronger dollar. And sure there was more detail of what he does believe happens, but that ties in with what you were saying. Just because the fed is hiking rates, dont expect that to be dollar positive. Thats absolutely right. You have to look at it both in terms of what the feds do and Monetary Policy elsewhere, in the positioning. If we have seen the dollar be the currency of choice for half a decade, and you think about what happened in 2014 when ecb went to a negative deposit rating, thats astonishing. I think weve still got a lot of that, and i think that therefore blunts the rally. I still think we will get to one yen, but it the just dont see it making new highs. Im not the ecb going to say the ecb will bounce into action because the Federal Reserve, but the pressure is going to mount. The more normalized the fed becomes, the more pressure there is on draghi and his cohorts to do something to move the dial. Is that me being too hopeful . I think thats the biggest threat, with the ecb does. Manus do you see it as a threat . , i do absolutely. We have had negative deposit rates going on three years now, which has driven money into a wide range of markets. If it hadnt been for that flow money, would be market what the markets be doing as well today as they are . My guess is not. I think the ecb has a really tough job of unwinding its policy without creating a major market arrest. Therefore i think the most likely outcome is they move incredibly slowly, and i dont think they will get bounced into making an early move. Anna what do you expect from the boj . Weve mentioned governor kuroda is speaking this morning, saying policy is bearing fruit, and that the Global Economy has finally reached escape velocity. If that is the case, then when do we start to see the boj catching up with the other Central Banks . Japan has always made it very clear that they dont target currencies, per se. However, my guess what the that, were we to see a yen trading around 1. 20, they would feel comfortable enough to start to move on policy. Anna simon, thank you for your time. Simon derrick, bny mellon. You can listen to more of him by going to bloomberg radio. If you are multitasking in the car, you can have a listen. Tv is the function on the bloomberg to get video streaming, and influencing the conversation by asking a question at the bottom of your screen. There is one man that always has an opinion, the ubs chairman axel weber, who talks about the ecb, what he thinks the central bank may start tapering soon. My expectation is that in june they will remove some of their easing biases they still have in the language, and around september announced they will taper their purchase program, which they will do over 69 months in 2018. We will probably have the ecb with a stable balance sheet, and we will talk about interestrate movements after that. Manus our exclusive interview with axel weber, next. This is bloomberg. Anna welcome back. 6 47 in london. Lets get the Bloomberg Business flash with Juliette Saly. Juliette anna, thank you. 6 47 in london. The worlds Biggest Hotel operator reported strong firstquarter results. Measured occupancy used by the industry between 1 and 3 . They say the strong growth in business demand letter to exceed expectations in north america and europe. Luxury handbag maker coach agreed to buy kate spade for 2. 4 billion. Coach has been trying to build a multibrand company through acquisitions, and investors are handling the deal. Thats your Bloomberg Business flash. Anna thank you manus thank you. Axel weber expects the European Central bank to move toward tapering around september. Anna speaking exclusively to kathleen hays, he says the ecb has to scale back. She asked him if he was still concerned by the rise of nationalism and antitrade in europe. When you look at the French Election in 1992, when the front nationale made it to the final, they had roughly 3 million supporters. Now what is 11 million. There is a rise in these forces, and the bigger concern for me is not the immediate future. I think the immediate future will see a relief rally for the euro, and stronger data coming out of european areas. There is no problem for the rest of this year, but we will move into the italian election next year, and theres a very strong antieurope sentiment. There are more problems ahead. And the british exit is a countdown that is happening now, with problems that will only be solved in the 12th our. Theres more volatility ahead over the next two years at least, and thats going to be a rocky road. You said there was a possibility when you were talking about this earlier that brexit is more than a risk to the u. K. , but all europe. What is the chance of that and how is it going to happen . Markets are really not good at pricing binary events. Binary events could be a hard brexit, they want to have andrence over immigration, they want to have trade agreements with the rest of the world. That is the definition of a hard brexit. There is very little on the continental european side that will be coming forward to accommodate that. I think there will be a pretty hard exit at the end, and that has a very negative repercussions on your, on both the continent in the u. K. It would still over continuously over the next two years into market volatility. Every speech the Prime Minister gives, every election outcome, will be priced by markets. There will be ups and downs, relief rallies, concerns, and it will emanate volatility. Banks like us have to choose strategies that will make sure that we can be of Continuous Service to our clients throughout europe. I have to ask you about the ecb then. A lot of people are saying, come on, mario draghi, get with us, tell us when and how you will taper. So much uncertainty is it more prudent for the ecb to wait . For mario draghi to keep stressing, i want to make sure the rising inflation is sustainable . No, i think we are in a different inflation environment. Inflation is closer to target, and the extreme monetary policies that have been enacted have to be scaled back. It was the right thing to do 10 years ago to move aggressively, just as much as it was right to do it then it is wrong to still be on that same course 10 years later. My expectation is that in june it will remove some of their easing biases they still have, and around september they will taper their purchase program, which they will do over 69 months in 2018. Come midnext year, we will have a stable balance sheet, and we will talk about Interest Rate movements after that. I think the ecb is clearly on a path to normalization, and yet they are following the fed with some delay. If anything were to go wrong in the economy they might change that course, but given the data and how they line up now, its likely they will follow this course. Manus that was axel weber with kathleen hays. Joining us, axel weber saying it was right to do it 10 years ago, strong data, strong europe. How in love with europe are you . We are pretty enthusiastic at this stage. We havent got to show that over the last seven or eight years. But at the moment you have strong corporate reform and improving economics, which gives you the kind of equity returns you have on your chart. Anna is that enthusiasm based on any expectation of what the ecb does for a long time, or is that not core to the thesis . I think its just a supportive background. You are seeing relatively modest inflationary pressure, and there is no requirement on the ecb to tighten policy, other than it probably thinks it showed for the financial system. But when you look at the there ista the probably still a lot of fair capacity in the economy. Its a pretty benign backdrop. Manus earnings season, you sat down and said, i am quite relieved. This is what caught my eye. Youce reaction so far quarter,ce old first and found there was a lack of profitable income. Absolutely. If we never go into and earning sure manyim companies are little bit nervous. Healthy skepticism. Is rare for companies to miss their guidance on the full year in the First Quarter. But they will say things like, maybe returns will be second half weighted. We just havent seen a lot of that. We have probably seen Companies Holding back guidance, they dont want to raise expectations. Anna what was gripping everyone from a risk perspective, we turn to the reform agenda. Is this something that excites you, that we could see further reform in labor markets . Speaking today, saying that the reforms need to be delivered before christmas. Macron must make reforms before christmas. Is this something that gets you excited about french stocks . Well what was exciting about the French Election was that we afforded we avoided a worstcase scenario. Even though it was largely expected, that was what was implied. I think with forecasting that didnt expect to see it happen. Christmast deliver by night be optimistic. We havent seen a lot of bad over recent years. A this is axel weber whole host of different issues. Was, i what are brexit thought that was quite simple. Does the shine come off the u. K. In any way for you . Volatilitys dropping in the gilt market, a runup in sterling. Is there anything changing the thinking around your u. K. Exposure . Not really, but we have been quite cautious, and we remain to be quite cautious. Lets go back to prejune. Even the most ardent brexit supporter would have said there will be some shortterm to mediumterm impact, but we are prepared to do this because we think a longterm prospects merit it. We havent yet seen some of itse cost implications and seems logical that there will be some elements of disruption. We havent even started it. Anna your portfolio moved away . What we havent done is looked to buy in some of the areas that ive been quite weak in cyclical areas, and we said lets see how it plays out. Manus ok. Ben, you stay with us. We have more to get through from european equities over at Aberdeen Asset management. Anna interesting headline coming across the bloomberg, the french expert minister manuel valls says he will be a parliamentary candidate. This is coming through from rtl. Just throwing that into the mix as we bring this hour of daybreak to a close. We will also talk about whats going on in south korea as the country goes to the polls. This is bloomberg. Manus politics turns east after months of turmoil. South koreans vote for their leader. We are live in seoul for the latest. Manus the ubs chairman tells bloomberg. My expectation is that in june they will remove some of their devices they have in the language. Theirey will taper purchase program. We will talk about interestrate movements after that. Manus welcome to bloomberg daybreak europe. I am manus cranny. Am anna edwards. We have the numbers dropping. The germany industry output falls on weaker demand. Production dropped in march versus an estimate of the 0. 7 decline, not having as had been feared by economists. Exports rose for the thirds consecutive month. We saw encouraging data yesterday and that was around the growth story in the rest of the eurozone. We have german Industrial Production dropping in march as to for investment gives an energy receded. Experts rose for a third month and output adjusted for seasonal inflation declined by zero point 4 . The data, day after that report that showed german factory orders expanding for a second month in march bolstered by 19 nationm the a area. They delivered their operating net loss, the 198. 52ar comes in at yen, the fullyear net loss for 2016. Revenue 1. 9 one trillion and that is in line with what the market had expected. The market was looking for a. Rop of 16 the dividend will be ¥14 per share. That is Mitsubishi Motors numbers and another german stock, 20. 3 million in terms of earnings, that is for adjusted ebit and the pencil architectural than 26. 2 million on the top line earnings. They are confirming the forecast which confirms what ben is saying. We have had a host of german reporting and we started the first hour talking about numbers from commerzbank. That is what they are tried to do is turn those numbers around. We will keep an eye on that. That is on the miss we had. Anna lets have a look at where we are on the futures. It looks as if they are positive at the start of trade. 2 of a present or so. We had a new record yesterday in u. S. Trading. As the vix slumped and we are getting calls saying sure the s p, we will pick up that theme in just a moment. Manus volatility dropped around the world, it is the lowest level since 1993 in the u. S. U. S. Equity futures are a shade lower this morning. Lets have a look at the risk radar. We have the msci asian index. Down by. 5 of 1 . South korean equities came off a record. Futures, i wonder if he has a short position. Shock, horror if he does. We made another record so third week in a row of rising s p. Out andstria closing japan, japan had a strong day coming after three days of being closed and the austrian market financials held back held by financials. Budget delivered later. There is that is the aaa rating at risk . We have the bond markets for you, we saw a fairly moderate move in the bond market yesterday, futures opened a couple of chicks down. Like ways with the likewise with the oat futures. He willthat news that run as a member of parliament. Lets see who comes forward and who ends up in the mix. Here is Juliette Saly. Australias aaa Credit Rating is back under the microscope as malcolm campbells government prepares to deliver a budget that appears long on spending pledges and short on savings. The struggle to balance the books has been complicated by recession level wage increases and weaker growth after the Mining Investment boom. Economists predict a deficit and fiscal 2018 of about 21 billion u. S. Dollars. Former acting attorney general cell yates says 18 days passed between a warning to the white lied and National Security to Vice President mike pence and the administrations decision to fire him. Gates met the testimony to a subcommittee yesterday. President trump suggested that any problems should have been flagged by the previous administration. British companies are finding it harder to hire the right stuff. The availability of workers for permanent and temporary positions fell at the fastest pace in 60 months in april. By theng to her report agreement and employment confederation. The shortage of applicants across a wide range of industries were seeing the closeout in markets and in austria. The nikkei is down by. 25 of 1 and it rallied strongly by two points to 2. 3 . Is down, a lot of weakness and banks ahead of the budget, this on a report that the by banks could be be hit with a levy. There is concern about the crackdown on financial leverage. Eoul clos fore thed election. Toshiba looking very strong in the japanese session closing higher by 4. 5 hitting out at these concerns that Western Digital is trying to interfere in the sales of its memory chip business. They came through with thirdquarter numbers but falling on the back of this about them the afr bank levy in australia. And up by 15 on these reports of that china make a merger. Also we are waiting the us inllion budget, 7 30 p. M. Austria. Bond bearers are looking at the yield curve, you can see this. There is speculation that the the white line could steepen further with the us trillion governor and expected to announce the big spending budget on infrastructure. You are seeing the yield higher. Represented by the pink line. We are expecting to see a lot of announcements about Infrastructure Spending from the turnbull government. Manus thank you. Budgetee where that detail delivers. Voting is underway in south korea after a campaign dominated by scandal. Potential trade disruption with the u. S. And growing worries about its unpredictable neighbor to the north. What are you seeing on the ground on election day . Shery voters have already cast their ballots. It expects around 80 voter turnout for this election. It is a most five hours to go for the pulse to close at 8 00 p. M. And we are continuing to see a steady stream of voters coming in at the polling station and casting their ballots. Despite the bad weather. It has been raining on and off. There is a lot of interest on his election. Whats are thinking about happens to the economy, we are seeing the slowest pace of growth since 2012 this year at two. 5 . What happens to north korea when you have a new President Trump, he could have a sitdown with the ,orthmen north Korean Leader bearing from decades of Foreign Relations between the u. S. , south korea, and north korea. A lot of peoples minds i have talked to on the ground being very worried about the state of the economy saying that although media talks about a revival in the south korean economy, that is not what they are seeing on the ground. New president to fix that. Manus the complexion of that new president in terms of thetions with north korea, Democratic Party is setting up if that is the winner. He wants to talk to north korea. Yes, the leading candidate has been much more open toward north korea. We had nine years of conservative rule in the south which meant a tough stance, hard sanctions. Jaein wants to talk and people are comparing his policies to the sunshine policy of 2008. He was a key advisor in those liberal administrations. A tougherst has had sell. He wants stronger military ties u. S. The all of this is coming into play as you mentioned, President Trump wants talks with kim jong the right circumstances present themselves. There is a u. S. Antimissile System Installed in the south of the country. A lot of people expect the leading candidate months to be better in negotiations with china. He has oppose the installation of that system from the getgo. Anna thank you. Our guest is still with us. Lets guess we are talking about Global Policy and total european policy. Think globally at the moment. We talked about european beities, where would you looking more globally, do you worry about what is happening in the u. S. With high valuations or high levels of stocks there and how about emerging markets . Guest we look at corporate performance them out difference that we are seeing in 2017 is a better performance in europe with developed markets and improving trends generally. There has been a delta on what we saw last year. The concern i have in my mind is even though we are seeing a recovering european economy and we are seeing a strong First Quarter for earnings in europe, we do start to see the u. S. Economy start to slide and what does that mean for european equities, can they withstand that dynamic . Having waited so long to see europe come through it would be disappointing to see that derailed. I am working out how that plays together. It will be important. Manus talk to us about the flow of money. One of the things we have put together, dropping volatility, is that a sign of complacency . The flow of money into your postmacron victory, this is what we started our show with which is the flow of money. And that momentum. Are you seeing more flow, more momentum, more requests into europe at of u. S. , talk to us about what the clients are chatting to you about. Guest we are seeing appetite for european equities. What we see is bigger flows into etf, followed by more diligence on active products. I suspect it will be the dynamic we see on the european side as well. I do not think it is difficult, the argument for europe against the u. S. Is quite strong but that has been ongoing for a number of years. With the political situation looking more favorable, it is easier for investors to buy into that. Anna when it comes to picking those stocks that investors will find some upside in, where do you look when it comes to the european names, you are looking for companies that are going to do well from a european recovery rather than a global one. Where would you go for those, retail names . We are a was looking for companies we think that would do well over the long run. It is not just those focused on the domestic agenda but companies that can benefit and you will because the markets are all over the place. Examples of that might be Something Like [inaudible] strong position in brazil. Trading at a record low valuation. Also with a nice to messick position in france and europe and leveraged into higher Interest Rates because they collect cash up front. Something like that that they can benefit from recovery in a number of different markets and policy trends would be the company we would be looking for. Manus the governor in japan is talking about animal spirits, he is talking about policies since the financial crisis, they are bearing fruit. The Global Economy has finally reached escape velocity. Of f there are a number questions out there. A strengthening of the economy in europe. Getting nervous around some of the policies that are being acted in china. That would be consequences for the market. Issues is thehe car industry. We have fascinating data coming out of the u. S. In the way in terms of auto sales. What one companies said. Do you buy into the excitement around tesla order you prefer to look for electric Car Technology and other Car Manufacturers . Guest we have never been great fans. They are cyclical and a lot of operational leverage, they make modest margins and it is a tough industry. Look to those that sell spades and shovels. Selling technology and the batteries, especially if they had strong positions. Oft might be the kind business that is final. It makes good margins and has good potential. Anna thank you for your time this morning. Will have a conversation with the ceo, what dehaze joining myself in anna. This is bloomberg. Anna welcome back. This is bloomberg daybreak. Deco has reported firstquarter estimates. Ating manus we have the ceo alain d ehaze. Is your largest client. What do you want to change . Bring more fluidity to this labor code. We expect him to further shortly,is labor code at the end of the summer. Allowing france to increase the flexibility of the labor market to attract investment, driving competitiveness, and create jobs which is the purpose of this. We have seen countries like italy and spain doing the same reforms, during the previous recession with excellent results today regarding the unemployment develop meant. Development. Anna good morning. Give us an idea how difficult it is to operate in the french labor market versus other parts of the years on either because it is more expensive or less lexical. Put some numbers on it for us. Guest it is difficult to put numbers behind flexibility. France inin comparison with other countries, it is easy and attractive to invest but it is always very difficult to restructure yourself as a company to eventually stop activities. That is what is very difficult what macrond from has said, the french population, one of his key actions is to reform this, to [inaudible] there is clarity for the companies, ones that want to restructure or reform their company. Not know exactly what it will cost. A second action that will be put into action is giving more power to the social dialogue and to the companys into the agree on theu can number of hours you want to ofk, eventually a new way working in the company. Much more power to the Companies Rather than to the labor code or what they call the segment or the branches. Manus we should say that you 7 , on the estimates of good numbers all around. Governor kuroda at the bank of japan said we have globally hit escape velocity. Manifestescape falsity escape velocity manifesting itself where you can say yes, i agree. Guest there are three countries in the world where we face [inaudible] and this is linked to low unemployment figures. The first country is the u. S. At 4. 6 . U. K. , very the good employment, very low unemployment figure. Face scarcity. The little other is softer, it is germany. Germany is excellent unemployment figure, very low and we have more and more difficulty to find candidates for our customers. Anna how difficult is it for four u. K. Businesses to find the me from the, given so rest of europe might be less inclined to come to the u. K. Now . Effect. Here is a double first of all, you have low unemployment figures, a scarcity of candidates but also due to the clarity of the outcome of the brexit, a lot of customers are reluctant to hire on the one hand and a lot of candidates are also reluctant to change because it is not clear how this brexit will develop and what kind of consequence it will have and kind ofwhy everybody is weight in cima before there is more clarity about the brexit. Com outcome. Anna thank you very much, speaking to us this morning from switzerland. Manus he said escape velocity countries, the u. K. , the u. S. , and tougher in germany eight softer in germany. We have commerzbank sitting numbers and we have these echo numbers which have beat comfortably. London, paris, and france, a nice set of spikes in paris up coming through there. These equity markets, the s p hitting a new record yesterday numberse volatility dropped the lowest since 1993 yesterday. Anna we had a host of numbers out of germany. Merce bancshares, commerzbank shares. Velocity is the message coming out of japan. We will talk about where we are on the global risk story. We will be speaking to the Commerce Bank commerce commerzbank. This is bloomberg. Welcome to bloomberg markets, the european open. We will bring you the first traits of the day. Alongside mattny miller. Here is what we are watching. Commerzbank beat the streets highest a estimates. They want to buy more businesses. We asked the cfo about his m a plans. B