Transcripts For BLOOMBERG Bloomberg Markets European Open 20240713

Close to current levels. Joining us now from our amsterdam euro is the Senior Energy economist at abm amro. Unchanged does not sound so that in a world where everybody is concerned that the economy is teetering on a recession. Do you share that view . Say i dont fully agree. We are a little bit more bearish to be quite honest. Especially after last weeks opec meeting, i think that agnal was rather mixed and little bit disappointing, actually. Saudisderstand why the think it should be 50 it should be 65, but i have my doubts whether we see that. Anna good morning to you. Let me ask you about the impact of the price we have at the moment on the ipo taking place tomorrow of saudi aramco. What are your expectations . We have seen expectations paired back. Creation of the worlds most valuable company. Yes indeed. It was a positive. In that respect. It was well oversubscribed. The price at the top of the range. Indeed, on the other end, it was disappointing because saudi arabia expected more out of this. Year,the oil price, last saudi arabia tried every thing to keep prices elevated. Production to keep this oil price, the brent oil price, up above 60. They manage so far, but they had to do quite a lot to keep prices at this level. It would have been much lower. Thanks very much for your time. Appreciate the call. Next, johnsons bad day. The Prime Minister looks to move past tough questions over the state of the Health Service. Remember Bloomberg Radio is live on your mobile device or dab Digital Radio in the london area. This is bloomberg. Anna welcome back to the european open. 25 minutes to go until the start of equities trading. We are looking for a flat start to the trading day. Boris johnson will be hoping to move on from a bad day yesterday when he faced questions over the state of the Health Service. The Prime Minister continues to hold the lead in the polls. Joining us now is the former u. K. Chancellor Philip Hammond. Great to speak to you. Let me ask you how vulnerable you think the tories lead in the polls is on allegations of underfunding the nhs. This is a sore spot for the party. The nhs is a huge and complex organization. Last government took a Bold Decision to put a huge amount of additional funding into the nhs. 34 billion pounds a year. Forrest johnson has made it clear he will continue that trend and go further in the future. The nhs needs to be properly funded, but it also needs to be constantly managed and monitored so it can cope with the challenges such a vast organization faces. You will never get to a situation where in an organization employing 1. 3 million people, treating hundreds of thousands of patients every day, you cannot find a story to broadcast or write about in the newspapers. That is the nature of such a huge organization, but i am clear that we have a fantastic Health Service in the u. K. Delivering fantastic health care to an unprecedented number of patients. Anna i think you are still a member of the conservative party. Expect a majority do you the conservative party to achieve here if that is your base Case Assumption . Yes, so i am not running, but i remain a member of the conservative party. A conservative supporter. Points are the Boris Johnson will win this election with a majority. The question is the size of that majority. In my view, the bigger the majority, the more authority the Prime Minister will have to take britain forward. It is important that we do have a clear mandate after the selection to get britain moving again. You think will change depending on the size the majority, philip . What kind of brexit will be created if Boris Johnson has a large majority or a slim majority . All, if Boris Johnson forms the next government, im sure brexit will be done very quickly in the sense we will push the Withdrawal Agreement through parliament and leave the European Union within a matter of weeks. Whether the majority is big or small. The difference will be in what happens next in terms of negotiation of a future relationship with the European Union and indeed, looking more widely at what britains future trade relationship is going to be with the United States and other partners. To me, the whole point of leaving the European Union is that we now have choices. We have to exercise that choice in britains best interest to protect britains jobs and make sure our economy grows so that we can finance the Public Services we want in the future, so that we can deliver the tax cuts Boris Johnson is talking about. That means the best possible trade outcome for the u. K. We should not go into this with any preconceptions. We should talk to our european neighbors about what they are prepared to offer britain by way of a trade deal. We should talk to the americans about what they are prepared to offer. Then we should come to a conclusion about what is in britains best interest. The more of a majority the Prime Minister the bigger majority of Prime Minister has, the more authority you will have to lead way itntry in whichever needs to go. How do you assess the on wto rulesing up and having no deal at the end of 2020 . Still a risk. Thats why i would like to see Boris Johnson win this election with a decent majority so that to a smalleholden group of extremists within the party. I would like to see him have the latitude and the moral authority to do what is right for britain, and i think that means completing brexit and then negotiating a deal with the European Union that allows us to continue the very substantial sotern of treatment europe the britains exporters, british job, or protect. The danger was leaving in 2019 without a deal. We avoided that outcome. Now we have to make sure we dont leave in 20 without a deal. We have to make sure we use the next month to negotiate a future arrangement with the European Union, whether it is a temporary interim arrangement or a permanent structure for the longterm, but make sure we can carry on trading with the European Union, including britains Financial Services trade in the city of london, which is so important to our economy. 11 of our tax revenues come from britains financial and business services. Anna Philip Hammond joining us from abu dhabi. Matt Deutsche Bank is out with headlines. It says it is meeting its return on annual equity goal, more ambitious. I spoke to the ceo a little bit ago. He said thats because of the further into negative territory. We also talked about the positive outlook for the Investment Bank. The Fourth Quarter trading revenue so far is higher. The Fourth Quarter looks good for the Investment Bank that he heads along with the whole bank. He has a lot of jobs, a lot to do at Deutsche Bank. We are going to bring you that interview with the ceo of Deutsche Bank after this break. Dont miss it. This is bloomberg. Matt we are 15 minutes away from the start of cash trading in europe and the u. K. Ive got a mixed picture as far as futures go. Ftse futures are up a little bit. Cac Index Futures are down. You could see that change a little because of Deutsche Bank. So far we are seeing calls for shares to rise this morning after Deutsche Banks ceo was optimistic about the outlook for the Investment Bank and perforce for Fourth Quarter trading revenue. Listen to what christian sewing told me this morning. Overall we are satisfied and we are happy with the progress over the last five months in all key dimensions, we are on plan. Some of them, we are ahead of our plan. Be it cost, be it capital. Look at the ecb decision from this morning or from yesterday. That gives us further comfort. Particular, revenues of the Investment Bank are encouraging. It is ahead of our expectations. I see momentum in the bank across all dimensions, and it gives us the right comfort that we are on track with our transformation. Matt falling revenue has been the headline until now. Do you see that turning around . You know, we have seen an october and november ahead of our expectations and ahead of last year. December,almost mid so we have to wait, but all i can see is that i am positive and i am encouraged with momentum. We took Swift Management action in particular in the investment back to focus on our key strengths. That seems to pay off. What changed . It has been a few quarters. What is the difference this quarter that has improved your Investment Bank . It is all about corporate narrative. It is important people know on what we are focusing. Now almost 70 of investment big revenues coming from businesses which are top five in the market. If you make clear to your people that we put our resources, our focus on that, in my view, that gives them clarity and comfort, which is high motivation for our people. Secondly, we see a lot of good client engagement. Over theke tightening last five months, bringing client engagement. Focus we have internally all plays together. The vote of confidence on clients, the vote of confidence from regulators and the internal progress we are doing is all playing into better momentum. Obviously pay had a lot to do with motivation as well. Is it difficult to balance costcutting with giving the right size bonuses to those employees you want to keep . It is always a performance question. We want to play appropriately to performance. That is the goal. Of course we have cost challenges and our costcutting program. On the other hand we are always measuring business according to performance. We need to strike the right balance. Im optimistic we can do this. Matt you have said your profitability target has become more ambitious. What does that mean . Typically those words are followed by profit warning a few months down the line. Seen in auguste and september a further decrease of the Interest Rates. Conservative management has to take that into account. Inever, we took swift action terms of passing on negative rates to our clients, in particular on the corporate side, but also wealth management, we have initiated other mitigating action. We have seen how much potential is there on the revenue side, but also on the cost side. Road, thewn the comfort we can achieve despite these challenges are 8 return on equity in 2022. We are confident we can achieve that, recognizing clearly the challenges, but with the track record we have, we have seen no reason to adjust. Matt you talk about passing on the costs can you elaborate on what the measures are . A flower ofd of measures. On the one hand, as we said three or four weeks ago, we started to pass on negative Interest Rates to certain client segments on the corporate side, on the ultra net worth. Onever, we focused more optimized advisory for our clients to change deposits into other investments. Measures inful asset, wealth management, but also the private bank, good work has been done there. Also to make sure clients are benefiting from that. We do get benefit from the ecb. There is no doubt. We have also in a conservative way started to increase the one or the other segment in order to offset. In the flower of mitigating measures, it shows us there is potential to offset. Matt is there going to come a time when all german depositors are going to have to pay banks to hold their balances . I dont think negative Interest Rates will be passed on to the normal client segment. We have legal restrictions there. I cannot see that. I think it is far more important actually to do a better advisory. If there is one bank in germany who has all the expertise and the capacity to advise in terms of moving to really good investment, giving clients flexibility, it is Deutsche Bank. Can you imagine Interest Rates staying negative . Are you prepared for Interest Rates to stay negative the next five or 10 years . We have taken a conservative outlook on the Interest Rates. In this regard, we also changed their underlying planning. Lower for have longer. We have prepared for that. We need to adjust our Business Model. We started to do that in july. Matt ecb regulators have in a sense commended you by lowering your capital requirements. What does that change for you operationally . You still intend to keep your ratio above 12. 5 . , it is nothing else than a very positive feedback for the way we have approached over the last i would say wanted to half years. At the end of the day, it is a signal of full credibility. Of course, it gives us the leeway, but we will not change our capital targets and those which we have contributed communicated to the markets, be in aon we want to stay conservatively managed bank. It gives us confidence we are on the right track, we will not change our targets. Matt is this something employers will be rewarded for in terms of bonuses . Formployees are rewarded performance in line with what we set ourselves as targets. One target is clearly that we have a more disciplined and Better Capital management. In 2019 we went this direction. Im sure one or the other way, we will think about the report for that. I go want to continue digging for more information on bonuses. Christian sewing not giving any up. He had an optimistic outlook for the Investment Bank. I think that will be reflected in shares today. Deutsche bank shares up about 1. 5 compared to yesterdays close. Let us see in just about five minutes time how those shares open up in frankfurt. Moving. E market really interesting, the acknowledgment that the acceptance that is now built into planning the lower for longer Interest Rate environment. Interesting to talk about the flower of tools they have available. Not just passing on low Interest Rates or making clients pay to deposit money, but also getting client deposits, getting clients to do some thing else with them, to put them elsewhere rather than leave them in the bank. There are things it seems banks can do at the margin. A very interesting conversation. ,sually when i say to somebody can Interest Rates stay negative for five to 10 years, that is a shocking statement, but it is interesting he did not react with much surprise. They are planning on a lower for longer scenario. It just brings us back to the conversation on a possible japanification of europe. Lets look at other shares that can move at the open this morning. You looking today at just eat. Anna another day we are talking about food delivery services. Rejecting a bid from prosus. Today we hear just eat is rejecting the offer from the Dutch Technology investment company, favoring the offer from another touch business, takeaway. Com. Baker also very much in focus. Really negative calls on where we could see the stock trading. Matt really. Yesterday we had oil out sing production was missing targets. The ceo and head of production resign. The dividend was suspended. Givinge see ted baker out some similar messages. The ceo is going to resign. Going to step down as trading in november was less than the brief was set out to be. Suspendednd will be at ted baker. Definitely another share you want to watch, one you dont want to belong at the very open this morning. You can see ted baker trading deep in the red. Futures, however, are still mixed across europe. ,e see gains and ftse futures [ electrical buzzing ] [ dramatic music ] ahhhh ahhhh elliott. You came back anna we are a minute from the start of cash equity trading this Tuesday Morning in europe. Here are your headlines. Stanley is cutting around 1500 jobs globally as part of an efficiency push, but Deutsche Banks ceo says he is upbeat about the lenders progress. Newfi will end its hunt for diabetes and heart medicine. How that will impact novo nordisk. We will speak to the ceo at 8 30 u. K. Time. Ceobaker loses its second in nine months, suspending its dividend. Shares look to tank at the open. Lets look at what futures are. Futures have been looking muted all morning, not expected to move far at the start of the european trading day and that remains the case. Dax see downside, although Deutsche Bank, suggestions are the stock could move to the upside. The ftse 100, seen up a touch at the start of trading. Lets get the market open. The big picture is we are waiting for news around trade. December, 15th of this coming weekend. Will we see any phase one deal and if we dont, does that mean the u. S. Will delay further tariffs or will it implement the further tariffs on chinese imports . Also a focus, as we see markets opening up pretty plat flat, what the ecb and fed does or say. They are not expected to do muchl. We dont expect Interest Rate changes, but we expect interesting conversations with regard to the fed. Any movement in 2020 in Interest Rates and with the ecb, what will we hear from Christine Lagarde at her First Press Conference . We have substantial underperformance on the german markets, down. 3 . The dutch market, down. 2 and the euro markets down. The ftse 100, down by. 1 . We dont see such a big move in the pound, fairly flat. The euro a touch stronger but not much. The movies in the Foreign Exchange markets, pretty muted. From a sector perspective, lets dig out underperformance in germany because it looks substantial. I can see from the floor of the studio, we have a large area of red on the markets. Green in health care, but that sounds pretty defensive. The staples sector in the green, but elsewhere we seem pretty decidedly red. Pretty decidedly to the downside. Let me take you to the mov screen on the bloomberg. Overall 4290, stocks to the downside. That is pretty convincing breadth to the downside. Upside, upt on the 4. 6 . Salafi also moving higher sanofi, also moving higher. Novo nordisk come also a touch higher. 7 . It is heavily weighted and that has an impact on markets. If i look at other movers heading to the downside, weve got asked at a group down 5. 6 , ill dig out some exdividends in a moment. Rollsroyce down 1. 9 . Interesting moves. The biggest german heavyweight i can see falling to explain the negativity. We see in terms of the overall markets, it started out as german underperformance and now we are seeing all of the markets in negative territory. Stoxx 600 down. 3 , the ftse, and dax down, now by. 6 . Matt we have shares in Deutsche Bank rising right now after christian sewing give a positive outlook for the Investment Bank in the Fourth Quarter and said he expects Investment Bank revenue to continue to rise in the coming year. Watch out for your Deutsche Bank shares and we will look at the wrecks of the dax to see what the big weight is. European markets are opening slightly to the downside now with the dax leading the way. The stoxx 600, down. 4 . If we turn to china, inflation picked up in november. 4. 5 . 110 porkurged prices surged 110 from a year earlier. Runucer prices extended the of declines, complicating the Central Banks effort to support the economy. Joining us now, allen higgins, the cio of koontz. Let me ask you your take on the chinese economy and the effects we have seen of the u. S. Trade war. Good morning, matt. In slow to own, but a bit of a global story. You have seen a Global Manufacturing slowdown all over the world here and only now do so we it bottoming out are somewhat more constructive forwardlooking, we see signs the Manufacturing Sector is optimism in china unrelated in europe. About the u. S. K because matt and i were drawn to an interesting survey. Most americans think the economy is on the right track according to a monthly survey by fannie maes National Housing survey. Those the balance between who think the economy is on the right crack versus those who think it is in the wrong place, that has been positive since 2017 but we have seen a diversions recently, which means more americans seem to think the economy is on the right track. Thinking to the electoral events, people think it is about the economy. That bodes in a certain direction. Alan sometimes, the elections are all about the economy, but that seems to be correlated with the unemployment rate. We are looking at consumers rather than manufacturing. The manufacturing intensity in the u. S. Is much less than in germany. Lows in 40 year unemployment in the u. S. On the back of a strong employment report, so knows prize if you think you are a man or woman in the street feels like the economy is doing well. Matt i think she is referring to, i believe it was a line that the economy from the bush, clinton election. It is not just an improvement, though. The amount of americans who feel the economy is going better come and ive got some very bearish viewers right now, but the amount of americans who think the economy is doing better than before donald trump came into office, 21 points higher. It is a shocking increase. How does this juxtapose in your view with the Actual Health of the u. S. Economy . I keep going to your man and woman in the street. We are upset with gdp and pmis because the Manufacturing Sector is a swing sector, but it really is employment. It is all about employment and interestingly, although i dont when the stock market was falling in response to one of his announcements or tweets, he looks at employment. That really is important here. The fact is, in the u. S. , we are at ultra low levels of unemployment. We are seeing some wage growth, so im with that survey. Ill go with that. Anna good place to start the conversation this morning. Alan higgins, cio of coutts stays with us. To movee minister looks past tough questions over the state of the national Health Service and u. K. More on the u. K. Next. This is bloomberg. Anna welcome back to the european open. 10 minutes into a negative session for european markets, down. 4 on the stoxx 600. A negative day for shareholders and ted baker, down by over 35 after executives have resigned. They lost another ceo and the dividend has been suspended. That is a bad news story for that bit of the retail sector. Just two days to go until the u. K. Elections, the Options Market suggests little further upside for the british pound if Boris Johnsons party wins a majority in the election. His conservatives led the by 10 ion labor party points in the average of the last five polls compiled by bloomberg as of december night. 9. Be joined by alan higgins, the cio of coutts. Good to see you this morning. Are we heading for a clear conservative party majority, do you think . Some of the polls say 10 to 12 points, but more recent ones overnight, six to seven, which is a big area vague area. Predicting election outcomes, votingould hope tactical is the outcome against a large conservative majority and that leads to a slightly more sensible pursuit of brexit policy next year but it is hard to say. Anna that is your hope, as you worded it. There are other views available, but what we heard from Philip Hammonds recently, but we heard this morning, the former chancellor, he said a bigger majority or substantial majority might be better for the tory party in terms of not being to extremists in the party, which doesnt chime with the view you sony there are two kinds of extremists from his point. Brexit the er g, the hardbrexit extremists, and the proeuropean and a closer relationship with the eu. It really does affect the number of more sensible centrists are no longer standing for election. In that sense, i am not sure who is an extremist, depending on your starting point is. It comes to mind that Boris Johnsons Withdrawal Agreement doesnt seem very extremist at all compared to what we have heard from sun in the erg. Tohough it is a mugs game forecast the election, it does look like the conservatives will win. It looks like the Withdrawal Agreement will finally get through. Does it make it easier for you as an investor . Alan yeah, unfortunately we have to invest against a backdrop that makes it tricky and i should say we are, like bloomberg, we are a broad church but if youces, look at how the market looks at this, yes, the market wants i think you are right, some kind of modest conservative majority and to get on with brexit, and that should lead to u. S. U. K. Assets performing. We have to combine political probability with where the market is priced and we see sterling as cheap, u. K. Domestic stocks as cheap. Anna you see sterling as cheap. Implied volatility the next week, this is something to be proud of. The british pound, expectations for more volatility from the real, rand, and other currencies. Alan i knew you would punish me and put that chart up. Based onising, because conventional wisdom, should it be a Hung Parliament or a surprise labor majority, which would be an outlier come the move in sterling would be vast array couple of days. In that sense, it is worth paying for just a couple of days of option premium and when you do your mathematics, implied volatility is high, but when you cut rate over the option of a few days, it is more palatable for investors. You can understand it, but lets hope it is a passing oneweek phenomenon. Matt do you expect us to have now an actual some form of brexit by the end of january . Sony i hope not, but the likelihood does seem to be pointing in that direction. That having been said, brexit itself wont be settled for many, many years to come. We have to go back and remind ourselves this is just brexit the beginning of the brexit incess, the easiest step having a Withdrawal Agreement. There are more challenging steps that will take 5, 10 years. It will be to end up with a renegotiated relationship and frankly, we havent left any time for that. Deadlinesticks to his of the end of 2020, for the transition, then we simply will not be able to have a replacement agreement and once again, the prospect of something that looks like a no deal brexit looms large. Anna you are clearly not a fan of brexit or a tory government, sounds like. John mcdonnell saying he does not expect rear trading does notng, expect capital flight with the labor party victory. Sony it is not about me being a fan of brexit or not, but the majority of the british public, the remain is the vast majority of option people would choose. There is a 9 difference. Anna i dont know about fast. Sony there are 11 who dont know, and if you distribute them equally the problem is the government, the choices on offer are not reflective of what the significant majority of the public want. That is my perspective and we should in a Representative Democracy respect the wishes. Anna will we see capital flight . Matt im not sure about that math. Then there isht, a substantial majority of people who want to remain, why on earth would Boris Johnsons conservatives win the election . Sony if this were a single issue election, if t Jeremy Corbyn himself or not a polarizing figure, if people were voting on binary issues, if referendum, there would be a significant majority this is a complemented complicated system with flawed leaders from the Political Parties and tribal loyalties are still dominant in the british political space. Polarization, taking us to the extreme. We will end up with electoral outcome that on brexit itself will not represent the majority of the british people. Suggestingseen polls a balance for remain, but when you look at the polls around the election and say where have the remainders gone because it is difficult to that trend from the voting intention. Sony kapoor, managing director at redefine. Withhiggins, cio of coutts a market perspective in the runup to the election. We will be bringing you special coverage on bloomberg tv as the polls closed so dont miss the action starting just before 10 00 p. M. We can catch the exit polls and sterlings reaction to them thursday night. That will be me, guide, and jon ferro around the desk. On the move in including ted baker, the fashion chain going from bad to worse as the chairman and interim ceo declined resigns. The stock is plunging. This is bloomberg. Anna welcome back to the european open. This is the picture for European Equity markets, down. 4 on the stoxx 600. One of the movers behind the big dani burgerx moves, has the movers. Dani one of the biggest movers to the downside is ted baker, falling by nearly a quarter of its value. Chairman areeo and resigning, suspending their dividend and pretax profit might be as low as 5 million pounds. The company saying the last months have been the most challenging in their history. The share price, reflecting that viewpoint. This comes after a scandal over the founders behavior in the workplace. Movers to the upside, computacenter trading at record highs, coming in ahead of expectations. Profitability, but eps so shares rallying nearly 8 . Finally, salafi will be newfi will end the hunt for diabetes and heart drugs, so the concentration will be ms and hemophilia. They will be making the Consumer Health unit a standalone and they see potential for a spin off. The idea of a spinoff, adding to the rally of 5 today. Matt thanks very much. Dani burger with some of your bigger movers. Morgan stanley is slashing 2 of its global workforce. The bank will cut 1500 jobs including several senior roles. Promoted 56 of its Investment Bankers to the role of managing director. Deutsche banks ceo told me he is upbeat about the lenders progress despite possible headwinds. Think we have taking a conservative outlook on the Interest Rates, therefore in this regard, we have changed our underlying planning. Have lower for longer, that is part of our overall plan so we have prepared for that and need to adjust our Business Model and we started to do that in july. Oft alan higgins, the cio coutts, our guest host for the hour. Didnt see that shocked we would be in negative Interest Rates for five or 10 years. How do you think his bank is coping with it . Alan you dont want to knock a bank when it is down, but it has been a troubled situation. You have to look at the equity performance. For us, we have been in financial debt not for the fainthearted, because you can lose everything if the bank goes bust. Youve been overcompensated for the default situation, like emerys of 2008, 2009. It has been a struggle not just for deutsches, but all european banks. Even in the u. S. In terms of return on equity. It has been a struggle and negative rates doesnt help. I know the person with the euro mortgage and paying far less than margin. The point about where you have exposure to banking, ive got the chart you talk about which is the share price heading lower and the past performance your reference and in the white, where you prefer to get your exposure. These shares dont look tempting on any turnaround . Alan the sector is looking more interesting. Deutsches is a struggle. You need a special analyst in here, but the graph shows you you are rewarded for a coupon, even though the bond has been trading at 92 at the top of your bloomberg terminal, but compounding the 6 over multiple a respectable 4 compound return and that is the power of debt over equity. Turning to banks and deutsches to one side, they are cheap enough now. Ing youve got the likes of on 6 yields, you dont need any growth to get in equity type return so i can see reasons to be in the sector as a whole. Anna even in a negative Interest Rate environment, there is a reason to get in . Alan the market is priced for the negative rate scenario, simply the status quo, no growth, turning the income stream from european banks is a Strong Enough return. I know it has been a year for equities this year, but compounding the region in european equities is not bad and that is what you get from the dividend stream. Deutsches is not paying dividends at the moment. Thanks for being with us, the cio of coutts will continue us onnversation with Bloomberg Radio in about 30 minutes time. Tune in for that. Coming up, we will speak to the ceo of novo nordisk. That is next. This is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Welcome back to Bloomberg Markets european open. This is how the session is panning out. You can see a sort of downward trajectory coming through for European Equity markets. The dax underperforming, now it seems to be a bit of outperformance from france. Elsewhere, we see many of these markets moving to the downside. The u. K. Market down about 0. 6 . Buoyanta little more but still in negative territory. Nafi announcing it will Start Research on diabetes, and that has the stock up. Lets get a bloomberg first word news update. Two days ahead of the u. K. Election and Health Service funding has taken center stage, with the Boris Johnson having an awkward encounter with a reporter. He was confronted with a picture of a sick child forced to sleep on the floor of a british hospital because of a shortage of beds. Johnsons conservatives are 10 points ahead of the Opposition Labour Party according to a poll. Saudi arabia is embarking on three years of spending cuts as the Government Faces a widening deficit. Its Fiscal Program marked a shift away from the stimulus that has helped power nonoil economic growth. Says it will earmark less money for subsidies, social benefits, and the military. Finance minister muhammad ali he plansbloomberg how to finance the governments shortfall. We will look at the market financing. Government we are talking to it all depends on the market and the timing of our needs. Macron isnt emmanuel bracing for around two of protests over his plan to reinforce britains retirement system. Its the day before the government announces its final version of the pension plan. Last week, demonstrations brought over a hundred thousand people onto the streets. In new zealand 800,000 people on the streets. In new zealand, as many as people may have been killed in a volcanic eruption. Five deaths are confirmed with eight more people still unaccounted for. The injured and missing include local people as well as tourists from australia, the u. S. , britain, china, and malaysia. Global news 24 hours a day, onair and on quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Anna thank you very much in hong kong. Lets turn our attention to the pharmaceutical industry. Rushing toanies are snatch up counter drugs. Sonafi agreed to buy another company in a push toward oncology treatment. Sonafi is gaining at nearly 5 this morning as it revealed a new focus on oncology and also a move away from other areas, including. Diabetes. Lets speak to the ceo of a business that works in the diabetes field, novo nordisk. On. Jorgensen joins us heard this news that sonafi plans to stop research on diabetes. Other Drug Companies are turning towards oncology and may be away from other things. Is the competitive environment getting easier right now . Lars well, it in diabetes, we believe there is a medical need for people with diabetes. But of course, it takes innovation to really fulfill that market. We believe we are one of the biggest innovators in that space and we believe we have the pipeline for the future so we can keep innovating to address that need from patients. Anna do you see more competition ebbing away here . Is more of the field been left to you . Lars you can say that in a number of categories. Soanfi was a leader for many years. Comes from from new types of medicines. Sonafi did not manage to jump on that early enough. It is all about innovation and the value you bring to patients and addressing the needs. They need better medicine. Matt anna matt . Matt from markets, it is about profitability. On your Capital Markets day a couple of weeks ago, we noticed shares fell 4 probably on disappointment with your u. S. Outlook. Why do you think that took investors by surprise that you see flattish growth in the u. S. . Over aell, we see that matter of a few years we are actually turning around. 70 of our business in the u. S. , to m being based based. We are impacted by the declining prices in the u. S. Gradually, we will be turning that around and we see strong dynamics. The disappointment you spoke to was that we announced that we still see price competition and price erosion in the instruments space. That is what is impacting our shortterm. We are very positive in terms of the momentum we can get back in our u. S. Business based on innovation. Matt i know you are also positive about innovation in the hemophilia space. What is your strategy look like in that area . What kind of innovation, you know, jean editing business do you see yourself gene editing business do you see yourself getting into . Lars we are launching two products in the hemophilia a and hemophilia b category. We made a deal recently to get into gene editing. We believe there is an opportunity down the road to bring innovating medicines to hemophilia. Ourxpect more than double obesity business before getting to 2025. We have a number of businesses to base our growth on. M a on hemophilia, does play any other kind of role . Lars we have announced that in business, we are looking to complement our business. We have done a partnership. We are actually looking at what we can get in on both technologies but also potential pipeline to complement the growth from our inhouse efforts. Matt where do you see the clearly, we have seen for years now a huge diabetes problem and massive markets like india also in the u. S. Clearly, we have seen for years now a big obesity story in the u. S. Do you see these problems moving across to other regions that were previously unaffected . Can you get a foothold in a market like europe, for example, if you see obesity and diabetes going to be indian and u. S. Problems here . Lars thats a good point. The who came out with a revised estimate for number of People Living with diabetes. Million people. That is a huge market to address. It is interesting to see that what we started, by selling our obesity medicine in the u. S. , it is actually not coming to the rest of the world. We grew our obesity franchised by 50 after the first three quarters of this year. There is a huge issue to deal with. Unless you tackle the challenges of obesity, ideally by prevention, but if you cannot prevent, you have to treat it with Lifestyle Changes and medicines. Unless you deal with that, obesity is the leading cause of diabetes, cancer, and a number of other cardiovascular diseases , which causes a huge challenge to society at cost to society. We need to do a better job in preventing and treating those for whom its too late to prevent. Anna we sit here in the u. K. As we are just a couple of days away from a u. K. Election. Of healthd provision care is part of the conversation here. After the election, we could be in a situation where we talk about a u. K. U. S. Trade deal and the nhs are medical provision might or might not be part of that conversation. We will see. As a european medical business, how do you watch that u. S. U. K. Trade deal to make sure you still have the role you want to play . Lars to be honest, i am not overly concerned about that. I am not overly concerned about that. I think there are Different Health care systems in the u. S. And europe. It is structured differently. I dont think you can kind of cross fertilize that overnight. Anna ok. Thanks very much for your thoughts this morning. Good to speak to you while you are visiting london. That is lars jorgensen, the ceo of novo nordisk joining us on san london. We will bring you some of the stock movers, including ashtead. They are slumping on its earnings. We will bring to that story next. This is bloomberg. Anna welcome back to Bloomberg Markets european open. We are 43 minutes into your trading day. Negative session, ftse 100 under pressure, as is the dax. Shouldered a bit by the i share price. Naf before i talk about these gains and the turnaround, it fell 70 yesterday after the ceo resigned, as well as the exploration director. These gains at 15 . 70 oes not undo the percent yesterday but shows that perhaps some investors are buying at the bottom. Perhaps the biggest drop in share prices might make tullow oil an acquisition target. Ashtead falling 8 after they gave a trading update. The results are mostly in line but analysts are saying for this rental company, they may miss some of the targets because they cited some headwinds in the u. K. So thateadwinds as well is making shares for the most in just over a year. Rollsroyce shares declining 4 after they announced that a ue act coo, Brad Reisinger bradley singer, is stepping down. There might be concerns about what that means for their confidence in the company. Released a statement saying the company is on a solid path forward. Matt thanks very much. Dani burger with some of your big movers. Deutsche released banks tradins turning the corner, according to christian sewing, the lenders ceo. I asked him about his more ambitious profitability target as well and if it could cause trouble down the line. Christian we took swift action in terms of passing on negative rates to our clients, in particular on the corporate side but also on the wealth management, we have initiated other mitigating action. We see from the first five months in this bank how much potential is there on the revenue side, but also on the cost side. All in all, looking down the road for the next three years, that gives us, we are heading all the goals in the first five months. The comfort that we can achieve espite these challenges, our 8 return on equity in 2022. We are confident we can achieve that, recognizing clearly the challenges, but with the track record that we have, we have seen no reason to adjust. Matt you talk about passing on the costs. In the release, you say you have taken substantial measures to offset negative rates. Can you elaborate on what those measures are . Christian well, it is kind of a flower of measures. On the one hand, as we said three or four weeks ago, we started to pass on negative Interest Rates to certain client segments. Beat on the corporate side. We focus far more on an even optimized for our clients. We have been very successful. Look at the inflows we have in the wealth management, in the asset management, but also in the private bank, and a lot of good work has been done there. We do get benefit from the ecb tiering, there is no doubt. We have also started to increase the one or the other long book segment in order to offset. It is a flower of mitigating measures and it shows us that there is potential to offset. Matt is there going to come a time when all german depositors are going to have to pay banks to hold their balances . Thattian i dont think negative Interest Rates in a broadway will pass in a broad way will pass on to the normal retail client segment. I cannot see that. I think it is far more important actually to do a better advisory. If there is one bank in germany who has all the expertise and the capacity to advise, in terms of moving from deposits to really good investment funds, giving clients flex building, then it is Deutsche Bank flexibility, then it is Deutsche Bank. Matt are you prepared for Interest Rates to stake negative the next 510 years stay negative the next 510 years . Christian we changed our underlying planning. Is k we have, and that i think we have lower for longer, that is part of our overall plan. We started to do that in july. Matt the ecb and regulators have in a sense commended you by, as you mentioned, lowering your capital ratio requirements. You did that change for operationally . You still plan to keep your cte ratio above 12. 5 . Christian first of all, it is nothing but very positive feedback for the way we approached over the last 1. 5 years. At the end of the day, it is a signal of full credibility. It gives us the one or the other the way but we will not change leeway but we will not change our international or capital targets. We want to stay and i always said that, a conservatively managed bank. It gives me comfort that we are on the right track but we will not change our targets. Anna that was the Deutsche Bank ceo, christian sewing, speaking to matt. Job cuts in the industry are still coming thick and fast. Morgan stanley announced that it 2 of itslashing global workforce. Joining us is bloombergs finance editor. Why is Morgan Stanley making these cuts . Well, this is done from a position of strength. It seems more like a cleanup and a further efficiency drive in some of their businesses. It is not the sort of cut where they are getting out of a business or retreating in any way. As we report, they have strengthened their market position despite cutting personnel and capital in trading. It is more of a clean up and efficiency move than any kind of desperation measure, if you will. Matt how does it fit into the larger picture of job losses in the sector . Ross well, i guess it adds a little bit to the u. S. Side of the ledger. But the job cuts last year have been enormously more in europe than anywhere else. We did a chart that showed how european job cuts have absolutely dominated. Asia has a tiny bit of job cuts. Almost all of it coming from europe. We really see how much more desperate the situation is for banks in europe than it is in the u. S. I think part of that comes from the fact that u. S. Banks are so much further ahead in the cleanup process that the financial crisis is behind them. A lot of the european banks are still more or less in the midst of recovery from that. Ross, thanks very much. There is bloombergs finance editor talking to us about just one of the job cuts story. I talked to the ceo of Deutsche Bank. Earlier, the bank told me they would have headcount reduced to less than 90,000 by year end. Up next, we will look ahead to the zew survey and u. K. Gdp data coming out today. With mlivs Richard Jones out of berlin. This is bloomberg. To bloombergback markets european open. We are almost an hour into the trading day and we are looking at some pretty significant red arrows here with the dax trading down more than 133 points. Joining us now from berlin is fx and jones, our mliv, rates strategist. We have a lot of data coming out today or rather some important data. What are you expecting from the zew survey in germany and u. K. Data in Great Britain . Good morning. I think the zew is forecast to have a little bit of a lift from the prior data. Data in greati think that woult with a lot of the other things we see coming out of europe. The french industrial and manufacturing data earlier was a beat. Some of the other data is coming in strongerthanexpected. I think that would be consistent with a slightly better reading for the zew. If you look at the u. K. Gdp, i think the key measure to look at will be the rolling three month measure. That is expected to come in flat , which after a Third Quarter 0. 3e there was zero spot growth, i think that will be interesting. That rating for the rolling three month will not be exactly what the bank of england wants to see. Anna we will look for that. Let me ask you about the chinese data and the impact you see it having in europe. We have this chinese cpi picture which moves upwards but may be some stability coming through. Weak. The other hand very that manyppi economists talk about being exported to the rest of the world, including europe. Most an that has been al internal problem for the ecb during its mandate. And thethe ppi data general slowness in china is something that has weighed on the eurozone economy, especially in germany. With that ppi rating today, i think it shows we are really not out of the woods at all and it will still be a big challenge for the global economy, a big challenge for the ecb, and something that is not going away anytime soon. Matt thanks very much for joining us this morning, Richard Jones, our mliv, fx, and rates strategist out of berlin. You can get the views of the rest of the team by typing mliv on the rest of your terminal. Up next, it is surveillance this is bloomberg. Francine headwinds, we will bring you our interview with the lenders. The u. K. Prime minister Boris Johnson is on the defense as the debate turns onto the Health Service. ,lans for breakthroughs welcome to bloomberg surveillance. I am Francine Lacqua in london