Transcripts For BLOOMBERG Bloomberg Daybreak Americas 201703

BLOOMBERG Bloomberg Daybreak Americas March 6, 2017

David i dont know how you put those two together. They are two different people. Jon neither do i. Deutsche bank chief economic analyst will be joining us this morning. Futures, a little bit softer today in the United States. In europe, lower for tents. The euro, a little bit weaker. German tenure is the best performer in europe. The dollaryen had a little bit of risk aversion overnight. Gold softer on the day, oil, softer on the day. Two political risks nothing like what we are facing here in the u. S. David the Deutsche Bank stock jon the Deutsche Bank stock, down this morning. Own cryan ripping up his. Urnaround plan the effort include selling part of the Asset Management business. Francine lacqua spoke earlier about the new strategy. Remember, i described as Capital Raising. Yet she need to advance it. I think, one year ago it would have been much more difficult for us. There is still a lot more uncertainty. I feel more comfortable sitting in the seat i sit this year than i would have last year. We are much more positive. The environment is good. We are seeing growth again. To some extent, we have done a lot of the hard work. There is still a lot to do. The regulators are still missing. We still focusing on improving controls and efficiency. Francine when you say the markets are good, was that unicredit that distilled the appetite for the sales . That certainly would have been a factor. Also, the shares hit a low in september. They have certain sort of double since then. The markets look as though there is momentum behind the banking sector. It looks possible as well as desirable. Credits how many job job cuts will be part of the strategy juggle . Strategy. We have not said we want to do it in the german fashion, so involved all the relevant stakeholders, and come to an agreement. Once the agreement is struck, it essentially quick and efficient process that gives carried out with relatively little risk. Francine could it be thousands . Tens of thousands . It is unlikely to be tens of thousands, but it will clearly be some job losses in germany. Jon joining us now is francine the. Great to have you on the program francine lacqua. Great to have you on the program. What was the old strategy and the new one . The old strategy, they wanted get rid of baking units. And, they wanted to grow organically. He is exactly flipping around completely. They want to keep postbank, so they have to be integrated, put trading and baking units Banking Units together. I asked him several times is, with hindsight, he did the wrong thing, he kind of admitted so. He was humbled. Jon is this bank still dealing with existential threats . Are they laying out a strategy for investors . It depends on whether they are able to subscribe and the shareholders say, yes, i want to give you more money and be part of the Capital Raising efforts. There isn told me that a shareholder, and we understand from bloomberg news, there is one that needs to be commenced if this is the right strategy. If this is the right strategy, then the share price can recoup a little bit. You have to look at the strategy longterm. Will this work . Will this actually make a profit . Will revenue increased . They want to ipo part of it, but we have to make sure the consecutive quarters, where money comes in, and the debt training debt trading unit. With the job losses, it is a question mark. Now. We can bring in jay the situation with Deutsche Bank , the market cap this morning 24. 8. Where has the money gone . It has obviously been frittered away in that strategies and illegal activities, paying off regulatory fines, etc. Is this a bank on its front foot, ready to move forward, or still doing dealing with legacy existential issues . My bet is somewhere in between. Tried to get on the front foot, but it is a very challenging environment. Most important way, lets recognize the big picture. The european economy is growing faster than the u. S. Investors need access to european equities. Last year was record outflows. Now, Everyone Wants to come back in. Thought trade in europe in the first part of the year of 100 yearoveryear. They see there is opportunity and the big investors need access to european equity, axis to the banks, which is the best play on growth and Interest Rates. Here you go. You can get access to european anks on a stock that is relatively low, but she cheap. Jon we have been repricing the reality is we had four Capital Infusions. It . His on the banks more broadly, they will make money. You have a growing economy, rising Interest Rates, which is great for bank profitability. They mentioned the unique credit unicredit deal. Things are getting fixed in europe. The question is if it is sustainable. That is the bigger question. David clearly, investors want to get in. You referred to unicredit. A good because it is deal, a good investment, or because they want to put the money somewhere . A little of both. You have to price it right. Also, the timing. People have been saying, we have been out of europe, we have to get back in. Earnings growth in europe, that of the double u. S. The visions of 2017 in europe u. S. ,ing up, and in the going down. There is a lot to like in however, the political environment. Are you getting paid for risk in the u. S. Very close to alltime highs or are you getting paid at Deutsche Bank versus jp morgan. I would take Deutsche Bank. Alix does that mean you are buying david bisping Deutsche Bank . I do not buy. A call veryde specifically, but when you look at yields in germany, 32 basis points on a 10 year boom. Talk about not a lot of available profitability. If you want to make money, you will need higher rates to do that. What is the cost of money . It is a lot higher. It is 25. In the u. S. Shortterm money in europe is negative, still shortterm negative. 32 is not a lot relative to 2. 5 for the u. S. Tenure 10 year. In the u. S. , the yield spread is actually shrinking, whereas in germany, at 3 , it is expanding. It goes continues and inflation continues, those rates go up, you will make more money as a bank. You have to remember, there are still pockets of the world where yields are negative. Europe is one of them. Alix thank you. You will be sticking with us. We want to welcome our twitter viewers who are with us. Is streamingbreak live. Coming up, china. This is numbered. Bloomberg. Emma this is bloomberg daybreak. Time now for other stories. I am emma chandra with your Bloomberg Business flash. A deal in europe today would make the secondlargest automaker. Andncludes General Motors bustle brands wetzel brands. The team here has done a jim is job. We would have been profitable last year. We put the business on a really tod that path significantly improve the bottom line. For the business to go to the next level, we need more scale here. Emma gm has owned opal for almost 90 years. Staying with europe, a deal today would create one of the biggest fund management. Says averaging is valued around 98 billion dollars. Does not reach a deal to create more electric cars. A deal was blocked. David thank you. It was a busy week in washington and down at maralago, they call it the southern white house, nowadays. Most of it centered on the russians. Did president obama really spy on the president elect during joining us is kevin cirilli. I dont understand. To they want the agenda to be all russian all the time . President obama brazing a lot of eyebrows as he accused the Intelligence Community and former president obama of wiretapping the campaign. This called on President Trump and Jeff Sessions to deny the allegations. This will only continue. My do that tomorrow, the number two nominee is testifying. A lot of moving parts today. David one of the questions i have is what does it do on capitol hill . We have obamacare, various issues up there. Question overhis the weekend to a lot of republican aides in the senate. There is that concern that President Trump is utilizing too much Political Capital on a host of these issues. This week was supposed to be about tax reform, about repealing parts of the formal care act. All of that now out the window. Later today, we dissipate that we are hearing from the administration and the immigration order on the middle east. Of course that would be the second round of orders coming after the first run was not down ocked down. David as much uncertainty about where the imitation is going, the Federal Reserve is not unwavering. Janet yellen loud and clear. At the meeting later this month, the committee will evaluate whether the appointment moving along with expectations. A change inse, rates would be appropriate. Speech,fter yellens you moved your expectation of from march to june. It was nice 6 likely in march. Does that they something about where we end up ultimately or is it a timing issue . Great issue. I think all chair yellen told us thanmove is sooner rather later. Endpoint, they assume, is not all that much higher. Productivity, labor force growth. These are issues that the fed does not have much control on. I think they tried to move pricing from a june hike to a march i. It is giving them often now the. If they were going in june, you would have half a year. The endpoint, im afraid, is not all that much higher. David you moved on from june to march. Did you also increase the number of height over the year . We increased the number of height this year, but nothing to the dominant rate projections. That . How do you deal with the market still thinks the pace is going to be slower. Fed are still below the projections, by the way. I think it is between davids point about politics and her point about the fed. The fed is anticipating policy being executed, a little bit. Expecting market policy to be implemented. Issuesmp imitation including movement on policy would make it less likely that the economy is going to grow as people expect. Therefore, Earnings Growth is about 15 of the s p. It has already started getting pulled back a little bit. Me, it means policy is less likely, which means Earnings Growth has to go down and stocks are not going far fast. Hear donaldnot trump at all. We look at the curve, what happened on that . I think the curve will likely flatten. The reason the state of the union was such a hit with the at some point details. Et to the to your point, janet yellen was asked, there is so much fiscal uncertainty. Including allnot fiscal uncertainty, what is the legislative timeframe . , the longer the stakes, the more the president loses republican support. Support he cane get. Isi think what has happened march will likely happen, december is much less likely. Thehey are moving timeframe, but where is the in point. Endpoint . It would argue for a 2 endpoint, the hope that over time, it will rise. I think the hope is dependent on significant legislative policy around the productivity and capital investment. If you dont get that, the fed may be ending at 2 , much lower than they were anticipating. Stanley fischer, on friday, if there was as conscious rate to conscious effort to have a rate hike, and if there was, he was to join it. Coming up, Deutsche Bank chief economic analyst. And, a conversation on global asset prices. City, this monday morning, good morning to you. You are watching bloomberg. Jon from new york city, and are viewers worldwide, this is bloomberg daybreak. Lets take a look at the markets. We opened things up this monday with the new trading week, a little bit softer, down about 1 on futures here in the United States. Aboutdon, the dax down half a percentage point. A busy week. A weaker euro story. A stronger yen. Marginal risk on the fx market. Euro, 1. 0583. Lets see some stock movement. Here is alix steel. Up over 1 ave gm over two days. You joe will pay for the unprofitable opal unit you peugeut will pay for the unprofitable opal unit. Yes, gm will take a break down. Gm is putting money into it so eugeot doesow p not have to worry about it. The money manager deal. You have averaging and Standard Life joining forces here. It is the largest active money manager now in the u. K. This, after averaging was hit aberdeenquarters of was hit with 15 quarters of redemption. It is a really interesting theme we are watching here. M a monday continues. Jon . Jon thank you very much. It is a busy week for payrolls and daybreak as well. Ceo of Societe Generale joining us. From your 80, bloomberg. Our from new york city and viewers worldwide, im jonathan ferro. Here is a look the markets as we begin this trading week. A bit softer in the United States. If you switch of the boards weekly, likely a busy including payrolls on friday. Last week completed the fourth straight week of gains for the dollar index during the longest since last july. This morning, some yen strength. The dollaryen down about 2 10 of 1 . Lets get you up to speed on some news elsewhere. Here is emma chandra. Emma in the u. S. , the white house once an investigation into President Trump claim that president obama had him wiretapped just before last years election. The president offered no evidence to support the allegation. In the part of the National Security apparatus that i was all, there was no such activity mounted against the president elect at the time, the candidate, or his campaign. Emma according to the new at times james comey asked the Justice Department to publicly denied the claims on wiretapping, but the agency has not done so. Russian hackers have launched a new wave of attacks. Against the road groups in the United States. Targeted isroups the center for american progress, a washington think tank. Some have paid ransom. Has risen to the threat,level of responding to north korea and missile north Korean Missile launches. Global news, 24 hours a day, powered by more than 2600 journalists in more than 120 countries. Jon thank you. In france, confusion reigns. Francois fillon says he will not quit the race despite a corruption scandal. Paris withed in more. What is going on with the party . The french republicans here are in a bit of a bind. They cannot just give up on the indidate, who has been mired scandal, likely facing charges later this week. They cannot just turn to someone else. A lot of the politicians who on Campaign Last week the vote the possibility of a comeback. Without it support of the full party, here vote his age and experience. There is clearly a desire for real change amongst the political of bp or. That happened is the Political Party grandes will get together, and we will see what they come up with. They do not face an easy decision or choices. Jon the market is tried to distill is down to something simple. Who is happier this morning tackle this morning . Marine le pen or a manual macron. Emmanuel that is a good question, and i dont know i have the answer. There is anger among the party and others. They say that Francois Fillon was supposed to be honest, and he was not. There have been some small town mayors saying they will go to le pen. You had the fn come out and say this morning, you, on the right are disappointed, joining us, it is time to change the poisons political atmosphere. Ultimately, the concern is it helps le pen. The secondhand polls show clearly that macron would defeat le pen in the second round. I dig it is too early to tell. Jon great work. We appreciate your time in the countdown to the french provincial results. In the bond market, stable. The euro, a little weak, but no drama. London, george. Great to have you on this program. You have seen this game time and time again and europe. A wave of populism, it would be called. How will evolve it of all in the coming months . It is populism. As we all know, as it was expressed by Marine Le Pen. Is doingegree, macron kind of his own version of it. It is a kind of populism that most people are more comfortable with. This is kind of a standoff as far as markets are concerned. What are people supposed to do . We dont know what the results will be. A firstlection is round, second round. People are suspicious now, with opinion polls, especially. The consequence of the le pen victory, if she were to come through, would be enormous. So big, it is difficult for market to come to play contemplate what it would mean, i think. We will really have to wait until the vote takes place. Jon in the shortterm, we have is consensus that the risk off candidate is le pen, and the as you were candidate would be macron. Let me twist that around. Said, on the has stump, so to speak, that we euro. Ow she is antih she said that she wants to hold a referendum, and reintroduce the french franc. What we are talking right, or what shes talking about is trying to persuade or get to a situation where she can get the national assembly, which is frances parliament, to approve a referendum, perhaps leading to france leaving the eu. If that happens, the eu is toast. This is capital control, a recession, a huge discontinuity. Why, if you want to put it the other way around, macron is the preferred candidate in terms of liberal thinking and markets are concerned. Alix sure. You also have to get growth. Reflecting market the lack of growth, even if we have some indicators picking up, and are the appropriate pricing the risk . I think the ecb plays into this. The ecb has been dovish. I think the bond market, or if you look at germany, or french ies, they are low pricing the growth. I would argue, you do not need round. To wendy second of a referendum, if she does win i think the news overnight is make you think that she will b make it at least through the first round. French argue that the making it threat is in. Alix the absolute level does not indicate to me that domination risk. I think

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