A very warm welcome to daybreak europe, our flagship morning show from london. Im anna edwards, in london. 6 00 in london. Manus is not sitting next to me this morning. He is over in paris where it is 7 00. Good morning. He is on the ground. General motors is said to be poised to announce the sale of its vauxhall unit today. Lets start with the timing. Why now . Just thethink its final stomach churning moment. How much loss can you actually tolerate, anna . That is whats going to be on mary barrowss mind. Its almost like a bad relationship, a mistress that keeps demanding more, to the tune of 20 billion of losses since 1990. They have done everything. They have pulled chevrolet off the european market, a highly saturated market. They tried to pull the record in 2009 at the height of the crisis. Theyve tried, on a few occasions, to structurally change, but this is a brand that has not made money for them. They have not got it right in europe so they are doing the final aboutface. Anna this is something that has not made money for gm. So what is the attraction, then, for the team buying and now . This is about scale, isnt it . Manus this is absolutely about scale. This is about the euro position, the market share. Vauxhall will give him about 60 of the market share in europe, and as i said, gm restricted what you could do in terms of selling. He restricted what could be done with those grams. This is an opportunity for him to expand bat. It would put him in the number two position in europe, cost savings about 2 billion, with access to electric technology. Thats the interesting underbelly to this story. They can get their hands on that and the financing unit as well, to continue to sell here in europe and abroad. Scale matters. Anna so they might want scale but not pension liabilities. What have been the biggest obstacles to this deal . Manus well, this is perhaps the biggest obstacle of all gm, iny barra, and vauxhall talks they wont walk away with a clean break, so to speak, in this divorce. Liabilities are going to be split up, and they will continue to have a relationship. Willyou have got is gm contribute 3 billion worth toward the active employees. Theres a pension underfunding of about 9 billion, and they will put 3 billion in for active employees. Gm will cover the retired helprs, 500 million to cover those active workers. Gm will get to nineyear warrants, which they can sell for a period of time. The unions i will leave you with this thought. The unions say the acquisition is an opportunity to seize and get the european roots back. Anna, lets see what the announcement is and what the News Conference brings, the price of pension liabilities. Anna we await the details. There will be some kind of transatlantic development, and it sound like there will be contact. We will be back at the top of the hour with more details on the auto story. We will get to the latest on the banking story in a moment, but we want to put up the risk radar because geopolitics is back in the markets overnight. Weve had the escalation of geopolitical tensions. Kim jong un in north korea firing four ballistic missiles. We see a little bit of money coming out of japanese equities, down. 2 . Money going into the yen. More broadly, the msci holding up well, and in fact we see Chinese Power Companies benefiting from that commitment to 6. 5 we got from the chinese authorities around their growth strategy. Or from beijing shortly. Stable on the dollar, despite earlier moves lower in the won. Little changed after erasing earlier losses. Its not being overdone by markets, certainly not being jumped on by asset classes. S p futures are weaker. We turn very much to a conversation around the fed as we go into next week, of course. There in mind the work function on the bloomberg does show the percentage chance of a rate hike next week, when the fed is above 90 . Lets get the bloomberg first word news with david ingles. Good morning, david. David hi, anna. Good morning. We start off with the former director of u. S. National intelligence, who denied a Donald Trumps claims that the Obama Administration ordered wiretapping on trump tower during the election campaign. The comments contradict these explosive allegations early saturday morning. A person familiar with the theytion told bloomberg can blame Breitbart News for it. In asia, japan has moved the ballisticspite four missiles into nearby waters off north korea. About 350 kilometers west of the nations northern prefecture. Prime minister shinzo abe says he will u. S. President Donald Trumps protectionist stance may propel asian, middle eastern, and latin american markets into alliances with the European Union, according to the European CommissionVice President , who told bloomberg exclusively that trumps rejection of the multilateral commercial deals and border taxes are using a push for free trade and investment tax. When there has been something to raise protectionism, especially from the u. S. Side, the rest of the world seems to be fighting back and saying that this is not our line. David french president ial candidate Francois Fillon has been asked to step down, deny accusation he used public money to pay his wife and children. Meanwhile, Party Executives brought forward a plan amid growing support from the former Prime Minister to take his place. Hes due to make an announcement at 9 30 u. K. Time. And the dutch Prime Minister has chaos of thenomic populist Freedom Party in next weeks election. Opinion polls show his numbers are virtually tied. Europes first major electoral test since the u. K. Voted to leave the European Union. This is an opportunity to stop the trend after brexit and the u. S. Election, before the french and german election. For the netherlands to vote for a policy, which i want to deliver, of continuity, of making sure these successful policies of the last four and a half years will be implemented over the next three or four years. David 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 , on your terminal. Im david ingles and this is bloomberg. Anna. Anna thank you. 6 09. Lets get uptodate with the asian equity session and other asset classes. Juliette saly is standing by with the geopolitical story. Very evident in the asian trading day. Juliette yes, anna. We have had reports of north koreas firing a ballistic missile, and a flight to the yen that has weighed on the nikkei, closing down by. 5 . Elsewhere there has been a pretty solid buy in asian equity markets, taking it in stride ahead of the expected rate hikes following Janet Yellens comments. Some solid buying in china as well. Having a look at individual stocks, south Korean Defense stocks in focus, Korea Aerospace up by 2. 5 , some even surging higher on the back of the Missile Launch from north korea. Shopping companies down i on escalating tensions. And Cathay Pacific in hong kong jumping up over 4 in late trade. We are having a look at samsung, particularly this chart. This is essentially target price of of the stock, going back to march last year. You can see not once is it in the red. We a continuing to see 90 of analysts say this stock has a despite themsung fact that everything we are seeing from samsung, the advised chair being arrested last month. Anna juliette, thank you. Juliette saly in hong kong. Lets turn to the banking story, a big story in europe. Deutsche bank announced an 8 billion euro share sale, among other measures, as john cryan start a new strategy. He gave the green light yesterday to selling a piece of his Asset Management business, naming two deputy ceos, and scrapping the sale of its Consumer Banking unit. Matt miller has more for us from berlin. Good to see you. Whats the most significant change here . Certainlyacktracking, a change in strategy coming through from john cryan. Matt yeah, exactly. Hes saying this is not a step back to what they already had at the bank, but he is reversing his strategy. Really, there are three things going on here. Theres the Capital Increase you have to think about. They will go out and raise 8 billion euros, theyre also going to rea reorganize the bank again, putting training and Investment Banking back together again. They just separated last year but cryan said, look, i looked at my strategy and it is it working, and we will do something about it. They are also going to name two coceos. Marcus schenck is one, the cfo. He will run the trading business, which hadnt been doing as well as other banks on wall street. That may be one of the reasons. Christian saving, a Consumer Bank hadead, is going to be a coceo alongside him. In a sense, and calls of the commerzbank strategy, other banks have done this as well, where they split the corporate business and consumer business and try to reduce the amount of customers may have and boost Profit Margins from them. Anna matt, you say that john cryan is addressing whether this is a backtracking on his strategy or not, the people have been asking what future has in store for john cryan, given he has named the two coceos. Matt exactly. What does john cryan do . He doesnt plan on going anywhere, and he is going to oversee regulatory issues in the u. S. As one focal point. He is going to remain the top ceo with two coceos. They are also going to be his successors possibly. That is one thing a lot of people will talk about. What does this mean for the man at the top . Is this his last move here . Its very interesting to see this third change. We will see how shareholders take it, because he has done some very positive things. He has boosted their cet1 ratios, one of the most important regulatory issues that Deutsche Bank have to face, alongside the fines they have had to pay. They now plan on getting cet1 ratio of 14 , which is significantly higher than is required at just under 12 . Anna matt, thank you very much. Matt miller in berlin. Plenty more from him as he go through the day. For more on Deutsche Bank, tune in at 8 15, where we will bring you are interview with the ceo, john cryan. For more on the banking annual, theres plenty to digest in the corporate world, we are joined carois investment management. Great to have you on the program. My colleague matt miller was just talking about the Capital Raising over at Deutsche Bank. This is clearly an issue for the Banking Sector in europe. Ive got this chart that shows Deutsche Bank is aiming for 14. 1 , which would be very strong compared to the 13 target. Where do you stand on european banks versus u. S. Banks . Good morning. Clearly, there will be, over time, situations where banks need to raise capital, and this will happen at various points in time. The reality is if you look at the Banking Sector, there are quite a few things working in favor of that. What is litigation. Litigations are going down, the amount of litigations is going down. If you look at regulation, that is also something which is baiting. Youll have things that work in the favor of banks in terms of quality. The most important is the rates. Rates are going higher, and we are in a deflationary environment. I dont think that is going to change in the foreseeable future. Rates even in europe are trending higher. Anna the u. S. Banks rate capital this has been hanging over europe for a long time. We see once again one of the reasons for Deutsche Bank doing this is trying to put questions about risk and the Banking Sector. Are we done with this in europe . We have the issue with italy. Clearly europe has a lot of issues, in the next three years it is clear there will be some sort of wobble. Our view is positive in the shortterm on banks, because reflation will bring them higher with the u. S. Banks, and clearly there is even more leverage. Anna we were also talking this morning about the auto sector, as we wait for the news around gm and pfa, and the deal that will be done. I wonder what interests you have, if any in the auto sector,. I have a graphic that shows how analysts are forecasting. After a strong rebound in auto sales in europe in the year since the crisis, the forecast suggests we are going to be fairly flat, or at least we will see a slower rate of growth in auto sales. What excites you or does not excite you about getting involved in autos . We arent very excited. Clearly the valuations are low, so there seems to be an opportunity in that sense, that the same time the Auto Industry is facing a lot of challenges from an industrial point of view, because the transition toward electric vehicles is going to be faster than most companies are prepared for. If you look at the longterm, it is difficult to be bullish. Anna doesnt that mean you would sell more cars . Its exciting for the businesses that have exposure to electric vehicles, but for all the dollars, there needs to be consolidation. For all the others, there needs to be consolidation. Anna thank you very much. He stays with us, from kairos. Coming up, preparing for lift off. Fed chair yellen boosts confidence in a march move, as a hike next week looks all but set. United we stand. We stick to the eu commissioner who says trump protectionism is bringing the rest of the world together. And walking on a knife edge. Chinas premier strikes an upbeat tone despite risks ahead. We are live in beijing with the latest from the National Peoples congress. This is bloomberg. Anna welcome back. This is bloomberg daybreak. Im and edwards. 6 20 in london. Juliette saly has the Bloomberg Business flash. Juliette anna, thank you. Scotlands largest insurance standard is in talks to acquire aberdeen Asset Management. Terms, Standard Life shareholders would own 67 of the combined group. The tie up would create one of europes biggest Fund Managers, overseeing 660 billion pounds. South korea is a special prosecutor has accused samsungs de facto head and other executives of conspiring to create fake documents to mask millions of dollars in bribes to a confidant of the nations president. Committeded to have perjury when he said he didnt know his company had paid money to entities controlled by the president , and wasnt asked by the president to provide financial support. Responding to this mornings announcement, samsung says the company has not given bribes or made improper requests for favors. That is your Bloomberg Business flash. Anna thank you very much. Lets turn our attention to what has happened in the u. S. Fed chair janet yellen is going town,e a more hawkish saying a hike in march is likely appropriate if the economy evolves as expected. A blackout period until march 15, and the policy announcement that takes place that day, so ill Market Attention is squarely focused on the job figure out on friday. The u. S. Is estimated to added hundred 90,000 jobs in february, which may be the make or break. Dollar and treasury yields both fell after yellens comments. Kairios us, the cio at investment management. Lets look at the feds story from your perspective. Yellen endorsing on friday this more hawkish tone. Showse a great chart that the real change in expectation in the markets around march. It has come from nowhere to being almost in the market psychology of certainty. What are your thoughts . They effectively raise rates last week. The market raise rates last week, so there are very few surprises that we are going to see next week with the fed. Anna they are still going to follow through. Its unlikely they will disappoint after the indication, clearlyink they are behind the curve to a certain extent. If you look at real rates in the u. S. , they are extremely low. Theyre very negative. Anna looking at inflation, the data moving in the direction of the feds goals on the inflation has changed that their mind . I was reading a great piece today that talks about its the stability in the rest of the world that has enabled the fed to consider hiking rates. If you look at last year, stability around the world is important in order to go through and follow through with rate hikes. But the reality is that inflation is powerful, and the markets are still underestimating what the impact will be in the future. You look at china, they are exporting inflation after exporting deflation for a long time. The Wage Inflation in the u. S. Is strong. Its inevitable that we will see rate hikes, unless there is a wobble. Anna Stanley Fischer pointing out, there is almost no Economic Indicator that has come in badly in the last three months. So where does this leave the fed . If we started march, do we do just three but spread out . Or do we do four . I think it is reasonable to expect three. We dont know whats going to happen for the rest of the year. It could be four, the we started thinking it was two. Now, after two months in which there was almost nothing, all of a sudden markets revised. We think this is likely to happen in the future. We will get closer and closer, and markets will reprice. Anna one thing that some to is what. Point President Trump will do, what he will be able to do, what he will be able to get through congress. Im interested in the timing because some say the fed should be holding off, because then they will be more clear. B