News conference. And six months from the e. U. Referendum, what exactly do we know about brexit . The big question this is bloomberg surveillance. I am mark barton in for francine lacqua. Here is nejra cehic. Deutsche bank and Credit Suisse have agreed to settle u. S. Investigations into their dealings in mortgagebacked securities. Deutsche bank will pay a 3. 1 billion civil penalty and 4. 1 billion in relief to customers. A 2. 48uisse will pay billion civil penalty and 2. 8 billion in relief for homeowners hit by collapse from housing prices. The Justice Department is suing barclays for fraud over the sale of mortgage bonds. Its as investors were deceived about the risk of securities. Our glaze has rejected the allegation, saying it will vigorously defend the complaint. President elect donald trump says he has asked boeing to of its superade hornet jets that could replace the Lockheed Martin f35. That is the main fighter of the airport, navy, and marine corps. It is the most expensive u. S. Weapon system ever and its development is more than a decade in the works. So the officials have presented the most detailed budget in the nations history. It included scenarios of how public finances could evolve through 2020 after being hurt through two years of low oil prices. Generally speaking, these concert these scenarios are conservative when it comes to oil prices. Review multiple sources. One is coming generally from alternative energy. We have used the International Energy prices. We have used imf projections. Top analyst the average. We have combined them. And we took a haircut to calculate most of these scenarios. It is increasing slightly over the years, but it is generally conservative. Six months after britain voted to leave the european union, signs are pointed to a socalled hard brexit, according to a report by 12 academics and policy researchers. By and you funded Research Program based at king college, london, said the shock decision united the 27 other Member States while exposing how divided britain is. Thanl news powered by more 2600 journalists and analysts in more than 120 countries. I am nejra cehic. Mark thanks a lot. Lets look at what is moving in the markets today. Shortened trading day here in the u k there is the stoxx 600, rising up to 360. 03 after falling for three days. The stoxx 600 banks index is going to be our big focus today. We will talk about that in a second with michael. Starling, six months on from the brexit vote it has been lower. Intraday down as low as 1. 18 in october. 1. 21 is the closing low, postbrexit. How much further do we have to fall . A big question for charles tivo, coming up. And the 10 year has been down and up since brexit. There it is today. 1. 36. Points down to let us look at how the banking shares are doing after the settlements on Mortgage Backed securities. The jamaica shares up. Credit suisse lower. They were up by a couple of a percent. Lets introduce our guest for the hour. The aviva investors head of rates, and michael is also here. Does that tell Us Deutsche Bank shareholders are a bit more relieved than Credit Suisse shareholders, everyone is really today. There is a sigh of relief that it could be over for Deutsche Bank. Michael i think the expectations for the fine have been ramped up for the 14 billion asked coming out. If you said a year ago they would settle for 7 billion, im not sure investors would be thrilled. We didnt where we have been, i think this is a bit of a relief area. Mark will it be a drag on earnings . Some said it could be a drag on earnings for years. Michael yes, but the way the settlement is structured they are paying the 3. 1 billion up front and have for . 1 billion of consumer relief that will happen over a number of years. The exact Financial Impact of that is not clear, because sometimes they have already written down some of the bonds they get relief on. It will take place over a number of years, rather than all up front. Mark does it have to raise capital, or have capitalraising plans been put to bed . Michael the bank has not said specifically. This does look on the lower end of what some analysts have been calling for, which seems to be a good sign for no Capital Raising happening. But we will wait to see. Mark otherwise, a busy day. Chris reese shares Credit Suisse shares are lower. A similar deal to Deutsche Bank. This seems to be its last major uncertainty removed. That could be the big take away from Credit Suisse. Michael certainly, this was the biggest thing on the legal front for it. A lot of these banks have shown that the tale of the legal talks continued further than we had originally expected. Most people were expecting this to be wrapping up around three years ago. So, you know, this could drag on. There is a few outstanding things. Certainly, this was the biggest item. Mark this mbs case drags on for other banks ubs, hsbc, rbs. Been sued for fraud over its sale of mortgage bonds. This is unusual for big banks. What about the government negotiations . Michael you usually have settlement talks that can drag on for months and months, but normally, you end up at a settlement. You do not go to court. The banks are not often willing to go to court because of the volatility, and because of the long amount of negative headlines that are out there. A big gaplearly had between what they were willing to pay and what the doj was asking. Mark monte dei paschi, what now . Clearly, they are going to be nationalized. What is the next step . Michael they have confirmed they are applying for state aid. Now, the question is in the details. The government has laid out some of the details of how the bonds will be swapped and what discount will be given. But we have to see. Have to see what that means for the burden that bondholders will share. Mark charles, does this draw a line in the sand under italy banking woes, or is this still just the beginning of what some are calling a wagnerian saga . Charles i think you are going to see a number of other secondtier and third tier italian banks probably go in the same way as a result of this package being agreed for monte. It is the first step, and it is a positive step for sure. But there is still a lot of wood to chop, so to speak. We can be reading these stories about various italian banks. Mark from an equity and credit perspective, banks are in better shape than six months ago. Charles absolutely. Particularly with the macro swapping given by the ecb and the policies they are pursuing, that is helping restructure and allow this process of reform. Unfortunately, this was not deal of within the was not dealable within the private sector. It is progress, and they were a cheap asset, very underpriced. The fact that some of the tail risks are being removed is progress. Mark is there a lid on the italian bond market because of the ecb . There was a talk about change of the debt load it self. Itself. Italys debt burden is big. It is not greece. Could they change the rules to focus more on the entirety of the debt load, which would benefit italy, if things get out of control . Charles they could do. I think as it stands, they dont need to. Obviously, it depends how much , ifhis bailout cost ends up you like, on the National Balance sheet, and might need additional funding. That can increase btp supply over a number of years, if that materializes. And that is obviously not a good thing. Before the time being, the ecb structure there is plenty of room to continue buying italian bonds. Mark michael, final word. Deutsche Bank Shareholder is clearly relieved today. But as you say, litigation risk remains for deutsche. It remains for Credit Suisse. And it remains for a number of banks. It is not over yet, is it . Michael no, i think you have got deutsche they have the fx investigation. They have russia. I have a number of things. They have said this would be the peak restructuring your, and getting this out of the way is a big piece of that, but there is more to come in 2017. Mark thank you, michael. Charles stays with us. Live pictures from moscow andident blood are true giving his annual News Conference. I will tell you what he has been saying. Russian gdp will have a strong a small drop. 0. 52 0. 6 percent this year. Russia should be able to release their inflation target. Budget deficit will be 3. 7 of gdp. An budget deficit is acceptable level, putin says, for russia now. Putins big day today. Do have problems . Of course we have problems. We have to ensure mark live pictures from moscow, where russian president Vladimir Putin is giving his annual News Conference. Lets get more with macro advisory senior advisory Partner Advisory partner chris. The reason that stands out to you . Chris it is following the active formula, talking about the economy. He has good news on that front that he can highlight this year. The economy is drifting out of recession, is expected to show modest growth next year. But there will be less growth. There is room for a modest amount of real wage growth or real income growth. He is focused on that. But i think later on, he will also stress the fact that there are cap times to come. More serious reforms need to be taking place to get the economy back on track. It starts with the good news. We come in with a little bit of reality. Michael a lot of mark the good news on the markets is based on crude, on crude rebound. Crude remains the big risk, the price of oil. Chris i think it is certainly the perception. We can see the way the markets reacted. There was a little bit of an uptick on the trump victory, but the real kicker came with the opec deal, the rise of the oil price. It is still very central to the russia story and very central to currency and the ability to attract investment. Thattainly do not believe russia is going to be able to deliver on its side of the production bargain. Technically, it will be very difficult. The headlines, the politics, the support for it have all been very positive. Even over the shortterm, every 10 extra over and above the 40 the russian budget is assuming closeth close to 12 to 13 billion. Mark is the opec deal unraveling before our eyes before it has even begun . Chris not before our eyes, but i think, spring, the situation will be different. It will be very difficult for develop Strong Political support. Unlike opec, russia has multiple independent oil companies. They all watch everybody else. There will be a modest contribution, i think. It will not close of the deal. It will be the return of libyan oil, u. S. Shale. Mark look at this chart. The dollar expanded in asia, all 31 of them. 2016, top of the pile. Russian ruble. Per dollar. In 12 months time, will there still be talk of the tree . Charles it is not going to have another year like this. That is contingent on the oil price. Given we expect, broadly speaking, a range trade for the oil price over the next 12 months, i think a lot of it will depend whether he is going to get reform process is coming through. Reforms usually come at a cost to growth, rather than being advantageous. But as long as the Oil Price Remains where it is, there is a little bit extra in the budget. You know, i think it will probably have a reasonable year, but it will not be anything nearly as spectacular. Mark a lot has changed. David cameron let us say he wasnt adversary he was an adversary. Matteo renzi was an adversary. Obama is leaving. The geopolitical stage has changed. To his advantage . Chris yes, i think it means the kremlin needs to deal with fewer sort of geopolitical confrontations, presumably, with the changes. And also the distractions of brexit coming up in europe. It means the kremlin should now be able to focus much more on domestic issues, rather than firefighting continuously on the international stage. I think that is the big change. It does there is no magic wand. Anybody who believes a Trump Presidency is going to deliver great things for the russian economy fairly quickly that is just unrealistic. It just means it is not going to get worse, geopolitically. You still have to deal with mark what is the closer relationship, if it is a closer relationship, between trump, the u. S. , and russia . What does that actually mean . If there is a quick quote pro ,uick quote pro quid pro quo does russia give anything . Chris under the Obama Administration, companies have been complaining they got no access to the white house, no support for business in russia. That should change. But i would stress that nobody even the russian government officials we talk to do not believe the Trump Presidency is going to dramatically change things. They understand trump will have to negotiate with a still very hostile congress. The republicans in congress, he is going to have to barter what policies he puts first. What it means is, if europe does move on sanctions, and i do think the emphasis has shifted more toward merkel, toured europe, to take the lead but if they make a change in sanctions next year, the Trump Administration would likely follow through quickly, whereas obama would not. Theink it improves backdrop. It improves the atmosphere. It lowers the perception of risk somewhat. All that does is, it removes potential dangers. It still exposes the fact you need to deal with domestic economic problems. Mark geopolitically, the dollar and post trump. Does it continue to win geopolitically in 2016 . The devil will lie in the detail. So far, we have been dealing supposedly fiscal expansion and potentially higher rates in the u. S. , and that has been driving a lot of strengthen the dollar. If we start to see trade issues and or tariffs creating inefficiencies and problems, that will support inflation, which is not necessarily good for growth. In the shortterm, all of the signs are that there should be some ongoing Dollar Strength. But we do not know the negatives yet. The unknown unknowns, if you like, of the trade relationship with china. Putting navarro in charge of the trade council he is a china hawk. Potential negative. But again, the devil lies in the details. We do not know what that is going to manifest as. Mark we will know more after january 20. Charles stays with us. Up next, the safest bets for next year. Is the future in bonds or equities . We look at the best performers this year. For more, turn into radio daybreak london. Mark welcome back to bloomberg. Im mark barton, in for francine lacqua. Bonds or equities in 2017 . The markets suffered one of steepest selloffs in record in the last couple of months. For the longest term perspective, yields have not changed much. The average shift in the 10 year of the nine biggest Government Bond markets was a 10 basis points in the u. S. The world just after was the climb. E to see rates charles, this is a simple chart, Global Equities versus global bonds. White line, equities. Blue line, bonds. We were saying trump with the 2 trillion charles rotation. Up or down,llion depending on what you are in. What outlook for the bond market are we going to see in 2017, given the shift in yields in recent months . Charles it is worth keeping in mind that if we just wind the clock back a few months, we were in the sort of depths of growth,nary, no world secular stagnation type forces that were compressing yields down and down and down. I think a lot of the reaction we have seen post trump is an unwind of that. To be honest, that was a process that actually started in the summer. That was when we had the low for yields. We have moved to a level where we are not that far from fair value. One of the prospects for next year, particularly in the u. S. You have the inflation outlook. It is to the upside, particularly with the u. S. Running at full employment. If there is a fiscal package or tax cuts from the new administration, that is pushing on something that is already moving along pretty fast. That is why the fed increase the expectations from two to three hikes next year. Even the fact that you will be pushing on an already running relatively hot economy, the ratherre more than that than less. If they prove particularly proactive, that starts the change in prospect from the very large and of the yield curve. That means they are tackling inflation. That could actually stabilize bonds. Mark back in a second. Surveillance continues. Mark welcome to our weekly brexit show live from london. I am mark barton, in for francine lacqua. For a round of brexit stories from this week, lets get to nejra cehic. Nejra a warning that her country will hold a new scotlands Prime Minister wants her country will hold a new independence referendum unless it can continue Single Market access. Stay evenressure to if the rest of britain quits. It would keep scotland in the Single Market. Hopefully, it would at least he scotland in the Single Market and deliver the powers to the Scottish Government and parliament to support that. May tolderesa lawmakers that businesses and the u. K. Government might need time to adjust to leaving the e. U. , and a temporary arrangement to smooth the way could be the solution. It was the clearest sign so far that the Prime Minister supports calls for a transition plan. Prime minister made we want to get this arrangement in place, so people can move on to a new relationship that they will have with the United Kingdom. And i think there is a willingness to undertake this on that basis. Of privateasure sector growth rose to the highest in a year. The confederation of british industry said its index was helped by a Strong Performance in manufacturing, the best in more than two years, while retail activity slowed somewhat. The overall output measure was up from f