For this morning i thought about putting Deutsche Bank. Its now gaining 10 . European stocks are doing, rebounding from the lowest levels since october 2013. Euro stoxx 600 gaining. The banks gaining 3. 5 , led by Deutsche Bank rising 10 after the german bank is considering buying back some of its debt. I want to show you the yen. The yen is so strong it may need more policy action from either the government or certainly from governor kuroda. Lets get to breaking news out of italy. Figures. Ome in terms of some of the data, yesterday it was a little bit disappointing in germany. Today, industrial output in italy falling to 0. 7 month on month. It is worse than expected. This is the situation we will keep a close eye on. Lets get to first word news. Antiestablishment candidate, donald trump and Bernie Sanders have claimed injuries in the New Hampshire primaries. Sanders one easily over Hillary Clinton, meaning the democrats could be heading for a long and competitive nomination fight. A crowded gop field with john kasich in second place. Fivean sachs has abandoned of its six recommended top trades for the year. The bank was wrong on the dollar. Yields on italian bonds and u. S. Inflation expectation and more. The fumbles underscore the volatilities that has beset global markets. Janet yellen will testify before congress, her first public appearance as the fed raised Interest Rates and december. Investors will be scrutinizing her remarks for signs of whether the central bank will continue pulling back its support for the nations economic recovery. Unicredit reported earnings yesterday amid a tough environment for the bank. The banks Fourth Quarter profits fell on onetime charges related to its share of costs for winding down four an italian blunders. The ceo says four italian lenders. Italian banks, the situation is worse. More difficult. Inht now isee that all banks europe are under pressure. The market needs a new floor. Side. Go back to buy nejra global news powered by our to 400 journalists and one hundred 50 news bureaus around th world. Deutsche bank, we were talking about it yesterday. A little bit of respite today. Look at the db shares prices gaining 9 . The biggest rise in four years. Thes a very big focus on program today. Im extremely pleased to be joined by the inetstesa ceo. After seven days of declines, the longest losing stretch since october 2014, finally, the stoxx 600 is rising. Stoxxover the period the 600 is down by 8. 4 . It is up today. 19 Industry Groups are trading higher today. Attention turns to janet yellen who testifies before the House Financial Services committee. She will strike a balance between signing confident sounding confident on the domestic economy and announcing there is a 29 chance of us that rate hike in december. Here is what is happening in the currency markets. Some of the riskier currencies are rising ahead of yellen. The rand up. Itsk at the yen, up to highest level in 15 months. Citigroup says dollar falls will someping yellen deflates of the enthusiasm about negative Interest Rates, which may support the dollar. Jumped out at me today. You know it well. Its draghis preferred inflation gauge. The fiveyear inflation swap rate which has plunged to a record low today, 1. 46 . . It measures the outlook for inflation for 2021. It highlights the challenge that draghi will have of getting inflation back to its mediumterm target just under 2 . Inflation is 1 5 of that level. Bring on march 10 when the ecb next meets. Francine it would fascinating to see what mario draghi does look at. I imagine he is also looking at eurodollar. Investors are still looking for the bottom of the selloff. Tumbling metal have sunks stocks. The stoxx 600 banking index is down 25 yeartodate. To discuss the impact of the market turmoil we are joined by market of the largest cap, intesa sanpaolo. Carlo messina joins me. Youre the secondlargest bank to have a bigger market cap. Youre in a good place at the moment. When i had this great interview with you, we have do the markets because they have been somewhat crazy. Some say theyre unpredictable. Others are saying this is a correction. Carlos i think the market is absolutely crazy. There is no definition. There is no correlation with the fundamentals. It is difficult when you have this kind of conditioned us markets are irrational. Weeks theythe some will come back to the fundamentals. 10 , 35 y it is if it is out of any kind of reason. Francine i have this debate almost every day. People say there is such a disconnect between the fundamentals of the markets. Others saying in past crises and is the markets that led. Based off things the real economy had not seen yet. Carlos it is probably a different story because we have not entered the real point is that market has to consider the fundamentals. They have move into a rational way. In two or three months. At the end, if you look at the main driver for the acceleration or deceleration in different countries, you have something that can justify a variation of 10 . Not this kind of results. So, if you look at china, 6 growth, ok. It is not 7 but it is six. Usa you can have some deceleration due to energy atuation, ok, but it is deceleration. They will remain a country with 2 growth. Then you have implication of disposal from sovereign funds. Ok, but we have a lot of dividends coming from the shares, from bonds. So, it may be there is probably an overreaction to some negative implication for deceleration and growth but not to go into a recession. This kinds of valuation, the implication is a deep recession. That is completely out of the figures of todays numbers. Francine do you think banks have been unfairly punished . Recovering Deutsche Bank carlos there is a good point because there was a lot of confusion in some areas in the banking sector. So you have focused on germany,. Especially on Deutsche Bank. You have focused on nonperforming loans. The result of confusion and miscommunication on the figures of the italian bank. In the end, the situation is much better today than two or three months ago. There is no fundamental reason to have this kind of devaluation of the share price of the banki ng system. Francine are you expecting more volatility . What can ceos, you are not in this case, but what can Central Banks try to do to be more transparent about what is going on . Carlos i think there are probably two implications. One is on the Central Banks attitudes. They have to continue quantitative easing and not increase Interest Rates in the usa. These are the two levers in which they have to move. Clear liquidity will remain in the market. This is very important because in the end it is a way you can create demand in opposite on the selling proposition. Francine ive heard for six months liquidity may be an issue. How do you stop those rumors . Carlo the point of liquidity is liquidity togive the market in order to increase the real economy. So, liquidity is not devoted to create the financial bubble. In reality, the result is improvement in the real economy. If you look at the figures in europe, we are not in a deceleration mode. Where in acceleration mode. Imf, 3. 1 , it is not zero. Acceleration in europe is coming from quantitative easing. The real economy. Ofs result of some actions the government but also action coming from quantitative easing, devaluation of the euro, internal demand and consumption coming from confidence of families. There are a lot of positives coming from quantitative easing that is not only its real economy. Francine i want to talk about your bank in a couple of minutes. And get your thoughts on how you see it. So, there is a difference between fundamentals of the markets. Oilmarkets are following almost blindly. Why is this . Carlo there is probably some points related with a clear someion with revenue in important countries. It is true there is a deceleration. Also companies related with that Energy Situation can have acceleration. There is a portion of the real economy that can have an impact. On the other side, in the family area, the internal demand coming from lower prices that give you more disposable income, you have a positive situation on real economy. The balance at this point are not negative. In reality, there is again over, positiveimates of the coming from the situation. Also, you can have some sovereign funds in reviews. Their exposure to some areas in order to have cash flow. But it is not something we can change the situation. I think in this moment there is a significant buying opportunity. Question one last negative rights. Buying opportunity you intimate many of the banks have been oversold. Are you not on easy about negative rates . Carlo absolutely not. The negative rates environment keeps the Banking System in the last three or four years. But thanks like us that changed the Business Model can have a significant benefit from zero interest or it negative Interest Rates. Because clients are moving to Wealth Management products. They will find solutions in order to have yield. If you are in a good position to convert from government bonds or retail bonds into assets under management, you can earn much more money. If you compare banks that made issuance during the time of the crisis, the cost of funding will reduce in a significant way. I see significant opportunities coming from these scenarios. Not threats. Aso for banks not in position like us, there can be 10 of the net income but not 50 . The implication and valuation are completely different from what the markets are continuing to see today. Francine an optimistic view. More thoughts from carlo. Bible ask him about ine i will ask him about intesa. As investors reel from a 2016 selloff. We will talk more with Carlo Messina ceo of intesa sanpaolo. As the primary voters of New Hampshire deliver a clear further, we will speak to a former senior staff aide in the clinton administration. And we will look ahead to Janet Yellens first public appearance on the u. S. Rate hike. Lets get straight to Bloomberg Business flash. Heineken has reported 2015 profit in line with estimates, excluding special items which was 2. 75 billion euros. It sees Profit Growth this year. Says earnings will rise this year helped by Growth Markets in asia. Operating profit will rise by a low singledigit percentage. Maker reported fourthquarter earnings that eat forecast. The ceo will speak on surveillance at 10 05 u. K. Time. Oil reported a loss as tumbling crude prices forced the company to writedowns. The net loss is over 1 billion in 2015. Is recommending no dividends be paid. Maesk says its underlying results will be below billion after. 1 the company wrote down the value of its oil assets. Crude prices is 45. Francine thank you so much. W, European Bank stocks have borne the brunt of this weeks selling. An exclusive interview, the Goldman Sachs president pinpointed it as a european problem. The one thing i am proud of i wouldan sachs, and say almost all of the u. S. Banks, we took our medicine early. We went out and raised capital really early in the process. Then we went out and raised capital second time. We did that years and years ago. And we really build our Balance Sheet up. We do leveraged ourselves. In normas liquidity and we made ourselves financially secure. I think some of the European Banks have been slow to getting themselves recapitalized and getting your financial Balance Sheet in the best place it could be. Francine that is a victory lap from gary cohn, the Goldman Sachs president. Carlo messina. He said, we did everything better and faster fine. Even if we have measures on these nonfarming loans the selloff continues. What reverses that trend . Carlo let me at the point on Goldman Sachs definition because i want to talk intesa sanpaolo. If you look at the italian Banking System, the average equity is the highest in europe. If you look at the leverage, it is the highest in europe. It is comparable with the one of Goldman Sachs. Thats right, but these are the figures. So, investors can make their position, they can consider some risky situation coming from non performing loans. If you have to evaluate a situation of a bank, you have to consider the risky assets. So, Goldman Sachs and other European Banks have a significant number of level three assets and their Balance Sheet. Without any kind of underlying assets because you have a piece yourper that is inside level three assets. In the italian situation, you have nonperforming loans but something to be evaluated on gross nonperforming loans. But you have net nonperforming loans. You start from 200 billion euro s, bad loans. Net non performing loans are 85 billion euros. You have collateral. Real estate in houses that are underlying the value of this 85 billion euros of nonperforming loans. So, if you want to end into a mood in spain, you can transform collateral into assets. And not having the problem of nonperforming loans. Francine the market is not seeing that sophistication. Carlo the point is we have to make clear position on this point. There is a lot of confusion on the italian situation. If you make an evaluation on a growing concern analysis comments are you will continue your life, you have to consider debt. You cant have Debt Recovery because you do not have the guarantee the real estate underlying. Its been 50 for the italian. He Real Estate Market. In two days, you have a failure have to make disposal and you have problem both in nonperforming and level three assets in a significant number of classic assets leverage is very important. Francine for investors to view it differently, do we need a big merger . Renzi is trying to put new measures carlo there is maybe one point that is strategic that is the acceleration of the recovery process. Because in reality we have guaranteed collateral real estate but the time of recovery is too long. It is seven years. You have to shorten two or three years. We need to have specific reform say that on the judicial situation you cannot have more than two or three years. In two or three years time, you can have all the reprocessed of the assets or close. It is really a very important point. Then you can enter into merger. But merger, it is something that can create better Competitive Position for other players and italy. It is very important to enter into mergers. We need Something Special in order to accelerate the recovery of the nonperforming loans in italy. Francine are you any closer to buying something . You keep telling me youre looking. Of banks iny kind italy. We are working on making a very good analysis of our nonperforming loans, because i think we have significant potential on the real estate our underliiees nonperforming loans. The Real Estate Market is recovering. There is an 18 plus in transaction and 2 plus in prices of real estate and the devaluation was only 9 in four years time. There is a significant opportunity to work in accelerating the recovery. Looking at the situation of m a in italy, we are not interested at all in any kind of transaction because we have such a significant leadership in italy. Im really concentrating on delivering my business plan. Inncine you made that clear davos. I was thinking possible m a are brought. Want to talkt abroad. Im focusing on italy. Loancine the bad provisions, arguing talks to sell additional portfolios . Carlo no. We are making analysis in order to understand what area of our portfolio can give us some plus opportunitiesi in terms of recovery. We want to accelerate the possibility of speeding up recovery because i want to reduce the nonperforming loans. We reduced it at the end of this year and the last quarter of 2015. We want to accelerate in the reduction of nonperforming loans. Francine you were constructive on 2016, what it means for intesa. What is your biggest concern, margins . Carlo i have only concern and confidence on the italian families. If these kinds of negative and pessimisms in the market can translate also on the italian families, we can have some threats on the recovery in the italian situation. But my evidence is absolutely that italian families are coming back to consumption. This means that internal demand is increasing in italy. Better will have a portfolio in the Wealth Management area. Francine thank you so much. We have to get you on for an hour next time. Coming up, we have plenty more. Trump and sanders triumph in New Hampshire. To the pulseme live here in london. Im francine lacqua. Bloomberg surveillance u. K. Industrial production is breaking right now. That this istant how mark carney sees his economy. Any factory outlook is unchanged. Industrial production down 0. 5 the estimate was of 0. 2 lower. We are worse figures from the u. K. Have worse figures from italy. You can see the pound on the back of that. Lets get straight to the first word news. Dont reflectocks the true risk of britain exiting the european union. The money manager says she is aree worried how funds shorting companies that generate sales in the u. K. Most risk including rollsroyce has plunged 19 this year. Into 2016, Goldman Sachs have abandoned five at six recommended top trades for the year. The bank was wrong on the dollar, yields on italian bonds, u. S. Inflation expectations and more. Thefumbles underscore