Have data points pointing at clients and investors being more optimists and ready to be constructive about the situation. They are really looking for concrete actions by the new administration in the u. S. Bts head of Continental Europe steps down amid via italian accounting scandal but the companys ceo says the situation is under control. Time to raise a glass as lvmh posts record fullyear profit and sales lifting the stock towards alltime highs spurring gains throughout the sector. Good morning. Welcome to street signs on the last trading day of the week. Enough earnings optimism this morning but thats not enough to lift the overall stoxx 600. We are looking at a bit of weakness across the overall heat map today. The broader index lower by 0. 3 . Yesterday the dow jones hit yet another record high stateside. The s p 500 and the nasdaq pairing off their own intraday record highs. In europe, investors are digesting a fresh round of earnings and m a activity. Lets see how that is carrying out into the individual bourses. The ftse 100 the outperformer, just barely in positive territory. Tesco is the real performer there. Elsewhere the xetra dax is lower by 0. 2 . The french cac 40 falling closely behind by 0. 3 . Italian main market lower by 0. 4 . How these moves are playing out in the sectors, lets give you a shot. A fair amount of red across sectors except retail getting a boost. That in part due to the tesco deal for booker. That lifting beverage higher by 0. 2 . Travel and leisure higher by 0. 4 . Lufthansa shares are on the rise after a broker resources. Overall that sector basically flat. Just clinging in positive territory. So lets tell you more about the deal of the day. Shares in tesco and booker are leading the pack in europe after britains biggest supermarket announced a merger with the uks largest cash and carry wholesale supplier. The merger values booker at 3. 7 billion pounds. Tesco said the deal would result in booker shareholders owning about 16 of the combined group. Dave lewis said the deal is completely on strategy. He said discussions on the booker acquisition began a year ago and that Richard Cousins was not supportive of the deal. Cousins surprised investors when he stepped down earlier this month with no explanation provided. Investors are cheering the deal this morning. Lets give you a check on shares of bt. Third quarter earnings and revenue came in line with estimates but were overshadowed by a profit warning earlier this week after the Company Revealed an accounting scandal in the italian division. Revenue rose 32 . According to people familiar with the batter, Corrado Sciolla will leave the company in the wake of the accounting scandal in italy. On tuesday bt posted its biggest oneday fall after going public in the 1980s. The italian accounting scandal rocked the firm costing 530 Million Pounds with bt under investigation in italy and facing two lawsuits from u. S. Shareholders. Separately bt has warned of slowing demand from the uk, the Public Sector and International Corporates since the brexit vote. Nonetheless it committed to raising dividends this year and next. But questions remain around gavin patersons leadership and pay package after he received 5. 4 Million Pounds in total compensation in 2016 alone. So much to go through this morning. Lets bring in guy petty. Guy, good morning to you. Thank you for joining us. What a week for bt. The negative headlines surrounding this company, spooking investors. The big question is have we seen the worst of it when we talk share price reaction . In our view we have got to the worst of it. I think theres three things that happened this yeweek. Firstly you have italy, which is a oneoff event priced in. Secondly you had the warnings in the uk Public Sector in the corporate businesses. That is slightly more fundamental. There could still be slight changes to that expectation Going Forward. But given the cuts this week, theyre probably relatively small. On the positive side, the fixed line and the eu business continue to do well. So, weve probably got a few things to continue to pull a move, but the real downside in our view is now largely baked into the share price. On italy specifically, youre calling it a oneoff incident. By the case itself is still lingering with question marks surrounding where we go next, the leadership involved. How detrimental do you think this factor alone could be . I think to accompany the pride its corporate governance, this is a big negative event. And it will take a long time to recover that. Were suggesting there seems to be country specific things going on in italy, that so far have not been seen to be anywhere else. And therefore its a little bit more compartmentalized. Yes, credibility has been broken. It will take a long time to restore that. Youve already seen or already mentioned there will be certain Management Changes and probably pressures for other things Going Forward as well to try and improve Investor Confidence and sentiment. In reality bt has to deliver and solve some other issues, namely it is still negotiating over the openreach solution, it needs more definition in its pension and needs to get through the next set of Champions League auctions. Clearing those three hurdles will give investors more visible in the midterm. On the openreach case when will investors get a clear solution on this one . And are the risks to the down side already factored in . Theres a lot of uncertainty. I think bt put out comments to say they can get this voluntary agreement with offcom. That would be constructive. Sooner the better. Every day without the agreement highlights they still remain distant. But the key thing is to get a solution there so we can work out what it is and move forward. You can argue that 2016 share price reaction to b it was also quite negative. A lot of that was pricing in open reach an pension issues. Guy, on the Champions League issue, we understand its going to be another competitive bargain going on for this one to claim the rights. Is there a risk that bt loses the rights . What will they have to pay to secure them . Our assumption is theyll have to pay about 25 more to keep the rights, but also sky might be more galvanized to do something. So there is a risk that they do lose them. That would be even though in the shortterm that would enhance the profitabilities and cash flows if they lost the rights, if the longterm it would put a dent into their pay tv strategy. Its very important for the next three to fiveyear outlook that they secure those rights. Do you think the fox sky bid, does that thing that anything for this auction . Does that move them along when you talk about sky being galvanized to try to get them . It gives sky flexibility. Probably doesnt change the strategy but they dont have to be so share price aware. Bear in mind the share price is effectively under offer. So it remains a big fox issue. It is slightly less relevant for sky. But in reality, you know, the fundamentals of what sky wants to do in europe and over the Champions League shouldnt have changed very much. Guy, thank you very much for joining us. That is guy petty, head of European Telecom research at mcquarry. Lets give you a check of shares of ubs which suffered cross border outflows of 7. 4 swiss francs. The bank beat net profit forecasts and reported a near 50 rise in pretax earnings just in the Fourth Quarter. Lets get out to carolin in zurich and has been following the results closely. A more upbeat, optimistic tone from ubs this morning. Yet investors dont seem convinced. What do you think is going on here . Shares are down probably for a couple reasons. This stock, like many other banking stocks, had a good run thanks to the trump rally. But also if you think about this, ubs is trying to morph into a wealth manager. It is one of the biggest Wealth Managers in the world and lessened exposure to Investment Banking. Yet in the First Quarter its the Investment Banking that delivered the beat and not the Wealth Management so theres a sense of disappointment that margin in Wealth Management and the outflow picture is still bleak. There is one major exception. That is Wealth Management americas given the trump optimism weve seen a pick up in activity there. Lets listen to sergio motto. We continue to see good momentum in our u. S. Businesses. We had good results, so that underlines the benefits of our diversified footprint. There has been a bit of positive momentum building into the Fourth Quarter, but, you know, im happy with the solid results. How much of this is down to the trump rally . In the u. S. We saw u. S. Peers benefiting from that but you have a slightly different product in regional mix. You are geared towards asia and equities, not towards the u. S. And debt. How does this effect you . Its true on a relative weighting we are smaller in the u. S. But we have been also making Good Investments in the u. S. In the last few years. You saw, again, good momentum and not only in our Wealth Management businesses but also if you look at our equities, the results were very good. So clearly the positive momentum post the elections has translated into more activity in the u. S. In the rest of the world i would say the situation was more muted. For the last was seems like five or seven years, whenever i spoke to you you have been cautious about the outlook. For the first time now, this, to me is surprising, youre more optimistic. Again, is this about the trump effect or is this about more political visibility overall . Well, look, ill try to always take out my own emotions from this kind of assessment. I look at facts. So i would describe our past statements more realistic. Today we are realistic because we have data points pointing at clients and investors being more optimists and ready to be constructive about the situation. Still they are really looking for concrete actions by the new administration in the u. S. To go into investing in the markets, but what i think is much more important is also potentially invest in their underlying businesses, which will really boost the economy. So you done think this is quite the turning point yet when it comes to client confidence, which has been incredibly low over the past couple years, not just affecting your bank but hitting the industry. Theres positive sentiment, the catalyst was clearly the new u. S. Administration. Probably there was also a desire, human desire to think positively after so many years and quarters of gloomy environments. So we need to see if this is sustainable. There is a good momentum. Again, we need to see facts and consistency in delivering those structural reforms. That was Sergio Ermotti the ceo of ubs. In a recent note by Deutsche Bank analysts they remain cautious on Wealth Managers. Why . They expect the recovery and transaction margins to remain muted. They have preference for fixed income Capital Market exposure by the likes of barclays. Did you get any more indication on the litigation questions . I know there was an additional provision for litigation, but ubs is trying to put this specific question mark behind them. How are they doing in those attempts . Litigation has always been an issue for ubs. They settled some of the high profile cases like the libor case. We have got credit suisse, Deutsche Bank now settling with the department of justice in the u. S. Ubs still needs to do that. However the total tally for ubs is expected to be a lot lower. This quarter, for example, they only set aside 170 million swiss francs. The total tally for litigation provisions in the u. S. Is 3. 1 billion swiss francs, compared to ubs. We are still waiting for that issue, we are still waiting for french authorities on tax matters. I asked Sergio Ermotti about that this morning. He didnt have much more clarity on that. Ceos of banks are quiet on that type of thing because they cant talk about litigation issues. Hopefully this will be settled for ubs in 2017. Thank you, carolin. Stay warm and happy birthday. Elsewhere, if youre looking for another reason to celebrate, coming up we will be talking about the year of the rooster. Thats right. Asia is getting ready to celebrate the Chinese New Year. Were asking whats in store on the geopolitical front and investors. Get in touch with the show, streetsignseurope cnbc or find me directly nancycnbc. Did you know, 90 of the Worlds Largest supercomputers run on intel . That means you can take a universe of data in your case literally and turn it into medical discoveries, diagnostic breakthroughs. Proof that black holes collapse into one singularity. I dont know what that is. But yes. Innovation runs on supercomputers. And supercomputers run on intel. You are super smart. And super busy. Ooh ufo false alarm, eyelash . Good morning. Welcome back to street signs. Lvmh posted record fullyear earnings and revenues. The top and bottom line numbers outpaced expectations in 2016 with a diverse geographic mix of gains thanks to strong sales in europe and the u. S. Combined. This along with a pick up in mainland china. The groups ceo tempered enthusiasm warning low stocks of louis vitton and hennessey cognac could weaken growth next year and Political Uncertainty could weigh on the second half. Banco de sabadells second half earnings slumped by 51 year on year after high court costs. Net profit hit 63. 5 million euros. The spanish lender said it will give a strategic update on february 7th. Shares lower by 1. 6 . The ceo of intessa Intesa Sanpaolo is considering a joint venture with allianz. Intesa is said to feel free to look at options to grow provided they dont hurt the banks capital strength. More than 100 italian mps have questioned the deal in parliament asking the government what steps it plans to take to prevent a foreign takeover. Joining me is james andrews. James, good morning. Good morning. Thank you for joining us. We were going to the break talking about Chinese New Year kicking off this weekend. What does the Chinese New Year have in store for european equities . For european equities, in the shortterm the numbers look good. Fundamentals in europe are positive. However i am nervous about the overall political backdrop, and the italian banking situation, which is obviously a loud that looms. Youre not the only one nervous about the italian banki political back drop. Do you think if we get a reform candidate, we could see some upside . Certainly. The nervousness is around this populous movement, brexit, trump. That, i guess s wheshgguess, is nervous now stems from and were concerned about growth and in terms of the banking crisis in italy, the knockon effect that could have, italy is the Third Largest issuer of debt in the world. The retail exposure to italian banks is the real concern here. Driver of italian gdp has been domestic consumption. The italian Retail Investor holds about a third of overall italian banking debt. It holds a half of the subordinated debt out there in italian banks. Under the new rules, theyll have to take the first hit before we can see state aid come in an support banking. Therefore theres got to be a concern about their growth and therefore the contagion elsewhere across. And a bit of concern on what that means for Retail Investors who hold the debt, how that will play out into italys own elections. Is that a risk investors have yet to take in . Certainly. If we think of drivers of this populous movement it has been the impact on the middle and lower incomes not seeing a benefit to this great recovery thats allegedly happened post financial crisis and weve seen in markets. Certainly a domestic consumer hit strongly by this impairment in italian debt. You talk about the fears around populism. Yet the poster child of populism in the United States, now President Donald Trump has been linked to this increase in stocks, the dow 20,000. Do you think this increase in animal spirits as they talk about it, will spill over to europe . Will we see more of that . What does that mean for investors right here . Obviously in terms of optimism, we are seeing a Consumer Price rise in europe grow at their fastest level in three years in december. So, there is inflationary pick up. There is positive sentiment. And expect germany Inflation Numbers to come out next week. That could well touch 2 . So, yes, theres a lot of positive momentum at the moment. I guess the negative is the uncertainty that surrounds banking and, indeed, politics in europe, whereas the europe theyre out the other side of the elections. Theyre out the other side of the banking crisis. Their banks are well funded. Everything is positive from a banking side. Obviously what were hearing from trump is this stimulus that hes looking to bring through. Lowering taxes, increasing spend, america first. Its interesting on the inflation debate because some voices will say dont worry about it, including ecb president mario draghi, theyre looking for a more sustained uptick in prices. How should one protect their portfolio against inflation risks . This is a key theme. It will be a key them in the uk, weve seen that massive fall in sterling which will see a cost push inflation. There