francine: the global rout continues. asian stocks tumble into bear markets. the fed's brave face. chair yellen testifies before congress today. a vote against the establishment. donald trump and bernie sanders beat rivals in new hampshire. to "the pulse" live here in london. i'm francine lacqua. we have the check in on the markets, and when i did my data
for this morning i thought about putting deutsche bank. it's 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. let's 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. let's get to first word news. anti-establishment 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 nation's economic recovery. unicredit reported earnings yesterday amid a tough environment for the bank. the bank's fourth quarter profits fell on one-time 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. i'm 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. it's draghi's preferred inflation gauge. the five-year 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 medium-term 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 euro-dollar. investors are still looking for the bottom of the selloff. tumbling metal have sunks stocks. the stoxx 600 banking index is down 25% year-to-date. to discuss the impact of the market turmoil we are joined by market of the largest cap, intesa sanpaolo. carlo messina joins me. you're the second-largest bank
to have a bigger market cap. you're 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 they're 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 today's 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 ceo's, 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 bank's 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: i've 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 -- it's 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 yellen's first public appearance on the u.s. rate hike. ♪
let's 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 single-digit percentage. maker reported fourth-quarter 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 write-downs. 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 week's 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 norma's 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 non-farming 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. that's 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 can't have debt recovery because you do not have the guarantee -- the real estate underlying. it's 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 you're 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. i'm 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. i'm 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
to "the pulse"me live here in london. i'm 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. let's get straight to the first word news. don't 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 rolls-royce 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 volatility that has the set global markets. federal reserve chair janet yellen will testify before congress later. it will be her first public appearance since the fed raise
interest rates. investors will because scrutinizing her remarks to find when the central bank will continue pulling back at support for the nation's economic recovery. global news 24 hours a day powered by a 2400 journalists in 150 news bureaus around the world. francine: deutsche bank jumping on news it is considering a fund by back. mark barton has details. mark: this is a three-day chart of shares. -4.5%.-9.5%, tuesday today, up by 11%. so, over the three days, we are still down by 3.8%, but it is some come back for shares at deutsche bank. it is said to be in the early stages of buying back some of its bonds. the bank has ample cash to make the purchases.
so, what a three-day move in deutsche bank's share price. check out some of the other big moving shares. hermes was lower. the french luxury handbag maker says that they may miss their medium-term goal showing how china slowing economy is weighing on even the most exclusive brands. revenue could rise by less than its goal of 8%. also reported its lowest sales growth in six years today, as november's paris attacks led to a drop in tourist spending. maersk.ap muller shares down by 6.3% today. reported an 84% plunge in profit last year. by lowerunit was hit
energy prices. its container division got squeezed between trade growth and overcapacity. million net income includes a right down by two point $6 billion and underlying profit this year will be significantly below last year's $3.1 billion. 3.1%.erg share up by heineken forecast higher profit fueled by market such as the u.s. and asia. even as they prepare to face a inbev'sllenge from ab purchase of sab miller. beer prices in china, russia and nigeria, they have been down. since february last year. carlsbergeineken and they will set weakness in eastern europe. francine: thank you so much.
the antiestablishment candidates donald trump and bernie sanders have won the latest pride national -- presidential primaries in the hamster. -- in new hampshire. hans nichols joins us. what do these commanding wins by sanders and trump actually mean? hans: that means we have an electric -- an electro we have not figured outt. when you have a 20 point percent victory by bernie sanders. that tells you something is going on in american politics. and trump had a nearly 20% margin. those weren't just wins. they were blow outs. another important part of the story is how quickly marco rubio fell. he had a difficult debate on saturday in new hampshire. chris christie took him down.
it did not help chris christie. he is down six place. difficult to see how he was on. now question is how many candidates come out and what did they do to challenge trump and his argument about making america great. here is how trump said it. are going to make america great again but we are going to do it the old-fashioned way -- we are going to beat china, japan, beat mexico in trade. beat all of these countries that are taking so much of our money away from us. on a daily basis. it is not going to happen anymore. : john kasich, the governor of ohio, he came in second. well ahead of the other pack. the key difference with john kasich, he has been taking a softer tone on the campaign trail. last night he spoke about healing. there is much less vitriol with kasich. we will see if his approach
matches the mood of the electorate. francine: the trillion dollar question, where does the race go from here? a conservativeto place for the republicans. they go to south carolina and nevada, more evangelicals. much moreats, diverse. they go to nevada first and then south carolina. those states could favor hillary demographically, there are more hispanics and nevada and more african-americans in south carolina. one thing bernie sanders made clear is he is quite to have the money to stay in the race for quite a while. i'm going tors: hold a fundraiser right here right now across america. go bernie is please sanders.com and contribute. help us raise the money we need to take the fight to nevada, south carolina, and the states on super tuesday.
hans: two things to watch today. sort strategyny brought into hillary clinton'sof campaign? and two, which republicans and how many of them drop out ahead of the next contest in south carolina? francine: they do so much. at's introduce morris reid, partner at mercury public affairs but served as a senior staff aide during the clinton administration. the timing could not be better. ofy, very -- i have a lot questions. >> hopefully i have some answers. francine: how do you read this? >> here is what i saw. >>donald trump did what he needed to do, he over performed. he needed to get back on that winner pedestal. that was important for him. what i saw the bernie sanders, saw a lot of strength. he needed to over performed to indicate to his constituency that he is in it to win and
attract the funding. the two of them did exceedingly well. they had to do with they needed to do. on the republican side, you'll see a lot of weeding out. dropof these are going to out. ted cruz is going to emerge because as you move to the south, organization and muscle matter. he'll do well. as you move to nevada and the self and the clinton's, you will see were money and muscle matters there. d think you will see curruz anc clinton getting stronger. francine: is the race any clearer? normally new hampshire clarifies. this time it hasn't. or are we not realizing? >> i disagree. barack obama lost new hampshire, became president. bill clinton lost new hampshire, became president. i think in new hampshire and contest.beauty they are not represented of the real electorate. you go there, you spend a lot
more time on the ground than you do most places. it's clarifying. this is a different race with different people. money and organization matters. francine: do think the race is open now? can hillary clinton get it bac k? >> i have been one of the democrats who thought it would be a good thing to have a real primary for her. she tends to start slow. boxer -- to be like a bernie sanders has struck a chord. there is anxiety on the left and the right. hillary clinton needs to understand it and tap into it. francine: can bernie sanders or donald trump become president of the u.s.? >> donald trump can get the nomination. i believe he can. bernie sanders, i do not believe he can get the nomination for two reasons. number one, organizational muscle. right now he does not have it. if he gets the money, perhaps he will but he is so far behind. it really matters when you have closed primaries, meaning the
participate.cannot the second thing is money. the clintons have the money in the campaign. he needs to take a lot of money if he is not going to take on a super pac. francine: what i don't understand, you're talking about voters, weamongst are seeing more extreme politicians doing better. what exactly do people fear in the states? what are the policies they should focus on? >> there are two things. number one in the primary process in america, the far left and the far right dominate the process. francine: not like this. >> we have not seen anything like this but we have never seen the anxiety that people in america are feeling. america is doing well but it is in a very different way. the economy is moving forward, less jobs. people are keeping money overseas. this is a very, very different time in america. you see people as they listen, i'm not doing as well as i think
i should. i'm not doing well because my kid went to college and they cannot find a job. so, america is going to a transformational time. what happens when you start to look inward, you start to blame other people. and that is what we are seeing around the world. when people are contracted, a contracting economy wants to make people keep people away because they believe there is less of pie. what we're seeing is not uncommon, we saw here in europe. the one thing that needs to be pointed out as we have a lot of anxiety but the right never won. people tend to vote the right way ultimately when it is time to vote. francine: one quick question. some breaking news out of the oil markets. do you think the republican party can split? if we do not have an establishment candidate, can we see another party forming? will, the republican party not split. they may work against their nominee but they will not split. francine: thank you for joining us today. we have breaking headlines out of the rosneft ceo.
ryan chilcote spoke to the ceo and he's saying they remain committed to -- traditional markets. that means they are pouring cold water is on talks with other nations. it is unlikely that opec and producers meet to find a deal to cut production. plenty more on that exclusive interview that ryan chilcote did coming up next. next, janet yellen appears before the house financial services committee. we consider what investors wanted here and why they may be disappointed coming up next. ♪
francine: breaking news from rosneft's ceo. ryan chilcote just spoke to him. we would do a quick check on oil. it was rising a touch. gaining 2.2%. sayingke to the ceo, they will not cut production. an: if you're thinking that the world's largest oil producers are about to cut in a coordinated fashion, perhaps after my conversation with ahead world's largest public at traded oil producer, , isbasically he said what iran going to cut, is brazil
going to cut? he pointed out saudi arabia has increased its drilling capacity by 40%. he said we're engaged in the battle for market share. countries ifour just outlined. we will continue to supply them with oil in those markets. francine: we are not expecting any coordination. coordination would mean 15 or 20 nations would come together and decide to cut production. h trying toc defend their market share. ryan: russia, when it comes to the issue of cutting with opec, a monolithic camp, there are different schools of thoughts in russia. they are in the camp that controls have a production. he will be looking to, and he has a big seat at the table, two when it comes to coordinating cuts. he did not completely dismiss it. he said, we need to see these
countries, brazil, iran, saudi arabia, mexico cutting production and seeing evidence of that in their investment plans if we're going to entertain this idea. point two, we are not going to lose any money in the process. i answer to my shareholders. liken't lose money, just they would not want to lose money. francine: later today, janet yellen will testify before congress, her first public appearance since the fed raised rates in december. investors will be scrutinizing her remarks for signs of when the central bank will next rates.n expectations of a hike in march have fallen to zero. for more, let's get out her economics editor in new york. michael mckee. what is janet yellen's message likely to be today? mike: she is going to be walking a tightrope. she wants to sound confident
about the economy but not so confident he will think she will raise rates again. nor does she want to sound so down the that people start to worry about the economic future. . so downbeat she is representing the entire fed. expected to stick close to their generate 27 statement, watching and waiting. fed, they can wait until their next meeting on march 16. the mandate for employment going relatively well. she is likely to say unemployment is at 4.9%. prices, ite of oil may be hard for them to hit their goal of progress. andwill talk about china the dollar and their perceived effects on the economy. seeill be interesting to what she has to say about wall street and whether the volatility we have seen is theicting a downturn and economy, reflects a downturn or is really just irrational panic in the fed's view. francine: i like the way you put
that. michael mckee in new york. he will join us on "surveillance". what janet down into yellen can and cannot say. let's get more with morris reid. thank you so much for sticking around. we were talking about this election and you were pointing to the fact that there is kind of investor angst, which is linked to job creation, to the economy which from the outside world looks ok when you look at the rest of the world. may be for americans it is not the kind of job creation they want. that makes the fed's job very quickly. >> there is one note on the fed. they will not be hiking interest rate between now and the election. i guarantee it. if hillary clinton is running, there is continuity. there is no way they want to have a hike. there has been great job performance. she is running as the continuity candidate. they do not want to upset the apple cart.
hikeine: they won't because of domestic, internal politics? never coordinates but my inkling is they will not do it because it would have a devastating impact on the economy perceptionwise. you got wall street anxiety. i do not anticipated happening. the problem with americans -- there are jobs being created but not jobs that americans want or they considered to be long-term, sustainable jobs. this is where obama and the next president needs to reinvest or invest in vocational education, three training the workforce, really focusing on where the jobs are for the 21st century. that is the problem. when you go to the midwest, detroit, the rust belt, they are scared. they look like they are behind because there is nothing going on. francine: -- this is a technology. in the last 10 years and even the way economists measure productivity is changing so quickly. it is difficult for any government to keep up. we have to embrace it.
because if you look at the japanese, they embraced it and fell behind. you look at the chinese, they doubled down on their manufacturing. now they are falling behind. you do one or two things. you invest heavily in manufacturing. in america, we demonize people that use their hands to do things. we say we need to use your brai like silicon valley. not everyone can participate in silicon valley. we need to understand that the jobs are parents have are not the jobs we will have. the fact that some of our parents worked for 40 years for a company, that is changing. have 3, generation will 4, maybe five jobs in their lifetime. people have to be nimble and retrained. francine: that was a great conversation. with you said in london, it is the type of the conversation that you have with the french. they think the u.s. labor force is so much more flexible. great to have you. coming up, we will bring a full
february, a gain that has not been seen so far this mud. this is the eight-day chart. 5%. index is down by 7.7 let's show you the big event -- janet yellen testifying before the house financial services committee. fed fund futures indicating a 29% chance of a rate hike in december. the yen up there, rising to the highest level in 15 months. draghi's preferred inflation gauge, lower level on record. francine: thank you so much. now "surveillance" is up next. we will have plenty more in these markets and be speaking to the ceo of carlsberg. we will spend a lot of time talking about yen. this is probably one of the unintended consequences for governor kuroda. the yen gain is so strong according to morgan stanley.
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