tv Bloomberg Markets European Open Bloomberg February 22, 2017 2:30am-4:01am EST
♪ guy: you are welcome to bloomberg markets. it is the european open. we bring you the first trades of the day. here's what we are watching today. no supplies is. loretta masters says the central tank does not want to blind side the market while philadelphia [inaudible] three hikes in 2017. investors will look at the minutes later today. not totally convinced. the ceo of total tells bloomberg in an exclusive interview he does not think it is tough times
for the oil industry are over. >> traditional versus challenger. lloyd's banks misses estimates deposits jump.s we speak to the chairman and cofounder at 8:30 a.m. gmt. bit of breaking news kicking off the show today. rwe, the german utility has told us they are taking an impairment, 4.3 you billion euros. nonoperating results. this is 4.3 billion euros on the german utility. nonoperating profit will be cut in 2016. adjusted net income for 2016 will be .8 billion. 2016 net loss of 5.7 billion euros. landscape forg them. from them, the news
that is the top line as we get more details. the net loss for the year for r we will be 5.7 million euros. futures indicated higher. europe itself was marching through 14 month high. the s&p rates its all-time high. a nice trend in the market. they are up .2 of 1%. in at the highest level it europe. it was energy that drove the market higher. to be had inief the market in the form of the australian market. that's have a look at gmm. that is global markets. if you check, the us trillions came to the market and the aussie dollar is bid. you can see it on top of the fx screen.
they have got it. will remain as aaa day? $11 billion worth of bonds, the largest sailing record in the feasted on it. the aussie dollars bid. the dollars generally a little bit stronger. the euro down by .2 of 1%. yen is your risk parameter, rising a little bit. we are waiting for that minutes from the federal reserve. loretta master does not want to cap the market of [inaudible] and harker at the philly fed is trying to channel this. we will get three rate hikes. goldman sachs warning this morning on commodities. show me the real demand and real stock draws. let's talk about the first word news. juliette saly is standing by. the u.s. government has outlined a sweeping crackdown on undocumented immigrants. donald trump's administration will seek to swiftly deport many
more people without court hearings and target migrants charged with crimes are thought to be dangerous. not just convicts. homeland security secretary john kelly also ordered the hiring of 15,000 more border patrol and immigration agents. and the building of the mexican border wall. bordermo regarding the security and immigration enforcement improvements outlines the step that dhs will take to secure the nation's southern border, prevent further illegal immigration until we repatriate illegal immigrants swiftly, consistently, and humanely. the former ceo has been sentenced to prison for misconduct. he was convicted for feeling this -- to disclose conflict of interest that arose when he was negotiating rent for luxury apartment. the sentence cap day stunning downfall. a stunning downfall.
and the government won its first clash over the last to trigger brexit. after two days of debate lawmakers agreed without a vote moved toe draft bill the next stage. theresa may bases a fight. -- faces a fight. her party unlikely to attempt to rewrite it. wants's emmanuel macron researchers and academics and other towns and people to move to france after brexit. he was speaking in london as he met theresa may and sought to assure up support for french voters living in the u.k. his visit came as one poll showed himself thing back into third place in the countries tumultuous race for the palace. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. bloomberg.
manus: thank you. we have had a conversation with and ceo.irman he sat down with john micklethwait. john asked him if he thinks opec will need to extend its production cuts past may. >> i'm convinced will have to do it. it is not really opec, it is also russia. we have [inaudible] what happened in september. real driving force was russia. russia for the first time in history and their leadership of vladimir putin accepted to make some cuts was the driver which for saudiargument arabia to change his policy. it is not really opec it -- opec. it is opec and the non-opec market. the inventories are quite high. it will be expanded beyond may.
that was -- priorities will become plain. there is some good news for this industry. >> what about shale, does that play into that at all? >> it plays. , the industry in the u.s. is very dynamic and consistent. at $55 you see money coming back in this industry. but she said you think it is quite expensive. >> what i said is if you want to invest to acquire position, it is expensive. if i want to acquire position in get $80.um i need to it is a matter of the step to invest is expensive. it is a business where the winners [inaudible] 40,000 for an acre is expensive. >> you increased your dividends, you beat analyst estimates. it looksdescribed how
like opec will continue beyond may. do you think the bad times for the oil industry are over? >> i am not fully convinced. we are in a volatile market. positivets, it is a trend and the markets are willing to go up but you have some negative impact potentially. the -- libya coming back to the market, will the country be compliant? our policy, our strategy is to continue to lower. it is an industry, it is a commodity. my job is to be sure that we are profitable. the answer is being disciplined. manus: on the eve of the election of donald trump total signed a prillaman are deal to develop a gas field in iran. him ifcklethwait asked
trump's election has changed his plans to move forward in iran. >> i have been encouraged by the statement by the defense minister. i think he seems to that she is willing to work within. -- he is willing to work within. if it is the case we will move on with our investments. we are a public company. butbey international laws it is nice to take some time to be bold. if the contract is good we will move on. >> have you talked to the u.s. administration? >> of course. i talked to the previous one. the way we behave is to be transparent. the state department is aware that -- so we are transparent. toing said that we are free behave or two thing to do and invest for what we think is good for our company. and our shareholders.
we are -- have a long history and it ran. we have been able to [inaudible] which is a good contract and we are willing to move forward. to do also to listen and with the u.s. administration will decide. listening is very important. i just congratulated him. [inaudible] >> do you think the administration and russia is a area of risk or opportunity? >> if we cannot find ways to bring back a dialogue between russia and the u.s., russia and europe, it is good for everybody. we are facing plenty of uncertainties. the middlear in east, in particular with isis. competition,ost
there is always a target for everybody. it will be good if we have more stability. it's u.s. president when he is elected is a case for -- was the case for george w. bush and obama and donald trump. they need to find a good [inaudible] we have a lot of investments. it is more important for the world only for total. >> have you changed your investment strategy in the u.s., when you look at trump, do you think you could be tougher you on climate change? how is he [inaudible] first policy is good for business. i am willing to come in and willing to develop gas. -- we are the number two,
number three world's largest company in energy business. we are willing to develop it. we're willing to develop chemicals. we will announce soon new projects in [inaudible] so we will create jobs. [inaudible] in particular i hope the policy in favor of solar and renewables will be maintained. it is very poor. -- very good. manus: keen to build on the gas business. we will speak to another ceo, of the spanish power company. their results after the market open. i have the chairman and cofounder of metro bank. burn in hell joins me on the set. ceo joins me on the set.
dropped. that was still above analyst predictions of 3.8 billion euros. in aircraftte surge deliveries failed to offset costs. engine glitches curb handovers in the latest a320 narrowbody. in singapore, to for more currency traders have been settled -- sentenced to jail terms for making false trades. one was sentenced to 15 weeks. an other was given eight-week sentence. according to their lawyers, neither man plans to appeal. to streams in talks major league baseball games according to a person familiar with the matter. the latest sign that sports leagues are embracing social media as a way to reach viewers. as they struggle to adjust to massive changes in the way consumers view video. that is your bloomberg is this flash. manus. manus: thank you very much.
let's focus in on the feds. loretta masters said the fed does not want to supply the markets on policy. here's what she told bloomberg. >> i would be comfortable with interest rates moving up. our job is to be as transparent about the rationale for policy path. we certainly never want to surprise the market. you do not want to delete too long because we will be behind. be behindeave we will the curve. if we make progress and keep delaying then we would potentially get behind. in a particular environment like this we might see more changes in our forecast. and associated appropriate policy. i think that is good in the sense of we want policy to take into account economic conditions.
economysee how the plays out. we will have to assess the package when we get more details about what those impacts will be. we have to be nimble about it in terms of being willing to change a policy path if you think the economy is evolving differently than we anticipate. let's talk to our macro strategist. master et al trying their best to move this work function. it is nowhere news a level that the fed would become trouble. i would say it is easy to make margin play. there is no chance of march hike. the two key things she said were that they do not want to surprise the market and the fed is not behind the curve yet. she was trying to warned that a hike is coming in tightening is coming later this year. hike without it
being priced at 70% or 80% as we have come to expect. it does not mean you have to hike in march. manus: you can go back to the greenspan era and communication was different. markets are so schizophrenic that if they went against the grain they might shock and perhaps undo all the work they want to do. let's talk about dollar-yen. it is in a range. you guys are talking about it being between a 50 and 100 day moving average. does the dollar move come lower on the global recovery which is typically what you see which is money flow into e.m. which is we are seeing -- where we are seeing the flow go. does it go back on the prospect of a hike in june? >> that is a controversial question because the market is divided. normally, a global growth scenario means kralev urging and that means funds going out of the dollar and investing in the rest of the world and it should be negative dollar. personally we will see that
correlation persist as we get down the growth cycle. the dollar will weaken. bets thathe market the u.s. is excelling ahead of the rest of the world. we have not seen any evidence. see the s&p is that records nearly every day nearly. a.m. equities language way below the highs of a few years ago. i do not think this can't continue. manus: it is called the american dream. talk to me about the aussies, they bought, they could not get enough of it. aaa grade as the they upgrade iron ore? an option. , it showsd sale demand for us chilean debt is still there. just recently, the yield of
australian debt over similar aaa rated peers reached a local high. it is not surprising we are seeing this monster demand. you mentioned iron ore. productions --s projections are lower than where chinese futures are pricing. it has not happened yet. so why suddenly now? it means the government might not -- might have to raise their projections which will be good for their budget and the economy and the demand for aussie might remain there. manus: thank you very much. the deliberations of the em live team. team.ive there is a stream of smart consciousness that you will be able to pick up. good ideas on how to set up your trading debt. we will take a look at what is coming out. lloyd's and metro, is it really a challenger versus tradition? we will talk about the numbers.
let's banking definitely going to be in our sideline. a couple of other stocks to keep an eye on. we will have a conversation with the metro ceo. deposits at 56%. 7.9 5 billion. lending is out. what is the changing landscape? for the an incentive challenger bank to take on some of their customers. i will put that question to him. the new engine option and the a320, things have not worked out according to plan. they pulled up a little in the fourth quarter but we saw pped, it isit dro still a beat on the street. mullet -- marine le pen, round two of the elections, breaking the 40% probability. still technically a loser, but the percentages are shifting. the markets are concerned. it is reflected into your paper.
>> there is less than 60 seconds to the start of your european trading day. futures look like this. it was absolutely undeniable on that energy markets believe in the power of the cartel. the opec cartel to affect change and get 100% compliance. that is the conversation i have, and exclusive conversation. the dax is up. keep an eye on a number of up .3%.al stocks, london, 72.44.
new business. keep an eye on two year government bond yields. we are down at a record low for the third day in a row. in france are rising. the stock markets are now open and it is official. keep an eye on the yields. equities are set for a stronger opening. let us get across to nejra cehic. nejra: manus, starting with the gilt markets, which are opening up right now. we are seeing the 10 year treasury yields rise some two basis points after comments from loretta mester on the fed. we are looking ahead. we were seeing european bond yields take higher. let us see how the gilt market is moving. up one basis point, shifting 1.25%, up one basis point on the 10 year yield. it is heading up nonetheless. looking at the imap for stocks,
for the stoxx 600, we are ever so slightly higher on europe's equity benchmark overall and if we look how the industry groups are breaking down, it is i.t. stocks leading the gains. financials as well up almost 4/10 of a percent. for a seeing oil up fourth day, its longest run of games since december. speaking of those financials, i have got this chart on u.k. banks. it is a big week for u.k. banks. we saw lloyd swing into profits, but the pretax profit was amiss. it is the special dividend the want to focus on. this chart showing u.k. lenders trading near their highest valuation in a year. i spoke to the senior bloomberg intelligence analyst on my radio , ok,just now and he said highest evaluation in a year, but historically, these u.k. lenders, not so expensive.
lloyds shares are the most expensive by this measure while rbs's are the cheapest. manus: thank you very much. youo your mov function and begin to understand who is driving this market. it is lloyd's and of course hsbc was battered yesterday. they did their share of bypass, but it is the consciousness of a global company that needs to -cale back further to state - to sate the market. all of that talk about a potential fed market, they have a little bit more to gain from a more aggressive hike process in the united states of america. i think that is a fair take. .05 is not going to shake a boat, but it is going to indicate the momentum of the board from the top. total, we have that exclusive conversation. go to bloomberg.com, pick it all up.
committed to in the united states of america, gas, and you have shell eking out another gain. on the contrary side, unilever and nestle. what happens next at unilever? they really tip pen to the paper yesterday. they better not rest to easy over there. lloyd's rocking it out over 4%. let us talk about the issues. metro bank and lloyds. the new kid on the block was a beat with lower than expected pretax loss and 56% jump in deposit. , fourth-quarter profit despite conduct and restructuring charges. let us make sense of the numbers. we have richard. think you so much. talk me through the fourth quarter, first of all. what was good? richard: absolutely. point tould clearly
the fact that there is no ppi charges in the fourth quarter. the scandal sort of dogged the large retail banks in the u.k., lloyds is setting aside money for this over the past few years. quarter, no charges. that is one of the things that helps their bottom line. there is a little bit of conduct charge in there, 475 million pounds. that contributes to the statutory miss on earnings. on an underlying basis, it is very strong, paying the dividend. things are generally quite good if you are a lloyds shareholder today. manus: that sets them apart from rbs. challenge. it is the difference between the two, isn't it? it is still difficult to envision a dividend prospect with rbs versus lloyds. richard: absolutely.
rbs is some way from paying dividends. their chief executive gave an interview to a newspaper today saying 2018 would be the year they would become profitable again. they are expected to post a 6.5 billion pound loss on friday, huge numbers. they are still taking massive provisions for a u.s. mortgage investigation. they have got huge restructuring charges. they are some way off. lloyds is kind of coming to this point now where we are basically interested in how profitable they are given the low interest rate in ryman. they are not really taking as many large historic items as their rivals. the dividends. can they keep that sustainable, grow that given where rates are in the k? manus: of course, it is all about sustainability. when it comes to bonuses, this is a very british pastime, obsession about british bank bonuses. pay?about
how much discussion is there around that? the market seems to be focused on whether he will take a pay cut. richard: he will take some small cut this year in terms of what he cut last, however, i think it a veryl very healthy -- healthy amount. he has to hit all of his targets. the board decided it was strong this year, cost-cutting achieved profitability achieved, dividends achieved, the things that are being taken away is the legacy ppi in the third quarter that was one billion charged for payment protection insurance and the group bonus as a law was weighted down almost 20% by that. manus: we will have a conversation with vernon hill very shortly. they are rocking it out, taking deposits, lending. they really are challenging the status quo, are they? richard: definitely. they are growing quite fast indeed. we see that huge growth in deposits.
on the other side of the balance sheet, they are improving their lending capability. that is something that is harder to do. you don't want to go lending to absolutely everybody in this low interest rate environment where skis aht in up over your little bit with bad loans. they are doing it prudently at the moment, grown quite fast. a charismatic chairman in vernon hill. there is certainly an interesting thing to watch out for. manus: i like that. i like a bit of brash and bold. i'm looking forward to having a chat with vernon. i will have you -- see you bright and early. great thanks to you, stephen morris, banks reported. if i had a bell, i would bring it. my apologies. 40 and slip. you will forgive me -- freudian slip. you will forgive me. the dots rises 12,000 for the first time since april 2015. if i look at the year to date in terms of what we have done so
far this year, these are the components. let me just change this into the year-to-date and you can see actually what you have managed to achieve. these are the numbers in terms of performance. lufthansa, we really having a conversation later on, but if you think about year to date, we have been rising for six years. the longest winning streak since 1986. up next, we'll speak with the ceo of a spanish power company on their results. in 10 minutes time, we will speed to the chairman and cofounder of metro bank. more on our exclusive interview with total chairman patrick. this is bloomberg. ♪
2017, would itt -- more businesses around the world? about 2016.happy i have seen this growth. the result is not an easy task. 53%.s already grown by we are starting to make things. today going to announce we are increasing our dividends by a similar amount. thatio: we have seen percent over 15%, increasing dividends in two years. the trend for the next year also, we are going to finance investment over 25 billion up to 2020, which almost half of those is going to be addressed in the united states.
the rest worldwide as well, mostly in the united states. growth an expectation of .o reach a level of profit it is good news for investors. it is interesting that your business is still in the investment atpex a different scale than the oil majors. let us talk about power pricing since it is down to the year. spanish power prices, they hit records. can we extrapolate anything for the first quarter? we just had the recap. prices are improving domestically for you. what might that mean if that holds for the first quarter? the first thing i have to say is that all the analysis has been made across the european union either by the cma
or regulator in spain, so it shows the competition is fair in all those countries. tremendous win, better when conditions. very high demand because of low prices hass, so the already increased, so seeing that, in the case of spain, almost 83% of the total will not be affected at all for the prices because they are fixed prices. it is very high, the numbers of those. in the case of what has been affected, it is only those ones which are low powered. only a small consumer. consumers increase average in january, october, december, three euros. important is to
say is offering them works and competition works for all the regulatory analyses. manus: that assad talk about the business, taking a forward. the blessing to me, i know you were looking at us it's. you committed to mexico and the united date. what about australia? you were looking at athens and australia. can you confirm or deny that for me? ignacio: we have demonstrated in our way 16 years that of moving is to the west. we never moved to the east, so if we make a move, we will always be in the west, not the east. so no, you're not looking at australia as a potential acquisition. we have nothing to increase in anything. it is mostly looking to the west
and not the east, so our department of m&a, i'm always looking at those things, but our strategy, our goals, our mission, is to move to the west, not to the east. manus: let us talk about the west, then. what about the united states of america? trump is in the white house, the energy landscape is changing. we know locally he is not exactly rattling for your renewables business. how much capital do you want to commit to the united states of america for expansion? from now to 2020, the numbers ranged from 9 billion to $10 billion to be invested in the united states. it is not dependent on the federal authorities, independent of state authorities. it is depending mostly on the regulation of the state. what is the renewables
obligation without already imposing to the companies? saying that, all renewables are covered by a law. for republicans and democrats, allowances are perfectly planned and he's going fromstematically reduced 2016-2020 where the cards credit would be zero. that has also been subscribed by the administration. putin is not only subscribing and supporting, but the secretary of treasury saying that would be a good example of how subsidies can be diminished in the very regular meanner. all of our renewables are covered by this and it is covered under the situation. manus: very clear message to the market. let us talk about your u.k.
exposure. you hedged your exposure last year. they are rolling off. can you give us details in terms of whether those hedges work? from everything you have heard and seen so far from the administration here in the united kingdom, as an inward investor in the united kingdom, are you more reticent now by committing capital to the u.k.? two questions, like tesco's, two for one. ignacio: well, lately, to the hedges, they were done this year, so we are already covered for the changes in all our accounts for the whole year. related to investment in britain, i think as well, most of them are related to networks, which is committed to socgen up to 2023 in the case of distribution and 2021 in the case of transmission. it ise and offshore --
not well absolutely covered with the existing agreement with the secretary of energy, and treasury. manus: thank you so much. [crosstalk] yous: ignacio galan, thank so much. time has run against us. thank you very much, sir. let us talk about that market movers. nejra cehic. nejra: it is a big week for u.k. bankers. to fourth-quarter profit. one of the headline profit numbers came in as a mess. the market is not focusing on that. lender,est mortgage consumer bank, saying lending margins would hold up this year, but not only that, it boosted its dividend. that seems to be what the market is focusing on, the special dividend propelling the shares to the highest since june 23. up 3.5% on lloyds right now. another stock that has the --
att.r e highest is barratt is confident and has proposed a special dividend. these two are the biggest on the stoxx 600 today. one of the biggest losers with airbus, down 1.4%, facing major issues with the domain product. the company did say profit will increase this year. it regains control over costs and production challenges. still, that stock down today. manus: thank you very much for a roundup of some of the stocks. are 56% jumpders in deposit and its underlying pretax loss beat the markets estimates. vernon hill joins us now for his first interview of the day.
welcome, good to see you this morning. good to see a challenger. everyone i know that goes into your banks on the kings road speak a few sibley of how good effusively of how good your bank is. break the numbers down for us, vernon. a pretext profit of 1.5 million. second quarter, we had been in profit. thank you for the kind words. customers, we turn customers into fans, and this is a service and convenience model. deposits are roughly 50% consumer and 50% commercial. we are as much a commercial bank as we are a consumer bank, and they are coming from the big five banks. they want a choice. manus: there is more on the way. if we take what rbs -- and i want your opinion on this -- they are holding the sales of williams and glenn. do you think that is a smart move? they have about 5% of the small, medium enterprise market.
how much of that business are you actively going to chase? vernon: we are actively chasing 100% of the market in every area. it is too soon to tell what this newest scheme in the world bank of scotland -- i would be reluctant to make a comment. our model is about gaining market share, and we are attracting market share from all of the banks. manus: you are gaining market share as you say. when you look at u.k. post-brexit, the consumer looks as if it might just have faltered a little bit. are you seeing at the front and in terms of lending to real customers? you, me, mom and dad, grandpa and grandma? vernon: britain is a dynamic gross market, and london is one of the great gross, world gross
markets. we are seeing no declining growth either on the business or consumer side and we are extremely optimistic about the market. about theimism market, i want to circle back. i know you are bit reluctant to make any comment about what might happen with williams and glenn, but as a man who is building a business, you have gone from zero to hero quite quickly. when you read the news, what would they need to offer me to get me to the table to talk about taking their customers. must've been something that went through your head in terms of what you would need to see from them? vernon: i really don't have an answer because it is too soon to tell, but we would like the competitive must've been somethg that went through your head in environment to be fair, and we would like the government to remove whatever there are. things all we ask for is a free market. manus: it is very hard in a business that has been built up over so many years. talk to me about, people are
saying you know donald trump might well. are you familiar with him? >> i do. manus: he is talking about rolling back regulation in the u.s., right? >> correct. manus: that has a trickle-down effect in the u.k. and to europe. do you think that will be a good thing, if he rolls back, it will be good for your business in the u.k.? vernon: i don't know anything about europe. i have written something's about the regulatory environment in britain before trump, more enlightened than were america has gone, and i think president trump has said he will rollback some of the burden of government in america. i think that is a great plus. it may have some minor effect in britain, but i do not see a big change. manus: in terms of the interest-rate environment, interesting when you listen to carney and look at the interest-rate pricing. your business is linked to interest-rate. it looks like a failing possibility of a hike on the
agenda. the market is getting further and further away for the potential of rate hikes. what do you make of that landscape? vernon: banks care more about the shape of the yield curve than the actual rates themselves. we would wish a steeper yield curve between the short-term rates and long-term rates. i am not sure anyone knows where rates are going. [laughter] manus: that is not really the most honest answer i have ever heard, but the inflection of the field curves, it is shifting. you may say, manus, i don't talk about europe, but the political landscape in europe has got a potential landscape in terms of the flow of deposit into the u.k., into your business in any way? vernon: not to my business. maybe the big four banks, but we are centered completely in britain, and we have seen very little influence in europe. manus: 48 branches, -- vernon: more coming. manus: where are they going to
the and how many more am i going to have? vernon: we opened one new store each month. 110.20, we expect to have manus: tell me the demographics of your new customers. vernon: there is no demographics. young, old,they are wealthy, not the wealthy. they are tired of being abused and they want choice. manus: everyone wants choice, vernon. thank you so much for joining us today on bloomberg. we wish you have a success. i'm not a fan yet, -- vernon: we will have to get that fixed. manus: vernon hill, chairman and cofounder of metro bank. 30 minutes into your trading day, this is how we are shaping up for the market. a nice rise, stoxx 600 up through the 14 month high. you are seeing the dax trade through as well, a nice move on the dax there. we are seeing the dots above 12,000 for the first time since
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manus: no surprises, the red a master tells the market this at -- loretta mester -- three hikes in 2017. investors will look to the minutes later today. not totally convinced, the ceo of total tells bloomberg in an exclusive interview that he does not think there are tough times for the oil industry. he does not think they are over. better times on the high street. lloyds bank swings in the profit as it boosts its dividends. a very good morning.
it is bloomberg markets, european open. i'm manus cranny. 30 minutes into your trading day, this is the shape of things to come. political risks might be rising in terms of marine le pen in round two. she has broken the 40% barrier. the markets are not interested in that. they are interested in bringing higher u.s. equity markets. energy markets are big. the belief is -- that is what the market is doing. media and banks are rising this morning. you are seeing europe breakthrough ties level in 14 months. the stoxx 600 has been writing for four days. there is a nice, brisk pace on the market. goldman had a commodities out this morning. they have not gone completely jerry maguire, but they are showing me the real demand of the commodity complex. that is the shape of the
market's two-year in germany, down in terms of yields. we are touching new record low third yearthe in a row. there is a subplot of political risk. we had a conversation with the total ceo and chairman, patrick patrick . >> there is a positive trend and you have negative impacts potentially. what are these ones, the u.s. andeholder increased, it will country be compliant? >> our strategy is to continue to lower breakevens.
, welcomeining me now to the show. skeptic. a he should have tuned into the secretary interview yesterday. the times, but the consensus would be that you need this agreement to extend between the opec and non-opec members beyond to maintain this kind of rally. there is the opec production and the price of oil. how convinced are you about the momentum above $50? >> first of all, he said we have volatile oil prices. we actually have not brought volatile oil prices at the moment, we have pretty stable oil prices because the opec cuts have worked, and they are doing what they should be doing, putting this around $50. i think there is this balance between oil stocks, really high levels, three decade high levels, so that should be pushing the price down, but opec
has succeeded in this 90% compliance with the cuts. i think they're going to past june.e cuts they will agree to continue for another six month, and that hopefully will, as far as they are concerned, provide the floor to say at this level. past june. i think it is a floor for the oil price and the risk is that it goes higher if demand picks and oil production in the u.s. does not pick up sufficiently. convinced about the renaissance in the global recovery, that there is a strong momentum? i'm not sure whether you would use the term. you look at u.s. growth. where are you on the scale, one to 10 on the scale of momentum in the global economy? jonathan: every market you look at at the moment is saying we are going to muddle through and succeed, so you have got pmi numbers that are coming out really positive, consumer sentiment numbers keep coming out positive, volatility
really low in most market, vi x at really low levels. earnings growth forecasts's are pretty high and everything you look at is that we are going to muddle through. the growth is going to continue. part of me is saying, well, that could actually happen. the muddle through quite often does work in the world, but to starthave got putting questions to that. a much or how long i have got for the answer. manus: you can keep going until we are told to get off. jonathan: what can trump get through, will he get through this phenomenal tax cut for corporations, will that continue? the second is europe. we could spend quite a long time. manus: we'll come back to your. jonathan: and the third is slowdown in china. all of those could derail the growth, so what i'm doing and portfolios is i am, my base case, is we do actually muddle
through and the world continues, but i have to spend a lot of time looking to where the protection is against these risks, so the most recent thing we have done this week is trim equities because we had such a strong rally since trump's election. manus: take moneys off the equities. we will go back to the european story in a moment. jonathan bell, cio. -- ifnder, your bloomberg you are a bloomberg customer, you can use tv . and onto do things live the fly here. that is the way we roll on bloomberg tv. you click on tv and it pops up. you can check on the charts and have a look at the functions, all on the right-hand side, and you can even, there you go, see yourself. johnson, in a second. you can click on the charts on the right-hand side. you can check the show
the top movers. nejra: a big week for u.k. banks, and yet another one report today. lloyds, the biggest consumer bank, swung to a fourth-quarter profit, a bit of a surprise. one of the headline profit numbers was a miss. lendergest mortgage saying lending margins will hold up this year, but not only that, it has boosted the dividend and it seems to be the special dividend the market is focusing on, pushing shares to the highest since june 23, the day of the brexit vote, up 3.7% for lloyds. barratt shares heading higher. saying it is confident in the outlook. a little bit of a theme here. the best performers on the stoxx 600. barratt up two point 4%.
sticking with plc, hays down to .4%. the vast majority of the markets remain positive. that he's were down. were down. it is about the dividend today. the interim dividend coming in a little light relative to expectations. manus. manus: thank you very much. bloomberg first word news with sebastian salek. sebastian. barratt sebastian: the u.s. government has outlined a sweeping crackdown on undocumented immigrants. donald trump administration will seek to swiftly deport people without court hearings and target migrants charged with crimes or thought to be dangerous, not just convict. john kelly also ordered the hiring of 15,000 more border control and immigration agents and the building of the mexican border wall. thehe memo regarding executive order for border security and immigration enforcement improvements outline the steps that dhs will take to
secure the nation's southern border, prevent further illegal immigration, and to repatriate illegal immigrants swiftly, consistently, and humanely. formeran: hong kong's chief executive has been sentenced to 20 months in prison for misconduct in office. on friday, he was convicted for failing to disclose a conflict of interest which arose when he was negotiating for a luxury apartment. caps a stunning downfall for an official who helped seal the former colony through a series of financial shocks. the government has won its first clash with parliament's unelected chamber over the plan to trigger brexit. after today's of debate, lawmakers agreed without a vote to let a draft to invoke article 52 road to the next stage. theresa may fights to that the law remain unchanged as some are likely to attempt to overwrite it. france's emmanuel macron says he wants talented people to move to
france after brexit. the presidential hopeful was speaking in london and sought to shore up support. news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. manus: thank you very much. circling back to the fed, waiting for loretta mester. u.s. central bank waiting too long. we spoke with the cleveland fed today and asks her what she needs to see before she is comfortable with a move. >> we will have to see how the economy plays out and assess the package when we get more details about what those impacts will be, and we have to be kind of nimble about it in terms of being willing, right, to change our policy path if we think the economy is evolving differently than we anticipate. manus: meanwhile, in
fed presidentthe says he continues to see three rate hikes this year. do worry about returning to the zero lower bound. that is a concern. that is, for me, while i think it is proof to have a gradual rate of policy increase, again, three is what i see this year. that forecast i have for three is independent of any fiscal policy changes one might experience. manus: and a little bit later today, i mentioned it earlier, the fomc's january 31 through february 1 meeting, the minutes. those are out at 7:00 p.m. u.k. time and investors will be looking for clues as to how tight the federal reserve's conversation is pure you can follow that on yourtliv fund -- your tliv function.
they are lining up, aren't they, like ducks, trying to shift the probability function of 38%. in march if the probability function is not up around 70%, 80% probability? with a really do something shocking like move without the market being fully briefed? jonathan: it would be a complete shift in yellen's approach so far, which has so far been to lead the market once the market expect to move. you can then make the move. do not make the move and surprised the market. at the moment, as you say, it is not looking likely in march. it is looking likely in may because that is where the probabilities are in terms of what the market is expecting, and i still suspect may is the most likely. it will be interesting to see what comes out of trump's discussion of congress in less than one week now. manus: yes. jonathan: and his phenomenal
corporation tax cuts. manus: do you think that will be down to 20%? jonathan: 20% is a number he said he wants to go to, so 35% is the top rate at the moment. that is a big target. i suspect he's having to have discussions at the moment and 20% may not be achievable. as an initial hit. at the same time, you have, what about this repatriation tax? canyon on set up a moment and bring back cash from the rest of the world and charge perhaps 10% tax at the same time? there is scope for disappointment there if we do not get to this 20% move, but there is also scope for the market. if you get a big tax cut, the markets say this is great news. at that point, the likelihood growth picks up and you have to have an interest rate hike sooner rather than later. manus: this is just what we have
put together. inflation expectations are at a three-year high, ok, and you have 10 year government bond yields just trying to make up their minds which way they break. everything you have just said to ,e, i just need to understand is it priced in equities, is it priced in the dollar, and does it shift, would it shift this momentum of inflation at petitions? i think the fed's fair gauge pce 1.4%. we are nowhere near the 2%. jonathan: i don't think the march hike -- manus: march is not priced in. jonathan: the issue i see actually is the momentum has been really strong. the pmi numbers, confidence numbers, that has been really strong, but we are beginning to see a few numbers rolling over from that. in the u.s., pmi's have come out
slightly weaker than they have last month. bank lending numbers, slightly weaker than they have been, and in fact, since the election, they have been slightly weaker, so having had this really strong momentum, i suspect what we may see his momentum tail off a little bit, and that is why you do not get the rate rise in march because there will not be the extra news that is required. manus: you said you took some money off the table, ok? all things being equal, are you looking for a retracement, has the market got the propensity to draw down by 5%, 10%? what is the issue to reenter? jonathan: my base case is that we muddle through. manus: yes. jonathan: you get enough that keeps the market where it is, but my concern -- and by bigger concern is what happens if that doesn't play out? market valuations are full. in the u.s., you have the
hasard multiple highest it been, cyclical adjusting price multiple in the top 4% than it has been in history since the numbers started, and you have got earnings growth numbers forecast at 10%, and all of these things, any of which can disappoint and lead to the market setback. arelthough i think we likely to muddle through, and that will keep the market high, there is significant risk that at some point something happens to upset that in the market has to come back in terms of price, so that is the reason why having seen this rally since the profit weake off the have seen since then, and i have got other things. i have added to commodities in case inflation picks up, inc. is what happens to the u.s. is inflationary and want some commodities to protect against that. and i have got investments in
high, cash, gold, all protection assets i can add to risk assets if there is a setback. manus: this is the aussie's game. it is a bit like digging iron ore. aussie yield israel. they offer 20 billion. the demand, pimco saw $20 billion demand for aussie paper. real yield matters in the real world. aussie paper gives the 1.2%. negative real rates in the u.s. -- falling or brave to pick up aaa?e -- to pick up jonathan: it is rare. negative rates of 1.9% in the u.k., and in germany, so everywhere else, -- manus: get as much of this stuff as you can. jonathan: if i can get a real return, let us have a little bit of that because it is pretty rare at the moment. value.rare and scarce
manus: you are welcome back. it is the market open. brexit. trump. the netherlands. first up on the global political stage, potential upsets your the freedom party is writing high -- ding high. onhe does come in first march the 15th, no other party is willing to share power with him. it is the same question every day. risks are rising. people who were perhaps a little bit clobbered, it is a bit like trump motors, coming out, showing their form. this risk is right. one way or the other, he's going to invoke some kind of change in the netherlands. to be thehe is likely largest party the way polled are that doesent, but
not necessarily mean he runs the government. it is more likely you see a coalition of other parties that forms a government, so i suspect that is the most likely position in the netherlands is that significant influence, the largest party, but not the party that can dictate what happens in the next government. and then, europe is on the knife edge in a number of places. holland clearly won. france clearly -- holland clearly one, france clearly another. there are a number of elections coming up that we have to be concerned about. manus: let us talk about of those risks because we have a recent poll. this is on fillon. since we have not seen 2015. i'm talking about the market, more put options than call options.
about the equity risk, currency carries quite a risk as well. that is a flip side to the european equity story. jonathan: yes, yes. and then, if marine is elected in france as president, that is , and ofhift to the e.u. course, you have to worry about what happens to the euro, what happens after? euroere a euros -- split? there are so many unknowns. if we go through this, there is going to be the first round, is it going to be fillon or macron? and then after that, who wind the presidential election? manus: i suspect it is not le pen. 40% of her winning in the second round for the first time in the polls. still not showing she would win. jonathan bell, our cio guest host from stanhope capital.
francine: the cleveland fed president says the central bank does not want to surprise the markets. will patrick crocker repeat his call for three hikes in 2017? not totally convinced. the ceo of total tells bloomberg he does not think the tough times for the oil industry are over, and speaks out against protectionism. to have countries around the world thinking it is better to be inside their borders will lead to catastrophe.