tv Bloomberg Markets European Open Bloomberg February 19, 2019 2:30am-4:00am EST
anna: good morning, welcome to european markets, the open. we are live here in the city of london. i anna edwards. the cache trade is less than 30 minutes away. thane cash trade is less 30 minutes away. ♪ anna: hsbc takes a hit. the ceo brown's out his first year with worse than expected results and the cfo tells bloomberg they are more concerned about the u.k. than china. >> we are able to grow our u.k. business, i think we are cautious on the outlook for credit given the lack of
certainty on the direction of the u.k. economy. hit: production outages bhp's first half results but could surging iron ore prices outweigh the bad news? in god's hands, jean-claude juncker expresses his frustration and the brexit talks as the u.k. tries to negotiate the irish backstop. welcome to the program. less than half an hour to go until the start of the equity trading day. we were without the u.s., presidents' day holiday there which means the start of trading could take a while to get into gear. taking -- this is what futures look at this morning, fairly flat. if we show you the gmm, what we have seen in the asian session, muted seems to be the way to sum up the moves and we have the moves and markets yesterday but in terms of what is going on in the asian equity session we are muted in those gains, futures look flat and the dollar looks fairly flat. we have kuroda and peter pratt
who said the central bank comments are keeping markets on their toes. corroded talked about the peterility of more qe and pratt talking about how guidance for the ecb could be changed. if the outlook worsens. we will focus on those stories. the dollar is fairly flat and we see some any coming out of emerging-market currencies. let's show you where we are on the sovereign debt story, some appetite this morning even if the stock story looks directionless. in terms of commodities, we have rubber moving higher, looking at some of the statistics, trade optimism cited for the one-month high that we touched yesterday. we are keeping an eye on oil prices, they are three months higher. let's put some of the moves in some perspective, global trade remains in focus as the european union found propped retaliation if the u.s. imposes tariffs on imported vehicles. transatlantic trade part of the
story. let's get to the markets with mark cudmore, bloomberg's markets live strategist in singapore. good to have you with us. let's talk about what is going on with the asian equities. verye not moving anywhere quickly in today's session but you believe there is more upside to come for the asian equities story. mark: absolutely. this morning in asia it started off relatively positively. europe has not taken monday's enthusiasm and it looked ok. after lunchtime, chinese equities slumped and that added negativity to the region. a little bit of disappointment. net-net we did not do too much on the day. i do think there is a lot of upside for overall asia strengthen equities over the months ahead. the five fastest growing -- growing economies are in asia, india, indonesia, malaysia, china command philippines. equity prices in the region are
pretty reasonably valued. you are looking at an estimate of 12.6 versus the five-year average of over 13. overall the equity prices still discounted, growth is pretty strong and we have the fed making -- -- dovish turns. thea providing stimulus and trade front is looking good for asia. trade has not resolved yet but unless it escalates there is a lot of ups -- upside. what about the chinese story question mark i have seen a couple of different takes, some things -- some are suggesting things are overbought is other suggesting china playing catch-up with the rest of the world and it has further to go on that basis. true, maybeould be overbought on a short-term basis, we have seen incredible gains and a pullback for the next few days, a couple of
percent would not be surprising. china has a lot more to catch up with the rest of the world. it will be a great year for chinese shares, they have had a great start and there will be volatility. the chinese government has made clear they will provide the stimulus to support the private sector, support the market and growth. if those measures are applied, they will applied more stimulus. the volatility will continue but there is a lot of upside. looking on it pe basis, chinese shares look cheap relative to most global peers. they can be overbought short-term but that might mean a small correction of a few days or week. overall they'll look good -- outlook looks good. aboutyou have been asking gold, why be bullish on gold, what kind of responses have you had? i am an idiothat because i am the one who has gotten gold wrong before which is why i asked this question. geopolitical
uncertainty, we have the situation in venezuela, that is quite high profile. there are these trade tensions we have not resolved. there is optimism on the front between china and the u.s. but we have the idea of transatlantic trade tensions. dividing some nervousness, people want to hedge and they feel that gold has fallen a long way and makes a valuable asset in the portfolio. ok with the next are hedge in the portfolio. we have seen the fed move more dovish and we have seen the ecb can't that they might provide that theyg -- shantou might provide more easing and corroded is commentary. central banks are sounding more dovish and that should be supportive going forward. i am sure no one was calling you an idiot. let's talk about what was going on on the end. we saw some yen softness.
it was a long time since we talked about the boj in great detail. kuroda is shaking things up talking about how there could be more easing if needed. what was the message? because is ironic monday people were getting excited about the idea that maybe there is a potential tapering in play with people willing to sell their long and bonds and people are pricing in that kind of trade. kuroda is emphasizing they are into easing, as long as the boj is an inflation target, they will continue down this path. it has in a decliner and the decline is picking up pace. with the declining population it and growth below 1% it is coming in at .85%. so for as long as the boj is inflation targeting, we will
continue to have easing in the central bank and that will weigh on the yen and on -- the yen on a long term basis. it is a wealthy country. it will grind weaker again. that kind of game plan will be the case for a long time to come unless the boj changes its mandate. anna: while we are talking about turns to the dovish side, we saw comments from peter pratt at the ecb that they could do more easing if needed and the guidance could be changed if the outlook worsens. how quickly do we think we get solid dovishness from the ecb or are we already hearing it? mark: we are starting to hear some of the guidance, the march ecb meeting is where we see a firm plan put in place. i am constructive on the economy and assets, we are getting late
in the cycle area that does not mean the end but the big weakling globally is europe. where growth deteriorated massively. the data is negative and it is unfortunate time that the ecb ended qe in december. they may want to change the name . they do not want to admit to feet and start the program they did before so people are talking thet some version of lending operations but they might name them something slightly different but it might takee programs that lending to support through the banks, particularly some italian banks. much, mark you very cudmore joining us with the latest on the session that has been underway for quite a while in asia. if you want to join the debate, get involved in our question of bullish on you are gold, give us your thoughts. on yourt at tv
bloomberg. let's get a bloomberg first word news update. >> brexit negotiators are working on a legal text for the most controversial part of the deal, the iris backstop. members of theresa may's cabinet are trying to force her to take a threat of a no deal brexit off the table. leading the commission to raise the prospect of delaying brexit. president trump has opted the rhetoric against the venezuelan machine. he called on the nation's army to switch support to the opposition and said the days of socialism are numbered but nicolas maduro hit back. president trump: you can choose do'sccept president guai offer of amnesty to live in peace with your countrymen and families. he does not seek retribution against you. and neither do we. you must not follow maduro's orders. >> today am a donald trump is giving orders, listen up,
military officers of the homeland, donald trump was giving orders to the bolivar yet it forces. commander-in-chief, is a donald trump of miami? withsweeping plan to link cities in china. hsbc says the region would have 67 million residents and a trillion dollar economy. it would also eclipsed japan as the world's fourth-largest exporter. global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: thank you. next, we get to the banking story, hsbc -- the market proves less optimistic than the bank of -- about its fourth-quarter
we are 60 minutes away from the start of the cash equities trading day. futures suggest we could be weaker but fairly flat at the start of the trading day. u.s. futures look flat as well and that might be where we are looking to for guidance. upbeat as is not as hsbc, shares of the group have ticked lower in hong kong after earnings fell short of estimates this despite saying it aims to meet its key financial targets. we spoke with the groups ufo earlier starting with the banks jaws ratio and what he thinks. >> it will not give you actual numbers, we like the system of jaws. i think underlying our cost growth at the moment important to remember we are in the middle of a substantial investment program. grow in investment spending by 10% last year and we intend to grow it again this year. big investment into growth and
big investment into digital transformation. and continuedct to commit to achieving positive jaws. manus: one or two people have said you might have to readdress that commitment you made last summer, the $15 billion to 18 ilya and dollars, is that say for intact, there is no reduction in that. ewen: we are being cautious, we have slowed some of that investors spend down and slowed we willstment and continue to be cautious until we see how the revenue environment lays out this year. it is a particularly volatile revenue outlook as we look at the year especially around the u.k. and to a lesser extent, with the u.s.-china trade discussions. manus: which of those worries you the most? you are the gateway into the soul of china, let's deal with
that. how will the chinese slowdown manifest itself in your numbers? it is hard to see that in 2018 numbers. we had revenue growth of 14%, 14% in mainland china and customers -- revenues were up 7%. we are seeing some credit softness is in the u k and the u.k. is the market i would be more concerned about at the moment than hong kong and china. manus: you have capital to deploy in the u.k., i am told you are trying to grow market share. has that proven hard in the current environment, how is it stacking up in the u.k.? team did a great job last year. we had markets growth of 10%, we took another 50 basis points of market share. weare protecting the share
wanted to take and we are growing our u.k. business. we are just cautious on the outlook for credit given the lack of certainty on the direction of the u.k. economy. manus: what have you in the board discussed on the preparedness for hard brexit, what is the discussion inside your boardroom? see, we haveuld been working on this for years the fed of a big operation in france that we have had for a long time. so for us, it is easier than some of our peers to prepare for brexit. on my side, capital funding, liquidity ratios all very strong. fed of a big operation in france that we have had for a long timeyou would han today's results that we have provision additional for the uncertain economic outlook in the u.k. cfo: that was hsbc's uf -- you and stephenson.
stevenson. relativeo do with the cost of banks. one of those metrics we talk about. olivia: iron ore is price could report, this-year after the world's biggest miner provided results it missed estimates. falling a percent. iron ore remains the top performing unit accounting for the largest share of revenue. huawei founder said there is no way the u.s. can crush us, and eyeing that the company -- denying that the company [indiscernible] this is britain looks to resist the trump administration's warning and allow huawei's technology to be used by telecom operators. hyundai is closing its factory in the u.k.
this is the fourth largest car employing 3.5 thousand people. production is being switched back to japan. the industry is reeling from job cuts and lost production in the run-up for brexit. that is your bloomberg business flash. anna: thank you. we are minutes away from the start of equities trading. we will take a look at the stocks to watch in the open, it just be is one of them, treating the asian session in hong kong. share prices on the in bhp, another one that is on the move in australia. we will focus on the performance of the mining sector and get you other stocks to watch. this is bloomberg. ♪
anna: this is bloomberg markets, the european open. minutes to go before the start of your equity trading day. let's get the latest on the stocks we are walking -- watching. hsbc and danig burger is focused on intercontinental. you on bhp. what is the performance there? >> it is a mixed bag this morning. earnings missed a little bit on mines in australia where they had a train derailment and some problems and a copper mine in chile. earnings came in lighter than
analysts were expecting. also there was not any new cash for investors, dividends were the same, no more buybacks but people are optimistic about the rest of the year, events in chile where the iron or outage ,eans that prices are flying they are optimistic about cash flow. that is meaning bigger payouts, maybe special evidence and buybacks for investors later in the year. not that exciting the last half but a better outlook for the rest of the year. what is the expectation with hsbc? >> hsbc in the fourth quarter estimates were hit by the market meltdown. they vowed to slow spending. the bank is looking at going its business and turning around its u.s. business so shares traded in hong kong are down the most in six weeks and they are called
down as much as 3% in europe trading. not too worried by china and the cfo said they see china avoiding a hard landing. we heard that message earlier. let's come to you on intercontinental hotels. >> china growth helping intercontinental be done operating profit, came in over a hundred million dollars, $790.te about the real concern here for per room. revenue goldman sachs is the trend is strong there and should be well received by the market. anna: thank you. and a few other stocks to look out for. talking about the strength of their business at the end of last year and the beginning of this. using some fairly strong language. they have seen trading a little bit higher given the settlement and damages and daimler and
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equities trading. this is how the markets are setting us up. a little bit of a bounce coming in the pound but it has been on order this morning. fairly flat on the dollar. the pound a little weaker this morning. may hold a cabinet meeting on brexit later on today. csi 300 over in china, this is the picture in the asian equity session. pretty muted seems to be the best way to describe the action. muted in asia, muted in the fx markets as well. appetite for the
dollar and little bit of retreat for emerging-market assets. central banking dovishness headlines add some yesterday after the overnight trading sessions. we do look to go a little bit weaker of the start of european trade. with or without the united states, we might be a little bit more directionless than usual. we have been back later on trading day. the expectation is that futures, we will be a little bit weaker but u.s. futures look ready flat through much of the asian sections. not expecting too much there. last session the u.s. was in play and we saw strong gains. that was about the optimism for trade. the pause in europe yesterday, we pause over in asia, waiting for another leg on the trade story. lot of trade optimism. this is the developing picture across europe.
we are as expecting seen some muted moves to the downside. let's look at the sector picture. a bit of corporate reporting to focus in this morning. financials and focus. hsbc. weaker in the asian session. sectors, both materials looks negative. financials looks negative as well as health care. energy giving a bid to the outside. bp is the biggest point scanner. the biggest scanner by percentage terms if we pull up the mov screen, this is a supplier to the aviation sector. i mention this one just before the break. let's look at what else is on the move. air france, klm. lots of aviation. definitely an aviation theme of what we're seeing moving to the upside.
business isbakery doing well. that stock of more than 5%. pandora is one of the biggest losers. bhp in there as well. done by 2.7% for that mining business. no new cash for shareholders. there is worry about iron ore prices for this is what we see at the moment. negative for bhp and hsbc. european equity markets. opening slightly lower this morning. the european union found proper teri at best retaliation if the u.s. imposes tariffs on imported vehicles with transatlantic trade tensions showing no times of easing. joins us now. good morning to you. give me your thoughts on trade and what can be achieved. you are suggesting there might be very little in terms of
material change as a result of any trade deal. a lot of rhetoric but no change. surely something must design signed the dots of line? steen: if you talk to the american negotiators, they are very disappointed. trump wants a deal. the chinese are saying the u.s. can't the negotiation with 140 claims they wanted to talk about. agreedthat is easily upon, 40% can be discussed but 20% is out of question. is,can imagine with the 20% security, technology, and the like. any -- the market will see any deal is something positive in terms of how long this trade lifts, how are you going to ratify the deal? assume there is a deal, will it be under wto rules? no because the u.s. with trump is not wine to go that route. include the chinese are not
going to allow the atomic energy agency that some inspect the country and the minister of finance or technology. we are very much pricing something that is not going to materialize. there will be some sort of eric victory for the two sides to claim and hold onto and extend the timeline but in terms of material impact, no. these two plans are incompatible. we will talk about the global growth story in a moment. one of the press conference taking place from honda. this is the ceo of honda, he will be speaking. coming out ofne this is that honda is confirming that the plans to close its swindon plant and 2020. they are also talking up things they're doing in turkey. the plant in swindon employs about 3500 people. europeanthe headquarters will continue to be located in the u.k., though, and
we look to the detail of why they are making this announcement before we jump to conclusions. for aleave that there moment. we will you any headlines a come through. japanese automakers and the extent to which they are based in the u.k. and producing in the u.k. very topical. getme also tell you, let's back to the conversation was steen. i've got a chart here want to show you. this is global growth momentum. you can link this to global trade or not but how concerned are you about a slowdown in global growth momentum? it's hardly slowed, it's a recession like speed but not because of trade. that thehe story was quantity of money collapsed led by china. money increased significantly. the price of energy and emerging-market was way off. adding a fifth component which is the strength of the dollar.
when you have an increase in the dollar value, we could be seen one of three. one of three means we have a recession. anna: do you see recession coming? steen: i think -- anna: is that your base case? steen: there's not enough dollars to fund this credit. gone so much that even though china is ramping up in all the central banks in the world are saying they want to be in it -- are in what i call you global policy panic to create more credit, the promise unlike in 7, 8 comment 2000, the amount of total debt in the world is so large that the base effect will be very small. you need a huge amount of credit. that's what we are seeing and that's why everyone is on the back foot. does that mean
the central bank's cushion us from the recession that takes a long time to manifest? steen: what they are doing is crowding out the ability of the business cycle. what is really happening over the last 10 years, we have disconnected the business cycle and replace it with a credit cycle only. every single response to any bump in the road will be a credit boost. that credit boost is not happening because the velocity of money is collapsing. pitcher board for the trading spouses morning, 80% of stocks that are down or banks. netre talking about tightening of monetary lending in the u.s.. in china, they're just really trying to support the collateral the banking system which is the property market area we are not doing anything's good for the world. we have crowded up productivity and increased inequality. anna: we talked about trade and
we talked about global growth. one sector that has been whistled by both is the author sector. we're showing pictures of this honda press conference with the ceo laying out plans put in the closure of a plant in the u.k.. by 2021.t closing is this a sector that the bad news can be in the price for autos or is there much more to calm? steen: for some oil companies it is. for the big german car manufacturers, i think some of them will be outright winners. over the course he last 10 sold, the amount of cars in the world reached about 80 billion cars a year. now the numbers coming down significantly to 50 or 60 and that means basically we have to have a new business model for cars. a car the future you will buy a car you're going to keep and just change the battery in the
software. need to convert themselves into platforms. the car committed the survive are the ones that become platforms, they become vehicles of entertainment, driverless, pools of share cars. all these that are able to get into the platform. manufacturing cars in your own, you're going to die slowly. anna: this chart shows the cheap valuations we attack to -- attached to automakers but you said so that is justified. industry isuto changing from individual people buying cars. will kneels don't buy cars anyway. in the future, cars are going to have utility functionality on a platform. a lot of other some of them physically driving the car. anna: thanks for joining us and your thoughts so far. he joins that she stays with us. we will bring the stocks on the move including hsbc as a cfo
speaking. giving details. including confirmation that it plans to close its swindon manufacturing plant in 2021. employs all about 3500 people. we also have the u.k. business secretary issuing a statement saying the closure of this plant decision.tating we're looking for the details of why honda has decided to make this decision at this time. clue the move being watched very clear -- carefully given what we've heard from others in the northeast. these aren't the comments being extentover to see what this is about brexit. honda says it plans to close factor in the u.k.. already buckling under's thousands of job cuts and the loss of key models in the run up to brexit. terms the hit has been in of key models not being produced in the u.k.. he will look for the details. let's get to our stories this
morning. seeing -- >> profits lower by 1%. missing analyst estimates. hsbc says there getting costs under control but jane -- blaine geopolitical uncertainties for making forecasting difficult. the cfo spoke with manus cranny earlier today. let's take a listen. you will be cautious on buybacks the near-term intuitive a better sense of direction of travel in the u.k. and a better sense of direction of china and u.s. discussions. dhp, part of the reason it's moving lower is also because of buybacks. was announced today in what a pretty soft quarter according to analysts. their forecast didn't change was still underlying profits missed estimates. i'm not sure how you would feel
about a vegan sausage roll but apparently it has a lot of fans. that's because greg's says it's sales this quarter were exceptional and really attributes it to a new campaign they've had on their vegan sausage rolls that drove a lot of sales which came in at 14.1% growth. anna: i have very liberal views on the subject of sausage rolls. fascinating stories. thes talk more about one of european equity markets, hsbc. the bank warning the geopolitical uncertainty makes the outlook far less certain. we talked about your big picture views and where you see the global economy into recession. in the central banks can't do much to cushion us. what would that leave the banking sector which hasn't recovered in this part of the world. hsbc a bit different and the u.s. different as well but
banks in europe not really having recovered from the financial crisis. >> they are really under pressure to come up with new investment. stantec is coming in and trying to disseminate its media and some of the greater markets. the banking industry will have to shrink in number of banks and in size of what they do. remember, atto least as an economist, the only place in economy creates credit, the only place is not the central bank but the banking sector. i think were getting a weaker banking sector. exactly for the reasons we said before. is launching a specific initiate for the banking sector. you see the banking sector as decreasingly less willing to lend to consumers. where do you see that manifesting? i think it's more the
consumers and businesses are not wanted to borrow from the sector. has been tiedctor into the u.s. overall. in some places you clearly need a slowdown like australia. in the european market is difficult for anyone to sell alone if you wanted to. it has meant impact on inflation expectation and that impacts the crowding out a productive care -- capital versus buyback programs and the like. >> you think consolidation is the answer? steen: not yet. what we see in germany between two relatively weak banks, it's not across pan-european effort. at the end of the day, the european institution, the eu ecb needs to figure out how to make it because at the center of any growth and any functional comments it's a very well functioning banking section. we have a very dispersed, very negative environment for banks
than easily taken care of. i think that's probably the economic question for the next one to two years. let's take a look at how markets are performing. european equity markets little bit weaker done by 0.1% or so. the sectors on the move we see weakness coming through in the banking sector, weakness coming through in the mining sector as well. also just want update you on a couple of other stocks. bhp a little3% and bit weaker down by 1.5%. the euro chorus grows louder, yet another ecb official focuses on change. more on that next. ♪
anna: welcome back. 21 minutes into the trading day. pictures from the press conference at honda were getting a q&a session taking place. some really interesting lines coming from the ceo saint u.k. plant closing is not because of brexit. electrification optimization for the move. the challenges affecting the
u.k. comments mumble of the uncertainty of brexit hanging over it, we will talk many times that the general uncertainty facing the auto sector. challenges that they face as a result. we will keep monitoring his press conference with the ceo of honda for any details. a fairly muted session underway from european equity markets. signal of concern on the economic slowdown is depressed. he is said officials could pitch -- pushback plans to raise interest rates if the downturn worsens. talked a little bit in passing about ecb story that we haven't dealt with it. when you think we will get a blooded till to the dovish side from the ecb are have we already's being fed that. steen: it's clear the ecb is nervous and we will have a change of leadership which is i think the bigger medium concern
we have to deal with. shellshockedare biggest think about it. ago,onths ago, nine months they were exclaiming to the whole world of this policy has worked for europe. and it turned the corner. here we are in january and they are almost in a panic mode in terms of what they need to do. they are talking about ways of supporting the banking sector. some suggest we are at the bottom here and not going to be a recession. avoided arrowly session. for europe as a whole be a slowdown before pickup. that we are in the trough. you don't share that view? steen: i will be playing for my favorite team when i get in shape. we can all hope and dream that structure of the banking
sector which is discussed is not in place. the ability to can 10 you to extend the low interest-rate and no hike is into help anything. if anything, the yield curve dictated by the intervention of the ecb dictates almost of the bank's can have less earnings and no ability to maneuver. we are not forcing on the system of panic. i think the recession will be the best thing to happen for europe because imagine if germany went to recession. they would have to activate infrastructure investment to reduce the physical surplus they are on. to reduce the current account surplus. we really need for an economics perspective is that you -- is a recession led in two by the german ability. until now, they had been the iny conservative fiscal hawk the bunch.
europe will be much better off they had a common denominator being the recession. anna: you are the third guest in today's who mention the need for more fiscal spending in the eurozone. i want to share this chart. index falling with bond yields. the link this has. people wondering how week bund yields get from here. is that part of what you see? hadn't into a recession in europe? i think it is but that's not a solution. it puts the onus on german bonds to be purchased more than anything else. i think with the ecb needs to do in the next stimulus is go to where the core issues remain. germany has an excess saving surplus they don't need. you need to support the economies of spain, italy, france as well.
we need it. in denmark in scandinavia, we have 1% growth. if this was 10 years ago, it would've been a disaster. now they are sealing off the growth. you seem quite gloomy. would you buy gold at the moment? the whole mental spectrum in terms of electricity, batteries, whatever. a lot of components. i think palladium is up 800% of the last five years. its tangible assets to offset the central bank policy of desperate panic response functions. anna: thank you very much. steen jackson stays with us. we will talk more about politicals in the u.k.. theresa may's negotiations attempt to rework the irish brak stop in brussels area we will
anna: hsbc takes a hit, the ceo rounds out his first year with worse than expected results and the cfo tells bloomberg they are more concerned about the u.k. than china. business --ur u.k. there just cautious on outlook for credit given the lack of certainty on the direction of the u.k. economy. hit: production outages bhp's first half results. the market isn't swayed by surging iron ore prices. the stock falls in london. jean-claude juncker expresses his frustration over brexit talks as the u.k. tries to negotiate the irish backstop. good morning and welcome to "bloomberg markets: the european
open." bloomberg'sards at european headquarters in london. 6:30 in london and this is the picture across the equity market. we are pretty divided on whether to go up or down, the stoxx 600 going higher or lower. wirecard come a big gainer. regulators taking action against short-sellers, up 7.8% this morning. we've seen some aviation and travel leisure stocks well divided. cement had some numbers out, that stock up for percent this morning. intercontinental up 2%. an aviation supplier settled on matters and that stock is up over 2%. to the downside, travel and leisure stocks down on the stoxx 600. ithad ryanair moments ago,
slipped off the biggest losers. hsbc is a topic of conversation today, down 3.3% as we watch what they have to say in hong kong with the interview from management. standard chartered, down in the banking sector. picture is we are treading water, looking for more guidance from the united states later today. they were out yesterday. bloomberg first word news with olivia house. vowed retaliation if the u.s. follows through with auto tariffs. brussels is preparing duties on 20 billion euros of u.s. goods. the dispute follows american tariffs on american steel and aluminum imports brought against the bloc under the national security designation. talks moved to washington following beijing meetings that president trump called productive.
china's vice premier will meet with the top u.s. trade team later in the week. higherch 1 deadline for tariffs is approaching. dubiouslds the distinction of having the worst bad loan ratio among major economies. it has overtaken italy for the percentage of npl's and a $90 billion pile of debt is putting some in doubt. fell.b.i. said the ration for the first time since 2016, which is too high for comfort. china announced a plan to link qualcomm and -- in cities in china. the aim is to rival california's silicon valley. will havethe region 67 million residents and a trillion dollars economy. it will eclipse japan as the world's fourth-largest exporter. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna: olivia, thank you.
themes in london and talk about brexit. time is running out for theresa may to put together a plan parliament will back. brexit negotiations are working on -- negotiators are working on a legal text for the most controversial part of the deal, the irish backstop. the european commission is raising the prospect of delaying brexit. is our reporter maria tadeo in brussels for us. good morning. is a compromise emerging between brussels and london this week? they are working on some new text. does that mean they can agree on some new text? maria: good morning, anna. we heard from jean-claude juncker who said we are in gods hands, but in reality on the ground, the situation is more fluid. we are in tying the entire brexit team, they are already touring europe trying to sell
the deal and we expect to hear from the attorney general. clearly, this is key. if he can say the backstop is it is not that bad, the prime minister hopes that can maybe persuade some mps to switch sides. that is what this new text should be about, clarifying the language on the backstop. from an eu perspective, that is not to say they think next week will solve all the problems. in the eyes of european leaders, they still think this will go to the wire. nothing substantial will take place until march, and again, the-claude juncker floating idea that ultimately, the u.k. will have to ask for an extension of article 50. anna: interesting to see what geoffrey cox, the attorney general has to say. he was ok with the last version of the backstop, which didn't please the research group. the split on the other side of u.k. politics in the labour party? of the the brussels view
seven mps quitting the labour party to set up something new. dynamics ofange the breast -- brexit from a brussels perspective? everyone was keeping a close eye on that yesterday and many have said privately that it has been difficult to figure out what jeremy corbyn really thinks about brexit, what he really thinks about the european union. also criticism in the past that he could have done a lot more to dissuade the referendum, campaign more favorably for the european union and that hasn't happened. in the eyes of the eu, prime -- prime minister may could get a sustained majority in the house of commons, but that looks difficult. the question in the eyes of brussels is, will this change the math in the u.k. parliament. they don't think that for the time being that will be the case. anna: maria tadeo in brussels.
let's bring back into the conversation steve jackets and -- from saxo bank in london. what is your base case with regard to brexit? what is your certainty attached to your base case? people have a base case send tail risk scenarios have high probability. steve: i'm 70%, 80% base case there will be an extension. i don't see this ending in march. may is taking the playbook from team.l she is running down the clock. she can't take the no deal off the table because that will lose negotiating power in the house of commons but i am negative u.k. assets but not because of brexit. because the credit contraction in the u.k. economy is the most severe we have seen in europe so
i am negative u.k. because of the economics, not because of the politics. the politics is a diversion and an important die version. it is the lack of transparency underlying microstructure is more severe and should have a bigger focus than talking again and again about brexit. anna: has the consumer been resilient where business has not been? business investment, is that the worry? mark carney talked about brexit hanging over business and investment. steen: it is the other way around. the brexit vote was followed by a massive credit expansion all of the u.k. everyone was surprised it was this -- there wasn't this fallout estimated by the bank of england and the reports at the time. what was going on in the underlying economy was the explosion in the amount of credit to the economy. anna: and the fact that 52% of people voted for it. aeen: remember, politics is derivative of the underlying
macro structure of the economy. in the u.k., you should be more concerned about the lack of momentum in the credit cycle, the lack of momentum in transparency, the lack of momentum in what is next for the u.k. we should have the discussion how can we reduce inequality, we and themack into and europe. seeing as an outsider someone who loves this country, it is confusing and difficult to see what you really want. anna: i'm not sure it is any clearer when you are less of an outsider, but thank you for sharing your thoughts. steen jakobsen, cio at saxo bank. our top stock stories with dani burger. dani: wirecard up a second day, headed for its biggest two-day gain since 2008 after boston band additional shorts on the company after all the price volatility. they be what we are seeing is a
short squeeze. market data shows 12% of shares still being shorted. still more room to run up if a short squeeze does ensue. intertrust n, off from the highs of the day, up 6% -- .6%. the us is a corporate story with eliot taking a position in interest. 6.3% of shares, the second-biggest investor. paul singer, billionaire, this is his fund. it has been somewhat active in the dutch space. finally, firstgroup earnings coming out. this is the transportation operator. sort of a mixed bag, but the positive thing that shareholders really want to see, especially in this environment, is cash flow, which is what firstgroup had. they are selling their manchester bus depot to the rivals, helping with that picture.
even though their greyhound division, as well as some of their rail saw weakness on infrastructure problems. anna: dani burger with your movers this morning. next, global growth slumps to its lowest level in a decade. we'll get the take from the chief economist of s&p ratings. he joins us in london. this is bloomberg. ♪
anna: welcome back to the european open. 43 minutes into the trading day. waiting for guidance to come from the u.s. session later on, but we are at session lows, down .3% on the stoxx 600. u.s. futures look to be slightly downward by the dow and s&p. the global economy is starting to look its weakest since the global financial crisis. a model by ubs suggests world growth slowed to 2.1% pace i the end of 2018 and with key indicators across europe, china, and the u.s. pointing downward, policymakers could be forced to action. joining us now, the global chief economist at s&p global ratings. good to have you with us in london. title of yourthe recent research piece which talks about how awesome is coming, not winter, channeling
"game of thrones," but not as bad as winter. explain autumn from an economic perspective. paul: we need slower global growth this year. the u.s. and china were both growing too quickly in our view, so the forecast we made at the time of the paper was for the u.s. to gradually slow to around two, potential growth. china has been growing too quickly for years, pumping too much credit into the economy so they should be trending into the fives not next year or this year, but gradually a more sustainable rate. the fact we are slowing is not necessarily a sign something bad will happen. it is the pace and path we get there. anna: my last guest thought we were headed to a global recession. you do not, but you share a view on stimulus, sharing that could be forthcoming. where do you see fiscal stimulus coming through? paul: it might be help in the u.s. on the infrastructure side. china is dialing up a little. and q1,re seeing is q4
is this a hiccup or will it be longer-lasting? slightly more optimistic analyst economists. or two willquarter be critical to see if the u.s. government shutdown, -- slowdown, german autos was terror to -- temporary and we will be lower for longer. if policymakers see lower longer, we could see more stimulus. anna: we have been following the travails of the auto sector. honda announced they are closing a plant in the u.k. but blaming the move to electrification and other big factors around the sector. is this something showing on global growth? it is weighing on germany. paul: it depends on the country. in germany, we had the switchover in q4 for environmental reasons, but there is a huge backlog. our analysts are looking at an
order book that needs to be filled, so we hope the q4 slowdown reverses and comes back up. for most countries, japan and germany are obvious ones. for most countries, auto will not move the macro needle but be a government story. that is part of the narrative for the bounceback. focus onot of people the slowdown in europe as being a concern despite the fact that on trade tension terms, it is the u.s. and china falling out. caught in the middle, recession in italy, slowdown in germany, is the room for fiscal spending in europe? paul: if you are starting with 130% debt to gdp ratio, you don't have much room. in germany, maybe there is room to do more on the fiscal side. france and spain look like they are doing relatively well. italy and germany slower but as we come out of the slowdown, we will see how much dialing of the policy needle we need.
this is autumn and not winter coming, how long will the zika last? a lot of people say we are late cycle. paul: i am not a fan that cycles have lifespans. it is not people come you don't have a probability of dying as you get older. if we soft land in the u.s., we could go two for a while. that is doable. -- europe'sr put potential is 1.5. we don't start rolling out the tombstones. anna: there are examples of economies that haven't had recessions for decades. paul: when up the usual suspects, you ask if the fed or the policymaker are taking away the punch bowl. are we on the verge of some repeat of 2008 were some super leverage in the financial system, the bif send others to not really. energy, we are not seeing supply shock, so there must be something driving the slowdown. if it is not the usual suspects, we go to a normal path
or it is something that is difficult to measure right now. expansions don't die of old age. something will happen to kill it if we go down that path. anna: paul, thank you for joining us. paul gruenwald, global chief economist at s&p global ratings. our stock of the hour come hsbc, given the extent of the share price move. the stock is down 3.5% this morning. the global tensions mean uncertainty after the profits missed estimates. geopolitical uncertainty in china, the u.s., and the u.k. have made the prognosis for the year less predictable after fourth-quarter earnings fell short of analyst estimates. to beives you something concerned about on a backward looking basis in the numbers they reported, but more forward-looking in the analyst responses here. full-year on weak
2018 results and a miss in terms of cost. the rates we are seeing cost rise versus revenue, disappointing according to analysts. a big focus on the cost story. next, the latest forecast sees more pain ahead for equities. certainly in europe. we did a poll. we will bring you the latest on that in a moment. this is bloomberg. ♪
anna: welcome back to the european open. 52 minutes into the trading day. it looks to be fairly flat at the start, but succumbing to the downside. down .25% on the stoxx 600, the dax managing to keep its head above water. the new year bounce in european stocks could fizzle out. european equities added $1 trillion in market value since december 27 on a dovish fed and trade optimism. now, concerns are creeping back in. bloomberg poll, the stoxx 600 is expected to lose 4.5% from yesterday's close by the end of the year. let's go to our equities reporter for the specifics. good to have you with us. what are analysts expecting from european stocks this year? expected to go down from where we are now. european stocks
have seen a tremendous rally in january and february, up almost 10% this year so far and it is the global drivers. the dovish fed, trait op -- trade optimism and all these fizzles -- factors could fizzle out. there is concern about trump's tariffs on automakers. european cars have been under pressure because all these things are fleeting. no phrase that says sell in february, but maybe we should do that on the basis of your research. what about the individual sectors? the auto sector has been beaten up and is relatively cheap compared to others. what has the poll told you? miners,cyclicals like automakers, industries that were beaten up last year because of the trade war have been going up this year. they are some of the best performance and that can reverse. time, telecoms and utilities, defensive, health care been under pressure. at the same time, health care is
expected to bring the best profit growth in europe this year so that could reverse. anna: it is interesting to think how the stock market performs over a year. i know that will be part of the conversation. let me ask you about what investors feel about european stocks these days. do they believe in this rally or do they want to stay on the sidelines? ksenia: we've had this 10% rally year to date but at the same time, the out lows from european -- outflows from european equities have continued. we have had almost 50 steady weeks of outflows since last shows yout just investors are preferring to stay on the sidelines because of messy politics, because of the lack of growth in europe. anna: thank you very much. ksenia galouchko, european equity reporter for bloomberg. to whereng polling as
european stocks move by the end of the year. havethe past hour, we brought your pictures of the honda press conference from tokyo. it runs almost an hour and honda confirmed it does plan to close its u.k. planting 2021. the u.k. business secretary saying this is a devastating decision. car industry that has already faced a number of headwinds including decisions by other japanese automakers not to manufacture certain vehicles in the u.k., so there is a lot of political focus on this. when specifically asked if this was to do with brexit, the honda ceo said the u.k. plant was not because of brexit and cited electric occasion and production optimization for the move. the pushing to electrics is a new big thing for the sector, is that? reviewing the -- isn't it? honda is saying they will export electric cars from japan and china to europe according to the ceo.
francine: jean-claude juncker express his frustration over brexit talks at u.k. tries to renegotiate the irish backstop. hit first half but concern over oil prices. .sbc takes a hit the chief executive rounds off his first year with -- with worse than expected results. is cfo tells bloomberg he more concerned about the u.k. then china. >> we are hoping to grow our u.k. business. we are cautious on the outlook for credit given the lack of certainty on the direction of the uk's economy.