tv Bloomberg Markets European Open Bloomberg March 5, 2019 2:30am-4:00am EST
anna: welcome to bloomberg markets: the european open. the cash trade is less than 30 minutes away. ♪ times, china cuts its growth forecast and announces 2 trillion yuan of tax premier warns of a tough economic battle ahead. theresa may put -- puts -- tries to sway the eu to make brexit concessions and raising his hand
for european renewal. and we're live at the geneva motor show, of vw's ceo said he is open to discussions with the trump administration over eliminating auto tariffs. also we speak to the ceo of toriano europe at 8:00 a.m. london time. half it -- less than half an hour to go till the start of trading. interesting to see the evolution of the u.s. futures as we have gone through the asian session. european futures looking to pick up from asia. the futures picture looks sort of flat to negative, it looks like to positive when you look at what is going on in the u.s., big selling in the u.s. toward the latter end of the trading day. factoring in some of that, factoring in the fact that china has downgraded its forecast. china outperforming. let's have a look at the gmm and
.how where you are this is the asian session of indonesia, singapore standing out to the brought -- downside. down and china outperforming this by the fact we got the lowering of the economic growth goals. the chinese currency also on the move but in the gmm we see the philippine peso standing out as an outside move. no change to the rba. let's have a look at the other side of the gmm, we want to show you what is happening in some of the commodity markets. if you are wondering how that will play out for mondays, oil prices are down by .51% but iron ore up 3% because the focus is aftermath ofthe the devastating down collapse in and city pointing to that is having an upward impact on iron ore prices.
china lowers its goals for economic growth and tax cuts. chinese -- the chinese premier said the country must brace for a tough battle ahead. chinese stocks outperform after rising to their highest level since june on signs of trade progress. the yuan has ticked higher. let's go to beijing. david inglis joins us from there. you're watching the people's congress unfold, today is a big day, the takeaway is the reassessment of growth and giving themselves a range of growth targets to land on. right, they said it was about 6.5% so now there is anecdotal and that growth will [indiscernible] this year. will is detail on how the support growth. you mentioned these wide-ranging
tax cuts, you have reductions in and tax cutsed tax are helping support the economy. on top of those fiscal measures, you're looking at targeted monetary policy. it is not a flood of money, when you look at their targets for m2 money supply growth, it is what gdp growth was last year. it is not falling a coup -- off a cliff. about employment and consumption, why has it become such a priority this year? there is a concern over jobs, here in china it is jobs, stability as it pertains to the party. when it comes to jobs, they want to create 11 million urban jobs, keeps the unemployment rate at 5.5% and for the first time,
they have explicitly stated in the work reported that anything that revolves around growth is ultimately targeted at keeping employment steady. that is a lot of ways, that addresses the primary concerns and the slowing consumption story. anna: thank you, david inglis joining us from beijing from the fromt -- with the latest the people's congress, we will watched of elements as they unfold, events take place over much of this week but let's have a look at market reaction. mark cudmore is joining us from singapore. good to have you with us. give us your thoughts on what we heard from china, we saw the chinese equity markets outperform and's -- we have seen some of the commodity market, they looked week but strengthened after we heard the growth number, how is the growth number being played out in markets? overall reaction has been positive, most things have come
in line with expectations and it is impressive how equities have ,eld up given they have had they have been out performers, there was a chance for weakness in chinese equities, there probably is in the days ahead. i was sitting in the office with european investors, what will they deliver and what can they expect? there is a big shift from a few years ago when evil did not care about the mpc. it shows how much the change of expectation is in europe, people are expecting more positive sentiment. they will keep delivering those policies. the truth, the real narrative is they are delivering a lot of policies but they will take time to feed through and it is not necessarily and eight big bazooka coming from the mpc. a chancel, there is that markets in the short-term
may be disappointed by the end of the week and when you take into account the optimism on the trade front, there is a chance for disappointment as you get a delay. asemain bullish for 2019 long as there is a trade freeze, it could be more difficult in the next few days. anna: as long as there is a trade truce. why have we learned in the last 20 for hours or we focused on the china story around growth and lookingpolicy for something more on trade, , we do not detail have a lot of detail on what the trade truce could look like. mark: that is the problem, we have had since december we have been pricing the positive story on trade and it is feeding into equities and it is the narrative that we will get a trade deal and get some concrete deals. we are lacking those details and it looks like all sides want to
sign a deal, i believe there will be a trade deal but there for negative headlines. global stocks have rallied about 16% since the christmas day low. there is a lot driven on optimism. if we get negative headlines showing there is some things that have not been resolved, maybe emphasizing a implementation product -- problem. the my base -- there might be some disappointment. hass that the optimism gotten ahead of reality perhaps in the short term. this morning how enforcement and implementation can be the key. let me ask you about italy, a couple of reasons to talk about italy, you have been asking this on the markets live blog, will italy be a negative catalyst for one of yourets and
colleagues is pointing out, since we had the italian election, a lot of concern about italian spending plans. is italy going to be a major concern on thursday? >> we certainly have a small minority who are -- italy is one of the biggest risks but as the situation deteriorates and the italian growth situation deteriorates, that will flare up again. most are pretty complacent. 10 year yields are back below u.s. yields, that is where they were until the second half of yieldsar when italian spiked. there is a massive spread between italian btp and german bund so people are looking for the gap to close further. i think the italian risk might flare up at some point. there is always a chance an election is called again, the
growth situation is terrible, whether it is this year or not it is difficult. there is a lot of maturity so maybe around may when we talk about the italian story again. anna: we will market in our calendars, thank you very much, joindmore, if you want to the debates, give us your aoughts, will italy be negative catalyst for european assets? you can reach out to the team at the markets live block at tv , the function to use. let's get a first word news update. is planning toei sue the u.s. government area bloomberg understands it will claim the administration has overstepped i banning the tech giants equipment from its networks. huawei is likely to argue it is unconstitutional to analyze a person or group without trial. a tokyo court has approved bail
for carlos ghosn on his absurd request, the bond said under $9 million. the tokyo prosecutor has decided to appeal the decision. the former nissan chairman spent more than 100 days behind bars after being accused of breach of trust and filing false statements. and a long struggle for democracy, the opposition leader returned to venezuela after speculation over how he would sneak back into the country without being arrested. instead, he took a flight straight to the nation's biggest airport during the maduro regime to act against him. it did not, at least not right away. and all theday streets of venezuela, we announced that yesterday and we are here today, we have a lot of work to be done with public workers, they will not continue supporting the dictatorship. the world must understand that the game has changed, this is an opportunity for trench mission in our nation. >> emmanuel macron wants to see an eu body to protect
[indiscernible] on his visionn for an ever closer european union, he wants a client bank to agn energy transition and regulator to force greater transparency. 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. very much. you we are live in geneva where europe's biggest motor show kicks off this week as emissions regulations kick in, how are carmakers progressing in the shift toward electrification? matt miller will be with us, we will talk about what is being discussed behind the scenes in geneva. bloomberg radio is live on your mobile device or dav digital radio in the london area. this is bloomberg. ♪
underperforming from the dax. electric vehicles are said to be the start of this week's geneva motor show. that miller is at the event, he already had a busy morning. he has been spoke -- speaking to .he vw ceo >> i don't think we have to protect our european companies with 10% import tax on american necessary, sot you have to understand in the tariffs game between different product and this is not in our hands but we would be open to that kind of discussion. anna: let's get to matt in geneva, what are the carmakers doing about trade concerns because they have been flagging these concerns for a while, calling for free trade. what are they doing about this? herbert day's said in the
worst-case scenario, tariffs would cost volkswagen $3 billion so there is a lot of money at stake my what they are doing volkswagenom -- at is talking directly to brussels --they are going to sisi oil cecilia malmstrom. they are going directly to washington, d.c. and herbert said he spoke to president trump about trade and they have done everything they can to convince the president and his administration that they do not need tariffs on either side of the atlantic. still, we will see what happens malmstrom goes to washington. what about how they will finance all the money they will
put into electrification, we talked about the tieups these businesses are doing in various parts of their enterprises to share the load, these big costs, big capital investments. we are seeing a lot of partnerships, you and i were talking about the interview and daimler -- bmw and daimler getting together. working on a ton of us vehicles, to work on car hailing at the other thing that volkswagen is doing, they are spending or than anything else on electrification. planning to ipo their truck unit, we should care about that in a few days, herbert said they are optimistic and we here analysts say they could monetize brands like porsche and if they did so, it could be worth more than the market cap of volkswagen today. he said they are continuing to
look at their brands and studying strategy but he would not give me the scoop yet on a possible ipo of their sports cars. will keep sure you pushing. thank you very much, at the geneva motor show. till the start of the trading day, we will take a look at stocks to watch. vodafone has announced a bond sale of 11 billion euros, this is an eye for -- an indication for equity markets as well. we will talk about that. this is bloomberg. ♪
anna: welcome back to the european open, eight minutes to go until the start of the cash equities trading day, let's get the bloomberg business flash. >> must reportedly lined cited many employees with his surprise announcement the electric carmaker would close most of its stores, bloomberg understands many sales personnel found out about the decision when the ceo made it public. until last week the store strategy seemed to be one of expansion. formalceeding with a takeover. the nearly $18ng billion deal. it is definitely not withdrawing
its hostile bid, he said he will take the offer to new want shareholders. jpmorgan will take on the profitable job of overseeing lyft sto -- overseeing lyft stock. will not disclose the ipo until a later filing. that is your bloomberg business flash. anna: thank you. live in hong kong. let's get your stocks to watch. we will bring in the team to tell us which stocks we are watching. where covering vodafone and -- we are covering vodafone and [inaudible] is good news for investment bankers who have not seen deals like this coming to the table, vodafone is raising 4 billion euros worth of pound denominated convertible bonds
and this is so they can fund the acquisitions of liberty global's german and eastern european assets. it helps vodafone not way up its balance sheet because this is an equity instrument. if the terms are right, investors could like this deal but what it does is it potentially dilutes vodafone shares so they said they may come back and do our share buyback to mitigate that. anna: this is something we need to focus in terms of equity market reaction so we will do that. this is a read across from the u.s., this story. right, european companies will be in focus when markets open. they have had disappointing forecasts. estimating raising concerns over its capability to keep its
growth space. names such as sap or micro focus could feel the read across, the sector is being called down 2%. anna: tell us the news that broke up after hours. >> the news is they -- they're plastic division is fetching a lot more than many were expecting. selling for 3 billion euros to advent. one analyst said the price tag is 500 million euros higher than what was expected and could generate 1.5 billion euros, many say it is adding new clout to the ceo for overhauling the company. us, youanks for joining can get the latest stories from our equities team, use first go on the bloomberg. a fairly flat start to the trading day, negative following on from a we saw in the asian equities session.
anna: just a minute until the start of the cash equities trading day in europe. let's talk how we are positioned on markets that could influence. the euro, down .1%. a little dollar strength in the market because the pound is weaker, down .1% despite the headlines from the dup suggesting they are optimistic about geoffrey cox's success. oil prices, down .4%. being weighed on by the conclusion of the chinese national people's congress that they have dropped their growth target to a range of 6.5%. that is weighing on some in the commodities space. the equity market for the mpc, china has outperformed.
china is up by a considerable margin, higher than the rest of the asian equities session, where generally the mood was muted. we saw moves to the downside on the msci asia-pacific. let's look how we are on the european equity markets. the talk has been about the chinese mpc, the growth number six to 6.5%, a wide landing range for the chinese economy. for 2019. also, what they are doing on taxes. that may be seen as stimulus to profit for chinese corporate's. partly why we saw the outperformance of chinese equities. we caught a glimpse of the futures minutes ago which were looking fairly flat. you are not expecting any vast moves repositioning on that china story this morning. futures for the sector dax look more negative than elsewhere. down by 18 of a percent on the very start of the trading day.
ftse 100, up .1%. on the sectors come on a date where we don't move all that far, you might expect to see some sectors moving down and some higher, and that is what we have. european equity markets look firmly divided. health care, getting a bid. financials looking strong. industrials moving to the upside. materials and energy moving higher, interesting given the chinese dropping their forecast a bit, coming down to six to 6.5%, the range. material stocks and energy stocks moving higher. let's look at the mov screen because we can tell you where we are on these individual stocks. , coming up in front of you. these are the stocks to the upside. schroders up 2.2, gvc up 1.6%. really a mixed bag of stocks to the upside. on the downside, where the
stocks losing ground. richemont down by 4%. we had news on them earlier on. it might have been some analyst action, but that is taking some headlines. a few other movie we are looking at this morning, british american tobacco, down .9%. they are taking a provision in terms of news out of quebec. we also see a couple of downgrades having it. an impact. . mock clear moving lower, iliad down 3%. and it was aes, richemont downgrade having an impact on that stock. european markets opening mixed as asian equities slip on news china lowered its goal for economic growth. joining us now, the senior vice president and chief market strategist at investment
managers. great to have you with us. make of the initial reaction to the chinese reevaluating their growth forecast, bringing it down to this range of 6% to 6.5%. is that a big surprise or the base case? >> not in enormous surprise -- an enormous surprise. the market expected this for a while. chinese growth has naturally been slowing. i think the global economy is naturally slowing and what we -- it common theme doesn't matter whether it is the u.s., japan, or china, countries are naturally slowing down to their more realistic potential gdp growth levels and something highe neighborhood of the fives to the low sixes is where china probably should be. that is where most people think it probably is for the next year or two. nice to see it formalized, but i'm not sure it is a massive surprise. anna: where do you see china
heading into the future because this has been such a source of growth for global businesses, exporters in europe and the u.s.? i was reading a piece that was saying china is losing its wow factor for understandable reasons. growth is coming down and the market needs to catch up. dave: that is an interesting way to put it. coming off.or is we are not talking about a developing emerging market anymore. still aalking about dynamic economy growing at 5, 6, 6.5, closer to six. it naturally has to slow down. labor force growth is flattening out quite a bit. , let's talk about trade but what is coming out of the cancy events, policymakers make a difference in china right now in managing that slowdown. i do worry about the accumulation of debt and there is a problem out there
eventually. i just don't see how a state capitalist run economy can't be managed, at least to the downside right now. i think they can hold on for a little bit. mi optimistic about china? yes, for the next couple of years. a few years out, let's see. anna: let me talk about trade because trump and xi might be close to a deal. we keep running that headline. and are waiting for the details. . markets have rallied a long way on the expectation of a trade deal. dave: some of it is already priced in. the market has been pretty optimistic about this one. i might be a little out of consensus. i wouldn't say were raided -- i think we will get some kind of deal. i've been referring to it as a nominal deal in our research. a deal in name only. exports,et a few more they will promise to open up some markets, but this is really all about verification and monitoring into the future.
president andthe u.s. trade rep have wide latitude to change the rules under section 232 or three a one means the chinese really have to -- 301 means the chinese have to stick to what is agreed to or we could be in the middle of tweet city and the world could go risk off. it isn't the deal itself that is a big deal to me. it is, are they able to stick to it in the next six months to two years? anna: monitoring, the of limitation. dave: that is where the rubber meets the road, and particularly because of how volatile trump's friend action can be to when he hears stories that he thinks are unfolding in a way that aren't positive. anna: dave, thank you. dave lafferty at natixis investors. next, stocks on the move including richemont. china cuts its growth target. we've also seen analysts
great to have you here this morning. let me ask you about the electrification push for toyota. we were talking about huge numbers for the european car manufacturers, but you were there long before anyone else. is it going to cost you as much as to electrify your whole fleet? we started the electrification 20 years ago with a hybrid vehicle. in europe, 50% of sales are hybrid vehicles so we are fairly advanced when it comes to electrification. if we look at the target, which has been set in the european electrification is an absolute requirement. inwill continue investing not just hybrid vehicles, but plug-in hybrid vehicles, electric vehicles. matt: what do you think of the
hydrogen fuel-cell potential? if you look out five to 10 years, do you see a mix of alternative powertrains or do battery vehicles when? johan: --win. johan: there will be a next. 20 -- mix. ago, we said there would be a hybrid portfolio of technologies that would be utilized and they would be utilized by the customers to suit their specific needs. therefore, we see a big market for hybrid vehicles and that technology dominant into the future. also, plug-in vehicles and electric vehicles. hydrogen, we still see as a small portion of the market in the future but long-term, hydrogen is a good energy carrier and a solution for the future. think abouto you the consolidation or collaboration we are seeing amongst automakers?
have bmwsudden, we with daimler on car sharing, volkswagen and ford working together on autonomous driving. where does toyota hope to partner up? johan: we started partnerships and alliances. in europe, we have the alliance with bmw to develop sports cars jointly. also, we have an alliance manufacturing facility. utilized and being developing jointly technologies, which is incredibly expensive to do. toyota is also doing that. on battery electric vehicles, we started a new company where 11 companies are participating in batteryng dedicated electric vehicle platform for battery electric vehicles. alliances are being utilized now
and really, project driven to make sure we can develop these technologies for the future in a cost-effective way. matt: does it help you in trade issues? trade concerns must be front and center for toyota as well as they are for carmakers globally. how do you see that getting resolved? johan: we have always believed as a company, we believe in free trade. i cannot comment on the usa, what will happen there. we would like to see an outcome without restrictions. in europe, we are not a big exporter of vehicles. there supplying mainly european market, so from that point of view, our main concern would be trade issues between the u.k. and a european market in the future. that could have a big impact. matt: you are still one of the biggest carmakers in the world. you have an incredible leader. what can you do to influence the
trade discussions? do you go to washington and talk to president trump? do you go to brussels? johan: in the u.s. and europe, we are doing what companies normally do to raise the point to highlight what the impact would be. that is the process we are in. matt: you brought up the supra. for gearheads, this is a special car with a special history. we've been waiting a long time to see this car come back with this company. what kind of demand are you getting? we have a fulle, subscription supply for this year. the demand has been very strong. we sold them out before we even had them. hopefully, this trend will continue. headsreally a car, petrol like myself have been waiting
for. we've seen excellent performance on the car. and of very good car course, it will be our flagship sports car into the future. matt: thank you so much for joining us. johan van zyl, ceo of toyota in europe. anna: think you very much. matt miller with johan van zyl talking about some new sports cars and also brexit and trade challenges to the business. let's talk about the auto sector with dave lafferty, chief strategist at natixis investments. over the past 12 months, autos and banks have been the worst-performing sectors in europe, a story we know very well. in the last few months, the stories for autos has looked better because they bounced a little bit. do you get involved in this sector or is it in the state of flux you need to stay away from? actually think you've
got global leading brands here and as you've mentioned, dave l -- they have lagged. the main areas. in a world that doesn't have cheap assets, banks and automakers are some of the cheapest places out there where there isn't a lot of cheapness across capital markets. i find it hard to believe that these are as impaired as their multiples would imply. -- under theis natixis umbrella, we have decent exposure to autos. we think we own a lot of these names at attractive valuations. anna: thank you for your thoughts, dave lafferty at natixis. he stays with us on the program. let's get your stock movers. henry: let's start with richemont, down more than 3%. --kamerica lira lynch
bankamerica merrill lynch lowered the rating. eurofins scientific, down over 5%. the revenue guidance was lower than expected. they do lab testing for food, environment, and the farmer industry. evonik nearly 4% higher. they are fetching 300 billion euros. analysts say 500 million euros, more than priced in. that price forg their plastic unit. renewal.next, european emmanuel macron sent a letter to the eu kaufman for states outlining an ambitious plan for europe hot future. what is -- europe's future. is he doubling down on commitments? we will discuss. this is bloomberg. ♪
renaissance. in an op-ed, he shared his lessons from brexit. crisis ofymbol of the the crisis -- he writes that brexit is a symbol of the crisis. he sounded the alarm about foreign interference in the upcoming election, calling for a europewide body. he called for a reorganization of defense cooperation. still with us, dave lafferty at natixis. governmentsut should buy more european assets or bias toward them. cry this fit the rallying from macron, does this tie with investment teams you are seeing or are we seeing more active governments across europe? dave: what it ties into is the idea that the u.s. has separated
from some of its allies. macron may be saying is we have to bet on ourselves. we have to double down on what we can do. the integration, further economical operation because maybe the international ties, whether it is the west with the u.s. or facing further east, may not look the way they have in the past, so in a sense, it is a chance to look within because some of that strength has to come internally because you can't necessarily rely on the people you used to be able to rely on. anna: years ago, european parliament elections were not anything markets got that agitated on or focused on and that has changed, hasn't it? it looks like more of a market moving event this may? dave: i think it is more important given where brexit is. we have no idea where that will turn out, but the europeans would prefer if the brits are leaving, they weren't part of the elections. that in and of itself in the view of an american, when you
have one of the largest economies pulling out, it really highlights the importance of the elections because now, that integration is so much more important when you are potentially losing one of the largest members. i would completely agree. i don't think anyone focused on european parliamentary elections until maybe a year and a half ago. now it seems like a bigger deal. let me ask you about what you are seeing in the pound. we have seen pound strength as the market readjusts and seems to be ruling out no deal. a surveyalking about of strategists who suggest a 9% chance of no deal. at the same time, members of the dup, the irish party in conjunction with the government saying they are hopeful for success in the brexit talks. it is incredibly difficult to work out what happens just weeks before the deadline. dave: it is amazing we have gotten this close.
as a source of volatility, it feels like so little ground has been covered on the most important issues. as it relates to the pound, this is another one where it might be buy the rumor, sell the story. at least the investment community seems to have a mildly optimistic view and that is a lot of what you have seen in the strength of the pound, the market playing into how the investment world is currently -- at least somewhat optimistic. we don't know if that is well-founded yet, but the pound has been moving up largely on that. anna: we will see if it is well-founded or misplaced. let me ask you about the broader european growth story. we have the ecb meeting this week. i was interested in this piece from one of my colleagues. it talks about the risk to the downside for euro-dollar. could it fall as low as 1.05?
the strategist is talking about how we could see a slowdown. 1.05 ifabout hitting the chinese slowdown persists, the link between europe and china. what is the vulnerability on the euro for you? dave: our view on the euro relative to the dollar has largely been that this is about which central-bank backpedals faster. when you look at most of last year, draghi appeared to be backpedaling much faster. powell at the fed was still full on two hikes. what we saw just at the end of last year and early this year, the weakness of the dollar. there was a recognition, a backing off by the u.s. fed and that sort of put the dollar under pressure relative to everybody, but in particular, relative to the euro. isa: part of what the ecb worrying about is the italian growth story. the question on them and live blog today is with regard to italy.
will it be a catalyst for european assets in 2019? easily loom large for you as an international investor? dave: it doesn't loom large. it is at the margin of europe. i think about the broader direction of europe and if italy is pulling that down or dragging it up. given the political uncertainty, some of the manufacturing and industrial production numbers, it looks like europe is slowing and italy is again beginning to pull it down. it is not a huge driver. for me, it is on the margin. it is additional given the direction europe is already decelerating. anna: good to have you with us today. dave lafferty, senior vice president and chief strategist at natixis investors. we were talking about brexit's direction and ahead of the deadline. we will be speaking to mp and former --
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♪ anna: 30 minutes into the trading day. here are your headlines. taxing times. china cut its forecast and announces 2 trillion yuan of tax cuts. back to brussels. theresa may puts her face in the attorney general to sway the eu into making brexit concessions. emmanuel macron raises his and in a rallying cry -- pen in a rallying cry. discussed with the trump administration over eliminating auto tariffs. good morning and welcome to "bloomberg markets: european open." i am anna edwards in the city of london. 30 minutes into the trading day.
it's a fairly lackluster session. we are jack justin -- we are digesting what we heard from china. stocks up, stocks down around 300 in either direction. 4onik is up by just under %. a little bit of guidance coming through. that will have some implications in terms of what they are going to do -- for shareholders essentially. let's have a look at the downside. we had the life sciences business. europe is giving some guidance. the guidance looking a little bit light according to some of the analysts. with have also had a downgrade -- we have also had a downgrade to regional. ashtead came through with some guidance. this is an equipment rental business.
2.6% aftery down by their update to markets this morning. let's get a bloomberg first word news update. is reportedly planning to sue the u.s. government. willberg understands it claim the administration has overstepped by banning the tech giants equipment from their networks. huawei is likely to argue it is unconstitutional to penalize a person or group without trial. a group has approved a bagel for carlos ghosn on his third request -- approved a bond for carlos ghosn on his third request. he has spent more than 100 days behind bars after being accused of breach of trust and filing false statements. heresa may has sent attorney general to brussels to negotiate legally binding changes to the backstop. if he succeeds, the prime minister's deal has a chance of
getting through parliament next week. if he fails, britain faces more uncertainty and brexit will likely be delayed. future candidate for the cfa might not have that extreme shooting weight for test results -- excruciating wait for test results. it could also allow the cfa to offer a wider selection of venues and more flexible scheduling. global news 24 hours a day, on-air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. anna? anna: thank you very much. sticking with our top story this morning it, here is the key takeaways from the national people's congress in beijing. china has set its gdp growth target or 2019 at a range of 6%-6.5%. this will give policymakers more room to maneuver. of tax cuts is
another headline. this is aimed at spurring the manufacturing sector. an additional 1% tax cut will be made to the second highest racket. plenty to be aware of when it comes to taxation and what that does to corporates. another headline out of the update from the empty seat. an increased -- mpc. an increased budget deficit. the government sees a deficit of 2.8% of gdp this year. david has been listening to developments in beijing. he is with us now. let's pick us up -- let's pick up on the last one we mentioned, spending plans on the budget deficit target. tell us the details? david: absolutely. the joke going around beijing, i have the work report here, by the way, is cutting the vat.
the budget deficit was revised up, the target at least, 2.8% as a function of these tax cuts. what's not obvious about that is in this worker report they have increased -- work report may have increased the plans to sell special local government bonds. that sort of plan has taken up to 320 billion u.s. dollars. if that is raised and is all spent and mostly targeted to infrastructure, if that is all spent and raised and everything, that actually takes the budget deficit closer to 5% of gdp. that the less obvious part. . anna: what about risks to the chinese economy? what are the under appreciated risks? david: obviously if they do raise that much amount of money and spend it, there is always
that old risk that is sort of goes back to where we saw it before, you know, going into the highways that go nowhere. the other thing i want to point out is that there is actually a risk brought up by deutsche bank earlier, the risk of overstimulating the economies. keep in mind it, if we get a deal on trade, if consumers cuts, if they tax push ahead with all of the spending plans and then the economy picks up and the pboc is easy as well, all of those things -- easing as well, all of those things together, you kind of wonder whether the growth target of 6.5% might be too low. deutsche bank is telling us to watch out for monetary policy because that might be the lever they dial back once everything falls into place and the stars aligned for beijing. anna: if they do. david, thank you very much. david with the latest on that chinese growth story.
let's talk about that with our guest in paris, the chief investment officer at bnp paribas what management, florent brones -- wealth management. .e is florent brones thank you for joining us. has this lower growth target changed your assessment of china? florent: we are positive about china equities, but overall about china capital markets. aret of all, the markets already anticipating lower growth in china this year and probably next. what is most important is that the chinese authorities are using all of the tools to get more -- in the future. they are easing monetary policy. they are talking more about fiscal stimulus of tax cuts. overall, we expect growth to be lower this year, especially during the first part of the
implicationsitive in terms of earnings growth. we also want to stress the internationalization of chinese capital markets. last week we had confirmation that msci is going to increase eightingese waiting -- w in global indices. andxpect positive momentum for it to continue to sometime and the trade negotiations between the u.s.-china is also a positive story for chinese equities overall. anna: last time we talked we talked about that internationalization of chinese capital markets. what are you expecting on that front this week? do you expect to hear more about maybe an increased acceptance of international money order more openness to international money? for example, in the property sector i read about that this morning. the chinesel,
authorities would love to see some international or capital flows into china. they would like the flows also into bond markets. also, the renminbi could be come -- could become a more internationalized currency. longer-term, the chinese capital markets are small compared to the size of the chinese economy. thisll, we think that rebalancing of higher capital markets overall compared to the size of the chinese economy is a long-term process and i think it is still time to benefit from it. anna: let me ask you your overall investment strategy on equities as we enter march. i was reading one of my colleague's writings about beware the highs of march.
we need to ask questions about whether this rally continues. jpmorgan is saying to keep buying stocks even if the equity market may look a little stretched. what do you think? florent: from a technical point of view, we decided to take some profits. we lowered our equity weighting to a neutral position. for longer-term, we are still positive. the tactical view is due to the fact that we had a very nice rally since the beginning of the year, due to policy makers and --, which are clearly more accommodated to positive shares. the second thing is that we have positive news flows coming from the political problems. what i have in my mind especially, the discussions between china and the u.s..
those positive factors are clearly there. we have to keep in mind also that the growth of the economy is slowing. growth will be slower than expected. that would lead to negative implications in terms of earnings growth. we have seen analysts cutting the estimate for this year. it is still in negative factor. practically, so for the next two or three months, we believe that the markets are going to consolidate after the nice rally we had in the first two months of this year. but longer term, we exclude the risk of recession. we think the global economy will not go into recession and so earnings growth will continue to be positive. the yields are too low, but overall it's very difficult to find positive real returns in fixed income assets, so we think
that capital will continue to flow into risky assets, especially into equities. short-term, cautious. longer-term, we are still positive. we will have other possibilities to increase the weighting of equities later in spring. anna: thank you for joining us. florent brones, the chief investment officer at bnp paribas wealth management. let's take a look at the stocks we are watching today. >> i am taking a deep dive into what's going on in the autoas matt is at that geneva motor show. january you can see we really hit that low. the auto sector has been put under pressure as washington and beijing are in the middle of this trade war. the auto industry, this sector has risen more than 18%. we are nearly out of a bear market. this a big topic at the geneva
auto show, that trade war. another big topic is what's going on for the future. by 2030, you can see in the white line here, electric vehicles will overtake the market. this has implications. matt was standing in front of a new electric buggy. vw is spending some $50 billion on some battery model. everybody is trying to get involved. what the future looks like has so many implications on the global economy in general. i want to take a look at what this means for the oil sector. crude is what i love to focus on. crude is made up of 42 gallons. nearly half of that goes to the auto industry and gasoline. all of this will be on display at the geneva motor show. matt will be talking to lamborghinis ceo, someone from aston martin, and peter schwarzenbauer of bmw.
anna: thank you very much. we are looking at some of the bigger picture stories around the auto's as we focus around that sector with geneva on the agenda. vw's's ceo says he is open to eliminating the eu 10% tariff on u.s. cars. he says we don't need. we will bring you that interview next. this is bloomberg. ♪
anna: welcome back to "bloomberg markets: european open." european equity markets trading pretty flat this morning. there is a portfolio review underway at vw. there are questions about how to cover emerging areas. the ceo also outlined what the carmaker is doing to avoid u.s. tariffs. >> we have been talking to the trump administration, also to european administration, to berlin. that is really a threat for us. it would cost us. is a very important market for our premier brands, for porsche, audi. we are really trying to avoid this conflict. i think it is possible to avoided. we have -- avoid it. we have to understand that between tariffs negotiations, which not only cover the automotive market, so we can
only facilitate, contribute, and show goodwill. matt: donald trump seems focused is levied tariff that on american cars. do we have to get rid of that? >> i don't think we have to protect european companies. it is just unnecessary. we are competitive. you have to understand, enable tariff -- in a whole tariff scheme between different products, this is not in our hands. we would be totally open to that kind of concession. matt: finally, there are just 24 days i think until the official brexit is scheduled. can you quantify the cost of a hard brexit? >> it's very hard to quantify because we do not know exactly what is going to happen. is bentley,exposure
exporting about 85% of its production into europe and asia and the americas. for them, this would be really a major reshuffle of their operations. that's probably the biggest concern. the u.k. is also an important market. i hope after a decision being made, some weight for the other, the market would recover and we would keep -- cars. anna: that was the vw ceo speaking to matt miller at the geneva auto show. coming up, with one were to go until the key brexit vote we will get the latest. theresa may tries to win some last-minute concessions from the eu. we will go live to brussels. what can jeffrey cox expect to achieve? this is bloomberg. ♪
♪ anna: welcome back to "bloomberg markets: european open." 52 minutes into your trading day. the european equity session turning increasingly positive as u.s. futures turn more positive. just getting pmi services numbers out of france. they come in a little bit better than had been expected. let's get to the latest on brexit. theresa may has sent 2 senior
ministers to brussels to seek concessions from the eu on the issue of the by which -- irish backstop. she is looking to secure enough support. we go live to maria tadeo in brussels. good morning. may has penned her hopes for a deal on the attorney general, geoffrey cox. cans e of these brexit -- she -- can she appease brexit-eers in her own party? >> if she gets some kind of legal document that gets those concessions, the deal has a good chance to be cleared by the u.k. parliament. u.k.ain elements that the had pushed forward is the unilateral access to the
backstop on the time limit simply will not fly. we understand the u.k. is actually looking at the the and a convention -- vienn convention as a way to get the roadmap to this deal. if would do the arbitration the european court of justice is in any way involved in this -- arbitration? if the european court of justice is anyway involved in this, that would probably not fly with brexit-eers. should we go for a delay of brexit? anna: interesting to see geoffrey cox pushing back against reports that say it's suggested he hasn't shifted his stance -- he has shifted his stance. thanks to maria tadeo. let's return to one of our top stories this morning. we are covering the china growth
story, also very linked, the auto space. carlos ghosn, a big force within this sector, has finally won b in after more than 100 days prison but with tokyo prosecutors appealing the decision, it's unclear if he will walk free. in as ghosn must reside japanese address and agree to have cameras in his home. he must not leave the country. joining us is dave. when will we know if carlos ghosn will be getting out and under which conditions precisely? >> the prosecutors have not told us, have not given us a time for that. we know that they are going through the appeal now. there is some speculation that it could be tomorrow. some news agencies are reporting that could happen. we do have the case of carlos ghosn's colleague, greg kelly, who was also arrested on the same day. he was released on bail.
that process went into the late-night, where as he was granted bail during the afternoon. as the prosecutor appealed that, and the court went into the night considering that appeal. ultimately they rejected the appeal and granted him bail. that was very late in the evening asia time, something like 10:00 p.m. or later. we are buckling up for a long night here. it could be watching and waiting to see whether a decision is made tonight. there has been a lot of speculation and if you look at in machinations that went before this happened with the lawyer predicting that he would be released. we do expect him to get up tomorrow. anna: thank you very much for the update. dave with the latest on carlos ghosn. time to tell you about some breaking news from the german economy. services pmi numbers coming through for germany.
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>> lowering the bar. china brings dunnage growth goal and announces a major tax-cut. winning over brussels. will theresa may pass her attorney general as macron lobbies for european renewal? almost $9e bond that million in we are live in tokyo. ♪ >> welcome to bloomberg surveillance. i'm francine lacqua in london. good morning. if you're watching from asia, good afternoon.