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tv   Bloomberg Surveillance  Bloomberg  March 18, 2019 4:00am-7:00am EDT

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equities in europe to go higher. the pound has stalled around that 1.3290 level. selig hammond said over the weekend that the deal will only come back to the house this week if they are confident they can win. futures point higher, in particular from london. let's see how these european markets pickup from asia. we saw some strength in the asian equity session, not an incredibly obvious catalyst, just a continuation of last week where we saw global equities make their best gains in a week. we are going higher in european markets as we had anticipated. the ftse 100 opening out of the bloc first. the ibex is another early moving. morning,big theme this which will surely add a little more upside to some of these markets. in particular the banking sector -- commerzbank and deutsche bank now in talks about some kind of tie up, we will talk more about
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that in just a moment. the prospects for the banking sector -- can that really do anything positive? it doesn't change low interest rates in the eurozone. that's where we are on the european equity markets, more muted gains because the ftse hasn't had a great make fx advantage and we don't see a great deal of weakness in the pound. the biggera look at picture and see where we are on the sectors, if there are any clues as to what markets are thinking. energy stocks look to be positive, industrials looking positive, health care looks mixed, a number of other businesses looking next. materials is a standout gainer with moves to the upside. let's talk about what individual we will getoing --
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to that and have a look at where we are and tell you exactly what's moving around. i'll's domicile one of the biggest gainers on the stoxx 600 this morning. we also see rolls-royce going higher. an interesting positive note for morgan stanley, tied up by just over 2%. rio tinto is one of those mining names. wirecard was the big loser last week, we saw that considerably weaker. we have a look at what is leading us lower. , theroup down by 2.4%, french retail business down, keeping an eye on things moving to the downside. anything that has to do with the housing industry after we saw on theumbers move down u.k. housing market. we spoke to the commercial director in london.
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let's talk about rival lenders deutsche bank and commerzbank. they have confirmed, as you were talking about, that they are starting official merger talks for some kind of tie up. it is not clear yet how it would work out, although deutsche bank is the much bigger of the two. combined, they would be europe's fourth-largest bank. the move puts tens of thousands of jobs at risk, and raises questions about how much capital deutsche would have to raise in order to buy commerzbank, if that is the way it would work, and whether or not it would have to sell assets to get there. potentiales this merger mean for shareholders and investors? joining us now to discuss further, the global strategist at allianz global investment, and the senior credit analyst at hermes investment management.
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is this the kind of move that investors should be encouraging? >> good morning. think they confirmed over the weekend that they are now in talks -- i think already with both banks, there was some risk involved. extent, it would seem like at least on papal it would make sense to combine the two. of course that doesn't mean it will be a walk in the park. the execution risk is quite important. we are talking about a combined 2nk of something like trillion euros of total assets. almost 40king about million, and of course the family requirement will be quite and typically when
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large banks merge together, there are economies of scale, which we would see what the financing would be. matt: this whole problem was brought on in one sense buy commerzbank's decision to try to buy dresner and deal with that. deutsche bank has been struggling to integrate for almost a decade now. when you look back at big bank stories even those two and others around europe, why are they so hard to get right? >> well, i think in general, generating economies of scale from different and nonintegrated i.t. systems doesn't help. little costen very synergy benefits to existing customer base. but in this case, i think there's a real problem with the strategy.
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deutsche bank has no longer a raison d'etre. it's a very small bank by german standards. it has wanted to play in the big league against the titans in new york and has failed, and i think the structure here in germany is one that i think is difficult because many people would not realize that the biggest german ratingive off the credit of the german government and therefore to some extent don't have to be particularly profitable, which makes it very hard for deutsche and commerzbank domestically to get a grip on the corporate business. the fact that the european union is not keen on this deal i think suggests that you not only have the big job loss fears -- some people are talking about 30,000 but this isbs -- the fact that where does this go for the eurozone banking system when we have negative rates and
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a weakening economy. they are really going to have to bend to brussels to get this one through. anna: good morning. what makes you think that brussels would be so against this? they wouldn't comment on this last weekend obviously it hasn't happened and there's nothing to comment on, but what makes you think brussels would be so dead set against this? a lot of people talk about the need to deal with the legacy issues. are onenk legacy issues thing -- from a strategic perspective this isn't going to make any european bank any bigger. if you are really competing against hsbc and bank of america , you need france and germany to get together, to have a continental wide bank. and i think that is where the politics get involved. they have been shouting at deutsche bank for a long time to get their capital ratios up and to sort out their business model and i'm not sure german
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politicians interfering helps deutsche bank with where it needs to go. anna: where does this leave bondholders? they are very close to deutsche bank bonds and that story -- where does this leave you? clearly new york thinks this will not solve all the problems and some of our guests have been said they are run for bondholders, not equity holders. >> i would concur in the sense that from an equity perspective and considering there will be a lot to be done, i think we can see probably the benefits in the medium to long-term. banks, ino combine to the battle will he fought in frankfurt because at the end of the day the ecb will decide whether it will go ahead or not. the fact that the bank will be
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asked to maintain a really high even 300 --l to this'll probably pose a financial strategy, even though it won't be the dominant market rate. for those beneficial considering the fact that the ecb is lax to think banks have to come together and try to at least have a second look to the cost income ratio. it is probably no longer economical. anna: ok. matt: how much -- in terms of
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cost cuts, if we will see deutsche bank buy commerzbank and try to save some money, how much do you want to see in terms of cost cuts, and how much will it cost to fund those? the front and costs are often higher than the annual cost they need to achieve. >> we will probably be looking lows, you would think this type of domestic m&a between a fourth and the fifth to one third of the target and i think that also indicates, since both are domestic and both have large operations in germany, we will see probably to one quarter to 1/5 will eventually have to go.
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but i think after we see a big intervention from berlin, there's also that chance. anna: thank you very much. the senior credit analyst at hermes investment management and allianz global investors, they stay with us. more time to talk to neil. up next, stocks on the move so far this morning, including dws, the group who is rising the most on record after it is set to get interest. bloomberg bill ♪
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♪ matt: welcome back to "bloomberg markets." this is the european open. 14 minutes into the trading day with our european equity indices gaining across the board. let's get to the individual stocks stories. for that, we go to dani burger. >> we are looking at the latest between the deutsche bank/commerzbank merger. some big moves. the companies are entering for will talks in commerzbank is rallying to highest since december, but both of these
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companies have fallen 40% in the past year or so they have a long way to go to recoup those gains. deutsche bank could need to raise as much as $8 billion to see this merger go through in one way to do that is selloff the asset management arm which is now searching 12%, trading at its highest price ever. allianz might be interested in buying the arm but those talks are still in the early stages, so there's a lot more to go for investors to digest as the story unfolds. anna: thank you very much. opec and allies meeting and observation on to set their oil production deal. saudi arabia says the coalition is nowhere near done, with efforts to rebalance the market. our guest is still with us. your thoughts on the oil market, how much they managed to continue to drive prices higher. asi think it's interesting
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the narrative of the slowing global economy that oil has been relatively resilient and it is becoming clear that we have supply problems. venezuela potentially producing been innow, nigeria has difficulty and americans are now targeting iranian supply. i think there's supply constraint emerging and when i am looking to take risk in the portfolio i think many people have given up on the oil story and the big dividends, and i feel very happy that it is somewhere i'd be putting money to work. anna: where else would you take risks? i have charts about the best week since november from a five-day rally -- november-december was pretty dreadful, but how much are you looking for risk? >> i'm not. you mentioned in your opening comments, we will see this weekend dovish the fed is. it was dovish over christmas when the markets were 20% lower. bounce.had a 14%
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i wouldn't expect them to be as dovish as they were then, because they are 5% off their highs. where i am looking to take risk is still in some of the income scenes like emerging-market debt or even some equity markets. the equity markets and i like the most are china and the u.k.. that is where many people are not interested in i think that is where the value lies in the market. matt: all right. thanks very much for joining us. neil duane, global strategist at allianz global investors. he will join us on bloomberg radio's "daybreak: europe." if you want to carry on that conversation, either tune into dab digital in the london area, go in the type rabi terminal.up next , barton sorrell joins us to talk about the first for your earnings from his rival. don't miss that conversation,
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next. this is bloomberg. ♪
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♪ anna: welcome back to the european open. 20 minutes into your trading day . european equity trading markets, up by .8%. the ftse 100 getting the best of the gains. the advertising group is for
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capital is eyeing more m&a after january showed revenue growth of over 30%. a competitor to wpp is hunting after a "powerful" 2018. joining us now, the executive chairman of s4 capital. let me ask you about the way you are as a business. i was looking at the details, operating loss -- what are your expectations? 50%,venues are up about profits up about 100%, eps almost tripled. acornsstart, and from oak trees grow. a good start in the content side and pragmatic side of the business and we are in the sweet in terms of digital advertising which as you know is growing about 20% a year versus the general market.
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you can see the big holding company groups struggling to get significant topline growth. anna: how much are you looking to do m&a? we started with nothing. there was a 2 million pound shell. combined on christmas eve. early days. but we will continue to make acquisitions, we have one acquisition in latin america and one in europe that we will be doing shortly. what we really focused on is broadening and deepening our relationships -- we have significant new business wins in the last three or four months, major global clients like png, nestle, avon, bayer, electrolux. strong new business gains. but we want to broaden and deepen those relationships and at the same time we want to take
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on more talent, particularly in the digital area. it is more concentration on that sweet spot. the biggerention advertising companies -- you are still one of the bigger shareholders -- how do you think wpp is handling this market? how do you think the new ceo is doing? >> if it to some at the top of wpp. andrew i think is focused on the disposal part of the business. it's early days to come to any judgment. i am, as you say, the largest individual shareholder. i increased my shareholding last week, at addition of about 300,000 shares. but the big advertising groups are all faced with the issues of legacy businesses. we at s4 capital have the
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advantage of being in the sweet , digitalhe industry content and digital programmatic. ofwe don't have the weight the legacy part of the business, which all of the six groups that you referred to paid. they are transitioning from legacy to digital, from analog to digital, and it is going to take them some time to get there. nonetheless, they will take your increase in your wpp stake as a vote of confidence on some level. why is that? there's a chance this could be broken up. >> well, no, the board finally saw sense and agreed to allocate the shares that were due under the psp, which will continue for
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some time. that increase came through allocation under those plans. but we will see how they develop. i am more focused now on s4 capital and its growth and its focus on this holy trinity as we call it, first by driving digital content and driving digital media. those are the three areas, where if you look at wpp or any of the other groups, you would see the growth. the overall growth of the industry was about 2% or 3%, but the digital part of the business, which is 20% of the industry as a whole at about 40% of major multinational and global clients, that is growing at 20%. that is where we are focused. anna: can i ask about brexit? clearly it's a big week in the brexit conversation. we will get some clarity this week.
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how much do you think brexit uncertainty is weighing on investment? is it by your business in the u.k.? >> i think we have become immune to it. there's uncertainty has existed for two years, two and a half years, and as i said before we started, i would like to see further delay. anna: more delay would be better than no deal? >> i do think so, if we can get the best possible arrangements with the eu, or a second referendum, whatever the way through is. but i don't think rushing headlong into an arrangement -- for something of such fundamental importance -- i also ,ind it somewhat aggravating being forced into three votes. it strikes me as slightly undemocratic. anna: thank you for joining us.
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the executive chairman of s4 capital. coming up, the german bank megamerger could be a reality. matt is on the ground as deutsche bank and commerzbank admit they are in talks. more on the banking sector next. this is bloomberg. ♪ want more from your entertainment experience?
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x 30 minutes and tear trading day and let's get headlines off of the bloomberg terminal. -- 30 minutes into your trading day and let's get headlines off the bloomberg terminal. opec ministers say april is too soon to decide whether the block will extend production cuts. saudi arabia spoke to bloomberg. we see the impact on inventory, we not going to change course. matt: creating a payments tighten, f i.s. announces its purchase of worldpay in a $40
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billion deal. good morning and welcome to bloomberg markets. this is the european open. i am matt miller alongside anna edwards. anna: let's talk more about why you are in frankfurt. bank has confirmed that they are in merger talks. both banks have struggled to restore revenue growth for years . they have lost 90% of their value from their peak. the government is consolidating. they told bloomberg they will not stand in the way of other cuts that are necessary. --ning us is class kneeling klaus neeling. giving -- give us your hopes and fears. merger talk or
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merger program does not make a lot of sense. both things have too much overlapping business areas. that means they would not fit ideally together. the only effect would be cost reduction. reduction means firing a lot of people. losing their jobs. there is a special taste that the finance minister is staying for such a project. 30,000 employees to 40,000 employees might lose their jobs. this is the at to create some kind of national champion. others say this would not be big enough to be a national champion.
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it may be re-created german champion with such a be -- it may made create a german champion with such a project. they can orientate to european or international competitors, over.t to try to take it is nearly the same business bank.as deutsche that christiane is really spending behind such a project. he is talking with commerzbank and commerce bank is talking commerzbank is talking with him. they are really convinced of the project but i don't know that this project will take place.
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matt: it is interesting that schulz, the social democrat finance minister would be behind a move that would risk thousands of jobs. why do you think the finance ministry is so set on this? does the german economy need this kind of merger? this: it does not need kind of merger because both banks are active right now. germans can go to them and make business with them. there is no real change on the situation after a possible merger. and we are in an election year. in my point of view, that is the real reason why they are pushing
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this project forward. and once again, i don't think 30,000 jobs would be enough. the number is even higher. we are talking to 40,000 to 50,000 jobs. look at what happened when commerzbank took over years ago. a number of jobs which is jobsly the number of the of the bank they took over is now gone. the ministerve standing behind such a project where that many employees can lose their job. hand -- yeah?ther give me the time, the government was always saying that they would avoid getting a bank in germany too big to fail
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with relevance to the financial system. would happen with such a merger and i don't believe the merger project will become real at the end. sorry. we are far enough away from the financial crisis that everybody has forgotten about the problem of too big to fail. i want to get to deborah in hong kong for the bloomberg first word news. eborah: theresa may is threatening to give up getting brexit done anytime soon. have backed down after promising to vote for her deal this week. it won't be put to parliament tomorrow unless there is a good chance it will be approved. crash in ethiopia is similar
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to a crash from months before. a preliminary report will be released within 30 days. the plane crashed minutes after it took off from the ethiopian capital. inre was renewed violence france this weekend. were torched and 200 people were arrested. emmanuel macron back in crisis management mode. -- popularity was boosted after allowing citizens to air grievances. zealand's worst mass shooting in 50 years -- in years have left 50 people dead. the gun ownership rate has risen in the past decade, but murders are still rare. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700
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journalists in more than 120 countries. in hong kong.o let's take a look at the stock movers this morning. >> what a day for merger talk. will buy the company for a record $43 billion deal in the international payment sector, rallying 10% to trade at a record high. this includes $11 per share of the london-based company as well. money laundering issues deepen for the company. they are asked to not take on new clients. ing says it is working to improve the process. finally, rio tinto gaining with minors today area that is as the price of iron ore rises. miners today.h
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that is as the price of iron ore rises. anna, matt? dani, thanks very much. let's get to oil. opec and its allies met in azerbaijan today to ramp up oil production. they are nowhere near done with efforts to rebalance the market, but the kingdom's oil minister said next month is too early to decide about the rest of the year. bilaterald from the talks yesterday. april would be premature to make any kind of production decisions. matt: joining us now is .nne-marie -- saudise saudi's
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conceding to russia?anne that's an: interesting question. they are surprised by all of this u.s. shale production. russia is saying that it is too early to tell. we don't know about the potential supply constraints in the market given venezuela and iran. this includes china, india, and greece. four months ago, they had a deadline of may. if they decide to choke exports to zero, we could see a serious supply constraint. the saudi oil minister saying that they may have to wait until june. take a look at this interview from last night about the market right now.
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>> a think it makes much more sense to start discussing this topic in may or june when we about hallof clarity these uncertainties playing out. that meeting in april may be scrapped. the ministers are still in this monitoring committee. what is still to be learned? what is on the agenda? annmarie: certainly whether or not they will scrap this april meeting, and any ministers come out and agree that they are to extending the cuts until later on in the year, that is the overarching question. do they see the need to cut production until the end of the the situation in caracas,
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oil dropping to 500,000 barrels a day and they told me last night there producing above one million barrels a day. of the issues that we hear about, when these cuts will be extended -- these are the issues that we hear about, when these cuts will be extended. annmarie in baku, the capital of azerbaijan talking oil. we will talk about in, coming up next. ethiopia said the crash had similarities from the one in indonesia last year. more on that next. this is bloomberg. ♪
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anna: welcome back to the european open. equity markets are catching a break. asian equity markets were strong. the chinese market in particular was strong. this flows through european sessions, boosted by lots of m&a
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activity and speculation from m&a to talk about today. boeingconcerns over the aircraft were raised as much as seven years ago. warned the maker had too much sway investing it -- investigating its own jets. the agency has not done enough to hold flowing accountable. that is what the ethiopian transport minister says. too many similarities between the two crashes of the 737 max 8 jets. looking at how this plane was first approved, the process of what do we understand about the role boeing could've had? >> the focus is tied to the software, talking about a cap played a role letting them down.
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it would provide quite extensive updates for the pilot. it is the picture of a company that wants to try to reduce the amount of additional training that was necessary. transport ist of looking at the process of how this plane was approved. that emergedng quite strongly is the modern world of aviation, the hasfacturer itself extensive sway in its own aircraft which might surprise some passengers. that is pretty shocking and it doesn't make a lot of sense when think about how checks and balances should work. how does this new information affect the current investigation ?
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it puts a lot of pressure on boeing. they have said over the weekend that they have a software update they can rollout that will come in. , solve the problems that contributed to the crash indonesia. -- theoretically, it could solve the problems that contributed to the crash in indonesia. apparently, partners were unaware of it. who knows if this will end when boeing delivers that software update. anna: thank you for joining us with the latest details on boeing. let's get to our stock of the hour. this is part of the frenzy of m&a activity we have seen this morning. is agreed to acquire will pay
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-- wellpay. by over 7% inp london trade. fis is based in jacksonville, florida. it will bring their value to about $43 billion. this is according to companies this morning. it is ohio-based and has a listing here in london. it reported analytics treasury and other services. we continue to watch the booming payments business and the boom in m&a for payments that this is not creating. up next, a report that will take a look at some stocks that are moving in some of the m&a activity around the banking sector. this is bloomberg.
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anna: welcome back to the
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european open. 52 minutes into your trading m&a is part of the reason we are seeing strength today. have confirmed they are in merger talks. it would make the combined firm europe's fourth biggest bank but puts thousands of jobs at risk. there are questions about how much money would have to be raised and if they would sell assets. , from our deals team, they have been tracking the possibility of m&a for a long time. bank finally considering a merger? what comes next? seems like it is 2016 once more. they tried to combine then and decided it wasn't working. but deutsche bank has had
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several issues since then. they are working in a low interest rate environment, and everybody is talking about if you can build a european champion. this is more of a german champion. the government responses very interesting. they are not going out and saying we back this, but it is also because the optics are out there, right? how does the government back that? had you say that we will continue paying investors. there have been conversations with the government on that. we just heard from klaus nieding, saying this is not what they want.
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this is at the behest of the german government. behind the scenes, the idea is schulz is the one pushing this deal forward in making it happen. finallyion is, if this gets done, does that mean other european mergers bubbling away in the background get done? does it open the floodgates to european bank mergers? ruth: i think so. one of the big questions we are looking at is even if the gender ok,erman government says what are regulators going to say? you are constantly thinking if the regulators will clear these deals to create champions, or will they say, you know what?
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we don't think there is a threat right now. local governments will see those go through. anna: we are seeing a boom in pay --t services and world and services like worldpay. ownershe private equity are the same ones that are listing this company, and they have made some really strong bets. where wecial sector is are seeing a lot of activity. it is really booming. it we have two ipos in the pipeline in europe and there could be more. thank you for joining us. if you are a terminal
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subscriber, check out the latest m&a news by typing in may go -- ma go in your terminal. don't miss a conversation with angela merkel later on bloomberg. ♪
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>> it is official, deutsche bank
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and commerzbank are discussing a merger. the government supports the deal but it could result in tens of thousands of job cuts. boeing's troubles deepen. ethiopia says data shows similarities from a previous downed aircraft. how did it get by certification? and theresa may tries to get support for her deal once again. good morning, everyone. good afternoon if you're watching from asia. taylor. lacqua and it is a little bit about the trade concern with the president coming from europe. of we have the possible ipo lyft. there has been a lack of ipos from the government shutdown. really excited to get the lyft
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ipo. and deutsche bank and commerzbank, really fun to figure out what is next for those companies. francine: and we will have a look at how the ecb can help or if it is just longer concerns. firstraight to bloomberg word news in new york city. the biggest deal ever in the international payment sector. fidelity has agreed to buy worldpay for about $43 billion including debt. is buyer known as fis offering a mix of cash and stock with revenue at about $12 billion. deutsche bank throwing in the towel after years of turnaround efforts. they agreed to begin government backed merger talks and bloomberg learned that the bank would start negotiations after the government signaled it would not stand in the way of job cuts, as many as 30,000 positions.
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the trade union has come out against a combination. they agreed monday to overhaul the country's gun laws after the massacre. ministers discussing a crackdown on semiautomatic weapons. 50 people were killed in the shootings at two mosques in the city of christchurch. and british prime minister theresa may is threatening and pleading in an attempt to get her brexit deal passed this week. parliament already rejecting the agreement twice. they have vowed trying to give a divorce from the european union if they don't support the deal. sticking with cutting output until june, the group known as opec, they could curb production to try to avoid a global glut.
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here is the saudi oil minister. >> until we see the impact on inventory, we are not going to change course. tictoc onnews on twitter, 24 hours a day, powered by 2700 journalists in more than 120 countries. we're looking at some of your data, viviana. a little bit down today, but we understand from various insiders that theresa may will only put that vote to parliament if she is convinced there is a chance that it gets through. we are looking at the stocks euro 600 gaining about .2%. mentioned the stocks index and you have seen a
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translated in the u.s. equity markets as well. s&p futures here after last week, one of the best going back since november. there are really some range bound treasury yields hovering between 260 and 280. dollarre is also weaker and weaker oil. news about opec being compliant with the production cuts. lenders deutsche bank and commerzbank have confirmed that they are in merger talks. it would make the combined firm europe's biggest bank but puts thousands of jobs at risk and raises questions about how much capital deutsche bank would have to raise. what could that mean for investors. we will be joined by a bloomberg columnist. and our guest from blackrock.
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what are the main hurdles? do they have regulators? is backing from berlin that is keen to create a national champion. small and medium-sized companies are the backbone of germany. as many as 30,000 jobs would have to go. it is very difficult. francine: but the politicians are behind this? elisa: so far, yes. before these merger talks were they said they are not willing to embrace -- francine: this would be cheeky for politicians when they see .he scale of job cuts does it mean anything for angela merkel specifically? it detracts from what
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they really in efficiency is in the banking world. yes. the two banks would become bigger but it is still faced with competition from other banks. it still makes the market very cutthroat and this will not change that anytime soon. doesn't appear to be on the agenda. taylor: when we talk about the job cuts, is this enough to get bothountries to return to revenue and profit growth? elisa: even if you can get the job cuts and the savings through, it is somewhat exposed to trading and the securities unit which is still inefficient. and you're left with a bank that is very geared to interest rates. and there's not much change in the rates. they are here to stay and this won't reduce being exposed to
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that. taylor: does this prove that bigger is the only way to get that are? deutsche bank wasn't able to get merging ofout the commerzbank. his merging the only way to get better? elisa: i don't think so. people argue that deutsche bank should get through its own issues before reconsidering a merger. there are certain questions about if this is the right thing to tackle the weaknesses. thank you for joining us, focusing on the finance. blackrock global chief investment strategist, i won't ask you about specific banks, but is bigger better? >> great to be here, francine.
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when we look at this deal, it emphasizes a number of challenges the european banking system is facing. weak growth and weak demand for credit. over time, our own indicators continue to point to european growth remaining just above zero. around 1% in the year ahead. we know that negative interest rates and very low interest rate have low pressure. indicated that it would be a very long time indeed and the structural over banking means none of those problems will disappear in the short term. taylor: will this be a catalyst for more mergers? one of the ways that you can deal with issues to try to cut costs is to grow larger
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over time. thatnk we will see more of as banks have limited options on how to support margins in a tough economic environment. but again, these measures themselves will not overcome the structural hurdles that are facing the european economy, the stock market, and the european sector in particular. those long-term issues and structural issues very different from here in the u.s.? big banksk at the like jpmorgan and bank of america. they have pretty favorable regulatory environments here in the u.s.. it makes it so much harder for them to compete against big banks in the u.s.. there is a different
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environment between u.s. banks and european banks. u.s. growth is slowing but still well above 2%. over time, it will continue going forward even though the economy is slowing. the yield curve is flat and it creates a more transit environment for banks to generate positive net interest rate margins over time. and you don't have that structural banking issue. that has been reflected in many of our clients activity. the banking sector and we have seen persistent outflows from investors from -- and from european markets. francine: thanks so much, richard. bank decides on monetary policy this week as the brexit saga rolls on.
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we talk to the peterson institute president at 6 a.m. in new york and 10:00 a.m. in london. this is bloomberg. ♪
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viviana: this is bloomberg surveillance. , wes for a $2 billion ipo are expected to get that earlier lyft.-- later today from they are aiming for market valuation of $20 billion to 25 billion dollars. it would be the largest from a tech company since snap went public two years ago. mosts have fallen the since january, why? it is part of china's largest consumer market leading to an unexpected drop in earnings.
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product lending chinese tourists cutting on spending in hong kong and macau. saysounder of huawei revenue is climbing despite u.s. pressure on allies not to use quality for the next five g wireless networks. of fears thate the company helped china spy on the west. thank you so much, viviana. theresa may has given up trying to get brexit done anytime soon. this is according to euro skeptics in her own party. a divorce agreement won't be put to parliament until there is a chance that it can actually be approved. we have ruth and richard with us. thank you for sticking around. is it all about the dup?
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>> i don't think that she will put it through unless the dup comes on board today. i don't think it's automatic that they come on board. it as a given that if the dup says no, brexit will also -- brexiteers will also say no. is numbers will be extremely close. she may lose by tens of us rather than 149. but even a loss by one vote is a loss. unlessot going through they feel like they can win the vote. it is more likely that she goes to the european summit and gets promised of extension that she can then put to parliament and say it is either going to be no brexit at all, a very long extension, or my deal and force it that way. that has been her strategy all along, but anything can happen. francine: nothing has changed
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since last week. what is she offering the hardline brexiteers? richard: the thing that is changing -- therese: the thing that is changing a little bit is the politics of it. is not quite as much of a trap as many claim. they could use the vienna convention. she tried to get out of it. there is a huge effort being made that says we can't accept the deal. the dup is under huge pressure from the business lobby and their traditional supporters. i would never on -- underestimate the dup's capacity to withstand the pressure. francine: what does this all mean for pound traders? richard: we have seen sterling
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move higher over the last week. one of the things that changed -- is the of no deal risk of no deal on the 29 of march. what has been really notable the last few days is that his been associated -- has been associated with stocks moving higher. they are externally focused. investors become more optimistic broadly because of u.k. assets. because they have perceived risk around no deal, even though there is a default option. delay is the most likely outcome here, but it is highly uncertain. it implies that most investors will be cautious about investing into u.k. assets until we get some clarity. taylor: how cautious are you?
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what otherthe pound, u.k. assets are you comfortable going into if we see some positive developments? therese: in the u.k. -- richard: in the u.k., international stocks benefit from the slow but growing economic environment. and there is a bottoming out of emerging market growth. u.k. companies have very strong fundamentals and our world-class in their sectors. i would love to be caught up in the broader brexit delays. we think they create an opportunity. on the fixed income side, preferring conventional bonds to links, the link bonds in the u.k., we have this very high inflation risk. even in the unlikely scenario that we have a new deal brexit, inflation is unlikely to rise as
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persistently as priced into the market today. bloombergat was opinion calmness and richard ill of blackrock stays with us. with aheadinterview of chicago school of business at 6 a.m. in new york and 10:00 a.m. in london. this is bloomberg. ♪
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francine: this is bloomberg
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surveillance. taylor and francine from london and new york. tom having a day off. european central banks very much in focus this week. the fomc is expected to hold rates and lower projections from the number of hikes in 2019. the same day brazil will probably keep key rates at 6.5% for an eighth straight week. brexit uncertainty means governor mark carney will likely leave u.k. rates at about .75%. the swiss national bank expected to hold at -.25%. and economists expect rates in norway to be raised 25 basis points to 1%. joining us is richard from blackrock. talk about the global coordinated central-bank action and what that has done to volatility. we have dampened volatility on mixed currencies. theseu concerned that
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global coordinated central-bank actions have made all of us a bit too complacent? richard: we have seen the change in central-bank policy this year . it this decline in volatility not just in equities, but in all risk assets. followedseen that be by indications of dovish policy in europe and asia. , they took some pressure off the currency that led to the significant risk rally. in the near term, we think that where wean environment are unlikely to get any change in fed policy. but that policy will remain loose globally for some time to come. it creates a tailwind for markets. they can have broad exposure to risk assets. we have seen this decline in the vix, we have seen this decline
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in market fear broadly. look at central banks now, for example. the feds are priced to make no change. you think about what the risks are for that consensus, fed -- the still the next move from the fed, it is more likely to be up and down. some signs of complacency creeping in, but that suggests .ctivity with investment but we are not seeing any signs of euphoria in the market. francine: what does it mean for currency returns? richard: stock will become the key driver of markets again. it suddenly becomes an important driver, not just emerging-market currencies, but if you look at the dollar, it is actually
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andying against the euro against the japanese yen earlier this year. it is because compared to those currencies, the dollar is the high-yielding currency. compared to emerging markets, you see flows coming out of the dollar into emerging markets and that supports em. is one of thets places you want to be taking risk because of currencies and increasingly looking at that. francine: thank you so much, richard. richard will stay with us. investors like what they are hearing from deutsche bank and commerzbank. this is bloomberg. ♪
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taylor: i am taylor riggs in new york with francine lacqua in london. tom keene has the day off. opec plus needs to stay the course on output courts. minister said.y
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the job is nowhere near complete and the group is repaired to do whatever is necessary in the second have to keep supply and demand in balance. here is the saudi oil minister. >> until we see it hurting consumers, until we see the impact on inventory, we are not going to change course. taylor: meanwhile, his russian counterpart told bloomberg it action early to predict on oil cuts. >> i think it makes much more sense to start discussing this topic in may or june, when we actually have a lot more clarity on the state of the markets and how all these things are playing out. is in: joining us now
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murray. -- anne-marie. how many more cuts do they want? the big question facing opec and its allies now is if they should extend these cuts to the end of the year. briefing, they are seeing increased supply, and they see they need to continue these cuts, while the russian oil minister told me they see a balanced market now but they are not sure what comes tomorrow. what he is alluding to is a fact there could be serious supply constraints given the situation. the united states granted waivers to a number of consumers anianrani and -- ir exports, but the deadline comes up in may. we could see serious supply
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constraints in the oil market. that is why many delegates say we should move the decision to extend in june, which is the saudi oil minister basically conceding a little to the russian oil minister. there could be a potential to extend cuts in the april meeting, which, as these managers -- masters our meeting, looks like they will scrap the opec+ meeting. francine: opec rarely speaks with one voice. how divided is opec+ right now? it seems like russia is actually setting the agenda. annmarie: exactly. evenlexander novak is not here today. that is why we had so much news last night in this briefing. they said they want to maintain this partnership and think it is good for the stability of the oil market, but as you can see, the saudi oil minister is saying we are seeing a surge in oil inventories.
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he is not too worried about shale, but he is saying him and many of his counterparts are surprised about what is going on in u.s. shale. and even with venezuelan oil production down and some strain on iran, they still see a need to cut production. alexander novak made it clear to me that right now, where we are range fors a good both consumers and producers, he thinks the market is a well-balanced, and we are not seeing the volatility. you can see the different paths both these ministers are making, and they make up the stock of this group. the opec side, the cost allied side. francine: annmarie hordern in baku. still with us, richard turnill. when you look at the price of oil, do you look at opec and opec+ or just shale? richard: opec has been the key driver of this.
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if you look at the last few opec meetings where they made the decision to cut supply, they have all been followed by a degree of rebound in oil over time. that has been the key driver. add to that concerns about supply in venezuela and iran succeeded with sanctions, but around that also increasing demand. so not just oil price but also google assets. francine: how do i match up what is going on in the oil price now and the fact that saudi aramco cannot find a bid, because people think it is the end of oil in 10 years? richard: if you look at in real terms, it is still relatively low. $68 today as well below not just the peak we saw at the end of last year but well below levels we have seen in many years historically. there are structural challenges still facing oil. what we are certainly not seeing is higher oil in any way
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crimping demand on the global economy. taylor: i want to touch a little more on what you said about the demand side of things. so much of the conversation is usually about supply. you mentioned, even a few months ago, there were a lot of concerns about the demand side of this. you say those have eased, and the demand picture is improving? richard: what we see right now is global growth is slowing. we see that in published indicators and our own proprietary indicators. the market is seeing increasing confidence that the slowdown will be managed and growth will bottom out around trend. there is still some downside risk to growth. it comes back to being you should be wary about complacency. but markets are getting increasingly confident we will see that bottoming out in the middle of the year. the area they are looking for to lead that bottoming out of
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stabilization and growth is china. china is where we are seeing policy ease most significantly, and we are starting to see the first signals that perhaps we are getting to a turning point in the chinese economy. taylor: richard turnill of blackrock is staying with us. in the meantime, let's get the bloomberg first word news. viviana: deutsche bank's ceo finally getting the green light for merger talks with commerzbank. germany's finance ministers agreed not to impose the tens of thousands of job cuts to make the deal work. employees unions are announcing their oppositions. 30,000 position could be cut, more than one out of five of the combined workforce. israel's prime minister will be looking for a trump bump when he comes to the u.s. next week. a corruption scandal is hanging over his bid for reelection. he is expected to emphasize his close relationship with president trump during the
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trip. the president already gave netanyahu and above gives, including the u.s. embassy to jerusalem. senator kirsten gillibrand joining the crowded field for president. in the video, she says america needs a leader who makes big, bold, and brave choices. she is positioning herself as a leader in the #metoo movement. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. francine: thank you. at stay with a possible merger talks between deutsche bank and commerzbank. analyst whos an currently has a sell rating on deutsche bank. what is your take on what happens next? how many job losses could we
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have, and are we really certain this merger would have political support of people in germany? not a merger. is it would be a takeover. deutsche bank would take over commerzbank. if you look at the size of both banks, clearly torture would make a bid for commerzbank shareholders -- clearly, forsche would make a bid commerce bank shareholders. there should be 20,000 to 40,000 jobs. and it is not the idea of deutsche bank to make a bid there. there is pressure from the german government that both things are not probable in the current environment. ifarding your question, germans would accept that, it depends. cuts, it ise job
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germans will, but ask a price. francine: you have a sell rating. with the merger painted to a buy or hold rating? dieter: we will have to see. what is the outcome, what they are telling analysts regarding possibility -- far.tability target so autsche bank wants to be further global investment bank. they have made a lot of losses out of this strategy the german business has been, so far, not a key focus of deutsche bank. stringentt have a
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strategy in the last couple of years. they decided to go out and sell with an ipo to another bank in 2015, and they could find buyer. they decided to reintegrate the bank. deutsche is not really interested in commerzbank, and commerzbank has nothing that would help deutsche bank to keep their big investment player. taylor: from what i can see, we do not have any indication yet that this is a stock or cash to that deal. how do you expect financing to go, and what is the fair value would like to see for the takeover of commerzbank by deutsche bank? dieter: there is a lot of
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utsche needsthat de for the takeover capital increase. i am not so sure. the -- for $.30, you get shareholder value of $1 billion, so this would be a lucky buy. if you're consolidating commerzbank, make a profit out of it, there is a revaluation of maybe 10 billion euros or 15 billion euros. maybe you need fresh capital for a restricted period of time for integration costs, but it could be limited. taylor: thank you. that was dieter hein. coming up, john micklethwait will be going by german
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chancellor angela merkel for an exclusive one-to-one conversation. watch it live on bloomberg tv, the terminal on live , or on radio. this is bloomberg. ♪
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francine: this is "bloomberg surveillance." lacqua in london. taylor riggs is in new york. tom keene has a what is day off. auditors confirmed the faa was not holding boeing into account -- we are talking about the crash that happened last week.
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bloomberg learned regulators were examining the 737 max's certification before the second of the two deadly crashes. joining us is our bloomberg aviation reporter. this is a very ellicott -- delicate matter. do we think or are just investigating that boeing has too much sway over the authentication process? >> what we're looking at now is what the process was. we know that, over time, the faa has almost outsourced safety regulation and edification processes to boeing itself. boeing was under a lot of pressure to get this certified and out in time, both when they and againlaunched when they were falling behind in terms of production. francine: first of all, do we know the equipment at the center of these crashes? we have a little data, but do we
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know what could be involved, and we have an into patient -- we are waiting for a con information that the mcas system that was involved in the crash in indonesia is linked , and of the two crashes are linked, there will need to be a thorough investigation. the system itself refers to the angle of attack. it is a protection mechanism, safety mechanism, that corrects the angle of the nose of the aircraft to avoid a stall. one of the senses it relies on -- it is a single sensor giving incorrect information. boeing is rolling out a software update in the next few weeks i should address the issue. whether that is enough, we will have to hear from investigators. taylor: there is a serious human
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aspect to this that we want to be sensitive, but we are also folding it into the bloomberg world of financials. to be frank, this is a company that has managed to turn a profit and post free cash flow of almost $14 billion a year. has this dented any of their financials yet, or is it too early to say that? the the immediate response, share price has taken a significant hit over the last week. what we will start to see is it depends on the timing. airlines from norwegian air s huttle to czech airlines have already said they will be looking for the groundings of these aircraft. and then there is a question of rolling out fixes and changes, how long that takes. finally, what kind of compensation if they need to change the training system for the pilots. a really big part of the sales pitch for this aircraft is it
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did not require that pilots had new training procedure. conversion from the old generation to the new year whether they need to change that system and boeing needs to compensate for it, that is a big question. francine: thanks, ben katz. up next, violence flares up against in france. what the latest yellow vests protest mean for emmanuel macron. this is bloomberg. ♪
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viviana: this is "bloomberg surveillance." pressuringnt is general motors over a factory in ohio that is the enclosed, tweeting he asked gm ceo mary
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barra to sell the plant. he also tried to shift into that democratic leader of the local union. cleared way for amazon to build headquarters in virginia. local government approved a million of$8 incentives. the first ever female superhero movie from marvel still packing them in. over the weekend, "captain lead theaking in to global box office. and that is the bloomberg business flash. francine: "captain marvel" -- there you go. will travel to
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france, italy, and monaco. the tour comes as european countries try to balance their concerns about chinese influence. let's get back to richard turnill of blackrock. the concern is, first, if you are china, where do you look for value in europe for big investments? and do they get scared away by the political situation? richard: what we already know is europe is more geared into chinese growth than the u.s. we think those links are only going to increase over time. one of the european economy is that as china recovers late in the year, that stimulates growth not just in china but across the world and particularly europe. from an investment perspective, outside investors looking to invest in europe, see europe as vulnerable.
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it is vulnerable politically. we see political risks across europe, including the yellow vests protests. francine: why would you invest in france right now? richard: the case of investing areurope is valuations relatively attractive. the ecb is on the sidelines and will benefit from global growth. our view is as you move late cycle in the economy, investors want to focus on quality. in an area as internationally that look more attractive to invest in would be emerging markets and also the u.s. francine: is there anything in europe that looks undervalued right now? richard: the european economy is a diverse economy. the stock market is diverse. almost half of european earnings click from outside of europe. so we see positive returns of europe going forward. we see attractive areas or
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investing, such as industrials and health care. but offor a global investor looking to allocate risk, we see more attractive opportunities elsewhere. taylor: i wonder if some of the trade tensions the u.s. has had with china has pushed china to look more to europe. there's europe see the same concerns about trade, with regards to ip theft? richard: i think people rightly focus on immediate risks, such as brexit, european fragmentation, some of the challenges we face in italy. but it is worth saying there is the pretension of risk such as u.s.-european trade tensions. right now, we have seen markets somee less focused than geopolitical risks over time. one of the reasons we feel that investors may want to focus on
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the u.s. and emerging markets to a greater extent than europe now is that some of those risks do not appear fully priced in two european assets today. francine: thank you so much. richard turnill of blackrock. coming up, adam posen and luigi zingales. we will be talking about europe. we will of course be talking about this big merger in the banking sector. when we look at what politicians have been saying and doing, german politics are behind this merger of commerzbank and deutsche bank. we will discuss that next in depth. this is bloomberg. ♪
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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. francine: it is official -- deutsche bank and commerzbank are discussing a merger.
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the government government -- the german government says it supports the deal, but could end with thousands of job cuts. data from the downed ethiopian plane shows clear similarities with the lion air crash. experts are asking how it got their design syndication. and theresa may tries to win support for her deal once again. good morning. good afternoon if you are watching from asia. this is "bloomberg surveillance ." i am francine lacqua in london, taylor riggs in new york, tom having a day off. if you look at the concerns we have, first, look out boeing trying to figure out the implications and trying to figure out when we get the lack box. -- black box. brexith all of the machinations, we still have policy coming out thursday. taylor: it is like one step
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forward, one step back for theresa may. i will leave it to you to explain. and that merger we are talking about, so interesting, our conversation last hour about deutsche bank and commerzbank and if those job cuts are the way to return the company back to growth. francine: i think a lot of analysts are hoping this is a trigger. let's go to viviana hurtado. viviana: fidelity national information services willing to obey worldpay for what is being called the biggest deal ever in the international payment sector. the buyer is known as fis. haveombined company will revenue of about $12 billion. deutsche bank throwing in the towel on years of failed turnaround efforts. germany's largest lender agreed to begin government-backed merger talks with commerzbank,
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bloomberg learning the bank said they would start negotiations after the government signaled it would not stand in the way of jobs and cost cuts. as many as 30,000 physicians could the at risk in a merger, the bank intriguing and coming out against the merger. and over to new zealand, where the prime minister's cabinet agreed to overhaul the gun laws. you may remember 50 people were killed in the shootings at two mosques. new zealand's gun ownership rate is one of the highest in the world. and british prime minister theresa may is threatening and pleading in an attempt to get her brexit deal past. get as given up trying to divorce deal and left -- unless members of her own party support the deal.
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sayi arabia and its allies it needs to stick with cutting output until june. opec+ meeting in azerbaijan, opec curbing production to try to avoid a global glut. here is the saudi oil minister. we see it-- until hurting consumers come until we see the impact on inventory, we are not going to change course. viviana: global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. thank you so much. let's get straight to markets. this is my data check it a lot of focus will be on pound. we had from the chancellor and a couple of other insiders that theresa may will not put the vote to parliament to a third meaningful vote if she does not think she can get it through. that vote, we understood, was meant to be for tomorrow. you can see pound on the back of
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that as we also understand we -- she is meeting dup today. i am also looking at crude oil because of the opec+ meeting in baku. opec+amazing to see that is now being driven by russia, and you look at european stocks, and they are gaining some 0.2%. taylor: that lift in european stocks is translating over here. even after last week, having one of their best weeks, going back since november. you are seeing a little weakness in the bloomberg dollar index as we await a more dovish stance from the fed this week. and the story of the day -- deutsche bank and commerzbank getting a lift here. and as we were talking last hour, the realization that it is a takeover, not a merger, is this enough for profit to boost
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the m&a environment. francine: thank you. rival lenders deutsche bank and commerzbank have confirmed they are in merger talks. it would make the combined firm europe's fourth biggest bank. if its thousands of jobs at risk and raises questions about how much capital deutsche bank would have to raise and whether the banks would have to sell assets. what does this all mean? joining us from frankfurt is bloomberg's matt miller. always great to speak to you on surveillance. when you look at the merger, first, how quickly can it be done, and what are the major hurdles they need to get the? there are a lot of hurdles. we have been talking to a number of shareholder representatives that point out the job cuts are probably the biggest hurdle, even with the backing of the finance ministry. we were told the number of job cuts would be well over 30,000.
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costs would need to be, possibly by 1/3. we are talking almost $30 billion in combined costs between these two banks. they would have more than $2 trillion of assets. taylor makes a good point. rarely is there ever anything such as a merger. there is typically one company buying another. deutsche bank is the much bigger bank here. they would have to figure out a way to get about 8 billion euros in order to finance these cost cuts. there would have to raise capital. they couldn't get all of that by selling assets. the cost would be one of the other big hurdles. francine: we were speaking to an analyst, dieter hein, who said this is not a merger -- matt: there is no such thing as a merger. when was the last time you heard of one? francine: but which one is
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healthier? matt: deutsche bank has its issues with the capital intensive bank. healthierk has a lot local business here in germany. but it is also having problems because of the low interest rate environment. both of them have a bigger exposure to low interest rates in europe. the question is would putting two weak banks together make one strong national champion? that is the income as we understand it, the finance ministry. but not the goal of the two may be at the banks, pushed into this by the german government, which owns a 60% stake in commerzbank. i am not sure if this is the kind of thing that would happen over the course of months, but it would take at least that
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long, many months, before we get some kind of tie up here. taylor: your member in your days back here in the u.s. in 2008, when two big to fail was all the -- when too big to fail was all the rage. and now it seems in europe that bigger is better, and mergers are the only way to get better. does that make the case in europe that bigger is a way to be better over there? matt: it is really interesting, because not only does it seem like people have forgotten about ,he problems of too big to fail but you have a social democrat and the finance ministry that is pushing for this merger that could result in 30,000 or 40,000 job cuts, not typically the centerleft party's main goal. ,s far as the too big to fail the systemic risk problem, we have already heard from the european central bank that they , and we had from
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the local german regulator that they also would not support a local merger. they prefer to have cross-border deals with european banks. maybe that is also building bigger institutions, but spread , transnational alliances, which they think would be healthier for the economy. francine: thank you so much. matt miller for us in frankfurt. staying on deutsche bank, executives are hardly putting their troubles behind them with a government-backed merger, with a european, the has pushed back -- with a european economy that has pushed back here let's put this all in contact with adam posen, peterson institute president, and luigi zingales, chicago booth school finance professor.
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right now, as you look at the possibility of this merger what does it mean for the strength of the e.u. economy? does germany need strong national champions? adam: it does not. the ecb and local supervisor are coming out against this, even though they do not seem to be able to stop it. you need real consolidation in the banking sector and you need cross-border. you have the graphic up of how poorly these two big german megabanks are doing versus the european average. the european average is less profitable than the global average. francine: do you agree with that? i keep hearing that if this merger goes through, it would be the catalyst for cross-border mergers, like an italian and french bank. luigi: i agree with adam.
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mergers.ross-border in particular, these mergers seem strength. -- strange. efficientank is not and has shown, all the time, cheats regularly. cheating,t a inefficient bank as a national champion, this is not a good sign. taylor: i want to throw a hardball question at you -- i know you cannot speak to commerzbank specifically, but there was a concern that their market value is trading below their book value. generally, what does that mean? is the market too discounted? entirefirst of all, the banking sector in europe is trading at a very low book to market. deutsche andboth
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commerzbank are trading even lower than the european average. it is clearly an indicator that the banks are not doing particularly well, and they may have some assets that may need to be discounted. commerzbank did not do particularly well, and deutsche and wasght another bank a poster child of what a merger should not be. it is funny that two banks that did poorly in previous mergers are thinking about fixing their own problems by merging again. it is also interesting that nothing is trading with -- at $60 billion, you can buy deutsche. it is in a stock of target, but nobody showed up to buy it. there are two possibilities.
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that you cannot buy because the government would block you one way or another peer the second is there are a lot of losses that are not being materialized yet. francine: and we will look at the cheating allegations and everything like that, but overall, if we need cross-border mergers, what would be the catalyst if it is not a domestic one? adam: the catalyst is political. it has to be the removal of the insistence by the national governments, led by germany, to keep its national champions. it has to be the new commission, when it comes in, actually supports what the ecb and local supervisors are saying rather than their own protective industries. this is becoming like boeing for germany. a cobbled, inefficient, overly protected company. francine: thank you. and we will have more on boeing. adam posen of peterson institute and witches and galas of the --
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of theigi zingales chicago booth school. tomorrow, john micklethwait will have an exclusive conversation with angela merkel. this is bloomberg. ♪
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taylor: breaking news here. lyft out with early numbers on its ipo. they are looking to file an ipo of 30 million shares ranging $52 to $62 a sale between either proceeds would raise around $1.9 billion. the bankers are happy --
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it will be jp morgan, credit suisse, and jeffries. selling around 31 million shares, ranging anywhere from $62 to $68. and some of the backlog and the lack of ipos that we have seen so far this year. francine: it is amazing. we are looking back at some of the previous ipos. this would be the biggest since snap went public. and we have a huge ipo in italy worth some $3.9 billion. and this is in payment services. it would be interesting to look at the industries that decide to ipo. amazing -- and the backlog, because of the government shutdown, we will see
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any more listings in the coming weeks. let's get back to adam posen and luigi zingales. if you look at lyft, i do not know if technology stocks are surging ahead -- adam: it has to be more fundamentals. you mentioned the payments deal in europe. we are seeing software companies coming to market when they have a consumer service to provide. that is a new step forward. we have not seen as much of that sector coming in. it is fundamentally more technology. francine: do you agree? luigi: yes, but i am also worried. the market for ipos has changed dramatically in the last 10 years. it used to be the case that companies are coming to market in earlier phases to finance growth. now, you can finance growth well in the equity market. so ipos are delayed. sometimes, it is just a way to
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holdings when you need to diversify or dampen overvalued stock when you accept the market to go down. i am not so sure that lyft coming to market is necessarily good news for the market. francine: let's get more on this ipo with our tech columnist, alex webb. is revenue of lyft exploding, but the losses getting bigger. alex: they are still in a huge price war with uber. this makes it harder for the likes of uber. it is interesting to see how this money will be used. is it only going to be used to reward employees? or might they start looking at new markets? that,re able to answer that will be interesting. taylor: how does lyft
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differentiate themselves from uber. job ofs done a great diversifying their revenue through uber eads. how does lyft differentiate themselves? alex: historically, we have seen them selves differentiate themselves on values. they do have a better exposure to things like bikes and scooters, which are far more profitable than cars, because you do not have a driver taking a huge jump of the revenue. uber will be talking about its food delivery business. the potential of that to diversify for any number of online products. there are wrinkles which differentiate these two companies, but ultimately, scale will be the winning factor. taylor: do we know anymore about how they will use the proceeds? we are coming out with more
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headlines about reward management or some of the employees of the ipo. any other indications of what they could use his funding round for? alex: not that i have seen. there is no surprise we see the founders take a disproportionate size of the voting power play that is par for the course when it comes to tech companies. interestingly, between them, they will not have a majority of share, voting share. francine: you were talking about the difference between uber and lyft. --r has promised everything flying cars, freight, scooters, whatever. is there market just for transportation, which is what lyft is trying to do, and how much national do they need to get? alex: that is the question. there are a lot of question marks around whether this
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rideshare hailing business has a lot of long-term profitability. on one hand, you have the drivers. but if you are doing autonomous cars, you're also having to front the cost of their vehicles, which is a huge acid-base, capital requirement, which perhaps a lot of investors are not keen to front. marksre remain question about the long-term viability. should -- focus has shifted. about the last mile delivery, which has a huge number of applications. taylor: you mentioned international growth. i was in south east asia last week, and they all use grab. they do not use uber or lyft. competitionght into they are seeing overseas, mainly in asia. alex: that is where uber has an advantage, and that its anchor shareholder is softbank itself
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is also the anchor shareholder in companies like grab. and it looks as though uber is going to do a deal to acquire a huge competitor in the middle east and pakistan and indian markets. uber has therefore not got the same competitive threat and a lot of those markets, because there is consolidation, sort of deciding who the winner will be, perhaps engineered a little by softbank. in its home market, it has that steepest competition in lyft. have aon, uber does not lot of competition, because there is not a ride-hailer with the same scale. if anything, uber may have an easier ride. -- we have heard indications they may buy something in europe. francine: thank you. alex webb with the latest on
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lyft. let's turn back to europe, back to the exit. theresa may threatening to give up trying to get brexit done any time soon. reports -- we're are just getting updates. there are three people in this. first, boris johnson used his column to urge tories to get theresa may to reject the deal. thend, jeremy corbyn saying party would trigger a no-confidence vote. sanginally, when brexiteer a bad deal is better than staying in the e.u. we are back with adam and luigi. who is a person you are looking for past theresa may? adam: mr. corbyn. because shift from a debate of do you gamble to try to get norway plus or the may deal?
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there is a coalescing group around corbyn. cares,t sure how much he but that gives him a basis for displacing may. francine: but he flip-flops a little bit. how can we be so sure about where he stands on europe? adam: i do not think you can be sure. i just said he is key to watch. it is not because i believe he is consistent. i think in his heart of hearts, he wants brexit. but he has enough sense of reality that if may gets through her deal, it does not serve his purposes at all. francine: this is so in the weeds, what is your base case for brexit over the next couple of months? is it just an extension, a long extension? luigi: i think it will be an extension.
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it cannot be a long extension, because otherwise the u.k. has to two part as they in european elections, and that will create a lot of problems. i think there will be a postman of the -- post moment of the problem, thinking or hoping some magic solution will arrive, but i doubt it will. francine: thank you. coming up next, we talk a lot about boeing -- did it have too much influence over safety approvals. concerns were raised around the playmaker's influence. premarket, bowing down. this is bloomberg. ♪ this isn't just any moving day.
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this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving...
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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. all of you. how you live, what you love. that's what inspired us to create america's most advanced internet. internet that puts you in charge. that protects what's important. it handles everything, and reaches everywhere. this is beyond wifi, this is xfi. simple. easy. awesome. xfinity, the future of awesome. francine: "bloomberg surveillance." taylor and francine from new york and london. tom has the day off.
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is ben katz, now our aviation reporter. how much sway does boeing have in certifying this new equipment used in both crashes? seeing, and there were a lot of reports that were moved a lothe faa of this information -- certification process to boeing. the question around boeing and the faa and their relationship has become a critical element of the story.
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nationalre seeing from governments is this relationship and how to fix it. francine: there were two crashes. we see there are similarities. when do we find out more about it? we the people or pilots would have been trained after the first crash. whether not properly trained? ben: this is one of the big questions we are waiting for boeing to clarify. there were instructions issued to pilots -- whether or not i reached every pilots or whether airlines were proactive in giving their pilots that training, that is the question the black box will hear what the pilots themselves have to say. that is the analysis and data they're looking for now. we heard over the weekend they saw similarities in their per
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luminary analysis of the black airlinesen ethiopian lion air that are potentially linked, and we should get more of a nation that today or tomorrow. taylor: as you have been mentioning, there is a serious human component. intos we fold this back the business world, you're looking at a company that outputs $14 billion of free cash flow. that number has doubled in three years. what is impact on profits and the revenue that boeing gets from those max 8 jets that could impact them? ben: it is a huge part of their revenue going forward. there are still around 5000 aircraft in their backlog. this will drive revenues and profits of the next few years. the big question is how quickly it will take to roll out these
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fixes that boeing is talking requirehether it will additional certification or any delays in that, and what kind of compensation, if boeing is held responsible for these crashes and the grounding of the .ircraft give topensation they the bigger companies. francine: we understand boeing engineers cleared of the equipment at the center of the crash probe. how can this happen? >> to me, this is a morality play about companies that are too big to fail, the our national champions, so they get trade protection and promotion by the government. and hands-off self policing record to wait regime. we are seeing this in boeing, too big to fail, and thus in theed, the way was banking system for this was a terrible morality play.
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francine: this could have been done in good faith, because it talked about training. littlee have to be a careful, but the idea is that we know there were complaints about boeing having too much sway over its own self-regulation. we note in trade deal after trade deal, the u.s. government decides boeing as a national interest because it is too big a national is champion. ths,r big these horrible dea but it is a way we run our coming out. taylor: i want to talk about what this means for competition, namely airbus. is there anyway way airbus can capitalize on recent failures to push them forward? ben: i know the airbus guys, and they would be devastated if i were to say they were anything but remorseful at the tragedy
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that has happened. but it is obviously put forward the question of whether or not airlines, such as lion air, which we know has been critical of the way boeing has handled the issue back in october, and have planted scrap their entire older -- order. this we will see unfold in the next few weeks or months as to whether more airlines need to make either alternative plans during the process in which the 737 is granted or otherwise switch to another aircraft. but it is too early to tell. we are still waiting for the black box. we still do not know the final, ultimate cause. .ven if there are similarities the big question is over how long it takes to really get the fix outcome how easy it is to install, how easy the training will be, and have a good leaders
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respond to it. taylor: thank you, ben katz. and a very patient losing dollars -- a very patient luigi's and dollars -- a very patient luigi zingales. let's go to first word news. viviana: lyft hoping to raise more than $2 billion in its ipo, the second largest right sale -- ride-hailing service planning to shareslmost 31 million at a price of $62 to $68 per share. deutsche bank ceo christian sewing finally getting the green light for merger talks with commerzbank. bloomberg learned that germany's finance ministers agreed not to oppose the tens of thousands of job cuts needed to make the deal work. employee unions already announcing their opposition.
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30,000 physicians -- positions could be cut. and senator justin gillibrand of new york facing a credit field running for the democratic presidential nomination. in a video announcement, gillibrand says america needs someone who can make big, bold, brave choices. global news 24 hours a day on air, and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you. let's get more on the possible merger between deutsche bank and commerzbank. a lot of analysts saying it would not be a merger of equals. droning is now is bloomberg e.u.ligent's senior analyst. we heard from luigi zingales and adam posen -- your take? that this is not a
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national champion and not a pan-european champion. but you need to take a large base, and both banks have gone to a stage where this is a merger of pain. they have both thrown the towel in. francine: the mergers of pain actually give fruit to something? what is their business model if they do merge? shrinking investment banking, consolidating balance sheets. they are still in the mid 60's for a income ratio. it is a first step in a long this isa country where an unprofitable banking market anyway, but in the absence of anything else, you have to take care of the costs. dollars --gi's and
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that nongales told us one wanted to buy deutsche bank. how concerning is it that perhaps, you could say, a bad bank is bought by an even worse bank. who is healthier here? jonathan: the days of large --opean banks being bought there are not any big targets that u.s. banks need to buy. asia has its own issues. in terms of consolidation, we spain, europe, italy, even and france, you have a structural problem as we go to the digital world. you have too much cost-based and too many branches. these two bad banks return assets at one third of the sector being pushed together. it is unfortunate we are here, but this is the only thing left to do. taylor: how much more time does
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this by four christian sewing? toathan: it will be two three years. it becomes a domestic focus. the fact is there are 4 billion or 5 billion costs to achieve. the have to be some form of capital arrays are there be targeting 22, 20 3 -- that would be the goal set the ceos will be accountable for. this will be a long and painful job. taylor: a long and painful job for christian sewing, not a job i am envious of. that was jonathan tyce. coming up, bank of new york mellon's chief strategist. this is bloomberg. ♪
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francine: "bloomberg surveillance," taylor and francine from london and new york, tom keene with a day off. we are waiting for that news conference in baku, capital of azerbaijan, where we hear from opec+, giving us an idea of how many output cuts they are committed to or not. it is interesting, when you look at the dynamics of opec or the oil minister of russia yesterday gave an interview to our annmarie hordern.
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he really seems it is russia, not saudi arabia, setting the agenda for a group that settles more than half of global production. as soon as we have any news from opec+, we will get back to that in give you that. for the moment, we understand that opec was is adding the united arab emirates as a member. still with us to look at inflation dynamics, luigi zingales and adam posen. how do you look at oil? shale gas or all that opec? luigi: first of all, the most important thing is the man. as the world -- is demand. as world economy is growing, demand will grow. otherwise, if they have to sustain any price increase, even with an opec cut. opec hasthink that reduced dramatically in power since the shale gas revolution,
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since you can bring more oil online fairly quickly at a limited price on demand. i think this flexibility on shale gas in america is impacting the power of opec. theor: we can also fold in oil conversation. with inflation. how concerned are you about inflation? is that where the focus needs to be? betweenhere is tension risk of inflation and risk of a softening economy. recently, the fed has slowed down its path of increasing rates, because it saw a lot of potential problems in the world economy. i think these potential problems have not disappeared. think about what the impact brexit will have on the european
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economy. that is still to be seen. what is the impact china will have on the world economy, this remains to be seen. this cloud is on the horizon. so i do not speck the fed to move. taylor: part of all these tensions you have been mentioning has been in response or the response has been from central banks to conduct coordinated central-bank action. i wonder the impact that has had on some of the volatility that we have been seeing. you have the measure of the vix coming down, options on treasuries coming down, fx volatility coming down. are you worried so much of this coordinated central-bank action has put a subdued action on some of the volatility we are seeing? luigi: to some extent. volatility,reducing it is good -- that is only a perception. is the market too complacent at this moment? but it is hard to
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tell. it is a subjective judgment of how risky some of these events are. two tail events being risky, so i do not fully understand the complacency of the market. taylor: we will half to have you back. of thes luigi zingales university of chicago. adam posen a peterson institute will stay with us. ast seeking to raise as much $2 billion in its ipo. more on the valuation of the u.s.'s second largest ride-hailing service, next. this is bloomberg. ♪
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viviana: this is "bloomberg surveillance." let's get the bloomberg business flash. president trump is pressuring general motors over a factory in ohio that is being closed. the president tweeted that he asked ceo mary barra to sell the plant. he also tried to shift blame to the democratic leader of a local union. lyft is hoping to raise more
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than $2 billion in its ipo. the second largest ride-hailing service coming out with offering today. raise 31 million shares at a price of $62 to $68 per share. businesshe bloomberg flash. taylor: thanks. time for the single best chart, -- in line to my chart, lyft has the ipo news, but comes on the heels of that 2019 has been a very low year. basicallyhis has been pure demand side. i remember the snap ipo a few years ago. the has not gone well. talk to me about lyft. to $68uation between $62
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a share we are seeing this morning. here.nks for having me when i was speaking to tom two weeks ago on the radio, i was putting the valuation between $20 billion and $25 billion. this is my rationale. when i look at this company, it is a platform company. sales for a typical u.s. company, it is between 2, 2.5 times revenue. 7 andplatform has between 10 times revenue. if you take current revenue for lyft and take it its current growth rate for five years, that will give you a number of between $6 billion and $7 billion. if you have that at 5 times, that should give you a future value at $35 billion. the value comes between $20
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billion and $23 billion. as a platform company, we have to be careful about this. the reason for that is they do not have a strong network it if you take a strong network company like facebook or airbnb, this is a weaker network. because competition can come in. switching costs is slow. future technology is changing. on top of that, i am a little concerned are out -- about the dilution of shares. taylor: we are getting a little technical here. talk to me a little more about the $2 billion they are planning to raise. where is that most useful for them to put that money to work? haran: i would think it is capex. capex is the most import thing for them. people are calling that $9
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billion net loss for them -- i understand. snap went public at $500 million loss. but this is an accounting number. when i look at the operating around minusey had $300 million. so they may just focus towards future cap knology -- future technology. they are building driver hubs. if they build a good relationship with the employees, that will serve them well. that will differentiate them from uber or grab in asia. francine: professor, thank you. haran segram there. let's get back to some of the things happening in europe, with chinese president xi jinping making state visits to europe. we are back with adam posen. resident xi is going to france, italy, and monaco. between france and italy, who is
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in a bigger mess? who needs trade more? adam: italy. good has not had very productivity numbers. italy is unable to get the tax forms it wants. it really needs the investment, and it is more credible to china that italy will give something up for it. france has its problems, but they are domestic political, not the same thing. francine: the population of the president was low in november, then came back up, and paris of the weekend was burning -- how does he get away from that? adam: it is very difficult. his initial instinct is what can i give them that will buy them off? you are already living in a french welfare state -- not to say there are not suffering people, but these are not the excluded immigrants. so what you can give them is
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unclear. you will talk more around transfers, a small amount of universal income. i am not sure it will work. it just -- it could purely be demand, which carries micron in the french government will be reluctant to back down. taylor: thank you. i want to hear from the press jmmcrence in paku, opec+ press conference. we are hearing from the study energy mr., saying they want a few months to drain excess inventory. this is bloomberg. ♪
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♪ ofhor: murder of "-- merger
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equels. the ecb pushes back its rate forecast. coalition looking to push back production cuts in a win for russia. dovish powell and friends as investors target the fomc meeting this week. david: welcome to "bloomberg monday." on this i'm david westin, along with alix steel. alix: we are looking at about $2.1 billion. what are we going to see about dual shares? david: that is the question. it is no coincidence, i think, that the two founders will get

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