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tv   Bloomberg Daybreak Europe  Bloomberg  March 27, 2019 2:00am-3:30am EDT

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nejra: good morning from bloomberg's european headquarters. this is "bloomberg daybreak: europe." pro brexit conservatives breathe life into the prime minister's deal, but cut her job be the cost of their support? we are live in westminster. joins voices of caution amid concerns of slowing global growth. mario draghi speaks in frankfurt. voice of london publishes results with chief executive john neil. he will discuss the action plan to address allegations of misconduct. don't miss it.
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nejra: good morning, everyone. just on 6:00 a.m. in london. we saw a return of risk to the markets in yesterday's session. the 10 year yield down a basis point on a 241 handle. yesterday we saw the s&p 500 rally. we are seeing futures from this morning. we could see continuation of the risk rally in the u.s. session. the dollar up for a second day. let's take a look at fx more broadly. we are seeing the new zealand dollar dropped the most in quite a few weeks on dovish comments from the reserve bank of new zealand. cable slightly on the back foot. we will be talking about brexit. the fact theresa may may be gaining support for her zeal. -- deal. but at what cost? i mentioned the rally in u.s. equities. a lot of that was down to the
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gain in oil stocks. oil extended its gains above $60 a barrel on wti with russia making commitments toward the output cuts and ongoing concerns around venezuela. let's check on the markets in asia. yvonne man has more. to theseeing a pause risk on we saw yesterday? to the risk on we saw yesterday? >> certainly we are seeing a global equity rally fizzle out this morning in asia. the afternoon session, we are looking better off the low of the session. japan heading the other direction as we saw a big bounceback yesterday. we ended the day down zero point -- your csi 300 up 0.9%. shrugging off bad data we got. chinese industrial profits for january and february plunging 14% year on year compared to the 1.9% drop we saw in december. further deterioration. markets looking past bad data as good news perhaps we could
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seeing more easing in the pipeline. take a look at bonds. you mentioned treasuries and how yields picking up just slightly lower here now. we are seeing a little bit of bond buying when it comes to asia fixed income. china's 10 year bond yields, down another two basis points around 3.09%. zealanda as well as new bonds are seeing a bit of a buying here today. new zealand to year yield, we are seeing yields tumble 12 basis points after that surprised dovish shift from the rpm fed. they mentioned the next move is likely going to be a cut. you did mention the kiwi dropping the most in seven weeks. nejra: thank you so much. san francisco fed president mary daly is the latest in a line of u.s. intro bankers supporting patients on future interest rate moves. she joins minneapolis' neel
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kashkari in calling for caution since the fed met last week. she discussed risk and the current shift in the bond market. >> there's a lot of factors holding down rates on the 10 year. the yields on the 10 year being held down for safety. you can see the emerging market in europe is not in great shape. people purchase our bonds. we have a balance sheet that is larger. i'm not dismissing this. i am just saying i am not freaked out. nejra: this is the reserve bank of new zealand comes the latest central bank to join the shift, holding rates at a record low. the governor says it is more likely to cut them amid slowing global growth. today is the turn of are you draghi to speak as he directed the ecb and its watchers conference. is -- good to have you both with us.
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can goldilocks continue? >> goldilocks can continue so long as a few risks go the right way. we don't have a major advance of the trade skirmishes in the u.s. and china and the eu china stimulus starts to work and gain momentum. so long as europe gets out of its political quagmire. growth should improve. we should all become more risk on. nejra: we have been seeing gains across assets. look at equities and bonds. here today, both gaining. -- year to date, both gaining. >> from what we see now, the key question is the goldilocks question. what you have seen in q1 was that all asset classes saw gains. if you look in risk-adjusted terms, it is interesting to see a fixed income space, the high-yield space, the i.t. space, this -- to see best
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adjusted returns. from a risk as it perspective it is probably going to be the risk assets the have to correct first a little bit. what we have seen, valuations too high,up a bit particularly in the credit space. i do not see much upside there yet. be the space that is a little too fragile and vulnerable. is interesting you say risk assets could correct first. at 241 today. goldman has joined the chorus of downplaying the menace of the inverted yield curve. risk assets should correct first. are we going to see the treasury 10 year yield stay at these levels for the same period? >> i don't worry as much as they would have before that we have an inverted yield curve.
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long-term bond yields globally have not been reflecting expectations for nominal gdp growth. since the financial crisis. this is not true in the past where they have largely felt economic expectations. now that they are lower, we believe they do reflect economic expectations. there are a lot of factors. welong as the risks fade, are a little more risk off. money comes out of safe assets and into risk assets. maybe emerging markets. long-term bond yields rise. my bets would be we should be consistently surprised on the downside throughout the cycle about just how low long-term bond yields stay. they don't necessarily reflect the markets implied you about where the economy is going. -- implied view about where the economy is going. nejra: earnings yield is 3% higher than u.s. treasuries. stocks tend to rally. how much more of a rally do you
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expect in equities? >> for the near term, we can hold up a little bit further. there will be bumps along the road. in asia, really it was valuation driven. if we look at equities year to date, it is not really an eps story. it is not a growth story. it is purely a function of expanding valuations. that is the problem. as soon as there is no uptake of earnings, we have seen the little bit. we have seen earnings revisions correct a bit of an uptick. if we do not see a genuine recovery of earnings into -- in q2, that is going to be a problem, later q2, not yet. if we do not see a bounce on the
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macro side and the micro side in the second quarter in u.s. activity, that is going to be a problem. after we had this dismal q1 in terms of macro and micro, obviously we expected q1 down, eps growth that almost. if we don't get a bounce, that's going to be a problem. nejra: we are trying to digest what different parts of the markets are telling us. you have some people saying, look, the yield curve inverting is a concern, others say credit markets are sending a different signal. other parts like commodity markets for example rallying your today, oil has had a big part of that. are commodity markets telling you we don't need to be as concerned by the yield curve inversion? >> partly. it is a more broad macro economic question.
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most written question i get asked is, the usual cycle is eight years. we are 10 years into this upswing. why are we having a recession? that partly is the problem. we need to recognize economic upswings don't die of old age. the world,rts of there is no such need for corrective recession. the excesses are not present. we live in this age of caution where we worry. longer rather than full steam ahead and correction around the corner is probably the way we are. nejra: we will talk more later whether we are at risk of excesses. kellen pickering at berenberg and max at hsbc stay with us for the hour. now look at the bloomberg first word news. dodged one import fight with qualcomm.
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the u.s. international trade commission has not validated a qualcomm packet for a battery saving feature, but apple in fern -- infringed a different patents. he recommended certain models of the iphone to be banned. parliament is preparing to vote on theresa may's brexit deal. this could soften britain's departure from the european union or cancel it altogether. as the risk of not leaving rises, pro-brexit conservatives are signaling they could shift to support the prime minister's deal. several have indicated the price could be that she has to resign. the global iron ore market is likely to have a shortfall according to. andrew forrest. he cites output reductions. the billionaire cautioned that other producers could face constraints in boosting output. there will be a supply deficit. our operations are massive.
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turn up the dial or turn down the dial that easily. can you guarantee all of that deficit? i cannot give you that guarantee. >> china has suspended the airworthiness certificate for the boeing 737 max. the nation needs to review a proposed modification before determining if the plane is safe. china grounded the country's fleet a day after the if european airlines flight crash. ethiopian airlines flight crash. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. nejra: thank you. coming up, back to plan a. there could be more twists ahead as parliament pertains -- prepares to vote on brexit. when you are traveling to work, to needs of bloomberg radio.
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nejra: this is "bloomberg daybreak: europe." it's more of a risk on tone in markets yesterday. we saw the 10 year yield edge higher. it is back down on a 241 basis point handle. chorus joining the downplaying the inverted yield curve menace. s&p futures on the front foot as -- aeresa -- after we saw big focus on the kiwi. dropping the most in seven weeks on a dovish turn from the bank of new zealand. cable down 0.2%. we look ahead to a vote in parliament tonight. the bti extending its gains to
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$60 a barrel -- wti extending its gains to $60 a barrel. reach out to us and the mliv team, ib+tv on your bloomberg. now let's get the bloomberg business flash. >> the securities and exchange commission has agreed to pay two whistleblowers a total of $60 million. they provided information that helps the agency when a settlement with j.p. morgan. this was over claims the banks failed to inform wealthy clients of conflict of interest. a law firm that represents one of the whistleblowers -- huawei has dodged an eu ban as the bloc laid out a strategy to ensure its networks are safe from cyberattacks. the u.s. had been pressuring europe to bar huawei over concerns the company could be
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forced to spy for beijing. --t is an acquisition accusation huawei and the chinese embassy have denied. defendedew chair has elon musk's tweeting, the habit that has put the company on a collision course with u.s. regulators. she took over the chairman role from musk as part of the settlement with the sec after elon musk's tweet on taking -- shares.te nejra: u.k. parliament has decided to take control of the brexit process. it is preparing to vote on rival plans to theresa may's deal. the aim is to find a divorce agreement that could get a majority. how will these indicative votes work? mp's can put forward their alternative proposals, but it will be up to the speaker of the house of commons to decide which are voted on. chosen ideas will be put to a valid -- ballot.
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the results are due to be announced later tonight. parliament will reflect on the results and on monday the plan is to take a closer look at two or three ideas that proved the most popular among lawmakers. bloomberg's european open anchor joins us with all the -- from westminster. what are the options flowing around? anna: good morning to you. important to consider the potential for sabotage. we have these plans set out, but that is going to be debated. 3:00 u.k. time. look out for any attempt by those who don't like this takeover by mp's. look out for attempts to sabotage. assuming it goes ahead, let's talk about the options. a labor customs union. this is a plan from the labour
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party that they could back theresa may's withdrawal deal if she agrees to talk about a customs union. remember, the withdrawal agreement is the thing that is legally binding. the future arrangement is not. we could see room to maneuver around that. a different type of customs , aon, a second referendum plan that includes the eea. there are a number of options. the key thing to watch out for is anything that looks like chaos could backfire for mp's who want a softer brexit and could end up supporting theresa may and her to get a deal through -- attempts to get a deal through. speaking of the prime minister, is there a prospect
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that the cost of getting her deal through could be her job? indeed. on the one hand, we have indicative votes taking place. perhaps on monday as well. theresa may is still trying to build support for her deal. she wants meetings to take place tomorrow and perhaps friday. some reports have suggested. what will be the point of on board?'s could be her departure? she's going to meet the committee later this evening. she is going to perhaps be pushed to name a date. will it come soon enough? have they left it too late? the more we hear about this kind of plan from the brexiteers, the more those on the remain side of the conservative party might be looking at the indicative vote
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process and say, maybe we can get something different. the next few days are going to be jampacked. they're going to be very important. we have heard from boris johnson , real holdout brexiteers, they may be tempted to back theresa may's plan if certain changes were to pass. board. have not come on she has until friday to get her deal through according to the terms she agreed in brussels. that moves brexit to may 22. the next few days are going to be crucial. twin tracks running in parallel. nejra: thank you for joining us. kallum pickering, senior economist at berenberg, and max at hsbc are still with us. where do you think we end up? >> that is a very good question. it is impossible to be
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confident. the hard brexit risk is low. no more than 15%. the prime minister has said she will not allow hard brexit. pullman is against it. let's suppose we are on one of two paths. if parliament finds a majority, , buthere is a majority let's say it picks customs or norway. what if the prime minister decides that contradicts the conservative manifesto? that brings up the election risk. what if the majority is not found? that means we could run into the 12 of april, the other date the eu has set and the u.k. still does not have a plan but wants to avoid a hard brexit. so long as the u.k. has moved away from debating theresa may's plan onto a process for the alternatives, which could end with the referendum, the eu would accept an extension. which gets away from a hard brexit which takes us to
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either a snap election or a longer extension. this is the beginning of the process of resolving brexit, not the end. nejra: those are the risks. max, how do you integrate this into your multi-asset strategy? max: i'm trying to shun away from it is much as possible. from a multi-asset perspective, if you anna global petroleum, if you don't have to be active in u.k. assets, you just stay neutral. frankly, it's not something i can gauge on a longer-term specter -- perspective. i heard a lot of options i frankly don't understand. i would say if you want to trade on this, daytrading, fair enough. but if you want to invest, i don't think there is an investment case any kind of active position right now beyond the short-term. .hat really makes it difficult if we put it into a global
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context as well, if we are saying we have a selloff in q4, we have a rebound of equities, that was not politically driven. it was much more fundamental. a story of goldilocks and of using. -- easing. kallum: the u.k. economy is holding up. if you believe the hard brexit risk is low, the u.k. is a good bet. the question is whether you have to hold on for two months or three years to get by upside. the question of hard brexit is the one the markets should be focusing on. nejra: i'm glad i have asked that question several times. kallum pickering and max stay with us. speaking of that, there is a problem with hedging brexit risk. traders want protection, but the market has been subdued. both hedges go to waste. dani burger. >> the goal really is to buy
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protection, but not waste money when nothing happens. you see your option premium decay. there is one tactic gaining traction from j.p. morgan. that is the buy credit default slot indexes and hold them for the next three weeks. their first call is about european credit will get riskier, which is in the white. one fourth of the european index has u.k. exposure. costs against insuring these corporate defaults should rise as brexit turmoil royals market sentiment. at the same time, u.s. credit risk is expected to climb amid that dovish pivot by the fed. the divergence gives you more upside. singleiquid indexes are name instruments, but j.p. morgan still thinks credit default swaps are cheap enough to make sense. it calls lloyd's the most exposed company to know deal. nejra: while fed officials call
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for caution, trumps appointing -- appointee and a 50 basis point cut. tune into bloomberg radio as always. i will join you there from 8 a.m.. ♪
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nejra: let's get a check of the world map. risk-off coming into asian markets on a headline level after the rally in the msci pacific index yesterday. weakness in japan. it was the opposite yesterday. let's get to the question of the day. now tolds low enough spur a rally in stocks? are still with me. max: they will be low enough now for keeping risk assets and equities where we are right now. rebound.have the q2 i don't think it is enough for
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rally. kallum: purely as an economist, if rallies should predict strong economic growth, low yields should not be predicting strong economic growth. districtan analyst low -- low rate helps. nejra: joining us from mumbai isn't a rush. -- neeraj shaw. what is driving the indian markets today? to you.morning session, markets led the banks higher. a banking index is the top
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gainer. banks are driving this interest. up and therefore the market moves up as well. an important point to consider. there is a borrowing program coming out for the next six months. that will keep the money markets excited. as we look at the equity markets, one i should be on the 10 year yield. activity in late trade today or tomorrow. i would watch for that. back to you. nejra: you are keeping an eye on your 10 year yields, i am keeping an eye on treasury yields. you see the big moves in fx markets this morning. >> the new zealand dollar caught my eye. it is especially interesting if
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we look at the gmm function. when you see these boxes have the black border, that means it is a three standard deviation move. time itp, 99.7% of the should be within three standard deviations. central bank saying a cut is likely. in thailand, the election remains alive. turkish lira taking a beating. equity markets mixed. the opposite picture from yesterday where we have china gaining. big moves in the bond market. we have been talking about negative yielding debt. now a fifth of the total investment grade total bond market is negative yielding. really confirmed by the move this week. the interesting thing is in 2018, we had this idea of global synchronized growth.
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we thought we would get away from negative yielding debt, from dovish central banks, but now we have made a round-trip return to where we are in 2817. nejra: thank you so much. niraj shah in mumbai. we had a treasury auction yesterday and i have a chart showing the demand that the u.s.' market of 2-year note's falling. max, my guests for the hour. on the bloomberg, the bond market decides to eat its own cooking. we were talking about whether the inversion is sending the same signal has previously. robert says we would not have seen this sort of demand for these notes at the auction yesterday if the bond market was not worried about recession. agree? >> absolutely.
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the bond market sends another signal than the equity market right now. however, given where yields are right now and where valuations are already and where eps expectations are, if you put that together, i think until the end of the year, if you start investing now, let's say you start with a clean sheet right now, it will be fairly unpleasant for the bears and the bulls. we have more upside for equities. yields are lower. overeasing we have seen the last four months, that's coming through. maybe that will make growth pickup in q2. that can stabilize equity markets globally. it's not something that really can spark another 10% rally. say,e other hand, if we look, you've got another 10% downturn in equities, i think the fed will be quick to respond. they are able to respond.
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they are also able to caution the downside. for the bears and the bulls it's going to be fairly dissatisfying. nejra: should the fed follow what the market is signaling? kallum: probably not. i don't see a good reason for the fed to move either way. yields long-term bond reflect risks. if those risks were to materialize, the china slowdown, trade wars, brexit, probably you would have to seriously consider whether or not we would have a recession. in that sense the bond market is looking at things the right way. chances are risks will not materialize over the next quarter or two. they will probably go the right way, in which case bond yields will start to rise. the fed should be concerned about inflation expectations, wage growth, normal at the long end of the cycle to show signs inflation is around the corner. there is no good reason to think
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inflation is around the corner. if markets feel concerned, why not put the central bank put in their? nejra: what about the u.s.? is it not sending mixed signals? there is concern in the housing market. if you take everything together, what is the net result? simplistically, the u.s. economy had a big fiscal stimulus late in the cycle and it had a confidence boom and growth temporarily sped up above trend. u.s. aslowdown in the loss of confidence so pronounced you might consider it to be something other than fiscal stimulus? maybe there is trade war seeping in, but probably not. this is a normal normalization. a multi-asset strategist, a big question is about the hunt for yield with
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rates this low on guppies. where are you hunting for yield? credit.on't think it is i do not think it is high yields. the risks are too high. last week, if you look at friday, you already see spreads up quite dramatically even inversion ofve a the yield curve. the risks are simply too high with this trip will be -- triple be. theink it is more sort of long-duration space and the equity space for the dividend yield pickup. i think that is more attractive right now. it is also the long-duration aspect of australia, where there really is something left. would in fixed income, you choose to take risk in
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duration or spread? >> i would rather take it in duration given what the bond market, the signals the bond market is telling us. from a spread perspective, i think the risk, if you go through them deteriorating it has deteriorated really throughout the cycle. it has not played a role as such so far. it really can very quickly snap back. we have seen that in q4. episodes,ery short but particularly the high-yield space. particularly dollar high-yield. dollar high-yield had this recovering q1 mostly because of high oil prices because of the rebound. for now, what is the basis for higher oil prices? i don't see much of a basis there. there is no support for high yields to rally further in the
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united states. nejra: just want to ask you about ecb. ecb missed its chance to normalize for the next downturn? >> it depends on how the risks materialize. europe is going through an industrial recession driven by outside the eurozone economy. we have been through trade wars, brexit, the china slowdown. chances are we will see enough wage growth and inflation expectations rising in europe for probably a year, year and a half down the line. there is a risk it does not normalize it cycle. the trade mentioned war. we are looking ahead. tell me where you see this evolving. a big question being whether the structural issues will be solved or whether trade war risk is going to keep coming up. kallum: it's good news china and
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the u.s. are seeing a slowdown. a huge incentive not to inflict damage through trade wars. trump probably wants a good economy heading into the next election. because there is no geostrategic rivalry between the u.s. and the eu, so long as the u.s. and china come to an agreement, markets will take their cue from that. those are the things i would be watching on trade. nejra: great to have you both with us this morning. . kallum pickering and max kettner . now let's get the bloomberg first word news. parliament is preparing to vote on rival plans to theresa may's brexit deal. these could soften britain's departure from the european union or cancel it altogether. as the risk of not leaving rises, pro-brexit conservatives are signaling they could shift to support the prime minister's deal. several have indicated the price could be that she has to resign.
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the global iron ore market is likely to have a shortfall according to fortescue metals founder andrew forrest. he cites output reductions at bolle. other couldire said face restraints. be athink there will supply deficit. our operations are massive. you just cannot turn up the dial or turn down the dial that easily. debra: the kiwi is tumbling after new zealand's central banks as its next move is likely to be a cut. it has joined the shift away from higher interest rates. traders are bracing for a 25 basis point rate cut by august. this move follows on the footsteps of the federal reserve. the u.s. central bank signaled it may not raise rates at all this year. global news, 24 hours a day on air and @tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries.
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this is bloomberg. nejra: debra mao in hong kong. coming up, china's industrial profits see the biggest drop in a decade. concern over the global slowdown. we discuss that next. when you are traveling to work, tune into bloomberg radio live on your mobile device or on dab digital radio. ♪
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nejra: this is "bloomberg daybreak: europe." we are asking the question. are yields low enough now to spur a rally in stoxx? mliv out to us and the team on your bloomberg. now let's get the bloomberg business flash. bank -- swedbank
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may have misled investors. that allegation comes from a swedish broadcaster. confidential documents it has obtained say more than 100 companies have done business with swedbank. a law firm tied to the panama papers allegations. the securities and agreed to pay whistleblowers $50 million. they provided information that helps the agency win an over $250 million settlement with j.p. morgan over claims the bank failed to inform wealthy clients of conflict of interest. a law firm that represents one of the whistleblowers disclosed the link to the jp morgan case. and --has dodged an eu ban. pressurings been european allies to ban huawei equipment over concerns the tech
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giant could be forced to spy for beijing. -- anin accusations accusation while way and the chinese embassy have denied. red signals are flashing for a slowdown in global growth. yield current version triggers fears of a recession. in china, companies have seen the worst start to a year since 2009. profits declined 14% from a year ago due to weaker factory inflation and slowing production. joining us now is a senior economist at hermes. great to have you with us. what are all the different signals in the market and in terms of data telling you about global growth? moment, they are
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mixed. data, it is athe mixed bag. in my mind, that is an indication there has been a slowdown ongoing in the global economy. there are different regions with different features. the euro zone and china have experienced a sharper slowdown. the u.s. has held up better. also, i would say, better confidence for consumers and businesses. going forward, my expectation is global growth rates will stabilize at lower levels compared to what we have seen the last couple years. nonetheless, they will stabilize what central banks worldwide are doing, which is providing more accommodations. accommodationg of
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, let's talk about china. bloomberg has done a survey. of the people bloomberg has spoken to, they see the pboc turning less dovish amid a recovery, but also concerns about the focus on stimulus likely to be on the fiscal side. do you see the stimulus from china continuing to be targeted and more on the fiscal side? think there is no surprise the chinese stimulus is more on the fiscal side. clearly china is facing a big challenge as its economy is transitioning from with ---market economy to a more developed market economy where consumers have a bigger role. in this context, china needs to
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to the bubble.t at the same time, china wants to .revent a sharp slowdown policymakers are focusing on fiscal stimulus, especially in the form of tax cuts. are tied toy domestic demand and consumers in china. nejra: the u.s. and china are to resume trade talks this week. robert lighthizer and steven mnuchin are due to visit beijing thursday and friday. lighthizer saying he's hoping besides can reach a deal. president trump has been bowing -- vowing an excellent deal. do you think that is what we are going to debt -- get? >> i am sure they will reach a deal. i'm not sure it will be excellent. there are strong incentives on both sides to reach some sort of
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agreement. the chinesethe chinese economy r pressure. trade tensions have played a role in providing pressure on growth. in the u.s. there has been a slowdown. president trump needs a boost to his ratings. , a deal is likely to be fragile and temporary. indeed, there are many sticking points. the countries are far apart. it looks like the implementation, and enforcement could be tricky. reached, trade deal is it is likely to be temporary for china. eventually, tensions are likely to persist in the long-term.
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nejra: this also poses challenges for the euro zone. we look ahead to the ecb and its conference later. we look ahead to hearing from mario draghi as well. what do you want to hear from the tltro three program? ecb have been quite vague because it wants to test the voters on what conditions can be. conditions will not be as generous as they used to be for the first round of tltro. expect the ecb to provide much detail at this stage. the ecb will lay out a few options. i do not think they will really
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show their cards yet. nejra: with all the limited , does ithe ecb have actually have the tools to lift the euro zone economy from where it is now? or does it have to come from the fiscal side? >> the ecb has maxed out, meaning it has reached the limits of its tools in terms of qe. there are strong political constraints. the rate is negative, which is challenging for the banking sector. likee same time, it looks the cycle is quite close to its end. it looks like the ecb is going to miss its opportunity, which the next downturn will
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need to come from the fiscal side. there is no really convincing fiscal framework. policymakers in the euro zone need to do more work on it. that is a challenge going forward. gora: i can't let you without getting your take on the inversion of the three-month 10 year yield curve in the u.s.. you have had all kinds of commentary so far. goldman has been the latest to join the chorus downplaying the potential menace of the inverted yield curve. is it signaling the u.s. recession is on its way? >> goldman has downplayed the signal because it has been quite reliable in predicting a recession. 2006, ben bernanke,
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the fed chair also downplaying the signal from the inversion of the yield curve, suggesting there were pressure on down -- on yields because of demand for safe assets. we know what happened one year and a half down the road. i'm not concerned for the short-term. i see the probability of a recession in 18 months is quite high. nejra: great to have you with us this morning. thank you so much. indian prime minister modi is giving an address to the nation. in a twitter post he said he would have an important message to deliver. coming up, lloyd's of london publishes its annual results eminently. we will speak with john neil. we will also discuss the
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exchange's action plan to address allegations of misconduct. do not miss it. ♪
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nejra: good morning from bloomberg's european headquarters. this is "bloomberg daybreak europe." pre-brexit conservatives breathe life into the prime minister's deal, but that her job be the cost of their support? dare to be dovish. the san francisco fed president joins the calls of caution amid slowing global growth. up next, merriam draghi speaks in -- mario draghi speaks in frankfurt. and we will speak with chief executive john neil and discuss the action plan to address allegations of misconduct. don't miss it. ♪
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nejra: good morning, everyone. it has just gone 7:00 a.m. in london. where our from cash equity trades in europe. more of a risk on tone in markets yesterday. equities gain in europe and the u.s.. looking at how we might shape up in today's section -- today's session. we might see another day of gains in europe. futures up a quarter of a percentage of -- percentage point. eating at the bond market, the 10 year treasury yesterday and shove, but down by about a basis point today. we had a strong bid to cover ratio, highest since november yesterday. more auctions this week in the u.s. it in terms of how europe might shape up, we could see the two near bund yield. let's check in on the markets in asia. juliet is in singapore with
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more. >> we are a little bit weaker on the pacific index, mainly due to weakness in japanese stocks today. you have 1500 companies on the broader topix, trading for rights for the dividends. there has been some very strong buying in chinese equities. we had a pretty dismal read on industrial profits, seeing the were start to a year since 2009, but that is getting everyone in the market suggesting there could be more easing coming through. quite a lot of buying in chinese equities. india also looking strong. australia pretty flat. new zealand hit a record high today. let's look at the assets and see why we saw the rally in kiwi stocks. we saw a plunge in the kiwi dollar, arrived in new zealand bonds. you can see the yield on the 10 year down by 11 basis points. bank turning dovish
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good -- dovish. the governor suggesting the next move is likely to be a cut rather than a hike. that has seen a lot of weakness in em currencies on the back of the dovish mood we are hearing from global central banks, and the the indonesian repair worst-performing concerns the -- worst-performing currency. slightly above the 3% this year. you've also seen tie and other em currencies under pressure. nejra: thank you so much. let's get the first word news with debra mao in hong kong. apple has dodged an import ban in a fight with faces another. the u.s. international invalidated a qualcomm patent for a battery saving feature, but earlier and a day, a separate judge set that apple had infringed a different qualcomm patent. he recommended older models of
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the iphone be banned. thailand is preparing to vote on parliament is the parent on rival plans for brexit. of notrisk -- as a risk leaving rises, pre-brexit supporters say they could shelve the prime minister's deal. several have indicated the price for approving it is she resides. and china resume high-level trade talks is week and are looking to close in on a deal. it could be the first step in and -- in a row to economic peace. both sides remain determined to reach an agreement. and the u.s. will continue talks next week. the gender pay gap is not explained by tenure, location, or role. glassdoor found that the wage a claimap could not be by these factors.
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when the figures are adjusted to reflect job characteristics, women make less than their male counterparts. 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. nejra: debra mao in hong kong, thank you. let's turn to a big interview of the day, i have a lloyd's of london ceo john neal with me on set in london. great to have you with us this morning. you just released your aggregated market results for 2018. you reported in aggregated market loss of one billion pounds. -- pounds for 2018. what's the outlook for 2019? john: throughout 2018, it was really important that we narrow the performance gap and demonstrate to the world that we could be back in profit for 2019. also today, we are talking, i'm excited to be talking about our
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view of what the future of the insurance market could look like, not just at lloyds but globally. finally, in view of the report that came through bloomberg last week, being very firm in the action we are taking to stamp out any form of inappropriate behavior or sexual harassment in our marketplace. nejra: you just brought up that report so let me give the information to viewers who might not be familiar with it. bloomberg businessweek gathered -- wrote an article taking a look at the culture inside lloyd's of london. it included from some of the 18 women who described an atmosphere of near persistent 330-year-old the london institution. the article said that women with international experience in insurance and other areas of finance is that the pervasive harassment at lloyds and the wider london market is unique. many women businessweek contacted said that taking this to court would not be worth it because of the damage to the
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reputations. john neal is next to me on set saying no one should ever experience harassment about -- harassment of any kind at work. articleimonies in the were not from employees from lloyd's of london but of various major insurance companies and insurance brokers who work in the london market. the vast majority of people who work at the lloyd's buildings are not employees of the exchange. in a press release yesterday, lloyd's talk about what they plan to do to combat this. an independent whistleblower hotline, it has laid out lifetime bans for inappropriate behavior, and proposals agreed upon at an emergency meeting of industry executives convened yesterday by ceo john neal. that's continue the conversation with john neal with the onset. i want to commend you on this what action you have taken
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following this report by bloomberg. but what can you say to reassure women that they will be safe not just while they are in the lloyd's of london building, but while they are having meetings with clients, socializing with colleagues and clients in pubs and bars in the surrounding area? year, i october last was honored to take on the position of chief executive of lloyd's of london and this is not the lloyd half i want to be part of. many of my lloyd's colleagues want to be part of either. whether it was 10 days ago or 10 years ago, it's simply not acceptable in this day and age that any woman should not feel safe. so you run through the actions we denounced. one is very important, and that is to understand through an independent cultural survey what we are doing well, but also what more we can do. whatever we say, we are not doing enough. we have got to ensure that
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everybody, whether it is a woman or man should feel safe anytime of day doing anything associated with the lloyd's market. undetermined that would be the case. nejra: how can you actually manage to convince people that they will feel safe also at the lloyd's of london building. it's one thing to police pager while people are at work, but a lot of the instances we reported were not in the building itself. john: you are right, of course, because we operate globally. we will impose our own sanctions wherever one of our constituent companies choose to do in the marketplace. if anyone ask inappropriately, we will be incredibly decisive, and as i said, that in -- that could include lifetime bans. we will not accept any form of bad behavior. nejra: a skeptic might say this is a form of crisis management or even closing the door after the horse has bolted. will you really be able to bring about an overhaul of culture
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that your predecessor, with all of her work on diversity did not manage to do in five-years? john: i think she did a fantastic job in bringing the marketplace forward. i think the inclusion pledge, the changes in the market have been incredibly significant. everyone i have spoken to has been shattered by the article. i have no doubt whatsoever that everyone wants to redouble their efforts to ensure that these events cannot occur. nejra: it's one thing to regulate behavior, it is another to regulate thought. what will you be doing to actually change the kind of attitudes that lead to sexual misconduct? john: two things, i would say. firstly, we are doing mandatory training for all of my staff, so that they can really understand and look out for actions they think are inappropriate undertaken by others. how do they intervene in a situation where summer is -- someone is feeling uncomfortable?
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is experience bystander that able to step into a situation and offer help. the other is really to understand what is working, what is working well, and inshore those lessons are learned by everyone across our business. nejra: what sort of response have you gotten when talking with industry executives? i know you have this crisis meeting on monday. john: what has encouraged me is that none of the participants in our marketplace -- let's remember, there's almost 100 insurance companies operating at lloyd's. everyone of those entities has lined up high and what i said yesterday without hesitation. i think everyone felt very ,isappointed to read the noise and determined to stand behind actions i have been discussing. nejra: bloomberg spoke to 18 women with something like 300 years of combined experience between them. when bloomberg spoke to these women, some of them said they had gone to their hr departments and been persuaded to stay silent.
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need to changems in the u.k. insurance industry? john: from what i have seen, and i have seen our hr systems, we take any work complaints incredibly seriously. but i heard that. one of the things we said we would do is set up an independently managed and confidential multi axis point that anyone can go to if they feel they have a complaint or grievous. at the very least, i can give them advice, or more strongly than that, a complaint committee -- can be heard. it can be right that people felt that way. nejra: what would you say to reassure women and possibly men who might know that they will be -- that there will be sanctions against anybody who behaves inappropriately towards them but they might be concerned that their reputation none will be at risk for coming forward? john: that is not the case. their reputation will not be impacted at all. if they have anything to say to us, it will be heard in a
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confidential manner, so they should not feel worried at all about talking to us in reporting to us, and they should feel totally reassured that if there is proven action that is inappropriate, we will take the most decisive action. nejra: how will you measure success? john: i think we will measure success by looking at the cultural survey i am talking about and repeating that regularly so we can see the changes. surveying lot of time our own people, what do they feel about what we are doing? even this year, what is a shame for me as i am announced only a few weeks ago significant changes in the workplace, particularly around maternity leave, which i think is industry-leading, particularly around care policies and sabbaticals. i feel passionately we have to look out after our people. what people say and how they feel is everything as far success is concerned us -- concerned for lloyd's. nejra: have you set a timeframe or is this ongoing work you will be doing? john: i think we have to act
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quickly and i want to see the responses to the survey as quickly as practically possible. i don't think our work should stop, it should carry on. you referenced the good work that out -- that my predecessor did. tomorrowp is meeting and they will have the same discussion we are having today and thinking what more they can do. nejra: and of course we all acknowledge the great work into appeal to do, but one person who came up was the focus of the diversity over tackling sexual harassment head on. and menreassure women out there that priority out there is taking an absolutely zero-tolerance approach to sexual harassment? john: let's be abundantly clear, if there is anything lower than zero, it is lower than zero. we will not accept any form of sexual harassment at all. nejra: thank you so much for joining me this morning.
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neal, ceo of lloyd's of london, we appreciate your time. coming up, as the fed is patient on rates, we speak to charles plosser. don't miss that interview, next. and as always, if you're traveling to work, tune in to bloomberg radio. the sum has been up a couple of hours in london. this is bloomberg. ♪
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♪ 7:18 a.m. in london, 40 minutes away from the equity market open in europe. this is "number daybreak europe." san francisco fed president mary daly is the latest in a long line of u.s. central bankers supporting patients on future interest rate moves. she joins minneapolis, and chicago in calling for caution since the fed met leslie week. sheking in san francisco,
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discussed risk in the current shift in the bond market. >> there are a lot of factors holding down rates on the 10-year, and the yields on the tenure being held down for flight to safety, you can see the emerging markets in europe is not in great shape, so people come and purchase our bonds appeared we have a balance sheet that is larger. i'm not dismissing the and saying were not paying attention to it, i am just saying we are not freaking out. nejra: this is the reserve bank of new zealand because the latest central bank to join the dove us -- dovish shifts. the governor says it is mo -- more likely to cut them. mario draghi is to speak today as he addresses the ecb at is watchers conference. joining the is charles plosser, former head of the philadelphia reserve bank. wonderful to have you with us. thank you for joining us. let's start with the federal
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reserve and let me ask you whether you think the fed's latest dovish pivot is setting them up for policy mistake. i think it is too early to tell. we don't know for sure. it might be the kind of overreacted in dovish signals. i think there is reasonable for caution in patients, but the danger is sending forward guidance about how long that will last and how it will play out, it is a little tricky. the fed often gets into, and central banks, is reacting to short-term events and then having to fall back or we know on signals -- back or renege on signals they said. i think they need to keep their options fairly open and not shut them down perhaps as dramatically as the markets perceived them to do. nejra: yes, and to get to the point you made about reacting to
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short-term events. ont brings me to the theory real business cycles that you pioneered. is that theory still relevant to today's circumstances? charles: of course it is. there are lots of shocks that occur to economies and the world economy and domestic economies. it has nothing to do with monetary policy or things that military -- that monetary policy can fix. we have to take a water view. i said this when i was at the putand still believe it, we too much faith in confidence -- and confidence in central banks to solve the economic challenges we face around the world. a littlee have to be more, i guess the word is realistic, about what central banks can do. i think we have to be careful about taking on too much, if you will, and hoping the central bank can solve our problems when in fact they may be unrelated to
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think that central banks can actually deal with. structural problems, labor market problems, real problems in trade. there is a limited ability to solve a lot of our problems. nejra: if the fed were to react to what the market is pricing right now, which is the next move from the fed being a cut, but also the signal we are seeing from the inversion of the three-month 10 year yield curve signaling perhaps a recession is on the horizon, if the fed were to follow this market signals and cut, with that be a mistake -- would that be a mistake? date,s: certainly at this i would say yes, i don't think it would be a wise thing to do. i think the signals are far from clear. there is uncertainty. i think that, for example, in the united states, a lot of the prognostications from the markets about u.s. companies
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earnings performance that we heard in the fall and december, and worries, they have not been nearly as bad or traumatic as the markets were making them out to be, at least so far. so i think we need to be a little cautious in reacting to these short-term decisions. i think mary daly in the played, lots you of things go on to determine long-term rates beyond their control. greenspan said we can control short-term rates but not long-term rates. we have to because his in reading too much -- we have to be cautious in reading too much in reading too much -- in reading too much in short-term signals. the fed should not be distracted by noise around the marketplace. said, we might be putting too much faith in the ability of central banks to solve problems, i have to ask you what your view is on modern monetary theory?
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well, i guess the short answer is not much. dangerous is a prescription. it is a belief somehow that central banks have a role in solving fiscal crises and problems, the role of an independent central bank and the centralwisdom to keep banks independent of fiscal policy decisions is a good one. this is just running headlong into that and undermining the independence of central banks around the world to the extent that we buy into this sort of notion that the fed or ecb has to find a fiscal policy action. it is quite troubling in my view. nejra: let's talk about the ecb, then. you are at the ecb and watchers conference. has the ecb missed its chance to
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normalize before the next downturn? well, i don't know the answer to that, and i don't know that anybody does. i think there is a risk, and i have been worried about this for years, that the sort of andaordinary actions unconventional policy that the fed and central banks have taken during this crisis have been around too long, if you will. i think we have to be careful that they don't become permanent , and i think that has a lot of risk to our institutions and ability to respond in the future if need be. i don't know when the next recession will come, it probably will at some point, but we are not very good at forecasting them. i think the best advice is to be prepared, and put yourself in a position that allows you to react if and when it is necessary. nejra: you have talked about the
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ability of central banks to react in future. have negative interest rates been worth it? charles: i think that's a question that the jury is still out on. some other, sweden, countries have tried to implement negative interest rates partly as a way of getting around the issue of quantitative easing and the balance sheet --blems that leads to it leads to but the evidence is mixed. some people think it has affect on the money markets in the short-term. most cases, negative interest rates have not filtered through to consumers very much, is my understanding. i think the evidence is mixed. whether or not negative interest rates really promote demand as monetary policies will want to do, i think the evidence is less than overwhelming.
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nejra: yes. charles plosser, former president of the philadelphia federal reserve bank. thank you for joining us. that is it for "daybreak europe." tune into bloomberg radio. this isn't just any moving day.
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>> welcome to "bloomberg markets: european open." i am anna edwards in westminster ahead of today's vote in parliament. ♪ anna: the road to normalization, ecb president mario draghi speaks in frankfurt shortly amid increasing doubts about returns to neutral policy. mais poisoned chalice. key lawmakers

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