>> deutsche bank reaches a $7.2 billion agreement to settle a u.s. mortgage probe. the details come from berlin. the justicesued by department after refusing to pay what the government demands. manus: italy readies a 20 billion euro bank bailout as monte dei paschi fails to raise the funds it needs. we are live to malan. -- milan.ia saudi arabia produces a budget to prove to the world a you can balance the books. vladimir putin holds his annual news conference a day after donald trump calls to boost the

nation's nuclear arsenals. all of the latest from moscow. welcome to "what'd you miss?" -- "bloomberg daybreak: europe," our flagship show from the city of london. deutsche bank, 50% less than at the height of the speculation of autumn. 1912. 50% ofe bank settles for the number originally expected. monte dei paschi will ask for state aid from what we understand. i have gathered together the price to book ratios. the red is that of the whole of europe. how decimated is banca monte paschi?

.05%.barely deutsche bank trade that .4%, the blue line, and it has seen a little bit of recovery. the question the market needs to ask itself today, is there a renewed probability of rising values once a state bailout is in place and deutsche bank settles with the regulators? deutsche bank has put $9 billion 2008.ince 200 defrauding fannie and freddie and mortgage-backed securities has drawn and $46 billion in fines, but this is a state of play. as a proposition to the market, do you see a resurgence? the yield curves are rising. is monte paschi and deutsche bank on your buy list?

not least the trumped week as well. have a look. manic --fairly flat at the moment. discretionary down by 1.1%. the data was mixed. household purchases great, but the jobless claims rising to the highest level in six months. al golden here up a third of 1%. here upave got gold in 0.3%. the have contracted for the 30th day in a row. a long drawng removal from gold and oil off by zero point 4%. oil trims its weaker gains. stockpiles rising in the united states of america. as eight span by 2.26 million barrels last week so inventories are the highest in three decades and the dollar, a little bit of a pod. down by 1/8.

afflicting on the jobless numbers from yesterday. those are your market. things in focus. gdp in focus in france as well. confidence in germany would drive this last trading session before the christmas festival. let us get the bloomberg first word news. angie lau is with me this morning. angie, good morning g. says: angela merkel germany will not give to islamist terrorists. she hoped that the attacker would be caught soon. the manhunt continues for the 24 euro tunisian expected to have driven the truck used. deutsche bank reaches the agreement to resolve a year-long u.s. investigation into its dealings and mortgage-backed securities. the bank will pay $3.1 billion civil penalty. italy is readying as much as $20 billion -- billion euros,

rather -- to bailout the country's banks. the news came after banca monte paschi failed. it could be followed by rescues for other lenders including banco popolare. toald trump has asked boeing replace the f-35's. the joint strike fighter is intended to be the main state fighter of the air force, navy, and marine corps. its development is more than a decade in the works. saudi officials have presented the most detailed budget in its history over an hour's long news conference. the presentation included scenarios of how public finances could evolve through 2020 after being hurt by two years of lower prices. 30 energy minister -- the saudi energy minister said local oil prices will rise. >> i cannot specify the date,

but it will not be late in 2017 that as we do it soon enough. angie: global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 100 20 countries. of course, you can find more on the bloomberg at top . -- 120 countries. of course, you can find more on the bloomberg at top . manus: coca-cola buying the bottling businesses in african by lloyds bank, bank of america's credit card business. they are buying delta lloyds. the agreement is -- delta lloyd have agreed on this as a transaction. you have the dutch insurance and investment company, nn, for a

broad church, the description of nn. deltaave agreed to buy lloyd. a return on equity, by 10%. they would be delighted with the return on investment of 10% for 2018 onwards. double digits in terms of dps from 2000 and 18 onwards. another deal, another date. about us get to asian markets. any christmas cheer for me, juliette? only if you are holding stocks in new zealand. santa has not found asia just yet. we have had a bleak day. the regional index excluding japan, which is closed. being hit quite hard today. we are seeing volumes very light ahead of the long weekend, with many markets closed on monday and tuesday after christmas.

australia yesterday hit a 2016 high. today, we saw that weakness in the iron ore price heat a lot of the minor players. it was a shortened trading day in australia and new zealand. hong kong extending this slump into correction territory and seeing these property players under pressure and concerned about outflow. consecutive0th session in hong kong and the hang seng off by 0.5%. down more than 10% from that september 9 high. from somecoming down of its gains, off by .9%. it hit a six-week high. elsewhere, we are seeing general weakness coming through in the emerging markets, particularly worth noting the controversial thatnts from president -- hit the gaming stocks in the philippines and this is a stock that globally has performed the worst in this quarter.

this is not a great session for the asian equities. manus. thank you very, much. hoping santa clause will visit us both. juliette saly with the latest on the markets. one of our biggest stories of the day is deutsche bank and it is said to have reached 7.2 billion dollar agreement to resolve its u.s. mortgage probe. it ends years of long investigation and removes a legal hurdle of its fuel investor angst. matt miller joins us now from berlin. good to see you. we have been waiting and debating about the crisis. $14 billion. today, 7.2 billion. how will that be paid? of thehat is one interesting parts of the settlement agreement, manus. $3.1 million -- billion dollars is going to be paid in cash as a civil penalty. $4.1 billion will be paid in

consumer belief, in ways like modified loans, so deutsche bank has said it is not clear if that is going to have a real financial effects on the earnings report that it is going to put out in february for 2016. the cash payment will take $1.2 billion out of earnings for the fourth quarter, and this is a little bit more than deutsche bank had budgeted for. they had budgeted about $2 billion to the cash raymond and we're looking at $1 billion more -- cash payment and we are looking at $1 billion more than that. manus: this bank has been battered since 2008. $8 billion set aside for the provisions. they have been involved in many different disputes. they have talked to find down by down by- the fine almost half. we talked about surviving. is this still too much money for the bank to bear? $7.2 billion?

matt: they have put aside $6.2 billion right now for all of their legal issues, so this is $1 billion more than they budgeted for, and they have still got things to look forward to on the horizon. they have been able to bring the fine in under some estimates. banks have a couple of coming out and saying, 9 billion dollars, kbw said $9 billion would be the upper threshold for pain. deutsche bank is going to need to raise $16 billion in capital, not even counting this fine, so it depends on how you look at it. than u.s. banks have had to pay relative to the size of their loan book. bank of america had a loan book four times the size of deutsche bank, but only had to pay $16 billion, so less than twice as much. manus: i love the way we both

have become so utterly immune. they only had to pay $16 billion. and u.s. institutions only had to pay $48 billion since 2008 for contorting, distorting, and moving over 80 of markets. variety of -- a markets. matt miller, joining us. let us bring in our guest, christian schulz, the european economic director at city. thank you summit for coming in this morning. pieces on the chessboard. deutsche bank moving on. 7.2 billion and change. no mean feat. it does move us through the eye of a market storm. just two months ago, we were talking about deutsche bank going bust, and contagion from deutsche bank. your first impressions when you hear that piece of news flow? christian: from an economic angle more generally, it does not seem that germany has held

back on the fragility's in the fragilitiesor -- in the banking sector. know, this one particular bank is a very large bank, but given the diversity of the german banking sector, it is certainly not the only bank that is available to provide a credit. questionse got many when i have been talking to investors about the german banking sector. this is clearly one of the main banking stories. if this move towards resolution, i'm confident i will have less questions about the german going, banking sector forward and perhaps more questions about the political outlook, about why the german economy, which has a little debt is not growing faster than it is, what constraints there are, because these things -- manus: what is the biggest constraint? i look at the italian story from a market perspective and i say

this is moving through the eye of a big storm. what is moving germany back? everyone is clamoring for fiscal latitude around europe. do you see that? this is the inflation at dictation, by the way, the five-year for the whole of europe. in 2017 atgermany all, driving miss five-year five-year further and higher -- this five-year five-year further and higher? christian: i guess for the first time in a very long time, be listed chance that angela merkel will not win the election, but it remains the case. manus: christian, christian there with the polls. christian: any comment on politics, we should not start with current polling. it is going to change. it is a few months away and there is the chance that merkel will not win. the most likely

alternative would be some kind of left-wing coalition and that may lead to a little bit of a fiscal easing in germany and perhaps more importantly, let's german strictness on the enforcement of the eurozone fiscal rules, perhaps opening us to european investment programs, so that could be the fiscal tailwind that people have been looking for, if she is a poor's reelected than mr. schwab remains the finance minister. manus: how worried are the clients that you speak to behind closed doors? now that we are seeing trump, seeing cameron don, seeing rising up ofg the marine le pen, are they worried merkel could go and the ramifications of that? christian: anything is possible and everybody is much more open to discussing the alternatives than they were previously. i mean, the merkel story came before brexit and trump really

became evident. the refugee crisis, her she is above 50% in most popularity ratings, which in the g7 still makes her the most popular leader, but of course, a lot less than she was before the refugee crisis. the story has been around for sometime. people have been assessing what it would mean and there has been ups and downsides to her. she is a most experienced leader in europe. we had major challenges with exit, the refugee crisis, euros on reforms coming up, and you need somebody who can commit the biggest economy to resolving these issues, and a new guy or woman may not be able to do this. the upside could be that some of the restrictions that germany theput around resolving crisis with fiscal stimulus perhaps, with a european deposit insurance scheme for the banking sector, debt neutralization,

support for the ecb, some of these rejections could be lifted if there is something else there and things move forward more quickly. manus: absolutely, those could be quite prophetic pieces of changes. let us get yousef up there for your highlight of the day ahead. it is not one, the christmas shopping. consumer confidence to asia. theinutes later, it is french gdp reading and at 9:00 a.m. london time, annual news conference. hunger in, get the popcorn. in, get the popcorn. it is a long one. the final meeting of u.k. gdp and the london stock exchange and the u.s. bond market close early, ahead of the christmas break. coming up on daybreak, the country government ready to -- monte paschi's plan fails. from the land with the latest. saudi shakeup. and historic budget prevented as

they aim to wean the economy of oil. we going into the details. brexit votes six-month on. -- months on. the u.k. waits in the e.u. departure lounge. this is bloomberg. ♪

6:21 hereis just gone in london. it is 2:21 in the afternoon. gorgeous shot of the harbor in hong kong. not so lovely for the hang seng. down .5%. that is get a bit of bloomberg business flash, a little bit of cheer with our juliette saly. juliette: the u.s. justice department sued barclays for fraud. the boj says investors would have seized the risk of securities.

barclays rejected the government's accusations. volkswagen has agreed to further settlement terms with owners of premium diesel models. the settlement covers gw, porsche, and audi vehicles after 2009. it is part of a larger accord that will add $1 billion to what the company has agreed to pay regulators, consumers, and lawyers in the u.s. and canada. six-month on from the u.s. for number, signs are pointing towards a hard brexit. the temperature of the u.k. economy this morning with a final meeting of the third quarter tp and a first look at the performance of the services sector in october. and manus, that is your bloomberg business flash. manus: thank you very much. let us return to one of our top stories. 20 billion euros into the country's banks after monte dei paschi failed to secure funds from investors.

a nationalization of the world oldest bank could also see other lenders seeking lifelines. joining us to discuss the story financeloomberg managing editor. christian schulz is with me in the studio. thank you for joining us. how did we get here, alicia? and how did it take so long? >> it has been a slow bar. what we have seen over the years of economic contraction accompanied by what you would expect, which is an increase in the stock and the banks not of theg rid stock. the model is not been profitable, and under these various squeezes, the banks have found themselves in a position in which they have up and able to find private money, private investors who are willing to take a leap of faith and back their turnaround at this juncture, even if monte paschi would have removed most of the bad debt from its box, or a

large chunk of it, investors are not to that would be sufficient to maintain a viable business model in the aftermath, and this is what we are seeing. it has been very slow over many years. manus: i suppose the question we have to ask ourselves and the great deal we made of this is the bail in. this is going to be an interesting time in terms of where they are built in. i'm going to interrupt both of us here. credit suisse has reached a settlement, and this is breaking news coming in across the bloomberg terminal. credit suisse has reached a settlement with the department of justice on retail mortgage-backed securities. credit suisse will pay consumer relief of 2.8 the end-all are, so this is -- 2.8 billion dollars. we had the news flow that deutsche bank had reached their settlement of $7.2 billion. that was split between reparations to consumers and to the department of justice. chargesuisse was a cap

of some $2 billion. this will come in their fourth-quarter numbers. that will come out and we will get those in january. this was his absolute objective, to shake up the bank, cut costs, get litigation out of the way. this is the vanguard at deutsche bank. consumer relief, two point $8 billion. that is the latest on the department of justice. that we bring it back to you and the monte dei paschi. if we take this at face value, credit suisse resolving, deutsche bank resolving. we are moving forward at an exceptional cost. quite an impressive night for news for european banks as you point out. paschi, which symbolizes the difficulties that

italian banks are going through. i think for the big legal cases, it clearly clears the deck in pledgedms, and the ceo removing litigation uncertainty is one of the key focuses. i think, once we look more closely at the numbers that are involved, the transparency going forward will be positively received by the investors. with the italian banks, that is different. they are injuring a very uncertain phase and will be essentially controlled by the government, and what we don't know is the type of restructuring the government has in mind for these institutions that are clearly not deemed to be viable by investors. will there be more consolidation, will they take an aggressive start on the costs, for example? these are questions we don't have the answer to. for the italian lenders, the pain ahead could be a little bit longer. manus: great work by you on the team. more to come.

our bureaung us from in italy. breaking news on bloomberg first. ♪

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you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. manus: it is 6:30 a.m. here in london and 3:30 in the afternoon in tokyo. the dollar-yen moving a little bit higher. look, you know what, dollar has hit a pause button. those numbers seem to have, you know, pushed the positive and on the big dollar trade -- pause button on the big dollar trade. you have a new edition of daybreak on your bloomberg and mobile. let us take a look at the top stories. italianw, it is the rescue and as our editor said to many italy, we still have

unknowns in terms of the ramifications for italian banks, but it is a bailout of monte paschi by the italian government. excuse me. approved a 20s billion euro program to rescue to bank after it failed attract enough investors, anchor investors. not story is deutsche bank paying 3.1 billion, the civil side -- next story is deutsche bank paying 3.1 billion, the civil side of the department of justice. payout is a fraction of the 14 billion initially demanded. that shook the market earlier this year. that is the understatement of 2016. finally, daybreak focuses on the euro, which was largely -- equity index -- excuse me. before the holiday weekend. and on lows down

volume. i have got to have a glass of water and i will hand over to nejra cehic to save me. asian stocks follow u.s. stocks lower today. japanese markets close and we are seeing losses in china and hong kong. let me take you through to the imap, dropping for an eight h session. most industry groups lower today. i found a great part on the function on the bloomberg. ivee a look, all of your l market action. this is showing the dividend yield on the msci asia-pacific and that has fallen on the white line to about 2.5%, pretty much matching the bond yield. treasuries become a more attractive alternative. a look at that chart. the 10 year treasury yields pretty much unchanged today,

2.55%. bloomberg dollar index pretty much unchanged. are is how major currencies shaping up against the greenback today. on the downside, the south korean won and the tight when you dollar as the worst performers. in the commodities space, gold climbing from its lowest close in 10 months today. piece by davidt for going -- by david on the bloomberg talking about how metals have performed a dramatic reversal near its close. copper and gold, i'm showing that here. what the piece argues is that copper and gold to maintain this negative correlation we have seen towards the end of the year, it really requires some magical belief about the economy. great piece, take a look at it. manus. manus: i'm alive! all is well. you don't have to jump in. saudi arabia has presented the most detailed budget ever. convincen attempt to

citizens and investors that it can -- the government said it had reduced its spending by 16% this year. it never the budget deficit more than expected. willorecasted shortfall drop again next year, revenues will improve, and it may be will even turn a budget surplus as early as 2019, according to people with knowledge of the metal. is that an optimistic scenario? saudi's topsome of officials had to say about the budget. at the same time, we built issue locally and will issueally -- locally and internationally. i cannot give you the details. want -- we are comfortable with our cash flow. the threely begin,

scenarios are conservatives when it comes to oil prices, so we sources, the multiple and one is coming internally from our industry of energy, aramco, and we have used the international energy prices. we have used imf production. we have used the top analyst average and complained them to calculate most of the scenarios. -- combined them to calculate most of the scenarios. it is generally conservative. >> 2017, i cannot specify the date, but it will not be late in 2017. as we do it soon enough. isthe 200 billion real directly toward companies, saudi , whonies, sdi companies want to expand their current business. is stillristian schulz with us. saudi comedic asian in saudiive, isn't it --

communication in overdrive, isn't it? they have scheduled this off 50 $50 oil. what is your best case scenario in terms of looking at the oil market? christian: jacopo oil price hasn moving up and down quite a bit this year. our experts are expecting the oil price to sort of generally rise as demand and supply globally come into a bit more of a balance, but there is so many on the demandnd side that i think you have to be cautious. we do expect the oil price to be roughly stable, slightly higher going forward, and in that sense, it looks like this is a relatively conservative, you know, baseline for that budget, which, i guess, is good news. manus: the other thing i was trying to think, i was watching the saudi news as it came through, and this came to mind. this is the relationship, the

trading relationship between saudi arabia and the u.s. suppose,look into, i the belly of who the trading relationships are. germany number six, italy #, france number eight. france has potential consequences in europe. i think saudi, of course, is one of the biggest economies out there in the middle east, among opec countries, and opec countries are important clients, customers, for luxury goods, for instance, or for weapons, as we know as well, so for certain industries, these are very important export markets, from a german perspective, you know, headline making quite often. but i think more generally, emerging markets, and if you include these countries in that category, they

were for a long time, if you like, cash cow exporters. that is where the investment went, and that is where the driving investment at home as well and over recent years, with china slowing down, that has sort of become almost the opposite story. it is the risk factor. the more exposed you were as an industrialized economy to emerging markets, the more skeptical emerging markets were looking at you. emerging markets are dealing with the issues, dealing with of problem, and coming out of the worst, at least, and it helps if commodity prices are coming up. that is one of the factors we are watching for 2017, how emerging markets plays out, and which of the industrializing economies are most exposed. some are top of the list there. manus: they have a lot of risk, christian. we have a little bit more to get

through with you. that is turn our attention to russia and the president vladimir putin hold his annual and of your press conference. he is expected to comment on and of youryear -- press conference. they are expecting a marathon session. moing more -- henry joins us from moscow. do you think anybody might ask him if russia influenced the united states election outcomes? well, i mean, it is hard to know whether anyone will put that question, but certainly i agree that trump is likely to be the main issue. it has been a game changer, the election of donald trump for russia. there are a lot of hopes in theyw rushing on that and hope that this will transform their relationship with the u.s. and the west more broadly, so

definitely, this will be one of the main focuses. manus: and what can we expect for 2017 for russia? i mean, it must you like you have the article on -- the erdogan/putin -- yet you have a rebuttal in many ways in terms of europe's position with built-in. what can we expect? >> i think, looking at it from moscow's point of view, their main hope is that they will see some easing or even listing of sanctions -- lifting of sanctions targeting the energy sector and the banking sector, so this is really what they are looking to happen. other issues,s of syria is an important one. we'll definitely see some sort of push together with turkey and iran and maybe other powers to peace agreement

in syria, one which would cement in power putin's ally, bashar assad. manus: we are 18 months away from the next presidential election in russia. i'm going to look for putin's reelection with the longest recession in two decades. there has been a recovery in the price of oil. his personal ratings are usually quite resilient. where do we stand 18 months out? confirmedin has not he will run, but he is widely expected to. been three years of falling incomes. russians have suffered from this recession, however he is expected to coast to reelection. interestingly enough, there is a possible challenge from his most vocal opposition, which is a navani.alled alexey

the kremlin is completely confident in the outcome. anus: as you say, there is great deal that can happen between now and 18 months. newss see what the day's unfolds from moscow. christian schulz is still with us. the great thawing of relations with putin, and yet, i was in front of david cameron last week the man u used to run the cia, and they were saying sanctions worked, sanctions do work. if i look at the global landscape right now, is there is thawing in the relations with putin? christian: they have signaled that he perhaps would have better relations with russia that obama had, so that is clearly an opportunity there, whether it will really materialize, we will have to see. guess,pe, with brexit, i

the british government has been one of the driving forces, i guess, behind the sanctions, so that we can set position, i guess, but we see at the last summit that the sanctions were extended or proposed to be extended. we have also seen they have moved towards that association agreement with ukraine which was not a threat, but certainly something that the russian government would see critical, that that is moving forward despite the dutch referendum rejecting it, so those were two, if you like, defeats for the pro-russian position in europe. next year is going to be hugely interesting for russia as well. what happens in europe during the dutch elections, the french elections, the german elections, in germany in particular, the centerleft is more russia -leaning or more russia-friendly . if they were to run the next government, that could be positive. manus: a great deal for change.

the anti-trump tweet, anyone have your bloomberg on you? amaze howeases to global politics is presented. let us have a look. this is a bite. of course, the potential escalation, we have putin saying we need more nuclear arms and trump talking about, you know, the need for building up the nuclear position in the united states of america. i think his press team tried to walk back on that from the context of the trade. let us have a look at that sweet. that is -- that tweet. the propensity for conflict. this is what trump had to say yesterday. that is rather disconcerting. it is so many moving pieces from an economic point of view. central banks need to be there fair and square, don't you think? christian: china, russia, the u.s., as a whole, starting to threaten each other in order to

cut some deals where they then have better bargaining chips on their side. that, you know, as long as it is just bargaining chips and deals everyone tries to get, that is risk but you know, the rises that something goes wrong, and that we will see more proxy conflicts somewhere as we do. geopolitical risks are clearly on the rise again in various parts of the world. again, something for 2017 that you have to keep in mind. central banks can only help us so much. what they are providing help to , or with banking crisis political situations here or there. it cannot change structure problems. manus: thank you so much, christians old. -- christian schulz. credit suisse, $5.3 billion they will pay to the department of

justice in regards to their mortgage. billion and they will pay $2.48 billion in a civil penalty. $2.8 billion in the form of consumer relief. this is the department of justice. let us get to our finance reporter. he joins us on the phone. $5.3 billion, where does that fit into what, perhaps, we had expected might be the worst case scenario? first of all, the proportion of the consumer relief is relatively high, so that is something. the bank will be able to pay over a longer period of time. provision thatng credit suisse has set aside for its outstanding legal matters, which is about 2 billion swiss francs. jan-hernik: we will have a

pretext charge in addition to those. we cannot exclude at this stage that there might be some action, but overall, what analysts said earlier, that this might cover the fine. it could have been worse. manus: it could have been worse, but if we look at the news flow over the past 24 hours, this is tollmably worse as a heavy , but going into the close of bigyear, it closes off one portion of litigation, so to that end, it can be seen as a slight catharsis. jan-hernik: yes, exactly. as you pointed out, it clears a major legal hurdle for the bank and with all of those numbers that have been floating around

over the past two months with deutsche bank, the opening bid, there was numbers floating around, 5 billion to 7 billion, you can say that this is now clearing a majorly hurdle, and credit suisse and tidjane thiam can continue overall what the ,ank so even cost-cutting modes i guess he is pleased that this is out of the way now. the bank announced various costs having measures since he has taken over. they have accelerated the program. they are cutting in switzerland and the investment bank and building a more resilient towards wealth management. overall, you can say that it is good that this uncertainty is out of the way, something that investors don't really like. manus: thank you so much. if you are just waking up and

tuning in this morning, you are tuning into a trifecta of banking stories that are going to drive some relief for the people running those banks. be askinge paschi may for state aid. deutsche bank has settled for a seven point $2 billion at the department of justice for mortgage-backed securities. they had estimated as much as $14 billion. tidjane thiam closes up a deal with a fine for mortgage-backed securities. reparation will be made in the form of $2 billion from, additional pretax charge, in this quarter. $5.3 billion, as we just heard from the reporter. civilllion in the penalty. in relief.n undoubtedly, it is banking that is going to dominate the market agenda on the final trading day. the christmas period. coming up on daybreak, what have we got for you? we have got a little bit of britain, brexit, what else?

we will check on the u.k. economy as we head towards the great exit debate of 2017 -- great brexit debate of 2017. ♪

manus: somewhere in that beautiful city at 1:53 a.m., somebody is putting down a glass of christmas cheer, getting ready to celebrate the holiday season. virtually flat. trade, 20,000, certainly not before christmas. sincemarks six months virginia voted to leave the european union, or brexit -- since britain voted to leave the european union, or brexit, as it is colloquially known. uncertainty over what brexit actually means and argues that britain is as divided as it was

six month ago. the report comes from the british consumer confidence has fallen to its lowest level since july on fears of a slowdown and rising inflation. christian schulz is european economist at citi, and still with us. you have a full and square you can't economy -- u.k. economy hat on. hard brexit is taking shape. this is what he says. we have a quote where hard brexit -- he put his mortgage on it. may is trying to bow to the right or keep the right happy and also the sheer levels of bitterness around europe we can around article 50 negotiations. are you leaning towards a hard brexit? "i put my mortgage on it." would you put your mortgage on a hard brexit? christian: we have got article

50 negotiations for two years ahead of us, presumably in 2019 will have to have a decision as that actually looks like. in the long run, i probably agree, hard brexit is perfectly possible because britain, politically, need to deliver this immigration control, which is inconsistent with staying in the single market of the e.u., -- so in the long run, it would have to be some exit from that single market, but i doubt though that by 2019, you can really risk, before the elections in the u k in 2020, -- u.k. in 2020, to do brexit immediately. two little time to really come to grips with all of the details of the regulations and so on, i think britain will go for a transition deal that will officially deliver exit from the e.u. and perhaps some other things such as exiting the policy fisheries, maybe getting

, but not exiting the single market immediately, and i think that is the crucial part it's for me, something along the lines of a norway style area from 2019 for a transition period seems more likely than immediate hard brexit. confidence isr under pressure, the lowest since july 2013. the reality is beginning to bite, isn't it? in terms of going shopping? there you go. we are worried. the economists have been incredibly resilient. i would not bet too much against the u.k. consumer continuing to support the economy, yet the going is getting harder. the main one is now that -- is rising. it is not so much the uncertainty but the inflation rising, which is going to drive

down real incomes, real spending power as saving rate are already at an all-time low. manus: christian, thank you so much for being with us today. that is my worst german yet. happy christmas. this is bloomberg. ♪

manus: deutsche bank reaches a $7.2 billion agreement to settle u.s. mortgage probe. all the details from berlin. credit suisse agrees to a $5.3 billion mortgage accord. italy ready for 20 billion euro bank blackout. banca monte paschi fails to raise the funds it needs. saudi arabia presents its most details budget ever in an effort to convince the world that it can balance the books. vladimir putin holds his annual news conference a day after he and donald trump

called to boost their nation's nuclear arsenals. alte all the latest from moscow. welcome to "bloomberg day break." our flagship morning show from london. i'm manus cranny. a warm welcome to you if you're just checking in. you're waking up to a trifecta of bank stories. anca monte paschi set to ask for bailout. deutsche bank ready to settle at $7.2 billion. 50% below what the market had expected or the justice epartment asked for.

futures are fairly undecide. these volumes are paltry. they are truly appalling at the moment. equity futures are up in london. paris, we're just waiting for it to open on the futures. it is fairly flat at the oment. let's take a look at the radar. for whatever indecision there is in europe, we have flat on our backs in the u.s. the dow never made it to 20,000. it may next week. there may be a new infusion in terms of some of those stocks or the -- for the -- for conflict. but you are seeing gold up

about .25%. i can tell you gold has climbed from its lowest close in january of this year. e.t.f. holding. you are seeing a little bit of a rise, a reprieve in gold. everybody is talking about what does it take to get gold above $1,200? you have oil, 5256. you have oil down by half of 1%. it has trimmed -- you still have stockpiles in the united states of america. this is where the huge debate comes in, if oil lives in this new area of $50 to $60. what does that do to the freddy macers? -- frackers. you have good numbers yesterday in terms of the consumer and g.d.p. doing better than estimated. hitting the highest level in

six months is what i think is just causing a little bit of hesitation in the overall dollar trade. that is the complexion of markets. you're going to wake up to bank risks this morning. keeping any on the s.m.i. credit suisse and deutsche bank trade at the start of the day and we wait for banca monte paschi. chancellor angela merkel said that germany won't give into islamic terrorism. she voiced hope that the main suspect in the berlin christmas market attack will be caught soon. the man hunt continues for 24-year-old tunisian suspected of having driven the semi truck on the evening. president-elect donald trump says that he asked boeing to price an upgrade of its f-18 super hornet jet.

that could replace lockheed martin's f-35. their f-35 is intended to be the mainstay of the fighter of air force, navy and marine corps. its development is more than a decade in the works. saudi officials have presented the most detailed budget in its history over the hours long news conference. the presentation included scenarios of how public finances could evolve through 2020 after being hurt two years of low oil prices. >> 2017. i cannot specify the date. but it will not be late in 017. manus: 2600 journalists and analysts in more than 120

countries and you can find all of the stories that you need for your trading day on bloomberg. this is bloomberg. you're watching and waking up this friday morning. santa claus doesn't seem to have a rally. how is the market flooring you just before christmas? >> well, if you are in new zealand or jakarta perhaps santa has visited you today manus . up for a sixth consecutive session that, market. the australian rally that we had been seeing faltered today. that weighed on a lot of the mining players. the australian share markets are closing a shortened day's trade down 1/3 of 1% ahead of the four-day christmas break. correction territory that hang seng is deepening today. property stocks lifted on hang seng index down for a 10th consecutive day. the hang seng getting very close to that 200-day moving

average today. the shanghai market on the close down by around 1%. still a lot of concerns, outflows playing into that market. this is a market, the six-week high on tuesday. japan not doing very well. the philippines index not on a good track at all. stocks in manila having their worst week since january. quickly looking at the bond market. a little bit of a mixed picture. the yield on the 10-year up ever so slightly. 2.81%. yields tracking lower on the south korea 10-year note. manus ? manus: thank you. a little bit of breaking news coming through from barclays. they settled with deutsche bank yesterday evening. the u.s. is suing barclays over residential mortgage-backed securities.

that lawsuit filed in a federal court in new york. quite an unprecedented move for the bank to be sued by the u.s. barclays has given their repass to in this morning. ack in the period of 2005 to 2007, the claim is in regards to mail and wire fraud. barclays rejects the claims made in the complaint. they said the complaint seeks unspecified monetary penalties. barclays will vigorously defend the complaint. this is a very initial repass back from barclays in regards to that lawsuit going back to the period of 2005-2007. just before the financial crisis.

so in terms of other breaking news that we have, let me just see, we have banca monte dei paschi de siena, breaking news. let me just get this for you. paschi shares and bonds are suspended from trading as of today. we are waiting to hear what the next step is for banca monte dei paschi as we understand they failed to raise the critical level which was 5 billion euros in terms of additional capital. we understand that they are readying themselves to ask for a bailout from the government. what size that bathe bailout is, we are very unsure of at hat stage. 5% of italian retail investors have gone bank bond. those that do are not that poor.

the equities, the bonds will be suspended from trading as of today. let's re-refocus back to one of our major stories. deutsche bank says it has reached a $7.2 billion agreement. of ends years investigation. matt miller joins us now from berlin. matt thanks for joining me. look, first up, the money. let's talk about the money and how is it going to be paid for? matt: so it is very similar to the way credit suisse settled with the justice department as well. what deutsche bank and credit suisse both are going to do is pay a large chunk of money as a civil penalty, in the case of deutsche bank, that is $3.1 billion of the $7.2 billion total and then the reminder deutsche bonk , $4.1 billion

is going to go to relief for consumers and relief for communities that were affected by the mortgage crisis. so for example, one possible way would be a modified loan for somebody who is under water. so that's interesting that we see that both with deutsche bank and credit suisse. that means that they won't have to take as much of a hit. deutsche bank is taking a 1.2 billion euro charge to its fourth quarter earnings. they said they may not be profitable for 2016. those numbers don't come out until february. we know there will be a 1.2 billion euro charge for deutsche bank. credit suisse about 2 billion euros. manus: thank you. the very latest on the deutsche bank details. 7.2 billion for deutsche bank and over 5 billion for credit suisse. banca monte dei paschi bonds have been suspended. the latest from the italian

exchanges. et's talk about italy. banca monte dei paschi failed to raise enough funds from investors. our next guest says earlier is month their share sales could be successful if there is a white knight. oining us is the head of we don't have the details in terms of the sides of the government stake. how do you look at this? as the closer of a long battle that finally closed that is good news or do you look at it as disastrous that banca monte dei paschi couldn't find a white knight investor? >> i guess the good news is that finally we are heading

towards a solution. state intervention obviously is not something great overall but in the end, italy is doing now what other countries have done many years ago to sustain their banking system. so i think overall it is good news. clearly we need a lot of details to understand how this situation is going to be dealt with. the decree and the statements minister are talking about bailing out the investors, basically talks about bailing out institutional investors, up to 75% of face value, which i would be very surprised but the details are going to be very important, where is the line between retail investors and professional investors. how are the investors going to

be reimbursed is going to be very complicated i guess. the amount of money that is going to be put in we don't know. clearly it is going to be probably more than 5 billion, i guess. manus: you think that the government is going to have to put in more than 5 billion euros? >> i guess so. the decree talks about 20 billions to sustain the banking sector. clearly there are other -- there are two others in the northern part of the country. that need funds quickly. so i guess the 20 billions are for at least these three interventions. now the other thing that needs to be clarified is the position of the european union. the government said that the intervention has been agreed to with the european union.

we don't know the details yet. as always, when these things happen that are very important, but overall clearly we are going to go towards a solution at least, it has been a negative focus for the italian market for so many months. manus: it has indeed. one of the things of course, that the italian banks have been trying to do is offload their bad loans. when you see bad loans going for state aid or nationalization, it is going to be allowed to use to dress it up in whatever way they would like to dress it up, this is where the market really, really hits down hard in terms of what they are prepared to offer for these bad loans to get them off the books. i've seen this in ireland and this is -- this is the big concern, isn't it? you're trying to get rid of bad loans and bad debt off your books. this is when the market literally will squeeze the

lemon as much as they can. i can't -- i can think of another word but disease not polite to use it at 7:00 a.m.. >> it is probably 50 billion to 60 billion ps. clearly it is a big widespread problem throughout the whole banking system and it is clearly very difficult to deal with in an efficient way. so we -- we said before, we shall see how how this shall be dealt with. the fact that the government is ready to put some money in is good news because clearly it is dissipating fears of worst scenarios like a default of the third biggest bank in italy that would have caused clearly a massive crisis. the problem is going to be difficult. it is going to be dealt in --

throughout 2017, surely, but i would focus today on the fact that clearly the debt of italy is going to increase but this is at the moment not a problem -- use we have a buyer of and this is not unsettling the markets. what was unsettling the markets was clearly a potential banking crisis. in the long end, we might end up with -- well, a number of banks that are more or less equal but they are nationalized. everybody can have his own opinion. clearly it is not -- it is not great news as far as i'm concerned. manus: no. it is not. i think the point about it is we saw once or twice what happens when you let people run on the bank what happens when you let a bank go under channeling a couple of banks in the united states of

america. let's talk about deutsche bank. we understand $7.2 billion settlement with the department of justice. we have credit suisse coming through as well. this this was half of the amount that was put on the table in the opening -- from the department of justice. does it help us move on through the story for deutsche bank? does it help john crier to get this one out of the way? >> i think the settlement is a good thing because it ends uncertainty. the headline number is quite high compared to what i was expecting or the market was expecting probably a bit less than that. as was mentioned before, the details on how this amount will be -- will be channeled the retail -- the

retail people that was affected is -- the effect of the overall payment meter means that the heat is not going to be as hard -- the hit is not going to be as hard in 2017. overall it should be taken positively by the market i guess. manus: thank you so much for joining us this morning. c.e.o. in milan. it has just crossed 7:19 in london. breaking headlines from barclays this morning. the department of justice in the united states in a new ork court yesterday evening, the mortgage-backed security period 2005-2007. barclays rejects the complaints made in the claim and barclays said this is the important line.

this is what they are going to have to deal with this morning. he complaint seeks unspecified monetary payment. barclays will vigorously defend the complaint. sally is standing by. full of christmas cheer i hear. sally: credit suisse agreed to pay $5.28 billion to resolve a u.s. probe into its mortgage-backed u.s. securities business. the bank said it will pay $2.48 billion with the remainder to consumer relief. the obama administration has been pressing to wrap up investigations of wall street firms that helped fuel the 2008 financial crisis. well, the u.s. justice department sued over its sale of mortgage bonds. they said they were deceived about the risk of securities.

barclays said it will vigorously defend the complaints. volkswagen has agreed to service settlement terms with models built after 2009. it is part of a larger accord that will add about $1 billion to what the company agreed to pay regulators consumers and lawyers in the u.s. and canada. six months on from the e.u. referendum, the sighs are pointing to a hard brexit. -- signs are pointing to a hard brexit. alibaba's on demand services unit is close to securing $1.2 billion of funding for its education pangs. it is getting backing from first time investors from

silver lake and china's wealth und. the union unite says the decision follows a revised offer from the airline which will go to its members. and that's your bloomberg business flash. manus ? manus: thank you very much. very happy christmas to juliet. we'll see you on the other side. my next guest, is optimistic about the outlook for trading next year. he is head of european rates and strategy. he joins us now on "daybreak europe." thank you so much for being with us, peter. >> good evening, manus . manus: the left hand side of the butcher scale. on the right hand side of course i have interest rates. ok?

so which is a going to trump which? excuse the pun. is it going to be politics that drives yields higher? >> no. manus: lower, excuse me. >> i think optimism, particularly on the inflation front is going to be something of a q 1 story and then i think we really start getting focused on the geopolitics once -- not only trump being in the start of his tenure but also we have the french election coming up. i see more -- a scope for more optimism first in the early part of the quarter. an energy price and a drive in inflation that we're going to see and i think that is going to get the markets quite excited. i think we're going to have some upward pressure on yields and pressure on yield curves but then i think we're going to realize all right, this is

as good as it was going to get. actually for the eurozone in particular, it is going to be more of a case of look how dysfunctional this thing is. we don't understand the politicians, the main actors who were controlling where the politician goes. also there is a lot of divergeance that i think we're going to see next year in particular. if i refer back to some of the data we had this week, italian wages. disappointing. they are still bottoming out. potentially if we have inflation continuing to prize next year, we could get back into a scenario where in italy, real wages perhaps could start to contract. purchasing power of the italian person could start to fall. whereas in core economies we could actually have some inflation that does turn into higher wages. so i think we're going to see another divergeance in the eurozone and that is generally

a bad thing because there is no real strong political construct for rebalancing the differences. manus: i'm going to play a slightly unfair one on you. i know you're a man who knows the direction of a bond yield or two. basically reflect back to where bond yields were, you know, back in 2013 and that big spike up in yields you had up to nearly 2%. then the next big cyclical move in yields was 2014. it looks like and this is where i want to try and get your opinion. we have had that trajectory ratcheting fire in the yields and bunds. i had that in the other day. that bond yields were going to get up to 75 basis points. perhaps i should sort of you know trade against this flow of movement in the bond market at the moment.

>> if we should see rises higher in bond yields, they would still to me be a buying opportunity. ultimately the bond yield i think is fair value, still should be through the course of next year, somewhere around 25 basis points. it is really, you know, it is a minuscule yield even though we have had headline inflation rising. the reason for it to stay low on a fair value basis and therefore to be where it expect it to trend back towards is because core inflation is still extremely low and we have rising political risks. we have to think in terms of owning bonds and owning other parts of the german curve. at they offer you is not a flight to quality. manus: time has run against us. head of european rates and strategy.

have a great christmas break if you don't join us again in 2016. we're going to li you with a shot of berlin. christmas begans and you have beautiful shot of the menorah there. ♪ generosity is its own form of power.

you can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter? get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues.

don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. >> good morning. welcome. you're watching bloomberg markets european open. it is going to be a busy one ty today. i'm guy johnson alongside matt miller. he is in berlin. this is what we're watching. sigh of relief? have any banks ever been happier with a 10-figure fine? but barclays is fighting back. they refuse to accept the