anna: cryan changes course. the deutsche bank ceo scraps is turnaround plan and starts afresh. the bank plans an 8 billion euro share sale. you can see our interview with him at age: 15 a.m. london time. china sets growth targets. the world's's second-largest economy aims for 6.5% growth, emphasizing stability. tensions flare as north korea fires ballistic missiles. the yen strengthens. driving towards a deal. general motors is said to be poised to sell its vauxhall dealers, in an announcement this morning. we are live at their headquarters.

a very warm welcome to "daybreak europe," our flagship morning show from london. i'm anna edwards, in london. 6:00 in london. manus is not sitting next to me this morning. he is over in paris where it is 7:00. good morning. he is on the ground. general motors is said to be poised to announce the sale of its vauxhall unit today. let's start with the timing. why now? just thethink it's final stomach churning moment. how much loss can you actually tolerate, anna? that is what's going to be on mary barrows's mind. it's almost like a bad relationship, a mistress that keeps demanding more, to the

tune of $20 billion of losses since 1990. they have done everything. they have pulled chevrolet off the european market, a highly saturated market. they tried to pull the record in 2009 at the height of the crisis. they've tried, on a few occasions, to structurally change, but this is a brand that has not made money for them. they have not got it right in europe so they are doing the final about-face. anna: this is something that has not made money for gm. so what is the attraction, then, for the team buying and now? this is about scale, isn't it? manus: this is absolutely about scale. this is about the euro position, the market share. vauxhall will give him about 60% of the market share in europe, and as i said,

gm restricted what you could do in terms of selling. he restricted what could be done with those grams. this is an opportunity for him to expand bat. it would put him in the number two position in europe, cost savings about $2 billion, with access to electric technology. that's the interesting underbelly to this story. they can get their hands on that and the financing unit as well, to continue to sell here in europe and abroad. scale matters. anna: so they might want scale but not pension liabilities. what have been the biggest obstacles to this deal? manus: well, this is perhaps the biggest obstacle of all -- gm, iny barra, and vauxhall talks -- they won't walk away with a clean break, so to speak, in this divorce.

liabilities are going to be split up, and they will continue to have a relationship. willyou have got is gm contribute $3 billion worth toward the active employees. there's a pension underfunding of about $9 billion, and they will put $3 billion in for active employees. gm will cover the retired helprs, $500 million to cover those active workers. gm will get to nine-year warrants, which they can sell for a period of time. the unions -- i will leave you with this thought. the unions say the acquisition is an opportunity to seize and get the european roots back. anna, let's see what the announcement is and what the news conference brings, the price of pension liabilities. anna: we await the details. there will be some kind of transatlantic development, and it sound like there will be contact. we will be back at the top of the hour with more details on the auto story. we will get to the latest on the

banking story in a moment, but we want to put up the risk radar because geopolitics is back in the markets overnight. we've had the escalation of geopolitical tensions. kim jong un in north korea firing four ballistic missiles. we see a little bit of money coming out of japanese equities, down .2%. money going into the yen. more broadly, the msci holding up well, and in fact we see chinese power companies benefiting from that commitment to 6.5% we got from the chinese authorities around their growth strategy. or from beijing shortly. stable on the dollar, despite earlier moves lower in the won. little changed after erasing earlier losses. it's not being overdone by markets, certainly not being jumped on by asset classes. s&p futures are weaker. we turn very much to a conversation around the fed as

we go into next week, of course. there in mind the work function on the bloomberg does show the percentage chance of a rate hike next week, when the fed is above 90%. let's get the bloomberg first word news with david ingles. good morning, david. david: hi, anna. good morning. we start off with the former director of u.s. national intelligence, who denied a donald trump's claims that the obama administration ordered wiretapping on trump tower during the election campaign. the comments contradict these explosive allegations early saturday morning. a person familiar with the theytion told bloomberg can blame breitbart news for it. in asia, japan has moved the ballisticspite four missiles into nearby waters off north korea.

about 350 kilometers west of the nation's northern prefecture. prime minister shinzo abe says he will -- u.s. president donald trump's protectionist stance may propel asian, middle eastern, and latin american markets into alliances with the european union, according to the european commission vice president, who told bloomberg exclusively that trump's rejection of the multilateral commercial deals and border taxes are using a push for free trade and investment tax. >> when there has been something to raise protectionism, especially from the u.s. side, the rest of the world seems to be fighting back and saying that this is not our line. david: french presidential candidate francois fillon has

been asked to step down, deny accusation he used public money to pay his wife and children. meanwhile, party executives brought forward a plan amid growing support from the former prime minister to take his place. he's due to make an announcement at 9:30 u.k. time. and the dutch prime minister has chaos of thenomic populist freedom party in next week's election. opinion polls show his numbers are virtually tied. europe's first major electoral test since the u.k. voted to leave the european union. >> this is an opportunity to stop the trend after brexit and the u.s. election, before the french and german election. for the netherlands to vote for a policy, which i want to deliver, of continuity, of

making sure these successful policies of the last four and a half years will be implemented over the next three or four years. david: global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. you can find more stories on the bloomberg at top , on your terminal. i'm david ingles and this is bloomberg. anna. anna: thank you. 6:09. let's get up-to-date with the asian equity session and other asset classes. juliette saly is standing by with the geopolitical story. very evident in the asian trading day. juliette: yes, anna. we have had reports of north korea's firing a ballistic missile, and a flight to the yen that has weighed on the nikkei, closing down by .5%. elsewhere there has been a pretty solid buy in asian equity markets, taking it in stride ahead of the expected rate hikes following janet yellen's comments. some solid buying in china as

well. having a look at individual stocks, south korean defense stocks in focus, korea aerospace up by 2.5%, some even surging higher on the back of the missile launch from north korea. shopping companies down i on escalating tensions. and cathay pacific in hong kong -- jumping up over 4% in late trade. we are having a look at samsung, particularly this chart. this is essentially target price of of the stock, going back to march last year. you can see not once is it in the red. we a continuing to see 90% of analysts say this stock has a despite themsung fact that everything we are seeing from samsung, the advised

chair being arrested last month. anna: juliette, thank you. juliette saly in hong kong. let's turn to the banking story, a big story in europe. deutsche bank announced an 8 billion euro share sale, among other measures, as john cryan start a new strategy. he gave the green light yesterday to selling a piece of his asset management business, naming two deputy ceos, and scrapping the sale of its consumer banking unit. matt miller has more for us from berlin. good to see you. what's the most significant change here? certainlyacktracking, a change in strategy coming through from john cryan. matt: yeah, exactly. he's saying this is not a step back to what they already had at the bank, but he is reversing his strategy. really, there are three things going on here. there's the capital increase you have to think about. they will go out and raise 8 billion euros, they're also

going to rea reorganize the bank again, putting training and investment banking back together again. they just separated last year but cryan said, look, i looked at my strategy and it is it working, and we will do something about it. they are also going to name two co-ceo's. marcus schenck is one, the cfo. he will run the trading business, which hadn't been doing as well as other banks on wall street. that may be one of the reasons. christian saving, a consumer bank hadead, is going to be a co-ceo alongside him. in a sense, and calls of the commerzbank strategy, other banks have done this as well, where they split the corporate business and consumer business and try to reduce the amount of customers may have and boost profit margins from them. anna: matt, you say that john cryan is addressing whether this

is a backtracking on his strategy or not, the people have been asking what future has in store for john cryan, given he has named the two co-ceos. matt: exactly. what does john cryan do? he doesn't plan on going anywhere, and he is going to oversee regulatory issues in the u.s. as one focal point. he is going to remain the top ceo with two co-ceos. they are also going to be his successors possibly. that is one thing a lot of people will talk about. what does this mean for the man at the top? is this his last move here? it's very interesting to see this third change. we will see how shareholders take it, because he has done some very positive things. he has boosted their cet-1 ratios, one of the most important regulatory issues that deutsche bank have to face, alongside the fines they have had to pay. they now plan on getting cet-1

ratio of 14%, which is significantly higher than is required at just under 12%. anna: matt, thank you very much. matt miller in berlin. plenty more from him as he go through the day. for more on deutsche bank, tune in at 8:15, where we will bring you are interview with the ceo, john cryan. for more on the banking annual, there's plenty to digest in the corporate world, we are joined carois investment management. great to have you on the program. my colleague matt miller was just talking about the capital raising over at deutsche bank. this is clearly an issue for the banking sector in europe. i've got this chart that shows deutsche bank is aiming for 14.1%, which would be very strong compared to the 13% target. where do you stand on european banks versus u.s. banks? >> good morning.

clearly, there will be, over time, situations where banks need to raise capital, and this will happen at various points in time. the reality is if you look at the banking sector, there are quite a few things working in favor of that . what is litigation. litigations are going down, the amount of litigations is going down. if you look at regulation, that is also something which is baiting. you'll have things that work in the favor of banks in terms of quality. the most important is the rates. rates are going higher, and we are in a deflationary environment. i don't think that is going to change in the foreseeable future. rates even in europe are trending higher. anna: the u.s. banks rate capital -- this has been hanging over europe for a long time. we see once again one of the reasons for deutsche bank doing this is trying to put questions

about risk and the banking sector. are we done with this in europe? >> we have the issue with italy. clearly europe has a lot of issues, in the next three years it is clear there will be some sort of wobble. our view is positive in the short-term on banks, because reflation will bring them higher with the u.s. banks, and clearly there is even more leverage. anna: we were also talking this morning about the auto sector, as we wait for the news around gm and pfa, and the deal that will be done. i wonder what interests you have, if any in the auto sector,. i have a graphic that shows how analysts are forecasting. after a strong rebound in auto sales in europe in the year since the crisis, the forecast suggests we are going to be fairly flat, or at least we will see a slower rate of growth in auto sales. what excites you or does not excite you about getting involved in autos? >> we aren't very excited. clearly the valuations are low,

so there seems to be an opportunity in that sense, that the same time the auto industry is facing a lot of challenges from an industrial point of view, because the transition toward electric vehicles is going to be faster than most companies are prepared for. if you look at the long-term, it is difficult to be bullish. anna: doesn't that mean you would sell more cars? >> it's exciting for the businesses that have exposure to electric vehicles, but for all the dollars, there needs to be consolidation. -- for all the others, there needs to be consolidation. anna: thank you very much. he stays with us, from kairos. coming up, preparing for lift off. fed chair yellen boosts confidence in a march move, as a hike next week looks all but set. united we stand. we stick to the eu commissioner who says trump protectionism is bringing the rest of the world together. and walking on a knife edge. china's premier strikes an upbeat tone despite risks ahead.

we are live in beijing with the latest from the national people's congress. this is bloomberg.. ♪

anna: welcome back. this is bloomberg daybreak. i'm and edwards. 6:20 in london. juliette saly has the bloomberg business flash. juliette: anna, thank you. scotland's largest insurance standard is in talks to acquire aberdeen asset management. terms, standard life shareholders would own 67% of the combined group. the tie up would create one of europe's biggest fund managers, overseeing 660 billion pounds. south korea is a special prosecutor has accused samsung's de facto head and other executives of conspiring to create fake documents to mask millions of dollars in bribes to a confidant of the nation's president. committeded to have

perjury when he said he didn't know his company had paid money to entities controlled by the president, and wasn't asked by the president to provide financial support. responding to this morning's announcement, samsung says the company has not given bribes or made improper requests for favors. that is your bloomberg business flash. anna: thank you very much. let's turn our attention to what has happened in the u.s. fed chair janet yellen is going town,e a more hawkish saying a hike in march is likely appropriate if the economy evolves as expected. a blackout period until march 15, and the policy announcement that takes place that day, so i'll market attention is squarely focused on the job figure out on friday. the u.s. is estimated to added hundred 90,000 jobs in february, which may be the make or break. dollar and treasury yields both fell after yellen's comments. kairios us, the cio at

investment management. let's look at the fed's story from your perspective. yellen endorsing on friday this more hawkish tone. showse a great chart that the real change in expectation in the markets around march. it has come from nowhere to being almost in the market psychology of certainty. what are your thoughts? >> they effectively raise rates last week. the market raise rates last week, so there are very few surprises that we are going to see next week with the fed. anna: they are still going to follow through. >> it's unlikely they will disappoint after the indication, clearlyink they are behind the curve to a certain extent. if you look at real rates in the u.s., they are extremely low. they're very negative. anna: looking at inflation, the data moving in the direction of the fed's goals on the inflation has changed that

their mind? i was reading a great piece today that talks about its the stability in the rest of the world that has enabled the fed to consider hiking rates. >> if you look at last year, stability around the world is important in order to go through and follow through with rate hikes. but the reality is that inflation is powerful, and the markets are still underestimating what the impact will be in the future. you look at china, they are exporting inflation after exporting deflation for a long time. the wage inflation in the u.s. is strong. it's inevitable that we will see rate hikes, unless there is a wobble. anna: stanley fischer pointing out, there is almost no economic indicator that has come in badly in the last three months. so where does this leave the fed? if we started march, do we do just three but spread out? or do we do four?

>> i think it is reasonable to expect three. we don't know what's going to happen for the rest of the year. it could be four, the we started thinking it was two. now, after two months in which there was almost nothing, all of a sudden markets revised. we think this is likely to happen in the future. we will get closer and closer, and markets will reprice. anna: one thing that some to is what .point president trump will do, what he will be able to do, what he will be able to get through congress. i'm interested in the timing because some say the fed should be holding off, because then they will be more clear. but that depends on how long it takes to get clarity on trump's plan at how quickly he will be able to move. how quickly do you think you will get momentum behind his fiscal plan? >> i was in the u.s. a few weeks ago, and the feeling from a lot of people we got is that tax

reform will happen sooner rather than later, and than infrastructure, and then probably trade. trade is the only real negative for the market. if you look at things as they should be, it's pretty much favorable to the stocks. anna: so positive's first and delay the negatives. >> the markets have already priced in. with rate hikes and real rates going higher, you may have impression in the s&p. anna: so you think we will be seeing the best of the s&p? we carry on like this? >> obviously, it's very strong and very alive, so i'm sure they will bring markets higher. the movely, we think we saw in january won't be driven by real rates going lower. at police to have one of the factors against it. anna: thank you very much. kairos investment management. we have just had numbers through from smb, 24.5 billion swiss

francs, to make a distribution of 1.7 billion to the government. we'll watch that story. up next, political risk around the french elections, in particular in europe. this is bloomberg. ♪

anna: welcome back. this is "bloomberg daybreak: europe," a bit of a murky view of tokyo this afternoon. we see the dollar-yen at the bottom of your screen. a little tension creeping back into the markets, geopolitical tension about what we have seen from north korea over the last 24 hours, firing four ballistic missiles. let's leave some of that conversation there, though for the moment and just get to some breaking news. we are getting news from psa. they say they are purchasing gm's european unit.

this coming through in the last minute or so for $2.2 billion. that is the price tag on there. bnp each to purchase 50% of the financing unit from opel. what was going to happen to the financing aspect, this is something we were waiting to get clarity on. we see the opel operating profit at 6% in 2026. they want to send that measure of profitability higher. gm plans to use the proceeds to accelerate share purchases to take non-cash special charge of $4 billion to $4.5 billion. psa purchasing gm's european union opel for 2.2 billion euros. manus is on the ground over there in paris and will be

joining us later on in the program with some analysis. we will be tracking this story as it develops throughout the morning. "daybreak" isof available on your bloomberg and your mobile. let's look at the stories that have made it into today's edition. cryan's blueprint will offer a billion dollars in stocks. -- offer $8 billion in stocks. the consumer division sale, proceed. the lender bank sued deputies, john cryan, who admitted the previous efforts failed. more m&a for you this morning. standard life is in talks to purchase aberdeen, reading a fund manager overseeing 660 billion pounds. at 3.7n's value is seen billion pounds.

finally, we focus on the chinese growth story. china wants to strike a balance between growth and risk. primarily, reaching the gdp goal of 6.5%, and cutting the monthly growth supply target to the 12%. nejra joins us right now with what you need to know from the overnight markets. nejra: could market. we are seeing most asian equity markets advanced. as you can see on the gmm, a lot of green on the board. the national people's congress is ongoing in china. there are two political tensions between japan and north korea. -- there are geopolitical tensions between japan and north korea. the new zealand dollar and the aussi dollar, the worst performers against the greenback. the yen is strengthen their. the cell.

yuan, south korean lower by 0.5%. a mixed picture in the bond space. and crude is down 2%. asian pacific and dekes, it is rebounding from the biggest weekly drop in nearly three months and trading near a two year high, as you can see from this chart. energy and mining companies are leading the rally. it seems like this momentum is coming more from the news out of china, rather than what came out from janet yellen's speech over the weekend because there was a muted reaction to yellen in u.s. equity markets on friday. but i wanted to highlight this s&p 500 futures chart. you have mark cranfield writing, saying that the s&p 500 futures is kicking off with a bearish bias on monday, just above a short-term pivot line at 2370. bullish momentum rolled over last week. as you can see up here.

and it might have further to run on the downside. the rising 21 day moving average is a possible area of support this week. another mark writing on the blog, saying that option retirees might not be the only thing holding the dollar-yen back. looking at the dollar reaction to yen on friday, it was surprisingly bearish and the 10 year treasury yield fell after her speech, suggesting markets are starting to fear a hiking cycle would be a mistake, despite those expectations ratcheting up for the march rate hike. 75. dollar-yen 1.13 ten-year treasury yields, 2.47%. anna: we are watching the geopolitical action this morning. let's get back to the car story because psa is purchasing gm's european unit opel. we just got confirmation in the

last three minutes of that. manus cranny is on the ground. anything in this statement that seems to be a surprise? we spoke to you at the top of the hour. the number then was $2.2 billion for psa purchasing gm's european unit. manus: actually, i think the key point will be for the gm shareholders because we are being told that the money they received, they are going to use that for additional share purchases. gm plans to use the proceeds to accelerate share purchases. the other dynamic is this, the financing, if you go into a showroom like this and you want to purchase an opel, you use financing. what we have here is psa and bnp , each to purchase 50% of the opel financing unit. they agreed on that financing partnership. this is critically important for the ongoing part of the business.

when it comes to synergy, because this is the critical part of the deal, it is about scale and access to technology. we are looking at 1.7 billion euros. that is by 2026. i'm going to make this objective call on that and the kind of numbers that were floating around out there anna, for around 2 billion euros. of course, i would need to double check the time spent oann that $2 billion worth of synergy. this is a concert of thought between the unions, politics in the united kingdom until about 2021. those agreements run through until then. the german side of the business and the french, of course. the union response thus far has been about regressing the roots of these european brands. deal.ap, a $2.3 billion psa purchases gm's opel brand.

1.7 billion euros by 2026. when it comes to operating margins, this gives you a sense of how tight it is to make money in the car market, which has seen a resurgence in terms of the number of sales. can it last as we turn to share riding? when it comes to the margin, opel's regarding margin of 2% by 2020, but the margin target is 6% by 2026. it is nice to be inside these cars, anna. anna: very nice. they are talking here about raising profitability. they have also spoke about how they think they can grow this business, the opel business, beyond the home region, using that to bring around governments and unions who might have objective. manus will be back with us at the top of the next hour. u.s. president donald trump's protectionist stance my propel economic powers in asia, the

middle east, and latin america into alliances. hi d a chance to speak with kataienen and i asked him to speak about the rise of populism in europe and what the commission has learned from it. >> europeans are in favor of eu integration. they are also in favor of europe. this seems to be the underlying fact. at the moment, there are many other factors which are changing to politics and changing the traditional parties functioning and a speaking with the electorate. so, the eu is not the primary target of the populists. that is only one of these issues the populists are opposing. just a couple of days ago, the commission president junker published a paper on the future

of europe. it gives an opportunity to the member states, and also to the citizens, to say what the eu in 2027 should look like. when the u.k. is leaving the eu, it does not mean the rest will continue, but it means a new eu in 2027 will emerge. and we need a kind of birth certificate of 2027 for the eu. the now -- by the end of year, it is apparent that the member states government and national parliaments have a right to say how or what the eu 2027 should look like. and after that, the european council, the heads of governments, will decide on the future of government and we will move on. katainen speaking to me last week.

there were potential charges of embezzlement against francois fi llonde. and ca and this caused dozens of his supporters to pull out. some party executives suggested that the former prime ministers should replace fillon as the party candidate. juppe will break his silence today. when you look at the french function the eu on the bloomberg, we have got macron, le pen, and fillon. the first run and second round make this a very different proposition compared to other al elections we have

witnessed. had you protect your portfolio -- how do you protect your portfolio? >> our view is, if you look at the social media by research, the left side is doing much better than the polls are suggesting. having said that, we don't take a view on that and we prefer to protect the portfolio. we find that in the context of what we are discussing, the uncertainties at a global level and on a geopolitical level, frankly, volatility is mispriced. even last week we started purchasing a little bit of volatility. anna: is it possible to protect yourself entirely from a le pen victory, given what she stands for? >> probably it is not possible, but if you structure your portfolio well, and the trends of the world continue, i think

even that scenario could be manageable within the context of a portfolio. anna: we have been looking of course, at the inflation story. we talked about it in the united states and we can translate that into europe and talk about where inflation have got to. this week is a big week for the ecb, of course. we are focusing on how much they will remain committed to the qe program. we are showing a chart of the euro area inflation recovering. now, of course you can' strip out oil and talk about the underlying state of inflation. is this enough for draghi and his team to stick to the path they have layed out. >> there is a big disconnect between where rates are and inflation in europe. at the end of the day, tension will enter the ecb and throughout the year, they will have to change their approach. this will be a game changer for markets. given where yields are in government bonds, they have to reprice and they are way below

where they should be. anna: so, they should be higher because the ecb should have a different policy? tooes, ray thirrates are negative. we are approaching german elections. political tensions will be too strong. anna: as we get to the german elections, the political pressure from germany, which has been quite a vocal supporter of a turning away from qe, you think that comes to the floor? >> yes, and that should help markets reprice. what we like is normally we prefer situations where there is asymmetry. anna: what is that due to the transatlantic trade? in 2017, we have the fed rates.edly hkinkingiking how do you invest transatlantic late around that scene? -- invest transatlanticly

around that scene? >> flows into european equities have been extremely negative. there is a sense that nobody owns european equities. if the banks star performing as we have seen before, then you have a catch up of players. staysmichele gesualdi with us. we will talk more about china when we get back to him shortly. remember, if you are a bloomberg customer, you can watch the show using the tv function. you look at that video stream, of course, but you can also follow all of the charts we are playing and reach out to the show directly at the bottom screen.d corner of the after a few moments, you will see the tv program launches and you get the a added content as

well. china unveils its latest economic forecasts. is there still a good case for the beijing bonds. we look under the hood at the $2.2 billion sale of gm to psa group. we were going in the wrong direction. deutsche bank unveils a raft of new measures. are they finally putting the past into the past? this is bloomberg. ♪

anna: a very warm welcome to "bloomberg daybreak: europe." this is a live shot of new york, 1:49 in the morning. 6:49 in the morning in london. when we get to the u.s. trading day, we will be a little lackluster, down 0.3%. we have that interview at 8:15

london time the john cryan. let's get to the latest bloomberg business flash with juliette saly. reporter: thank you. insurer is ingest talks to acquire aberdeen asset management. under the terms of the potential deal standard life shareholders would own 66.7% of the combined group. this would great when of europe's biggest fund managers come over thing 606 the billion pounds. managers, overseeing 660 billion pounds. y. lee is alleged to have emitted perjury. asked by thes not president to provide financial support. responding to this morning's announcement, samsung said the company had not given bribes or made improper requests.

that is your bloomberg business flash. anna: thank you, juliette saly. delivered hisr work report before the national people's congress gathering in beijing. he struck an update note on the nation's slowing expansion and rising debt, but also flagged the specter of greater challenges ahead. tom mackenzie is in beijing and has been following this story. take us through what we have learned. key takeaway is the softer gdp target of 6.5%. they are focusing on reigning in the financial risks in the chinese economy. premier league is saying the focuses are on nonperforming loans, which continue to pick up in the shadow banking sector and on online financing, areas where he has grave concern. other areas where he has concern, the external environment. and he talked about the growing

anti-globalization sentiment you have been talking about, which has been reflected in france, brexit, and with donald trump. he is very cautious and concerned about protectionism. there are other factors that could prove a risk to that 6.5% gdp target. one of them is the property sector, which is a delicate balance with legislators and policymakers here because there is too much venturing into the smaller cities. there are a number of risk factors around this and i have not touched on the fed. hikes go ahead, that will put further pressure on the yuan. they have had to burn through their fx reserves to support the currency. anna: the dollar is pretty flat this morning, but could it revive and risk things for the chinese? the market forom

story, geopolitics are back in play today as well. how is china likely to respond to the latest missile tests from austria? -- from north korea. tom: they are likely to be very unhappy because this is an event that will overshadow to some degree the npc. we will hear from the foreign minister on wednesday. he is likely to be questioned on how he will respond to north korea at that press conference. we can look at how china has responded until now. in february, they did block from northcoal korea. tensions have been exacerbated between the two allies. china does still present accounts for about 70% of trade with north korea and provides a lot of energy and food aid. they do have more sticks than leverage they can use. they are also facing pressure from donald trump to take a

harder line on north korea. some want to keep a friendly alliance with the north koreans. others want to see a tougher stance. the chinese, like the u.s., are rather fluid on this one as well. hopefully we get more clarity on wednesday with the press conference. anna: thank you, tom mackenzie, joining us from beijing on the latest. michele is still with us here in london. let's talk about china then, and the overarching theme of growth and stability they wanted to highlight at this conference in beijing. there are challenges around nonperforming loans and the intellect globalization movements, risks in the private sector. yet, you think investors are a little too gloomy on china? >> yes. without they were too gloomy last year as well.

there are many sectors benefiting from china's growth. if you look at what came out over the weekend, shooting growth needs to come through. so, i think that is distorted we will see for the foreseeable future. all the other issues we talked about, they will be a challenge for the long-term. in the short-term, they need to manage growth to a certain level. anna: and you have faith in their ability to manage growth through the transition? i pulled up this chart. we have got the chinese gdp number in the blue. and then we have the index coming through in the white, which is the measure of bank loans, electricity production, rail volumes, and all of those factors that could give us a slightly different view of the gdp picture. >> and they have essentially been doing qe through the banks. they might be stopping that and reversing part of that.

they want to manage growth to a level that is acceptable to them and allows them to also make the shift to consumer driven economy. anna: one of the risks tom pointed out there is what the fed is doing. this chart, the dollar's revival might up end the sense of calm. last year it seems the tension around capital outflows could become the dominant them oe of 2017, but it has been very quiet. >> reserves are going down and exports are weakening. they are under a lot of pressure and we think they will continue to weaken. they will try to manage the path of weakening because they cannot have a confidence crisis. the trend is clearly weaker for the yuan. yuan, buter for the they will try to manage their growth story. next on the program, driving the

deal. we look under the hood of the 2.2 billion euro sale of gm's european operation to psa. it looks like they have managed to come to an understanding around a number of roadblocks. we have analysis next. this is bloomberg. ♪

anna: john cryan change course, scrapping his original turnaround strategy. the bank plans an 8 billion euro share sale. you can see our interview with john cryan at 8:15. china sets it growth targets. the world's second largest economy aims for 6.5% growth this year as it emphasizes stability. tensions flare as north korea fires four ballistic missiles. the yen strengthens. manus: and a driving the deal. psa group agrees to purchase gm's opel unit in a deal valued at 2.2 billion euros.

anna: a very warm welcome to "bloomberg daybreak: europe," our flagship morning show from london. i'm anna edwards. manus: and i am manus cranny, live from paris. anna: good morning. manus, let's start with this auto story. we just had confirmation about some of the details. you have been looking at those details. we just had a confirmed, then? manus: absolutely. the deal is done. they took a lot of discussion with unions and governments. togeot will pay $2.2 billion gm. m at number two. that is what he gets, scale, size, and brand. he is set to deliver synergies of on margins on the

business. opel is the european business and voxel is the european brent. they will go from 2% to 6% in 2026. you purchase these cars on financing the deal. bnp will purchase a 50-50 split in the financing. what about gm? caching if you are a shareholder at gm. share buybacks are on the agenda. that is what they intend to do with the proceeds from this divestment, a $4 billion to 4.5 billion dollars cash charge. and want to use approximately $2 billion for share buybacks. there are warrants. gm will retain the option to re equityeugeot with an stake. when it comes to the pension funds, gm is taking

responsibility. anna, they will contribute to the active numbers and the retirees. anna: thank you very much, manus cranny with the latest in the auto story. we will get back to him for more there. let's get an update on some breaking news we have got here. standard life putting out a comment, based on all the press around the weekend around m&a. it seems the press comment was pretty much on the mark. standard life to buy aberdeen asset management for 286.5 pence per share. aberdeen is entitled to get an interim dividend of up to 7.5 pence. seedard life and aberdeen material earnings. this is the latest defensive move by the active asset management sector that is grappling with the pressure coming into the industry because of those cheaper funds that do, in some cases, outperform these active managers.

the merger of scotland's two biggest moneymakers, this is a trend because of this rising pressure. so, we have seen a range of these -- a number of these types part of thethis asset management industry adjusts. let's get up to date with what is happening in the banking sector over in germany. we will have the interview with john cryan later on during the program. deutsche bank, we are expected to see it open considerably weaker at the start of the trading day, falling 10% on trade gains, versus the close on friday. also, this could. spread further into the banking sector. commerzbank is set to fall for present compared to -- fall 4% compared to its close on friday. the headline really, deutsche

bank is trying to boost its capital ratio, reversing the old strategy, boosting their capital levels, raising $8.5 billion in this share sale. :15 i say, john cryan, 8 u.k. time. he said overnight that they took this brave step of admitting they were wrong, or they were going in the wrong direction, but he does not intend to go anywhere. a lot to talk with john cryan about. let's look at where the market but us for the start of the european equity trading. it looks like we will be weaker at the start of trade. no surprise when you factor in the geopolitical tension and the weakness in the futures in the states. i mentioned geopolitics, this in relation to north korea firing -- relation to north korea firing four holistic missiles. we see the yen strengthening.

japanese equities are underperforming. the broader picture for asian equities has been resilient in the face of that jude political masci, up .4% on the asian-pacific. futures as i mentioned, they are expected to be weaker at the start of the european trading day and we are expecting to go weaker at the start of the u.s. trading day. good market participant -- could market participants be asking themselves how many market rate hikes they want to see from the fed this year? reporter: thank you. former director of u.s. national intelligence james clapper has denied donald trump's calim that the obama administration ordered wiretapping on trump tower during the election campaign. his comments contradict explosive allegations by the president by twitter. a person familiar with the situation told bloomberg that

trump relied on reports in conservative data, including breitbartn news. japan has move to the highest possible alert level after north korea fired four listed missiles. three of the missiles fell within the economic zone. the prime minister abe says he will launch a firm protest with north korea and south korea's acting president called this a serious provocation. u.s. president donald trump's protectionist stance might propel latin american, asian, and middle eastern nations into alliances. that is according to the european commission's vice president, who told bloomberg exclusively that trump's rejection of multilateral commercial deals are giving way to the eu's push for free trade and investment pacts.

somethingere has been else to raise protectionism, especially from the u.s. side, the rest of the world seems to be fighting back and saying, this is not orur line. >> francois fillon has rejected calls to step down. he denied allegations pay he used public money to his wife and children for carrying out fictitious jobs. this is amid growing support for former prime minister juppe to take his place. uppe will make an announcement at 9:30 u.k. time again today. the populist freedom party, if they win the election next week, we have been warned of chaos. they vote on march 15 is europe's first major test after

the u.k. opted to leave the european union. >> this is an opportunity to stop the trends before the french and german elections, and for the netherlands to vote for a policy, in which i want to deliver, of continuity, of making sure that the successful policies of the last four and a half years will be implemented over the next three to four years. reporter: global news 24 hours a day, powered by 2600 journalists and analysts in more than 120 countries around the world. you can find more stories on the bloomberg at top . thingslooking at how panned out in the asian session. you did see that flight to safety after north korea fired those ballistic missiles. that send the nikkei lower, down 0.5%. elsewhere markets have taken this in stride. australia also had a good day.

korea, supported by samsung today. looking at the individual stocks, you did see the south korean defense players looking very strong today. korean air space, up 2.5%. the china and a south korean tensions continue, though. there are reports that china has closed stores across rural china. and the capex in hong kong, jumping the most in one year. this is after the price target was raised more than 6% on the stock. the vice chair was jailed one month ago. but if you look at this chart, pricen see the target is still very much above water, all the way going back to march of last year. not once has it been in the red. this is still very much viewed as a valid and a strong stock. much,thank you very

juliette saly. let's talk about the banking sector in europe. a big story for european markets. the deutsche bank share price could be down 10% at the start of trade. deutsche bank has announced an 8 billion euro share sale. directors at the german lender also gave the green light yesterday to selling a piece of the asset management business. two deputy ceo's are scrapping the sale. matt miller has more from berlin. matt, what is the most significant change here then? there have been a host of measures announced by deutsche bank. matt: there is a lot, but the capital raise has to be the first thing shareholders look at this morning. as a result, the shares are called down 10% from friday's close. last year, john cryan came out and said, we don't need to raise capital. obviously, things change and

apparently, they have, because he will ask for $8.5 billion. at the same time, reversing his strategy on the trading and investment bank, reversing his strategy on the sale of postbank, integrating the into the broader consumer business. it is very interesting, but investors might be, initially at least, disappointed that his strategy previously has not worked out and now he will come back and say, i'm going to do an about-face and. ask for another $8.5 million anna: also, backtracking than on some of the plans for postbank. matt: they were going to sell postbank, and now they are putting it back in the consumer business. one of the more interesting thing for me as somebody following the deutsche bank executive board, they are putting in two executive ceo's. they will have essentially, three ceo's with john cryan as the head.

one of them will leave the investment banking business in the trading business,s o the corporate clients. the other one is going, he comes from the consumer banking division. so, it is almost as if they are splitting into a commerzbank type of model, trying to reduce their client books and boost margins. but where will they get increased revenue? they expect revenue to fall 1% from the lowest it has been in the last decade. this even if you think tackles the capital issue, there are questions around revenue still remaining. matt miller in berlin. for more on deutsche bank, don't forget, we have the interview with john cryan at 8:15. let's bring into the conversation, our guest, julian howard. manus cranny is not next to me, but he is still with us over in peugeotthe

headquarters. julian, great to have you here with us. let's talk about deutsche bank or more generally, about the capital raising plans we see for european banks. we are still in this part of the story, aren't we? shows this chart which where this takes them on capital, 13.1%, this is where they are planning they will be now, above the previous target. when do we see an end to the capital raising requirements? >> i think it is not far off now. the environment for banking and generally, whether it is in the u.s. or europe specifically, is about to improve as we get higher interest rates. i think the profitability will improve and we will see that return on equity's start to lift above the 10% number. while the market is focused on deutsche bank and it is generally been is and we saw this down 10% production, i

think the outlook is starting to improve. this could be the trough, and maybe even a buying opportunity in the financial sector as we see the ecb stepping away from the suppression we have seen on the bond yields, and the growth numbers are starting to come through. anna: manus joins us from paris, julian. manus: a very good morning to you. when i look at this story, three ceo's in a lineup. and albeit, john cryan saying, i admit we made a mistake. has cryan lost credibility, or is capital the absolute paramount issue? >> i find the candor very refreshing. this idea that he was taking it in one strategic direction and that did not work and so, now it is time to go in another. that is refreshing. it is expensive, having to raise more capital. he will have to fund that

strategic change, but overall, deutsche bank, i think it is the start of much better news from this point onwards. for deutsche bank and for european banking, in general. i think it will be interesting to see how the market response. we have seen the 10% production, but i suspect we can see a lot of bids coming in today. anna: it is interesting, you think this could change the story. we have seen some m&a in the markets as well. but standard life to buy aberdeen asset management for 3.8 billion pounds. this is a story of active managers fighting back. this is something we have seen elsewhere within the industry. >> i think this is a capacity issue, just like with the car story. i think there are probably too many asset managers out there trading too few assets. from this trend from active to passive, i think we have seen $500 billion flow from one to the other in 2016. i think this is a logical step

and we will see a lot more of it in the coming months and years. manus: do you think we will see more cross-border action? we saw some of the bank insurance prospects in italy. here we are, a very u.k. centered deal. do you see more m&a? the yield curve's move and things potentially are changing in interest rates. 2017,s the theme of the year of dealmaking? >> within the u.k. it is actually fine. today's deal was within the u.k. what might be more problematic is if we get more overseas m&a or bids, or aggressive takeovers of u.k. financial companies. that could be more problematic because it plays into the brexit politics and the government will be keen not to have this image of the uk.k. is on sale on the cheap because sterling is cheap.

we have to be careful about how much of this we are going to see around financial u.k. company. around unilever there is already this political backdrop that we don't want to see overseas companies coming in and buying of assets. i think we just need to be careful of what kind of origination there is, and which companies are buying which, and where they are coming from. more m&a, but not overseas into the u.k. that will be more of an issue. manus: i am here in paris in peu geot. i find it ironic. they still have more options to purchase more peugeot at a later stage. how do you look at europe? there is this potential renaissance in europe, isn't there? it is manifested in those numbers. is improving.

more joint ventures to come. >> i think the auto industry has had far too much capacity in the past and gm has not been able to get opel profitable for over a decade. it has been this long running saga. i think the deal has made sense and peugeot has done better recently and they will be able to release some synergies and close some factories. this is political stuff. we have the french election coming up soon and we have to be careful of what the impact could be on the politics if we get announcements around jump savings is this is exactly what the election is about, the response to globalization and mass job losses and stagnating wages. longer-term, the european story is improving. we are getting lower on unemployment, better growth, getting some inflation coming through. if we get through the french election, this could be quite an incredible turnaround, and opportunities like the deutsche bank news, they make for interesting entry points in the eurostoxx 50.

anna: julian howard stays with us on "daybreak: europe." up next, la resistance. fillon remains defiance as pressure rises in his own party for him to step down. what does this mean for the french election? this is bloomberg. ♪

anna: welcome back to "bloomberg daybreak: europe." in france, the leadership of the republican party will meet to discuss fillon's future after dozens of his top supporters have stopped their funding. down, sayingd he was staying in the race. some have suggested that the former prime minister juppe

should replace fillon as the party candidate. juppe will break his silence today. julian howard is still with us on "daybreak: europe." manus cranny is over in paris, covering the corporate story. populism in europe then, as we see this nervousness around the political calendar, as you call it, the political minefield in 2017. the we see this, jobs keep just going higher. does this make sense? >> it does make sense. if you look at volatility against policy uncertainty, the two were pretty much correlated. as you get more uncertainty, stocks sell off. last year, this trend broke for three key reasons, which will continue. the first is that fundamentals are improving. growth is better, corporate earnings are better. the second is bank liquidity is still there. that means the system is

functioning well. the third is the retail investors have not gotten involved in this rally. that leaves more institutions and network individuals engaged in equities, they tend to take a longer-term view. they can just focus on the fundamentals and not get too involved in what's happening short-term. wwhereas, the slightly flight here retail investor -- the slightly flightier retail investor are not doing this. manus: in terms of european equities, trying to be flighty and flirty in think. is underhe euro pressure. u you time yo mentioned le pen in the polls, the euro reacts. >> it is a logical choice.

i think it is essentially because we don't feel the risk is as high as everyone forces. it is difficult to talk about denying electoral outcomes in europe after 2016. particular, and even if you have a big margin of pen's support, it is hard to see her get through. that is because of the constitutional block you see in france where on the second round, it is unlikely she will be able to make it because the support will coalesce around either macron or fillon. also, the support for the euro in france is that nearly 70%. even if le pen comes through, what is she going to do? colin referendum on the euro? she is going to lose it right away. i think europe is the opportunity. anna: two big firebreaks, but you don't want to be complacent. julian howard, thank you for

joining us this morning. that is it for "bloomberg daybreak: europe." "bloomberg markets: the european open" is next. we have john cryan at 8:15 u.k. time. that is under one hour. this is bloomberg. ♪

>> monday morning and welcome. you are watching "bloomberg markets: the european open." your first cash trade coming up shortly. i am guy johnson in london. matt miller is in berlin, for now at least. what are we talking about this monday morning? a subject close to your heart? deutsche bank, the lender is scrapping its strategy and planning at $8.5 billion share sales, after the turnaround