anna: good morning, i'm anna edwards. this is "bloomberg daybreak: europe." officialstone, fed deliver an upbeat prospect of faster rate hikes. beijing is back, equities in china rise after being shut for the new year holiday that other markets in the region retreat along with u.s. futures. in decision time, theresa may and her cabinet rather for a marathon meeting today to thrash out what the u.k. wants from it you trade deal. -- from anti-e.u. trade deal -- deal.n e.u. trade

welcome to the program, this is "bloomberg daybreak: europe." let's get straight into the earnings season, a lot of earnings to get through. deutsche's telecom targeting 4% adjusted 2018, with ebitda. fourth-quarter revenue is in line with the estimate of 19.2 billion. were getting confirmation of the topline growth story and also new targets. the new target one of the focuses for the market going into these numbers. this is a business that has struggled to do a megadeal over in the united states. handsanted to get their on the t-mobile assets and that did not work out so they are focusing on europe. will regulators let them meet their expectations in europe? they're looking to germany, and poland and the netherlands,

hoping for growth there. an update on their debit in expected, that some of the earnings stories we're watching out for this morning. let's get to the risk radar and show you where we then overnight on the asian equities session. playing catch-up for the chinese market, standout performers with big gains for the chinese equity market. more generally, the market is moving lower. this had to do with what we heard from the fed yesterday. we have the futures in here as well, suggesting we will see further downside at the start of the u.s. trading day. interesting when you watch how the fed minutes went down, at first it seemed to be good news but as we move progressively through the day and the markets became more custom to the positive assessment from the fed, the good news turned into bad news because it was based on higher expectations are faster expectation of rate hikes from the fed. negative across the equity

market as a result of that. the dollar and yen respecting that result attitude this morning. plenty more earnings to talk through, a host of companies giving earnings reports and we ceos with bigsome decisions to make. that's at 7:00 a.m. u.k. time. later we will speak to the ceo of barclays, numbers from barclays out at 7:00 this morning. how will their fixed income business have performed and what kind of performance will they see in that part of the company? what is the latest update on the legal challenges they are facing? an update on that later on. let's kick off with theresa may and her most senior cabinet colleagues. they tried to thrash out an agreement on what kind of trade deal and want with the european

union. the meeting comes with just 13 months until brexit day. meeting to spell out her blueprint before talks at brussels next month. the u.k. has asked the e.u. for flex ability on the length of the brexit transition with a longer bridging phase that lasts until it is no longer needed. bank of america the latest overseas bank to commit its long-term future to the u.k., even as the country prepares for brexit. the u.s. lender has extended the lease on its london headquarters until 2032. the financial center london is owned by norway's sovereign wealth fund. the new south african president's gamb ling on a tax hike raising the 18th to 15% as it tries to stabilize -- raising vat to 15%.

the finance minister spoke to bloomberg after presenting his budget. at the moment it's staying away from any further downgrade and beginning to improve the outlook as we regain our investment grade. yousef: president trump has promised to act quickly to prevent more u.s. school shootings. he met with survivors and victims of the recent attack and other atrocities. the white house planning what he calls very strong actions. he endorsed the idea of arming schoolteachers to confront attackers. an. lawmakers launching inquiry into cryptocurrencies to investigate their benefits and risk and consider how it should be regulated. many will examine the impact of bitcoin and his peers on banks and consumers consider whether they ultimately replace

traditional money or could replace, rather. global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. find more stories on the bloomberg at top . let's cross over to david for a check on what's happening in the markets in asia. david: we are entering the last leg of trade across the asia-pacific. most benchmarks are down, australia already closed. a little bit of support from minors but you can call it flat on that market. suffice to say the risk off following the hawkish fed minutes. we're looking at 1% decline on the nikkei 225. china opening for the first time new year, up lunar 2% there.

the first-ever ever trade we had in taiwan yesterday, up about 2.8%. let's look at some of the movers across the region. in keeping with a holiday theme across the asia-pacific, we're getting substantial gains coming through in hong kong. a lot of the tourism related shares, air china up 8.7%. officially from the government of beijing, that revenue -- tourism revenue was up roughly 13% over the holiday. about 60 billion euros, roughly speaking. and in keeping with the travel for theood earnings outlook for the month ahead.

overall down in the asia-pacific. anna: thank you very much, david inglis there in hong kong. second-largest insurance business, the bottom line never seem to be ahead of estimates. net income for 2017 coming in at 6.20 one billion euros, above the estimate. there had been a focus on a buyback from this business, whether we would see a potential buyback, as the sectors covering from the big hurricane season that was devastating. wildfires in california and earthquakes in mexico, but there have been some in the sector returning money to shareholders. we did get a dividend from the , getting a boost from the u.s. life insurance business ahead of the ipo and that's when the market is focus. the key ipo of u.s. assets coming shortly.

we will see how they take that debit in a little later on. the minutes of janet yellen's last fed meeting show policymakers are increasingly positive on the u.s. economy and optimistic able reach their inflation targets. officials expect the rate of growth this year to exceed initial estimates and the labor market will continue to strengthen. the minneapolis that president neel kashkari said their paying close attention to inflation and wage growth but it will not overreact to single data point. he spoke to bloomberg's mike mckee. theome say we should raise inflation target. i'm not in favor of raising it up 2% to 3%. i want us to hit the 2% inflation target. if we get hit the 2% inflation target, that would be a positive development in that will give us a little more room to respond to future downturns. neel kashkari at joining -- on bloomberg.

good to have you with us here today. let's talk about what we heard from the fed. watching the market reaction it seemed as if at first the market took it at face value, positive assessment of the u.s. economy, and the second order started to hit home and market started to stress at that hikes. did anything move for you, did the dial get moved by these minutes yesterday? >> [indiscernible] in terms of economic growth and , we are seeing a regime shift. this can last two or three months and during that time, we could have some concern about inflation, especially the federal reserve in terms of communication and interest hikes. arounds the regime shift

higher inflation dynamics or the leadership of the central bank? >> in a way, both. we have a shift in the economy. this is a tough situation for the federal reserve. of course the name of the game is not to be high the curve for the fed. approach for especially the fed today is to be behind the curve or to tie the monetary -- aiding the economic growth. difficultared for a way to change monetary policy. a negative impact to markets, and at the same time not be behind the curve. idea do we have a good about the tax changes we've seen?

we need to understand what kind of effect they will have to then understand how the fed will have to respond. >> we have a reasonably good idea of the impact on economic growth we expect for this year, maybe slightly above 3%. that is quite clear. what is not clear is the impact on inflation. spiralentering a vicious with wage growth promulgating a higher inflation rate, or not? this is very unclear. anna: janet yellen said how it was a real mystery. >> [indiscernible] a strong wake up. it could create some shock in markets. subprimeculty for the banks is to reposition its

monetary policy. this is very and clear today. this is a situation in which were seeing the markets in trouble. this is why we experience volatility peaks because we have to reposition anticipation in inflation but we do not know if inflation will be above 2%, which is the target of the fed, or just at the target. course the tax cut feeds into that conversation. we have to work out what the tax cut does for inflation payment it's already a big question for markets. i have this chart that talks about the earnings expectations in the united states. u.s. earnings expectations have been going up very fast and have sharply accelerated thanks to the tax stimulus. there are plenty of things to

threat oft, the inflation brett spirit how excited are you around this kind of earnings story and where are you investing for it? >> we are very excited about it. we expect a direct impact and an indirect impact. meaning that thanks to the corporate tax rate, the federal tax rate, we have to just adjust earnings growth for this year. growth why we are on the surge from 20% before the u.s. tax cuts to close to 20% today. in the threshold is around 21% or 22%. is ane could have indirect impact through the acceleration and economic growth

, but it's earnings growth yet to think about. we could have a sudden boost effect in the markets because of that. a risko you think it is to the upside in the united states. >> we are seeing more upside and downside. anna: are you confused by the weakness that we saw in the u.s. dollar? said it is explainable because even though we haven't seen a balance sheet reduction from the ecb or the boj, we have and tapering from the ecb the direction of travel is clear for the central banks and that's what he attributed to the weakness of the dollar. >> we expect strong economic growth in the u.s. and high interest rates for the short-term and long-term. we observe exactly the opposite, ,ow to explain the paradox

because we have the global economic cycle and then it makes it lets -- less risky to invest in emerging markets. interesting, the high-yield. environment but it makes more sense today to invest in the emerging markets. anna: is there a point at which the higher yields in the u.s. change that and the money goes back to the u.s.? >> in a circular approach, we should observe strengthening u.s. dollar against emerging currencies. this is where we stick to our $1.24 for year-end targets. much.thank you very us on the with

program payment mainland china sees a surge in stocks. will be live in beijing to talk about the strongest performers. barclays joins us. you can see that interview just after 6:00 london time. this is bloomberg. ♪

anna: this is "bloomberg daybreak: europe." this is singapore, 2:20 in the afternoon there. asia-pacific shaken a little by the commentary out of the fed about the strength of the u.s. economy. we see that index down, but china is raising back after the lunar new year. that's get the bloomberg business flash. with theet's kickoff

billionaire founder of the rose biggest hedge fund. he says there's a high probability of a u.s. recession before the next presidential election. he says were not in bubble territory yet. >> we are not even in the bubble stage yet. we are in the pre-bubble stage it could go into a bubble stage because of this thing that then can be followed by a bust phase. i would say that the probability prior to the next presidential election would be relatively high. 70% or something like that. yousef: ford's head of north american operations is leaving with immediate effect following an investigation into inappropriate behavior. finding he engaged in conduct that was inconsistent with the company's code of conduct. they issued a statement saying he regrets not exhibiting

leadership behaviors consistent with the principles that the company and i have always espoused. and pratt & whitney has injured -- introduced a temporary fix to keep the airbus flying until it solution is found. pratt is scrapping production of --ew seal that cost indian engine vibrations and took several jets out of service. that's your bloomberg business flash. thank you. mainland chinese stocks surged as trading resumed wallowing a week long lunar new year holiday. consumer shares so strong advances in air china. shanghai listed stocks are heading for the biggest gains since the third of january. our china markets reporter joins us from beijing. good to have you on the program. these are the big gains in mainland stocks. what is behind the gains in

consumer shares and what's it tells us about how everybody spent the new year? >> you would not even know it was a down day in the rest of asia if you were just looking at the main and market. the shanghai composite and the shenzhen benchmark of around 2%, very strong gains out of the gate. chinese traders appear to have returned from the weeklong holiday refreshed and are really catching up. we saw the hang seng china enterprise index in hong kong that tracks chinese shares. it gained around 3% over the great, so we're seeing gains of a similar magnitude in the mainland today. in terms of where the gains are coming from, they're all quite related to the chinese or lunar new year holiday. consumer shares leading the still industry companies are gaining their strongly. fell, others up more than 4% in shanghai.

we saw box office takings in china over the new year break surged more than 40%, so a decent showing for the box office. shareserators, cosmetic and the airlines, air china also of strongly after what looks quite successful in terms of the chinese new year holiday. anna: so that's what everyone is doing with their new year's holiday. what about the bond market? same spike up the in yields. what is going on here. often the pboc likes to follow the fed to stop the currency diverging from the current path too much. >> that's right. all eyes on the bond market this morning after the events with treasuries and the spike in yields. everybody was wondering whether the chinese benchmark bonds would follow suit but there hasn't been much movement in the

10 year yield at all. it's hanging around 3.89%. the level it was at a week ago as we went on holiday. this was after the big spike in , it does not seem to have spooked anybody here and the pboc has injected a lot of cash today. so they might've been foreseeing that. anna: thank you for that. allocation isset here. your thoughts on china at the moment as we witness the big selloff we saw in global equities to large extent, and then the recovery. where does this take us on the china story? christophe: we are quite positive especially in china. we were afraid about markets and potential slump in the economic growth, which is not the case. 6.5% int something like economic growth.

, the equity --3% chinese equity markets are very attractive in terms of value. we see a way to close the gap terms of valuation. anna: do you have the stomach to play it directly, the chinese equity market? to playhe: we prefer , themerging markets thinking is regarding the chinese equity markets, you play essentially the tech trends, the tech stocks. for this reason, to diversify. i guess stays with us on the program. the u.k. cabinet heads to

theresa may's country residence as the primary six -- as she they agreement on what really want. were bring you the latest. this is bloomberg. ♪ retail.

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and now, get a $200 prepaid card when you buy an iphone. it's a new kind of network designed to save you money. call, visit, or go to xfnitymobile.com. anna: this is "bloomberg daybreak: europe." 7:30 in paris are berlin. in tokyo its 3:30 in the afternoon. the dollar against again, substantial movements. dollar going back -- money going back into the yen. being reflected in that currency pair. let's get to some breaking news with numbers from the second-biggest construction company in france. it has diversified be on construction. euros, justillion above the estimate. the net income is very much above the estimate of 870

million euros. saying they expect gradual profitability improvement in 2018. the question is to what extent they get a boost from the french economic growth story. grand paris is a big development project, president and others have set their sights on it. this brings new subways to paris and new metros. to what extent will that be delayed is another big question. moreremained rather diversified than they had planned let's get an update on the markets more broadway -- more broadly. >> asian markets waking up to a tighter fed. stocks trading lower this morning. despite the fed's positive assessment of the u.s. economy, the market choosing to focus on the trajectory and pace of the u.s. rate hikes. china is up 2% as a come back from the weeklong holiday celebrating the year of the dog.

treasuries is where the story is right now. pushing on yields higher yesterday, the 10 year yield any 2.95%, the highest in four years. it seems only a matter of time when the tenure yield will hit 3%. back from 2011s for important levels beyond that threshold. a lot of analyst at different trajectories. more than half the 50 we surveyed say the 10 yield will in 2018 at a below the 3% key toeshold and treasury is one watch today. let's in on oil, the threat reemerges, futures closing lows are for the first time in new york yesterday. stay we get data from a --omberg survey saying in inventories increased 2.9 moon barrels last week.

one guest saying it may cover demand just not for this year but into 2020. obviously north america is where he seeing high demand as well as brazil and mexico. anna: thank you very much for that update on the market. germany's top administrative court will decide today if cities in europe's biggest auto market can vin diesel cars. the environmental lobby sued cities across germany to make and enforce e.u. air pollution limits they had exceeded for years. is colin. good to have you on the program with us. tell us about how automakers are viewing this decision. our automakers worried about what is going to be heard?

>> they are worried and they should be worked. they stand in a position where all of a sudden they have to pay attention to municipal regulations. in the past they paid attention at the national level. now there is a wild west policy going on at the city level they have to worry about. so they are paying attention to it and they are definitely worried about it. if it goes against them, you could see residual values of diesel vehicles start to fall in that could impact sales. anna: it's also around what they produce into the future. >> and what consumers choose. looking a lot of time at electric vehicles. they are still a small share of the market but they are double last year. uncertainty, we think some of the smaller markets that have been smaller segments of the auto market are positioned to benefit. anna: you have to wonder how much it might set a precedent. it's not just a -- an issue in

specific cities. seismic shift the are seeing going on at the moment away from petrol driven cars and diesel driven cars and toward electric vehicles, how are you investing for that future? christophe: we look at innovation trends. have seven sources of innovation and among them, onrgy and a strong impact the car industry. we expect probably half of sales could be in electric cars by midcentury, so it is a big regime shift for carmakers. not just in germany but elsewhere, obviously. what happens if the cities lose this particular decision?

>> there is a real possibility that it doesn't go in their favor. some of the damage is already done. a lot of these things have been in the headlines. people buying cars have seen all this. would you buy diesel right now given that it faces and uncertain regulatory regime in the future? in my view you will start to see diesel sales fall faster than many expect. anna: and will we see driving bans very quickly? >> probably more disincentives to use diesel in the center of the city. they are worried about urban air quality and the health of the citizens. anna: thank you very much, colin. let's turn our attention to u.k. politics. theresa may will shut away her most senior cabinet ministers until late thursday night in an effort to force them to agree on what kind of brexit trade deal they want with the european union. talks in brussels are due to

start on trade next month and in in october. christophe is still with us with thoughts on u.k. assets. are your thoughts totally dominated by brexit or are you focused on the short-term? christophe: we are focused on the midterm. the brexit is a long event for the negotiation scenario. what we expect is a hard brexit or nothing. the transition of the exit could last much longer than expected. meaning that it's very hard to create an environment for the , in terms of

financial and economic causes very high for the u.k. economy. pressure on the u.k. economy in terms of economic growth and in terms of inflation because we have a sudden the u.k. economy. we're in a contrasting cycle, cyclical approach versus the rest of the global economy because of brexit. anna: to what extent do you think markets have factored in a hard brexit versus a soft brexit? is it still a market of session? a guest yesterday said markets are factoring in, markets must be factoring in a soft brexit because it was a harder brexit, more mobility would be factored into the european system. coursephe: court -- of

there are negative consequences of a -- of brexit on the economy. we don't factor in for the time , the market brexit is just waiting for the final solution, the final agreement between the u.k. and the rest of the european union. it could take years. anna: does it matter to you whether we see the u.k. staying in a customs arrangement? christophe: it's absolutely crucial. ofhave that same kind agreement for the time being with the rest of the european perfect probably the situation but it could take , and this is why we can

-- in the meantime, the u.k. economy has to stay live. anna: none of the leading politicians talk about canceling it just yet. i want to show you this chart, it brings in the bank of england and their perspective around option pricing. sterling declines seen as the bank of england emphasizes a very gradual approach. they surprised some by talking aggressively that hikes but the focus seems to be on gradualism. how do you perceive a rate hike cycle given the uncertainties that lie ahead? englandhe: the bank of has to tighten monetary policy nor to fight inflationary pressure and then to try to maintain the value of the

currency. on the other hand, because of , theyre the u.k. is under should adopt an easy monetary policy style, this is why the keyword today is gradual approach. besides to choose tightening on easing but not to quickly because you have to preserve economic growth in the u.k.. this is why they should adopt a very gradual approach on monetary policy. anna: but inflation is a real and present event in the u.k.. growth has not fallen off the cliff in the way that is feared yet. >> we were discussing about the fed for the opposite reason. is because of the weakening current see and its

impact on inflation. at the end, the name of the game is exactly the same, not to be behind the curve, including the bank of england. thoughts,ks for your you'll stay with us on daybreak. to the bank of latvia governor. you can see that interview at 1:30 this afternoon. it's a story we've been covering extensively over the last few days. fascinating developments there. coming up later today, the ecb publishes the account of its latest meeting as european policymakers look to address the banking crisis in latvia. later in the show will speak to staley.eley ceo jes this is bloomberg. ♪

anna: this is "bloomberg daybreak: europe." 1:45 in the morning in new york. futures point down, market shaken a little bit by what they heard from the fed yesterday. turning into expectations of higher or faster rates and that was something taking the edge on equity markets in asia and possibly will do so again in the united states. let's get the bloomberg business flash. the billionaire founder of the world's biggest hedge fund says markets are not yet in volatile territory but he cautions there's a high probability of a u.s. recession before the next presidential election. >> we are not even in the bubble stage yet. we are in the pre-bubble stage a could go into a bubble stage because of this thing and that could be followed by a bust phase.

probabilitythat the of a recession prior to the next presidential election would be relatively high. 70% or something like that. ford's head of north american operations is leaving with immediate effect wallowing in investigation into inappropriate behavior. an internal inquiry found the executive vice president engaged in conduct that was inconsistent with the companies code of conduct. issued a statement saying he regrets instances of not exhibiting leadership behaviors consistent that the company has always espouse. pratt & whitney has issued a temporary fix to keep airbus planes flying until a permanent solution is found. a unit of united technologies said scrapping production of the new seal that cost engine vibration put some jets out of service.

that's the bloomberg business flash. anna: let's get to some breaking in spain telecom giant with fourth-quarter numbers coming through. they given a dividend, cash dividend for 2018. 1%enues to grow at about they say 2018. us operating income, given 3.9 billion. 2018, heavy for promotional activity in the spanish premium segment in the last quarter. will see how impressed analysts and investors are. and comparisons in latin america. let's turn our attention to the baltics, the head of the latvian central bank has denied seeking rights and accuse lenders of conspiring against him. guy johnson has an exclusive

, released on bail 48 hours later, he has rebuffed appeals to step aside. good to have you on the program. what is the latest there from riga? >> at the moment, the story has gone quiet. they have released him on bail and will speak to him this afternoon. summary questions need to be answered at this stage. huge numbers of planes and counterclaims being swirled at the moment. what we want to know is what evidence is being leveled against the governor and what does he know about the charge that have been made against him? authorities say they are criminalting and is a investigation against a top official for solicitation of bribes. they're talking about in excess of 100,000 euros.

what are the nature of the charges and what do they pertain to? authorities are saying that pertain not to some of the claims being made by some of the banks in the news at the moment. about whatd to know is aovernor things conspiracy against him, what evidence he has to back that up. it will be an interesting conversation, a lot of detail still missing in extremely intriguing case. anna: the implications of the ecb, they'll be gathering to hear more about this case. the presence of russia looms over this, one of the areas of uncertainty, exactly what the role of russia is in all of this. it.his is one aspect to the defense ministry, without actually naming russia, said that he believed there was

interference into domestic politics and domestic affairs. and that this was being done to try to destabilize the country in advance of october elections. russia was not actually named in that statement, but the invocation was fairly clear that this was coming from moscow. again, this is something we don't know much detail about because russia was not formally named, but the fact that the defense ministry came out and said that was hugely interesting. it will be interesting to see what details are behind that and what the governor knows about that aspect to this case. anna: parallels are being drawn with other electoral processes globally. you can see that exclusive interview with the bank of latvia governor at 1:30 this afternoon london time. we are focused on the riga

story, but let's say with it -- stay with easy be more generally. and outside crisis imitating from one of the smallest member states. latvia remains the hot topic. will shed additional light on how close the central bank is to unwinding its bond purchase program. this is a backward looking set and won't feature the reference to latvia because that situation has developed since. i guess to still with us. when you look at the european growth story and the strength you see in european growth, i was looking at one chart that suggested we seen the fastest growth in eight years.

>> thanks to the -- germany and regarding the widening of the program of assets from the ecb, once again come the same story for the federal reserve. it should be [indiscernible] do you think the ecb is behind the curve? christophe: essentially behind the curve, but they have no choice at the time being. because inflation is still below

, there is no choice for central banks. they have to be behind the curve . the program, we expect nothing before the beginning of next year. so one year from now -- in terms of taste the unwinding, once again it should be very aggressive. look at the fed situation which is ahead of the curve. contractionpect a in the size of the balance sheet by only 400 billion u.s. dollars, four years after the end of qe. and the story should be the same for the ecb. of the big issues

politically that markets will have to deal with shortly is the italian election. we've seen a range of elections last are taking place in europe and mostly the markets handle things. simplify i have this chart that fascinates me. this is the way italy had used the cover provided by the ecb to extend the maturity of its government debt. this led some to conclude that even if there is tension in markets as a result of the electoral outcomes in italy, that italy will be protected because of the work it has done. christophe: protected to a certain point. economy that has the highest ratio at more than 130%. with the threshold in the coming years, this is where italy needs , but ofd its majority

course italy is preserved from the financial crisis to some point. , therefficult to say isn't a clear answer but as long as the burden of debt and especially the interest rate burden is quite limited toward economic growth, italy is preserved. as long as growth is well above , as long is the case as long-term interest rates are 2%-5%, the situation is manageable. anna: thank you for joining us today. joining us for the last hour here on "bloomberg daybreak: europe." up next, fascinating conversations with some big ceos

from across europe, various sectors. the saudi sovereign wealth fund is said to be seeking a stake in profits. this is bloomberg. ♪ . . .

retail. under pressure like never before. and its connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. anna: good morning from

bloomberg's european headquarters in the city of london. i am anna edwards. these are today's top stories. fed officials deliver an upbeat assessment of the u.s. economy, ramping up the prospect of higher rate hikes. equities in china rise after being shut for the new year holiday, but other markets in the region retreat with u.s. futures. and theresa may and her cabinet gather for a marathon meeting today to thrash out what the u.k. wants from an eu trade deal. ♪ ♪

warm welcome back to the program. 7:00 in. london. this is. 7:00 in london, this is "bloomberg daybreak europe." what kind of payout is in store from this business that has been under pressure of late? we are getting a final dividend , revenuence per share of 28 billion pounds, above the estimate of 27.4 4 billion, that number coming in above -- 27.44 billion, that number coming about the estimate. a host of other comments. they intend to pursue the sale of their u.k. nuclear investment. the company issued a profit warning in november, under pressure because the government has been taking efforts to cap the profits that can be made. on the other side, brazilian oil

and gas prices have impacted the numbers on a positive note. to the banking sector, because we are getting numbers from barclays. a final dividend there of sebastien: -- two pence per share. pretax of 93 million, for the fourth quarter in pounds. a full dividend restoration in 2018 for 6.5 pence. call these numbers just trickling through. interesting numbers on the dividend. the focus on whether we will see the same we have seen in other banking earnings, whether the fixed income was weak, something we heard from hsbc. some in the united states, of course. and this is a big transatlantic banking business, as we know. a focus on key corporate clients in europe, and whether there are write-downs associated with them

as they were with hsbc. those numbers are through from barclays, and we will speak to ley,ceo of barclays, jes stae shortly after 7:15 we will hear from him. morning,oomberg this fourth-quarter pretax profit 93 million, 6.5 pence dividend in 2018, as we said. other earnings reports we're getting this morning, anglo american coming through from the mining sector. full-year adjusted profit, 3.3 billion in line with the estimate of 3.3 2 billion. eps number looks to be just about in line, for the full year -- 2.57 for the full year, just shy of the estimate of 2.6. the focus was very much on the dividend, would they pay their first full-year dividend since 2015? they had to stop the dividend sebastien: years ago -- two years ago.

what appetite do they have for expansion, how much of the many -- have they been able to cut down on debt? they are talking about diamond production, giving us an update on diamond production, talking about their safety record, another interesting thread to the anglo american story. we will speak to the ceo of anglo american at 8:00 a.m. u.k. time. the earnings coming thick and fast this morning. numbers from the defense sector. bae reporting fully adjusted ebitda, 3.6% above estimates. they are starting 2018 with a streamlined organization, they say, and giving us an update on their backlog. their ability to keep in the mix on the aviation side, very much the focus here. lower production is something they talked about in the past.

slower production of jets, and they said they were cutting their workforce in the military jet area by 10%. we heard this week from the u.k. minister, who had things to say about the prowess of the u.k. in aviation, so watch that as well. let's talk about the broader market. futures show us we will be down at the start of the european trading day. in the minutes we got from the federal reserve and what we saw in that session, you can see how this has played out into the asian session and how it is expected to play into the futures in the american market later on today. in the u.s., we saw good news was good news initially. the fed's promising assessment went quite well with equity investors, but increasingly the markets questions what that meant for rate hikes. if we put up the risk radar, negative moves on the msci

asia-pacific, and we expect to be weaker at the start of the u.s. trading day as a result of the commentary around the fed. that fits in with the risk off atmosphere i am describing. we are seeing money going into the yen, breaking the trend we have seen in recent days. theet's kick off with minutes of janet yellen's last meeting, showing policymakers are increasingly positive on the u.s. economy and optimistic it will reach inflation targets. they expect the rate of growth to exceed initial estimates and that the labor market will strengthen. minneapolis fed president neel kashkari says the fomc is paying close attention to wage growth, but they were not overreact to single data points. >> some people out there say we should raise our inflation target. i am not in favor of raising our inflation target from 2% to 3%. i want us to actually hit our 2% target. if we can hit the 2% target,

that will be a positive development and will give us more room to respond to future downturns. yousef: theresa may and her colleagues will today try to thrash out an agreement on what kind of trade deal they want with the european union. with just overes 13 months until brexit, with may urgently needing to spell out her blueprint before talks in brussels next month. the u.k. asked the eu for flexibility on the length of the brexit transition period, lasting until it is no longer needed. bank of america is the latest overseas bank to commit to a long-term future in the u.k. even as the country prepares for brexit. the lender has increased its lease on its london headquarters to 2032. bank of america merrill lynch in london is owned by norway's sovereign wealth fund.

he tries to stabilize the nation's that -- the first time since the end of apartheid south africa has raised a tax that is seen as hitting the poor hardest. the finance minister spoke to bloomberg after presenting his budget. >> the focus at the moment is any further from downgrade, and beginning to improve the outlook so we can regain our investment grade. yousef: global news 24 hours a day, powered by more than 2700 journalists in more than 120 countries. you can find more stories on the bloomberg. let's cross to david ingles in asia and check on the markets. david: thank you so much. also on the bloomberg, you get something that looks like this, the equity session in the

asia-pacific. china just closing up shop, the stand out for you today, reopening after the long break. best day for chinese equities since august 2016. japan, the philippines, .4%. other areas across southeast asia seeing weakness. about thewn about .9%, course of the equities session, how weak currencies are trading at the moment. a few names we want to bring your attention to when it comes to the lunar new year, because we are getting crazy numbers, official numbers out of the chinese mainland. air china, the airlines are getting business. the film related names are getting bid up. a few names. 120 billion u.s. dollars, retail sales, 75 billion u.s. dollars

in tourism revenue. in box office ticket sales, to about 850 million u.s. dollars, over the course of just seven days. so you understand the optimism coming into these markets, in the broader theme as well, at the moment, never bet against the chinese consumer, because they have so far really come out on top. anna: david ingles, joining us from hong kong. saudi arabia's sovereign wealth fund is in talks to buy a 15% stake of accor's property business. they say the transaction could value the unit at about six .2 billion euros. accor hotels has seen a rise in revenue, up 17.7%, missing estimates but beating estimates before interest and tax line. sebastien bazin is the company's

chairman and ceo, and he joins us here on set in london. great to have you with us. welcome to the program. in terms of the results and in terms of the guidance you are giving to the markets, where are you most excited about your portfolio? sebastien: very excited about europe. doing very well, rebounding very nicely on the continent, in france. very excited about asia-pacific. doing very strongly in australia, new zealand. nice rebound in chile, peru, in resume.irmer strong in the middle east, strong in sub-saharan africa. pretty good every place except brazil, but brazil is actually back in sao paulo and weak in rio. anna: are there any weak spots, parts of the globe that keep you up at night? sebastien: the tourism industry is blessed. so many travelers, increasing 5% per annum. so you have a very good macro

demand, exceeding supply. anna: let me ask you about hotel invest, the part of the business that is up for sale, yet it is taking time. sebastien: always takes time. anna: what is the delay? why is this taking as long as it is? sebastien: first because it is an extraordinary opportunity and many people are asking to it -- for it. you are talking about the largest hotel portfolio by far in europe. 28 different countries, 500 legal entities, over 30,000 people working at those hotels, so it is a very sizable company, $4 billion in sales -- 4 billion in sales, and a lot of diverse investors. you have to put everybody together under the same format, the same agreement, the same legal status. it will take as much time as needed. there is not any urgency.

we will get it done with the economics we want. anna: any updated guidance on how long it will take? at the time of your result, a lack of progress could be seen as a negative. the market wants to get some timing. sebastien: markets are impatient by nature. i said last night, it will take some weeks to close, not some months. we're almost there. it's a matter of a few days, hopefully less than a few weeks. anna: talking to the same types of people? sebastien: bloomberg has been doing purdue well on it. anna: we talked about the saudi's looking for 15%. does that sound accurate? sebastien: i will not comment, but you are not entirely wrong, and probably missing one or two or three of them, and i will not tell you. anna: do we have any on the list two should not be there? sebastien: you should be talking to them. i will not tell you that, either. anna: what about what part of the business you are trying to sell?

is that still up for negotiation, or has that been decided, the percentage? sebastien: accor has been a developer, owner, constructor of hotels, and operator and franchiser. my peers have been going asset-light, no longer owning real estate, so i am trying to go asset-light as well, probably 20 years later than them, which is fine because my portfolio is worth a lot of money, and we made a lot of money over the last five years. i am saying, get new investors, take majority ownership of that portfolio. accor will keep a very sizable piece of it, because it has continued to grow and is a nice buffer against inflation. those assets are in the middle, not going to go anyplace else, and extremely valuable. anna: what kind of percentage do you want to keep to be that buffer? sebastien: as much as i can. i don't need that much money, but i need to do consolidate real estate from the balance

sheet. anna: thank you very much for enjoying -- joining us, giving us the latest on that process and the performance of the business. sebastien bazin, accor hotels chairman and ceo joining us. barclays has reported earnings. jes staley joins us now, barclays ceo. great to have you on the program, as always. i know you want to tell me how well the business has done in your view. but also update me on what has been happening since january. more volatility in the market may have added opportunity for you? we: very quickly, on 17, closed with profit before tax up 10%, which we are comfortable with. the big news was week ended restructuring of the bank. no more assets we are looking to sell, no more businesses we are looking to close. we begin 2018 with a clean operating model, the first time in five years for barclays.

also, we closed 17 with a very strong capital position, 13.3%, above our target and the first time we have done that in a long time. what that is going to enable 18 we plan for a dividend of 6.5 pence for our shareholders, more than double what we paid in 2016 and 2017, so we feel good about that. the markets are right. the first part of january and february, volatility came back, as some of us thought it might, and that is good for the markets business, but it is way too early to get any indication, but that was quite positive. anna: in terms of that market business, then, what are your expectations? you talk about tangible equity targets for the business as a whole in 2019 of 9%.

is that going to be a stretch? jes: i don't think so. we generated a return of 5.6% in 17, so about 350 basis points to go. 150 basis points of that are really advantages we will have in refinancing the liabilities of the bank. we have a lot of expensive liabilities that are rolling of. higher real interest rates in the u.s. and you cable play into that number. improvement on the tax basis will play into that. over 600d to spend billion pounds in 2017 that will not be there in 2019. that's 150 of the 350. 75 basis points for come from reducing costs. we have given guidance we will of 13.6 ton 2019

13.9 billion pounds, well off the run rate of 2017 of 14.2 billion pounds. we have very good visibility on where the reductions will come from. in terms of earnings, you can be as conservative as 125 basis points. half of that easily will come from the consumer part of our business. our mortgage portfolio grew by 4 billion pounds in the second half of 2017, funded by 4 billion pound growth in our deposit base during the course of the year. our u.s. and german businesses are doing very well. german card business is up 10% in 2017, and in our u.s. card business, our perceivables -- receivables were up 12%. we have great new programs that are doing well. we feel confident in our 9% or better number for 19. anna: so you have some cost levers you can pull, and you have other opportunities for the business. what feedback are you getting

from shareholders around your ability to close that 350 basis point gap? are they with you for the long haul on this journey, or are they putting you under pressure to deliver that 350 basis points quicker? jes: we very much appreciate the support that we have got from our shareholder base. i think another aspect of the much is that they are very looking forward to barclays getting into position where we can return excess capital, so hopefully our share coders -- shareholders will take comfort from the fact we will increase our dividend as planned, a significant amount. we are also going to talk about, as we generate excess capital, given that we are over our capital number, the bank for the first time will start to look at buybacks. that is down the road, but it is something on the table, because we recognize we have an obligation to begin to return excess returns in greater numbers to our shareholders. anna: and is there a mathematical equation

shareholders should look to on that, when capital gets to a certain percentage, you start to return to shareholders? what are the metrics you look at to decide when that buyback starts to happen? jes: we are not putting out any mathematical formulas. we like taking the dividend from 3 pence to 6.5 pence for 2018. we talked about where our capital number is, around 13%, versus risk rated assets. let's see how earnings progress, and how performance of the banks progresses, but as we generate excess capital, we do look forward to returning it to shareholders. anna: can i ask you about brexit? when you look at the u.k. business, how is that impacted or not by brexit? do you see it in your numbers? jes: pretty consistent -- brexit is going to have impact -- an

impact. it is very difficult to calculate. but i do not think it will have a significant impact on london as a financial sector and therefore barclays. we are very committed to europe. we are one of the largest underwriters coming out of europe. we have contingency plans to increase our presence in dublin makeur irish subsidiary to sure we can do tomorrow what we do today with european clients. but we think london will be fine, barclays will be fine, and let's see what happens with brexit a year from now. anna: we know members of the government are gathering today to talk about brexit. a transition deal, does that matter to barclays? should that be the focus? or is it more around long-term trade for you? jes: the transition is important, and we stated that. i think it gives the market and

the industry time to absorb the a way thatrexit in is orderly for both europe as well as the u.k. to keep, we would like as much connectivity with europe as possible. we think it is good for both europe and the united kingdom. we hope negotiations come out in a way that is an economic gain for both sides. legalclearly there are challenges facing barclays at this time. no doubt there are limits to what you can say on those subjects, but do you find this is taking up rather more time than you would like, having to deal with it? how do you manage to stay focused with the legal challenges hanging over the bank? jes: you know, one of the challenges of the bank has been to put behind us legacy legal and conduct issues. i think we are in fairly good shape in terms of putting ppi behind us. we have put libor behind us.

we have put issues with energy groups behind us in terms of the ferc. we have two big issues still around, th mortgage backed securities and around qatar. both of those occurred over a decade ago, and we hope we find resolution in the courts with both of them. anna: widening their investigation and including barclays bank plc, which holds the banking licenses. is there anything you can do to limit the risk to that part of the business, as you wait for the legal process to take its course? ? can continue, we to run the bank as we are running it. stock went up post that charge. credit spreads are tighter, actually. and it's something that happened 10 years ago. we will let the legal system take its due course. we think barclays is fine.

anna: in terms of u.s. versus u.k., clearly you have a big business transatlantic. are you looking to move any businesses to the united states, in anticipation of a lighter regulatory environment? jes: the u.s. is about 40% of revenues right now, so we really are a transatlantic bank. obviously the change in the tax rate has a benefit for barclays. we are very enthusiastic by what we see in our u.s. consumer business. the relationship we have with american airlines, with jetblue, the one we launched with uber that has enormous possibility. we like the consumer footprint we have in the u.s., and our corporate and investment bank. very important for us, what we are doing in the markets business. last year was a record year for barclays in terms of equity underwriting, debt underwriting and m&a fees. there's a lot of opportunity for

us. anna: update us briefly on what the tax changes in the united states, what the impact will be in the shorter and longer term for barclays. jes: we will give guidance later this morning on what it's going to do to our effective tax rate. it will be positive for the bank, but i will let our cfo give you all the details later. anna: thank you very much. jes staley, barclays ceo, joining us as they produce numbers, boosting their dividend sharehe bank, and buybacks now on the card for the future. let's get a check on these markets. we are expecting to see negative moves at the start of the european trading day. a general downdraft we expect to experience. we are following the united states and asia in that regard. in the trading day yesterday, the comments from the fed, positive around the u.s.

economy, but then the market started to realize this might hiking,her, faster rate and that's why we saw some equities coming off the boil a bit. that spread into asia, and today we see it will spread into europe. s&p futures also pointing downwards. lots of individual corporate stories. we will keep an eye out for barclays with the numbers we got, and the update on return of cash to shareholders. shareholders, to something of a theme for the businesses we heard about. centrica, numbers from that business as well, a big focus on whether the dividend would survive at that business. we got some news on the dividend. anglo american also produced numbers, and we will speak to the management of anglo american a little later today. a host of earnings to factor into the start of european trade today. we will also talk to politics, about what has been going on in the banking sector in latvia. an exclusive interview with the

bank of latvia governor. of course, he has been very much in the news of late. at can see that interview 1:30 p.m. london time. guy johnson is our man in riga for that. this is bloomberg. ♪

>> welcome to "bloomberg markets european open." i am manus cranny. trading gets underway in less than 30 minutes. ♪ manus: the fed feels confident. u.s. central bankers send a strong message on growth, as the auction armageddon is averted. the verdict of barclays -- revenue plunged in the fourth quarter but ceo jes staley says