>> from london, i'm nejra cehic. manus: and i'm manus cranny, live in dubai. these are today's top stories. apple costs suggests stabilization and life beyond the iphone, but chinese sales funds. -- plunge. investors weigh clarity from jay powell. u.s. futures point higher ahead of the rate decision. and theresa may seeks talks after parliament rips apart her divorce agreement. the eu says the deal is not open for negotiation.

we are live from westminster and brussels. manus: warm welcome to "daybreak: europe." 's net sales expected to grow midst single digits. .hat is the guidance fourth-quarter earnings per share misses estimates. about 25 on the earnings pressure, below the market extra of about -- below the market estimate of about 26. income, ites to net is a miss. they have missed on net income and earnings per share. market holds it at $2.90 billion.

and the guidance in terms of 2019, core operating income will grow mid to high single digits. a third of the revenue comes from the united states of america. the ceo has already cautioned on in the shift in u.s. drug pricing shakeup by the trump administration. they will try to raise prices by 14% this year. answers.has the he joins the bloomberg team at 8:00 a.m.. i have gone for the drugs, you have gone for hard engineering. nejra: this comes a few days after we were talking about the residents from the eu. first quarter industrial business profit coming in at two point zero 7 billion euros, a miss on the estimate of 2.1 4 billion euros -- on the estimate -- 2.14 billion euros

billion euros. first-quarter sales come in at 20.1 billion euros. the first quarter, power and gas adjusted down 50% to 119 million euros. on thes we are seeing first quarter profit is largely on the power and gas level. that is the explanation we are getting. the ceo facing hurdles in transforming his engineering company. i talked earlier about the plan to merge the rail unit, likely to be blocked by the eu. corporate profit falling after the growth in demand for factory software basically failing to make up for a protected slump in orders for large power plant turbines. it is that industrial business, the profit from that

industrial business dropping 6% to 2.1 billion euros, the focus here for the markets, manus. pontusto get back to the , there is a piece of breaking news on our con -- alcon. it still sees the spin up happening in the first half of this year. the reason why that is important is 10%, it carries $3 billion worth of debt. 's gross debt is an issue for novartis. it is expected to go in the first half of 2019. with that in mind, let me take you back to novartis and back to santander, because this is where you see the net income beat quite strongly, 2.7 billion. net interest income also racing away, 9.0 6 billion.

billion -- 9.06 billion. what they did was they built up there capital back at the end of the fourth quarter, 11.1%. the average of their peers was 14.1%. brazil is still critically important. anna bunton made a huge ,ecision, the biggest call someone say, in the history of banking in the past 10 years. they bedded he would get payouts. that has not happened. she decided not to go through with the hiring of him, and that was to income. .e have the u.s. rollcall nejra: the big focus coming from apple. we saw the s&p 500 drop ever so slightly.

we were struggling in direct and a little bit, and tech stocks were underperforming ahead of the apple earnings. as apple comes out in reports its first holiday quarter sales declined since 2001, the company is trying to tell investors not to focus on the iphone, look at our services business. for the moment, it seems that investors were buying that. we saw shares jump 5.5%, and that has been pushing nasdaq futures higher, up 6/10 of 1%. other tech stocks gaining in post rating as well. aoking to s&p futures, we saw weaker session yesterday, but overall struggling for direction on the broader s&p futures, which mirrors what we are seeing in the asian session. looking ahead to the fed, we are getting that press conference from jerome powell, a big thing for the markets, as well as the u.s.-china trade talks. the 10 year yield takes up one basis point. cable bouncing back from a drop 130.96.of 1% yesterday,

does that mean no deal is on the table now that theresa may will have to go back to brussels and try to renegotiate something while the u.k. said no more renegotiation, at least for now? the extent of the brexit deadline is looking much less likely. manus. manus: it's almost as if we are a step closer to a hard brexit. let me take you to some of the other global issues. iron ore is convulsing. singapore futures ratcheting higher. this goes back to the tragedy a tailings dam, potentially cutting the rapid by 40 million tons this year. if you think about it, this is going to put pressure on the market. goldman sachs saying they are overly concerned. futures are up 99%.

capital economics says it will be delivered at around $75 for the rest of the year. you are seeing pressure. gold is at an eight month high. you have a softer fed. etf's are at the highest since 2018. let me show you what is going on with the yuan. there is a great deal of optimism priced into the trade talks. mnuchin signaled there is a chance that everything is on the table. but there is the mnuchin camp versus the white house or camp -- lighthauser camp. the debate on the strength of the chinese economy is up for grabs. one person who can give us context, juliette saly in singapore. ore move and iron the yuan has been pivotal here in asia, although you are seeing chinese stocks weaker in late trading ahead of the talks in washington.

a very mixed picture in asia. australia, though, boosted along with korean stocks. the coffee up about 200 points thanks to sam kong and sk hynix -- thanks to samsung and sk hynix. it is a big day in terms of numbers for asia. in new zealand, could have four-year numbers lower-than-expected. shares down the most in two years, up by 13.5%. rio tinto, bhp all moving on the valet story which has moved the iron ore futures contract here in singapore. rio tinto jumping the most, one point in more than a decade, but rising the most since 2011 on the close. and watching the start up companies in japan, sampaio has just closed down in tokyo, up by 25%. its joint venture partner down by 18.5%. they essentially dragged down the startup index in japan as well. they had a brain trauma drug

that failed to get off the ground, really hurting the health care stocks in japan. nejra: thanks, juliette in singapore. let's go to first word news with debra mao in hong kong. debra: a key part of theresa may's brexit deal has been ripped up by parliament. the prime minister promises to go back to brussels to renegotiate the irish backstop proposal. this follows parliament voting against the amendment that will have given parliament the ability to delay the exit from the eu. sterling took a leg lower. appetite inlimited u.n.uan negotiations -- negotiations. but, in contrast to a fortnight

ago, this house has made it clear what it needs to move a withdrawal agreement. : u.s. consumer confidence still excite, but the underlying data suggests a recession is coming. tweeted that the most recessionary signal at the moment is the gap between current consumer sentiment and expectations, which is at its widest gap since march of 2001, the first month of the u.s. recession that year. earlier this month, he said consumer expectations were flashing yellow for recession. the u.s. is signaling a way to end the trade war with china. steven mnuchin says if china gets enough concessions during this week's talks, the administration may lift all tariffs. he is set to meet with top officials in washington and china today and tomorrow. the u.s. is said to escalate the trade war with fresh tariffs. mnuchin told foxbusiness "everything is on the table" regarding china. for more, we speak with

elizabeth warren. that conversation after 9:00 p.m. london time. hours a day,4 powered by more than 2700 journalists and analysts in more than 120 countries. manus: thank you very much. that convinced investors life beyond the iphone will not be so bad, sending shares higher after hours trading, as holiday results suggested the company's forecast has begun to stabilize after a positing -- punishing end to 2018. revenue from services and wearable devices grew from a year earlier. sales in china were down 26%. let's get to our senior technology media analyst, matthew. good to see you this morning. for me, the surprise was they lifted the lid on some of their margins, some of their wearables , some of the other parts of the

business that they are hoping will bolster the iphone story. >> that's right, because there were not any surprises in the numbers. i think people will be priests -- be pleased to see the margin split. the fact that you have gross margins over 60% on services will be something the bulls of the stock will latch onto. you would not believe they would be profitable a couple weeks ago , listening to the way tim cook talked about pushing not just the success of the iphone outside of china, but all of the other devices, pushing the i watches. it is a successful product with opportunity in the health market going forward. nejra: i wonder why investors are buying this. iphone revenue fell more than 9 billion in the first quarter from earlier. gains from the other products rose by a cumulative $5.1 billion. can apple really say that it is

everything but the iphone , when itt this stage probably needs to sell more handsets to get people to buy into all the services? let's face it, iphone is still more than 60% of revenue. it will be a long time before that is not what the company is all about. active iphones grew a little less than 100 million over the year. it is usually important, and that will be the focus for investors. yesterday's aftermarket move was a bit of a relief rally. china is going to be an important factor for them in the coming quarters. much, thank you very matthew breaking down the numbers for us. our bloomberg intelligence team always crunching the numbers for you. ,he sentiment in the markets michael sullivan.

good to see you. we have not seen you in a long time at this hour. relief?reathe a sigh of apple was not as much of a tragedy is -- as we were expecting. we are saved. michael: we are not quite saved. market valuet in the same market cap as about facebook or jpmorgan. a lot of damage has been done. the multiple has been vastly reduced. the income was slightly better than some of the whisper numbers last night, and the rhetoric from management in terms of what business does focus on has changed. what i find interesting is that apple -- we have seen other examples this week, with caterpillar, for example -- is going to have to address how it cells into the non-us market, and how it manages its supply change because of the trade war, because of this tectonic shift

between the u.s. and china. this is going to be a really profound challenge that multinational global companies are going to have to deal with. you have seenfar a mixed picture in terms of how much of a concern china is in the earnings. when i spoke to the fap ceo and the philips ceo, they were fairly upbeat on china, but a lot of companies are showing concern, caterpillar among them. and the look at apple tech sector, how much as an investor do you have to think about peak smartphone in terms of which part of the tech sector you want to invest in, or is it not about peak smart, but simply peak iphone? daniel: there are a couple of dynamics -- michael: there are a number of dynamics, especially the pricing of the iphone. you have cheaper models coming out of china, and you have the chinese consumer, who has quite a different purchasing outlook

in terms of what they will spend on data with the iphone compared to other pockets is -- compared to other packages. investor, you have to recognize apple is a big chunk of so many investment instruments, so many etf's. ,t's market cap is so big bigger than all the equities of the middle eastern, african region itself. it is a big swing factor in terms of portfolios. then you have the whole supply chain. it is not just where the stock is going to trade, but the whole portfolio dynamic as well. manus: it is that ripple affect. stay with us. we have a lot more to get through. coming up, it is fed day, and jay powell begins a new air of news conferences. investors will be on the lookout for any signs of potential dovishness. don't miss our special coverage

on the fed and the latest decision, followed by chairman powell's news conference today, all of that starting at 7:00 p.m. london time, 2:00 if you are in new york. ♪

this is "bloomberg daybreak: europe." manus: more breaking news, the results on although. you have fourth-quarter operating at 10.6 billion. beat.cally it is a when it comes to breaking it down in terms of demand, europe's truck market, 300,000

units. they see the full year in north america as 310 thousand units, and they are proposing a next her dividend of five swedish krona. the fourth quarter, truck order intake collapsed -- when i am saying it collapsed, it declined, by 14%. don't forget caterpillar had its issues. they said that big slowdown in china. this is volvo, ford quarter truck and a -- fourth quarter truck intake dropped by 15%. digesting thers earnings, trying to get that clearer picture on china and how concerned we should be about the slowdown and its impact on global earnings. -- msci pacifica next we look ahead to the fed. with that in mind, we are seeing a weaker dollar against the yuan , at its highest in july, and iron ore absolutely convulsed,

after the to turmoil, world's largest producer outlined plans to cut output after a deadly dam breach. go back,eresa may, renegotiated deal that you told us was completely un-ren egotiable. is a hard brexit back on the table? we will put that to our guest host shortly. nasdaq is up 6/10 of 1%. go on the apple. although we had the morning from credit suisse this morning that a pervasive stock and the supply chain is to be kept an eye on. got away with we it as far as the nasdaq is concerned. what should we be watching today? nejra: that could just be a relief rally for today for apple

. for today, at 1:00 p.m. we get german cpi. it would give us a readout of how the uk's biggest economy -- how the eu's biggest economy is playing out. at 7:00 p.m. london time, the fed's rate decision, followed by chairman jay powell's news conference half an hour later. michael o'sullivan from credit suisse is still with us. michael, lots of things to focus on, but i am going to hone in on the balance sheet. there is something interesting for rob a bank, think about where treasurers go. corporate supplies falling, treasury yields fall. you see that range of 240 to 280 for 10 year yields. would you agree? pattern between the fed continuing to tighten the balance sheet, etc., is potentially quite a difficult one.

if that's an area where to come to pass, it would take you close to recession simply because of the burden of debt on the u.s. a lot of them have issued debt to share buybacks instead of buying equipment, etc. two things about the fed, the first is that historically the day of the fed meeting accounts for a really big chunk of equity gains, if you look back at the last 20 years. -- chairman powell has the worst record recently of fed chairs in terms of the performance of the stock market during his tenure so far. that may make him a little more nervous. i think he is being quite slow to be centralized to market volatility. maybe people in the fed her taking an overly academic view of market volatility in the context of generally ok macro data.

i think for the time being, the fed will continue their relatively dovish communication. we see that there is relatively that theey can do, and economy will probably strengthen as we get into the second half of this year, and then we will be looking at the making of another rate hike. manus: michael, they do not want a rerun of what happened in december, do they? sheetthe fed's balance into the gdp library, but i also put in with the new york fed thinks is going to happen. in other words, it's like traveling and where we arrive. how important is it that they clarify their desire to poi -- their desired endpoint for this balance sheet? >> i am not sure that is important, because what is going on is the conviction of the fed and other central banks is being tested very early on in the qt process.

nejra: we will have to leave it there, michael o'sullivan from credit suisse stays with us. we will carry on the conversation shortly. ♪

our customers are holding on to their older iphones .han longer in the past when you pair this with macroeconomic factors, it resulted in iphone revenue down 15% from last year. the is pretty global, and they did not talk about it. that raises questions in my mind. >> i do not think nationalism more government pr guidance played a role here. i think it is a product cycle. iphone needs to ramp-up in addition. >> -- needs a ramp-up in

innovation. >> they are going to offset that growth with the growth and services. outnventory will not clear until the middle of this year. we expect more earnings to come in the next few months before we find a bottom. manus, what is interesting is you basically have executives trying to say, we are no longer all about the iphone. look at our wearables, armed services business. big things that were central to apple, iphone and china, both those are slowing. drop, andone sales first quarter holiday sales climb since 2001. it has lost a third of its market value since october. we get a relief rally, but is it going to continue, and what does it mean for poor leo's more broadly -- for portfolios more broadly?

manus: if you flick it across, look at louis vuitton. if you're not buying a thousand dollar iphone, you are buying a $5,000 code, but you are certainly buying cognac. cognacuitton bags and show that the chinese side of the business at the higher end is doing very well. we both hear -- we will hear more later. the boom cannot last forever. ,hina is buying very high-end but apple, back to your point, is it peak apple rather than peak smartphone? nejra: that's what i asked michael, our guests with us this hour. we have seen numbers come through from a lot of semi conductor stocks. the question markets are trying to digest more broadly is, how much is a slowdown in china figuring into these earnings?

we also have banking earnings. you were looking at santander at the top of the hour, manus. manus: we have indeed. santander beats on that income, beats on profits. what is going on in the emerging market? how is there u.k. business looking? i think this woman has the answer. she did not take andrea are tell on board. she has a conversation with francine lacqua later on. stay tuned for that. she made a strategic decision. he was due to join her as a ceo and that did not happen. -- a button -- and a vote in ana botin probably made one of the biggest banking decisions and years. nejra: joining us in merrill lynch -- is mirage shop, and here in london is dani burger.

are we starting to buy some support? >> we are finding some support. there are commonalities because out here, 19 companies are delivering numbers which are better than estimates. firstly, a quick roundup of what markets are doing at this point in time, line. flat for the sensex. -- lying very flat for the sensex. that indexes up about half a percent. my numbers coming out of giving crucial support to the equity markets. that markets have come off quite a bit in the last few weeks, and as a result of that, they are trading very close to levels from which they bounce back each time they reach those levels in the last four or five months. might look at some better days for the indian markets in the next few. back to you. .anus: thank you very much

dani, you are keeping an eye on volatility. volatility has been dropping. our last guest said it may offer an opportunity. drop innly that volatility, but it is important to put into context what realized volatility is doing. i am looking at the pound to show you that. volatility might be coming down, but historical volatility is still rising. this is the split between one option traders think the pound will look like in terms of one-month volatility and the real-life. it has stayed above the average since the start of this year, even after yesterday's may backing to look at the brexit deal again. 130.88.see the price at perhaps it is not moving much because may is going to have to go to brussels to get that the use backing, which has said it will not just to get the eu's

backing. the other important move we are watching today is iron ore. the largest producer of the commodity says visited guest said it is going to cut output after a devastating dam breach -- said it is going to cut output after a devastating dam breach. check out what happened after the news was announced. the price surges. i also have the standard deviation band, and this is a beyond three standard deviation move. their competitors also moving higher on the news. manus: thank you very much. there withrg team the latest on volatility in the pound. let's get deeper into the brexit weeds. a series of votes were triggered yesterday evening at the house of commons. they had a mission to change the irish backstop.

afterile, the pound fell lawmakers rejected a plan to delay brexit if no deal is secured. the eu holds firm with president donald tusk reiterating the agreement. the backstop is not open for negotiation. that is the position as of now. it could all change. anna edwards knows a thing or two about that. good morning. what is the message from last night's series of votes? rip it up and started again. i am not singing a song, but you might. anna: things did not go that badly for theresa may last night . she won most of the votes she intended to yesterday. she fought off challenges in the shape of indicative votes and those sort of things. in a sense, she has a clear message to take back to brussels.

crucially, we do understand that the amendment could come back to haunt her. we know that the 14th of february, we could still be here and doing it once again. expressedd see yesterday in parliament was that in the commons there is no majority for no deal. that was one of the fence she lost, and that could come back with a vengeance valentine's day. nejra: that prospect of no deal wearing its head again. good to see you. why does the u.k. think it can change its arrangement when the eu is saying it cannot? anna: we will hear more from what the eu is saying in a limitedfrom maria, but enthusiasm is the way theresa may frames it.

limited enthusiasm, and her words, to open up the withdrawal agreement, and she said it will not be easy. they are open to some extensions of brexit data. the message is clear from brussels. the words looking at being used in westminster, you could suggest that she did not say she wanted to replace the backstop. she said talking about the legally binding changed of the withdrawal agreement, could that be some kind of code? could it go alongside the withdrawal agreement? that would not necessarily be enough to bring the hard-line of her party on board. there is a lot to do. whether she can do this in two weeks is an incredible ask, but she believes she has something to go back to brussels to ask for. manus: it is interesting that jeremy corbyn has apparently agreed to meet with theresa may for cross party talks. maria, good morning to you. any signs that the eu -- anna

just sidelined the possible nuances. the response from europe thus far, any probability at this stage of renegotiating the current deal? gloria: i would say there is no appetite to do this in brussels. the reaction was almost immediate to last night's vote. the european union thinks this is a year with two years in the that the prime minister just made two weeks ago and put to a vote and said it was the best deal. when it comes to the irish backstop, there is little wiggle room, because the eu will tell you a promise to fix it is not good enough. getting around that does not exist in 2019. maybe a political declaration, maybe extending article 50, that could do, but in terms of concessions that could appeal to brexiteers, there is no appetite

for that in brussels for the time being. they do not think they could put anything on the table that would satisfy them. manus: maria, thank you very much. maria tadeo in brussels, anna edwards in westminster. we will track the story. michael, i have written down here, this is either mac million or delusional -- megyn kelly -- machivellian or delusional. how do you describe it? separate theo theater of politics from where the capital is shaping up. i am in dublin tomorrow. there is no appetite there to get in on the backstop. the rhetoric there around a no deal brexit is stepping up. but i think that is unlikely. i think in sort of the chaotic way of which politics tends to

be done in europe and now in the u.k., we are beginning to be funneled towards a solution. i think it ultimately will still be a soft brexit solution. there will be any give him a backstop, but you may, as we get to mid-february, have a joint statement from the some other governments, saying if there is maybe a speedy and constructive process around future relations, maybe the backstop will be limited, and that is a logical concession. i think formally, it will be no concession. if we get to mid-february and , thendeal has not passed parliament itself takes over, and i think that would produce a softer brexit type of settlement , especially now that the labor leader is willing to talk. the role of labour here is

underestimated. trajectoryerms of for the pound, are we in a holding pattern with a lot of volatility through valentine's day, and then beyond that there is more upside, if your thesis spares out? >> there should be. a positive on the pound right now against the dollar. i think the pound has had a good rally in the last couple of weeks. i think the fact that we do not have an immediate sanctioning in parliament of the next engine of article 50 slightly compresses the progress and heightens the risk that there is an accident in the progress. no surprise to see the pound step back a little bit, but the pound is still underwrote. my sense is that currency traders are looking to switch out of the dollar to all the major currencies. there is quite a bit of potential for the pound if we go down this path. it is interesting that

you and i focused in on jeremy corbyn now being prepared to have talks, and as anna said, there was a symbolic nonbinding vote that proposed leaving without a deal. there is no appetite in that house for no deal. there are two battered and bruised areas. one of them is domestic stocks in the u.k.. battered would be a word, down at 2016 levels. if your thesis is correct, is it too early, or should it be on my radar to take some u.k. domestic risk in the portfolio? >> it should be on the radar. one of the things i can see talking to investors in asia and around the world is very few people are actually long the u.k. and long u.k. assets. we see that across a range of assets, be it the proper bond

market, even the property market. there is quite a bit of positioning to work into. i think it is also contingent on if you like the brexit handbrake being released on the economy, and growth, confidence, and sentiment getting to pick up as well. nejra: michael o'sullivan stays with us. , a digitalng news services company paying out 23.4% of worldwide share capital to holders. we have some numbers through as well. for your operating margin coming 10.3 percent versus the goal at the low end of the range. the cfo seeing a macro slowdown with marginal impact on the company. a few lines to get our heads around. the cfo is speaking now in a call with reporters. manus: coming up, chinese consumers may not be snapping up

, but they are snapping up a bit of -- appetite for luxury goods showing no signs of dying. we hear exclusively from the lg mh ceo himself.

you can see a mixed picture for asian equities. futures pointing higher, particularly on the nasdaq. rally after hours, the company trying to tell investors to focus on everything but the drop in iphone sales. we saw a relief rally. trade talks and the fed also in focus, as well as earnings out of europe. manus: what will governor powell have to say about this?

let's talk about an exclusive interview we have on china's economy. it might be slowing, but earnings from lvmh are holding up. lvmh has christian dior, louis vuitton in their umbrella. organic growth went to 17%. bloombergnault told why the company is seeing growth in china. >> the last quarter was growing faster in china for our products. the main reason is the desirability of our products, whether it is louis vuitton or christian dior. our products, louis vuitton, for bytance, have been created two fantastic designers. products are arriving

taste of there the customer is more and more sophisticated as they hit big success. before the end of the year, before christmas. the reason is the desirability of the products. >> are you seeing chinese consumers spending more when they are touring as tourists, or more in mainland china? there has been a trend of spending more and home and west when they are on holiday. the reason why we have different designs from city to city, and why we have a very to be in toucham with the consumers in china.

i remember the first time i was in china, in 1991, opened the first louis vuitton shop there. there were no cars in the streets and no buildings in beijing. it's incredible. that's the speed at which this country has evolved. china, we were selling the louis vuitton products at a small shop in a hotel, and building from there. now in china it is a number one brand. >> we saw 2018 sales, but the lunar new year in china is this day next week. are you seeing strong sales in january leading up to this massive consumer period for chinese consumers to buy? >> it is a trend that continues in january, yes. i want to ask what the health

of the consumer in l.a. and new york, not just a shame. -- not just beijing. u.s. is your second largest market. if there is a slowdown in china, can the u.s. make up for that? >> i think the economy in the u.s. is, as you know, very growing. , we had thats trend in 2018 continue at the beginning of this year for louis , for burberry, and for many of our brands. 2018 was a very good year for us. nejra: that was our exclusive with the lvmh ceo bernard arnault. i am loving all these earnings aboutiews as we hear

global growth and his impact on corporate. credit suisse, you think, should be overweight equities in 2019. is that based on a believe that demand will hold up from china, or is it more focused on the fact that the u.s. economy will drive global markets? michael: we started the year overweight equities, and that was based on the level of dislocation of the markets we saw in november and december, and the fact that many people feared the market volatility pretense a recession. we have a slightly less bleak view on the world economy. there is potential for china to recover the same. it was more of a mark-ish view. we have a very nice rally. -- we are at a point where positioning among hedge funds, and a lot of them are slightly short the market. you will, for the next week or so, see more money come into the

markets, and then we may get a pause and people begin to the risk. .- de-risk many of the emerging markets, brazil, turkey, have really well. -- have performed really well. manus: in terms of those developed markets, i am thinking about dividends. vojust realized, vol making a special dividend. the dividend from louis vuitton up by 20%. is dividend going to be an important facet as you look at 2019 in developed markets? michael: i think it is. if you look at a range of -- if you look at value, look at banks in europe, look at the european autos, you get some exaggerated dividends. it raises a question as to whether some of these are sustainable. we think in many cases, they are. in the context of higher rates in the states, for many

investors it is quite a compelling argument. you do at the same time need catalysts. the one that is important for me as we move beyond this tariff -- in this much bigger picture, breakdown relations between the u.s. and china. we may have news on that today or tomorrow. we are also thinking about the fact whether some investors might be moving more into small caps. they gave into a rally in 2015. will that be the same this time? michael, great to have you with us. coming up on bloomberg television, we speak to the ceo.a test -- are a remember, if you

bloomberg user, you can interact with everything narrow and i do. you can catch us on bloomberg tv. this is bloomberg. ♪

manus: good morning from dubai. i'm manus cranny. from: i'm nejra cehic live the city of london. these are today's top stories. manus: tech relief rally. apple results and forecasts suggest stabilization and life e.on iphone. -- beyond iphone. the fed mess, investors await clarity from jay powell. whippednetary messages financial markets. collision course. aftera may seeks talks parliament rips apart her divorce agreement. the eu says the deal is not open for renegotiation.

we are live to westminster and brussels. nejra: just about 7:00 a.m. on london. let me get you to some headlines from nasdaq. oslo at offer to buy 152 norwegian krone a share. we were waiting for an update on this. basically they unanimously decided to recommend holders to accept the offer. mastec and oslo have entered -- nasdaq and oslo bors have entered into a transaction pact. krone perwegian share. we are into earnings season. we have a number of numbers out

today. also from siemens, first quarter industrial business coming in at a miss. in the u.s. session yesterday, we saw weakness by the end of the session, but in the futures, we have seen the bump up in the nasdaq because of apple gaining in after-hours trading. they had a drop in iphone sales, but what they are highlighting is look beyond that, look at the other services. business is going to stabilize and that is where we are ok, even though we have been seeing the softness in china. are we going to see any kind of feedthrough into europe? it is a mixed fixture -- picture on the futures. it is the u.s.-china trade tensions in focus this week. as well as the fed. ftse futures higher by 0.4%. did the weaker sterling yesterday have anything to do with that? the pound has bounced back today even though the process this prospect of the no deal brexit is coming to the -- even though

the process -- prospect of the new deal brexit is coming to the fore. manus? manus: the only thing the bond markets are interested in is what jay powell has to say. let's look at u.s. treasury futures, german boones -- bonds, and italian. you will hear about twin deficits. you will hear them talk about the size of the refunding for the united states of america. do you want to put your money in inflation tips? you want to be in pure duration? dipped government bonds by seven basis points. thaties get their bid from nasdaq -- not that nasdaq, from that apple story, whether we just sort of almost got away from it. let's get your singapore roundup on the asian markets.

>> yes, then very mixed. chinese markets fall into the close. by 0.8%. trade talks in washington. we have seen south korea close higher by around 1%. japan was weaker today on those overall global worries. australia's market supported by that spike you have seen in iron ore. the afx up by 0.2%. flat in india. let's have a look at currency markets. it has been all about the chinese yuan, the best-performing asian currency, rising by 0.3% against the dollar. saying thisng piece is due in part to the trade optimism and the run on dollar -- chinese renminbi, i should say, ahead of the new year. having a look at the indian rupee, the weakest performing

asian currency two days out from the indian budget. singapore iron ore very much in play. it is likely to move a lot of the miners in the european session as well. manus: yes, it is interesting what goldman sachs had to say about that huge discombobulated and in the ore market. in theombobulation ore market. this is on the energy side. this is from metco energy. the offer is in cash. 10% premium to the closing price. medco been recommended, energy reports recommended cash ophir.or phir --

let's get to new york with your first word headlines. good day. >> thanks. technology stocks rallied in after markets as investors took solace in apple forecast that sales won't get worse. the tech giant is losing ground in china. 27% in the holiday quarter. this means almost $5 billion of lost revenue. users are holding on to their older iphones a bit longer. when you pair this with the macro factors, particularly in emerging markets, it resulted in iphone revenue that was down 15% from last year. results accounted for significantly more than our entire year-over-year revenue decline. continuesexit chaos as a key part of theresa may's brexit deal has been ripped up by parliament. the prime minister has promised

to head back to brussels to renegotiate the contentious irish backstop proposal. this follows parliament voting against the amendment that would have given it the ability to delay the exit from the eu. european leaders have said the deal is not up for renegotiation. sterling took a leg lower. north korea is unlikely to give up its nuclear weapons. that is according to a top u.s. intelligence chief. donald trump has previously expressed confidence he can persuade kim jong-un to disarm. the director of national intelligence seemed to throw water on that possibility, saying they continue to see activities that are inconsistent with full denuclearization. >> we currently assess that north korea will seek to retain its wmd capabilities and is unlikely to completely give up its nuclear weapons and production capabilities because it's leaders ultimately view nuclear weapons as critical to regime survival. ritika: venezuela's president is

ready to enter talks with the opposition. that's according to a russian state run news service. this follows mounting pressure on the president to resign. he has banned the opposition leader from leading the country and the regime has drowned out forces seeking to topple it, using rolling internet blackouts and gag orders. day onnews 24 hours per air and at tictoc on twitter powered by more than 2700 /ournalists and analysts nejra: thank you so much. equities in asia a little mixed as the earnings season is rolling on. investors are waiting the desk awaiting the fed policy meeting -- awaiting the fed policy meeting. climbing as trade talks get underway in washington. joining us now is the head of

investing strategy at rbc. a big thing to fill up that picture overnight as well is the earnings we got from apple. iphone revenue still falling. still weakness in china. they are trying to get investors to focus on the fact that we are not all about the iphone, it is a whole services business. overnight, investors seemed to buy it. was it just a relief rally? if we look at the earnings picture, we have the route in the fourth quarter that left a cushion for disappointment with these earnings coming out now. that said, companies beating estimates at the lowest rates since early 2017. . the earnings we have seen so far, does that give enough reason to buy into equities right now in the u.s.? >> last year was a particularly strong year. is thatare noticing companies are beating on average by a bit less than they did last

year. now 5%s expectations are of the year. robustseeing a less economy. a slightly softer u.s. economy. forecast for gdp in the u.s. has come down to 2.25%. still some growth. that is achievable given market valuations. we think it is appropriate to maintain a market wait on u.s. equities. manus: a very good morning to you. the great debate is this. we are just coming out of shutdown. this was tweeted last night. the most recessionary signal at present is the consumer's future expectations relative to the current expectations. it is the worst reading he has ever seen. so, would you be as worried as

jeffrey gundlach in terms of what he is seeing? are you on recession watch? frederique: we are clearly -- we are very late in the cycle and we monitor our recessionary indicators on a weekly basis. they are very important. for us, the one indicator to keep looking at is the yield curve and while we are close to inversion, we are not quite there yet. we have to keep in mind that there was a lag between inversion and actual recession. so, we are still relatively comfortable, but we have knowledge that we are late in the cycle. when economies are at full capacity, we can slip into recession quite easily. nejra: in that case, what do you need to see to move overweight in u.s. equities versus market weight? you have u.s. china trade tensions. you have a potential slowdown in china.

we have talked about the u.s. economy and your expectations. it seems like there is quite a high bar for equities to move to that overweight. frederique: there is a high bar. happy to be market weight. the next move will probably be to take some money off the table. manus: can we just slip across into europe? figures fromrowth france and they were not as bad as everybody thought this morning. germany has been pummeled. italy is in recession mode. france got away with it, so to speak. what is your view on europe and european growth? is it just inextricably stuck to china or how do you look at the european portfolio? frederique: the relationship with china with trade is very important. we have seen in europe a number of runoffs, a string of runoffs

int year, the economy france, in germany as much weaker than what we would have expected last year. the numbers and france were weaker. if we look at what happened with the economic activity in the first month of the year, it would suggest that the economy is going to remain weak over the next month. having said that, we have to remember that looking at the global background, it is weaker, but there is still some growth europe, weem and, in are at a low point in terms of unemployment and we would expect the cycle to reassert itself later in the year. nejra: interesting. you said when we were talking about u.s. equities that your next move would be to possibly take money off the table. my question becomes, where do you put that money to work? treasuries? you said the yield is going to be between 2.5% and 2.8%.

or is it later in the year that you are thinking about putting money to work in europe, given what you have said? frederique: we would probably look at fixed income allocation. nejra: where exactly? frederique: probably u.s., u.s. investment grade. nejra: that would be credit? frederique: credit is very important to stay in quality credit. nejra: the head of investment strategy at rbc wealth management stays with us. don't miss our special coverage of the fed's latest rate decision and chairman powell's news conference today starting 7:00 p.m. london time live on bloomberg tv and radio. it is all about the fed. manus: yes it is all about the fed. this is a dramatic move. the stock plunge is the most in nearly 20 years. coming out with a profit warning this morning.

you are seeing a dizzying drop in this stock. it fell by the biggest amount in nearly 19 years. the profit warn. they are a south african-based grocer. as we keep an eye on that story as it develops, we will bring you more on that. ok. that is the state of play on shoprite. we have another conversation to have. what does he have to say about the airline industry? we just had those numbers. join us for that exclusive conversation. that is coming up. this is bloomberg. ♪ ♪

nejra: this is "bloomberg daybreak: europe." i'm nejra cehic in london. manus: i'm manus cranny in dubai. let's give a quick shot of the markets. futures are up and running. equities breathe a sigh of relief. apple battered and bruised in china, but they are selling more wristwatches and health monitoring equipment. you want at a six-month high. will they have a good trade deal? you have a little bit of move on iron ore. you are seeing real concerns. goldman sachs says stop getting over-awed by iron ore. nejra: cable bouncing back after the plunge yesterday. a little bit of a relief rally. theresa may saying she wants to renegotiate with the eu. they said they won't renegotiate. does that mean the prospect of no deal becomes a little bit higher?

the market seems to be positioning more for a delay to brexit. that is dynamic to think about. ftse futures on the front foot. euro stocks futures were flat. the nasdaq futures seeming to be reacting to those apple numbers. how to convince investors that it is more than the iphone or was that just a relief rally? perhaps also due to low expectations going into that. let's get a bloomberg business flash. ritika: thanks. societe generale is said to be planning job cuts in a move to drive down cost after he trading slump in the fourth quarter. sources said the french lender is seeking to trim expenses by 100 million euros annually and potentially by a much higher amount. the cuts are said to be focused on its global banking and investor solutions unit. the plan may be made public as soon as next week. ebay has reached out to activist

investors. the ceo announced the first-ever dividend, but rejected the idea of sending ticket marketplace step up. elliott management sent a letter to ebay last week outlining steps it needed to take to boost the company value, including potentially selling part of the company. a positive story for chipmakers. amd a very rosy outlook for 2019. it said revenue would rise despite rivals posting disappointing results and downgrading outlooks. that is your bloomberg business flash. manus: thank you. air, eastern europe's biggest discount airline, is maintaining its full-year net income guidance. -- asit operates in a couple year.

we have a conversation with the ceo of wizz air jozsef varadi. you are sticking to the guidance. what i want to know from you is just how confident you are in terms of pricing. are we going to see a tough year in terms of the prices in your industry? which might put pressure on your guidance? jozsef: we are very confident in our guidance. we are seeing the fundamentals in the business. clearly, this year has been very turbulent. lots of macro economic issues. hired -- high fuel price. we have pretty good visibility for the remainder of the financial year. we will be closing at the end of march. we are confident. the only uncertainty we have is where we are going to be landing inside that range and that depends on a number of factors, like hell brexit is going to play out. nejra: let's get your visibility on brexit than. great to have you here. you have established two major

western european bases in london and austria. what is your view of the u.k. market as we head toward this brexit deadline? are you prepared for all eventualities, even if we get this no deal? jozsef: since the brexit vote two years ago, we have been growing our u.k. business by about 25%-30%. we remain very upbeat about u.k. demand. uncertainties around brexit may create issues. it is more the uncertainties than brexit itself. i think we are ready for any scenario how brexit would play out. we have a u.k. airline come european airline. we have been taking the actions needed. we remain very confident. manus: let's pursue that one more step because we have had video warnings from mr. anders at airbus. you are in a different position

and a different business. what i want to know from you as a ceo, would it change your view of how much more capital you would put to play in the u.k.? you would reallocate elsewhere? what would your view be? jozsef: our view is simple. we would look at the return on capital and we would make capital allocations on that basis, for so long as the u.k. remains a robust consumer market. we will continue to grow the business here. nejra: i want to ask about norwegian air. that has been a big story this week and the fact that they have said they will slow growth and focus on profitability. does that create opportunity for you? jozsef: if you look at the european airline industry, it is fair to say the industry has yet to be -- [indiscernible] there have been a number of us towardhing consolidation, but i think there are more to come. underperforming airlines -- [indiscernible] i think they will need to start acting together to make sure

that they address financial issues. i think it is going to be a more rational market creating opportunities for the better performing airlines such as wizz air. manus: do you think we are going a see more -- we have had dozen smaller airline collapse in the second half of last year -- do you think we going to get more names in the bin as it were? jozsef: absolutely. manus: who is most at risk> who is most at risk? jozsef: it is a long list. if you look at the industry in europe, you probably have five or six airlines performing properly based on proper financial standards. i think all the others are at risk. [indiscernible] we have a bunch of national carriers that are all ailing and failing. some are surviving because of government support, but not because of the business they are in. nejra: you mentioned the challenges, fuel prices. your view on the oil price and

how you are hedging for it? jozsef: if i had a view, i would be in a different business. i don't know. we have a business model that is formidable for any sort of circumstances. so long as you are the cost producer, you are fine with low fuel price or high fuel price. in a low fuel price environment, we grow more. we take more market share in a high fuel price. we don't really care about the fuel price. nejra: jozsef varadi, ceo and cofounder of wizz air, great to join us this morning. jozsef: thank you. manus: yes. you remind me of a very young michael o'leary with ambitions for all of the low-cost airlines, as more airlines go bust and only five or six airlines are performing properly. that is it for "daybreak europe." european market open is up next. traveling to work,

wherever you go, tune in to bloomberg on your mobile device. lots of earnings to digest across our platforms. this is bloomberg. ♪

>> good morning, welcome to "bloomberg markets: european open." i'm anna edwards alongside matt miller. he is over in germany. >>, good morning. today, the markets say don't mention hauwai. markets are mixed. tech and the miners set to outperform. cash trade is set to outperform.