nejra: good morning, from bloomberg headquarters in london. manus: i am manus cranny in dubai. these are today's top stories. leads --y powell leaves expectations for a rate hike hanging and signals flex ability on the down sheet. mark to ask and optimism on trade, talks between beijing and washington for a second day. can a deal be reached? a socialrs stick with network through a series of privacy scandals. the company is determined to earn back trust.

manus: a dividend of 8.7. if you are a rauch's shoot -- roush shareholder. bio-similarson in to the blockbusters they have under pressure. let's get you through the rest of the numbers. you have full-year net profit of 10.7 8 billion in terms of the numbers for the full year. the core operating profit 21.5, that is below estimate. this is what we want to give an eye on, 56.85, the market penciled in 64.48.

a beat for them. they have challenges on their breast cancer drug along with the immune -- autoimmune. are earnings-per-share 18.1 beat on the estimate of 17.8. significant beat on core earnings-per-share and the guidance is to grow broadly in line. you will have a look at swatch. good morning. full-year operating profit at 1.1 5 billion swiss francs. the estimate 1.2 9 billion swiss francs, looking at that hot headline on the bloomberg, that -- sing business slowed in december. people were not buying for christmas. full-year sales of 5.7% missing the estimate of a gain of a .1%.

dividend per share coming in at eight swiss francs, the estimate was 8.4. that is a miss on the four-year evident per share. thancomes in weaker expected nations, 13.6%. the estimate was 14.9. it does see 2019 healthy growth. that is the silver lining we can look at in these lines coming out. if i look at the net sales, a .4 8 billion swiss francs, that is coming in weaker than the estimate of 8.65. it is the full-year profit number you want to focus on, that is a mess. looking at nokia. taking a look going into this, analysts looking for some turnaround progress, also a boost from 5g especially after they well-received update a few days ago. nokia, let's have a look. fourth-quarter adjusted

operating profit at 1.1 2 billion euros. the estimate is 1.7. that is a beat on the fourth-quarter adjusted operating profit. the fourth quarter eps coming in thing in line at 13 euros and 2019 adjusted operating margin nine to 12%. that is for 2019. for 2020 it sees that adjusted operating margin at 12 to 16%. nokia technologies margin at 6%. manus: this is the bank and brokerage in japan, coming in at 90 ¥.3 billion. it looks like they are taking a one-time loss, that has gone red. it one-time loss of ¥81.4 billion.

in need to drilling a little bit more in terms of what the write-down is. the big issue for nomar out, they are going through restructuring. let me give you some depth on the net revenue. the revenue for nine months through december 31 and decreased by 27% from the same coming year ago. not just on expenses, they increased under 5%. in terms of the goodwill, a 1.4 alien attributed to the of anale as a result assessment of goodwill. this is a technical point but there is a one-off item that is skewing the numbers and it is due to wholesale. that is where the attribution comes through in the quarterly numbers. we have nor -- more as we go. -- i have the oil

story. the best month, we will flourish the bests week with month since 2015. the russians are cutting oil output and saudi arabia exporting the lowest amount since 2017. is have the yuan, the number not as bad as everyone expected. exports were better, the numbers were not too bad but i want to take to -- take you to one of your favorite charts. the curve, the steepeners were the play. any athleticat curbs, they all steepened because of that pivot to patients and benevolence on the balance sheet and those two areas of benevolence by jay powell suggests the fed is on major pause mode, my last guest from bank of singapore was surprised by the amount of

dovishness in his tone. get up early and get you top of the show. the question becomes with the fed, some people are asking whether the next step would be and and deposit in the balance sheet runoff or a rate hike. you have sound -- shown the equity market and we saw the s&p

nejra: joining us now, managing 33.5 billion pounds in asset. good to have you with us. the main question in my mind is in terms of the next steps from the fed even what we heard yesterday, are we more likely to see a halt and the balance sheet runoff rather than a rate hike? guest: we will see a slowdown, this is a change from the last time we spoke about caution. brexit as well as crosswinds. also a clear indication of markets. if they tighten, they might start loosening. and there is a possibility they might look at the market and see what happens if they think the world economy is weaker.

manus: good morning. have listen toy jay powell, let's translate it into trade. emerging markets are probably one of the most lit markets of 2019. with this fed in this mode, do you engage more with em equity then debt? guest: i think with the fed in this mode and given the -- they had a massive [indiscernible] there is, it is true that butese exports and imports that does not change the fact that we have strong growth and despite trade tensions there is a huge amount of growth within emerging markets as a whole and given the correction we saw

there is value there. opposition is to increase emerging markets because opportunity is there. nejra: it is hard to argue against the fact that the fed has moved to the tune of the markets. if this move and what we are hearing signaled can encourage excessive risk-taking. guest: the market is relieved the fed is listening. it is taking into account other aspects. the data out of europe is weaker. that -- they are beginning to realize the data is weaker. trade negotiations are having a problem and they are taking a cautious attitude which will be welcome. we will have last -- one last sir john earnings and we saw facebook how -- with facebook that can affect the way that stock prices behave. manus: stay with us, we have

much more to get from you. facebook outpaces the estimates. privacyries of scandals. sheryl sandberg says the company is determined to win back trust. that interview next. nejra: when you're traveling to work, tune into bloomberg on digital radio dav in the london area. this is bloomberg. ♪

manus: this is bloomberg daybreak europe. nejra: our european -- in art european headquarters in london. the company reported fourth-quarter sales of $16.91 billion beating the highest estimates. this sparked a surge in extended trading of 11%. concerns still linger. emily chang spoke to the coo

sheryl sandberg about its collection of user data. emily: i want to be clear what calleds, this was an app the facebook research app. there is nothing sacred about it. participants knew they were in and a great majority of people were adults, not teens and people were compensated for being part of market research. emily: even apple has punished you. was violating their terms and that is something we never want to do and we are working with them on employee certificates. it has been a productive day where people are continuing to do good work. emily: this is a sort of not again moment for a lot of people. what do you have to say in terms of why should people trust you? why should people trust facebook cheryl: what matters is people know how their information is being used and in this case, the

people using the research app in the study new they were in it and knew how their information was being used that you are right, it has been a challenging time for facebook and we need to earn back people's trust with the steps we take for it one of the things you saw in our quarter is how much we are investing in safety and security and you know this, if you want to look at what a company cares about look at where it spends its money. we have changed our profitability because we want to take the hard steps to protect people on the platform and ucs doing that. you see what happens with the elections, the u.s. midterms and around the world. decreasing the distribution of fake news, these are hard and ongoing problems but we are determined to do the hard work and keep doing it. emily: the ftc has been investigating privacy practices a record preparing for fine. what are you preparing for? cheryl: we are working with the ftc and regulators. what we are preparing for us to

continue to make the investments in safety and security. mark said it was a top priority on our earnings call and we have a lot of work to do. progresse making good in a lot of areas and we will continue to work hard. [inaudible]nuing to products. people are continuing to use facebook around the world and we are making important investments. one of the things i am proud of is we are making massive investments in capex and renewable energy. the next year, we will be 100% renewable and all of our operations including our data centers. we will continue to make investments across the board. that was the facebook coo speaking to bloomberg's emily chang. let's bring in matthew block some. to you, first of all, why isn't

facebook suffering more adverse effect? one could say from all the privacy scandals, they have more users, more advertising, it seems the users do not care at this juncture. and: i think that is right there are two or three things you can point to tell the explain. the first is where the ad revenues come from. 90% is from mobile and that speaks to the addiction we have with our phones. and the fact that facebook does have some great products that people want to use. focus, investors ask a much instagram is making. the sense that instagram is becoming popular and can drive that engagement and revenue. lesstisers have become long-term. the online platform has helped that transactional spend they want to generate.

those are the three main things that are driving us. priorities andut any risk on the horizon, particularly as they focus on meeting the demands of regulators? fortmatt: 2019 is about inward -- focus they said on the call. the issues around privacy and security. there is a lot more work to be done. this second one on introducing new products and services and pushing that through, the next wave of how people engage with the platforms. the third is to execute better on their business and the fourth to tell the story of what connectivity can do. that kind of purposeful sense that mark zuckerberg likes to have. can i bring it to you, listening to the stickiness of facebook and i put the things

together, we are bang in the middle of this reporting season. we have had apple and facebook. in the shaken at all belief in the feng trade because we are recovering, are you part sters? recovering faang a fan. was never the key point about facebook is users do not have an alternative product to go to so they shifted from facebook to instagram. the facebook -- talk about facebook going into more content, that is like facebook getting rid of journalists, and attempt to reduce news through a digital platform. what they are saying is the who are of young people constantly on their phones, the majority of people concentrate on having a mobile device. they stopped using facebook but shifted to using instagram.

there is no alternative. earlier today nokia reported. i remember at the beginning when there was the alternative to nokia. is for some time to come. facebook dominates, the young people have no alternative other than facebook and they want to be in the media and advertisers know this. they make the noises about you have to be better but they do not have an alternative. nejra: i have another question for you but we will have to leave it for here -- here for now. stays with us through our programming. we speak to the cfo of royal dutch shell. that is at 7:00 a.m. london time. when you are traveling to work tune into bloomberg on your dav digital device in london.

this is bloomberg. ♪

♪ asian equities, a 1.5% gain in the s&p 500 yesterday, giving a lift to equities. patience and flexibility on the balance sheet. month headed for its best since 2018. we will be speaking exclusively to the ceo later. there are three things. investors want the dividends in buybacks, they want the debt to be cut, and they want the production growth and cap acts. what will they see here and will

it be satisfactory? manus: if you think they were flushed up to the gills with cash, then they had that stunning collapse in prices in the quarter. the question now, are you overpricing the cash allocation? what is shell going to say about the buyback? what are they going to say about cap acts -- capex? have stuck to a in january. nejra: you point exactly to the point about this free cash flow, which is what investors will be looking for as well. there has been a debate with shell whether there was a risk of under investing, not focusing enough on the growing reserves. that commitment to the buyback,

is that sustainable at $65 oil, or 62 as we are trading today. coming up, we speak to the cfo and thatdutch shell, will be after you break the numbers at 7:00 a.m. london time. >> the federal reserve has signaled it is done raising rates at least for a while. a bias toward tightening with a -- with a much more dovish stance. they say there have been conflicting signals on the global outlook. >> we are facing a contradictory picture, a generally strong economic performance alongside -- common sense management suggests patiently awaiting

greater clarity, an approach that has served policymakers well in the past. >> more gloomy news from italy. the prime minister says the economy probably shrank in the fourth quarter. a recession could hinder the populace government's spending plans. it came a day before of the announcement. preliminary data will be published today at 10:00 a.m. london time. the u.k. prime minister is getting ready to head back to brussels but the eu isn't planning on offering any concessions. they said they need to believe the u.k. is all but out of options before they accept a deal. preemptive approval to move large part of its business from britain to a dublin-based subsidiary. it would transfer 190 billion euros in assets.

the assets have not moved yet has citedcfarland ongoing brexit uncertainty as a significant concern. global news 24 hours a day on air and at tictoc on twitter. manus: thank you very much. let's get you up to speed with the rest of the markets around the world. the team is standing by. into the end of the month, let's take it to you first of all. big day tomorrow in terms of the budget. what about the markets? >> it is fantastic if i can put it that way. i believed that ahead of the markets, the budgets would be circumspect.

all are doing it in the session today. i just want to draw particular attention. had gained a little bit but now below 71. i just want to draw your attention to one key chart. the banking stocks are the ones which are giving strong support. to factorspart due including things that are doing really well. banking index is finding support. the crucial 200 day average. optionsres and expiration date, looking at that very closely. for tomorrow's session, the budget remains center stage. >> if you are an indian market watcher -- you are an indian market watcher and you are the best on this show at watching

those for us. what kind of turbo boost? fedtastic, all great ways to describe what's going on. the index headed for its best month since march 2016. that was all after we got those is uppmi's, but the fed nearly 1.4%. this is the fourth day so far this year that we have seen gains of over 1%. the dollar now trading at its lowest. we also get some jobs data in the u.s. tomorrow. shows a weaker level of hiring, that also might feed into the narrative. nasdaq futures gaining yesterday after the fed's decision, but we can't forget the indio syncretic

stories. i want to take you into my --minal to show you what emerging markets past their 200 day moving average. rsi, now in overbought territory at 73. thank you so much both for joining us today. let's turn to trade negotiations between the u.s. and china, set to resume today. high-level talks began in washington yesterday and, so far, there is little in -- little indication that beijing will bend to u.s. demands. lift to markets from the fed yesterday. the two big things really where the fed and the u.s.-china trade talks. will we get the same kind of boost today? >> they are linked.

they saw, was weak, it is affecting world trade. will we get a major breakthrough out of the trade talks? it seems unlikely. they want to come to some kind of deal. the u.s. is being quite aggressive in its tactics. the chinese companies, the whole thing about the ipo's. i think this is it, for market euphoria. that youte significant mentioned that the u.s. economy is in a good place. a month ago, he you said a strong place. slightly less than strong. i think it remains in reasonable territory. the rest of the world, technical recession, slowdown in europe, slow down in china. it might be a hard brexit.

the rest of the world looks shaky. i think we have gone as far as we can on macro news. let's translate some of that to the yuan. part of that is the dollar. that is a given, the softness in the dollar. my question is, are we recklessly presumptuous on a trade, i.e. the soft dollar and the stronger renminbi? i get the sense that we have priced ourselves -- we are using these phrases. maybe we are all just a little bit recklessly presumptuous. >> i think that is a very good point. the fact that the fed is being cautious might indicate that they are worried it wouldn't be anywhere soon. ago, it was that i

think eventually there will be a deal. what you have to worry about is the deal right now, right here. china does want to find an accommodation but i think you are right. i think you should take the fed changing its position on more trouble to come from a macro economic point of view. interest rate probably will rise from now. heit gets worse, of course, has indicated that they are willing to look at loosening. we are way away from that. nejra: how much more economic trouble is likely to come from china? has significant is that in the picture of the slowdown we are painting? whileis the major reason i think there has been less demand for -- let's go to a specific company. look at alibaba's numbers. what has declined in china is physical goods being bought and sold. this is a consumer pulling back and that is i think because they

are worried about the business in china. it depends how much of a slowdown we get. everybody has incredible faith in the chinese central authorities to control both the credit cycle and the economic cycle, and china is growing at 6%, more than anywhere else in the world. whatnk that is partially the fed is looking at. re-rating,ssive which means there is an opportunity there. for the rest of the world, they want see how quickly chinese consumer spending can return. economicey quote developments and fed pressures. how do you want to play china if they are throwing a whole lot of fiscal mud at the wall. do you want to be longer hung saying -- longer hang seng?

if you are going to trade long in china, is it domestic or offshore? >> i'm not really equipped to be able to answer that. on china,y, be long but i have no idea whether onshore or offshore on that one. nejra: you have lots of news on lots of other things, so no worries. stay with us. manus: coming up, the eu is said to be prepared to take brexit down to the last minute. heise -- high-stakes summit rather than a cave-in. this is bloomberg. ♪

>> the u.s. economy is in a good place and we will continue to use our monetary policy tools to

keep it there. despite this outlook, over the past few months, we have seen some crosscurrents and conflicting signals. the roads have slowed in some major foreign economies. common sense risk management suggests patiently awaiting greater clarity. an approach to conservative policymaking is in the past. the committee is evaluating the appropriate timing for the end of balance sheet runoff. this will likely be part of a plan of ultimately reaching our balance sheet goals while minimizing risk and avoiding unnecessary market disruption. we don't react to most things that happen in the financial markets, but when we see a sustained change in financial conditions, that has to play into our thinking. it is sort of the essence of what we do.

let's get a check on some of the price action today. the fed signaled it is putting further interest rate increases on hold. let's say the rally does hold through the rest of the day. global stocks are on course for their best month since march 2016. it is all about sentiment, isn't it? have beendaq futures climbing on better than expected results at facebook. belln reports after the for the rest of the day. >> tesla's cfo is retiring. the exit reinforces the company's reputation -- reputation of having a revolving

door for executives. speaking on an earnings call, ceo elon musk sounded more sober than in the past, and he seems to have put the days of wildly optimistic goals behind him. optimisticpoint, i'm about being probably -- about being profitable in q1. not by a lot, but i'm optimistic about being profitable in q1 and for all quarters. >> microsoft sales met part of thebut company cause concern. growth has slowed from the kneeled -- from the near doubling in 2017. samsung is reducing spending this year to focus on the profitability of its memory chips. this after posting its biggest net income decline in two years. sales and sliding

share of cell phones has hit the company. that is your bloomberg business flash. nejra: thank you. the european union said to be prepared to take brexit down to a last-minute high-stakes summit rather than cave in to demands. to give isn't willing any concessions to prime minister theresa may without a meeting. the next summit is scheduled just seven days before the u.k.'s planned exit date. is the eu ready to take this to the wire? if you look at the fact that we are not expecting to see prime minister may this week in brussels, and that pretty much every conversations he had this week with her current -- with her european counterparts have been done over the phone. the european leaders, european

commission, none of them really are expecting or want to see her or are in a rush to see her or give her any concessions. we understand based on sources speaking to bloomberg that they don't plan to really give her anything before the meaningful vote. number two, that will be next february. also, the eu leaders do not want to call an emergency summit. that summit is only do a week before brexit day. of course, this is classic the same when it comes to the deal. you've heard prime minister may still wants to get this deal. the european parliament wants to get a deal across. in brussels, you are seeing the opposite. the chances of no deal have increased particularly after the vote. manus: it is interesting, that

rhetoric that was absolutely on message throughout the day, no change, no rhodesia -- no renegotiation. do they run the risk than of taking theresa may back to parliament next week where parliament then takes control of this protest? do you think that is what is happening in the background? >> there are many options on the table. ultimately, brexit is not a binary choice. run thelly want to clock down but also see what other options. in terms of the european thinking, they just think that at this point there is nothing they can put on the table that would satisfy brexiteers and they are not ready to ditch the backstop. nejra: thank you so much. let's look at what else you should be watching today across

europe. at 8:00 a.m., we will hear from spain. will fourth quarter gdp keep praise -- keep pace with france? the fourth quarter gdp figures come out today. that is at the same time you get a readout for the entire euro area. he has beenus: patiently listening to the discussion, he's with hermes investment management. would feel the u.s. the impact of a hard brexit. i'm surprised in that suddenly the rest of the world has woken up that if there is a hard brexit, it would likely involve disruption. that is significant that it is on his radar. >> the world always knew that a hard brexit would be on the radar because it would affect financial markets. the assumption was that there would be a deal done at some stage. what we are seeing in the brexit

negotiations is extraordinary. there is an asymmetric negotiation going on. n our's a negotiation withi own house of commons, but we are not negotiating with our counterparts. i think there is a possibility that if we just move toward the 29th of march and the deadline is there, we find ourselves through a hard brexit. i think that is what worries markets at this stage. of course, we are not just going to stop. wills like airline flights be extended through negotiation, things like even tourist markets. but, if you think the likelihood of hard brexit has increased, there is a further factor that slows down the growth in europe and certainly in the u.k. nejra: it is interesting that you make that link between the

two. if you look at volatility, we've seen that dropping on the chart as a disorderly brexit. be the market interpretation, not the interpretation you are making. i might ask, out of all the regions in the world, because we always worry about china and the fed, the market underpricing the risk in europe. >> everyone is saying, the eu always finds a solution at the last minute. you see different ways of doing it. would beean perhaps the one favored say by the ,abour party, the customs union or perhaps another referendum. reallyof this, no one is accepting the possibility that theypoliticians say, look,

have voted and they should do what they said. i think the market is not taking as seriously as it should. that is a good enough answer for me. in terms of markets, they were saying a no deal brexit is rising. they say you want to be in gilts. they could see a 25 basis point collapse. if you have to protect yourself from a hard brexit, would you do that with 10 year british paper bunds?ear u.s. paper, or >> i would do both. 10 year british paper would be nice because the british comedy -- the british economy recovers in the long-term. but in the short-term term you see easing. manus: mark carney has threatened that he might need to raise rates. you said we might see easing.

>> mark carney said he would like to raise rates because he's worried about inflation and that's what he's protecting against. look in the long-term. a the hard brexit results in slow down to the economy, you have got to ease up on your policy. in terms of the u.s., i would do the same, because they are likely to stop easing sooner. nejra: what bigger concerns does that cause? for another time, thank you so much for joining us. always loved having you with us. up, we speak exclusively to the cfo of royal dutch shell. manus: we have that and we also have the ceo of rush. two absolutely huge companies. the numbers will drop.

what is going on? have a look at the charts. ♪

manus: good morning from dubai. this is "bloomberg daybreak: europe." nejra: these are today's top stories. manus: pivoting to patients. expectationslieves for a rate hike hang by a thread. a dovish news conference signals flexibility. asian equities are getting a boost from the trade optimism. talks between beijing and washington enter a second day. can a deal be reached? facebook shares surged. advertisers stick with social media through privacy scandals.

they are determined to earn back trust. nejra: good morning, everyone. we are an hour away from the start of cash equity trading. let's start with unilever. on track for 2020 goals. four-year adjusted operating profit coming in at 9.3 6 billion euros. that is a comfortable beat on the 9.2 8 billion euros estimate. up 2.9%.e the estimate was up 3.5%. a little weaker than expected. up two point 1%. the estimate was 2%. i'm looking at the four-year adjusted operating margin. 18.4% as well.

questions might be asked about exclusive talks on -- there were talks about that recently. also people looking for more clarity on the outlook on the buyback. emerging markets very much and focus. -- in focus. lots of questions for the new ceo. don't miss that interview at 10:30 london time. now to the shell numbers. kicking off big oil, big earnings with a big beat. a fourth-quarter adjusted net profit of $5.69 billion. the debt ratio comes in at 20%. this is the critical issue. can they remain on track? the third front of that share buyback program will begin.

that beat estimates in terms of the dividends and cash flow, $22 billion coming from them. the question is, are they investing enough money to continue the growth? with --ortable are they these are just some of the questions we will put to the cfo. she joins us very shortly. her exclusive interview right here on daybreak. a little more breaking news. nejra: let's turn from big oil to retail and look at h&m. fourth quarter pretax coming in a miss on the fourth quarter. capex to reduce.

the four-year dividend per share beating estimates. gradualo see improvements in inventory situation. inventory development should be improving in the right direction. it talks about negative year-end defects. costs of 560 million swedish krona. the fourth quarter results negatively affected by logistics costs. perhaps a bit of an explanation for the mess on that fourth quarter pretax. that is the main number to look at. coming in at a miss. gaming,hen it comes to nintendo operating profit is a considerable beat. you are looking at ¥156.6 billion. switche a full-year hardware sales at 17 million

units. view,n operating point of the forecast missus estimates. es estimates. in terms of the guidance and forecast, they still beat operating income. the estimate was for ¥266 billion. the full year net income comes in at 165. that is a miss. in terms of sales, a little bit light. we have the interview to beat all interviews of the day. nejra: shell reporting adjusted profit for the fourth quarter that beat the average analyst estimate. joining us now for an excuse of interview is the chief financial officer of shell. so happy to have you with us. thank you for giving us your time. that a comfortable beat on

adjusted profit at $4.69 billion, an estimate of 5.39. first of all, explain how you got to that number. >> thank you for having me on the show. it is a great set of results to be sharing. it reflects the strength of the company. we have been reshaping shell, shifting her portfolio. moving to higher value barrels. strengthnly built on over the last couple of years. our balance sheet continues to remain resilient. what you are seeing is the result of two years of reshaping the company from a portfolio perspective, from a cost perspective. manus: very good day to you. great to have you with us.

it is great to see a woman as a cfo of a major company joining us. the market wants to know about your buyback. they want to know about the durability of the $25 billion buyback at these kind of prices. what can you tell us? you have started a third round. the market wants to know about durability. is an buyback program important commitment we made to the markets. we remain committed to achieving between $5 million by 2020. to remember the amount of cash the company generated. a pretty extraordinary number. more than twice what it was in 2014 when prices were $99 a barrel. versus $70 on average for the year. our strong cash flow generation is what is allowing us to invest in shell to grow the company, to

pay down debt. we have been strengthening our balance sheet the last couple of years. and of course start the share buyback program, increase shareholder distribution. we have completed $4.5 billion already. we have committed to the next round of $2.5 billion. if you look at the underlying cash flow generation, we are able to achieve what i think is a very ambitious set of objectives which is growing the company, deleveraging, strength and balance sheet, and continuing to increase shareholder distribution. >> there are a lot of ambitious things to achieve for oil majors in general. dividends and buybacks, but also cutting debt and production growth and capex. my next question is about that. you have talked about the free cash flow. there is debate among analysts in terms of shell being at risk of under investing and also

enough on growing reserves. what do you say to those concerns? >> we are focusing on growing value and growing our cash flow, which we have generated over the past couple years. it is important to look at the quality of our cash flow. the amount we have been investing in the company the last couple years is allowing us now to generate $50 billion in cash flow from operations. we have been the highest generator of cash flow for the last four quarters. assessing terms of our investment, assessing the direction of the company, the proof is in the pudding. what i would also point out is that our capital discipline and capital efficiency is in the different place than it was a couple years ago. we have reshaped the company in

terms of our unit development cost, and terms of our unit operating costs, so what we are able to the today is more than before for a given dollar of capital spent. than half of our cash flow is coming from our upstream business. we have huge industry-leading businesses in our integrated portfolio and of course our downstream business. businesses are less capital dependent to generate growth. it is important to understand the nature of our cash flows, which are not necessarily dependent on excessive levels of capital investment. the way we have reshaped our company allows us to accomplish more with the same dollar of capital spent. manus: we are going to get into the demand side in just a second. we have a running commentary on your results. they are focusing at the moment,

the market, we are focusing on your indebtedness. falling to 20.3%. i'm being very kind. down to 23.1%. how much are you going to do on that? what more is achievable in terms of making that number better? >> strengthening our balance sheet has been a priority for us. we committed to bring it from 30% down to 20% or below. we have been working through that. that is an important commitment. i would point out we are benefiting this quarter from the drop in prices and the impact that has on capital, which then increases the amount of cash we have received in terms of working capital. that accelerated the reduction in our gearing from 23 to 20%. what we want is sustainably to

be at 20% or below. i am confident the cash generation and the right macroenvironment will allow us to achieve our objectives, which continue to invest and grow the company, continue to deleverage, continue to be a priority for the next couple of years until we reach 20% or below on a sustainable basis. you have to start with the cash flow. that gives us a lot of freedom and a lot of opportunity to deliver on this very ambitious agenda. nejra: your breaking news on the bloomberg summing up what you have just told us, shelley's getting more bang for each buck invested, that messages coming through loud and clear. in terms of developing the cash flow, we have talked about this at length. we come back to those three prongs. dividends and buybacks, cutting

debt, production growth, and capex. any of those more of a priority for you? am i hearing it wrong when i hear the biggest priority is the investment? >> we are going to do it all. we need to do it all. to objective is to be able -- into achieve that we need to have a strong balance sheet that is resilient through the cycle and we need to increase shareholder distributions. that is what we are going to do. our priority is generating the right level of cash so we can achieve all of those objectives. finally, we want to squeeze something in about global demand. where i'm sitting geographically, everybody is rushing. what is the demand cycle like? is there a tapering demand? give us the insight. >> we've got a big portfolio.

lng, oil, lubricants, and of course 70 countries around the world, it is hard to have one answer. overall, oil demands globally have continued to increase. that has been driven by growth in demand particularly in places like china, india, et cetera. markets like mexico. it is market specific. on the whole, we see strong demand for oil and gas. nejra: thank you so much for joining us this morning. the waterlook at market story today. the fed signaled rate hikes on hold, adding fuel to this month's risk rally. have advanced more than 7% since growth worries hampered sentiment last year. joining us now is the chief emerging markets macro strategist at goldman sachs. delighted to have you with us. thank you for your patience.

dollar.lk about the the bloomberg dollar index has had a four-month low. i was talking recently about goldman's short call. does what we heard from the fed put more conviction on that call and perhaps even encourage you to go more short? >> absolutely. yesterday there was a very clear message from the fed. a willingness to be patient. it is a culmination of a message . the tone had been shifting relative to the december meeting in the intermediate statements between jay powell and clara. -- clarida. also in terms of the balance -- amongch has been market participants. they did change their guidance and willingness to make changes there as appropriate certainly is going to put further pressure

on the dollar in addition to what you have seen yesterday. it heightens our conviction that in the short dollar view there is more to go there. quid pro quo, if you want to be more short the dollar. where in e.m. do you want to be? we have this chart, the biggest losses last year. morgan.ot blackrock, jp all saying you want to belong em. how discerning we long? emerging market bonds i would classe our favorite asset , especially high-yielding emerging market bonds. they have tailwinds apart from the fed. many of the high-yielding emerging markets, places like south africa, brazil, russia, indonesia, india, you have seen

growth pick up as well. saw inhe drawdowns you the middle summer of 2018, growth is moving higher. you have this big fall in oil prices, almost 30%. that is creating downside inflation surprise. the reason why we prefer the emerging market bond asset class is it benefits not just from a more patient fed, it also benefits from this combination of somewhat stronger growth from a low base, but also downside inflation surprises. if you see a more broadening out of the growth process across the world, across the major parts of the world including china, pmi in china today was more encouraging, it makes sense to move further across the asset market spectrum. things like em equities should do well in that environment. nejra: we are getting increasingly concerned -- i know people are split, but about the

prospect for global growth. particularly if you look at china and europe. you talked about the fed, you talked about growth, and you talked about oil. what if we get a bounce back in the oil price and china turns out worse than we expect? bei think those would downside in particular. the one i would worry more about is that china turns out to be worse than we expect. there are two things about china. one is the trade negotiations. markets are beginning to price a fair amount of optimism but about that. now seems to be the base case outcome in market prices. if that assumption turns out not to be true, that would be a downside risk. em x china, the high-yield complex after the fed decision that isooks to be -- hard to sustain.

if you do not see some stabilization in china, you will start to see wobbles there as well. some of the cyclical data we have seen so far perhaps paints to pessimistic a picture of the underlying growth momentum relative to things like the more domestic labor market. think the pmi this morning was encouraging. our expectation of stabilization em are more forecast in fact. >> one could say we are surprised by the stoicism of the yuan. are you? >> i think there's a few factors it boundedre keeping on both sides. clearly there has been a lot of expectation that some sort of agreement is possible between the u.s. and china. i think that has supported.

, we have been building for some time that chinese local debt is being added to the .loomberg aggregate deficit that is one surprise chinese policymakers have had their eye on. getting institutional money involved in chinese local debt markets. at source of support is also important. equally on the others i would say at this point, there is no miss valuation in see ny to correct. from 201516.t you can see going back to 2018, but it is hard to move.multi-percent those are factors keeping it somewhat bounded.

nejra: there is no miss valuation of the cny, where do you see miss valuation? >> across the broader range of em high-yield or's. yielders. on the flipside, the dollar feels like an overvalued asset. certainly in our fair value metrics. when you see protectionist impulses from the u.s. tend to be top of mind, they tend to come alongside a deteriorating nonoil trade balance. it is often a mark of protectionism. the dollar feels somewhat overvalued. manus: we will see whether that holds. thank you. let's turn to one of the biggest pharma stories on the block. roche reported profit that beat

in the fourth quarter. it says the new guard of medicines results will bolster profit this year. agingit moves away from blocks. at chief executive officer roche joins us. move over the old guard, rally for the new peten take. -- potentate. welcome to the show. with are very pleased 2018. the growth was entirely driven by our early launch. this trend to continue into 2019. we will see growth and we will see growth from newly launched medicines. london.ood morning from

i'm going to get straight to it and ask whether roche will use any legal means to blunt the onset of similar competition in the u.s. for those three drugs. >> hours certainty is around innovation. our strategy is to move the standard of care. that's what we do. you see the growth we are having now. of course, we also defend intellectual property of our medicines, but the strategy is around innovation and it is about moving the standard of care. manus: let's stick with that u.s. theme. the shifting landscape in the u.s. health care is incredibly important. two years into the trump administration, are you seeing less pressure on pricing? what is your plan? what is the roche plan in terms of trying to get price increases through in the united states?

ourt all has to do with medicines, which are truly differentiated, and which provide significant benefits for patients. that if you provide real innovation, real benefit for patients in the united states, and payers continue to therefore there is no doubt in my mind the u.s. will need a very attractive country for a company like ours. nejra: i am hearing innovation loud and clear from you. you have been talking about the fact you are not into megamerger's and the m&a strategy remains on changed -- unchanged. if we look at the industry more broadly, what do you think will

be the hottest disease areas for buyer tech acquisitions? >> our strategy is a very optimistic one. we go where the science takes us. we follow the opportunities. it has brought us overtime into new areas. we were one of the first companies to go into oncology. we are one of the first companies to go into new areas in neuroscience. we have an opportunistic strategy. when the science opens up, we go into it. i'm very excited these days about our emerging neuroscience portfolio. we have very interesting data in important diseases like huntington's or autism. one ofbelieve could be the next areas of growth for our company. at the end of the day, we have to follow the science. talking aboutbeen this subject for 22 years now.

roche -- have you heard anything from novartis in regard to a potential sale of their stake in your company? >> no i haven't. them to beou welcome with you as an enduring relationship? well, as you point out, it is the stake of novartis. they control the stake and they have to decide what they do with it. ourre very happy with investors, including novartis. nejra: thank you so much for joining us this morning. coming up, another great earnings interview. we speak to the new ceo of unilever. don't miss that interview after 7:30 a.m. london time. manus: we have had a feast here this morning. we have stockmarkets on the up.

and i. it from nejra the european open is up next. what a beautiful day in london. it's warmer in to buy. ♪

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anna: good morning, welcome to "bloomberg markets: european open." edwards alongside matt miller in berlin. matt: today the markets say patience is a virtue. stocks in the u.s. and asia bounce as the fed signals rate hikes are over for now. european futures point higher. cash trade is less than 30 minutes away. anna: t