>> good morning from london, on nejra cehic. cranny at i'm manus the north africa summit in abu dhabi. this is bloomberg "daybreak: europe." these are today's top stories. deal ife's willing to the countries are near a trade agreement. optimism spreads across the globe with stocks in asia extending wall street's klein. an high-stakes gamble, theresa may and the e.u. had for an all or nothing last-minute brexit showdown.

manus: a warm welcome to "daybreak: europe." let's get straight to the , a 20%g chemicals giant stake in this company. full-year adjusted ebitda matches estimates, that is the message. when it comes to the final quarter of the year, this is what the market will be focused on, the slowdown. we've seen the drop in fourth-quarter adjusted ebitda. fourth-quarter sales also a miss. , still robust demand around the world. we want to see what they said

about guidance as we get into this later on. theyourself is a this and -- full-year sales is a miss on the fourth quarter. a little bit of pressure and a slowdown on the chemical side. good morning, you've got the banks of europe. nejra: we will speak with the clarion cfo later -- clariant cfo later. the estimate for amro was 439 million euros. a significant miss on fourth-quarter net. the final dividend per share comes in as a miss on the fourth-quarter profit. a number for the final dividend per share of 80 euro cents.

more than the estimate of 66.4%. bear in mind that basically abn amro wants to get the cost 55% withino below four years. they have quite a way to go with that coming in at 17.2%. fourth-quarter operating income comes in pretty much in line. the key thing to remember is it's one of the better capitalized european banks. shareholders looking at how much capital in return. the fourth-quarter net coming in as a miss. , news on aeineken dividend recently. let's see what heineken brings up. adjusted profit comes in a 3.80 7 billion euros, a beat on the estimate of 3.4 billion. it seems 2019, continued

volatility in economic conditions. the red headline is full-year consumer organic beer volume up 4.2%. the estimate was 4%, so that is a beat there on that number. the dividend is lighter than the market had estimated. we had the announcement on the share buyback and special dividend just a couple of weeks ago. the originalthan estimate. on the operational side of the business, it is a beat, the operating income which is adjusted.

in terms of actual numbers, they managed to get the price rises through. the big challenge is the cost price inflation. we have the dividend, we had the special dividend and the share buyback announced just 10 days ago. let me show you the global markets because there's almost , tremendous bounce in these markets from the equity side. i love what robert burgess said about the equity markets. it doesn't take much to get the he may let theut march 1 deadline slide a little bit. you want to be long american equities. wti, they have dropped production more than the market had anticipated. tweet us night, we are

almost back to production levels, so all that good work of the past four years is there. governor to a risk back on the market. the next move could be up or down, and that shifted the probability of a rate cut later in the year from 90% to 60%. good morning, new zealand one of the central bank that doesn't seem to be following the fed on that dovish path. the s&p 500 had its biggest one-day jump this month when it went above the moving average. talking about risk and the dow jones hitting a 10 week high. the teen year yield has not moved so much.

it was in the equity markets that we've been largely seeing this appetite for risk showing up. the 10-year gilts steady. perhaps there's something interesting to read into that. we're seeing some yuan strength trade talks out optimism and the comments from president trump. january was the second best month ever for the . .- ever for the yuan we could see it head toward seven. let's check in on the markets with juliette saly in singapore. how is the risk on rally looking in asia? continuing, all those factors you mentioned. asian stocks higher for second session, on track for their highest close since october. the msci asia-pacific index up 10% from its december lows,

suggesting that correction we had has now been reversed. the nikkei closing higher by 1.3% on in weakness. energy stocks propelling hong kong and chinese stocks. australia a little weaker, and i will tell you why in just a moment. overall's solid moves coming in across equity markets. let's look at some of the movers in the region. toshiba cutting its operating income for the full year, missing lower estimates. remember it has that very big drop before the results came through yesterday when it was the lowest in three months. today investors buying the news. softbank rallying strongly today. the t-mobile ceo saying he won't be buying or using any huawei equipment. you saw the australian sharemarket buck the upbeat

trend across the region because it is the biggest stop by market cap on the index. overall, a solid session, looking at asian stocks will close at october highs. nejra: juliette president trump said he is open to extending a march 1 deadline to raise tariffs on chinese goods if the two sides are near an agreement. negotiators began the latest round of talks this week, little more than two weeks ahead of a planned doubling of duties on $200 billion of chinese imports. our guest is jeremy stretch.

let's start with the yuan. i was talking about what a great month it had in january, some doubting the sustainability of that rally. what do you need to see from the trade talks for a rally to continue? jeremy: we need to see some signs of progress, so it appears we are inching towards some degree of resolution. think there will be a number bumps in the road until we get to some degree of final certainty. i think we are moving in that arection and we will see meeting at the end of the week. that is moving the process slowly forward. that march 1 deadline is coming increasingly interview but if there is a discussion or perception that the day can be pushed back a little bit, i think that will alleviate some of the pressures and help underlined the generalized strength of the currency. jeremy, good morning, good to see you. when we look at the relief rally trade on the equity side, sir robert burgess said equity traders are easily pleased.

do you like the prospect of a relief rally? is it the aussie dollar, aussie yen? how do you play the relief trade? jeremy: when you look at the prospect of changing trade dynamics, and obviously australia has been the proxy, as it were over the course of the last decade or so for the momentum in the chinese economy. if we can see some degree of resolution i think we will see the aussie dollar making gains. i think it is an aussie dollar story. the u.s. dollar is susceptible to some downside risk so i would be happy to favor and aussie dollar bias in the context of some degree of resolution. nejra: what are the downside risks for the dollar?

snapping an eight day rally yesterday. jeremy: we have seen a significant rally after that late january slump. we've seen markets repricing fed expectations. others have been repriced lower in certain instances. we're in a scenario are watching to see how it holds up but we have to remain susceptible to international investor flows that maybe less keen to continue to flow back toward the u.s. dollar because the macro data is slowing. the fed will be increasingly off the table and will see that tightening bias start to diminish and we should not lose sight of the fact that there are twin deficits that will impact investor sentiment. were you surprised by the someealand central bank,

would say it's a price the market by putting to a risk like into it. is that healthy? jeremy: in a sense, it is. we shouldn't ever get into a scenario where markets are so biased in one direction that it almost becomes inevitable that they are only headed in one way. in a sense, markets were overly too much in terms of easing. we've seen that in a number of central banks, the markets have been to sanguine about the risk of monetary tightening, going back to australia. in the context of australia and new zealand, when you look at the underlying fundamentals, there has been some deceleration but when you look at the relative strength the economy and the relative tightening for the labor market, even if we see modest deceleration, they're still necessity for both central banks to consider some degree of monetary tightening. markets have become to relaxed

and we have now seen a snapback correction on the back of those comments. nejra: jeremy stretch stays with us. let's get the bloomberg first word news with debra mao in hong kong. >> president trump is playing down the threat of another government shutdown. we learned president is likely to grudgingly sign a deal , thend by capitol hill use executive powers to fight additional border measures. he tweeted he will get almost $23 billion for border security, but did not explain how he arrived at that number. jay powell says there's low risk of a recession in the u.s.. the fed chairman adds that the economy is strong but the benefits have not been felt evenly across america. former fed chairman alan greenspan's warning about the risk of stagflation. his concern is the ballooning budget deficit spurring inflation at a time when growth is slowing.

the jeff bezos scandal is adding to the national enquirer's woes. a $31.5r emaar reported billion loss in the six months through september, marking an improvement over the year before. now it looks like it is in for a fight with world richest man. on monday he increased his wealth by a bigger dollar figure and all of ami's revenue for the first half of the financial year . theresa may's top brexit a is reported to said she will wait until the last moment before putting her deal to parliament. moveg they discussed the in a bar in brussels earlier this week. saying it would force lawmakers to choose between the deal or a potentially lengthy brexit delay. global news, 24 hours a day, on-air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. nejra: thank you so much. next, clariantp

confirms its 2021 guidance for above market growth. we will speak to the cfo, next. nejra: and will hear from clifford abrahams at 6:30 a.m. london time. this is bloomberg. ♪

manus: this is bloomberg "daybreak: europe." dhabi for the middle east and north africa summit. nejra: i'm in our european headquarters in london. let's get a check of the markets, asia continuing the risk rally we saw yesterday. we see the new zealand dollar at the central bank play down the talk of an interest rate cut.

not following in the footsteps of the rba in the fed, turning more dovish. when hundred 29. there has been talk in brussels of a long brexit delay. manus: there's no doubt about it, what i found interesting is, this is a defining moment from the allianz advisor. he wants to be long america are divergent strain. the biggest three-day gain in almost a month because trade talks in tariffs may push past march 1. debbie tias rebounding from a two-week low and saudi an eraion is back to undoing all that good production work. debra mao is with us from hong kong. remindedder has investors that bonds can come at

nasty surprises. saying it was given option to call 1.5 billion euros of notes next month. the announcement came right at the deadline for a decision. the bank cited the need to balance interests of all investors. to cut an is trying percent of staff as part of a companywide restructuring. this after the videogame maker delivered a disappointing sales forecast and reported revenue of $2.8 billion, missing the $3 billion projected by analysts. activision said sales of some of its key games have been disappointing. modelis rushing as many three's to china as it can. the electric car company has at least three ships due to arrive by the end of the month before the trade truce expires. ratchet fear it could tariffs back up and make the company cars more expensive in china and boost the cost of key

components it uses. that is your bloomberg business flash. nejra: debra mao, thank you so much. key segments of the latest risk rally are under threat. flocking to cash at a level not seen since before the financial crisis. calling for reversal in one of the hottest trades of 2019, emerging markets. what have you got? >> it something to watch because the survey has a pretty good history of calling for reversal. were seeing that investors are very bearish. and what are they bearish on? 18% of respondents saying em is the most crowded trade. last month it was the dollar. the dollar now only at 17%. maybe this big rally we have seen is the longest since 2016, perhaps it has more life left in it than we had been cash coming

in next. if investors are about to pull cash from the trade, we might soon given avalanche of selling. that's because one of the most popular etf's this year is em. this has absorbed about $5 billion this year. the market cap stands just under 60 billion. as you can see this is by far a record for this etf. you today is the most popular etf globally. it had to be out about 6000 other funds. investors can pull money just as fast as they put it in. thank you very much. stretch, tell us the truth. has there been a wall of money?

it?re we just overdoing jeremy: certainly there has been interest in the trade and it has been a function of the fact that markets have been repricing fed expectations. it has provided impetus to look for high yields elsewhere. and where you find those high yields? there has been selected appetite in that regard. i have some sympathy with that we've seen that

significant money flow moving into that space. if we can see a continuation of global growth and we don't see extreme negative scenario that was playing out over the last two or three months extended to the year ahead, the trade was crowded but doesn't imply that we will see a significant reversal. i think it often comes back to that debate about politics and the trade and if we can see some degree of movement or resolution then i think those crowded trades are not necessarily set for an immediate reversal. if you get positive news from the trade talk, is the tide lifted or do you have selected appetite? jeremy: it is a case of not thinking a rising tide lifts all boats or at least not equally. it's looking for that greater propensity in terms of trade relationships with china and in terms of the global context. the new looking at someone like korea where there is some continued scope for gradual appreciation. that gettingn see back to the 1100 threshold or maybe a little bit lower.

you also have to be mindful of those currencies in the em space to have susceptibility to political uncertainty. that's where there is differential going forward. we've talked to a number about thent guests real resurgence of the carry trade. to what extent are you seeing real evidence of that? which is the funding currency of choice? jeremy: you are right that there has been a resurgence in that carry trade and we have seen interest in looking at currencies like the euro as well as the yen. that's where there has been some interest over the course of the last few months. stretch stays with

us. coming up next, clariant fourth-quarter sales miss the mark. we speak to the cfo next. this is bloomberg. ♪ this isn't just any moving day.

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nejra: asian equities in the green. risk appetite across the market, here's the picture across the region. the msci asia-pacific index is in striking distance of its highest close since october, up 10% from its december low. hearing ont you been your final day there. manus: he was on a panel with me -- talkingith the about private equity. there are deals being done here. you walk around the core doors and you see bilateral happening.

might know that's is used to rough-and-tumble in the market. galaxy digital is where he does it at the moment. i started asking about the chance of a recovery. take a listen. >> would kind of hit and equilibrium in this zone. markets can gon, either way, but it feels like we are grinding along the bottom. and the next move will be significantly higher. there's a ton of buying power in the u.s.. there will be a trillion dollars of buybacks this year in the stock market. there is support from the fed. growth is fine in the u.s.. a little slower than last year, but not collapsing. dollars versus

emerging markets is a great trade right now. emerging markets got beat up last year. i wish you could be here. seeing major decision-makers come together at this conference. the other big line from might mike nos, -- from vogratz. nejra: he sounded like he was short dollar, long yen. he likes bitcoin, he wants to the long equities and he is interested in the him space as well. let's see what the appetite for risk is looking like a cross global markets.

great to see you, as always. retail inflation numbers is to 19 month low. however assets reacted since the meeting? >> i would have thought that banks would fly off, but that hasn't happened. , banksetty much in line are not doing all that well. are the has reacted bond yields. they have come off in the session today. bond markets have taken note of the lower retell inflation we are talking about. tradedest levels they've in the calendar year thus far, about 7.27. off andields have come if these moves continue, as some point you'll see financial markets reacting. the hope is there would be more

to come. ahead that is something everyone is still looking forward to. much. thank you very a policy of achievement maybe for the equity markets and traders. those are your markets, and in terms of where we go next, we will have a look at a couple of different markets. thoseing to do one of magic markets on television, i'm not sure where we are going next. nejra: anne-marie has a broader sweep of the markets for us. we been talking about their risk on all morning. get into the details for us. >> take a look at what is going on across equities. morning.r this

we have optimism over trade, donald trump saying he may be willing to extend the march 1 deadline if the talks progress. excited about the new zealand dollar as well as the two-year bond yield, the new england -- new zealand dollars surging, hinting at a less dovish policy. one of the biggest stories is what is going on in the cocoa bonds. santander decided to not call 1.5 billion euros on their cocoa bonds, which sent the bonds totaling. the question now is, will there be investor backlash? traditionally priced cocoa on the fact that they would be called on the first option. other banks may follow suit of what santander did. this is one of the top stories on the bloomberg terminal is

learning -- this morning and certainly one we will be watching all day. manus: thank you very much, anne-marie. let's talk about results. missed the mark on fourth-quarter chemical sales. joining us is the cfo. good morning, sir. what happened in the fourth quarter? i want to get a sense of the demand from your customers in the fourth quarter. good morning. patrick: good morning to you, thanks for having me. we have seen a good development in 2018 in terms of results and demand. we had 5% growth but as you

mentioned, q3 was a bit softer, with 3%. we managed to outperform the previous year in terms of profit margins but sales showed a slight coming down from the previous dynamic, driven by softer china and a softer europe, which is due to the trade uncertainties and people being a little bit cautious. however, we see that demand is there. we will look for the numbers after chinese new year in q1 but we are certain to have further good growth in china in 2018 as well. like you haveds some optimism around china despite the slowdown you just mentioned. tell me more about the chinese slowdown. was it in construction, consumer chemicals? patrick: consumer was doing well. some softness as we

uncertaintyading to with customers in terms of mobile in electronics, phones, and automotive softness as well. that will probably resolve as people find their way into 2019 with more certainty in terms of supply chains and tariffs. news: you have a beautiful relationship, how is that going? what is the most important thing with this new investor, where is the meeting of minds? it provides us with a long-term strategic shareholder, allowing us to really planned the group, looking forward we've announced a major transformation and improvement of performance as well until 2021. improvement of our offering

is progressing every year and will be the driver going into 2019. also the portfolio as where finalizing to get the high-performance material business into our portfolio which would be a great addition terms of high-value, high-margin business. on the other hand it allows us to sell more which businesses so it is a profound reshaping of the group that is taking place and will secure a significant margin improvement in the next couple of years. nejra: when you talk about selling mature portfolios, how has the level of interest in this asset? then? do you expect to get

business market leader in its area. from that point of view, we look forward to a good development further on in the process. manus: can i ask you, patrick, just the quantum of asset sales were going to see from you. can you give us a range? what kind of divestments are we really looking at? patrick: in september we announce the scope of the investment which by market analyst was estimated to be between one billion and 2 billion. that is the range that is in the air today. nejra: thank you so much, patrick. great to have you with us this morning. this just over six weeks to go, markets are still unclear what type of brexit the u.k. is heading toward, so how should investors play sterling? >> as brexit uncertainty

continues to swirl, some analysts are trying to forecast an event that many of their peers have said is untradable. in the event of a shift toward a softer brexit, cables have strengthened and a hard brexit would still bring a boost to the butd, leaving it to settle extending article 50 and putting the u.k. in political limbo would be worst of all, sinking the pound to 130. david guatemala hsbc says staying in the e.u. could give starting a surge of 21 55, a level not seen since 2015, but that an exit from the block without a trade it would be disastrous. has not fall into since the 1980's. still, none of the forecast are as pessimistic as the bank of england's worst-case scenario. mark carney warns that disorderly brexit could see the pound dropped to below parity with the dollar.

with time running out until britain leaves the e.u., with her without a deal, who knows where sterling will end up trading? manus: there's a host of divergence on where sterling could head in the coming weeks and even after that. with the had a chat head of sovereign and fitch. he thought the currency had already done a lot of the heavy lifting. if she runs down the clock and we hard brexit, do you think the heavy lifting is done with sterling, or how much more danger is to come? patrick: it's an interesting debate as to how much or how fall -- how fast it will under a hard brexit if you want to call it that.

i was talking to a central banker who was of the opinion that the downside risk of starting would be limited. i'm not convinced that is the case. we can all debate the potential macro headwinds of the no deal exit, but from the perspective investor,rnational that context has to be fully discounted. there are still some reasonably substantial downside. i would not be as bearish as david bloom, but we could easily see something in the region of 116 to 118. a reasonable degree of downside risk but there is still a great deal of uncertainty. it makes it remarkably difficult to trade the currency. political risk is something we find difficult to manage. nejra: so difficult to trade the currency. would you advise clients to approach sterling by options? patrick: that has to be the way

to look at it at the moment. the problem is, and i find this on a daily basis, the goal keeps moving in terms of the timing. is he going to be the next meaningful vote on the 27th? are we extending the process out to the 21st or the march 25 deadline? in terms ofty looking in the options based because of the optionality around the time horizons which continue to move. it makes it remarkably difficult because of that deviance. eurosterling?out europe is not immune from its own slowdown story. saids basically what james , there is no ability to normalize. g think you get more volatility

on cable than eurosterling under a hard or soft brexit? would have to say sterling versus the dollar is where you'll see more volatility. traditionally that is what you would look at for the highest degree of movement in the event. of a political sight of the lose fact that if we see a nasty exit scenario, there will be collateral damage an impact on the euro side as well. those components will move in but startingstep getting the greatest downside risk in a note to brexit. hada: the bad news we've for the eurozone in terms of fundamentals and growth, is that fully priced into the euro right now? i'm not convinced it is. patrick: in the context of the

decline we've seen in the real economy in germany, it has been largely priced in. markets have ignored the fact that there is little degree of fiscal expansion starting to be seen in europe. talking about the real economy and exports in germany and extrapolating that across the rest of the eurozone. i think markets missed some of the good news and focused on the negative headlines in that context. but of course there is political risk to way as well. that continues to swirl around on the euro side of the equation. as always we can remain above -- above that 112 threshold, i think that provides some degree of safety and some sort of support which will encourage stronger buys for the rest of the year. their, weemy stretch

continue the conversation on radio at 7:30 a.m. u.k. time. coming up, this is what we have for you. of abmation with the ceo amro. radioe in to bloomberg when you're traveling to work in the london area. this is bloomberg. ♪

manus: this is bloomberg "daybreak: europe." i'm at the middle east and north africa summit. nejra: a disappointing release from abn amro, it's been hit by an increase in bad loans and additional costs related to money laundering prevention.

us is clifford abrams, great to have you with us on the show. thanks for joining us. ,et's start with the dividend investors likely to focus on that. what reassurance can you give to shareholders that you will be increasing the dividends at any unchanged?eping it we paid outis year 62% in 2018. the actual amount is in line because last year was so really strong profits. going forward, we're making no commitments regarding dividends in 2019. it is extremely early. we are well placed to consider additional distributions for 2019 and would clearly make

decisions for the dividend at the end of the year, which is in about one year's time. manus: we are at the start of the year. we talk a lot about germany on the cusp of recession, italy slowing down, the core of europe is under pressure. what do you see in the lending numbers? is there any slowdown? clifford: the european economy as a whole is slowing down over recent months. the netherlands, sentiment remains positive. the forecast for 2019 gdp growth is around 2% and still strong after that. the sentiment here is good. in terms of overall book of business, we are roughly flat. what we are doing is shrinking somewhat in the mortgage business where mortgage conditions are competitive. we are focused on profitability

rather than volume and we are's dudley growing our commercial bank. we're trading in this environment to ensure we make good returns on our loans and keeping the old business roughly flat which is good for capital course,on and in due possible distributions to shareholders, as you pointed out earlier. nejra: where do you expect the bank to growth this year in terms of topline revenue? clifford: as i said, we expect the overall bank to be pretty flat for this year. we gave some guidance in november last year where we set the overall book would be flat, reflecting the trends i indicated earlier. we are still facing headwinds of continuing low interest rates which is putting pressure on our profit margin so we're working hard to ensure our asset margins remain resilient, and we are working hard to keep costs or

controlled and ensure we deliver good returns overall, which is our primary goal. we have a target for return on equity of 10%-13%, and in 2018 .e delivered a little over 11% so the bank is in good shape and we reconfirmed our guidance for 2019. to income ratio comes in at 70.2 with the target of 68. the other issue for the banks is really money laundering and trying to make sure everything in the house is in good order. are you finding it hard to find enough people to make that part of the bank fit the purpose? clifford: as you say, we are working hard on our due diligence as our banks across europe. we have about 1000 people working on this currently in the business, about 5% of our staff.

we announced a program expenses and that explains much of the dip of profits in q4. we think it is a one-off event and were looking to scale up further, another 400 people. so we are committed to doing what we need to do to ensure we play the role as effective financial gatekeeper for society. we will put the necessary resources in place to ensure we do that. nejra: a final question on the government pledging to cut its stake in abn amro to zero. roughly estimated, when do you expect the state will have sold everything? clifford: i cannot speculate on their trading strategy. they currently own 56%. i think it is for the state to decide how they sell down and we are clearly running the bank in

the interest of all our shareholders and stakeholders. we will look to the state to decide as to where it wants to take its interest down. manus: we are always up against the clock. deutsche bank and commerzbank coming together, the the landscape is shifting. his consolidation good for european banking? clifford: the speculation you refer to, there hasn't been much action. we feel we had scale in our core markets. we are all that interested in consolidation. in doingre interested is scaling our core businesses. you saw last year that we bought a small private bank in belgium and that improves the scale of her private bank, particularly in belgium. we would like to see more of that for our business. in terms of bigger consolidation, i would leave that to others to discuss the wise and wherefores.

we are sticking to our business and ensuring we deliver the profit numbers we all expect. manus: don't give the regulators anymore issues to deal with. thank you so much, clifford abrahams. ♪ i'm a veteran

and the army taught me a lot about commitment. which i apply to my life and my work. at comcast we're commited to delivering the best experience possible, by being on time everytime. and if we are ever late, we'll give you a automatic twenty dollar credit. my name is antonio and i'm a technician at comcast. we're working to make things simple, easy and awesome. nejra: good morning.

manus: i am manus cranny. nejra: this is "bloomberg daybreak: europe." i am nejra cehic alongside manus cranny in all be doubly. here are today's top stories. president trump is flexible on tariffina terrace deadline. optimism spreads across the globe. european and u.s. futures point higher.

a mixed bag, european companies report earnings, heineken. the risk rally is alive and well. the s&p had his biggest one-day jump yesterday. it goes above the 200 day moving average. looking at the futures, u.s. futures higher, and the dow hit a 10 week high. in europe the rally will continue. dax and cac 40 futures higher by 0.4%. is this optimism around trade talks? would any extension beyond march 1 the good news or prolong the uncertainty. the knee-jerk reaction is risk on.

the 10 year treasury yield holds at around 269. we have the cash bond markets opening in europe and will bring you an update on that. let's check in on markets in asia. juliette saly in singapore has more. risk on dayother across asian markets. we are closing in on october highs. 10% from itsup december lows, which means it has reversed the correction. we have seen strong buying from chinese equities. closing higher by 2%. a weaker yen wishing up equities as well. the weight on australia's market, but elsewhere is looking good. india up by 0.3%. a little switch out on e.m.'s today. certainly catching the tailwind

after global equities had their best session in three weeks. let's look at currency moves. the market was expecting it could turn dovish, but rates could move higher or lower, and investors piled into the kiwi pushing it up by 1.5%. a little less dovish than was expected. uan higher, and we have had risk on moves that means the yen is out of favor. they yen weaker against the dollar by 0.1%. manus: juliette saly in singapore. nejra: global equities rallied the most in three weeks as president trump says he is open to extending a march 1 deadline to raise tariffs on chinese

goods if they are near an agreement. -- heke to the founder discussed the market rally. >> there is a ton of buying power in the u.s. from buy backs, $1 trillion in buybacks. a lot. you have support from buy backs, support from the fed, growth is fine in the u.s. manus: what is your top trade? short dollars versus emerging markets right now. emerging markets got beat up last year. and the long equities. long equities, joining us now is colin purdie, head of global investment grade credit, aviva investors. conviction on equities in u.s. equities, how much conviction do you have in

the risk on rally in credit? colin: i think we are more cautious than that, we have seen a large move in january on doing to some degree the weakness in december. there are challenges in the credit market, and we should not ignore those. from a fundamental perspective we agreed markets are in good shape as we go to the earnings season. s&p, good earnings beat. from a technical perspective, there is the question of central bank buying in the absence of the central banks in the bond market. that causes some concern. we have seen the influence of credit, that is positive. that technical picture is mixed. the big unknown is supply, what will that be in the year ahead and how will it impact the market? good morning to you. we saw spain and italy come to

the markets with decent supply. quite aggressive demand, would you concur in the trepidation on the european bond by? colin: we are coming from a ourtion where credit was favorite in december, and the change in the central banks, the stance we have seen since then has been telling. carry affect how -- assets have come back, we have seen strong returns already. thinking that was a weak position through the year and had to change positioning. we have seen a lot of demand across the sovereign space, and recent bond deals as well significantly large books for deals this week. anheuser-busch last month

multibillion deals. nejra: why do you like euro high yields? when you consider whether a european economy is, some people might be surprised by that. ecb that we feel will not move in terms of rates for the foreseeable future, and draghi has made that clear. in that environment, 3% plus yield that you get on the high-yield space is not bad. newspside from the tariffs as well, if we get a de-escalation, a deal struck, europe being an export led economy will benefit from that. high-yield companies will benefit. a negative rate environment where we have trillions of dollars of negative assets globally, we think european high yields look ok. manus: what about the default for 2019 in europe?

we're dealing with the economic reality of slowdown in germany. and the recession in italy. are you concerned? what default risks are you looking at in 2019? colin: we think the false will p, but we- tick u think of it as a downgrade cycle. everyone is concerned about the italian recession. this is the sixth recession italy has had since the formation of the euro zone in 2000. it is not something new or something the market is not used to. we think it is something the market can see through. interestingly from a default perspective, normally as you come to the end of a bull market in the high-yield space, you see maturities have been pushed up significantly. that has not happened this time,

and i think that is due to the length of the cycle, maybe investor caution. there are reasons maturities are coming up in the next two years, and we are keeping a close eye on, and that will contribute to the uptick in the default cycle. nejra: talk to me about what sectors you prefer. i know you like the banking sector. is that getting crowded in credit? colin: as we saw yesterday, it shows people that there is differentiation and people have different views on the sector. from a fundamental perspective, this trait makes sense for a bond investor. the banks have raised a lot of capital since the same time the risk of the institutions take his lower. from a credit investor perspective, that is attractive. banks in europe trade a premium and nonfinancial debt, it looks attractive from the perspective.

when you put them together, it is an attractive proposition. choose, weou had to have a german bank story, a story and the consolidation the german banking system, there has been a lot of discussion and rumor around the potential tie up. we think there is some fundamental issues with the german banking sectors. we are remaining relatively

cautious. similarly in italy, when you look at germany and italy these of the only banking systems that have not been cleansed since the financial crisis. we are relatively cautious on italy. we like the u.s. banking system and think the big money makes sense here. a still trade at a premium but are in a strong position and are coming through with a higher rate environment. away: you were not getting from us without commenting on brexit. i want your thoughts on euro investment grade. the implications of brexit touch investment. colin: indeed, i will borrow from a report, when you look at the composition of euro investment grade market, there is more u.k. domicile companies italian and spanish combined. that is telling. when you consider french companies and german companies trading with the u.k., you find a reasonable amount of brexit risk in euro investment grade. we are unaware of how the brexit transition will happen, or if it will happen. that is something that gives us a degree of caution. nejra: thank you so much, colin purdie, head of global investment grade credit, aviva investors great to have you with

us this morning. withijuicy bonds can come nasty surprises. the spanish lender rattled the market saying it will skip an option to call 1.5 billion euros of notes next month. that came at the deadline for the decision. joining us now bloomberg's managing editor for rates and fx . did this come out of the blue? have beeninvestors a couple ofall for weeks, and that is the problem, the communication strategy the bank took. last moment till investors what it would do. it is something the bond market was uncomfortable with. the decision itself kind of unprecedented in the market, there are two schools of

thought, one, some bondholders are angry with how it is executed. tarifetet convent --it makes sense for their shareholders, it is cheaper to roll over for this rather than reading it at this point. edeem it athan wr this point. what we will be looking out for his market-based. will there be a broader repricing across the sector? the feeling is yes because the assumption that all bonds at the first opportunity will no longer be there, and set a precedent going forward, the bigger risk notdoes it have just for the most risky securities out there, i do not

think santander -- investors did not like the way they were treated. we will be watching for all of those things. bloomberg's managing at a editor. coming up, we speak with kenneth bowles, cfo, smurfit kappa group . that conversation next. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." 40 minutes to the start of cash trading in europe. manus: i am manus cranny in abu dhabi. let's get you the question of the day. which will crack first, the

nervous equity traders, or the treasury yields? where will the crack's come first. join the team, they are there. let's get your business flash. santander has reminded investors that juicy bonds come with nasty surprises. the spanish lender rattled the market saying it will skip an option to recall 1.5 billion euros next month. the announcement came at the deadline for the decision. the balance of interest for investors. activision is planning to cut 8% of staff as part of a companywide restructuring after the videogame maker delivered eight disappointing sales forecasts, and revenue of $2.8 billion, missing the $3 billion rejected by analysts. activision says some of its key

games have been disappointing. tola is rushing models china, the electric car company has at least three ships due to arrive by the end of the month before the truce expires. they could ratchet tariffs morep, this will make cars expensive and the key costs of components it uses. manus: thank you very much. numbers.e sense of the kenneth bowles, cfo, smurfit kappa group joins us. i want to get a sense, everyone we are speaking to in real economy side, was there a slowdown in the fourth quarter? what happened in the backend of your business in 2018? morning and thank

you for having me. i think it is clear that the bigger economies suffered some slowdown in the second half. we saw a good first half and it continued into october. november was in line with expectations, and december slightly below. as we have come back in january 2019, in the context of europe, we are ahead of expectations and our american businesses good and ended strongly in terms of demand. 2019 has started well. there is softness in december, but more pleasing 2019 started well. into the are headed uncertainty of brexit, are you taking steps to contingency plan for no deal? kenneth: when we look at our business in the context of the u.k., it is an island economy, broadly everything we make in the u.k. we sell in the u.k.. we take paper from our irish

plants, but that is not a logistical problem. our bigger plans are linked to our customer plans. what supplies they might need to hold, but we are not seeing that yet. while there is no deal, it becomes a higher risk, ultimately you have to believe the parties will come to some arrangement to avoid instability that could result from no deal to read we are optimistic at this point, but given that our role as a supplier and a supply chain partner, our customers need to know when that event as well. said: tony smurfit freezing u.k. investment amid the brexit uncertainty. can you give us an update? are you freezing in the u.k.? kenneth: we are freezing any large-scale investments. different than any major investor.

until we have a level of certainty on what is happening. the impact of tariffs or something else could make us rethink our investment. large-scale investments we will continue to look at. is no doubt about it, you rejected a bid last year . your stock is down 25% since he rejected that bid. what do you want to say to the shareholders? there might be some people feeling you could do better. kenneth: i think it is fair to out of the process, we engage actively with our shareholder base. we have seen a low level of turnover in the shareholder base , suggesting they are relatively happy with smurfit cap. -- smurfit kappa.

if we go back to may last year, we said we would be better than bank 20 -- better than 2017. if we think about this business as a long-term business which it is, you have to look at the bid in the context over the longer term, and the reality is the bed in front of us -- the bid in out, if us, that played you look through our share price in q2 through the third quarter held up at those levels until general equities came down across the world. we have to see it in the context of that also. we will come back to that in a second, you talked about your return on equities. quite strong. you also said the smurfit kappa story is one of leverage. what exactly are the numbers?

kenneth: if you go back to our leveraged, 5.5 times you sell the financial crisis and the effect that had. our focus from 2013 is one of growth. we are continuing to focus on internal investment. also the leverage problem. times for the acquisitions, and the maturity profile of five years on our debt and significant liquidity, we see ourselves in a different place. a differenting of place, to go back to international paper, if they were to cut back in return with an offer, would your response be different? kenneth: i cannot speculate. focus on ip,job to

it is my job to focus on our customers. deflected on that. one thing that came up, you said you did not have a high turnover, but what did they ask you and tony to do? what is most important for them? kenneth: the most important thing for them came out of what we did this time last year, the delivery of our medium-term plan and deliver on that plan. that plan is designed to take smurfit kappa

to attract growth where we see it to make sure the paper we supplied keep their operations best in class, and that is why you are seeing the level of returns generated to 2018 begin to come true. it is the existing asset base and the opportunity ahead of us. if you think about those beyond our normal basis, it is the continued rise of commerce. it is all those things into bigger drivers of secular growth alongside the normal drivers of growth. nejra: this is a wide-ranging conversation, i am loving it. on a move to protectionism, the king had to the u.s.-china trade talks, how worried are you on the impact of trade talks not just on your business but on the industry globally? a two-wayrade is street, and the u.s. and china will have to come to a compromise. worry as ahave to global player that if it continues at the level of a lack of stability, fundamentally trade is a two-way street and they will get it together. manus: thank you very much for being our guest. kenneth bowles, cfo, smurfit kappa group.

that is it from abu dhabi. we have cryptocurrencies, the european market open, if you're traveling to work we are never far from you. ♪

anna: good morning, welcome to "bloomberg markets: european open." we are live from our european headquarters in london. i am anna edwards alongside matt miller in berlin. matt: today the market say take a cue from wall street, global stocks extend the rally as asian stocks hit a four-month high. is an em extending into overbought territory? just 30 minutes away from the open. anna: