nejra: good morning. i'm nejra cehic. this is bloomberg daybreak: europe and these are today's top stories. going nowhere. the u.s. and china fail to narrow the gap on train issues. stocks fall with you as futures. shutdown averted. congress approved a spending package. trump is expected to sign the deal but could declare a national emergency to fund the wall. the u.k. parliament throws out theresa may's plan to renegotiate brexit, but time is running out. ♪

nejra: good morning and welcome to daybreak europe. just under two hours away from the start of cash equity trading in europe. you want to watch these numbers crossing the bloomberg right now. raising the dividend to nine euros per share versus eight euros, the estimate was 8.81. also an increase, raising the dividend to nine euros a share. in terms of the other numbers coming through, third-quarter net income comes in at 1.7 6 billion euros. that is in line with the estimate of 1.7 6 billion. 11.5 billion euros versus the estimate of 11.5 billion euros. that for your operating profit comes in at 2.7 7 billion euros, a slight miss on the estimate of 2.7 9 billion euros. comes in at 130.6 billion euros versus the estimate of 129.2 5

billion euros. these are some of the euros coming through. also a statement from allianz, saying they plan to buy back as much as $1.7 billion in shares. but the key red headline crossing is on the students. it will be interesting to see what the picture is in terms of inflows and outflows into pimco. we will be speaking to the cfo later. lots of questions. let's get to the markets now. we're seeing a weaker picture in terms of u.s. futures, down .4%. a little nervousness in the u.s. session after the retail sales, worst drop in nine years. the treasury yield dropped to a 2.65 handle and we're holding on there, futures pointing lower. part of the reaction is that there may be some questioning on the u.s. china trade talks, pessimism among investors. you can see that reflected in dollar-yen, 110.33.

we're seeing the aussie under pressure along with the yuan. we did see cable drop yesterday, and we dipped below the 128 handle, just above it now, another embarrassing defeat for theresa may in parliament. keeping a close eye on indian assets after the attack, and of course we've had the prime minister modi coming out and condemning the attack. yields on indian bonds jumping five basis points. and keeping an eye on crude, wti up .3%, heading for a weaker gain of almost 4%. opec cuts outweighing concerns around trade, at least the oil markets. let's check in on the markets in asia. juliette saly in singapore has more. happy friday, not so in markets. the reality check starting to set in around the trade talks. juliette: yes, absolutely.

and weaker data out of china. modi said, prime minister said there will be a reply to the attack ikashmir. you can see the indian market is .09%.ound we seen selling coming through. the nikkei down over 1%. hong kong and china bearing the brunt. on the hang seng index, pretty much every stock is in the red. it is out and play today. remember we had a pretty good week for asian stocks, and the index is on track for a weekly gain of around .5%, hitting october highs earlier in the week. let's have a look at the stocks we are watching. this is on reports of a clampdown, government clampdown on underground banking, which could start to affect some of the revenue at the macau casinos. japan is the worst

performer when you look at the mrr function, fallen the most in eight years after for your operating income missed the lowest estimates. for the upside, we have a producer in china, a big rally coming through, nothing to do with the year of the pig. it's because of the swine flu affecting a lot of the producers and investors are betting it's going to push pork prices higher. nejra: thank you so much, juliette saly in singapore, keeping an eye on pork prices as well as anything else in the asian market. time is running out between the u.s. and china to prevent a ramp-up of tariffs march 1. there are few signs of progress. bloomberg learned the two sides are split over washington's demand for structural reforms to the chinese economy. what does our guest make of this lack of progress? joining us is richard kelly. delighted to have you with us. thank you for joining us this morning.

i don't want to say i told you riskt yesterday we had a on rally and i was saying to myself, why the rally? we might get the extension but it pushes uncertainty further. not only that, are they really going to come to an agreement? now we get the doubt coming in and risk asset selloff. what you stand and where do we go from here? richard: i think the best case scenario anyone should be hoping for is extension of talks, and people are still talking. you're not going to solve it in 60 days. this is about getting to something so the u.s. of ministration can claim victory -- administration can claim victory, and for the chinese can move forward without massive change to what their plans are. of the tradespects talks are the markets mispricing the most? i have a feeling it's around europe, rather than around u.s. or china. richard: everyone is focusing on

u.s. or china, but the more it starts to move past, we know we have reports on the auto tariffs and moving forward. i think that site isn't priced in at all. everybody is looking at europe and bad data domestically. nobody is looking at the u.s. of ministration turning the negotiating forces over to hear. -- over to here. nejra: how does it affect your strategy when you look at u.s. china at the moment? we will get on data in a minute. are you playing this through currencies? are you staying away? are you targeting a weaker yuan? richard: a weaker yuan is a side of the process. you have weaker in the chinese authorities and pboc. they are trying to press wholesale lending rates, trying to keep them close to the floor as they can. they can't cut rates significantly. they can't move currency significantly. that makes it difficult from a market perspective. if they started ever trade, this

probably bigger opportunity -- there's probably bigger opportunity. nejra: if there is deflationary pressure in china, will it say to the rest of the emerging-market in the sense you see more easing from central banks, therefore putting currencies under pressure as well? richard: i think we're just shy of deflation now, but it's just a matter of time. i think that disinflationary, deflationary side is what's coming through. if you look at a global deceleration in trade, it's similar in 2015-2016, except instead of a collapse in commodity prices, this was an overall collapse in the markets and it will feed through into corporate earnings and profits and believed through into the economy and require bank accommodation. nejra: you highlighted a chart about asian exports stalling. here.e a version tell us how this is factoring in how you view currencies in the

region. richard: something overlooked, everyone was telling us their stories why we recovered so quickly. it's very easy to model many things in economics. the most important things we need to watch tend to fall outside the models. what we saw in the last round of trump tariffs was an accumulation of inventories through the production chain. once those tariffs were put in place, those inventories had to start working off. that was going on significantly over december. i think it's still going on and we have two months of that happening. while that is happening, manufacturing growth isn't happening and that's what we're seeing. we're seeing the fallout of one round of tariffs and what can happen again as we see these tariffs implemented around the world. nejra: really interesting, two things you brought up investors are watching as closely, the impact of auto tariffs on europe

and will be can see from the asian export engine stalling. just talked to me then about what that means for which currencies you'd be buying, which you'd be selling, where your long, where your short in terms of global yield. richard: while you want to wait for a dollar weakness story, that makes it difficult. you have issues on the g10. within emerging-market, in spite of some of the value investors may see, i don't think this is a bank the table, we must buy iem. but it is still a reach for yields. go for the high-yield there's an you feel ok. there's a long-term side of that. than its regional trade. in asia, indonesia, philippines, over taiwan, singapore, becomes the better trade because you want to move away from the trade flows going on. nejra: basically, you'd rather

trading emerging-market currencies against each other rather than make any kind of convincing dollar play at the moment. in terms of risk sentiment, what is it going to sustain the risk rally from here? we talk more about it next, but just your thoughts. richard: we're still looking for a bottom in the data. i don't think we're there yet. i think you're looking through that somewhere over the next four to six weeks. you should reach the point where the data becomes less bad. it is the ego screen on bloomberg and still about number, but better than what we were thinking. then i think you're looking at several months of dovish central banks. that reinforces the recovery, and reinforces risk sentiment. i think when we get to the second half of the year, you would be surprised at central banks that now return to their hawkish sentiment, see that stabilization coming in. i think we'll be well into the summer before that happens. nejra: we'll talk more about

that in a second. we have to talk more about u.s. retail sales. richard kelly stays with us. let's get bloomberg first word news with debra mao in hong kong. debra? debra: the u.k. parliament has thrown out theresa may's plan to renegotiate brexit. anti-eu lawmakers in her own party refused to vote for the motion, abstaining in protest. the defeat stripped the prime minister of a mandate to make changes to her divorce deal. the jury twice seventh, some mps sometry -- february 27, mps will try to take no deal off the table. congress sent president trump the legislation he needed to avoid a shutdown. he is set to sign the bill if it know he's not happy with it. bloomberg learned he's also planning to use executive authority to spend $8 billion on the border wall, provoking a lengthy legal battle over presidential power. >> i had an opportunity to speak to president trump and he has

indicated he is prepared to sign the bill. he will also be issuing a national emergency declaration at the same time. and i've indicated to him i'm going to prepare, i'm going to support the national emergency declaration. debra: india has suffered its worst tariff attack since modi came to power. at least 37 paramilitary personnel has died on an assault in a convoy in kashmir. in pakistan-based terrorist group has claimed responsibility for the attack. prime minister modi is under pressure to approve a military response against india's neighbor. amazon is axing plans to build headquarters in new york. mayor de blasio says the e-commerce giant is throwing away a great opportunity. the decision comes after fierce opposition from some local residents and politicians. former goldman sachs ceo lloyd blankfein said the move against

amazon was both anti-progress and anti-democratic. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. nejra? nejra: debra mao in hong kong, thank you. today, we're asking the question, will an extension of the tariff deadline helped or hurt will equities? you can join the debate, ib+tv on your bloomberg. coming up, what's hot and what's not. we dig through filings of hedge funds. that includes a surprise bid for hilton's timeshare spinoff. that's next. when you're traveling to work, to into bloomberg radio or on dvb digital radio in the london area. this is bloomberg. ♪

nejra: this is bloomberg

daybreak: europe. i'm nejra cehic in london. let's get a picture of the markets. you're seeing weakness come through, asia-pacific index almost down .9%. concerns over a lack of progress in trade talks. not a huge surprise, the risk taken off the table after the rally yesterday. a little pressure on the offshore u.n.. -- yuan. cuts may be affecting trade. dollar on this front foot. u.s. oil under pressure. oou're a stocks futures als pointed lower. will a likely extension of a china tariff deadline helped or hurt global equities? you can join the debate. reach out to us on ib+tv on your bloomberg. let's get a bloomberg business flash. debra mao has that in hong kong.

debra? debra: fort and volkswagen are closing in on an agreement for self driving cars. bloomberg learned there has been a couple of breakthroughs, one of them a framework for vw to invest in ai. the automakers discussed of valuing the company at about $4 billion. allianz has raised its dividends, announcing profit in line with estimates. the german insurer yesterday announced 1.5 billion euros share buyback program. return moneyhe'll to shareholders if he can't find attractive acquisitions. one focus for allianz is turning around performance at pimco. that's your bloomberg business flash. nejra? nejra: debra mao, thank you so much. let's take a look at what's hot and what's not in the hedge fund world. bloomberg steny berger has been digging into the data. what have you found? dani: let's start with the key

trend. the fourth quarter was about protecting performance and seeking safety. here are the top three etf editions. you have your standard s&p 500 etf. the second two here, though, are basically funds they give managers short-term debt exposure. i also have the past three month performance of them so you see it definitely benefited managers , but still a safety play. in terms of the big names, we saw buffett completely exited his stake, also cut apple by 1%. let's dig into other tax -- tech names. onesf the more popular among managers was alibaba, specifically viking saw some additions. also spotify. managers -- spotify at a

breakneck pace. what are the surprise winners i want to get into our pretty interesting. the price of which in the right -- in the white. this is from hilton worldwide. in the blue, highfield capitals position. this chunk over here is what they announced. this should set and the new yellow position over here is from greenlight capital. that's worth $35 million. nejra: bloomberg steny berger, thank you so much. richard kelly is still with us. i want to pick up on the big picture point that hedge fund managers were busy protecting performers. many saw the values of equity holdings drop. is the rotation away from overweight in u.s. assets at a point to that you now would have expected? or more or less? richard: i think it's a necessary part of the cycle. a lot of this was fueled by fiscal stimulus through the last year. there was no ability to pivot

away from assets. as we're looking now, that driver is starting to fade. on valuations, equities are the most expensive in the world. talking about emerging markets, you want high-yielders, but and in asia and india are some of the most expensive. there is a chance of rotation out of assets, which is what's needed to get it going, which kick starts the economy. this is the necessary rotation that needs to happen. nejra: necessary, but what's going to drive the rotation? as you pointed to the dollar, yes it weakened, then rebounded right back. richard: valuations give it incentive. you still need the trigger. you're right. positive data used to be good for the u.s. and the dollar. going forward, it should be more positive for europe. brexit holds things up right now. a lot of u.k. assets are cheap. if we can result brexit, that gets u.k. assets moving.

back its sterling moving. now those violations across europe starts looking attractive. nejra: talking of data, u.s. retail sales puzzling. richard: one-month data, extremely poor across the board. what was a bit puzzling and interesting is if you look across the collapse of retail sales across the g10, it happened everywhere. this wasn't just a u.s. story. nejra: ok. so, that's the retail sales. you're not so concerned right now. where are you seeing signs we could see a pickup in the data? what about credit conditions? a concern to you or ok for now? richard: i think we're okay. when we got the senior loan officer survey to tell us what banks were doing, we saw a sharp deceleration to neutral. wasn't a tightening, but we saw easing come off.

i think there's still plenty of credit there to meet the demand. that's what you're looking for, is there a shortage of credit for those looking to invest in business opportunity? we haven't seen that. we're not restrictive on that. the data has been ok. most interesting, going back to german factory orders, you start to see the sales pick up. even though they were bad numbers, the guts to you we should be looking for a rebound in industrial production in germany, and broadly, in europe next month. it's going to be more europe led than u.s. led. pricing in is the terms of premiums and real rates in the u.s. telling you about rebounds in risk sentiment? richard: it's still not there. you can pivot that into breakevens. we've seen a rally in equities. we've seen progression in trends, but it remains low. markets don't see the level of

policy rates from central banks as appropriate. they're too tight, and that's the reason you will have to see persistent dovishness for some time until markets reach better traction. nejra: dovishness brings me onto inflation. global investors are not used to upside surprises judging by this chart i've got on the bloomberg now. is there a risk of an upside inflation surprise? you revised down your g10 10 year yield forecast, so my guess is perhaps not. richard: i think that's what happened. there were lots of fears the last six to nine months that this acceleration in which growth in the u.s. and a pickup in inflation was going to give us upside risks to these forecasts in 2019. as we got into november, december, those risks seem to have dissipated. neville we sitting growth seems to reinforce -- now, what we've seen in growth seems to reinforce that. i think it's telling us we're

still in this regime. it's different from upside surprises. we're still in a sluggish recovery. nejra: 10 year yield, you see where? richard: 2.85 is the cap. nejra: 20 basis points higher than where we are now. richard kelly stays with us. break some news here. 2018 comes in at 15.3 billion euros. billionmate is 15 to 2 -- 15.2 billion euros. that is a comfortable beat. 15.27 billion euros. momentum increasing for a government-backed fix for edf, offering a hope of resolution for fundamental problems, ranging from low-power prices to aging nuclear power plants. coming up, is the u.k. backing down on the next up? after theresa may suffers

another defeat, we'll bring you the latest from westminster and brussels. that's next. when you're traveling to work, listen to bloomberg radio. i'll be there. this is bloomberg. ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers. "activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast.

nejra: optimism has limits when it comes to trade talks. 24 hours ago, we were seeing optimism and equity markets. not so in asia today, a sea of red as concerns mount over the progress between discussions with the u.s. and china. let's check in on the markets around the world. joining us in mumbai is near tie, and here is dani burger. what's dominating the indian market today? it's not all about the trade talks, is it? we had an unfortunate attack hitting some of these markets. unfortunate, for sure. probably not wooing the markets

as much. but unfortunately, what's happened, and before i get to the markets, just a brief mention here, there's a press briefing that the prime minister had this morning. i think amongst the most notable comments made was that the military has been a freehand to decide what is proper. that's the key takeaway here. don't expect to see the end of it and should not. that's the key message from india on the terror attack yesterday. onto the markets, about .75% in the red right now. maybe the trade talks not moving ahead as planned. i was reading that the markets to be about .75% for the benchmark indices. but the idiosyncratic factor is tons. spit take it -- specific factors related to markets, some

observations -- as a result of that, the pharma index is down about several percent, a very steep gash. from a specific sector perspective, watch out for pharma. weakness in india markets, today for sure. nejra: thank you so much. dani, you're looking at the rally in brent. curious because we are seeing a correlation between equity markets and oil in the past few days. equity markets are down. oil is up. what's happening? dani: the reason equity markets are down is trade concerns. but that's not impacting oil. a very interesting break in the correlation. i'm going to channel my best and reporter and and take you through brent -- annmarie hordern and take you through brent. this is a 4.7% rally in brent. a lot of this comes down to the opec plus cuts, russia recently

joining in, saying they will accelerate the pace, that they will reduce output. for now, that's overshadowing geopolitical tensions we're seeing. other metals not as lucky. i'm looking at industrial metals . they had a really positive january, the best month in a year. check out what's happened the past seven days. consistent days. this is the longest streak we've seen of declines since 2017. unlike brent, a lot of trade tensions, as well as worse than expected u.s. data yesterday weighing on the industrial metal outlook. dani, thank you both so much. today, we're asking the question, will an extension of the china tariff deadline helped or hurt equities? you can join the debate. reach out to us on ib+tv on the bloomberg. let's get bloomberg first word

news with debra mao in hong kong. debra? debra: there are few signs of progress in trade talks. time is running out to reach an agreement that will avert an increase in u.s. tariffs on chinese goods by march 1. president trump says he's open to delaying the deadline. it may take a meeting between the president and china's choosing paying to seal the best xi jinping to seal the deal. factories accelerated for a seventh month, adding to concerns about inflation. it rose 0.1% in january. concerns are mounting of the impact this might have on industrial profit. they started falling late last year amid a slowing economy. congress has sent president trump the legislation he needed to avoid another government shutdown. he is set to sign the bill even though he isn't happy with it. bloomberg learned he's also planning to use executive authority to spend $8 billion on

the border wall, the move risk provoking a lengthy legal battle over presidential powers. the trump administration is considering the next power to blocking nicolas maduro. it may block entities from dealing with venezuela. the u.s. is also bracing for of possible bankruptcy filing, and american refiner joined by venezuela. amazon is axing plans to build a headquarters in new york. mayor de blasio says the e-commerce giant is throwing away a great opportunity. the decision comes after fierce opposition from some local residents and politicians. former goldman sachs ceo lloyd blankfein says the move against amazon was both anti-progress and anti-democratic. global news, 24 hours a day on air and at tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. nejra? nejra: debra mao in hong kong, thank you so much.

now let's get the latest on brexit. six weeks to go, theresa may preparing to compromise over the irish border. bloomberg learned the brexit secretary told its eu counterpart britain is not trying to open the withdrawal agreement. yesterday saw may suffer another defeat in the house of commons with lawmakers throwing up her plans to renegotiate brexit. let's speak to our team on the ground. maria tadeo is in brussels. russell and, let's start with you. good morning. this was a nonbinding vote. so, outline for our global audience why this matters. ross lend: it is symbolic because it was nonbinding, but it was also meaningful. what theresa may is seeking to do is to present a united front to brussels. parliament is behind me, lawmakers are behind me. they endorse my approach and they are going to give me free reign to negotiate with you. that's what didn't happen last

night. arguably, it does weaken her position with two weeks to go to present something to parliament to get a change to that deal. nejra: what is the likelihood of parliament taking control of the process and delaying brexit? all comeswell, it down to how parliament votes on federate with a seventh and whether at that point parliament -- with on february 27 and whether at that point -- we also they extend brexit. right now, her priority is to get a deal, have an arrangement for the end of march. given her results of a no deal brexit could be catastrophic for businesses, people are talking stockpiling and worrying about that. it does make sense to have a backup, which would be to delay brexit for several months.

that's definitely still on the table. nejra: maria, ros was saying this leaves theresa may weaker in the eyes of brussels. but does the u.k. actually still want to renegotiate the brexit deal? i've been reading reports that suggest otherwise. maria: two things. in the eyes of the european union, and this is a nonbinding vote, this is a weak prime minister who is unable to get a majority. and that is so key for the european union. you need al you positive majority and the u.k. parliament. likes to be seen and there's still unable to the skeptic side of her own party. in terms of concessions of renegotiating the deal, publicly, the prime minister still very defined. she said she won't extend article 50 and she will deliver

brexit on time. , behind the scenes we do here the u.k. has now almost conceded it won't be able to renegotiate the deal. it won't be able to get the concessions the prime minister may need and that will have to settle for a very european compromise. that is good news for the eu, you could argue, but bad news when it comes to the deal getting through the u.k. parliament. nejra: thank you to our team on nde ground, rosalind adn maria, thank you both so much. let's get the thoughts of richard kelly. has the market fully priced in the risk of a no deal? i've asked this question so may times, but i feel it's still relevant. richard: no, it hasn't. the market has given up trying to trade brexit. we're sitting in some range of the middle of where we could end up in the market doesn't know what to price itself. nejra: what do you advise at toronto dominion?

look elsewhere to other assets? avoid cable? richard: that's what's happening. anyone who doesn't have to be involved just isn't being invested. that's where we're at. there's no way we're going to finish on time. let's say we get to a deal at some point. you could see sterling back to 135. that's significantly away from where we are here. but with no deal and the chaos that comes through that, still looking at 5-10% downside. there's no way to position for that. nejra: earlier, you were saying you lowered your year-end forecast for g10 rates. what about gilts? does the bank include gilts? richard: so i mean, our year end target is still premised on a deal. politics is not a linear process. it's not a fun process. through the sausage making, we might get some sort of deal.

because this has taken so long and certainly persisted, the ability and the need for the bank of england to hike twice isn't there anymore. that was confirmed by the boe. we still have another hike. once this gets cleared off summer between march and june, the boe is able to step in and provide another hike. that gives us another 30, 40, 50 basis points because they haven't been able to participate in markets at all. nejra: meanwhile, tenure bunds, you see ending -- tenure bunds you see ending on 25 basis points. you see a deeper rate hike by the ecb by the end of the year. this is while you're saying central banks are turning dovish globally. why would the ecb hiking globally while data in the eurozone has been poor? richard: we are setting as ourselves up for a tale of two halves. there's no reason for draghi to sound hawkish and discuss that right now. we come into a march meeting,

one where he continues to be dovish. having that's the big debate, but he can save that for april or june. as the data starts to turn around, it could be as soon as next month, that starts to build over time. i think we shouldn't discount the ability and the potential interest in the ecb and governing council to move negative rates. there is a debate whether negative rates are good or bad at this point in the cycle. we know they are costly for banks in terms of what's going on. there's a lower hurdle for the ecb to provide that tempo rate hike, still at a gradual pace, but end of year is feasible. we go to 2004, the last time they started a cycle the exact same way. the fed was hiking, the ecb was going to hike. we had poor data at the turn of the year. the ecb got dovish, announced downside risk, still hike to by the end of the year.

we're in a similar cycle. we've seen this before. still needs the data to deliver. nejra: you do think they can manage the markets between now and the end of the year. the market is not pricing in what you're expecting. also, take your point in terms of you've written some research about the impact on the transition mechanism from negative rates. why would the ecb, to placate the markets, not raise the depot rates? or do you think they will introduce helped rose? richard: i think it's sitting on edge.'s -- knife's i think the argument is to start to win the market off mediation. when you talk to investors, there's still a deep divide their. those in the market are still concerned about going into the market and not have ecb funding. investor side is still saying we have cash that needs to go to work. not convinced if you had to find yourself in the market you're

going to have a significant borrowing cost. i think this market is strong enough to withstand some of that. the other side is, a lot of this is pushed by regulatory issues. lcr, funding ratios, this is sort of the reason the markets say june is the deadline. below a one-year window, it changes the way regulators look at it. but it's not binding yet. it's still until june 2020. by that point, we're in a different growth environment. if negative rates are gone, do we need this liquidity? i'm not sure. nejra: we've talked ten-year bund yield. where does the euro and the year? 124, but that requires brexit to go well. i'm not under the impression it's a low hurdle together, but the dominoes are set up correctly. nejra: richard kelly, head of toronto strategy dominion bank,

thank you for joining us. he will be considering discontinuing the -- continuing the conversation with us. raises dividends more than expected. we go live to the cfo of allianz. that is next ♪ -- that is next. ♪

nejra: this is bloomberg daybreak: europe. i'm nejra cehic in london. breaking news. the red headline on the

bloomberg is the fourth quarter adjusted net comes in at 1.4 6 billion euros. that is a very comfortable beat on the estimate of 1.4 8 billion euros. what we looking at here is a for your dividend of 83 euro sent. 15y and us targets on march -- and us targets on march 15, and fourth quarter production comes in at 1.488 euros per day. fourth quarter adjusted net at a beat. continuing the theme better than expected numbers of a lot of these oil majors. let's check in on some of the price action. stocks in asia retreating from the highest levels since october as chances of a breakthrough in u.s. china talks diminished. the pound weakening as prime minister theresa may lost another round of exit voting in public -- brexit voting in parliament. we did dip lower 128 and the session.

oil heading for its biggest weekly gain in a month as opec plus supply cuts counter trade worries. now, allianz has raised its dividend and said it's targeting 2019 operating profit between 11 billion euros and 12 billion euros, after the largest insurer announced a share buyback as much as 1.5 billion euros. joining us from munich is the cfo of allianz. great to have you with us on the program. thank you so much for giving us some of your time. so raising the dividend. you've also announced the buy back, essentially returning a fair amount of capital to shareholders. what's led to these decisions? morning, andod very pleased about 2018. we had an increase of 4%. we had an increase in net income of 10%. we had an increase of dividend share of 12.5%, and in increase

in the earnings-per-share's of 14%. if you look at the metrics, they are very strong. we had strong capitalization of liquidity and clearly and so we have a policy where we like to do m&a the same time we andapital appreciation replace 1.5 billion euros of buybacks. over the course of 2018, we had about 2 billion of acquisitions. it's really a combination of strong performance, and then we combine this with external growth and also with display in capital management. this explains why the second numbers not so good on oil dimension. nejra:, ok you mentioned m&a and sort of suggested while returning capital to shareholders, it doesn't necessarily mean you'll be holding back on m&a.

tell me about your plans for m&a in 2019. giulio: you know, i would just like to speak about what we did. we -- major018, acquisition. like --did acquisitions then we did acquisitions and continents like africa or asia, so we're looking at growth we might have 10 years down the road. i would say for 2019, you might look at something along the lines. it's really a combination between acquisition and whatever we have available, we are very happy to invest in our set because every time we do a buy back, we're investing in our self, and we believe there is good reason to invest in allianz. nejra: ok, understood, thank you.

can i also ask you about inflows or outflows from pimco? what is the picture there? what do you see in terms of inflows or outflows? giulio: yeah, when you look at 2018, we had pimco outflows of about 8 billion. when you look at quarterly development in 2018, we had good quarters and then we had weaker quarters. the last quarter was indeed more difficult. we had about 30 billion of outflows in the fourth quarter. but as we go into the first quarter of 2019, we see that we get back to positive influence. one thing which is very important to highlight, we always look at the inflows and outflows. but i think what is really crucial is to look at the margin, which is about how much revenue you do at of the business that you bring in. and when you look at the managing for pimco and agi, you

can see that it's going up. and it's going up, more or less, on a quarterly basis. so we see a lot of quality of the business. and this also explains why last year, our revenue went up. 6%.d revenue went up about and this is growth operating profit of about 7%. very good fundamentals, and yes there is some volatility, but fundamentally the business is developing really nice. nejra: ok, i fully hear your positive story and your positive outlook for 2019. not to focus too much on the negativity and the difficulty of the fourth quarter, but bear with me. i would like to know more details about the outflows. what regions and strategies were hardest hit? giulio: you know, when you look at the region, it's mostly

europe and a little bit of asia. but europe was mostly affected. and when you look at the strategy, i would say the traditional strategy. when you look at the alternative strategy, you see positive outflows. i would say the plain vanilla strategy and the european business has been more and more affected in the u.s.. when you look at the flows for 2018, they've been positive. nejra: ok, and you've talked about the fee margins going up. let me ask you about pricing in property and casualty. is it high enough? have a you know, we combined nature of 94%, which is a very good come by nature, especially when you look at the retail business. it's better than 94%. some would say the pricing is definitely solid.

and when we look at the environment as we go into 2019, i would say it is benign, so depending on the country, depending on the business, you see either stable rate environment or you see a positive rate environment. so i would say, in general, a good pricing situation, also with some upside, one area of focus is the industrial business, where we know that prices in constraints over the last year's and now we see better momentum as we go into 2019. nejra: ok, thank you so much for joining us. of -- of cfo of allianz, great to catch up with you. a few signs of progress in negotiations this week. we'll talk trade next. markets taking a hit in asia. and in terms of futures, just over an hour from the start of

cash equity trading in europe. european futures lower, as well. bloomberg users can interact with the charts using gtv . this is bloomberg. ♪ this isn't just any moving day.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today.

cehic. the u.s. and china failed to narrow the gap on key trade issues. stocks in asia fall. shutdown averted, congress approved a spending package, president trump is expected to sign the deal, but could declare a national emergency to fund a wall. valentine's day revolt, the parliament throws out theresa may's plans, time is running out.

good morning. under an hour from cash equity trading in europe. a lot of breaking news on the bloomberg terminal. rbs numbers are out. numbers from the royal bank of scotland, fourth-quarter pretax operating profit for rbs comes in at 572 million pounds. the estimate is 371 million pounds. that is a comfortable beat on the fourth quarter. rbs intending to pay a 7.5 pence dividend for 2018, that is the red headline crossing the bloomberg. the other headline is on that pretax number that i just gave you. looking at the other numbers, the four-year net interest

income comes in at 8.6 billion pounds. fourth-quarter net interest income at 2.8 billion pounds. that is of the on the estimate of 2.17. operating pretax coming in at a big beat. let's get to other headlines. out of china, we will keep an i on trade talks, the reality is setting in for markets. atna, new loans coming in 3000 the estimate was billion, that is more loans than expected. credit easing is a question we can ask. those are the china headlines. there are more headlines coming

through on rbs that i am keep an eye on. over the 12% goal, and that is the latest. also have to get the car sales. the u.s. and china trade issue, we must not forget europe and the prospect of auto tariffs. european auto sales down in january for a fifth drop in a row. it is not a pretty picture for the european car market. let's get to the markets. an hour fromer cash equity trading. there seemed to be optimism yesterday on the prospect of an extension of the deadline on march 1. why is everyone getting excited, that prolongs the uncertainty. will they really come to an answer on structural issues in 60 days? today we get a reality check.

asia down, futures down in the u.s. retail data in the u.s., the worst drop in nine years. a 265 handled today. we are not seeing a huge amount of movement in europe. yesterday the 10 year bond yield dropped. it looks like there could be a wide.of boom spread overall the trend is toward money moving out of bonds. futures steady. juliette saly is in singapore. good to see you again. has anything changed in the past hour in terms of the risk off sentiment? juliette: not really. the optimism from yesterday

seems to have faded. weakness coming through in japan .ith a drop of 1% on the nikkei a terrible day in hong kong, every stock on the hang seng is in the red. we have comments from prime minister modi in the last couple hours condemning the attack on kashmir. 0.8%. markets down by a slightly brighter day in australia, but asian stocks on track for a gain of 0.5% after highs earlier in the week. in terms of assets we are watching, the rupee, indian bonds slid following comments from prime minister modi, and the finance minister. we have seen more momentum coming into the rupee. it is weaker against the dollar, but not the lows we saw earlier in the session. perhaps the r.b.i. has been

intervening to keep it from plummeting too much. the trade deficit widening more than expected. nejra: juliette saly in singapore, thank you so much. time is running out for a deal between the u.s. and china to prevent a ramp up of tariffs. there are few signs of progress. the sides are split over emand forn's d structural reform to the chinese economy. joining us now is paul markham, director, newton investment management. great to have you with me. you probably heard me saying i was skeptical yesterday about the risk on in markets, and we get risk off today he read we cannot put too much weight in daily moves.

be looking to you increase risk now or take it off the table? paul: there are a variety of things moving around the world. on that subject, the beginning of the week was hopeful for markets, and we saw positive rhetoric from the u.s. government and the president. as the week has gone on, it has become evident that the u.s. is looking for structural change as to how the chinese economy and relationships are conducted. that is something we should not expect a change. the chinese offering to buy more, oddities -- more something thes markets would see is positive. we will probably get a modest positive reaction, but given the fact the global economy may be

peaking or have peaked, a little caution is warranted. nejra: you slightly answer the question, i will ask anyway. , will ation on mliv likely extension of the china tariff deadline helped or hurt global equities? paul: i think in the near-term it will have an impact on the positive side but will wear off. i do not think an extension does anything but kick the can down the road. off theolution is not table, and that is good. ,e may be subject to other news particularly brexit. nejra: you underweight autos, is that to do with trade or are there other issues? paul: it is part of the story. to selling into china, and that is based on

valuations. on the whole we have felt the gradual deterioration is a concern. there is particularly huge changes structurally in the auto industry over the next several years. the consumer does not seem to be embracing the move to ev's and different forms of vehicles which we will see in the next 10 to 15 years. the auto industry has capacity and antiquated production techniques and distribution models which do not look attractive to an investor. we are happy to be underweight, but we feel a chinese moelis they give the opportunity to draw upside from the e.m.'s in china in the near-term. nejra: are you looking for opportunities to the upside as well in other sectors or equity markets if we get a positive resolution to the u.s.-china trade talk? the knee-jerk reaction

will generally be to purchase economies with direct commodity exposure, and on a fundamental basis, that is not necessarily the best retreated trade. globalnese domination of markets is falling away somewhat. that may be a tactical trade. the chinese consumer is the place to be exposed given the government has a desire to grow the middle class, and that should be the longer-term opportunity. nejra: does that lead you to eurozone companies in the ?onsumer discretionary space i do not know what you are looking at luxury stocks or other industries, maybe i.t. companies in the eurozone that have had exposure to china. paul: the euro zone does not offer much in terms of i.t., the u.s. tends to dominate that space. there are stocks that can give you exposure to that.

staples, access to cosmetics ifld be good growth areas the chinese consumer grows. certain beverages, high-end beverages can work well, in india as well as china. there will be interesting areas. an escalation of difficulties between china and the rest of the world with regard to products used in that space. that may not be a good place to be in. nejra: the week inflation reading we have out of china, that raises concerns about corporate profits. is that good for the consumer? it would not be because of wage growth not picking up. aspects,re are two inflation has been subdued, and coming in lower than expected. it does give some space

potentially for the chinese authorities to be stimulative regarding monetary policy. it has been their policy to slow credit growth, that has been a concern. room.ay get some wiggle the difficult they have a stimulating the economy into a strong real estate market. the real estate market has become the proxy for the chinese investor since the equity markets have been unkind to investors over the last few years. look toorities will form a balancing act from consumer credit and nonsecure than, rather household or mortgage loans. , maybell tread that line not as much as in the past. nejra: thank you so much, paul markham, director, newton stays withmanagement

us. now debra mao in hong kong. the u.k. parliament has thrown out theresa may's plan to renegotiate brexit. lawmakers in her own party refused to vote for the motion, abstaining in protest. .hey demand changes some mps will try to take no deal off the table if they an agreement. congress has sent president trump the legislation needed to avoid another government shutdown. he has set to sign the bill leave and though he is not happy with it. trump is also planning to use executive authority to spend $8 billion on the border wall. worsthas suffered its terrorist attack since modi came to power. the death toll climbed to 41 after the saldana convoy in

kashmir. a pakistan group has claimed responsibly for the attack. prime minister modi is under pressure to prove a military response against its neighbor. plans to build a new headquarters in new york. the e-commerce china is throwing away an opportunity after fierce opposition. lloyd blankfein says the move against amazon was anti-progress and antidemocratic. global news, 24 hours a day on air and at tic-toc on twitter, powered by 2700 journalists and analysts in more than 120 countries. nejra: debra mao in hong kong. thank you. the world bank says half of nigeria's 200 million people live below the poverty line of $1.90. the poll iniew africa's biggest economy, that is next. this is bloomberg.

♪

nejra: 7:17 a.m. in london. 22 minutes from equities opening in europe. in london.cehic risk taken off the table today. rbs, the key line, fourth-quarter operating profits pretax coming in a live hundred 72 million pounds, a comfortable beat on the estimate at 371 million pounds. rbs intending to pay a special dividend for 2018. in terms of beats, i talked about fourth-quarter pretax operating profit being a beat, net interest income also a beat. total income in terms of the miss, it came in a little soft. impairments expected to

increase in 2019. let's turn to nigeria, the economy has recovered from a recession in 2016. that is the claim by the president. a televiseding in speech ahead of tomorrow's election. the vote is expected to be close . for more on the ramifications in nation, we are joined -- who is likely to win? reports are unreliable. close contest. a the president is likely to emerge as the winner. outcome --

[indiscernible] nejra: what is the atmosphere on the ground, violent or calm? electionsn [indiscernible] so far it has been calm. some deaths recorded during [indiscernible] they look for peace and order during the election. nejra: thank you for joining us. a note on nigerian stocks, they have lost the most globally. we have seen a little of a

recovery. let's get the bloomberg business flash from debra mao in hong kong. news out of the filings, berkshire hathaway has shaken up portfolio. it stake in apple, and exited a $2 billion stake in oracle. 2018ent the second half of -- is not the only company having a hard time in new york. elon musk spoke to city officials about connecting jfk international airport with manhattan via a tunnel. it has been considered a holy grail for commuters. nejra: debra mao in hong kong. let's get the latest on brexit. with six weeks to go, the exit

secretary told his eu counterpart that britain is not trying to reopen the withdrawal agreement. yesterday saw theresa may suffer another defeat in the house of commons with lawmakers throwing out her plan to renegotiate brexit. paul markham, director, newton investment management is still with us. you overweight the u.k.. when i talk about it, why not? paul: we overweight companies that are located in the u.k., they have a good repetition for good government, for being time zero, english-speaking, everything that makes it easy to do global business. tailwind for great companies. when it comes to domestically focused parts, it continues to be our belief the u.k. economy is likely to have headwinds in

the coming years. it is generally a cyclical economy anyway. if you add the uncertainties, it makes the prospects of the domestic u.k. economy less risky. nejra: do you see sterling rallying hard enough to affect review on those big global u.k. companies? paul: if we had some form of market friendly resolution, and norway plus, or a second referendum which looks unlikely, we would see serious reevaluation of sterling. in that situation, the ftse would be better. that would change that view. unlikely that we get the second referendum, or even

something more i can to a soft brexit -- more akin to a soft brexit. you have caution as well on the u.s. you wonder wait the u.s. but you have been for quite a while. that is what i find interesting. before the selloff in the fourth quarter, why the lack of interest in the u.s. markets? paul: it is a large part of and thatpitalization, means there are quite a few companies with the u.s. which are more attractively valued. we have been overweight in certain areas within the u.s. market, notably technology, which has been a strong performer over a multiyear period. u.s. domestics are harder to come by, one might invest

heavily in retailers, they have strong structural headwinds. we feel there are opportunities around the world that means the u.s. does not have to be in an overweight position, but half of our global capitalization weight. the retail sales data we got yesterday, and a lot of people say do not focus on that, but it was ugly nonetheless. japan is one of the places you see opportunity. people talk to me about the second or third derivative effect impacting japan. why are you positive on it? paul: we see it as a self-help story on the corporate side, many are willing to accept. we feel the crosswinds from china are significant. also the fact that if we see global industrial production start to roll over, that will be

a problem in japan as it is for germany. the big advantage japan has to set its own monetary policy, and the boj has continued to be pedal to the metal in regards to his attitude to liquidity and interest rates, but also corporate governance. governance in japan in the past was poor. we believe now they are showing transparency, shareholder feminists, the ability to report clearly which we have never seen in the past. nejra: great to speak to you. next i will ask you why you underweight europe. some people make parallels between europe and japan. thank you paul markham, director, newton investment management, great to have you with me today. that is it for "bloomberg daybreak: europe." the european open is next. we see futures falling a little lower. risk off today. tune in to digital radio on your mobile device in the london

area. this is bloomberg. ♪ the latest innovation from xfinity

isn't just a store. it's a save more with a new kind of wireless network store. it's a look what your wifi can do now store. a get your questions answered by awesome experts store. it's a now there's one store that connects your life like never before store. the xfinity store is here. and it's simple, easy, awesome.

"bloomberg markets: european open." we are live from our european headquarters here in london. alongside mattds miller in munich for the securities conference. matt: good morning, the markets say the devil is in the details. stocks falling around the world, weak economic data shows no sign of an end. talkshina trade wrapping up with little progress. cash trade is less than 30 minutes away.