♪ >> good morning from bloomberg's european hecklers in london. this is "bloomberg daybreak: europe." diverging fortunes. facebook shares on rising sales and optimism over a privacy investigation. it's a different story at tesla after a cash setback. the dollar hit a four-month high as u.s. stocks trade near records and the outlook for other major economies darkens. banks bonanza. profits beatsrter estimates. we speak to the ceo, sergio ermotti. barclays is next to report. don't miss our exclusive ceo, jesion with the

staley. ♪ good morning, everyone. welcome to "bloomberg daybreak: europe." we have got a lot of breaking to get through for you this morning. , just start with swedbank hitting the tape right now on the bloomberg. what we see is first-quarter net interest income for swedbank coming in at 6.4 2 billion swedish krona. is a little bit of a mess on the first-quarter net interest income. taking a look at other headlines coming through here, so swedbank is establishing a dedicated anti-financial crime unit. the interim ceo saying that capital and liquidity position is strong. it is also swedbank making changes in the group executive committee and more of the numbers coming through.

first-quarter net income comes in net 5.2 7 billion swedish ofna, beating the estimate 4.8 billion swedish krona. again,erim ceo commentary coming through saying that first-quarter costs rose amid the investigations. we are familiar with those challenges in terms of the investigations into financial crimes. swedbank establishing that dedicated anti-financial crime unit. we will bring you any more lines as we get them. let me move to. nokia and see what we have here as these numbers come through. toia talking about a puts it test a particularly week first quarter -- nokia talking about a particularly weak first quarter. you are looking at 59 million euros. it was estimated to have a profit of 282.7 million euros.

it is reported a first-quarter adjusted operating loss. it still sees for your adjusted levels and the full-year operating margin as well. the first quarter not looking so pretty, according to these numbers. the red headlines, the first-quarter adjusted loss per share coming in at two euro cents. that is coming in soft as well. the first quarter adjusted loss per share. that is some of the news breaking right now. let me recap what we got from ubs a few minutes ago. first quarter turned out a bit better than investors may have expected after sergio ermotti's dire outlook last month. the bank saying that the market environment improved since late march. basically net income of $1.14

billion beat analyst estimates. wealth management attractive more than $22 billion -- attracted more than $22 billion in new money. this is after the surprise good news on the trading unit in credit suisse. the first-quarter pretax came in at $1.55 billion, beating estimates. onre was a beat first-quarter pretax. strongillion was a very beat. the firstflows in quarter for global wealth management of $22.3 billion coming in as a focus. ubs sounding the all clear. you can follow all of this on the tliv blog. this is something you can follow with the commentary from our colleagues at bloomberg news.

also coming up, we speak to the chief executive of it ubs, sergio ermotti. the interview is coming soon. on aank is reassuring share buyback program aiming to resume buybacks this quarter. that is also key. measures to mitigate the market headwinds should come in the second half of the year and support the capital return plan. lots to get through in the markets. we hit that record high on tuesday, pulled back a bit from that in the u.s. equity market. we are up 0.1%. to 10 year yield is unchanged. -- the 10 year yield is unchanged. we had that move away from the hawkish bias from the bank of canada. we have that cpi miss in australia and in europe we had confidence in germany and france pushing the euro to an almost two-year low. the 10 year bond yield went back into negative territory. the weakness in the euro perhaps

one of the reasons we see such dollar strength in today's session. the bloomberg dollar index at a four-month high. how much of that is about greenback strength and how much of it is about weakness everywhere -- elsewhere? let's check in on the markets in asia. juliette saly in singapore has more for us. great to have you with us. talk us through the risk appetite, or not, in asia today. juliette: [laughter] a little bit mixed. you have certainly seen japanese stocks start to rise higher. the nikkei up by 0.5%. there was no change from the boj theyy, as expected, but did say they are considering a facility to lend ats their hold theirestors -- atf's hold to investors.

because beat is weaker -- the kospi is weaker. the australian market, ignore that, that is yesterday's move. we have seen some weakness coming through in chinese stocks in the latter part of the afternoon. hong kong trying to get into positive territory and that's important, because it has been on this very long losing streak. let's have a look at some of the stocks we have been watching in detail. speaking of hong kong, a liquor %,ker is down by about 0.4 despite bank of america merrill lynch upgrading their price tag. their first-quarter results came in better than expected. hitachi also in focus and japan. it is considering selling its stake in hitachi chemical. another player in japan, the worst performer up by almost 10% , stanley electric lighting

equipment. you have some his is that mrs., it's -- some misses, some hits. a very busy day for asian investors. nejra: always busy for you. is very busy for us as well with all of these earnings. thank you, juliette saly in singapore. shares surged in after-hours trading after the social media group posted robust sales growth. asides after it set billions of dollars in legal expenses related to a federal trade commission investigation. >> to the ongoing settlement discussions we are having with the ftc, this matter is not resolved. the actual amount of payment remains uncertain. we are estimating its range to be a billion dollars-$5 billion. $3annot comment --

billion-$5 billion. i cannot comment further. nejra: a different story at reopens theon musk door to raising capital after the electric carmaker posted a bigger than expected loss for the first quarter. shares dipped before closing flat in extended trade. joining us to discuss from tokyo is bloomberg's global business editor. dave commitment to have you with us. elon musk -- dave, great to have a with us. what was the real surprise with these results? >> there were a number of them. the numbers themselves were surprising. they missed their targets, came in under analyst expectations. the loss was larger. the biggest surprise was that here we are in the middle of the next quarter already and there is still not a clear-cut plan for clearing up these problems. the big issue in the previous

quarter was deliveries were off. deliveries of the model three, especially sales abroad. there were logistics difficulties, and yet nothing about whatr tesla exactly is being done to prevent that. was this just a force of nature? the company made some missteps in delivering these vehicles. for a global carmaker, especially one selling cars this technologically complex, logistics is a very important point. it's not easy at all to have his global supply chains and deliver vehicles all over the world. investors need to know that has been cleared up and need to be convinced that these deliveries are going to pick up as projected. are no longer in a position to say next quarter is going to be better and have investors believed them. nejra: thank you so much to bloomberg's asia media business

editor joining us from tokyo. joining us now is lena komileva, chief economist and managing director at g plus economics. we are deep into earnings season in the u.s. and europe. we saw yesterday u.s. stocks pulled back a little bit from record highs. is that a sign of more to come? is the best over? lena: we are in extremely binary markets at the moment. you have this increased optimism about the general environment. we have some signs of receding geopolitical risk. there are signs of progress on the u.s.-china trade talks. brexit has been pushed back. there is also the receding volatility at record lows. the turmoil of the fourth quarter is far behind us. we have got evidence that the worst case, recessionary default scenario, is not going to materialize.

, the goldilocks combination of extremely easy monetary conditions, depressed volatility, and a stable and strong global growth environment seems to be doing the trick. having said this. , we have had a double-digit increase in equity markets since the start of the year against the backdrop of stabilizing growth. it has come with price-to-earnings growth also rising in double digits. there has been a valuation increase without the fundamental increase. the concern is that this is all central-bank engineered. even pricing a fed rate cut, how much more can stimulus be delivered in the margin? i think it's good the markets are pausing for breath. we don't think we are going to get a meltdown. nejra: got it.

stabilization, not a meltdown, with a possibility of india correction -- a deep correction. you already talked about the goldilocks scenario. let's dig more into earnings. s&p average post earnings gain or loss can be quite clearly seen. it is being interpreted as iraqi rockygs season, you -- a earnings season. are earnings more vulnerable to downgrades and add to your thesis that we will see a market correction later in the year? lena: great question. we started to hear -- the year with a very low base for expectations. it's ridiculous that only four weeks ago we were pricing a recession risk. now we are talking about a potential melt up and risk assets. this kind of binary risk is a reflection of the fact that it's

not in a normal distribution environment in terms of portfolio returns. we have high deficit, high debt economies. hand, we have this right-hand tail risk of excessive market returns when that stimulus is reconfirmed. between these extremes, it can go some way to explain how we have had this enormous turnaround in the last six months from a contractionary recessionary surge in volatility eerieds a real piece we have right now. the euro zone just one shock away from a recession. china is still a question mark. nejra: lena komileva, thank you so much, chief economist and managing director at g plus economics stays with us.

let's get the bloomberg first word news with debra mao in hong kong. >> as brexit chaos continues, lawmakers in theresa may's own party are asking her to provide a clear timetable for her departure. this gives the prime minister a little breathing room. they shied away from a change in party rules to make it easier to oust her. scotland's first minister calls for a new independence vote within the next two years. president donald trump has shifted the u.s. stance on libya. in a phone call with a libyan warlord, he reportedly backed an assault on the country's capital. this would have opposed the internationally backed government. the white house put out a statement. agreedese court has to release carlos ghosn from court for a second time. the bond was set at ¥500 million.

the former auto executive could be released as soon as today. prosecutors are appealing the bail ruling. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra: debra mao in hong kong, thank you so much. coming up, we speak to the chief executive of ubs, sergio ermotti. taley,we speak to jes s the chief executive of barclays. don't miss that exclusive conversation after 7:00 a.m. london time. this is bloomberg. ♪

♪ nejra: this is "bloomberg daybreak: europe." i am nejra cehic in london. we are drafting a little bit on the msci asia-pacific index, though we are holding near a two-week low. there is a little bit of a mixed picture. the yen and little bit stronger,

which is interesting, because overall we are seeing dollar strength. hardening its pledge to keep interest rates ultra low into 2020. weakness coming through in the korean yuan, trading its lowest since 2017. i mentioned the dollar strength. a lot of that was down to euro weakness yesterday. nasdaq futures on the front foot. we had tech earnings positive. facebook and microsoft earnings, even though we are seeing s&p 00 ebitda futures not as high. today we are asking the question, will dollar-yen trade 1.14.at 1.10 or let's get the bloomberg business

flash with debra mao in hong kong. quarter turned out better than many expected. chief executive sergio ermotti had warned of one of the worst quarters in recent history, but the swiss bank attracted more than $22 billion in new money to its key wealth management division. thomas that tesla would -- promise that tesla would stop losing money turned out to be premature. the company is opening the door to more capital after posting a bigger the next update lost for the first quarter. tesla is planning as much as $2.5 billion in capital expenditures this year, more than the amount of cash on its balance sheet. now to a bloomberg scoop. on amazon team auditing alexa commands can access the home addresses of customers. it can also access a host of user data.

there is no indication amazon employees have tried to track down individual users, but to wombers of the alexa team -- t members of the alexa team have expressed their concerns to bloomberg. 14% from avenue rose year earlier to over $30 billion. azure cloud services revenue grew by over 70%. major new clients included walgreens and exxon mobil. nejra: debra mao, thank you so much. let's focus on the dollar and its 2019 surge, as investors pile into treasuries. bloomberg dollar index has climbed to its highest level this year. this week is expected to show the world's largest economies humming along. lena komileva, chief economist

and managing director at g plus economics is still with us. the dollar climbed to a 2019 high as other currencies are suffering. yesterday -- earlier you are saying we're sort of passed the best for the u.s. economy. is dollar strength more about weakness elsewhere? lena: it's remarkable that the dollar has defied expectations for strength at a time when the u.s. economy was drawing above trend and the fed was in a tightening mode. now that u.s. growth is stabilizing and the fed has declared on extended pause, the dollar is outperforming. that tells us how unusual the cycle is. the fact that the risk traded just --, is aot reflection that the markets are -- there is strength -- concern about the strength of durability

of this particular rally. default, that means it cannot last for a number of quarters. we're probably towards the end of it, given valuations moved so far ahead of earnings at this point, even with earnings holder than -- better than expected. the fact that we are seeing this hedge together with some signals from the data that markets are becoming more cautious on equity strength, that's a sign to me that markets are looking to hedge and balance portfolios, given that binary nature of markets between high-risk inheritance. nejra: what about the fact -- and high returns. i am wondering, and a lot of people make comparisons to 1998. they say if the fed cuts, it will be preempting trying to

extend that cycle. we are different in terms of where the fed bond is. we would be ending the hiking cycle in a very different place. is the market right to be at the moment pricing a fed rate cut so aggressively? lena: i am cautious about interpreting this as a fundamental signal, the markets pricing of a rate cut, because we are in such a disjointed environment with record highs in the dollartrengthen -- strength in the dollar. i think this kind of artificial environment tells us something about distortion. in the heart of this is the fed pause. it is just an extended gap between the macroeconomic inputs and the positive reaction function. it's not the end of history or the business cycle, or this historic policy cycle, the first

one since the financial crisis a decade ago. fed hasne hand, the room now that we are in a low inflation environment to let the economy inform policy officials, so are the appropriate neutral rate level is. if growth disappoints, if inflection -- inflation overshoots, we know that fed policy is stimulative. i think the markets are ahead of itself pricing in a rate cut. nejra: lena komileva, chief economist and managing director at g plus economics stays with us. we speak to the ceo of a swedish telecoms company. don't miss that interview next. later, we speak to the chief executive of ubs, sergio ermotti. this is bloomberg. ♪

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>> 6:30 a.m. in london. let's look at how equity markets are trading. seeing quite a bit of red in china, but overall, the index drifting a little bit, some strength coming through in japan, but a mixed picture. lots of breaking news coming through into earnings season. confirming its 2019 fiscal year

ebitda forecast. willues and results continue. a reminder that yesterday, we did see shares jumped basically softbank'sard million-dollar bet. let's move on and get a sense of what is coming through with these numbers. just getting through these lines are i can bring them for you. ebitda onter adjusted track with plans to exit its animal health business p are first-quarter sales coming in at 13.2 billion euros. the estimate, 12.5 set test 12.50 7 billion euros. the outlook confirmed for bear -- bayer. those are some of the numbers coming through as we stick with

earnings and talk about stockholm-based tell you, which has reported sales below analyst estimates. says itcom operator sees improving trends throughout the year and should see the impact and contract wins and cost cuts. telia joins us on the phone from stockholm. great to have you with us. thank you for joining us this morning. talk to us a little bit about the outlook. the 2019 outlook had been reiterated. talk to me about how you expect to reach some of those targets. >> good morning from stockholm. comfortabledent and about the outlook for the year, which would also be confirmed recently at our capital markets today. $12 billion to 12.5 billion dollars in operational free cash flow, a big upping of our cash flow which is our main focus. we also did add to our guidance

for the year the cost elements for the total business and for the swedish business. that is 2% down on the total business and 3% down on the swedish business. that is all in line. we also took the opportunity to up our synergy estimates on the where we made the acquisition last year. and on track to forver improved cash flow the year. >> you mentioned the swedish business. i wonder how you are actually the rot in sweden, if i can put it that way. how long do you expect the decline of legacy phone services to weigh on the business? >> a couple more years. we have the copper fixed telephony business in play and we have a decline of about one

billion per year which we have compensated for in the past. actually overcompensated for in the past as we had growth. this quarter and a couple of aarters now, we are in situation where we need to work even harder with the cost elements and cash flow elements, but having said that, 2020 is the year when sweden turns even doctrines around and that was out on capitalid markets day by our swedish -- swedish ceo. we hope to also see improving trends through the year in the mobile area where i think the market had a very soft mobile quarter, but holding up our positions on market share and so forth. all according to plan. >> ok, so according to plan. from what you say, it sounds like you expect 2020 to be the inr when market trends

sweden will improve. let me ask you about broadcasting. do you see a chance that the eu commission will accept the acquisition of barnier broadcasting with the revenues you have proposed? >> we are in an exciting place where we are trying to get our deal approved, which is a superb proposition for our customers as well as shareholders, we believe and we have already said that this is something that will take time. having said that, of course, you work hard to get approvals as soon as you can. i will not comment on any of the a lotg discussions, but of big discussions are going on. i have not changed my view on the prospect of getting a deal through, but i have changed my view on the prospects of the see ins based on what we

trading forecasting as they report through last year and into this year. >> let's talk a little bit about the competitive situation in the finish market as well. expect tell a north's entry into that market to mean for the competitive situation? ,> i think it is a logical step and it is a player we know, and it is a good, rational, nopetent owner, and i expect material change to the way the finish market operates. we are focused on delivering on our plans and priorities, which is really exciting. we are the true convergent , but we arenland giving proof points to market all the time on exciting new , as i, so we welcome them did to mike. -- my. therei did to my peer

recently. >> let's catch up on markets throughout the world. great to have you both with us. trend stocks bucking the as the rest of asia moves higher. some of those, china has been moving lower. what is the story today? >> good morning. much better, but still bucking the trend, you are right. not as high as the star of the trading day. it is expiring week as well. some positivity in the session .oday banks leading the charge higher. a couple of very important earnings coming out later today. that is something we're keeping an eye out for. yesterday.ed late

let's hope earnings live up to expectations. back to you. >> thank you. gains carrying over from yesterday's u.s. tech session and the nasdaq. >> that's right. we had strong earnings from facebook and microsoft, but remember those happened after the close and the u.s. -- in the u.s., so it is the futures market we are paying attention to and seeing gains. there are technical indicators indicators could come back down. the level we say is overbought. overbought thet nasdaq futures has been since back in the beginning of 2018. this in itself does not mean that nasdaq futures and tech as a whole will come back down, but you have to ask where the conviction is behind this rally. to that point, i have another chart. this is a pretty solid indicator from the american association of

individual investors surveyed and this is the number of people who say they are neutral. neutral readings the highest 2016, so people are saying we do not have much conviction behind this rally. a couple things here -- you have the market really being supported by dovish central banks as well as in the middle a very busy earnings season. this is the busiest week for the quarter, so investors may want to see more confirmation of those earnings before they feel confident in some of those neutral readings turning into bullish or even bearish readings. you so much. now an update on a story we have been closely following. as of yesterday, deutsche bank and commerzbank had no plan to disclose their intention to merge by this friday. that's when deutsche bank is scheduled to report earnings. according to "the wall street journal," the two sides are said to be far from an agreement.

the banks have been bogged down over issues including lack of investor support and union opposition. we are moments away from our interview with the ceo of ubs. that is bloomberg. ♪ -- that is next. this is bloomberg. ♪

>> this is "bloomberg daybreak: europe." the dollar very much in focus because we have seen it had a four-month high, mainly driven by the strength yesterday. today, we are holding on to that. dropped tothe euro an almost two-year low. course, we have heard from the boj today as a decision comes in but heartening its pledge to keep interest rates also lit -- ultra low into 2020. the yen rising with holidays looming.

10-year bund yields back into negative territory. we see global bond heels drop yesterday. the treasury yields also moving lower. we have had various signals around the world of central-bank dovishness. australia and canada pulling back on hawkish buys as well. and oil steady at the moment. we have seen a little bit of a move lower with stockpile data. let's get back to ubs. at first glance, a quarter better than expected. march helpedn other banks. that income beating the highest analysts estimate -- net income. also, ubs was able to book more than $22 billion of new money in its key wealth management division. also, investment banking revenues declined 27 percent with equity trading at the advisory business taking a hit. that is something to bear in

mind. trading,and bond revenue gaining 9%, bucking the trend of the bank and the bank planning to resume share buybacks, confirming capital guidance. let's turn to the interview. take a look. >> if you look at the first two months of a quarter, i would say probably even the first week or two in march, they were quite challenging. in the second half of march, market conditions and more importantly, investor sentiment changed for the good. strong finish, which is coming a little bit into april as well, so that has changed dramatically. at the end of the day, if you look at absolute levels, the equity market has been recovering in the quarter. >> could we define it as being a

conviction shift or more definite shift? >> i think it is more an organization. were stillq4, people shocked coming into q1. >> the market is probably going to focus on net income, but putting that money to work, are clients still hesitant? are they still parking cash? are very pleased with new money results. they are strong and aligned with .ur strategy to grow having said that, the market is overly focused on that new money. he is a very important matrix, but it's not the only matrix that counts because the quality is very important. i am pleased with results and to our we are back growth rate and we will continue itfocus on making sure we do in a sustainable and value added way. >> in terms of growth, i'm having a debate about what is

going on with china and how that is impacting the confidence, specifically on the wealth management. what can you tell me about the recovery or lack of hard landing there? >> if i look at asia and china, it is indeed quite a clear sign so the correlation betweentheree recovery of the equity market we saw in the first quarter definitely ahead of investor sentiment recovery. veryes were down, but also important indicator, cash levels , declared cash levels by asian investors were up to 35%. globally, we see this number around 32%, which is quite astonishing. u.s., 25%. if you look at that as an indicator of how careful the asian investors have been in the first quarter, it's a pretty good inch mark. shiftre was the product

if we look at the recovery? the year on year comparison was very challenging. had aly because everybody pretty good first quarter last year, but also we had an exceptional first quarter, and our performance was affected by that, but the change we saw in sentiment was clearly on the equity side in the second half of march. we saw volumes coming back, conviction coming back and people taking a little bit more risk on their asset allocation. >> the by that you are be starting. you seem very sure you can hit your target this year. >> our ambition is to reach up to $1 billion. we will implement and start to do the buyback in the second but we will face it

depending on market conditions and the business outlook which will determine how we do it, but our commitment is to maximize shareholder returns without compromising our ability to invest in the future. up to indicated cuts of 300 million dollars. is that still a number in your low volatilityis period perhaps force you to up the level of cost cuts you need to affect? >> we have two initiatives. one is the structural cost initiative we have been taking and are taking regardless of market conditions. this is something we announced in our investor update back in october. the second when you are inerring to is more tactical respect to delaying investments, slowing down investments. a fuel savings pattern we want to pursue in order to protect our profitability and capital.

we are going to see the benefits in the second half of the year and then we will continue to focus on everything we can do to do that. i think it is already quite a focused way to achieve a balance between growth and civics. >> cannot push you a little bit on that? are there any sacred cows when it comes to cost? is everything up for dosideration if you have to the serial cost cuts? >> actually, for us, in order to go into this hypothetical discussion do the serial, we need to see trends that last longer than a couple of months. but when you talk about compensation, compensation is based on performance, and we have been seeing in the first theter that despite pressure on revenues where we saw a 12% contraction of revenues, we were able to respond. we have 10% contraction in our cost based on structural cost

and also compensation. right.you are i did go to hypotheticals, but you've got to try. dws, we understand the asset manager favors doing a deal with ubs. are you in advance talks with dws? >> we are not commenting on our asset management business has gone through a lot of restructuring and is well positioned for the future, so i it is not surprising that in the asset management industry , hearing rumors about different players, but we are not commenting on specific m&a situations. >> that was ubs ceo speaking to my co-anchor earlier. great to have you with us. great interview. blog today,at their

they say that at first glance, it is a quarter better than expected. you just had an in-depth conversation with the ceo. is this a quarter he can feel good about after that dire outlook from last month? >> i think this sort of cleared the decks, really. conversation is a very measured approach. the way in which we look at how all of these banks perform, our timeframe of assessments are changing and i think he really wanted to make that point. there is still caution from the clients. the one thing that i got the sense of was things have improved on a variety of pieces of the business. investment banking revenues down , but the investment bank has been on the edge. wealth management, they are seeing record inflows in asia. when this comes down to putting that money to work and clients

regaining confidence, that pretty much got stymied in the fourth quarter. it carried through in the first two months of this year, but his tone was very much upbeat, but one of cautiously looking at the data. is not ready to rip cost out yet. he will do it bit by bit. if he needs to, but it was a very measured tone in terms of the slight recovery that we see and if that reaches some kind of escape velocity, we are not there yet. as he said, it was more normalization rather than a conviction term on both sides of the business. >> interesting. jonathan has already been messaging me talking about that investment tank operating income only down 27%, better than what has been talked about. that is some of the context he has been giving me at least. also, you talked about dws in that interview.

what else did you talk about in terms of m&a? >> when you look at the in a story, they are just doing another interview, so got to lower my voice a little bit. he did notbout it is want to talk about dws. i remember in 2014, he set the tax profit of $1 billion. they never quite got there. i get the sense everybody is talking to everybody in this marketplace. when asked if deutsche bank and commerce bank come together, we talked about that, he said that will not necessarily affect his business, but the question i would put when you come back together again in three or four months is if commerce bank and deutsche bank come together, there's an issue in the market because clients are going to look at their counterparty. they have to look at with the institution is doing and if that creates flow opportunity for the investment bank, and does that trade opportunity for consolidation -- he is a big

believer in overall consolidation in the banking market. i'm almost whispering, so i think on that note, i have managed to lower my voice to a level no one has ever heard on bloomberg. a first. >> sounds smooth as silk. thanks for joining us. you will be back on this show when you are back in dubai. some finalo get thoughts with you on europe. earlier i showed where the 10-year bund yields closed yesterday, back in negative territory. ofthat confidence data out france and germany, your take on the eurozone economy right now. >> it is clear italy is facing the policy efficiency frontier. ago, nobody in the market believed the ecb had what it takes and that it would be enough. it is a credit to resident

year that the ecb is in the position that it is a credit to president draghi's tenure. when i say is critical, however, is that the ecb was designed to target inflation, to secure inflation and price stability. sinceually fell through the beginning of the last decade, and that is to ensure crisis, two no reflate eurozone growth and to ensure sustainability and every part of the eurozone, it's quite obvious that even after five years of negative rates, the ecb still has to do more and the ecb really is just one shock away recession.

>> li na will be continuing the conversation with us on bloomberg radio at 7:30 a.m. u.k. time. next, barclays reports earnings. we speak to the bank ceo. do not it -- do not miss that exclusive interview.

bloomberg'sing from european headquarters in the city of london. this is bloomberg daybreak: europe and these are the day's top stories. >> our mission is to reach up to one billion, and we will implement and start to do the depending on market conditions and the outlook. ' ceo gets into detail on the group's buyback restart. next up, we hear exclusively from jeff daly is numbers hit the wire. diverging fortunes, facebook shares jump on rising sales.

a different story at tesla after a big cash setback. >> what's going on? >> hey, everyone. welcome to daybreak europe. it's just on 7:00 a.m. in london. let's get to these numbers from barclays. civ total income comes in at 2.5 billion pounds versus 2.8 billion a year ago. the corporate and investment coming in atncome 1.30 7 billion pounds versus 1.40 6 billion a year ago. first quarter adjusted cost to income ratio at 62%. first quarter adjusted return on tangible equities at 9.6%.

i beat the red headline, but i can tell you the vet headline is that first-quarter corporate and investment bank civ market income coming in at 1.30 7 1.46on pounds versus billion a year ago. pretaxo looking at profit of 8.20 7 million pounds years 1.18 billion pounds on year. a lot of headlines coming through here from barclays. also, by the way, just want to tension this, got a headline coming through from rbs saying rock mcewan has resigned from the role as ceo, so that is breaking on the bloomberg right now. the, we have news on competition and markets merger.y blocking a more details on that, but first,

a very important an exclusive interview to get to. let's get to our exclusive interview with the ceo of ark lays who is standing by. great to have you with us this morning. thank you for joining us as always and giving us some of your time. i have run through some of the numbers, but can i get your take ? how would you characterize the quarter for corporate and investment banking? >> for the banks overall, we feel good about the first quarter. we generated earnings of one billion pounds. we closed our capital ratio, our target, and important we, our return was 9.6% versus our target for this year of 9%. that is in part led by a pretty good cost number at 3.3 billion pounds. we feel good about the overall performance. like all the other banks, basically, the choppiness, particularly in investment

banking around capital equity markets and in a activity around the world, we sought it light and up with the u.s. in part because of the government shutdown and the sec being off-line for a time, but also things like brexit i think very much subdued major board room activity in the u.k. and across europe, but despite that, i think we did quite well in our markets business. for the sixth consecutive quarter, we gained target share over u.s. peers and the profitability of our market business in the first quarter like last year was double digits, which we feel good about. >> how would you characterize your performance versus your u.s. peers? are you satisfied with that? >> particularly in the macro fixed where we trade income securities, currencies, and credit, we were down only 3%. versuss outperformance

u.s. peers, which was good. more importantly, we like the nine point 6% return on tangible equity in the first quarter as we make our way through the year to deliver 9% or better to our shareholders, one billion pounds of profitability clean. this time last year, we were writing a $2 billion check to the u.s. department of justice. we no longer have those issues, so we have a reasonably profitable first quarter to deliver one billion pounds of profitability to shareholders. >> the investment backed shares have a profitable first quarter including the departure of tim crosby. youwith rate oversight will meet the investment banking challenge differently when the market, it could be argued, does not pay you for it? two main objectives behind the organization

announced a couple of weeks ago. first and foremost, we wanted to put under a single lens our global consumer franchise and global payments franchise. given what technology is doing focusednce, being laser on payments, particularly around the consumer space is very important, so we put all that business together. the second thing was we wanted to bring into the investment community of the bank more direct contact with those running the corporate and investment banks. ,he head of the corporate bank the head of markets and the head of banking are reporting to me. we think that was the appropriate thing to do. those are the main reasons that led to the reorganization we talked about a couple of weeks ago. >> the reasons are clear, but will anything change in the strategy with greater oversight? >> know, the strategy remains the same.

we want to be a transatlantic .onsumer and wholesale bank if you look year-over-year, our this great it assets dedicated to the corporate and investment banking down a little bit, but roughly flat. our u.s. card business, we increased the capital allocated to that business year-over-year, but overall, the strategy remains exactly as it was before. the same strategy we set out in march of 2016 when we begin the andney of reengineering reorganizing barclays. >> there have also been reports that you are cutting bonuses for bankers and traders to try to cut costs. is that true? >> one of the big decisions we when we gotears ago to barclays was we took a charge of 400 million pounds in 2016,

and we took that charge in order for us to be able to align variable compensation on a quarterly basis with revenue numbers because revenues are variable, and i think to manage a business like this, you have to be able to balance your cost with revenues in any given quarter. that was a decision taken long we knew. he gives us the flexibility we exercise than the first quarter to manage expenses and ensure the profitability of our investors deserve. that was a strategy we set years ago and was executed in the first quarter. >> in terms of the trajectory for compensation then, can you give me a little more clarity in terms of how that sits with the ? oup cost target for 2019 >> our cost targets that we set we are veryo comfortable with those targets, but as we said, if revenues

continue to be light, we will make the proper adjustments to compensation and cost overall so we can manage to the profitable levels we have committed to our shareholders with. we are very comfortable with the targets we've got out there. we like how we performed in the , obviously,r, but we look forward to a recovery, particularly around investment banking fees. andook forward to growing profitability with our consumer bank. we look forward to increase contributions from our u.s. card business and payment business globally, so we are comfortable about the future trajectory and we will manage costs such that we seek to deliver the profitability for shareholders. criticism ofecent the investment bank and barclays clearly can out and responded to those already, amounted to a sort of warning about capital risks.

intelligence analyst is skeptical that the capital position at barclays is for sharee enough buybacks. would you agree with that? >> last year in 2018, we tripled the amount of capital we returned to stakeholders. we more than doubled the common dividend at in the fourth quarter last year, we spent 700 million pounds of capital, repurchasing very expensive dollar preferred during the financial crisis, so that was the use of capital generation we had in 2018. with our ratio of capital to risk assets at roughly 13%, it has been our in-state target. with that level, we have comfortably passed the stress test. we feel fine with the level of capital we have as a bank, but as we generate excess earnings and if we continue to repeat one billion pounds a quarter, we will have excess earnings that we can use to grow the bank and

return capital to shareholders. ok, so you are comfortable with the capital and talking about the excess earnings which might allow you to increase capital returned to shareholders. what is holding you back right now from initiating a buyback program? the year progress. we feel good about where we are profitability-wise. we talked about a progressive increase in our dividend as our earnings grow, and we will deal with issues like buybacks at a later point. is their uncertainty around brexit holding you back by any chance for the fact we have had to delay? does that change anything for you on the buyback front? >> clearly i think everyone would like to see the uncertainty of brexit behind us, and it does not look like that will happen any time soon. let's let the year take its

and we will deal with those capital issues at the appropriate time. >> ok, understood. one analyst at jefferies said ahead of the earnings that on tangiblereturn equity will be a stretch. how confident are you of achieving the return on tangible equity targets? >> we set our return target date of years ago. we said we would do 9% or better in 2019 and 10% or better in 2020. when we did that in 2017, our return handle equities for the year was 5.6%. we have the challenge of convincing shareholders how we would make up that gap of some 300 or 400 basis points. last year, we delivered 8.5% x conduct and litigation issues and we started the year at 9.6%. i think we feel quite comfortable that the 9% target

for this year. we are improving the funding cost of our balance sheet, pit ofing today securities off our balance sheets improving profitability by some 60 basis points. a lot of things are happening in our favor. we are confident about 9% this year and 10% next year. >> one thing that has worked in your favor recently as well has been the performance of equity trading. i remember us talking about that last quarter. barclays really outperformed on that front. you did say earlier that you were happy that you outperformed your u.s. peers in the first quarter. what about the equity trading in the first quarter? what can you tell investors about that? ofone of the advantages having a diversified portfolio across all of your businesses is

at anyone quarter, one business will do better, and another may have a weaker time. we have a difficult comparison with the first quarter of last year in equities. our flow derivative trading in equities, first quarter of last year was about what he percent year-over-year. we've seen disappointing volatility and the equity markets was quite low, but overall in our markets business, we aim market share on the back of what we did and currency credits and rates, so we feel good about the performance of our capital markets team. >> thank you so much for joining us. really great to have you with us this morning. appreciate your time as always and have a great day. good luck on the call. let's turn now to rbs. lots of breaking news coming through this morning. from hisas resigned role as ceo. he will remain in position until a successor is named. he has a 12-month notice period,

but he resigned. that is what we are learning at the moment. essentially he will step down in 12 months, and basically rbs saying it will start a search for his successor immediately. 2013.ned rbs in that's the breaking news we can bring you so far on rbs. lots to get through, of course, this morning. we have just spoken to jeff daly of barclays, and we will recap any earnings news for you just coming up. this is bloomberg. ♪

>> this is bloomberg daybreak: europe. i'm they reach a ridge in london. let's get back to the breaking news i broke earlier -- i'm nejra cehic in london. let's get back to the breaking news i broke early. let's get to the senior bank analyst for bloomberg

intelligence who has been very busy this morning. let's focus on rbs for a second. first of all, why? has this come totally out of the blue? >> it is a bit of a surprise, but if you think about what rbs has achieved, what he has , if anything, the investment case now is more of a wait and see story because we know we have big buybacks coming. we know the dividend is restored. we know they will buy that government shares, but all of this is brexit dependent. rbs is back in the slow lane now. they have delivered on cost, ship around. it is in pretty decent health. from his perspective, he is probably thinking he has done rbs is and if anything, a much more dull story for the next 24 months that it has been the last five years. >> what about succession?

what in your view might the succession plan b? >> if you think where rbs is now, it is a u.k. investment bank, so i would not be surprised if it is somebody internal. newly 95% of their balance sheet is u.k.. this is still about stripping cost. it is about capital management, liquidity management, about managing the sme book and trying to defend and grow retail market share, so you want -- i don't think you need a big heavy i would be not surprised if we had somebody internal promoted. >> have got a couple of names in my head. probably too early. first, whoever it is, and we are talking a year from now? >> first has to be how to deliver growth. in good check, loads of capital, generating decent -- decent

amounts of capital, but there's very little growth, and with them, they can grow mortgage market share, they can grow credit, but they have been quite cautious over the last sheet of years, understandably, but to return this to a top line story, which at some point they will have to, they need to change their strategy a little bit in the u.k. >> am going to be a bit unfair because i know you have not had a chance to properly go through the numbers since you ran straight to set, but your first take on what you have seen from barclays relative to what you were expecting. >> a couple of comments that i've seen them going to have a look at, capital looks like a bit of a mess. and he's talking about if the environment does not change, we will have to lower our costs guidance. if it was shouting from the rooftops, he would not have said that. clearly evident a metered outlook. trading, i have not had a chance to look at the properly, but i think things will be fine. equities, i imagine, may have

slipped slightly versus expectations, but first reaction is if he is talking about lowering costs guidance potentially, he is not saying the outlook is rosy. >> thank you so much for joining us. always appreciate your time. we will let you get back to those barclays numbers. staying with the banking theme, deutsche bank and commerzbank are far from the merging deal, according to "wall street journal" and the german lenders have no plans to announce a merger friday when deutsche bank announces earnings. talks have been bogged down by issues including lack of investor support and opposition --m labor unions poured labor unions. thank you for joining us this morning. you sit on the economic advisory board of the german federal ministry of finance. let me start by asking you how financele the german

minister is to political attack in view of his reported support for the merger. >> there is indeed a lot of report on how much the finance politics overall has been engaged, has interfered in these merger talks. this is obviously something that is difficult and might even be dangerous, given that this is a merger between two banks, although admittedly, one bank has the power of ownership by the german government, but it is important any of these decisions have to be taken without political interference. simply because this is an economic and business question to be solved, not a political one. >> deutsche bank has repeatedly failed to turn itself around. it is at risk of losing its investment grade rating. do you think a standalone future for deutsche bank is preferable over a merger? >> deutsche bank indeed has come

through very difficult years. at the same time last year for the first time in five years, they managed to show a profit, even though a low one, and at the same time, they managed also costat estimates on their targets that they announced. at the same time, they managed to show the number of employees that they wanted to achieve, so therefore there is progress. at the same time, they need to think again about their strategy, in particular when it comes to the investment banking business, and they now need to show in particular, the capability of their business model going forward. is expected shift independent of the merger is going through or not. >> i'm glad you brought up the investment bank. we all know there are some particular problems for deutsche bank according to many critics. how much does it need to be cut the bank'sst

business model? >> in my view, there will be a cut in the investment banking business. the question is to what extent the bank can be active every where and in every business. the bank has started implementing a more focused strategy on being active only in certain regions and i think that strategy has to follow even with more force simple because the bank is too small to afford to be active in all these businesses all around the world. >> commerzbank could be taken the by a foreign bank if merger with deutsche bank does not happen. how much of a problem could that create for the german export industry in the event of recession? very important for germany in particular, for a country that is bank based in which companies really rely on bank financing and in which

small and medium-sized enterprises need support from banks going abroad. it is very important they also had a bank at their side. at the same time, even with a failing merger, there would still be deutsche bank and potentially another or more than another bank being active, so still, the support is there. say the german corporate sector overall has been saving on an aggregate basis. if the recession should arrive, they would come with a very strong foothold. >> great to have you with us, the president of the european school of management and technology. to the breaking news from the last half-hour. this after the u.k. competition and markets authority blocked the deal.

you and macintosh who oversaw the investigation, concluded there is no effective way of addressing the concerns other than to block the merger. we will stay across that story. futures pointing a little bit higher. this is bloomberg. ♪ ♪ so with xfinity mobile

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john: anna: welcome to europeang markets open." hits its dollar highest in four months as u.s. futures bounce following solid tech earnings. europe is pointing higher. cash trade is less than 30 minutes away. anna: s