manus: good morning from the middle east headquarters in dubai. i am manus cranny. this is bloomberg daybreak: europe. data disappointment. china's manufacturing pmi misses but does this mean the pboc will keep its foot on the stimulus panel? trade talks kick off in beijing. not as easy as a, b, c. out of the shares slump on slowing and revenue growth. samsung this is the bottom line and issues are guarded outlook. results bonanza. bloomberg across the today.

we speak with danske bank and standard chartered, as the latter announced a billion-dollar buyback. breaking news coming across the terminal. lufthansa on the airline side, to cut euro wings capacity growth to zero in 2019. call the carriers around europe are under pressure from the headwinds of the cost of actually getting those planes into the sky. lufthansa makes this announcement with regards to the budget airline eurowings capacity to zero this year. concerning the guidance for 2019, previously expected to

grow capacity by 2%. first-quarter revenue comes in at 7.80 9 billion, in line with what the market had estimated, 7.88. they are confirming first-quarter negative adjusted ebit's of 36 million versus a positive number last year, 52 million. lower earnings due to weaker demand and overcapacity, especially in the short and medium european. we've seen casualties come through across the airline space. i want to move to the other major story this morning. we have a print in standard chartered. they have announced their munificence to the market. first-quarter results, a buyback. this is what bill winters wanted to do. he wanted to reset the agenda for standard chartered. a pretax profit of $1.38 billion. what you are seeing is adjusted

pretax profit of $1.38 billion. this is about the buyback. it had been flagged significantly in the best reports that the buyback is there. $1 billion. this is a bank that has gone through major settlement litigation on iran and trade sanctions. that is the performance of standard chartered carried santander has come out with their numbers. -- chartered. santander has come up with their numbers. penciledhe market had in 11.9%. technically it is a miss. of 1.80 4come beats billion. they are raising money. one man has the answer on the appetites, the cfo. he will join me later on in programming. stay tuned for that in under 30 minutes. i'll have the cfo join me. to the markets.

are you shaken by the data from china? are you saying, there is a fragility in the recovery on the pmi? the won.cted i would say global sentiment and global trade sentiment is part of the reason. there is dollar china and the s&p futures. for me.save the won as if by magic. are looking at china data missing, weaker samsung profits. industrial production, that also played in but you are looking at a currency which has lost 2.5% of its value this month. let's look at the board. s&p futures, disney made a record high. you have angst around numbers, but you are looking at s&p

futures giving up .1%. morgan stanley says the valuation of the s&p 500, 17 times earnings, above the 10 year average. they are worried if you buy into these upticks and. you have dollar-yuan. the pmi suggests fragility in the currency. that is the dollar against the yuan. in terms of analyzing the numbers and sentiments. in asia, juliette saly rocs the markets every day. take it away. oniette: really focusing in korea in the wake of samsung earnings. we have japan out of action this leading the cost be is .5 percent., off by disappointing numbers coming through out of south korea. industrial output falling 2.8% year on year in march. hong kong's market coming under

pressure in late trade but we are seeing upside in mainland chinese stocks. both still in, expansionary areas but it is going to be whether or not we will see the stimulus continue from officials and in australia, by .5%.closing lower concerns about how big banks will fare when they release earnings in the wake of that royal commission into the ranking industry. industry. samsung's numbers, lagging even reduced estimates they had already flocked to the market due to a fall in memory chip revenue and the delay of the foldable phone. unchanged after calling earlier in the second -- session. in india, falling the most on record, fourth-quarter loss coming through due to bad loans and other provisions under the new ceo. seeing quite a bit of weakness

from that stock, the biggest laggard in india today. wh group, we've been watching the tradeke of talks. this is the port producer. did flagged challenges due to the swine flu virus and talks between the u.s. and china. they are seeing the best gain so far this year, mainly due to the fact that there is concern about the company already factored in. manus: thank you, juliette saly in singapore. china's manufacturing pmi slipped in april but make it above the 59. the data signals stabilization in the first quarter is still fragile. the factory gauge is still expanding but at a slower pace than march. the blackstone chairman schwarzman says china's economy looks solid after the stimulus. he spoke to bloomberg at the conference in beverly hills, california. >> china has stimulated its

economy like they said they would when the tariffs went in. i was there four weeks ago. the people at the central bank were telling me it worked very nicely, and now you are seeing the results of that, which is -- has surprise some commentators that china's economy looks pretty solid now. in the six's. 6% growth. it didn't particularly surprise me. they have the ability in china to really force money into their system to create growth. they are doing it and it has been successful. >> are you putting more money into china at this point at blackstone? are you investing more heavily, and where? steve: we just bought a company there. i think china is a harder place and west for outsiders,

always have to be prudent and thoughtful when you invest. we are looking in the real estate area, as well. depends what happens and what values are there. a word from steve schwarzman, chairman and ceo of blackstone at the conference in california. host is the head of multi-asset funds at legal and general investors. good to see you this morning. i took the china stock market. i would say you have had your melt up in china all predicated on what the pboc had done. when you look at this market, is the regime fully intact for you? are youna on board or cautious given the data sweep this morning? >> we remain very confident on china and recent trips of experts to the region. it reinforces the confidence that china will stimulate and

they will be successful. they have the firepower and the will to do it, so the 3 trillion cm wide it was pumped into the economy in march has only been they were 2016 when seeing a previous wobble. this is very much textbook from them. they understand the need to focus on growth over reform right now so the latest numbers are, if anything, a positive. some have talked about if it gets too big too quickly, they will take their foot off the pedal where our base case is the stimulus has a pronounced impact for 12 to 15 months. that is the historical cycle of how long the stimulus has had an impact. manus: you made the point, and we will talk more about the u.s. inflation story later -- let's continue to the east for the moment. you have maintained the reflation story will come. we must be patient from the epicenter of china? is that your vacation area? john: there is something --

trade scenario? john: tariffs are having some impact on chinese imports. january and february, there were $10 billion less of imports in china with that being diverted to mexico, south korea, and vietnam. they are suffering a bit of headwinds from the tariffs. you can understand why the annese are keen to reach agreement so the stimulus can have its full effect. to some degree, the u.s. is right it can win a trade war with china. you look at the growth impact of tariffs and it can be about five times as big for the chinese as for the u.s. because of the size of exports in the economy and imports and exports between the countries. manus: shinzo abe and donald trump will meet. one thing the caught my eye -- these are the pmi's for vietnam, china, and japan. this is the big question.

b,y a, need a trade deal and they need the trade deal to counter a sales tax increase. what is your perception of japan right now with those two key market factors? they have kicked the inflation target down the road. doors,e behind closed pretty honest about the fact they don't anticipate hitting it. no further action will be taken to hit it despite that they still are aiming for it. they are not taking new actions and that puts japan in a difficult position. it is very tied into the global manufacturing cycle because of its large export sector. they will be seeing some run over from the trade war. they just wanty, to get the donald trump thing out of the way so they can get on. a look to do a deal as part of the pacific partnership

previously and the u.s. pulled endsnd it may well be it up being pretty similar. there have been talk -- has been talk from u.s. farmers that the impact the european deal has had on them where they thought they have become marginally less competitive and seen in impacting areas like pork. perspective, the u.s. in particular, segments of the u.s. are keen to see a quick deal in japan and recognize the probably move on to europe. yeah, and as far as the european story is concerned, would you agree with goldman? we've got lines to wrap up in standard chartered but do you chinae with goldman's on that the fragility, albeit fragile, in china, will have an impact on the european story as well? john: absolutely. european stocks are one of the few things investors really don't like and that probably gives the more of a tailwind and other investments. thes something we own and

reason is around the china stimulus story, partly around the general gloom there and partly around the fiscal stimulus in europe where we expect countries like germany to pick up fiscal spending. it will be the biggest fiscal spend -- stimulus in europe since 2010. still moderate, but up from a decade. manus: but got plenty more to get to. buybacks, bid ups, standard charters. the buyback is reinvigorating the standard chartered story'with jumped by 7% in hong kong after the buyback was -- announced. i this is bill winters saying a straight message to the market. they are focused and encouraged by the progress. third-quarter results show a 10% rise in adjusted pretax profit and $1 billion in terms of buybacks. winters as then under amazing pressure to turn around this

story. the recent objectives announced and a return on tangible equities. 9.6 percent, reiterated 10% double return on equity is the target by 2021. a little bit skeptical, in terms of that, but a blockbuster day for the stock at the moment. london -- ins in a london with the roundup. >> alphabet shares are falling after revenue misses estimates on concerns advertisers are shifting spending from google to other rivals. roseue from advertising 15%, the slowest pace since 2015. this is stark contrast to ad sales.20% jump in samsung has joined rivals and cautiously predicting a rebound in chip prices. this outlook comes as the south korean tech giant posted

first-quarter profits the missed estimates. it is the latest setback for a experienced trouble with it smartphones. standard chartered will buy back $1 billion in shares. the first time in more than two decades, after an over $1 billion settlement with u.s. regulators. this was a repeat violation of iranian violations. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ olivia, thank you. coming up on bloomberg, we speak to the cfo of danske bank. 7:00 a.m. london time. this is bloomberg. ♪

manus: it is "bloomberg daybreak: europe" from dubai. i am the manus cranny let's

focus on the world's largest economy. chief executive at goldman sachs says jay powell is doing a good job and he doesn't expect a lot of policy activity through the rest of 2019. --sat down with an interview to an interview with erik schatzker. >> activity levels have improved throughout the quarter. a little speed bump in the fourth quarter, risk off. government shutdown contributed and the environment at the beginning of the year but the underlying economy in the u.s. has continued to do quite well and as we move through the quarter, you saw more of a move back into risk assets, markets have performed well. as you get around the world, stimulus and china has helped fuel improvement in china. i was in china a couple of weeks ago. lagging a little bit but the overall package, especially with it central banks made coming out of the end of

the year and the first quarter, has been constructive so client activity has improved. nice certainly at a pretty level. : how be think the results it has had in financial markets will influence the way central bankers think about policy going forward into 2020? i think policymakers have been pretty clear on communication with respect to how policy looks throughout the year into 2020. could make the case in october, jay powell might have screwed up a little. david: i think the chairman is doing a very good job, a difficult job. as you translate forward, it doesn't look like there will be a lot of policy activity through the rest of the year and to 2020. economists are predicting one increase late in the year 2020. he is cautious on the fact that you could see a cut. it doesn't really see that but

right now, the economy is chugging along pretty well and policy i will be stable. stableicc the impact of policy is the credit market. david: the credit markets are pretty constructive. but whenpretty easy, thelook at the big banks, participation in the big sale credit markets, there i don't think there has been real movement in credit standards. what you are alluding to a little bit is when you get out of the regulated institutions and into the shadow banking markets, there is less transparency around that activity where it is harder to see but that is an area to watch. i don't think it is necessarily at thetomach -- systemic moment but it is an to watch. some of the capital in that state is longer dated capital so it is not money that can run away quickly, but as those

shadow credit markets grow, that will be something to watch and monitor. the regulatory environment has pushed more credit lending in that direction. that will be something to focus on. erik: what is the better alternative? regulators pay closer attention to the shadow market or change the rules to allow more credit to go back to regulated institutions like yours? david: i think it is a balance. to havee, finding ways a better understanding and more transparency as those markets grow will be important for the construct of credit markets and business leaders in our part of the business and regulators should think about those things. manus: that was the goldman ceo david solomon sitting with erik schatzker. john roe is from legal and general investment managers and john, when you look at -- listen to solomon spreading the good word in what the fed are doing -- when you look at record high

in the s&p 500, do you think valuations are getting a little stretched trading on the pef 17? that is above the 10 year average. stretched? averagee 10 year contains the period after the global financial crisis. its 2015, it is around the average and that has been a period when inflation expectations have come down and pe is on a forward-looking basis, around 10% lower than at the peak in 2017. there is room to go back to that level and that shouldn't be seen as a cap. i don't see valuations as a restriction on equities at this level. the juxtaposition of what we have to look at this morning ,s we sit down was the pce which was fundamentally under pressure, the slowest since

january 2018. the consumer is still firing on all cylinders, i would say. the best gain in a decade. up .9% on the month, so which do you put a greater store value on in the smorgasbord of data? isn: the consumer spending two thirds of the u.s. economy perspective, that is a driver. in q1, he was a bit weaker and more about inventories and around exports, which has been theied by the tariffs so number is appealing and it is clear the fed wants to see more inflation before it worries too much about consumer spending. the change in the fed's reaction function so that perspective, it is good news the consumer is doing positively and it feeds into the idea that we have record low unemployment levels, less than 4%. similar to what we saw before

the end of the previous peaks but it can stay there for some period. is athat perspective, it nice situation for the fed where they are had getting falling inflation below target and targeting higher inflation rate. they are going through a process of formalizing increasing their coreto a target of 2.25 on pce rather than 2% target historically. do you see -- you also talk about breakevens rising in the near-term. we just need to be patient to see that briefly? john: exactly. lower than five years ago, despite such low unemployment. that leads to a lot of risks in one direction, inflation, risks to the upside undermining the fed's position. it makes a lot of sense for us. manus: that ties in with bloomberg opinion pieces that we are being lulled into a false

sense of status quo from the fed. of multi-asset funds at legal and general. this gentleman joins me briefly. everything next on bloomberg. ♪ so with xfinity mobile

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manus: this is "bloomberg daybreak: europe." i want to bring you hot news, .3% up for the quarter, matching the median estimate in the market despite the closures we have seen across france every saturday with the protests. 3.1%, matching median estimates. we will revert back to the french story in a moment. in the meantime, one of our big bank earnings stories. santander, spain's biggest bank. the latinat as

aerican units prepared for -- a one-time charge of restructuring in the u.k.. we have on the phone from madrid an exclusive interview with jose garcia cantera, the santander ceo. jose garcia cantera, good to have you with me. talk about the balancing act. i've got italy coming out of recession, germany under pressure. how would you describe your spanish market to me? jose: good morning, everyone. the banking environment in challengingneral is , despite which, we continue to grow revenues and were able to cut costs. undoubtedly, the market conditions in europe and specifically in spain are clearly weaker than in latin america. we have a very strong presence

in high-growth markets in latin america that compensated for weaker performance in europe. are you worried about the trend you are seeing? are there cracks in the european story that suggest we are headed to a deeper economic trough? jose: no. when we look at the performance of our unit in europe, we have positive evolution in the auto in santanderess, consumer finance, the largest independent auto financing europe. it is growing revenues and gaining market share despite car sales being down 3%. we are growing our portfolio and doing well. the u.k. is challenging. it is very high competition in mortgages.

we have the uncertainty associated with brexit and in spain, the trends are similar to what we have seen in recent quarters. good economic growth with possible growth in smaller and medium-sized businesses on consumer loans, good production in mortgages but sufficient to compensate the back book. cost: let's talk about cuts. you had a global target of 1.2 billion. one billion of that is in europe. branches are you going to have to close in spain, and consequently, an estimate of the job cuts you might have to make at home in spain? jose: customers are changing their behavior. -- the relationship with the banks is changing and using less the branches and the more the digital channels.

if you look at our numbers in the last 12 months, we grew our digital customers by 6.5 million, huge number. manus: what does that mean for the reduction, let's say, in branch space? adjusting ouren physical distribution network in all countries, especially in staying as consequence of the merger with banco popolare, we have been closing branches. we have been working with unions to look at the next phase of the restructuring. of that dialogue, out of those negotiations, we will state the figures but significantly fewer branches. manus: can i talk to you about your current capital rate earning? of full getting a hold ownership of the mexican business makes very good sense. what is -- has the response

been? this has been their capital raising in as many years. is the appetite solid for this rights issue? give me the guidance. jose: it is early to say because this process will finish probably in september once we get all the regulatory approval. we have to get regulatory approval in the u.s. and mexico. positive.on has been investors in the mexican unit are able to monetize investment at a pretty high price, much higher than analysts' target prices. the her shoulder -- the shareholders of the group, around 14% to 15% in europe. it is a pretty good proposition and we think it will go very well, but again, it is a lengthy process that we will finish in september. manus: will you replicate this

in brazil? anre is a lovely line from analyst who says you are kicking the tires in mexico. you are testing the appetite of the market for the strategy. would you like to replicate this in brazil or other subsidiaries you have smaller holdings in? jose: mexico is a very specific case. we are happy with current structure. currently, we have no plans on the table right now regarding any other list subsidiary. manus: are you worried about the political risk at home in spain in terms of the risk of banking taxes? we obviously have a potential new government. voice in be a higher the government, are you concerned about that in any way? jose: the outcome of the election will require agreements between different political parties and this is too early to say. will have aiticians

written agreement with a position. we think priorities the government will need to address is unemployment -- we need to create policies, ensuring the economy continues to thrive, and incentivizing long-term savings to assure future growth and make sure the spanish economy is less reliant on international capital markets. those are the key issues. again, regarding banking, it is too early because we haven't even seen the agreements. manus: i know. i just thought i would get that in their. -- in there. the commerzbank-deutsche bank deal has fallen apart for now and doesn't look as if any more life will come to it. will there be assets across borders you are actively

interested in in europe? will you look at commerzbank assets if it came up or commerzbank itself? does it deal like that make sense for yourself and the budget? jose: to be completely honest, it is something we are really not thinking of right now. we think europe needs farther progress in banking union for mergers or acquisitions to happen. we still have a long way to go in that sense, so this is something we are not contemplating at all at the moment. that's the most express response i've had from a cfo -- or ceo in a long time. jose garcia cantera, come back and speak to us again on the quarterly numbers for santander. breaking news coming through. the telecoms player is saying to us that the have reaffirmed their objectives for 2019,

excluding spain, from a network deal. vodafone, they have signed a network sharing deal with vodafone in spain. this is an important point. it will see an initial of around 300 million euros spread over a period of four years. --y take the opportunity we to reaffirm objectives for 2019, excluding the spain network deal. they are convinced an entire network is a strategic asset and players who sell towers have financial stress. those are breaking lines from orange. more markets to be had. we are in mumbai and london. first of all, it is about yes bank. good morning. >> good morning. you summed it up. markets -- that

is probably one area markets are on today. down half a percent in the benchmarks but the nifty is down more than 1% and large portion of it is courtesy of spain. the stock is down 20%. it is not dubbed the most heavyweight but because of the results and guidance from the new management of yes bank about as coming off, the stock has corrected the most since the extension did not happen six months ago. yes bank down, some of the other companies have come into question and the broader markets have some jitter affects in the financial space and as a result of yes bank and all of this, you have the sentiment under the scanner in the session today in india. not starting off well and banks being the principal reason, yes bank the main one on your screen right now. manus: thank you very much.

let's get you into the show and talk about the markets. i suppose there is a mixed reaction. the word was "fragile" recovery in china. how is it playing out across your markets? dani: if he said china pmi's missed, your thought might but theloff in markets fragile recovery is helping it. china is not the biggest reactor. on the gmm screen, we will see china is gaining about .25%. maybe hope the foot gets put on the stimulus pedal. other markets are taking a hit. we are seeing australia selloff, the aussie dollar not hitting the screen yet but one of the biggest assets under pressure. i direct that on the chinese economy. south korea shares dropping nearly .20%. mixed data out of south korea. in the chinese data, -- the south korean won dropping .5%.

in bonds, we are seeing in 10 year yields, moving further away from the record low. whether it is risk on a risk off today is a confused picture. copper, gaining but at the same time, the yen is gaining. volumes there are light. dollar just flipped onto the screen. that is gaining, as well. currencies, we have been talking about this a lot. fx volatility has been so punishingly low. dollar-yen the u.s. three-month implied volatility has fallen in line with the aussie dollar, new zealand dollar volatility. very rarely does this pair match the others. the last time it happened was in 2015. according to rbc, part of the reason is investors, when they want to sell volatility and get the income, they are doing it on the majors. that is where we are seeing alatility happen, presenting

trade opportunity for investors who want to bet the spread will go back to normal. do you know what, all i would suggest if you want to write volatility, go back to 1994 and look at the bond market. if you want to take the risk, great roundups from the yes bank story in mumbai. quick shotgive you a of standard chartered. a rally by 7.2% this morning in asian trade. you look at the stock that has had the biggest one-day move since 2016. the volume traded through on the stock at the moment is 188% of a normal day's volume over the past three months. you are looking at standard -- i'm notiveback talking about charity -- i'm talking about buybacks from the ceo. let's get to john roe, multi-asset funds manager at legal and general.

i won't delve into the specifics of standard chartered, but one thing has come through. award your shareholders, buyback standard chartered and markets ensuring shareholders the buyback was on the agenda and the growth story was intact. alphas of banking. is that a fair takeaway on the season thus far? john: i think so. with bank valuations below book value, there is a risk that the trend becomes one we start giving capital back and why would that be a worry? if it came at the cost of lending, it starts to have an impact on credit conditions. if banks are too distressed against book value, where is the impetus to lend? maybe this is one of the reasons the ecb is looking at potentially tearing deposit rates so they get more release to banks to hold onto that money. if it was the start of a trend

and you see how well it is reported this morning, you could see a lot of other banks looking at a similar approach, cost-cutting and repatriation of capital. manus: i want to get to the european markets. we touched on it with china and the consequence that goldman sachs suggested it would have for our markets in europe. --ant to take to your story you talk about the five-year european inflation and we hit around 1.4% at the moment. the debate is to weather the inflation story from china paring its across europe. as you look at the european picture, i get a sense perhaps the worst is pass and you are betting the strongest stimulus is 2010. -- since 2010. this is quite a robust call. john: germany had talked about increasing fiscal spending and when you look at france, you've

got the populace government in italy which will have another go at increasing fiscal spending when they come around that process in september. they will get a lot more sympathy for that given the position france has. the last big stimulus was 2010 and then 2011, there was a small one. can you add them all up, we might get past the 2011 number which is an something we are used to in europe. that would help on the growth side and the chinese inflation. there will not really be help on the inflation side. the same pattern in the u.s., we are seeing in the eurozone and in areas like sweden. from that perspective, i think the inflation side in europe is increasingly worrying. we have five-year inflation at or below the levels where mario draghi talked about doing whatever it takes and the importance of the inflation anchor and to some degree, it feels the u.s. -- you are up --

europe has given up on generating inflation like japan. ist we really need significantly higher spending but that would need to come from the germans. they forgot large amounts of fiscal space but not the mentality to want to spend that. manus: there's always a great distance between desire and reality when it comes to spending money on the fiscal side. can you square the lack of inflation with your proclivity for wanting to hold court european bonds? aheadt fundamentally against a flareup in risk or you believe a lack of inflation and a hedge are good bedfellows? john: very good bedfellows. action, it further will probably be the ecb and on that side, they will be looking to drag down yields through the mitigating measures talked about, please steered deposit depositthese teared

rates. effectively, the steep curves give an element of protection to any high yields. 20germany, when you need basis point higher yields in 12 months to not make money, and italy, that is more like 50 basis points. these are big cushions built-in when you compare them with the flatter curves in places like japan or the u.s. manus: john, thank you very much. john roe, head of multi-asset funds at legal and general investment management. more to come on bloomberg. we speak to the founder and chief executive of siddall. -- citadel. powwow later on. ♪

manus: it is "bloomberg daybreak: europe." welcome back to the show. to the oil markets, a week after

the u.s. flag tighter sanctions on iranian crude, prices are back to where they were before the announcement. henry porter and chases -- annmarie hordern chases oil ministers and what is on the agenda? >> very excited. it is a busy week, the longest bowl run for oil in 13 years and hedge funds are placing bets, nearly 14 as many times for wti to go higher than it is to the downside. this is seeing supply risks come to a threat in the market. many are worried prices could escalate. it is a week for corporate earnings. petrochina reported a steady first quarter profit and production earnings offset decline in refinery. we have at the top of the next hour, bp, first-quarter earnings. then, royal dutch shell. also on thursday, this is where things get earnings --

interesting. iranian waivers are set to expire and president trump says he will not grant another set to these countries currently importing iranian crude. that includes china, italy, greece, south korea. also, taiwan. that means sanctions are back on the table for iran. it will be a busy few days for us. had a guest who said the drop in iranian production exports is much higher and more aggressive than when the obama waivers were implemented. annmarie hordern. john roe is my guest host. he is the head of multi-asset funds at legal and general. when you look at what anne-marie has outlined, big oil is incredibly important to the momentum and sentiment of the

major indices. when you look at the movement in the oil market, where do you go? the inflation story, the dividend, or big oil? which of the trifecta interests you the most in that story? john: it would be the inflation story. the risk and sentiment if you got the spike. power starting point is a preference for being long energy and that is the spillover macro effect it can have on the broader portfolios. that is what we worry about because it can act as a headwind for growth. waivers are something we expected and the reason for that, trump had a choice to have an ally in saudi arabia producing that last million barrels or iran producing it. kate made a lot of sense he would and that when he could as soon as he saw the price wasn't going to high. spear from therm saudi arabians they will fill that gap.

in the medium-term, the supply demand, the china stimulus are risks to the upside. there is risk the higher-price continues longer. the oil price still has a downward shape, which is hard to maintain if people start to believe prices can stick. isus: can i ask you then, that your base case with the translation from energy prices? we look at the core cpi, core, core all the way. it is hardly ripping ahead when you strip out energy in europe. how do you protect yourself from that translation effect? is it some kind of replacement -- inflation in europe? the u.s..tick to in europe, we think the gap between the unemployment levels before the financial crisis now means there won't be that strength behind any inflation

pick up and also the taxes in europe on petroleum mean the impact of a price change is less on the inflation number. from that perspective, it is very much the u.s. we look at where there tends to be a strong relationship between inflation expectations and spot oil. that is where we would be more focused on alongside the energy position we talked about. it is very much the u.s. being the place we are focused on inflation risks in the energy market and more generally. manus: john, i think we've run out of time. i was almost going to get a brexit question in. anna edwards will never forgive me for doing an hour without brexit. his own, brave man on in that big studio in london. the head of multi-asset funds at legal and general. john will continue his discussion on bloomberg radio at 7:30 a.m. big oil makes the headlines on

bloomberg. bp reports and i'll bring you the numbers. then, a conversation with bob dudley, the chief executive. he is at the milken institute annual conference. we will hear from bob later in the day. ♪

♪ ♪ manus: good morning, from bloomberg middle east headquarters in dubai. i'm manus cranny, and this is bloomberg daybreak: europe. today's top stories. chinese manufacturing pmi misses, but does this mean the pboc will keep its foot on the stimulus pedal? trade talks kick off in beijing. alphabetsy as abc, shares a slumping on slowing revenue growth. samsung misses on the bottom line and issues a guided -- gu arded outlook. cfo's of danske bank

and standard chartered, the latter after a bumper buyback. ♪ ♪ cents: a dividend of 10.25 from bp. bob dudley delivers numbers bang in line, pretty much as the market expected. capital expenditure is something the market will focus on, coming back from the capex desert. $3.65 billion. 10.25%,terly dividend, capex $3.65 billion. the headline number has come exactly in line. not often that you see that. bp is up 11% year to date.

total raised production when they came out with their numbers . in the united states of america, but the question is where they are with production. bp's operating cash flow excluding the gulf of mexico, $5.9 billion. go to tliv, you can pick up the bloig, the team are all there with commentary. danske bank, they see full-year net income for this year at 14 to 16 billion danish krone. to take intod account the money laundering case. the outlook is unchanged. the case requires considerable attention. it has been a difficult start to the year, despite growth in lending. so they are saying net interest

incomes at 5.5 2 billion, slightly lighter than the market estimated, 5.71. 16% from a year ago. this is at a company that's recovering from the worst dirty 239 billionl, dollars flowing through the estonian unit over nine years. half the market value wiped out last year, and the search for a new ceo continues. net income, 2.99, below the estimate of 3.30. i will speak to danske bank, the man running the institution, christian baltzer, with me very shortly. pmi's give you a quick look, in china missing estimates. is it a fragile recovery? does the pboc need to do more? let's have a look from paris to

london to berlin for futures. french gdp across the tape. i'll give you a refrain on 0.3%, pretty much in line with estimates london is flat, equity markets treading water. we have a lot to deal with. bp, standard charter's buyback, possibly bolstering the london market. standard chartered will be one of the big numbers in london. dax is down 0.1%. let's look at the bond markets. pce versus consumer spending. the two opposites, aren't they? couplee lowest in a years, versus decade high in the consumer side. prices up slightly, bunds up nine pips at the moment.

more european data will come across the tape to help us. in singapore has the downdraft from china data, as we go into golden week. out of actionapan all the way until next tuesday, and tomorrow most asian markets will be closed for may day. in the wake of the data you mentioned, it is a question of whether we will see more stimulus from the pboc, but ouer r own intelligence analyst at bloomberg says we could see more slowdown in the pmi's because the start of the year is always affected by seasonal factors. indian markets are being weighed sensex heavyweights, office 0.4%. australia closed lower in the wake of earnings from big banks, concern of how

they will do in the wake of the royal commission into the financial industry. em's, some movement into and watching south korea, kospi off 0.4% after samson missed with numbers -- samsung missed with numbers you mentioned you will watch standard chartered in london when it opens. we have seen standard chartered shares rise sharply in hong kong, up as much as 0.7% after the market said it would announce buybacks, now up almost 5% in late hong kong trade. the korean won is weaker on the back of disappointing samsung numbers, seeing quite a few outflows. the aussie dollar always a proxy for what we see between the u.s.-china trade talks. a little coming through on the aussie ahead of crucial talks. manus: juliet, thank you very much. in resident market expert

singapore. standard chartered, bp, announcements this week. our guest, good morning, good to see you. credit suisse had a better markets business last year. standard chartered giving us a buyback. it has the feeling that it could have been a lot worse? >> i completely agree with that. relative tok at it fourth-quarter numbers. the fourth quarter had more misses than beats, which is super rare. the fourth quarte was pretty much the worst in a decade, so q1 was an easy comparison. we're roughly balanced, about a quarter of the way through. this is the busiest week of the entire reporting season, in the midst of it right now, but it seems better than in the fourth

quarter, which fits with maybe the stabilization we have seen in the broader data in the euro zone, emerging markets and china. so i would argue it is not a stellar reporting season, i don't think anyone expected that, but it is certainly better than the fourth quarter. it is encouraging, starting to see stabilization, cash returns coming through, supporting equities. manus: you also, i the sense when i read through your notes that perhaps the worst has passed for the euro area. let's drill into that, in terms of tragedy. we will find out more from the fed, when powell speaks, but as far as the euro is concerned, do you have a based on the euro? which parts of europe on the equity side are you want to own? you suggested germany. why? nick: if we are right and we are starting to stabilize, we should

perhaps look at the more cyclical parts of the market, the parts that have lagged. looking back to the market since 2018, germany has been the worst performing european market, even worse than the u.k. with all the brexit woes, worse than italy with the budget concerns. so we would argue this is one to look at in terms of the catch-up potential. when you look at the dax, it's a very cyclical market, industrials, autos, financial exposure. so if we are right that we are seeing recovery in the data more broadly, we should be moving more cyclical and the dax fits that. when you look at valuations in germany relative to the broader european market, we had 10 year lows. we got back to where we were in the recession, the global financial crisis, 2008, 2009. so valuations in germany are pretty cheap and pretty attractive, and as the cycle

turns, that is similar we should get more exposure to, rather than less. m --: nickm stay with nick, stay with me. of european equity strategy at ubs. coming up, this man joins me o danske balzter, cfo bankf. that's in the next five minutes. stay with the bloomberg team from dubai to london. christian baltzer joins us next. this is bloomberg. ♪

♪ it is "daybreak europe." i'm manus cranny in dubai. danske bank says net interest income will be lower in 2019 than 2018, as denmark's biggest bank reports income below estimates and warns that the estonian money laundering a case could require significant

attention. with us from copenhagen in his first interview of the day is danske bank cfo christian baltzer. thank you for joining us. you talk about net income being lower than in 2018. are we looking at single-digit lower? put some kind of proportion around that, for guidance. christian: so, what we basically have said, we expect it to be in the same range, given that we would have volume growth to offset funding cost. what we are seeing with the danish rate margin being a little lower for longer, we won't get the benefit from that, and we see funding costs have increased in q1. i think it is the funding cost driving it, and a little bit of the rate margins against us in the danish market specifically. so we are guiding lower, not with specific numbers in a range. manus: and one thing the analysts are looking at is cost to revenue. si there -- is there

inevitability it is negative this year? christian: with the investments we are doing to make sure we are as strong as we can be to fight financial crime, that will increase costs significantly. we also communicated that in our outlook before, and with income pressure we are seeing in rates in denmark, and the generally tough market conditions in europe with competition extreme lehigh, we do see -- extremely high, we do see this might lean negative. but we think it is the right thing for the future of danske bank, to invest in this area to fight financial crime as good as possible. manus: one of the consequences, an outflow on the retail side of the business, retail customers had left. there's national attrition, i know that might be part of your response, but try to give a context of the institutional damage to relationships.

have you seen any other material changes in counterparty relationships in this quarter? christian: so, i think it's important to say, we can isolate the impact to our retail customers in denmark looking across. we have good relations, good activity in general with clients. if you look at our retail in the first quarter, we saw a 6.4% outflow of retail customers, higher than we would normally see with underlying attrition. we do see the last couple weeks of the quarter were slowing slowingth the news around the estonia case. we do see light at the end of the tunnel when it comes to the danish retail sector customer. we're already, in the fourth quarter we got past it with a lot of institutional investors. when we explained how we were

investing to make sure this never happens again, we were able to move on and talk business, and have been talking business with a lot of clients for the first quarter. again, we can isolate this to a retail, denmark kind of area where we've seen reduction in customers. manus: let's get to that, and to actually doing business a. what is the loan growth outlook for this year, christian? christian: we are having a loan growth in the quarter, year on year of 3%. we generally will see growth in sweden, norway and finland, and in denmark we will be a little cautious. we are seeing rate cycle activity in denmark, meaning we are being a little more strict on loan giving in the danish segments, but in norway and sweden we see significant growth. great growth with partnership agreements. in general, we aren't guiding necessarily for how much growth, but are seeing very good traction in our norwegian, swedish, finnish portfolio.

the danish portfolio is a little more balanced on the lending growth side. manus: you mentioned negative rates, and the pressure that is having. every cfo and ceo are grappling with that. the consequence, passing the negative rates to customers. where are you with that? if we are lower for longer on a protracted basis, is there an inevitability that has to happen? christian: denmark was one of the first countries to have to live with negative rates. we have actually grown used to negative rates in the danish portfolio. in sweden, norway and finland, we are not having the same negativity, so to speak in rates. but we already adjusted our business operating model in denmark for operating in a negative-rate environment. when and if denmark rates increase, that will significant the uplift our profits.

manus: do you think as you look at the business, christian, looking at the stock price. 254 krone, 130. have you had any inkling you are susceptible at the moment to a bid? christian: you have to remember, shareholder,ority which has been a long term shareholder with us for a very long time, and there's no change in their view of long-term ownership of danske bank. they see that as natural ownership of infrastructure in danish society, so we have not seen any, we don't expect any, because of this kind of area. manus: when you look at the landscape across europe, we caught up with a number of cfo's and ceo's, the dislocation in the german market, the swiss market. when you look at the european

banking landscape, what's your view for 2019? will we see a monster cross-border deal? how do you look at the world? christian: predicting the future is really, really hard when it comes to large mergers and whatnot. in general, scale is important in the future banking. but i think being close to your customers, knowing your customers, knowing the society you part of an being there to help prosperity in your society is even more important now, and not necessarily the huge conglomerate banking we have seen. we will have to wait and see. as you said, it is anybody's guess. manus: listen, i love a hypothetical question. they must have a special skill for all cfo's and ceo's to reject those questions. one final one for the bond tea m. are you issuing any more debt, part of the plan in bolstering

financials? christian: i think it's really important to understand, we issued 51 billion in devtbt here in the quarter. we plan 70 to 90 billion for the year, so we frontloaded our funding. a lot of this was because of requirements we have to adhere to by the first of july. we will also issue in the second quarter, but a lot of the headwinds in the first quarter is due to the fact we were very early off the clock to issue a significant amount of funding. 90 we will stick to our 72 to i'mlion target, adnd pleased we have issued as much as 51 billion in the first quarter. manus: christian, good to see you this morning and thank you for taking the time to speak with bloomberg. christian baltzer, cfo of danske bank. that has been a tough run, on

that bank. head ofmy guest host, european strategy at ubs. don't worry, i won't ask if you're buying more ubs stock. but looking at the banking sector, santander doing deals to consolidate in latin america, and you heard about that tough time at danske, but there are rewards aplenty in the banking sector with buybacks. this is the critical issue, really. one of the been clear laggards looking at larger sectors in europe, cyclical part of the market. as we heard in that interview, obviously the interest rate outlook not just in denmark, but the wider euro zone and switzerland as well, have been incredibly tough for banks. negative rate environments, very difficult in the pressure it puts on net interest margins for

banks. and when you look at what has happened in the last couple of weeks, the ecb, when you have the push out in interest rate expectations, that was incredibly damaging for the outlook for banks in terms of when the interest rates will finally normalize. we would argue the market has been far too pessimistic, if you look at where rate hikes are expected, the forward rates markets, well into next year and beyond. market comes around to that view, and that will take pressure off the banks. cash return, for those who have capital at decent levels, that is one thing that will help shareholders. to,other thing they alluded it feels like there is m&a to come. we don't know what deal it will be, but it feels like the landscape across europe, and italy, germany,, elsewhere you

need consolidation to get better pricing and profitability. ceos: i couldn't get your to agree to consolidation last week, either. [laughter] hello, sergio. [laughter] the ecb t, argument materially? we saw french gdp in line with themates, 0.3%, with all pressure they have had on the streets. what re-rates the ecb storry that the rest of the market is missing, that you are not? nick: people look a lot at pmi's , the indicators, the soft data as they were, suggesting gdp growth in q1 running about 0.2%. but the hard datasets, things like industrial production, retail, auto sales, these are coming in stronger, coming in stronger to something like 0.6 for q1. so we would argue that there is

some real stabilization in the economy. we had a load of one-offs last year. the water levels in the rhine affecting chemicals and shipping across germany. jaunes across paris and so on. there are lots of effects we think will start to ameliorate through the year. particularly china. china is stabilizing, and that will help u.s. as well. manus: you have the view of value versus growth stocks, and looked at it in a relative sense. talking about valuation, the highest historical levels, value to growth stocks, since mid-2016. how is that play out for the rest of 2019, in your view? nick: yes, because as you say, you are looking at the stretch for growth and value. in europe, where there is not as growth, people

look for exposure to structural growth companies that don't need to be concerned with gdp growth and so on. the high-growth stocks, you pay a premium to them relative to value, and that is the highest it has been for seven years, almost as high as in 2000. so the catalyst for that to improve would be signs of economic growth coming through, a bit more confidence, not needing to hide in growth stocks. again, growth and inflation are the triggers. manus: nick, thank you very much. nick nelson, head of european strategy at ubs, thank you for being -- thank you for being here. the saudi minister of oil, expansion is possible to the end of 2019. this is incredibly important. saudi arabia will not exceed its opec plus deal limit. r.i.a.rce is

we have much more coming up. chartered's cfo joins the bloomberg conversation, bob dudley as well. ♪ alright boys, time for bed.

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>> good morning and welcome to "bloomberg markets the european open." i'm anna edwards alongside matt miller in berlin. proceede markets say with caution. signs lead china slowdown might not be over. gains on the mainland muted as europe points lower after a slew of earnings released this morning. the cash trade is less than 30 minutes away. ♪ ♪ anna: china's engine sputters.