nejra: good morning from london. this is "bloomberg daybreak: europe." global stocks retreat after wall street hits fresh records. trade, president xi jinping and trump reaffirm their commitments. are expected to show thousands of jobs added. the dollar sits a two month high. and finding results. a page, saying it will deliver quarterly profits by the end of the year.

♪ nejra: welcome to "bloomberg daybreak: europe." we get straight to a redhead line crossing the bloomberg. exit accepted the resignation of tidjane thiam. will the covering that battle later on. they are appointing thomas as ceo. top as thethe program has been moving forward. , unanimously accepting the resignation. we are seeing red on the screen -- seeing red on the screen. pullback.

10 year yields are flipping as well. yield is on a 1.6 to handle. markets are out with a note saying the bid for the yen is not as strong as previously. yield, at the 10 year ken griffin is calling out the markets, saying the risk is grossly underpriced. we are filing deeper. an additional 41 coronavirus cases on a quarantine cruise ship. beijing has ramped up efforts to contain the virus that has claimed over 630 lives in the country. we spoke lucidly to china's ambassador to the eu.

epidemic will affect the economy in china and the world. the effects will be limited and short-term. nejra: joining us from hong kong is our chief north asia correspondent stephen engle. great to have you with us. tell us about the cases. >> there were 28,000 confirmed cases yesterday, so this is an addition of over 3000. add,are severe i might 22,000 plus are in the epicenter of hubei. it is the case that it is mostly contained for now.

as you have been noting about what is happening in japan with 41 more cases aboard the cruise they have 61 cases in japan. the deaths are primarily still in hubei province. twodeaths in china, plus outside. , 69 ofe 73 new deaths them were in the epicenter. epicenter, hospitals are reporting they are desperately they are alsoies desperately short of qualified doctors and nurses to the tune of more than 2200 doctors and nurses. it is not helped by the fact that we have lost one of the whistleblower doctors late last

night who was credited with announcing the dangers of this virus. however, he was fairly muzzled by local authorities. he'd passedrked -- away last night and that has sparked sympathy and criticism of the lack of transparency in china. nejra: we will come back to the coronavirus in just a moment, but i want to get back to this headline i broke at the top of the hour in terms of tidjane thiam resigning. we understand he is going to be ceo.ced as the credit suisse board has been supporting the chairman until april 2021.

dayere looking ahead to a when credit suisse descended into an open civil war or manage a settlement between the chairman of verona and the now former ceo. we were looking ahead it to this board meeting that rona had to publicly back. he is remaining on the board until 2021. impact of theic coronavirus unfolds and experts should tamp down on risk in the portfolio. to a globalrding market strategist at a jp morgan. great to have you with us. you are focusing on the reopening of chinese factories. .ou say that in either case

why? reopen, theres are more people coming. virus is spreading and that kforce factory closures down the road. it could be the case that the chinese authorities are not comfortable to allow the wide so that wefactories could effectively delay the factory opening. open as widely as the market expects. costs a lotclosing of chinese gdp. factors widely open on monday or whether it is delayed by one week, it could change. nejra: that delay could spoil

your base cases of shaped recovery. you are still overweight equities and it is tactical. you have got more reasons than just the openings. >> indeed. we should not forget that the u.s. equity market is close. that the position backdrop at the beginning of this year is almost in the middle of what we saw at the beginning of 2019. 2019 was a very strong year for equities. investors started the year underweight. on equities, what about volatility? so,ou see a pickup, and if where? minimum, the coronavirus

issues are going to cloud the macro picture. we are for sure going to have a big decline in global's you factor in emi. -- pmi. the markets will not be sure how much of that klein will be virus-related. think -- decline will be virus-related. embedded inemains options markets. these are implied to go as low as 7.8. it makes it attractive to be long volume on these places. nejra: you are actually upping the allocation to credit.

europe of credit risk in is down to lowest since the financial crisis. >> it is more about not putting all of your eggs in one basket. another recommended way of credit was into more overweight equities. now that allocation is gone there is less reason to use that . nejra: what would cause you to change your view in equities? what would make you reassured the coronavirus was under control? >> as you mentioned, a factory reopening. the coronavirus is not spreading and that is positive. that should make us lift allocation to high levels.

nejra: what about safe havens? do you have any preference? interestingly, the yen has not performed that well. >> gold go up because it is supported by more circular rather than tactical flows, these are driven by tail investors at the central bank. they are both underweight gold relative to the overall asset composition. reluctant tonc is intervene. in terms of global equity evaluation, i believe you are focusing on the u.s. underweight versus the aero area. is that related to the coronavirus? again, notout,

putting all of your eggs in one basket. equities, overweight it is better not to focus on the u.s. if you are less overweight equities, you don't want to put your eggs in one basket. nejra: in terms of sectors, you favor cyclicals. why? is more like long-standing positions. we don't want to take the portfolio. you are overweight on equities, don't put your names in one basket by focusing on secular growth.

they are trying to spread the risks to different articles. nejra: our guest essays with us. joining us for more is stuart wallace. on what we know so far. >> it is quite a surprise. . we knew they were meeting in zurich. it was absolutely clear there was a significant number of shareholders keen on him staying on. it is a surprising turn of events the replacement is something of a veteran who has been there since 1999. nejra: just give us the background as to what to be leading to the showdown. >> this has been going on for

months and we are getting glimpses of what appears to be a fight between two individuals. we were the meeting, reporting that both sides were basically tussling it out and that a showdown would have to be made. it certainly can't be both in the scenario. nejra: what does it mean for credit suisse's strategy? >> we don't now, but we will see in a few days. it has been a calamitous performance from them. but on the other hand, we have faced some real challenges. there is still some on picking and confidencee that needs to be rebuilt. nejra: as we were looking ahead to this board meeting, what might be expected? >> there was more yesterday and

the day before. there is more for the chairman and ceo to come out with. it is a watershed moment for the bank. none of which i could answer at the moment. how do we expect shareholders to react? >> i have not seen an open call yet. the first thing i'll do when i get back is pull up my screen. they have not had time to digest one,is is a really tough because it is not what we were expecting. nejra: a big surprise when this did break at 6:00 a.m.. >> this is rather unique. i don't think there's any other

answer. but in terms of that dynamic, this could be read across all poweres because of that and who will make those decisions. nejra: i want to bring in our guest. i'm wondering if you have a view on european banks in particular. niklos: european banks are divided by spectrum. very different from u.s. banks. perform,ean banks to you need to see a resumption of that upwards trajectory which

has been the global cycle since last october. happen ands not china delays that process, i think it will be very difficult for european banks. we have got francine lacqua joining us on the phone to talk more about the credit suisse story. your first take on news this morning? >> it will take a lot of people by surprise. if you think about what happened in september. they had followed someone who had then gone to work for ubs eared they had been playing out over the last 10-11 days. we knew the chairman and chief executive were fighting over the reputation of credit suisse. this potential third allegation of spying had shown there were unflattering lies in the innerworkings of credit suisse. leading private bankers trusted

their rich clients. this was a surprise because we on spoken to a shareholder monday. he was a major international shareholder who told us he was 100% behind the chief executive. for many, this will come as quite funny news. nejra: bloombergs francine lacqua, great caddy with us. we will keep across this breaking news story on tidjane thiam and bring you all of the latest on the coronavirus and the reaction across assets. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." let's recap the breaking news we had for you. we understand it to john tm is stepping down and will be replaced at the swiss lender.

the board of directors accepted .he resignation at this meeting he will step down after the presentation of course -- of fourth-quarter results. wrona, hasn, ernst set that under his leadership, credit suisse repurposed strategy stored strategy and engendered an exceptional level of cooperation between various divisions. hasboard says wrona unanimous backing until his term ends. whatig question now is happens under new leadership and we will perhaps have more details. getting back to an eventful week in u.s. politics, it was capped with one of the most anticipated economic releases of the month.

may havemployment investors rethinking the outlook of the country's health. ken griffin has warned about the risks of rising inflation. are utterlyets prepared for the inflation. he says that after years of subdued prices, there is absently no preparedness for an inflationary environment. will get to the comments on the numbers, but what sort of narrative are you looking at for over and what support your weight equities? i think the u.s. labor market has been in a good place for some time. there is the idea that u.s. is a safe place to be.

these are the equity sectors investors go into when things do not look good. this is where we stand right now. i think u.s. market is more of a safe tape -- safe haven. we areit spreads unlikely to see coronavirus issues affecting the market didn't changing safe haven equities. nejra: interestingly, equities and bond markets are telling a different story on the economy. yields have been falling, the curve remains suppressed. i believe you think we are going to see a steepening. why do you hold onto that call?

we are more excited about the idea of a steepening of the u.s.. on the argument that we are going to see a lot of inflation, but more that we are going to see what we call a big deceleration. last year, it reached a new record. funds, flattening global yield curves. year we was that, this , whiche an acceleration is a big negative demand. the problem is this is not happen. maybe it is the coronavirus issue, may be reasons.

but even the coronavirus issue emerged and we did not see any evidence of a slowdown in bond buying. close to $80 billion into bond funds. analyzing it, it is close to one trillion eared -- one trillion. so we are not seeing the rotation we need, so we are less and less confident. , wea: last time you were on compared where we are now two in midcycle adjustment in the u.s.. are?at still where we >> we are less confident on that idea.

it is a cycle similar to 95-96. the rate markets are steepening, particularly the front and of that spread went into boosted territory and we are arguing that it needs to stay in positive territory for the midcycle adjustments to play out. unfortunately, that forward to negativeback in territory. condition we had put needs to play out. what does that mean for the dollar and how you would trade that? to play dollar weakness has been a waste of time.

dollar weakness of any significance, you need growth inputs of similar magnitude to what we saw in 2017 where the rest of the world was also growing positively. if anything, the coronavirus issue will cloud the market for the next few months. so we are in the same backdrop as last year, in terms of the dollar. we are in a range and the dollar will stay strong until we see a pickup of some significance. doubtful given the coronavirus. . our guest from jp morgan stays with us.

but get back to breaking news. tidjane thiam is resigning. there's likely to be an uproar against key shareholders who had backed him in a damaging scandal. he will be replaced by thomas gottstein. this is bloomberg.

nejra: good morning from bloombergs european headquarters in london. is "bloomberg daybreak: europe." tidjane thiam it resigns as the board unanimously backs wrona. he will be replaced by thomas gottstein. after walls retreat street and europe hit fresh records. trumpent xi jinping and reaffirm their commitment to tropez's -- two phase one. sits at a two-month

high ahead of the jobs report. nejra: let's get back to the news from credit suisse that we got at the top of the hour the ceo resigning, a shock move that is likely to fuel an uproar among shareholders who had backed him of a damaging scandal. amidst a damaging scandal. he will be replaced by thomas gottstein, the leader of the swiss unit. the chairman has the board's unanimous backing to complete the term until april 2021. discuss is our finance editor and a guest.

how much of a surprise is this and how much pushback will there be from shareholders? >> it is a bit of a surprise. there was this power struggle going on for a couple of days and weeks. at some point, there has to be a decision. it was a surprise in the good job he did turning around the bank. that the boardg fully backed wrona. there were some high-profile investors who strongly opposed it. nejra: what do we expect the strategy to look like now? they are not going to change it dramatically. thomas gottstein is a long-term manager at the bank and knows the strategies quite well.

he knows the changes of the last year that were put in place. he is the former manager of the universal bank in this -- and is at the heart of it. he has the strategies to go back to wealth management. i don't expect that the strategy is going to change dramatically. nejra: let me bring you in here. this position -- how does this position ubs? >> it's hard to say how much it will change their approach or competitiveness. both of them do overlap in a lot of ways and we will have to see if there is a serious strategy change with the new ceo. this could obviously be a shock to the shares.

but i can't imagine there will be any immediate impact on the performance of the bank. -- nejra: thank you both so much. the european equity portfolio manager at allie owns. -- allianz. what is your first take when you look at the european banking sector? >> it is a big shock for investors. the news we heard was that mr. tidjane thiam was getting support from investors. so i think you will see a shock in the markets. us, theyrtantly for will hear from the new ceo. nejra: what would you want to

hear in terms of that front? continuation would be positive. they are moving away to a more visible, stable wealth management and parts of asset management. , expect that will be continued but investors will be watching eagerly. nejra: when you look at the sector more broadly, is that a sector that attracts you and all? -- at all? my previous guest was saying that until we get fears of coronavirus going away, banks do not necessarily look attractive. >> banks in europe are facing big, structural challenges. they are facing growing importantly, it is difficult for them to earn a net interest rate margin. these rates have actually reversed now and it looks like

much of europe is talking about lower rather than higher rates. environment, it is difficult to earn a meaningful return. interestingly, some of the cfos we spoke to are adamant they are finding ways to manage and mitigate the low interest rate environment. are you convinced by that? is that something you are actually noticing? yes and now. thanks have surprised through earnings season but the bar here is incredibly low. thanks have disappointed investors for most of the past decade. this is beginning to turn, but at the moment, there are too

many structural challenges. nejra: we heard from christine lagarde this week talking about there being limits to monetary policy. it was a slight shift in tone. in ais your confidence bottoming in the eurozone economy? data can be volatile and we look to industrial production today. >> it was certainly a negative has beenand most data broadly positive. optimism youing are beginning to see an upswing. in terms of christine lagarde's comments, that is a material risk for asset classes more broadly. of the outlook for most these banks is increasingly bearish. but if we do see a slowdown, their tools are rather limited.

nejra: credit risk is at the lowest since the financial crisis. what is that telling you? >> that there is optimism in the markets. the big topic we are discussing is the coronavirus that unfortunately remains unknown. there are huge consequences at the human and economic level. job is to understand the economic consequences and the fact that credit spreads and equity markets are back to where they were precrisis. it shows investors are confident that growth consequent is would be limited, or alternatively, that monetary stimulus china has announced will mitigate the growth slowdown. my view is that it is a combination of those two. at thes more optimism

speed of the acceleration is showing. speed we hear from experts implies that the number of infections is likely to peak. nejra: marcus stays with us. up next, we bring you all the latest on the news this morning. tidjane thiam resigned as the board unanimously backs ernst wrona. this is bloomberg.

nejra: this is "bloomberg daybreak: europe." if you are just tuning in, teach ntm has resigned. we learned that he will be replaced by 20 year veteran thomas gottstein. the board has unanimously backed the chairman ernst round -- wrona until the end of his term in april 2021.

it is a move that might fuel an uproar amongst key shareholders who had backed the former ceo. we spoke to one of those shareholders earlier this week. listening. -- listen in. >> there is what i would have to guess is an orchestrated news flow trying to pin something on him, who has not appeared to do anything wrong. so we are 100% absolutely behind him. david haro was speaking to us a few days ago, saying he is 100% hind teach ntm. behind tidjane thiam. background, the trouble started in september when it emerged that the bank spied on a star banker after he

announced he was joining a rival. include as emerged personal falling out between the two executives and the suicide of a contractor. it really rattled business circles in zurich, an area that normally enjoys quite a reputation. the internal probe then concluded he did not know about the spy and the chief operating officer was responsible. this is an ongoing story with lots of threads to it. it soon emerged that peter followed.o this is a scandal that has seen teach ntm unable to shake it off. meeting was expected and we have now learned that he has resigned and will be replaced.

backedrd has unanimously ernst wrona until the end of his term. it is the culmination of a andlict between the ceo wrona. you could say it dented the banks resignation and prompted questions about the culture. while he was cleared, the bank struggled to move beyond the scandal. but get back to the impact of the coronavirus. luxury goods will be hit by a bad first quarter as a result of the outbreak. meanwhile, the virus may cause a temporary slowdown in the beauty market in china where strong demand helped the company beat sales estimates. allianz is still with us. have we peaked in terms of

spread of the virus? is it too early to bottom fish? how is your strategy being shaped the virus? marcus: it is challenging for us but also the corporate management team. as you see, that is something we have seen reflected time and time again. companies guiding either a wide range or excluding the impact of coronavirus. clearly, this is the time of year where they are providing the full-year guidance. l'oreal, it's interesting to see the strength of the results. , 30% growthortantly coming from asia-pacific. this is one of the benefits and challenges for the luxury sector. the market now accounts for 35% of luxury spending. last year, it accounted for 90% of total growth.

this is different from the outbreak of sars. slowdownsay a material -- see a material slowdown, the luxury sector will be heard far more than others. -- hurt far more than others. nejra: where would you be wanting to allocate that exposure? >> technology. it is a sector that has outperformed for nine of the last years in a row. but beneath the bonnet, the reasons for that outperformance are the right ones. the sector is continually outgrowing the wider market. it looked like the tech sector would have delivered earnings relative to the wider market. there are clear content winners within the sector. one interesting sector is the semi conductor sector. within that, conductor companies exposed to markets.

that has been a challenging place to be. what the results point out are that revenues are beginning to turn. because companies are generally running low utilization as soon you see that shift, you could see significant impact on the bottom line. that is why the prices are recovering. show, when i started the futures were lower in the u.s. and europe. i understand the argument about u.s. exceptionalism, equities, and the bull case. you could argue that if we don't see a recovery, europe is vulnerable in terms of growth. why is the european equity market needing to be able to

absorb bad news while also adjusting to any hints of good news. we are heading to the best week of global equities since june. why the resilience of european equities? marcus: there are a lot of reasons to be optimistic. global growth is on and upwards trajectory. remember, we are in a low rate environment. there are lots of reasons to be optimistic. lower.ons are far when you see inflows like we are beginning to see, these asset classes can turn very quickly. nejra: we were -45 minutes ago and we are flat on futures right now. marcus will stay with us and we will talk more about earnings season.

we will also bring you our interview with l'oreal's ceo. this is bloomberg. ♪

nejra: this is "bloomberg daybreak: europe." ntmcredit suisse ceo teach resigned and the board unanimously backed chairman ernst wrona until the end of his term. is a stunningg reversal for an executive who was backed by shareholders after a damaging scandal. it is the culmination of a conflict that escalated after a recent spying scandal dented the banks reputation and prompted difficult questions about culture at the top of the firm. while he was cleared and a

lieutenant took the fall, the bank has struggled to move beyond the scandal as more cases have surfaced the -- surfaced. . the outcome seems to be that thiam. his resigning. iam is resigning. some have urged that chief board member to stepped out himself and it was an unusual public display of support. the final outcome is he has resigned and was replaced. nejra: results remain ahead of expectations. he says full-year guidance is generally positive and etf beats are close to a high, indicating the worst of growth lag maybe behind us. abundant amidst

the coronavirus. our place says they take comfort in the improvement but warned that visibility is low and the risks acute. our guest is still with us. what is the quality of the beats we have had so far? marcus: unusually high. 42% of companies have so far beaten estimates by 5%. but as you rightly say, the beats are high. artificiallyey are high because you have seen an earnings of downgrades. muchve seen that to a lesser extent in q4 results. the one area we have to guide cautiously is in company guidance. we are seeingd, companies be much more conservative, issuing broader guidance. nejra: are there risks to the downside?

thats: a large part of depends on your outlook. there are reasons to be positive . and therell positive are opportunities this is creating. lookhose prepared to through the short-term, this can create opportunities. marcus: are you positive on cyclicals? nejra: i know you are up semi conductors, but is that a semi conductor or cyclical story? marcus: semi conductors, specifically. the companies we like are the content winners. they are exposed to long-term trends. more broadly, in terms of cyclical stocks. if you look at areas like mining and energy, you will see a much bigger impact from the slowdown

it's clutching. so we would focus on companies that are long-term real winners. nejra: how much dispersion are you seeing? it seems certain this is a market trading on sentiment around coronavirus? marcus: that's true. you have seen it break a little bit as they gather momentum. certainly ares being rewarded and that's what we like to see. investors can start picking right and we really do see that performance dispersion. nejra: where are the best opportunities that you see if the concerns start to fade? marcus: we discussed the luxury sector, and l'oreal had pointed companies withun the best strategies are

continuing to take shares from smaller competitors. the brands are getting bigger and continue to dominate other markets. nejra: do you have companies with high exposure not just to china, but the wider emerging-market? marcus: that is a clear growth driver for many of these markets. these regions are driving consumption. unfortunately, consumption is now at low single-digit levels. so clearly, you need to exercise caution, but on a 10 year view, is one of the most closely attractive regions. nejra: thank you so much for joining us. that's it for "bloomberg daybreak: europe." european open is up next. futures were on the back foot, but we are now trading flat after hitting records yesterday.

we have also learned that tidjane thiam has -- is stepping down. he will be replaced by thomas gottstein. until aprilstays on 2021. ♪

anna: good morning. we are live in london. i'm anna edwards alongside matt miller. matt: market say to hold out for the jobs report. treasury yields dip ahead of payroll data. futures are holding steady around record highs. the cash trading is less than one hour away. ♪