guy: good morning, welcome to "bloomberg markets: the european open." in london.nson matt miller is in berlin. the cash trade less than 30 minutes away. ♪ guy: the bank of japan governor mr. kuroda will lead the central bank another five years. in pushing higher after the nomination. will it break 105? suga is getting concerned in tokyo about the change. the tie-in in

election points to a grand coalition. coloring deutsche bank. after lowering its stake, the chinese conglomerate hna turns to them to help hedge its stake in the german lender. half an hour till the european open. look at where we see futures trading after the gains yesterday, futures are up today and a percent mispriced is indicating again at the open. pretty decent gain across european indexes, with the exception of the ftse which is open lower.e -- to everyone else looks green on friday. treasuries, we are holding at a level of 2.9%. this is a three-day chart of the treasury yield and you can see that after a big gain on valentine's day, up to 2.9%, we are holding their. , ones coming down a tick

basis point. otherwise, it looks like levels will stay high on this friday. charthere is only one column i want to point to, the foreign exchange markets. 1.25dollar pushing through yesterday. 1.20 why 40 -- 1.2540. the base of the trend is 1.0 586 where we are trading on yen. will we push below that? the japanese authorities from the government point of view beginning to get worried about what is happening. it will be interesting to see what the political story ends up looking like. the dollar trading down again. let's get a first word news update with ed ludlow. ed: shinzo abe has nominated governor kuroda to lead the bank of japan for another five-year term. the appointment provides -- and meansdst

aggressive monument -- monetary stimulus. the u.s. senate has block four immigration proposals, steepening an impasse of how to protect 1.8 million the undocumented young immigrants from deportation. a bipartisan measure would have provided $.5 billion in border security and up have to citizenship. following presidential criticism, they threatened to veto. britain should aim for a partial customs union with the eu after it leads to the block. they said at -- an agreement that covers industrial goods would -- the key industries while allowing the government forge an independent trade policy. theresa may has said the country plans to leave the eu customs union. withillerson has met turkey's president in an attempt to ease tensions inflamed by american support for kurdish forces in syria.

the three and a half hour meeting in ankara came on the last step of his five nation tour through the middle east. tillerson had told reporters that the country's objectives are in line, but there are differences of how to achieve them. has amassed short bet against europe's biggest companies, totaling more than $21 billion. his company bridgewater associates turned bearish on europe last month, and also started shorting japan stocks around the same time. the hedge fund is long u.s. equities despite his call that there is a rising risk of recession in the next 18 to 24 months. exports this year are expected to be higher than any country in the last 25 years. they are expected to sell more than 36.5 million metric tons overseas according to consultants and the institute for agricultural market studies. more farm investment in recent years has allowed russia to grab

market share from the u.s. and canada. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. matt: dollar-yen continues to weaken toward 105. the options market suggests this would be overdone but the parent is far from lows in 2016 in it dipped to 100. joining us from singapore is mark cudmore, bloomberg mliv strategist. what do you see in this dollar-yen trade? i know you are did this morning that the euro makes a better reserve currency, or at least i saw that on "daybreak," but the yen seems to be where everyone is going. completely, i don't think this is just about haven flows. the yen proved itself yet again as the ultimate haven fx play during the recent turmoil and that helped the move this month. this week, we have seen assets

trade well and still, the yen is the outperforming nearly every day. this is really about the market wanting to sell dollar no matter what. the higher yields we saw this week didn't help the dollar. good growth doesn't help the dollar. there is a whole narrative out there that there are structural flows that need to come out of the dollar because overall, u.s. assets are being undermined by trump and people need to move away from dollar denominated assets. the yen is at the forefront of that play. today see an acceleration , it had a few attempts before i finally went. pipsit did go, we went 45 below, but there is no technical support in dollar-yen at the moment. matt: i'm probably not going to get a chance to talk about this through the program, so on bitcoin -- my inbox is flooded with crypto analysts who say we are back to -- going to go back

to $1700. what do you make of the resurgence in the biggest cryptocurrency? mark: i think we could actually head back up to those highs again. i don't feel the selloff we saw in december showed the signs of the ultimate bubble top. bitcointerm is that will go to zero, but i don't think we have finished the bubble. i think we would see bitcoin selloff post-christmas when credit card bills were due and ahead of the chinese new year when people want cash to buy presents. in past years,is we said how bitcoin was set for a terrible december and january and that happen. now that it has passed, we could probably see a rally again. people who believe in it are not selling out and more people will get back into the hype for another rally. we may go higher again this time

before the initial crash, maybe any years time. -- in a years time. guy: let's talk about treasuries. citigroup putting out a crazy target. this is a tale risk story. they are talking about 4.5 on the u.s. 10 year, we have been in a range for u.s. treasuries below 1.5 to three since 2011. his 4.5 really that crazy -- is 4.5 really that crazy? mark: it is not a crazy idea. it is saying the new normal will go back to the old three crisis normal, where there was rampant inflation and growth, and we are seeing that growth. i am personally suspicious of the inflation narrative. her are small signs of inflation acceleration in the u.s., but nowhere else on the globe. i don't think the u.s. can take off on an inflation spell on its own unless the dollar collapses. realuld have to see a

dollar crisis, which i think is unlikely, for the inflation narrative to take off. if you believe that idea, earnings are great, than 4.5% is not completely crazy. guy: to come back to the dollar and a dollar collapse, mr. suga in japan is voicing concern about the move we are beginning to see against the yen. a few in europe are getting nervous about what is happening. the rate of change is critical, the delta, what happens in these targets and how quickly we get to them. the you see any evidence we could see an acceleration in this story? we have seen turbulence in the last week or so in stocks, what about a big blowout move in foreign exchange? mark: they're definitely has to y on the radar. it is something to consider. i was a secular bear and remain

so on the dollar. too many acids allocate there. thought of weeks ago, i the dollar was a bounce. rapidly in the dollar's favor. higher real yield, the growth story is taking off. even though i believe in the secular bearish dollar story, i thought there was an excuse for a tactical bounce. it hasn't materialized at all. in fact, the dollar down move has accelerated. this is a worrying sign because it shows people are starting to buy into the narrative that they are giving up on the dollar, no longer believe the dollar is the ultimate reserve currency and they want to strategically cut down allocations there. if that narrative continues to take hold, this could be worrying. currently, the dollar makes up over 60% of the world's reserve -- fx reserve and yet, the u.s. economy will still fall to being less than 20% of the world economy. it seems there is too much money wrapped up in dollars. i thought this narrative would

play out over many years, but it looks like everyone wants to accelerate the story and that is a concern. guy: great stuff, thank you mark cudmore. joining us from the mliv team. , the letters you need to know. i want to take a look at headlines. carlos ghosn speaking to analysts in europe and saying a couple of interesting things for the injured were jewel -- individual stock stories and the industry. renault, he is saying the departures have been based on private decision, there hasn't been a management conflict and it is really the board's decision succession and not his. he is also saying as far as the industry is concerned that 2018

is going to be the europe moderate growth. he says consumer behavior will be difficult to predict, but is mainly counting on china, brazil and russell -- russia for growth. interesting to hear from carlos ghosn this morning. watch the auto stock on the open in what is expected to be an update for markets. this is bloomberg. ♪

♪ -- it is theet

european open, 15 minutes ahead of the start of cash trading. back to the bloomberg's new/with ed ludlow. says therance cfo company won't launch a discount arm yet. afterng to bloomberg tv reporting full-year operating revenues up 42%, the air france cfo says demand and load factors are increasing. europe's biggest carrier planned a major hiking capacity with a boost to seeking as much as 4% this year. he played down the prospect of investment in joint venture partner and italian -- alitalia. alitalia, if they are able to be a partner, would be good. we are interested in what is happening considering alitalia, but it doesn't mean we will be involved with the other company.

ed: europe's biggest insurer is raising its dividend and sticking with a planter retaining cash -- return cash to shareholders despite a year of natural disasters. 5.3%,z will increase by that is the company reported decreased earnings of 1.4 billion euros in the fourth quarter. partly affected by the one-off impact of u.s. tax charges. that is your bloomberg business flash. kuroda has been appointed by shinzo abe to lead the bank of japan for another five years. we are halfway through his term effectively. joining us from tokyo, bloomberg's brett miller. we have kuroda nominated. business as normal now? desiringflation policies that have been put in place by corrode at the last five years, do we get more of the same? next months,er the

we get more of the same. that means a greater divergence with the ecb and the fed. that will be interesting in terms of international global banking with japan moving in the opposite direction to global counterparts. we will be looking at the meeting with kuroda and his two deputies in april. that will be the first chance we get to see if the new leadership team makes any changes. as usualect business the next few months. but during his five-year term so far, he came in with really amazingly huge asset purchases, but switched. he moved to a negative interest rate, then tried yield curve control. we could see further changes from mr. kuroda down the line. theoretically, this divergence should be negative for the yen, but the yen is

chiefng and suga, the secretary on tape voicing concerns about the rate of change in terms of the yen trade. how big a feature will this be of the next few months for the japanese authorities? i would say the japanese authorities will be on guard. they are on guard today and will be the next few weeks. if we look at the impact of monetary policy in the bank of japan, it is mixed in terms of inflation that it has weakened the yen. that has been good for exporters and has been one of the hopes for reflation, eventually it .ould push up import prices now we are getting the opposite of what the government wants in terms of the yen. the cabinet secretary suga has voiced concerns. earlier in the morning, the finance minister's tone has

changed a little. he is not quite as happy as he a few monthsen back with the yen. there is concern among the government. export competitiveness gets hurt if the yen strengthens too much. matt: is there any chance of another nominee than kuroda? did he have any combination -- competition? brett: we have been surveying economists speaking to investors, insiders in policy circles in tokyo and yes, other names came up that mr. kuroda was the favorite buy and a norm us margin. i think most of the speculation started to center on the deputies and eventually, it it or four. to three there were no great surprises in the names and when you think about the fact that governor kuroda and prime minister abe have a good working relationship, it was no prize he was picked for the job for another five years. matt: thanks, brett.

bloomberg's brett miller. joining us out of tokyo. we are minutes from the open. we will look at your stocks to watch. there are a lot of equities to keep an eye on, including renault. deutsche bank, as well. allianz, given what is going on with the dividend. watch them, this is bloomberg. the open is 10 minutes away. ♪

♪ guy: six minutes till the start of cash trading in europe. european stocks broadly called higher, but what about individual names? we are joined from our stocks team. casper, let's talk about vivendi . uninstallation a was one note i read this morning. the story has become more about music. especially with platforms coming up. people will go back to the stevie wonder and johnny cash jams. there has been talk about

listing universal music. now they have come out with a more cautious tone and the listing is not in the cards yet. they didn't provide a guidance for the business. the other business has done a transition phase, so lack of good news. nothing severely bad, but not great. aboutwhat are we hearing oil and gas output climbing to a record high -- some conflicting reports out of oil majors the last couple of weeks. is one of thethis more encouraging ones. record oil and gas output right on time, when we get oil above $60 a barrel, looking pretty good right now. bank, hna, the largest shareholder obviously troubled. but it has turned to ubs and is putting options collars effectively to limit losses

around this steak, which it wants to broadly hold onto. been reducing the stake in two troubled countries of late. this perhaps could provide a little stabilization if they say they will hold on to this current steak, we will see. -- stake, we will see. guy: great stuff. if you want to find out what is happening with the stocks team, first go should be your first port of call. you can find it on your mobile app and your bloomberg. coming up, the market open. fair values pointing to a positive start. euro stoxx 50 up by about .6 this morning. remember, asia is significantly subdued as a result of the lunar holiday. s&p 500 up by .3% but it is early on that front. what is happening

with deutsche bank and vivendi. plenty of stocks to focus on. up next, the market open. this is bloomberg. ♪

guy: minutes to go until the start of cash trading this morning. generally quiet today because of the holiday. tokyo is open. up 1%.ed around what will we learn about today's numbers from europe? bloomberg to get an idea of what the fair values look like. half -- up half of 1%.

europe is expected to open positively. keep an eye on vivendi this morning. keep an eye on air france. show you the numbers in just a moment. in the meantime, let's see how these are opening in europe. these are the numbers you need to look at. opening up on the ftse 100 a little softer. expecting not quite as strong as that, but similar numbers for the rest of the european story. monday up -- london is up. we will come back and look at the dax in a few minutes. ftse take a look at the 350. health care bid. the whole wheel is bid. you can see some red down there. energy looks solid.

materials looks pretty solid. performance coming through in the financials. matt, what do you got? take a look at what we are seeing at the open, it reflects what we saw on the s&p over -- overnight. 472 gainers, 27 losers. 350 are risingck on the stoxx 600 as well. take a look at the individual winners. schneider electric at the top. the big gainer is renault. 4.4% for renault. the contract is extended. i guess he is still be rockstar ceo. he expects moderate growth this year. china, brazil, and russia will be the key, and he is going to make the combination with nissan irreversible.

no headlines driving the stock up there. eni is a gainer with more than 2% right now. take a look at the losers. there aren't very many. right at the top, vivendi. about vivendig right at the open. it is down 4%. some of these losers are falling big time. look at saab. this is not the maker of the iconic 900 spg. this is the maker of the airplane engine. rightn see it is down 7% now. otherwise, some big losers. down 2.4%, but otherwise, there are few. stocks have had something

of a recovery, you might call it remarkable. a period in which we witnessed the first -- the worst week in nearly two years for stocks. companies leading the way include -- we are talking about highly indebted companies else in back. joining us now is danny bergen. kick us off. talk us through what is happening here in terms of the leaders. leverageeresting the companies and shorted companies are leading the charge. reporter: when you think about what would come back from market decline, it would usually be companies that -- the most. when we looked at the way the market cooled off, the entire market cells. there is some distinction on the

way back up. in the russelles 1000 are staging their best week since 2016. that would indicate short covering is coming in, which i think is interesting. if you are a bomb short equity manager, you have done pretty well during these past few weeks. remained exposed to the market. that is another threat that has yet to go. you can't say this market washed out all of this overvaluation. everybody is out. they were protected. the other interesting piece, very indebted companies, their best week since 2013. these are companies with risky balance sheets that are seeing a comeback. matt: a lot of these countries's have week balance sheets, so does that mean -- what is going on?

is a risk appetite back on or is it related to short covering? dani: when we see short covering , we see quality tend to underperform. that might be at play, but the weird thing here is, when we think about what is happening in the credit space, the cash bonds still looking kind of healthy, but when we think of the etf to my short interest is skyrocketing. $6 billion coming from drunk bond funds. that would indicate investors are not feeling great about this debt. another bank of america survey shows that investors are the most concerned about corporate balance sheet on record, but still, we are not seeing them walk the walk, so to say. that in not showing equities. you have these highly indebted companies with risky balance sheets outperforming. both sides can't be right,

especially as we see interest rates raise. you have got to imagine that it might be the jump on etf leading the way. guy: this has been a confusing time. you can look at assets and they make sense, but the complete narrative doesn't. what do you make of investor sentiment? >> i think the narrative around this one piece of data, early earnings, is stronger than expected. this story of inflation potentially getting out of , tightening behind the curve. i am not convinced of that. guy: when the cpi data cannot, stocks went up. derek: going back to equities, you don't, tightening behind the curve. i am not convinced of that. get that price action in an undervalued market. any peculiar narrative can be the trigger for a large correction when you are in overvalued territory. that is what happened last week. terms of risk appetite me back

this week, there is lots of conflicting stories going on in the markets, but ultimately, every valuation metric i look at told you the equity markets are it in overvalued territory. let me try to sort this out. you were talking about the reaction to the average hourly earnings number back when we had the jobs number. in between was when the stock market went absolutely haywire. what do you attribute that to? about theen talking big reasons for the market so off and returned to volatility. derek: i think there is a bigger fundamental story, but it is partially linked to the u.s.

treasury market. that is what is happening in washington and the policies. the unfunded $1.5 trillion tax cut program was legislated for in december, that doesn't mean that it is being ignored now. it is a delayed reaction. on top of that, we have the $300 billion increase in spending and this ridiculous budget from the white house, which tells you one thing, that the presidency and the republican party care less about the long-term fiscal risk in the united states. i think investors are beginning to react to that. this could be a slow burn story that runs for months and months. ultimately, there is risk their that weren't there are year ago in relation to long-term yields in the debt problem in the united states becoming more of an issue for investors. guy: the initial inflation fears that sent the market down, then

we got a strong inflation number and it sent the market up. we will talk about that. quick question, bridgewater. getting more and more information about radel yields positioning. iss the theory that he looking for a domestic play still hold water? to scale of the short seems be getting bigger. dani: it does. only if we could see the underside of his book it would answer a lot of questions. he had that linkedin post where he talked about late stage economies, when you have earnings looking good, economic data coming in well, that is when you get interest-rate drive in. that is when you turn bearish. maybe it is an overall bearish position on europe, but i would have to imagine, and we talked about this, my obsessing over this, the way these shorts are

positioned where they are proportional to the index. i think it is possible that this is a bearish play on europe, but it might be more focused. it could be on domestic companies in europe, because these are big international companies he is shorting that would face headwinds should the euro strengthened. -- should the euro strengthened. guy: thank you very much, indeed. derek halpenny is going to stick around. we will talk about what is happening with the yen. we will also talk about which stocks are on the move this morning. is popping up by nearly 3%. the ceo will remain for another four years. this is bloomberg. ♪ ♪

matt: welcome back to bloomberg markets. this is the european open. we are looking at gains across the board in europe right now. on the dax we are up .4%. .6% in london on the ftse. let's take a look into the individual indexes and find out the stories with stocks. for that, we go to near a church. baby food sales

outperforming rivals last year. it is seeing double digits growth at constant currencies, and also proposing a dividend of 80 $.90 a share. that is up 12%. up 1% right now. renault also higher, revenue jumping 15%. extending their ceo and chairman by four years. they also named a coo. one of theg at biggest gainers on the stocks 600. it got more than 4%, as you can see. guy: thank you very much. go to helsinki now.

theing us on the phone is finnair ceo. in 2018 be a good year? >> 2017 was a good year for us. execution of our plan and we will continue to grow into 2018. strategy,rms of the you are looking at long haul. he was looking at asia, taking advantage of your geographical advantage you have a. we are seeing more and more, local sectionhe looking at long haul. does this undermine your strategy going forward? pekka: we are focusing on the northeast asia. when we look at the long haul, that is primarily the transatlantic part.

most of our capacity is on asian roots. matt: are there any asian routes that are concerning you know? -- concerning you now? and there any you want to see improved? pekka: competition is increasing in all of our markets. there hasn't been any up until now. when we look at our performance, last year was the biggest in japan, number two in china. and wes on these markets feel we have been successful there, and that continues. it is depressing to hear an airline ceo say there are no free rides. problemsk about the

that may be free rides caused for some of your competition, former competition, air berlin. we have had some consolidation monarchs in the industry in europe. has that helped you? have you been able to take advantage of those open spaces? pekka: in some cases, yes, but in some cases we are suffering from it. it is not really a great boost we have seen out of it. somehow, the markets are polarized. some airlines are doing better than the others and the others are feeling. -- are feeling. it is a new development that has started. guy: a quick question on oil prices and currencies. what kind of headwinds do you see in 2018? i'm assuming you have hedged out

some of the risk. similar story on the foreign exchange market. if oil continues to push higher, how do those hedges continue to work? pekka: we do have a hedging policy, a lower degree of hedging. we continue to have the same policy and it has supported our development nicely. we see currency movements as well at the same time, and it tends to be that when oil gets more expensive at the same time, u.s. dollar tends to get cheaper. that is what is happening right now, so in terms of the euro, we don't see a sharp oil price increase. over the past few weeks, oil has turned down quite a bit. matt: what can you tell me about ticket prices in general?

it has always struck me that i don't see over my adult consumer life airline ticket prices really changing that much. how hard is it to raise revenues, and how can you do that? pekka: many airlines, including us, have separated the flight --ket with more and more revenues are collected through ancillary services. that is how the industry has responded to that one. guy: thank you very much, indeed. ceo. vauramo, the finnair he is focused on the asian trade. up next, we will focus on the

asian trade. japan's prime minister has nominated kuroda for another term as boj governor. we will discuss. derek halpenny is sitting next to me. this is bloomberg. ♪ ♪

welcome back to the

european market open on bloomberg. let's take a look at how markets are doing around the world with the world map here on my terminal. i will zoom in on europe. you can see we are looking at green across the board. the iberian peninsula gaining to third -- getting to third of 1%. the u.k. markets doing much better, .6% gains. we have strong -- a very similar picture to what we saw in the u.s. yesterday. guy: absolutely. coming into the end of the week, so it has been interesting for the markets as they bounced back after that shortfall the week before. what will next week bring? let's talk about the big story in the markets. that is what is happening with the yen. next halpenny is sitting

to me on set in london. thent to take a look at dollar-yen distribution of expectations from the forecasting community. the middle of the distribution north of the hundred five we got. the market is out of position. why, what is going on? how much more do you think the yen is going to run? derek: i think a lot of analysts tend to lean on the fed raising rates, to your spread raising higher. we have set for some time that there are changing dynamics in the yen market, which makes it a

lot more of a positive market for the japanese yen. abenomics and to it's a beginning phase, it coincided with unusually small currency services in japan. reinforce the yen weakness when boj policy began to become very aggressive. we are in a situation now where there is very obvious policy goingn boj forward. recordincides with account surpluses in place in japan. we have seen a huge swing back to what is more normal. spread, from a historical perspective for japanese investors, it is still quite narrow. ares rising because the fed raising rates, but historically, the spread is still not what japanese investors are used to. that means there is still more hedging going on or hedging costs rise.

there has been less portfolio outflow, and that has helped to support the yen. just quickly, and's or your question about right now, a lot of the move until now has been a dollar story. if you look at the nominal boj aade index, it has reached load ports the end of last year, beginning of this year. it is only this latest move that the yen has started to outperform and the trade weighted index has started to move higher. we are still in or around the one your average, below the two your average and below the five-year average. ,rom a historical perspective the yen is on the weaker side. i think that needs to be taken into account in the context of what the boj is doing. matt: thanks very much. you will stick with us. will stay with

us. up next, elections in italy. the last polls are published before the election. will we see a hung parliament? this is bloomberg. ♪ retail.

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and now, get a $200 prepaid card when you buy an iphone. it's a new kind of network designed to save you money. call, visit, or go to xfnitymobile.com. are 30 minutes into your trading day. here are the top headlines. half term, bank of japan governor kuroda will leave the central bank for another five years, and the yen pushes higher after the nomination. with two weeks to go until be italian election. a granders point to coalition. are investors under pricing detail risks? deutsche bank, after lowering turns to ubs hna to help hedge its stake in the german lender. welcome to bloomberg markets, the european open.

30 minutes into the trading day. what are we looking at? we are looking at a probably positive picture. european markets, up .5%. utilities are bid, which is interesting. oil and gas making a comeback as well. telecom is looking solid. real estate reasonably well bid. vivendi looks to be the story. let's get a bloomberg first word news update. sebastian: the u.s. senate has blocked four immigration proposals, deepening a bitter impasse of how to protect 1.8 million young undocumented immigrants from pete -- from deportation. following harsh criticism by president trump, the white house has threatened to veto the measure.

the institute of directors of u.k. business groups as britain should aim for a partial customs union with the e.u.. they say an agreement covering industrial goods and process agricultural credits would help maintain the competitiveness of u.k. industries. theresa may has said the country plans to leave the e.u. customs union. elio that --rate dalio's company turned bearish on europe last month. the hedge fund is monti was equities, despite his call that there was rising risk of recession. rex tillerson has met with turkey's president in an attempt -- came at the last

stop of his tour. he says the company's objectives are completely aligned. russia's wheat export is expected to be higher than any country in the last 25 years. more farm investment has allowed russia to grab major market share. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. matt: thank you very much. more than two weeks, italian voters are going to head to the polls. , it indicates a hung parliament as the most likely outcome. we are not allowed to talk about the polling numbers between now

and then. due tos the last day local laws in italy. our reporter joins us with the wrap of italian polls until the election. what does it look like as we stand two weeks before the vote? reporter: today is the last day italian newspapers can publish any polling numbers and we can talk about them on television. i want to start with a bloomberg news survey. economists are seeing things 33% chance of a hung parliament. you can see the purple in the pie chart. oft would be a teaming up matteo renzi's party, the democratic party, as well as another party. that is what the business community is rallying four. this would mean better relations with the e.u..

they see it as pro business investment and probe economic reform. 21% -- 22%, a bet for center-right majority. sliver in pink. this is a party at called for referendum on the euro. they would be the last one economists are seeing to come to power. they are leading in the proposal and have been for months. this chart shows the bloomberg composite index of all of the polls. they are the purple line and have been leading for months. what is interesting is -- showugh the polls

five-star party movement in the lead, they don't really have a chance of making it to power. elections force parties to make a coalition instead of going it themselves. -- wehe thunder selves find ourselves in a situation where markets don't price this until the last minute. only two weeks to go we are seeing a little bit of election jitters. i have the ftse versus the stoxx 600. the ftse has been outperforming the stoxx 600 up until the last week. we actually see it lagging behind slightly. if you look at the italian german ten-year spread, you see it slightly crawling back. but at thezy, moment, we are seeing a little bit of election jitters. guy: great stuff. thank you very much. still with us, derek halpenny.

are you worried? derek: there is risks for sure. i can understand why, when you look at the pricing and you are not seeing much indication of risk premium being priced, because i think investors would be pretty cautious and reluctant about taking a tail risk position at this point. the fundamental story in europe has changed. since the great financial crisis until maybe just a year-and-a-half ago, we had weak economic fundamentals and pronounced time of political uncertainty. with the more solid fundamental bases we have at the moment, it in termse big reaction of tail risk from up local risk of it. i'm not saying it is relevant, but i think the likelihood is that we are going to see this

past. even if we get a nasty outcome or unexpected outcome, i think markets will take a wait and see view before we see -- how risk looking at reversal pricing, how the market is hedging this. i am trying to figure out whether anybody is free cap. i have two big political events at the same time. i have the voting germany, which we don't know which way it is going to go. then you have this italian election in which everybody seems so conflict. does this fit together? derek: when you go to previous political ovens in europe and you had big market moves, it was related to existential risks. guy: if i am an italian

candidate, i am taking a lesson from marine le pen. shift i think the rapid towards a referendum on the euro , i don't think that is going to materialize weekly. when we get the election results, when we get the german spd vote. what is the worst case scenario initially? it is potentially gridlock in italy, greater uncertainty. that is hardly new. in germany, we have the spd vote going against the grand coalition. that is perhaps -- that perhaps spells the end of angela merkel. ok, that is the bigger near-term risk uncertainty, but then is it going to result in any kind of pronounced change in the direction of economic policy in germany? i don't think so. there is uncertainty, but is it going to result in a big pickup and market volatility?

i'm not convinced. matt: i'm also not convinced that populistment parties are going to stop talking about crazy plans to leave the eurozone. we can take brexit as an example that voters don't only cast a ballot in their best economic interest. note, let's talk about what will you -- about what you think the spd voters will turn in as a result on march 5. or on march 4. do you think the grand coalition is a no go, likely that the spd says forget about it? derek: if you look at national polling, it suggests that this is not a particularly popular move, where you have the spd down.ctually coming reports suggesting in terms of

the internal spd polls, they are voting ino the spd favor of the grand coalition, but of course, if the national guard continues to suggest this, there are definitely risks that the spd could actually surprise and we might get a vote rejecting the grand coalition. been telling clients is there are these two political risk events taking place on the fourth of march. i have a greater iron germany as germany asal one that the potential one that might be where the focus is. guy: we will see. derek halpenny will stick around. he will join us on bloomberg radio shortly at 9:00 a.m. if you're a bloomberg customer, ,ou can watch this show including the video stream, radio stream, including the functionalities we put up.

tv on your bloomberg. this is bloomberg. ♪ ♪

matt: welcome back to the european open. i am matt miller in berlin. we are 45 minutes into your trading day with gains across the board.

a group has lowered its holdings of deutsche bank. waschinese conglomerate reducing its stake following a squeeze on its finances. entered --s has also come into additional hedges to limit potential losses on the rest of its holdings. joining us is steven arons. state? they cut the did it have too many other financial obligations? that is: it seems exactly what happened. they have been in deep trouble for a while now. they said previously they want to stay a significant investor in deutsche bank. in the filing we saw, they had to sell shares to repay margin loan. -- to repay a margin loan.

liquidityren't in the squeeze, there were probably other ways to repay that. that seems to be at the root of all of this. matt: what will the real to -- what will they be able to sell next, or do they still have to? steven: they were very clear statement. they said they don't intend to cut their stake in deutsche bank any further. investors aren't reassured that they won't continue to cut. they are in trouble. we have seen each piece of news coming out seems to be worse than the one before. theplan for them is to keep holding at the current level. let's see if they can do it.

the i'm curious about auctions collar that has been put on. .hat would be symmetrical we have any idea where the strike prices are? -- do we have any idea where the strike prices are? steven: the filing is public. it gives clear details on the exercise price. it used to be 15 euros. which currently trades at 13. they will have to renegotiate this. it is close to 12 euros if i remember correctly. deutschent price of bank won't kick in until the beginning of next year. there is still time. they are hoping it won't get to that point again, but the current price is around 12 euros. what does this mean for

john crime in and the rest of the team? mattersthis confusing in terms of management's ability to get a grip on the bank? steven: clearly, all of the questions floating around about 18 i haven't helped deutsche bank. haven't helped deutsche bank. another investor is raising questions about the stability of willhareholdings if they have to's -- have to sell more shares in the future. it raises questions about who brought this investor to deutsche bank and why did they

come and did they find the right investor? there are a lot of questions people should ask. solid is john's job right now? do you think there are shareholders who want to see a change at the top? steven: difficult to say. the people i speak with tell me there is not --. if there was, maybe they would consider the alternative. there is and. -- there is not. last fall, there was a debate amongst shareholders whether to replace john, but that has been -- that abdur little bit. -- that ebbed a little bit. the first or second quarter results, if they don't improve, the discussion will be revived. guy: great stuff. thank you very much.

reportern banks joining us from frankfurt. up next, we will bring you some of the movers this morning. air france is one of those. the stock under pressure. this is bloomberg. ♪ ♪

cannot be totally concerning alitalia . we are interested on what is happening concerning the company. it doesn't mean we will be involved in the equity of the company. guy: the air france ceo talking about alitalia. not a good morning for air france stock. let's find out how bad it is. nejra: mid-cap stocks i am focusing on. air france down more than 6%. it is one of the worst performers in the session. there was a marginal this on the four here are putting profit. the company plans to accelerate its capacity increases. it will boost ceating this year. this will boost seating

year. some of that news, we are still seeing investors not buy into the stock this morning, also not buying into saab. that is down 9%. dropping the most since 2013. fourth quarter of putting profit missing its lowest estimate on the four your dividend missing estimates as well. upside, a company is gaining the most since 2014, hitting its highest since august of last year. perhaps what is giving investors optimism is the company saying it has got be potential to significantly improve its 2019. guy: let's talk about another stock on the move this morning, that is vivendi. it is under pressure. is -- the view is we

haven't heard anything. the concern about what is happening around universal is a, there doesn't appear to be a big plan that provides impetus to take the market forward. that is something the market is not wild on. some green metrics this morning, volume very high. we are seeing the stock trading down by over 5%. matt: great choice for chart for stock of the hour, because vivendi is taking the most points off of the stoxx 600 or holding it back the most. one thing not holding back european stocks are the dividend yields. take a look at this chart. white the u.s. , -10 yearvidend yield treasuries. because treasuries are yielding

yields i just dividends only 1.8%, you can see investors are turned off by that dividend yield. here is europe. it is a different story. take a look at the blue line. that is the stoxx 600 dividend yield. , minus payout of 3.6% moons, which are 70 basis points. it is much more attractive for investors to buy european stocks over local debt been for u.s. investors to buy their domestic stock over u.s. treasury's. guy: it is going to be interesting to see how this plays out for european companies. matt is waiting to go skiing, but he is not done yet. .loomberg radio is up next we have another hour of his company to enjoy.

digital radio is where we are both heading this morning. surveillance" is up next. this is bloomberg. ♪ governornk of japan's

has granted another five-year term. down friday, and european industries head higher. volatility continues to retreat. is fear taking a backseat once again? and saving this city. reports that britain is ready to lay out the post-brexit vision. will brussels be on board? ♪