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tv   Bloomberg Markets European Close  Bloomberg  April 3, 2019 11:00am-12:00pm EDT

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guy: 30 minutes left in the european trading day. from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. this is the european close on "bloomberg markets." guy: we got some decent data coming out of europe in the form of services pmi. that drove the risk on story we've been watching, circling around the world. bit ofave potentially a a story where investors, portfolio managers are now fearful of missing out. some of them behind their benchmarks are beginning to chase this rally. the data is maybe augmenting that decision-making process. 1%.stoxx 600 is up 8/10 of the card and mining sectors doing well. the card sector could close into a bull market, up 20% from its lows. the pound is also rising as well. we have this meeting taking place at the moment between
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jeremy corbyn and the prime minister of the u.k. they try to fathom a way to take this brexit story forward. we will talk about that more in just a moment. the banks are in focus as well. story that it a is looking for options for its asset management division. globally, banks like j.p. morgan are looking for asset management divisions, trying to figure out what to do next. ubs possibly looking to merge with dws out of deutsche bank come up those units together, and spend them out. that is one option being considered. brexit clearly a dominant theme. coming up later in this program, we will talk to claire perry, the u.k. minister of energy. she attended the cabinet meeting yesterday that ultimately resulted in this meeting taking place today with jeremy corbyn. we will get her insight as to where brexit goes next. vonnie: here in the u.s., a little more optimism about the potential for the u.s. and china
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actually agree on a deal. there are still some sticking points, but in the last hour, larry kudlow saying they are getting closer. this is certainly contribute into the bounce we are seeing today. the s&p 500 at 2883. semiconductor stocks rallying off the back of that. amd up 10%. i'll sure you and phillip morris some of the stocks -- al tria and phillip morris some of the stocks lower, links to reports products are to blame. caterpillar has turned around, 1% after a downgrade from deutsche bank that follows a downgrade last month by ubs.
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looks like times might be getting just a little tougher for caterpillar, but the stock market not projecting that, at least right now. guy: let's get back to the brexit story and figure out what is going to happen next. the prime minister's meeting jeremy corbyn, the leader of the opposition party, right now. we don't know what is going to was old from that meeting. earlier, the prime minister defended her strategy of making this meeting happen in parliament. pm may: i think there are a number of areas we agree on in relation to brexit. leavingwant to deliver the eu with a deal. we both want to protect jobs, to ensure we have free movement. we both recognize the importance of the withdrawal agreement. what we want to do now is find a way forward that can deliver on brexit and the result of the referendum, and ensure that the people can continue to have trust in their politicians doing what is asked of them to do. every number of this house is involved in brexit.
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i want to deliver brexit in an orderly way, as soon as possible, without having to fight your appeal and -- without having to fight european polemic to reelections -- european parliamentary elections. should investors be pricing in a soft exit now, or have they already done so? guest: i think they've done so in the currency markets. they've yet to do so in the stock market. the pound is the world's strongest performing currency this year to date. it has played the sentiment beautifully, and there has been a real-time barometer that we haven't had any of the crises earlier. it is well priced in the currency markets. it is not priced into either the u.k. equity market or the european equity market. we are sitting with huge political penalties under valuations. guy: where would you see the
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happening there? would it be realty companies, continental banks? where would you see the biggest bang for your buck? guest: the hunch is that you will see bigger moves over the next three to six months if there is a softer deal. index, and parts of the ftse 250 are very tech oriented. behink the real change will flowing internationally into europe. out on themore money funds bases this first quarter out of europe. i think the trigger is this reverses, and suddenly sentiment goes from sick man of the globe, really, into value opportunity, and we get quite a dramatic rewriting across the majority of european sectors. vonnie: in that case, what do
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you imagine would look attractive valuation wise? , the: first of all european index is trading at about 13 times forward, down from over 16 times at the end of last year. the yield is close to 3.7%, which should put it in perspective, 12 times the yield. that's never really happened before. you have this opportunity. first of all, i think you need to get the core industrials moving. we've seen leadership already from airbus, and we need to flow that through into a number of other exporters. that, i think, will flow into some of the tech and automation names. ironically, i think it will be the banks were we still have a real profitability problem caused by negative rates. -- that might, provide headwind
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to that outlook. brexit is the great dark cloud. all the recent sentiment indicates that we have seen particularly out of germany, they are all high frequency of sightings of exit earnings risk. while i think there is a legacy fringe political risk, -- spend. a long-term reflation problem in italy, i think brexit is much more of a factor in determining sentiment and flows. if we can close this off, it is quite possible for european equities, which have not on -- outperform the u.s. this year, actually being the world's best performers in 2019. is aappreciate that brexit cloud hanging over europe at the moment. one of the bigger clouds we see what hasver europe is been going on in china. the relationship to the german
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data has been pretty clear. we are seeing signs of civilization within the chinese economy. stimulus is being generated of us far seemingly producing results. what will be the lag between china stabilizing and starting to grow and feeding through into the european storm? the market will want to discount that. >> a great question. i've just come back from touring german companies. the -- is almost unprecedented. we were posting numbers above 60. which is red-hot in just -- december of last year. we were posting numbers in the low 40's today. the german countries i have spoke to are very clear. this is not just a china problem. it is brexit. it is emissions. it is low river levels in terms of moving around germany. there is a whole number of factors. my hunch is the patient gets up and walks a little more quickly than we expect.
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we have a net positive government stimulus of .4%. we look as though we are getting somewhere on the china u.s. talks. we might be looking at the darkest hour. >> does that mean german funds are overpriced? we crossednegative, through the japanese 10 year a week ago. an extraordinary concept. yes i do. remember, the ecb has pushed out. we are looking at reversing negative rates. only in 2022. -- will be stepping down from his term having never overseen a rate rise. conditions are extremely generous. i would expect to see that bond market start to pull back those yields. the 30, 40 back to basis point, we are beginning to see normalization. >> plenty more still to discuss. talk about what is
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going on with the global economy. get a sense of where it is going next. the news.heck in on courtney has that. >> house democrats are setting up a battle that could end up in the supreme court. the judiciary committee is demanding that attorney general william barr turn over robert mueller's full russia report. bar has said that he will give congress a redacted version of the report this month. u.s. china trade talks which resumed today in washington. both sides are warning a number of sticking points, among them, intellectual property protection and how to enforce any agreement. for night at a dinner republican lawmakers, president trump said the u.s. was finally getting tough on trade. >> we are standing up to china's chronic trading abuses and theft of intellectual properties and so many other things that they have done to us. i don't know how you people allowed this to happen for so many years.
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you have been here longer than me. >> in other news, the city of chicago has made history for the first time ever. it has elected a black woman as my -- mayor. she is also the first openly gay leader of the third-largest city in the u.s.. she won with 74% of the votes over another black female democrat. chicago is struggling with budget problems and gun violence. more details coming out about the first crash of the boeing 737 max back in october. according to investigative documents, a sensor on the indonesian plane had been reported in an aircraft maintenance facility in florida. the sensor was installed on the 737 max the day before the crash. local news, -- global news 24 hours a day. this is bloomberg. >> thank you. let's get a check on markets now. the s&p 500 up 6/10 of 1%.
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dow is up 3/10 of a percent. nasdaq is up more than 1%. both the s&p and nasdaq are higher. only two semiconductor stops in the index that are lower. that is -- micron, prime materials, they are all higher by multiple percentage points today. this is bloomberg. ♪
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>> >> from bloomberg. --
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-- as
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>> i think global equities are going to catch up. >> if you say i have done 16%, do you think your investors would be happy with it? i am wondering how much of this we have already had and risk-adjusted. how much more there is still to come. presumably the first part of
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that readjustment process you are describing is the relatively easy and low risk part. the higher we climbed up that process, the risk adjustment changes. how do you manage that profile? >> i think you certainly say that u.s. great stocks will pause come of it economy will leaves anthat anonymous amount of risk to the global markets which really did not participate in the rally in 2017 and 2018. it is a technical value catch up. it can be of quite material magnitude, particularly if was see another year of record dividend growth. 2018 south 9.5% dividend growth. so those dividends are pumping away underneath. and i think that is what will ng or the structural rerati
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any pathway to it. >> thank you so much for being here. thank you very much indeed. >> just want to point out that nato secretary-general is on capitol hill addressing a joint session of congress right now. a reaffirmation of congress .upport for nato of course, president trump is not so keen on nato, saying that nato allies have done little progress on his demand for their increase of financial support to nato. ♪ a memorial to the 2900. ♪
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vonnie: and we are checking u.s. markets. the dow is the worst performer among the major indices and stop .25%.
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the s&p 500 up .5%. the nasdaq is the runaway winner, up 1%. part of that story is semiconductors. the philadelphia stocks index up 2.7%. microdevices up as much as 10%. the idea china and the u.s. are coming closer to a deal impacting those stocks today. guy: european stocks are definitely on the front foot. gains being made. you can see the london market underperforming. i'm checking my numbers. it looks as if the auto sector in europe could be just about to enter a bull market. up 20% off its low. the european closes next. this is bloomberg. ♪ so with xfinity mobile
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now that's simple, easy, awesome. customize each line by paying for data by the gig or get unlimited. and now get $250 back when you buy a new samsung galaxy. click, call, or visit a store today. guy: we are wrapping up the session in europe. already seconds to go. -- 30 seconds to go. keep an eye on the ftse move.
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potentially we're about to see the ftse in italy closing in a bull market, up 20% off its lows, which is quite a turnaround considering the political story we have been watching in italy over the last few months. quite a turnaround. equities have been rallying across europe as we indicated. lows and toff those rally 50% quite an impressive performance for the ftse. today the ftse 100 and the dax are trading higher. vonniewas mentioning -- was mentioning early with semiconductors in the united states. st micro one of those stocks doing well. there are also stories tsmc is facing greater orders as a result of some of the handset makers beginning to boost demand
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. that is a story we were watching. ubs is having a positive session. there was a story suggesting this is a business looking to spinoff its asset management division. there are a number of options on the table for its asset management. we will talk about the details. ubs trading up 1.34%. burberry was downgraded. it was a bank of america downgraded. that is knocking that u.k. stock. the other area where we are about to enter the bull market is the european auto sector. very much related to what is happening with the china story. this is the european 600 auto sector. lows were hit in december, as were many markets. since then we have rallied and the top line does not tell the story. we are, if we just get through the close, through the option settlement process, if we close
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where we are, we will be enabled market for the european auto sector which is quite an incredible story considering some of the headwinds that sector faces. that is look at the european close. we will have details of the settlement shortly. to continue your thread on semiconductors, we are getting upgrades from number of -- from numera. amd up as much as 10%. both the euro and sterling are stronger today. read into that what you will. perhaps it is positioning and perhaps it is optimism. 2.50. year yield is above crude above its moving average after we got the drop down -- the drawdown. we're seeing that come up a little bit. $.38. $62.21.
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let's look at global macro movers. we have our top markets. guy, you mentioned some of them. given the weakness of the dollar, many of the emerging-market currencies are slightly stronger. the ruble .2%. crude oil and commodity story. iron ore coming off a little bit. that is not the primary story for iron ore. it has been up big. we'll be talking about that shortly. once againan banks in focus. regulators probing what may have been one of the biggest money laundering scandals in history. we are now learning the alarm bells sounded years ago at deutsche bank. compliance workers flag suspicious transactions. this is related to the danske bank story. here is bloomberg's managing editor for finance. let's start out with deutsche
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bank. deutsche bank was once removed from this story. from bill browder, maybe they did not which might hold the key to this story. potential thathe there are deutsche bank employees in united states flagging things that long ago has to be a concern. >> deutsche bank's role in the money laundering scandal is that of a correspondent bank, which comes with a different set of responsibilities than the frontline banks. it is a respondent bank. deutsche bank's responsibilities here were to know its customers. the primary bank has more of the responsibilities in terms of going down to the individual customers. nonetheless, a do have a burden of responsibility.
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as we have seen recently, it is not necessarily enough to be a correspondent bank to completely avoid all responsibility. the regulators have come after many banks who played such a role. to that extent, ignoring the alarm bells, turning a blind eye to the suspicious transactions, the scale of which was staggering. $150 billion. it is troubling. it comes as there are other scrutiny on deutsche bank at this point, whether it is to the unit that that particular made to donald trump and companies associated with him or the doj. it is a -- it does not look good. vonnie: we did see insider
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accounts about what went down and we learn from that that even as other banks stopped doing business with this unit at dansk a bank, deutsche bank kept going. that means we had a good insight into how operations work. what else did we learn and is compliance working differently? sree: deutsche bank did put out a statement that they have increased their level -- their presence and their due diligence , so there have been lessons learned. ,hen you look back at the path since the financial crisis in 2008, we have seen the legal to for -- the legal tap deutsche bank surpass $18 billion from a variety of ,ifferent types of businesses whether it is mortgage bonds or -- there been 70 types of
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manyiny -- there been so types of scrutiny. the legal task for this type of behavior has been high. guy: potentially commerzbank will make a decision next tuesday as to whether it will merge with deutsche bank or hold talks to proceed. let's talk about ubs. what we know about the future of ubs's asset management division? sree: what we know about the asset management business in general is that scale is important. whereas we used to define scale is $500 billion or more under management, now it is becoming increasingly clear that if you do not have at least $1 trillion in assets under management, you're not playing with the big boys. think of blackrock. $6.3 trillion. think of vanguard. it is an increasingly cruel business for asset managers and what ubs is trying to do with
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$800 billion in asset management is still a pretty small part of what ubs does in terms of managing money overall. they need to increase their footprint. guy: thank you much indie. bloombergs -- thank you very much, indeed. bloomberg's managing editor for finance. vonnie: shares of gamestop are at their lowest since 2005. the company struggling to adapt to changes in the videogame industry. taylor riggs has more. this is all about streaming, isn't it taylor:? a structural change -- isn't it? taylor: a structural change in the videogame industry. their revenue has been declining for the last three years, now off 5% to 10%. management is saying this year 7.5%. it does not look good. you've had a lot of new competitors like apple and google it will launch streaming online video games.
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said they blizzard were offering free call of duty for the month of april. gamestop as a traditional retailer is struggling with those structural changes as people go more online. the stores have used game sales. it is an across-the-board frustration. guy: when do investors get in on the act? when do we start to see them pressuring the management team? taylor: you have seen a little bit of that. sideop six holders are buy passive index funds. they did respond to activist investors who suggested two additional board members. they make those changes this week ended appointed new ceo who will take over april 15. vonnie: it is not like they didn't have an example? remember blockbuster? netflix came along everyone said it would be fine. gamestop, come on. taylor: shares off the lows by
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5%. since 2004.owest a little bit of a rebound but not much. vonnie: people still like to feel the gains in their hands. taylor riggs with our stock of the hour. let's check in with the first word news. courtney: president trump's relationship with jay powell is reportedly not getting any better. the president blasted towelette three meetings in the past week. the journal says he blamed the dead for holding back the company -- the fed for holding back the company and the stock market. "i guess ijay powell am stuck with you." authorities want to know what a woman was doing at trumps mar-a-lago resort in california. -- in florida. told to talk as
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member of the trump family about u.s. chinese relations. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm courtney donohoe. this is bloomberg. guy: thank you very much. i'm just trying to do the math. , closed in can tell a bull market, 20% off its lows. ftse 100 finishing at session highs. the pound was higher which did at a drag on the ftse 100. tobacco stocks weaker. the dax outperforming today strongly on the back of the decent data we have seen. decent chinese data has in a contributing factor to what we have seen in terms of the dax. you can tune in to bloomberg radio at the top of the hour on digital radio. jon ferro rejoining us at 5:00 p.m. in london. it is a cable show.
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john represents the dollar half of that portion. he will be in new york and i will be in london. remember we are not quite done with the show good shortly we will be speaking with u.k. minister of energy. she attended the cabinet meeting yesterday with prime minister theresa may. we will get her take on where the talks with labor leader jeremy corbyn will take the brexit story next. this is bloomberg. ♪
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vonnie: it is time for our global battle of the charts. we continuing our march madness tournament. today's winner is going on to the final round. the pressure is on.
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michael mckee is the pinch hitter today. last time i wore the colors of duke and north carolina. both out of the tournament. today black-and-white. completely neutral. here's a question for donald trump. if the fed cuts interest rates, do you want what you get? if we going to a recession as economists are forecasting in an election year, who will you call it the fed cannot help you? go back to previous recessions. the fed has had plenty of room to cut. , 1050ut 825 basis points basis points, 653 in the 1980's. and 7.5990's seven basis point cuts. the fed does not have enough room to cut rates. we will have to go immediately to extraordinary measures like qe which the president says he does not like and there is no
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guarantee those will work. the monetary policy may be out of the game if the fred has to -- if the fed has to leave rates there. it'll be up to congress and fiscal policy. they do not move quickly. be careful what you ask for. vonnie: beautiful job. against michael we have taylor riggs. taylor: i was told michael brought his a game so i will think if i say standard deviation enough it makes me sound smart and i win. we are looking at the s&p 500. we know it is only less than 2% off the highs it reached last september. brian levin of oppenheimer funds said there is still room total run. on thisre missing out rally you should get back in because we could go higher. i'm taking a look at a forward pe ratio basis. we are at 16.7. we are above the average. we have not hit one or two standard deviation. we could see if there is room
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for this market to go higher and get back in. you can find this at gtv . vonnie: taylor, amazing job. my interest was piqued in taylor's strategy. she might be playing the long game. perhaps we should forfeit her place. i think my winner is michael mckee today. guy: i would agree with that. i think the president could find himself in a difficult position were there to be a recession in 2020. vonnie: i'm talking about the game. you're talking about the substance. so michael mckee wins. this will set us up for an interesting next round. taylor's chart was good. as you can expect at this stage in the competition. claire perry, u.k. minister of
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energy, will be joining us we hope shortly. we'll talk about what is next for brexit. this is bloomberg. ♪ the biggest week in television is almost here.
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guy: live from london, i'm guy johnson. vonnie: from new york, i'm vonnie quinn. close" onhe european european markets. guy: claire perry will not be on this program. things are moving quickly in westminster -- they are moving slowly. meetings are still ongoing and overrunning, as a result, we're hoping she will be able to join bloomberg later on this evening. let's return to the banking story in europe. our big interview of the afternoon with the chair of santander. francine lacqua spoke with ana botin about the banks plans.
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ana: we will be investing $20 billion in digital. billion, most is digital. it is quite a healthy ratio. in terms of scale, we are there with the biggest banks in the world. fourth or fifth in the u.s. depending on how you measure that. we have enough scale to invest across the globe. one of the ways we are to work more for countries like the u.s. and countries where we do not have the profitability we want. your returns to shareholders is probably one of the highest out there compared to rivals. when were your share price fall? ana: you tell me. it is frustrating. we can put it in the box of european banks, although have our business is in america. it is a question of interest
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rates in europe. we were at seven euros two years ago. we have more capital so we took our capital from a 27 to 1130. a return on tangible equities was from 10 to 11.7. our share price lower than a few years ago. having said this, what is important is our earnings-per-share -- we also had adverse effects. arranged against us and we delivered 55% earnings-per-share over this time period. in europe it was about 20%. definitely the market very was different than most european banks. francine: is there anything investors ask of you? is it what you do with the u.s. bank? is it capital? people asked about capital all the time. recognitionetting
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for our diversification. however, the market does give us that recognition. if you look at santander, the debt structure is trading at , similar toead banks that have 13% or 14%. the second question is what price you pay to get to 12% faster? a business that is going to deliver 11% return like the u.s.? in three years, is it worth it? our model is more predictable. this is bloomberg data, and i give you credit for that. you look at global data, earnings-per-share volatility over the last 20 years, we have 9% versus our peers at 140%. and we grow earnings. we grow earnings not as much as the others but we grow earnings three times or four times. we have a more predictable
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business model which requires less capital. we performed better under stress. we have delivered in the past and i'm confident we will in the future. francine: are you still bullish about brazil? ana: remember our conversation. francine: this was right before the election. ana: right before the election and right before the country suffered one of the worst recessions ever. our bank did much better. this is the other thing about our business. we lend money in europe and north america. we do a lot of transactional banking in latin america. only 30% of our loans is in latin america. a lot of upside for the future. that is why we want to resilience to crisis and why today we announced our payment services division which is super exciting. to answer your question, i think brazil will continue to do well and we are now 20% are o.t. and we want to grow.
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-- rote and we want to grow. francine: i've asked you if he is here to stay, does he have the confidence of everyone? we are moving forward and the team is comfortable. we have had all of our top team here yesterday. .e have our digital video he is a great leader, we work great together and we have an amazing team working for him. we are optimistic about the future. francine: what happens for brexit question mark have you considered the worst? ana: we have been working for months to ensure that all of our customers -- we have a big bank here and in spain. companies, small companies, big companies, we are ready to service them. we are ready and they can trust the service will continue whatever happens with brexit. guy: ana botin, the santander
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chair speaking to francine lacqua. we will bring you more highlights from that conversation throughout the day. vonnie: let's have a quick look at u.s. markets. we are still in positive territory. the ftse in italy did enter the premarket. good economic data all around. the nasdaq up 1.1% on chip stocks. optimism for a china trade deal and also upgrades. coming up, "balance of power" david westin. guests include the former australian prime minister. this is bloomberg. ♪
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♪ david: from bloomberg world
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headquarters in new york, i am david westin. tocome to balance of power the world of politics meets the world of business. tadeo onsels, maria europe's reaction to prime minister may's latest attempt to reach agreement with brexit -- with labor. all of the action on u.s. china trade is happening where you are. what is going on and what you expect? >> just down the street xi jinping's emissary is in town meeting with robert lighthizer. they are trying to hash out this deal. we are in what feels like the end game of the end game. the big question is how long is that handy game going to last? david: we will talk more about that in the moment. right now we want to go to brussels and maria tadeo. we're little bit of reaction for mr. juncker today. maria: we did.


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