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tv   The Pulse  Bloomberg  April 15, 2016 4:00am-5:01am EDT

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francine: building on credit, a debt surge spurs a renowned in china. no intervention yet. the yen henceforth worst week since the bank of japan cut into negative territory. and, goldman cuts. set toestment bank is join j.p. morgan and wells fargo in a cost-cutting push as slums in trading and deal making their toll. spain's industry minister becomes the latest casualty of the scandal for now. welcome to "the pulse" live from
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bloomberg's european headquarters in london. i'm francine lacqua. let's get to the markets, global equities holding near a high for the year. a picture for stoxx i wanted to show you automakers. folks like an -- volkswagen's market share reached a low. we have been talking about it all week. it did see a little bit of weakness. a sign of relief for governor kuroda. let's get straight to the bloomberg first word news with nejra cehic. nejra: thanks, francine. goldman sachs is said to be advancing on its biggest cost-cutting pushing years. according to people with knowledge of the effort, ceo lloyd blankfein is calling for the push which includes firings and curbs on travel and entertainment expenses. bonds are inyield
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the midst of their worst two-month selloff since 2014. investors say they have yet to fully price in the risk of default. speaking in washington, the governor of immediacy set of corporate debt burden is heavy, is not veryrage high. federal reserve bank of atlanta president dennis lockhart said he will no longer push for a rate increase this month. speaking to bloomberg's kathleen hays, the fed official said there are still opportunities and ray to make a move. you look at the calendar, there are enough meetings remaining this year that if the data were to suggest it is the appropriate policy to have three moves, to moves, three moves, both are possible. it is going to depend on how the economy evolves. least nine people were
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killed when a magnitude 6.5 earthquake in southern japan caused the strongest shaking ins for 2011 disaster. the quick yesterday also injured more than 750 people. there were no reports of damage to japan's only operating nuclear reactors. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. think -- francine: thank you so much. inwill go to enda curran just a couple minutes to talk china. we had news that china's economy stabilized in the first quarter. gdp rose 6.7% in the first three months of the year. march saw industrial output and resale sales pick up. let's introduce our guest, patrick spencer, vice chairman of equities at bayard.
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the company has over $150 billion in assets under management. when you look at china, should we be less worried more fundamentally they still have a lot of debt, so if the chinese economy doesn't management in the right way, it could go pear-shaped? essence, they've doubled their gdp in dollar terms, so it is a phenomenal growth engine. like every growth engine, it has to slow a little. the slowing seems to be bottoming. he looked at the export numbers this week which were quite startling. numbers overnight saw money supply also and housing was up 6% in the quarter. the stats are suggesting that things are bottoming, which is encouraging. people in the market want to see stability.
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there is a lot of gears that the central bank can still pull huge reserves. reserves in china were up for the first time in five months the other day. huge reserves, more gears on the interest rate front. shadow banking has always been a problem, but growth i think stabilizing. francine: let's get to our chief asia correspondent in hong kong. what do you make of the figures? enda: i think it is definitely adding to the stabilization. quite a turnaround. as recently as january, china was viewed as a global pariah. this growth is still being driven by a huge surge in credit. that is an economy where debt has grown at a next natural rate over the last couple years as they unleashed massive stimulus. there are concerns that policymakers are pushing reforms
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to one side in favor of near-term growth, doing whatever it takes to hit their growth target and concerns that may be china is storing up bigger problems down the road. it is paying for growth in the near term. i think that is a concern. francine: we are just getting some breaking news out of the pboc on credit cards. we had a great chart on bloomberg just a couple days ago, showing that a lot of chinese are still avoiding credit cards. the title of that chart was "plastic isn't so fantastic pure, ." they've set a floor limit on credit card rates. they are setting an upper limit on credit card rates on overdrawn balance. how does this come into play with how much money is leaving the country? growth is stabilizing.
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do we still have the concerns about outflows or has that been laid to rest? this i think it is part of stabilization narrative. we have seen capital outflows ease of somewhat. we saw the reserves take higher. overnk however the threat capital outflows hasn't gone away. look at the trade numbers this week. we saw another anomaly pointing to fake trade invoicing, pointing to people trying to get cash out and secure hard currency elsewhere. the capital outflows story hasn't gone away. the one to watch would be the fed. if janet yellen wants to signal another rate hike, that would change pressure on capital outflows. it hasn't left the scene altogether. francine: the other big unknown is the rebalancing. are we seeing a rising share of
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gdp coming from consumption? enda: if you look at today's numbers, retail sales have looked quite well. that is not bad when you consider what was happening on the stock market, the confusion over the yuan, the rush to get money out, the conversation zombiethe cutback on state-owned enterprises. through all of that, consumption seems to be holding up relatively ok. consumers work in these industrial sectors. you have to say that it is showing signs of revitalizing even if it is not enough. francine: thank you so much, enda curran, our chief asia economics correspondent. patrick, you were saying that you are seeking a rebalancing. the economy is stabilizing in china. what doesn't it mean for your
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equity investments? are you diversifying? patrick: i think the important point about currency and the dollar, is the beginning of the year, there's been a lot of skeptics saying that in shanghai, the imf agreed that they will work the dollar lower. i suspect what is happening is, if you look at all the world global pm eyes, china pmi was quite strong, so i expect what is happening is growth is coming back. we talked about the exports earlier. that bodes well for equities in general. francine: how do you marry that with one the imf is saying? they are cutting growth forecasts. is it growth back a lot more than we expected? we wouldn't be expecting it to be higher. patrick: we have to be careful about the growth. what we don't want is stagflation. we don't want inflation coming back and no growth.
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goldilocksalmost scenario, where growth is ok, but not fantastic. maybe 2%, 2.5%. that is slowing. i think what has happened is , as i say, it is a goldilocks scenario. we don't want it to be too much. and not to sue slow. , sort of much more injection of stimulus. i think we are in a good place. francine: in a good place. you are one of the very few guests that have said that. we will talk more. patrick spencer. stay with "the pulse." plenty coming up, including the panama papers trail, takes us to spain. we are live in madrid. then the analyst who beat the
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polls. the man who correctly predicted the outcome of the u.k. elections gives us his take on the brexit vote. and ceo lloyd blankfein sent to rein in costs. ♪
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francine: let's get straight to the bloomberg business flash with nejra cehic. nejra: goldman sachs is sent to
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the embarking on its biggest cost-cutting pushing years. people with knowledge of the effort, ceo lloyd blankfein is calling for the push which includes firings and curbs on travel and entertainment expenses. pharmaceuticals is working with investment banks to review options after receiving interest in a number of its businesses. the drugmaker had previously said that it might dispose of certain non-core assets as it seeks to pay down some of its $32 billion in debt. the company is working to return to stable footing after a disastrous run that site stock lose almost 90% of its value. volkswagen's european market share has reached a five-year low. the company's brands, including new, accounted for 23.4% of registrations in the three months ended march.
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car buyers snubbed the german automaker and termed to bmw, fiat chrysler, and daimler. francine: thank you so much. the panama papers have claimed another casualty. hosing manuel -- jose manuel soria claimed -- [indiscernible] for more, let's speak to our european government editor. denied any involvement in the firm. honest, as, to be completely catastrophic pr gaffe . he came out at the start of the week with these unprompted comments, saying that anybody named the papers had to give immediate explanations. anyone who didn't have an explanation was hiding something.
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barely minutes later, he himself was named in the papers. he came out with this aggressive, categorical denial of all the facts being reported and spent the rest of the week backtracking until we get to where we are this morning with his resignation. francine: that is a pretty disastrous week. how will this affect the complex political situation? this is a disaster for the pp and acting prime minister mariano rajoy. there has not been much suggestion that soria did anything illegal. it is simply the outrage over the contradictions. joy's party is riddled with corruption. soria is now going to become a symbol of the corruption which
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his opponents are going to use to better the prime minister atm now until the deadline the start of next month and most likely through to the elections in june. francine: thank you so much. scandal unleashed by the panama papers continues to unfold, political risk, just one of the global risk factors. christine lagarde warned there is plenty to worry about. >> there is plenty to worry about. but as i have said and has been repeated several times, we are on alert, not alarm. we believe that the global economy can actually repair legacies, can regain its bigger, and become more inclusive. responsesrrent policy need to be faster and need to go deeper. alarming --l right, or other, but not alarming.
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let's go to patrick spencer. christine lagarde almost shares your view that it could be a lot worse. you are more optimistic. you think there's a good deal to be done in equities. patrick: i do. central banks can do what they want. they can buy equities if they so choose. i listened to lagarde last night and i think she framed the environment with regard to central policy. we talked about the goldilocks scenario. she was saying that yemen will be data dependent. there are going to be gradual rate increases. the communication around those increases are going to be frequent. she is going to have a view to international events. i think she framed an environment of that core deluxe scenario. we haven't got the strong growth, so you are not going to see a huge amount of interest rate increases.
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francine: for me, this feels reassuring. you don't have real growth. they are rationalizing. that is a good thing. but they may be cost-cutting to a point where they hurt themselves. patrick: but companies, it is all about confidence. the cash is there. the u.s. especially, which drives the engine of the world, is two thirds consumer. they are in pretty good shape. , slowing,obs, auto but they are in good shape. that will drive the u.s. economy. eventually, you will get normalization. we haven't got a blueprint for this. they are going to work it out. they are just feeling their way through. the consumer is strong. capex will come back. the banks are awash with cash. i think what you are seeing is growth which will benefit
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equities and the famous old saying, keep it simple. you get 2.2% in u.s. equities and the seeming european equities. francine: we are getting breaking news out of opec. this is a chart of the hour. this is the production of various countries in 2001 when we found they had an agreement to freeze production. we're just hearing from the iranian oil minister that he won't attend those talks to freeze production. this is our chart of the day. it shows that despite all these countries deciding to freeze production, russia still pumped oil and that was the same case for norway. very few left a couple months after deciding to freeze production. we're hoping that there may be a cut in production are a freeze
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in production, but the iranian oil minister saying he won't attend. what does it mean for oil companies? there's very little money to be made. apex andd to cut cp dividend. patrick: last night, i was watching carlyle, the big private equity company. i think it was, baker hughes, buying a lot of assets. that happens at the bottom of the cycle. what you get in the cycles is, companies tend to cut costs. the next thing they start to do is cut capacity. that is what you've been seeing in the last 18 months. you are coming to the end of the bottom of that cycle. it is like catching a falling knife. maybe oil prices going little lower. saying that inventories would be in balance because of the cuts
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in shale was an important milestone. you look at all the stocks, the oil stocks are outperforming. francine: from a very low base. patrick: correct. chesapeake was up 30%. francine: patrick, thank you so much for now. can russian opec take credit for the oil rally this week? the iranian oil minister will not join the other ministers in doha. we are back in a couple minutes. ♪
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francine: welcome back. we had breaking news the last couple minutes that the iranian oil minister won't intend the doha freeze talks on sunday, but who will attend in his place is the iranian back governor. -- opec governor. we know that iran has said in the past they want to pump as much as they can to get back to the production before sanctions, but maybe there's an agreement amongst the others. posed for a second weekly advance. an output freeseas top of the agenda. almosts a global glut vanishing later this year. patrick spencer is still with us. patrick, you said, a lot of the oil companies' share prices increased significantly, but from a low base.
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there must be better valued stocks out there. patrick: sure. in terms of the u.s. market or generally? francine: give me your three best shots at making money this year. patrick: it has got to be in equities. i've been in equities for 30 plus years. it is still the only wealth creator left in this business. francine: with negative rates, you're not wrong. patrick: certainly, that pushes you more into my point that i was trying to make earlier. in the u.s., you've got 2.2% yields on the s&p, 1.8% in 10-year treasuries. --ply put, that is going to you talk about negative rates. cash is being structurally attacked through negative interest rates. holding cash doesn't do you could anymore. you've got to go back into a wealth creating machine, which
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is equities. u.s. equities, 2.2%. bonds, 1.1%. markets are always up the following year when you have this disparity. francine: patrick, thank you so much. ♪
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welcome to "the pulse" live from bloomberg's european headquarters in london. i'm francine lacqua. let's get straight to the bloomberg first word news with nejra cehic. economyhina's stabilized last quarter, meeting expectations. growth calvert is in march as a surge raised for us questions over the sustainability over expansion. industrial output and retail sales also picked up last month and beat analyst forecast. haspanama papers scandal
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seen the ousting of another european figure. spanish industry minister jose manuel soria has resigned after links to an offshore company. he first denied any involvement with the business, then backtracked as new revelations showed he was involved in a firm registered in britain. a little over a week since his predecessor was ousted, iceland's new prime minister is pushing ahead with economic reforms. explained how his country is taking the final step to removing the capital controls that have been in place and's the 2008 financial crisis. >> if we are successful with these conditions we've put in place and we fulfill them, i envision that we will have removed capital controls on households and corporations, and the pension fund will have been let out with more funds than they've been able to do up to this point, and we will also
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have in place precautionary measures needed to protect the general public and the national interest. global newsnejra: 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. francine: thank you so much. european markets are in the red this morning. let's head to bloomberg with mark barton. mark: stocks in europe are falling for the first day in six. they are set for the first weekly gain in five. china once again setting the tone. we had first quarter growth of 6.7%, matching estimates. asset investment and retail sales picked up in march. there's the index today and all its main constituents, down by 0.4%. this is the yen this week against all its major trading
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peers. it has fallen against most of them. these currencies have risen against the yen. it is headed for the worst week against the dollar since the boj unveiled its negative interest rate strategy on january 29. the dollar rising over 1% against the yen this week. that lessened the speculation for the boj to intervene in the market. we had kuroda speaking yesterday in washington. he said he had no plan to bring up the forex markets or currency intervention. are penciling in more stimulus from the boj. one of the big corporate stories today is from car four. shares are up 3.9%. france's biggest retailer reporting higher first-quarter revenue. growth compensated for a decline
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in china. happy anniversary or not for the stoxx 600. a year to the day, the stoxx 600 hit a record high. 600 hasen, the stoxx fallen by 17%. let's look back at the past two peaks for the stoxx 600. look what happened thereafter. 50% in thell of over ensuing years. 50%housing bubble, we saw a decline. if history repeats itself, francine, the stoxx 600 could, i say could, fall another 50%. happy birthday, stoxx 600. francine: i don't like that so much. usually happy birthday is a bit of up news. mark barton with a great asset
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check. there is a chance but you k12 vote to leave the eu. he is menacing. singh, one of the few people to correctly predict the outcome of the election. thank you so much for joining us. he's the referendum not different? can you be certain that you are predicting the right numbers like you did with the election? is, there isanswer no certainty about this. referendums are particularly hard to predict. they are unique events. you have a general election every four or five years, which allows pollsters to do a lot of work that wouldn't be able to do on a referendum, and people like myself to do analysis that you can do when you have a series of data points.
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with a referendum, we don't have very many of them in britain. , there is a fair amount of uncertainty about this. what the forecast tries to do is scientifically analyze the likely distribution of probabilities and events and the most likely outcomes. francine: first of all, the pulse that we see, about 30% undecided, but then 35%, 35% for and against brexit. you are at 24% chance of brexit. >> it has actually been revised down slightly. it is now 22%. basically, what we're looking at is a series of recent polls. if you simply take an average of the most recent field goals, you get something that is very
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close. there's a difference between what different polls are showing. theonline polls, most of recent ones, are showing something close. the phone polls remain with quite a clear lead. ncp ise average that constructing does is to take into account the type of poll and the polling company doing the recent polls. if a company that shows always a close race shows a close race, it is not treated as news. it sort of takes the news rather than the noise. ,f you adjust for all of those which is what the polling average does, you then get a slightly bigger lead for remain. at the moment, the average showing just over a three-point lead. trenderendums, there is a where the status quo tends to outperform as you get closer to
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the date. it is not always the case, but it does tend to be the situation. when you combine those things, where get a situation remain his favorite. obviously, there is a reasonable chance now that that is a vote to leave. it is certainly not in the bag. it would be wrong to try to pretend these forecasts are more certain than they are. francine: i understand there's a lot of uncertainty. we've been trying to figure out what would it take for this country to leave the eu. is that a very difficult to model in terms of probabilities? the problems that we are dealing with, emotions, do they change quickly or does it take years? >> that is the thing that is artist to analyze. -- hardest to analyze. if you ask people about the
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issues they are concerned about, the eu itself in britain's relationship to the eu is not something many people would say is hugely important. pollsmigration is in most the most important issue. the way that plays into the debate is something that will be important to watch closely. that is the major sort of advantage for the leave side. on the other side, people are concerned about their own finances and the economy more generally. of risk, if britain leaves the eu, of bad things happening to the economy, takes over, that would be more likely to swing it the other way. in general, people do have a certain risk aversion that tends to kick in later, hence the forecast. reasonablyre sort of
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important issues on both sides of the argument, which is perhaps why the polls are so finely balanced at the moment. francine: great stuff. thank you for coming on, matt gh, founder of number crusher politics. if you want to see those polls, you can go to to break, i want to show you our chart of the hour. top five countries for remittances, nationals working abroad and sending money back home, india china, the philippines, mexico, and france. this is the one that surprised us in the newsroom. france received an estimated $23 million last year from workers overseas. that may play into whether the eu stays together or not. much for that. up next, after hackers stole
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phones from bangladesh's central bank and moved to the ruvell's exchange rate, could we see more cyberattacks? ♪
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francine: the fiat chrysler chairman has renewed a push to merge with one of the auto industry's big guys, saying savings could top $10 billion a
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year. fiat chrysler and ferrari both hold meetings today. viewers aref our extremely excited about that, the first time that fiat, cnh, and ferrari shareholders meet the same day outside italy. what has been said so far? >> we just spoke with sergio marchionne. sergio who are the big guys that potentially could team up with fiat chrysler. essentially, he said that if you ork at them, the first four five carmakers in the world, gm, -- heagen, toyota, ford said gm closed the doors, so it is not likely we will have a discussion with them at this
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point. the koreans are not interested. potentially there are just three candidates left to dance with marchionne. mean that they are having talks with one of them, but ideally those are the three candidates that would make sense to team up with fiat chrysler. john said they were merging with one of the big guys and could give savings of $10 billion every year. francine: so that is for m&a. they want to become more of a lifestyle brand. i love that the ticker is "race u.s." is that being taken well by shareholders? francine: -- fiate new board will be
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with several luxury experts. you're going to have kids wake. you're going to have the elkin brothers. they have to tackle this issue. , he saidhionne sold they wanted to create a luxury goods company and he appointed a new head of the luxury goods division. until now, we haven't seen the outcome of the strategy. marchionne said you have to wait until 2017 to see the outcome. clearly, there is some skepticism among analysts and investors. shares have lost more than 20% since the ipo. an investor i spoke with told me ferrari has an identity crisis. they have to decide how to expand without diluting the brand. francine: certainly not an easy task, but fascinating. thank you so much for grabbing mr. marchionne as he was having
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a cigarette outside. that is wonderful. we will keep up-to-date with any new developments throughout the day. the founder of casper ski lab expects more tax on financial targets to come. hackers recently stole funds from bangladesh and moved the russian ruble's exchange rate. he made the comments in and the schools of interview with ryan chilcote -- in an exclusive interview with ryan chilcote. what a fantastic interview. what did he tell you? ryan: in february 2015, the ruble moved 15% in 40 minutes. russians are used to volatility, but won said this is too much. they contacted a anti-hacker group and they said, you've been hacked. half $1 billion in trades had been made on their systems by hackers. that is what they say caused this ruble moved.
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it is getting so bad, at least in russia and ukraine, that aspersky says that cybercrime, at least in some context, is starting to look like cyber terrorism. >> i'm afraid that the situation is getting from bad to worse. they are criminals. they learned these technologies. they understood that they are able to attack well protected networks. i'm afraid the next step is the more serious attacks. these technologies are available. the criminals work for money. whereraid about scenarios very bad guys will employ professional criminals to pack financial systems -- hack financial systems to paralyze them. and you say that since the
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attack on a stock market that we've heard of, the incident of hacking into the malaysian stock market, there's another one that you know about that isn't in the public knowledge. there are several ses under investigation. i'm not able to talk about it. but very soon, i'm afraid we will have more news about the high-profile attacks. ryan: were russian hackers behind the attacks on morgan stanley and the other big banks that we learned about last year? ng hackers speaki unfortunately are very professional. we see many languages in the tech world. mainly chinese, spanish, portuguese, and russian. most of the sophisticated attacks are russians. ryan: one of my favorite hacks in russia, they effectively hacked into cash machines and programmed them that it just
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spits out money. they don't even have to touch the cash machine. funny,e: that is kind of but at the same time, people lose money. you have to make sure if you are a bank or central-bank that you have the software to protect yourself. how much do you spend on this? ryan: eugene kaspersky said this is costing in general, cybercrime and everything, $100 billion a year. you've got to make sure you are ahead of the hackers. francine: spend money, that is kind of what you are telling us. ryan chilcote with the latest on hacking coming from russia. up next, reporting season on wall street. banks have found a new way to please investors. goldman sachs is sent to join j.p. morgan and wells fargo in slashing costs. ♪
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francine: goldman sachs said to be embarking on its deepest cost-cutting push in years. the ceo's cuts are to employ layoffs as the bank tries to whether a slump. that is according to people with knowledge of the effort. michael moore joins us now with the rest of the details. thank you so much for coming on. what sort of measures are we talking about? >> this is kind of
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across-the-board, not just laying off people, cutting deeper than they normally cut this time of year, but expenses, travel, anywhere they can find cost-cutting, they are doing it. they are expected to have a drop in first-quarter revenue. francine: is this surprising? this is what all of their rivals are doing. >> in that way, it is not surprising. a said, not only are we cutting costs, we've got moorman to cut. banks are trying to wait for revenue to turn around. until then, they've got to control what they can control. had j.p. morgan kicking off earnings season from banks. on the trading business, it wasn't as bad as expected. >> especially j.p. morgan. a lot of warnings came out in early march about the trading business. it wasn't quite as bad as had
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been feared. march was a little bit better. the rates trading business was very active. you saw some activity pick up there. quite domerica didn't as well as jpmorgan in part because they have a smaller are moreiness and focused on the credit side, which had a tough quarter. francine: what are we expecting from citigroup? >> citigroup has a good size macro business. it will be interesting to see where they fall in between j.p. if -- theyf a, or had warned in early march. we will see how good their march was. francine: thank you so much. we will have plenty more throughout the day. you can follow citigroup's announcement and conference call as they happen on bloomberg function. that is for terminal users. you can really follow up to the
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minute followings when they come out. our experts are in charge of that. stay with bloomberg. surveillance is next. tom keene will be joining me from new york. we will be speaking to a harvard economics professor. we will also be speaking to the international monetary fund first managing director. both those interviews out of washington. we will also be talking to adam pozen about strength in the again. that has cooled off a little this week but we want to ask him what his next steps are for governor kuroda. this is new york city. we are seeing some live pictures. tom keene getting ready to come on set. he's probably in one of those apartment blocks, brushing his teeth as he runs to bloomberg headquarters. this is a picture of european stocks. they were in lower a little bit. carmakers driving down european stocks after volkswagen
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disappointed. the scandal on emissions hit demand for their cars. autos, one of the biggest losers. that is the ftse. we also talk brexit. "surveillance" is next. ♪
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francine: building on credit, property rebounds in china, driving first quarter growth of .7%. no intervention yet, the yen had its worst week since the bank of japan cut into negative territory falling to levels that analysts say could spark more easing. and goldman cuts its losses. they're set to join j.p. morgan and wells fargo in a cost-cutting push as a slump in trading take their toll. this is "bloomberg surveillance." tom, we've had quite a week. equities not doing much, but again, i look at currencies,


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