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tv   The Pulse  Bloomberg  May 10, 2016 4:00am-5:01am EDT

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click's cutting deep. credit suisse poses -- posts -- >> cutting the credit suisse posts -- miners lead the charge after yesterday's plunge. it is a green bay for european trading -- it is a green day for european trading. chinese consumer prices rise for a third straight month as the pboc gains reasons not to ease. ♪ >> welcome to the pulse.
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i am mark barton, a quick look at the market -- at the markets. we are going to see a second consecutive day of gains if things stay the same for the next seven hours. the stoxx europe 600 is a by 1% today. the mining index is the big performing industry group after slumping yesterday. credit suisse big jump today. we had a loss, not quite as bad as forecasts and brent crude is up today after reporting yesterday up .6%. here is nejra cehic. nejra: china's consumer prices continue to rise at a healthy pace in april, but still a bit low the government's target rate . 2.3% was driven by prices given the pboc a reason to hold off on another rate reduction. easing ing to an
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factory gain inflation. be his topverty will priority as he claims of victory in the filipina -- in the philippines presidential election. a zero tolerance approach to crime and corruption. a string of on guarded -- unguarded comments. as ills political system has fallen even further as -- an old that bodies vote to impeach the president. the announcement by the senate head seemed to take presidents and suggested the drive to impeach was back on track. of moreable database than 200 thousand panamanian shell companies have been released in the latest move by the international consortium of international journalists. it derived from millions of leaked documents. the company specialized in
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setting up secret shell companies with clients including relative and associate heads of state like vladimir putin and british prime minister david cameron. global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. you can find more stories on the bloomberg at top . mark. mark: credit suisse reporting a loss for the first quarter compared with the profit a year ago. shares are up today. fixated tidjane thiam says he is confident to deliver cost cuts this year. >> we have done 3500. target -- 58% on target at the end of the first quarter. billion target of 1.4 42015 of net savings. we have done all more than half.
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mark: the chief exec of spoke to bloomberg's francine lacqua who joins us. markets have made it tough for banks. is he expecting less volatility from here? francine: i really try to press him on his expectations for the global markets, the capital markets and the volatility did he mentioned the lack of liquidity in the markets. he was very cautious. he says it is difficult to call the bottom get. is stillng environment .xpected to be difficult everything he put in place is starting to come in fruition. market volatility makes trading difficult. up theiring to build
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capital buffers. what did he have to say about credit suisse's capital? francine: this is one of the issues we tried to discuss. he started at the bank less than a year ago. five months into the job he announced a huge capital raising exercise together with an overhaul, a big restructuring of the bank. he almost did a profit warning and had to cut even deeper. the investment bank has been a lot of questions about the capital, on whether he needed to raise more. i asked him whether he also was concerned about capital and whether it would be enough to sell 30% of the swiss bank? he says he is confident that is enough and he pointed to the numbers today, 11.4. he says that is not bad, especially given the turmoil we saw in the markets and credit suisse has endured. mark: francine lacqua in zurich who spoke to the credit suisse chief executive. joining us now, james bevan,
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chief investment officer. poundss manage 6 billion at ccl a. thank you for joining us. i made a chart just for you. it is credit suisse versus ubs. it has been normalized, so the column to your right shows the percentage decline in 2016, clearly conceived ubs has outperformed credit suisse but still ubs down 18%. credit suisse down 33%. what does it take for james bevan to change his view on european investment banks? james: i want to see a real advantage. on to see a reason why these two players can be winners. the only exposure that we have two goldman sachs are the investors -- technology will give them a cutting-edge. they will get better margins. they will succeed.
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mark: who is doing best in europe? if you had to pick one investment bank, does one stand out against the group lack of james: -- against the group? james: i would be thinking about credit suisse in the european context, because they do have a very strong franchise. the have great people. new problem is if cost-cutting involves significant job losses, we don't know if the good people will be the ones to leave. mark: let's talk earnings. ea function, earnings analysis. this is the earnings analysis for the stoxx 600. we're looking at surprises. all securities, the sales surprise is -2.5%. sales are missing by 2.5%. earnings has got a green, up by 4%. all of the individual industry groups are just below.
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what is the take away? first of all, we had better capital discipline, so we have seen companies attempting to maximize shareholder value. there is been some financial engineering which has allowed earnings to rise faster than sales. the second issue is earning has been an asset. that is good news. let's good news is the earnings and some companies are better than might be expected because they have not invested in the long-term futures companies. management is cautious. at the end of the day, we need to see investing in projects that have a crematory terms. mark: these are the companies your keeping an eye on. james: incremental return is important. daysu get back to the where high levels of profitability led to an influx of capital, you would have to look at the paper sector, very
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bad news. they spent too much money. this time around, i see companies interested in trying to keep margins high. i look at the global companies that are in europe. companies maintaining the value by a very strong focus. mark: james bevan, chief investment officer. stay with us. stay with "the pulse." china's inflection -- china's inflation rate picks up. the chief fixated a credit suisse signals the worst is over as the swiss bank reports -- we will bring you the interview and easyjet lands a loss. . capacity glut what some gains we will ask when profits will take off again for europe's second-biggest discount airline. ♪
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mark: let's get the bloomberg business flash. here's nejra cehic. nejra: crude is lower this morning after it cut its profit forecast to a minimum of 1.4 billion euros. that's compared to a previous to 1.9 billion euros. germany's largest steel maker says adjusted earnings in the
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three months fell 30% from a year earlier to 336 million euros. that beat analyst estimates. the company's cfo told bloomberg how the steel block is impacting the industry. >> angela merkel could be helpful and we did see -- rice increases to reach the 1.6 billion to 1.9 billion makeup nine third. it is not only about price increases. nejra: a deck of has -- accelerating european economic growth. the world's largest provider of temporary workers said the sales rose 5% to 5.3 3 billion euros that beat the 5.2 8 billion euros average of six analyst hurt by phone carriers cutting spending on wireless networks.
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in its reports, a combined company, first quarter sales fell 9% to 5.6 billion euros. analysts expected 5.7 6 billion euros. -- the company is betting on the deal to tap into newer products, such as internet protocol .etworks that is the bloomberg business flash. mark. --k: china's index consumers let's get over to bloomberg's allen wan was in shanghai. what can we take away today from the inflation data? allen: i think the biggest take away his the deflation is easing . that is going to help the government to curb overcapacity. prices could help boost the profits of the company's. my concern is whether or not
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this trend is sustainable because the biggest contributor to easing deflation was a jump in crude prices. and prices such as iron and iron ore. inher food prices and a rise inflation could deter central banks from cutting interest rates anytime where growth outlook is very uncertain. mark: allen, there is a great story on the bloomberg about china's great commodity boom. -- there any other chinese lurking on the horizon? yes, one is the property market. we are seeing prices in shanghai surging. a possible 40% increase in my own rent. there are other asset classes that are seeing risk, for example bitcoin.
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it has more than doubled since the lows of last year. valuationn is the old technology companies that have invested in firms which are seeking the list in the stock market. marco allen, thank you for joining us. let's get more from james bevan. one of your key macro seems is china. let's start with how to play china, whether you believe in stabilization or whether you do not believe. james: china's government has capacity to use fiscal policy to achieve the rebalance that is required that any other key central bank or government combined. therefore their school to do so is much greater.
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i'm very optimistic that it can be dealt with well. when one looks at the preparedness of china to soak up the pain, that i find very positive. , they goods for example usual suspects -- on the back of the gulf results. mark: you think that is coming to an end? it is necessary to buy the share prices -- one all of the good news is in the price. lvmh, relatively flat on its back. the same logic applied? i worry about some of the auto companies. in the european context, i could see her no looking -- were no doing relatively well.
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europeanhe rest of the auto sector is going to have a very difficult time. +++ huge demand for vehicle without having a big headache on how they are going to deal with the transition. mark: the disruption caused by china -- so you wrote in your piece. please elaborate. james: i look at the pain that has been felt by the internet companies in the first quarter. big markdowns of the alphabets and the amazons. these long-standing gas
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companies that really know what are doing are going to be fabulous at creating long-term value. the key is picking them up now rather than waiting until the good news is back in the market. mark: we talked early about easyjet, what it is facing. you like one european airline. james: iag. they have a well structured business. they know how to make profit. they are back on track. how does one per to speed in these policy trends? just an investor should look at rolls-royce. the after service benefits are enormous. i would say rolls-royce is going to be a huge engine of creation. mark: they've been battered. they've got a new ceo. the revamp is on the way. you are cautious, james. investors should consider taking equities it to benchmark and why is that? james: there is equanimity about the u.s. presidential election.
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i see you us equities fair value relative to debt. if mr. trump is the next president and he delivers on this empty foreign rhetoric, i think markets are going to get surprised. mark: when will it start to be factored in? the markets are sort of sanguine. they are not bothered about the election. james: i agree. anticipation, the rates on the upside are constrained. yet the risks are clear and certain in the context that mr. trump will be a powerful man. if he delivers on half of his rhetoric, -- mark: james bevan. up next, brazil dumping erode. the hour.chart of that's next.
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mark: results index is one of the -- brazil's index is one of the best performance this year. here is your chart of the hour. to his jeep's valuation in eight weeks after investors dump stocks on concern that the impeachment process would be derailed. the lower house annulled -- he
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reversed the decision paving the way for the senate to begin hearings on the impeachment. this is price-to-earnings ratio. it is, from 10 to 16. down to 13.5 now. 36%.s risen by let's talk to james. from january is 36%. premiumdeserve a $.20 -- a 20% premium? james: [indiscernible] in the mix, there is good news there. i have two issues of caution. why would one take this risk when there are so many other emerging market opportunities? the real economy is starting to impact on company earnings. we have disappointing numbers.
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almost entirely on the back of the difficult brazil climate. atemerging markets,, i look some outstanding opportunities like the taiwan semi. to inies that are used the context of ongoing disinflation and deflation. where i would be pumping money today. mark: how are you assessing european equities, given the stronger euro? james: the disarray around the future for the euro system altogether. you think how close we got to portugal being downgraded to a noninvestment grade. that would leave chaos and the target. also it will challenges. these challenges keep getting papered over rather than addressed.
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i'm certainly feel concerned -- i felt concerned your has political risks -- concerns that europe has political risks. has very strong tenants within it. france and germany. i worry much more about the -- continue to function without having a's -- a single physical authority. we have fiscal transfers through the system. when logix wake up, there will be a problem. mark: james, great to see you. just as we into the break, i want to see one of the early better performing industry groups. 3%.ad a big rise of almost now the mining index, the gains of the day have almost completely been erased. credit suisse losses, less than
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estimated. the stock cutting taking center stage. -- tidjanem the thiam next. ♪
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mark: welcome to the polls, lime from the bloomberg headquarters. i am mark barton. getting some trade data out of the u.k. andill see a trade deficit sure enough, the total first-quarter trade deficit $30.3 billion, the most since the first quarter of 2008. we are importing more than we are exporting. the march goods export rise was 1.9 but the import gain was .6%.
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were estimating 11.5. the total trade deficit does narrow it to 3.8 billion but a trade deficit is something the u.k. economy has had to get used to for decades on end. let's get the latest bloomberg first word news. nejra: china's consumer prices continue to rise at a healthy pace in april but still below the government target rate. the inflation was mainly driven by food prices that gave the pboc reason to hold off on another rate reduction. the consumer pride index narrowed last month. poverty will be his top priority as he claims history -- victory in the philippines election. commentsof unguarded
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failed to damage his appeal, capturing about 39% of the vote. the massive wildfires that swept 85%ugh fort mcmurray left of the city intact, but completely leveled some neighborhoods. about 88,000 residents were evacuated and production from -- surrounding oil towns was was cut by about 40%. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. mark: thank you. credit suisse has reported a second consecutive pretax loss. tm isief executive tj and tihanent -- tj and tm -- thiam spoke to francine lacqua in zurich.
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tidjane: january, february are very bad. march was better and april was better than march. may showing some positive signs so it is always difficult when you are in that position. we still remain cautious in terms of outlook because it feels fragile, sentiment feels fragile there. i think hopefully, but the market is very sensitive and there's not much liquidity. we have to see about the second quarter. >> so it will not necessarily be easy to make money? when we look at things like our ipo price line, it is very strong. the same pipeline is quite strong, up 60% year on year. there are spots where we see strength but then there are
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growth andd global growth in china, things move around. >> on the job cuts, 6000 job cuts this year. tidjane: that was the target, and we have done 3500 so we are 58% into the target at the end of the first quarter. we think it is progressing at that pace. we had a target of 1.4 billion for 2016 of net savings. we believe we have already done half of that. we are confident in our target. not -- int topic, i am am always sorry to have to talk about job losses but it is a price we have to pay to create the platform we want for our future. we do not believe in a boom investment with great years and terrible years.
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successful, we need a strong capital base. we need relatively stable income streams, so not too volatile. something maybe we do not talk about enough, but good compliance. healthy growth so that we protect the reputation of the bank, which is really our most precious asset. we really think about serving our time -- our clients and making sure they are happy. about the connection between private banking and investment banking. 4.2 billion of net flows in asia in the first quarter, when billion of that are referenced -- people who know investment , so we really believe in
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that model. we believe it works, we believe the numbers show it works, and the potential long-term is huge. these are stable, high quality earnings. mark: credit suisse chief executive speaking to francine lacqua in zurich. thank you for joining us. we can't help but look at the share prices among the best performers in europe today. it is a lost but not as bad as expected. moehring declines in the other banks -- mirroring declines in the other banks but not as bad. what is the big take away? >> may be the results are not quite as bad as some have feared. i think the equity market, maybe there is a little bit of relief and also a sort of bounceback for credit suisse.
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otherwise i would say it is a clear sort of restructuring situation. credit suisse is still in the early stage of sort of a restructuring phase. that is usually the time when the results are the worst because you want to book many want to take, you a lot of the pain first and then later on have a positive earnings story. mark: get all the bad news out of the way earlier. on cost reduction, they have achieved more than half of their 1.4 billion francs in net cost targets for this year. on that basis things are going according to plan. otto: i think the cost-cutting story is a positive in these
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results and clearly the company is making more effort on that then they had originally set out to do. mark: other positives? capital? leverage ratio 3.3%. otto: capital is maybe a bit of a different view on the credit side versus the equity. i would say for the credit side it is probably good enough, not brilliant but may be good enough for now. for the equity market, the capital build is more the issue, the fact that credit suisse is taking quite a long time to generate free cash that can be paid out in dividends, which for debt investors is more of a secondary concern. plan of the general
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cutting back the investment bank to free up capital to expand wealth management, are you worried about this? is there an extent that you go too far in impacting the franchise? otto: i think it is a? mark.is a question credits -- credit suisse has not been the only bank in that situation. the difficulty that the investment bank model is it used to be before the crisis does not really work so with regulation we have to restructure that at adjusted to the new world basically. yes, i think there is always a risk that cuts go too far, that maybe the franchise gets damaged to some extent. on that again i would say for credit investors, having a least anfocus on at
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concept, much more stable earnings producers like wealth management, private banking, etc., is actually a good thing rather than just this heavy focus on basically market-driven results which while you have a good month, good quarter you have great results. you have a bad quarter, that is not ideal really for credit investors who like a much more predictable -- mark: this is a lovely chart for equity investors. it shows how tidjane thiam has fared since june 1 last year. total return which includes dividends down 42%. their peers have fared better, down 62%. how does it fair for credit investor relative to its peers? otto: for credit investors it has been a much less problematic story.
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credit suisse has not really been an outlier and performance, spreads have held up, and maybe the secret is also not small capital increases done late last year so equity investors always live at the risk of dilution, which credit investors do not have. to see you again, thank you for joining us. big data is becoming big business but how can companies use the power of information to drive sales and improve the customer experience? it is a damp day in london. that summer did not last long. ♪
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mark: let's check out what is happening to equity markets. -- naraeck with merit jake. if you look at the stoxx 600 it is up more than 1% at the moment. most industry groups actually higher with banks and travel and leisure stocks among the best performers. if you look at individual indices, the dax is up today but this chart shows something a little different, trader skepticism that descended as it surged toward a bull market last month.
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that skepticism has done nothing but intensify because what this line as showing is that bearish outcomes reached a high this year. this is the put calls ratio rising. the ratio between puts and calls is near the highest in a year on the dax. even after a four-day rebound, the dax has been up for days, it is still below its peak from two weeks ago. not only that, volatility has been higher than that in spain and italy so investors increasingly bearish on the dax despite its recent gains. i want to show you one of germany's stocks, the biggest steelmaker in germany, this stock has had the biggest decline among germany's 30 top stocks.
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throughhree months march 31, this seems to be moving on the fact that the company cut its profit forecast. this is in the steel industry but it is having a glut of the metal, shares down 5% intraday. producers have been hit by cheap chinese steel which has undercut european and u.s. prices. mark: let's talk about the outlet -- outlook for the u.s. economy. his baseline says scenario is moderate economic growth. >> if we needed additional stimulus tools we have other tools available in the fed. those are well understood. the fed also coming out of the verys use more guidance powerfully to change long-term expectations so our outlook, we are not forecasting hours session, baseline scenarios,
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moderate economic growth so we do not think we will need those tools but they are there if we do not -- if we need them. it is a global think tank sheh hopes to deliver -- also served in the white house in the national economic committee. why is your day important for tackling economic challenges? donna: so much of our economy is premised on the data the government produces. doing in our think tank is using real-time transactions. demand deposit transactions, loan transactions to get a pulse on what is happening on the economy. mark: give us an idea of what
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your data is saying about consumer trends in the united states. last: as you may remember, year we had a very significant slowdown in retail sales. this would have been true in the aggregate outlook statistics and we noted it in ours as well. months, toward the end of the year we saw maybe a silver lining which were three out of six months saw positive growth and we saw growth across all 15 cities. stay cautiously optimistic that things are really improving for the consumer. mark: how does that policy affect consumer trends? diana: the most important thing is the extent to which consumers will have access to credit. should rates remain low, credit is easier to access. economynt to which the is showing some positive momentum could in fact be the
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reason the fed raises rates in which case the consumer will be affected. mark: do you have a view on when or if the fed will go in june or later? it is what the fed was telling the market. we see ishink what enough jitters and the economy that the fed will take it one step at a time. mark: you have been looking at the size of growth, the gig economy, the sharing economy. what have you discovered? diana: it is growing dramatically quickly. in the last three years we see a 47 fold increase in individuals earning income from these platforms. the second thing is it is for most people a supplementary form of income. most people have a primary job and this is typically 20% to 30% of their total income. we see for some of these platforms where they involve
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performing a task as opposed to renting an asset that it is helping offset income volatility. among our many important findings is that most people in the u.s., and we expect in most countries, are experiencing very high levels of income volatility and consumption volatility so any measure that allows them to asset that is a positive thing. diana farrell, chief executive of the j.p. morgan chase institute. headwinds for easy jets, we will dig into the airline's loss. details next. ♪
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posted a pretax lows of 34 million pounds, less than estimates. they are trading higher today and we spoke to the ceo carolyn mccall. lyn: we are coming in at the same as last year, about 5 million profit. it is the foreign exchange movement that affects us this year so despite paris and brussels, we have been able to do very well in the first half and i think that shows our customers really like us. mark: let's bring in benjamin cap.
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but was the most significant part of these numbers? benjamin: 24 million is not a small number but you have to take into consideration 3 million headwinds from currency exchange and auto. once you factor in all the currency changes they are looking at about 5 million which is on par almost with 7 million. that is what they have been promoting this morning. the other significant number that came out as they are all year forecast. in january they pointed to about $758sensus of million. now they are pointing toward 721 million and that is because of the terror taxes. -- terror attacks. mark: what was the impact of the terror attacks? benjamin: the downing of the passenger jet in egypt, the
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paris attacks, and brussels. easyjet is forecasting about 18 million pounds hit but what they have done is they have been pushing their cost-cutting cost cuts withng suppliers to cut down on the costs, moving some of the staff to cheaper destinations, and really trying to cut back on the to limit the impact of 18 million. mark: what is the outlook for the summer and the fair prices? benjamin: after the brussels attacks, numbers are recovering somewhat. the problem is revenue per seat are still quite low, a combination of increased rivals, from all its including the national carriers like british airways affiliates, we are looking at the moment 6% and fares -- in fares, but a
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good summer. mark: thank you, benjamin. i wanted to show you a stock today, a stock that is trading for the first day. , up by 30%late today. 27% -- it has grown to become one of the great chocolate retailers. it has 84 stores, 500,000 online customers. the money raised today will be used to expand its store. , i will bell chatting to him at 4:45. a quick look at the equity markets today, looks like stocks are trading higher. credit suisse a big part of that. but it wase a loss
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not as bad as estimated. it is making progress on its cost-cutting exercises. surveillance is next. tom keene will be joining us from new york. ♪
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francine: credit suisse post is as -- posts a second-quarter losses. it is a green day for european chinese inflation firm of the pboc gains reasons not to ease. this is bloomberg surveillance. lacqua, tom keene in new york. tom:

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