Transcripts For BLOOMBERG Countdown 20151102

Im guy johnson. Anna about 6 00 here in the morning in london. We had a turkish election. The Market Reaction is already pretty clear. A stronger turkish lira. This is it versus the u. S. Dollar. That is the game that the turkish lira has made and the loss of the power of the u. S. Dollar. Erdogan says the world must respect this decision. We have got some numbers coming through. Ryanair just reporting profits up by 37 . A little bit cautious about the winter. Laterl get some analysis and talk to Michael Oleary. Lets talk more detail about the hsbc story. Thirdquarter profits Beat Estimates. This is a global bank but it is europes largest bank. To darren inow hong kong. Why are the numbers better than expected . 6. 1 billion on the pretax reported by hsbc. Analysts were looking at something in the area of 5. 2 billion. Analysts cant even cant usually gets in advance certain items and hsbc usually pretty transparent. Namely, we are talking about lower fines and lower settlement payments, and also lower payments in terms of redressing their u. K. Customers. U. S. Dollars lower. Also some stable movements in credit spreads. A couple of drags on the figures that the company has identified. Retail banking and Wealth Management were affected by the slumping hong kong stock market. Also hurt by Challenging Market conditions. Tell us a little bit more about the domicile decision. They were supposed to tell investors where they were going to be domiciled by the end of this year i understand. Arren essentially it seems that they are guiding the market to the fact that this decision might be pushed out into next year. What they have said is that while the review is progressing, they have said that the selfimposed deadline at the end of the year is flexible and can be moved. The fact of the matter is, they will provide a further announcement or further update when they are ready. At the time when the full year is up which is likely to come in february. The hot burning question as far as domicile goes has been pushed out a little further. Lets stay with the banking theme. Caroline hyde is standing by. Caroline it looks like a positive story. Youre seeing operating profit rise some 25 . The estimate had been for 318 Million Euros, so this is a significant beat on the profit side. Revenue also climbing. 7 . Can see revenue up also improving the capital ratio , the measure of financial strength. What they call staying right on track when it comes to the successful turnaround. These comments coming from the chief executive who, we learned over the weekend, will not extend his current contract past 2016. Euro bailoutllion and the overall he made. He now is going to be taking an exit. We are seeing the same in new leaders at credit squeeze, suisse, credit barclays, deutsche bank. Guy thank you very much, indeed. Anna some numbers from ryanair at the top of the hour. Our European Aviation correspondent has been pouring over the details. This summer, i think across the board, most of the characters have been pretty happy. The rotten weather in northern europe. The environment across the board has helped keep these numbers up for i e. G. , british airways, all the characters. Guy what is the outlook . They guided toward the upper end of the range so they are feeling confident. I was asking the cfo earlier this morning, he was saying that they are going to be keeping 10 warplanes in the air 10 warplanes in the more planes in the air. They are going to be able to keep their costs down and continue to drive passenger numbers. Anna where they going to continue to grow . 50 increase in capacity in germany. They open database in berlin last week. That will be a big battleground for the lowCost Carriers. Also targeting germany, and enormous economy. I dont think with tons of is going to take that one line down. Spain. Nd other areas, guy last time they release numbers this is a more muted kind of story. This is another significant hike. It is still within the range. Kari ryanair tends to be very cautious. Guidance last time was impressive. Last year, they chose to upgrade five times. Last week, ieg fell. I think everyone is curious to see how this capacity battle is going to play out. Anna one of the costs you would expect these airlines to be benefiting to be benefiting from is the oil price. They are increasing their hedging, granted prices are down. Obviously, they are confident that prices are going to stay around that range or maybe a little bit up. Whether they need to tweak their hedging policy. I think now, they are definitely confident. I think they have had the upfront benefits of the lower prices and they are probably in better shape going into this winter than they would have been otherwise. Kari it is interesting, some of the weaker carriers are being able to hold on because they can take advantage of these lower fuel costs. That just creates a more competitive environment because you have more people in the environment more people offering lower prices and it drives down yields. Ryanair is wellpositioned to deal with this. Regardless, across the board, it is going to be a challenge. Ryanair Ceo Michael Oleary will be into the studio around 7 00 u. K. Time here on bloomberg. Anna and he does bounce. Lets check in on the markets in asia. Chinae some data out of that is being digested by the market. The Hong Kong Market was down significantly earlier on . Zeb we are seeing a decline today as we take a look at stocks across the region. In fact, the regional benchmark falling. Official numbers on sunday and then a private gauge both showing essentially a third month of contraction. Remember, china, the Major Trading partner to so many economies around the world, particularly in the asiapacific. Rob interior producers in australia for example. Region,e across the Southeast Asia seeing a big decline. We had export numbers out of south korea today. However, a bit of an uplift right now. As for the china markets, shanghai down 1 , hung saying down. This is what youre seeing in terms of the movers. We are seeing difficult earnings reports from petro china, for example. Air china all in play. The noodle maker late last week was the top mover, now it is down 7 on this session. We will we are also closely following several key movements in the nikkei 225. One stock to us today in japan is yahoo japan. That is because investment costs for promotional activity. And may have a 20 year on year increase in terms of revenues. 9 drop. We are also following the macau casino stocks today, because despite a pullback in gaming revenues, it was the best performance. Gains why we are saying from a cow stock despite a dismal outlook for gaming. Doesnt seem too bad despite the gloomy outlook for macaus revenues. Anna you mentioned there the inth korean exports down 16 september. Just another illustration. We saw the currency story kind of reverberating around korea. Also, we are keeping an eye on what is happening in turkey. Without a pretty clear Market Reaction. This is the dollar versus the turkish lira. We are now getting the book handed over to europe and we are getting another move lower as well. Definitely long thought lire this morning long athe lire. Just giving you a sense of the scale. Just to give you a sort of sense of the movement. See, the strengthening mira. The strengthening lire. A. Anna it is all about Manufacturing Day today here in europe. Half an hour after that, we get data from the u k janet yellen gives testimony before the u. S. House committee. She will be talking about regulation in the financial system. Thursday, a bank of england Rate Decision at noon london time. Arguably theay, most important data release of. He week, the u. S. Jobs report what will that key piece of data added to the banks . Into the mix . Guy up next, were going live to istanbul to break down what it all means for the markets and the political story in the country. Anna what welcome back, it is 18 minutes past six in london. Guy europes largest Bank Reported a 32 gain in q3 profits. The leader also said it may not announce a decision on its domicile this year. Data showed manufacturing is still declining in the worlds secondlargest economy. The official purchasing Managers Index was unchanged at 49. 8 in october. That ms. Estimates and marked a Third Straight month of contraction. Turkeys ruling party swept back into office strengthening 13 years ofdogans power. The lira has jumped the most in almost two years on optimism that we are going to get some political stability. Anna bloombergs, can he live istanbul. Onesrise win for her to surprise win for erdogans party. Erdogan has done it again. His party surprised the pollsters and experts with a big and solid majority. Coalition talks going back to what happened in june when the ak party lost its majority, was forced into Coalition Talks. President erdogan to the that many call a gamble, but that gamble has paid off. Around 23 million votes from this, the country following that june vote. Tensions and violence here in. He last five months we have had bombings that have killed over 100 people in and ankara alone. In we have a refugee crisis from syria and a few significant economic challenges that the next government will have to face. Security guard and that is what the people have bought into. The relief from the investor community. The lira versus the dollar up around 4. 49 . Will that relief be temporary . Investors are breathing a sigh of relief because there arent going to be weeks of dispute and political battles. They also were relieved, i think, because the proKurdish Party got into government. Is that relief going to be shortlived . With the happens executive presidency . We didnt quite get a super majority so what happens next . The ak june, that is all party were pretty much banging on about. They want enough votes so president erdogan could have the executive power to change the constitution to have this executive presidency. They dont have enough votes to call a referendum. A lot of his critics say the has been taking that power anyway. We have seen the crackdown on the media in the past few months. Will they push with that. Certainly more power than. Rdogan wants centralization of power is going to be a key concern for investors. Problems economic facing this country, slowing growth around 8 . Then you have consumer confidence, flat or falling. The huge social divisions that are being caused by these political rifts. Not to mention the breakdown of the truce with pkk militants. The list is long and you have to be a brave investor to move back into turkey and less is just for a shortterm relief rally. Guy that is a really interesting point to leave the report on. Tom mackenzie joining us from istanbul. Anna lets bring in our next guest. Good morning. A brave investor goes back into turkey right now . Are annoyedost because they predicted he was going to do worse than he did. I think things are looking quite good. Obviously there are economic had ams, but we have battering position, a strong mandate. Had people defect from the Kurdish Party to them. They had people from the ultranationalist party. That is saying that people look to them to try to find some sort of settlement. Majoritys that the wants to carry on. The interesting thing is that the other party, the main opposition party, has roughly the same amount of seats. It is a very strong majority. They have problems. The problems are connected to the european economy. , but hee the refugees has managed to negotiate 3 billion out of the eu. And they have is. Negative. Ink it is as i think this majority gives stability. Guy it gives a stability but what it doesnt do is put the country in a position where he can do things to restore the economic prowess that turkey enjoyed three, 4, 5 years ago. You wonder whether or not actually making sure the businesses are able to operate in a free and effective way, whether the central bank can deliver the rate policies. I just wonder whether that is there. The question is, what this party guy crash gets pretty hard. We can say crashed it because europe crashed. I take a middle line. Stability, the biggest problem i have is that they need europe to recover. Anna are you worried about their reliance on external debt . It is not a slamdunk either way. Not as negative as hundreds are saying this morning. Everyoneryone guy seems relaxed when it comes to the currency. Thank you very much. Anna next, coming up on yuan retreatshe after more evidence of weakness in the worlds secondbiggest economy. Two gauges of the chinese manufacturing story. The official reading down for a third month at 49. 8. If you are looking for a silver lining. \ guy when we come back, plenty more on turkey plus the corporate stories. Hsbc and ryanair. London, 7 3030 in in brussels. Anna hsbc Beat Estimates as costs related to find and legal settlements declined. Europes largest banks reported a gain in thirdquarter profits. The letter said it may not announce its decision on its domicile this year. Guy greece part main banks must raise 4. 4 billion euros in fresh capital as taxpayers face the cost of repairing the damage of wrangling between the government and creditors. The banks have until friday to submit recapitalization plans. Anna Russian Aviation Officials Say the airliner that crashed on saturday appears to have broken up in midair and a scattering debris over eight kilometers. The airbus crashed after leaving for st. Petersburg. All 224 people on board were killed. Egypt and russia have dismissed claims from Islamic State that it brought the airplane down. Guy lets take you back to whats happening with the economic story globally. Chinese manufacturing declined for the third month in a row amid faltering global demand. Pmi saw an improvement over the previous month. That beat the median estimate. This is one of the biggest releases of the month. A lot of chinese data, you cant trust it that much. It is a big number. I think quite a good number. Shows distinct improvement from the past couple of months. It does look as if the policy support that youve been putting through in china is getting a bit of traction now. Theyve been trying to boost growth and the numbers are getting worse. I think its quite encouraging that you are getting signs of stability, moderate improvement, in these numbers. I think thats a reassurance. We saw the purchasing Manufacturing Index 49. 8, weaker than expected. Any number below 50 does show contraction. With those figures combined with the gdp figures and the expectation that gdp is slowing, it is putting some negative bearing on the markets this morning. Anna lets speak to our chief asia economics correspondent, enda curran. What do the pmi numbers tell us . Weve got two sets of data. good morning. There may be a hint of stabilization. It depends what way you want to look at the chinese economy. It still remains that the Manufacturing Sector in china is stuck in the slow lane. It is mired in disinflation. That is not just the china story. That all thees stimulus that has been put into the economy isnt yet getting much bang for its buck. People are hoping it is now starting to gain a little bit of ground. The pmi indicators demonstrate that china has far to go before it is back on smooth territory. Guy what is happening with the global trade story . How do the two things fit together . Enda the dynamic with the chinese economy is that we know they are trying to transition their growth model away from one ,hat relied on heavy industry exportled manufacturing and the like, and trying to get services and consumers. There has been a reshuffle. We cant ignore the global trade story. The global trade story is weak right now. That is feeding into china. Some of the biggest customers are in europe. And japan. Those economies, the u. S. Economy, it may be on a different slip, but all that feeds into china. It is not just internal. Anna what does it all mean for the pboc . Any indication that this makes further action . Six have already cut rates times. Any further action expected from the pboc . Enda thats right. Theyve cut six times this year, often late on a friday night. I think economists think they will still come back in. We will have to see if theres a pickup in demand for new loans. Also, dont forget the fiscal side. The government pumping money in to try and get some new projects with otherund measures to get spending going amongst consumers. Economists say the central bank may not be quite done. Also, keep an eye on the other authorities. Anna thank you, enda curran. Guy what we see this morning is a very large surge in the turkish lira, which is continuing to strengthen. Istanbul has just opened up. The banks are leaving quite a significant upside charge. We are getting a very strong reaction both in terms of whats happening with the fixed income story, the fx story, and now the equity story in the mix as well. We are up 5. 6 at the moment. Anna lets get back to hermes. We just had a report on the chinese data. If you are looking to make a case that the manufacturing data has bottomed, you could possibly make that. You could. That itan indication might flatten at this level, 49. 8. We know they want to slow the economy down. They want to move from manufacturing to consumer. The reason this question is important is, what will the fed due in december . Saying 5050. E i expect them to start hiking in december. Anna they took away their reference to the international atmosphere. They did. There isnt a crisis internationally. They are looking at the u. S. There is a fingerprint about the u. S. On average, i think it is time to start doing this. Guy turkey, big current account deficit. The fed goes. Is this rally that we are seeing in turkey i think youre right. Theres an element where that is affected. I think this is, like i said, i think this is partly a marketing element. Nobody expected this outcome. Then it comes down to just whether they can reignite the economy as in the past. Anna whats going to be interesting for many of these emerging markets is how the dollar performs. Are you in the camp that says if they hike him a we see a continuation of Dollar Strength . Im not sure. We are all anticipating hikes. Will the Dollar Strengthened versus the euro, maybe. Guy what does a little bit look like . Down to one . Maybe. They need to increase liquidity in the markets. I think probably thats it. This . Hat happens post the era the aunt the first hike, i think is more interesting than the era before the first hike. You get a dovish hike, what then . There are two ways you can look at this. One says that very low Interest Rates can justify the share prices in the states. There is another outside scenario people are not thinking about. Historically, rises in Interest Rates coincide with rises in stock markets. Do you buy into this argument that you need a little bit of a hike in Interest Rates to remind companies that money can get more expensive and that might make them invest in the short term . Exactly. American corporations have been sitting on cash. They have been giving it back to shareholders or doing m a. At some stage, they have to stop investing it. If the cost of borrowing goes up a little bit, that might convince them to start investing. On argument, but its been made many times. Thank you. To india has pledged maintain spending on infrastructure as it looks to boost growth. Riddick are concerned the government will have to cut back to meet its deficit target. The junior finance minister says theres no need. He spoke to bloombergs editor in chief. We seem to be in a very comfortable position as far as the fiscal deficit target is concerned. Incomes are running very strong right now. Five months more of the fiscal year to go. On the divestment side, we had quite a challenging target of 69,500 growers. We have some work to do. We think when we combine all these elements and take a look at the expenditure side, i think we have just enough sort of to work with. That weery confident will meet our 3. 9 fiscal deficit target. Can i ask you about the rupee . The rupee has been fairly stable this year. Do you think the worst days of the rupee are behind us . Is it now a much more Stable Currency . The rupee reflects the macroeconomic stability that we have been able to achieve in the last weeks and months of our government. When we came to power in may 2014, the macro indicators were all flashing red. Due to the policy moves and the downturn in the commodity markets, weve been able to restore stability to our macro economy. Now all those meters are flashing green. Currencies other that have been roiled by the volatility in the currency markets, the rupee has been quite an island of stability. It affects the very strong macroeconomic foundations we now have. Guy lets head further west. Turkish lira jumping as the party keeps its grip on power. As you can see, the markets rising very nicely. , the estimableup 100 rising by 5. 3 . That negative number is the dollar falling against the turkish lira. We are live in istanbul, beautiful pictures. We are back in just a couple minutes. Anna welcome back. You are watching countdown. Here are the stories you need to know. Guy hsbc has the estimates. Europes largest Bank Reported a gain and profits. It may announce a decision on its thomas ill. On its domicile. Anna the chinese yuan retreated from its lowest level since the august devaluation as data showed manufacturing is still in decline. The official purchasing managers inex was unchanged at 49. 8 october. That missed estimates of 50. Guy turkeys Ruling Ak Party has slipped back into office, strengthening president erdogans grip on power. Parliamentary the majority that the party lost five months ago. Turkish stocks and the lira are jumping this morning after the results on optimism of political stability. Anna lets get more on that now. We are joined in the studio by michael harris. And a professor joins us from istanbul. He is professor of finance. Professor, if we could come to you first, what do you make of the shortterm reaction in markets . It seems that people are more positive around the turkish story this morning. Do you think thats justified by the results we saw . Yeah, i think so. Liraan see the turkish jumping, and everybody believes continue, and it will at least four years. They hope there will be some Structural Reforms in turkey that we are waiting for. There is some progress in the economics in turkey. Guy michael, lets bring you in. Everything pretty negative on turkey. Weve been worrying about the politics, about security, about the economy. Yet we get a pop in stocks this morning. We are getting a move in the lira. It was from a very extreme position. Without a doubt. One of the things people worry about, are we going to have a third election . Can a coalition be formed . The simplicity of a single Party Majority removes those uncertainties. A lot of people are calendar year investors. Anna what difference does it make that we have a government that doesnt need a Coalition Partner in the turkish context . How important is it to have that ability to make policy alone . Turkey could have handled the coalition. The country has come far enough. We have a single Party Majority, so now the reason the market was a lot of people including myself were arguing that a coalition wouldnt be that bad. It would create checks and balances. The economy can withstand it. Now it is a debate about those checks and balances. One thing we need to keep in mind, almost regardless of the political party, economics are not ideological. Theres a consensus for reforms in the country. It is about, will the ak party put the right individuals in safe in place to allow reforms to happen . Professor, what do you think the answer to that question is . What will be the reform motivation that comes out of mr. Erdogan and his party . How will they push that forward . How will the relationship with the central bank change . Give us the economic backdrop now. First of all, i would like to say that the ak party also faces problems in turkey. 2009, there are no Foreign Direct Investments in turkey. The party will have to change some economic problems in turkey and make some economic reforms, Structural Reforms. [indiscernible] we are awaiting that. He will be the economy minister in turkey. I think, with his experience of the past, he will make good things for the turkish economy. Also for Structural Reforms in turkey. Everybody in turkey, especially the foreign investors, also wait for Structural Reforms. Take the case of the turkish central bank. We should keep in mind that the rent president [indiscernible] i think that they will try to change something for the central they but i think for now will not take in peoples minds reform for the turkish central bank. When we are close to april, i think they will try to think about centralbank reforms in turkey. Anna michael, you set out some that youailed reports think need to be undertaken. A lot of them referred to foreignexchange, which is interesting when you see such volatility in the lira. Ive been less focused on those shorterterm. Who are the economic actors going to be . The Central Bank Governor is probably going to be the last choice. Up until then, who is the economy minister going to be . The Central Bank Governors choice will be crucial. Erdogan aggressively attacked this Central Bank Governor. They have taken decisions for political reasons. If he decides hes going to have a total political appointee running the central bank, this stability will not be something the markets reward. April. A window until i think a lot of it will come down to, are we still in election environment . I would say this was not an ideological attack on the Central Bank Governor. Erdogan and many of his advisers dont have much economic power and would say high Interest Rates cause high inflation. That is just a frustration that inflation is too high. If we go straight to a constitutional referendum for erdogan to create an executive presidency, we remain in election mode and economics remain a political issue, not an ideological one. If we take a step back and say, lets recover, lets not have a constitutional referendum on the presidency, and we push this back to our three years and see how things develop, then we are going to see probably the right people in place. If we see the right people in place, the markets arent sentimental, they are not going to be so focused on whats happening from a political perspective regarding individual liberties. Anna michael, thank you very much. Michael harris. , thank you very much as well. Guy lets get back to some of the corporate news. The ceo of commerzbank says he wont extend his contract. Martin blessing has been at the helm for years. He wants to embark on a new chapter in his professional life. Lets find out everything we need to know. Hans nichols joins us from berlin. Hans when you look at what the lord is saying, they are disappointed because they did offer a contract extension, but they are thankful that Martin Blessing has given them almost a full year to figure out who his successor is. Blessing announced that he wouldnt accept this contract extension. He is not resigning until october 2016. Heres what mr. Blessing said in his statements. This is a mckinsey train. At the helm since 2008. It is now time to embark on a new chapter in my professional life. The fouryear strategy ands in 2016. He thought it was a good time to select someone new. Look at what the stock has done this year. Its down about 8 . The overall banking index was up ever so slightly. They did announce this morning they will be paying a . 20 per share dividend. Deutsche bank has halted their dividend. This is the first dividend from commerzbank since 2007. Mr. Blessing has presided over the bank in extraordinary times. There was a 20 billion bailout. You see some of the other things hes done. He orchestrated a Major Overhaul of the bank. They did cut a lot of jobs. They saw the company through a takeover. You look at what this bank is doing in terms of return on equity. Last year, it was around 1 . This year, we expect that a little higher. They did report an operating profit that Beat Estimates. They came in at 429 Million Euros. That the 319 Million Euros average. We will see how the market reacts to the news of their increase in profits for the Third Quarter as well. Anna thank you very much. Hans nichols joining us from berlin. Guy we are going to take a break. After that, we are talking about whats happening with ryanair. Ryanair pushing guidance up towards the top end of the stated range. Michael oleary, the ceo of the company, is going to be joining us after this break. We will get his take on what winter looks like. This morning is quite foggy. Anna we will also keep an eye on what is going on in turkey, where it is not foggy. The weather is lovely. The turkish lira gaining ground. The Turkish Stock Exchange gaining ground. We will be back. We live in a pick and choose world. Love or like . Naughty or nice . Calm or bright . But at bedtime. Why settle for this . Enter sleep number. Dont miss the semiannual sale going on now Sleepiq Technology tells you how you slept and what adjustments you can make. She likes the bed soft. Hes more hardcore. So your sleep goes from good to great to wow gift the best sleep of your life to your whole family. Only at a sleep number store. Right now save 500 on the veterans day special Edition Mattress with Sleepiq Technology. Know better sleep with sleep number. Anna turkish delight. The lira soars as erdogans party sweeps back into office. Guy hsbc reports a bigger than expected jump in thirdquarter profits and says that it may delay its domicile decision until next year. Anna ryanair pushes profit expectations to the upper end of the forecast range. We speak to Ceo Michael Oleary in just a few minutes. Guy welcome to countdown. Anna welcome to the program. Guy ryanair out with numbers this morning. Secondquarter profit jumped. The carrier attracted a Record Number of summer bookings. It also said fullyear earnings will be at the top end of its forecast range. Joining us now to go throu the figures is Michael Oleary, the ceo. Anna and Kari Lundgren is also here with us. Guy looking very comfortable now. Michael the expensive seat here between the two pretty ladies. Guy you must be happy with the numbers. The summer was great. How is winter going to be . Michael winter is looking remarkably robust. Our load factors were already rising. Weve stepped up the fullyear guidance. The fullyear profits are now at the upper end of the range, just over 1. 2 billion. We plan to lower fares, keep them flat in the Third Quarter, then down 4 in First Quarter next year. Most of the competition are either raising prices or withdrawing capacity. Anna does that constitute a price war . Michael i dont think so. Ande are at the lowest end we have the lowest fares in europe, if we are planning to drive our fares lower, i think that means good news for consumers and bad news for the competition. Going to cause that decline in fares is our capacity going up. I think for the next year or two, absent any extraneous events, we are going to see Strong Performance in the summer months. There isnt that much net Capacity Growth in europe. The winter growth would be weaker. In the past years, we were grounding aircraft in the winter. We are now not grounding anything except for maintenance. Routes andng 120 new growing strongly in the market where increasingly, thanks to me being nicer to people, millions of customers now want to fly ryanair. If id only learned in college that being nice was good for business, i would have done it years ago. Kari how much mileage do you think you are going to get out of the always Getting Better plan . Do you think thats going to continue . Bruised as long as we we boost profitability, we have another 12 months of development to interior slimline seats, the new website, a key element for us, sending people who want to receive travel deals, isat are hotel going to be very impressive for our business. Weve been laced to big data and the mobile app, but we are catching up quickly. We have such a cost advantage. All we have to do is keep rolling out that cost advantage. Weve already hedged our fuel for the full fy 17. 10 insaving another fair reduction next year. We will be happy to meet you. Kari the fuel is an interesting question. One would almost think you would want to change or alter your strategy given that you were 90 hedged in the past. How do you feel about hedging . Michael i think we will always get it wrong with fuel. We know as little as anybody else about where oil prices are going. Profit, next year we are hedged at 62 a barrel, huge cost savings coming through. We plan and hope to give away most of those savings to our customers in the form of lower fares. Why do the hedging at all, michael . In years gone by, you used to say, we will get it wrong on fuel, but you used that as a reason for not hedging. Now you do hedge. And your rivals dont. Michael they cant. Weve always taken the view that no matter what we do, we get it wrong on fuel. But if we had, at least we have cost certainty. This year, we got it wrong. This time last year, we were hedging at 92 a barrel. We clearly got it wrong. Yet we can still make 1. 2 billion in net profits. Next year, we are hedged at 62 a barrel. If we were in the stock market, we might be doing it a little lower. Savingsillion in fuel in a year were you are making 1. 2 billion in profits. You can pass on low fares to customers. Base inres the next germany . How is lufthansa going to react . Andael we opened colon berlin. I cant tell you where is next. I think munich will be one of the later ones. How is lufthansa going to react . I think by stepping up with lower prices in our markets. Those prices will still be higher than ours. Any time in history when a flight carrier has said, ryanair , we will never surrender, they always lose. In a price war, everybody focuses on price. We win. Anna how big can germany get for you . Germany will be a reasonably big market for us. We are underrepresented. We have a 7 market share in germany. 25 share in0 to most markets. We expect germany to double or triple in size for us. It depends on how quickly some of the deals get done, but it is a market that is growing strongly for us at the moment. Italy is growing strongly. Spain is growing strongly. In the u k, we are growing very strongly. Theres lofty growth out there. Guy would you like to see mr. Draghi push the euro down further . What impact will that have on your business . Michael at the moment, the weak euro is a negative for the industry. Guy for you are the industry . Michael we are in a very luxurious position. Weve hedged our dollar capex to the euro. We are in a very strong position. Euro isly, the weak probably a negative because so much of our costs are in dollars. So we would like to see the euro recover somewhat. But we are insulated from it for the next two or three years. Anna you mentioned the u. K. Markets. Theres a big Political Uncertainty right now because of brexit. Is that something you are Contingency Planning around . Michael you would waste far too much time Contingency Planning. Very important to us, yes. The referendum is going to be very important to ryanair as a business. And to the economy generally. We believe the u. K. Should be part of europe. We support the governments position that theres a lot of rubbish that needs reform. So a reformed europe would be a much better market for us all to be in. I continue to believe in the sense of the u. K. Electorate. I think when push comes to shove , as it did in the general election last year, people will vote in the best interest of the economy and stay in europe. Kari . Past, weve been talking about consolidation. Will lower fuel costs delay that . Is that a problem for the next year . 6 i think michael i think lower fuel costs is going to keep the cripples alive, but it is clear who will be the big survivors. In europe, there will be big five carriers. The biggest to will be ryanair and easyjet. The big three flag carriers will integrate with the gulf carriers and the u. S. Majors. Ryanair and easyjet will continue to dominate the shorthaul business, which is why weve begun talking to longhaul carriers about giving them feet in some of our airports. It is a logical development. We are making bundles of money in short haul. Do you care to announce who your first partner is going to be . Michael it we are in discussions with a number of them. I think if you go forward in 5, 10 years time, i think its inevitable that the lower Cost Carriers will be doing a significant amount of shorthaul flying for the legacy carriers a fee basis. On guy when you saw the downing of the metro jet, visit make you rethink your strategy . How do you manage that sort of story . How do you manage airspace that you dont understand . Michael we generally stay out of those markets outside of europe. We dont fly to egypt. Likeot flying anything else, these incidents are rare, but we are well aware of them. We want to get to the bottom of what happened. If any safety issues need to be learned, we in ryanair and the rest of the industry will take account of them. I think its always better to wait until you know what happened before we rush to make immediate judgments. Guy is the nature of the winter sun destination changing . Is their capacity elsewhere that can fill in for that and make the story work . Michael it has been one of the sea changes this year in our summer business. Weve had a summer where everything has gone right. One of the things that didnt go right was very bad weather in northern europe. You had the terrorist attacks in tunisia and egypt. Youve seen a flight of european holidaymakers back to greece, italy, spain, and i think that will continue for another 12 months. We are looking forward to next summers bookings. Very strong bookings into greece, italy, spain, the canaries. People are getting more nervous about north africa and the middle east. The long haul or European Union destinations next summer is very good for our business. Anna thank you for joining us this morning. Good luck. Ceoael oleary, ryanairs joining us, and bloombergs aviation correspondent, Kari Lundgren. Guy rather big stories this morning. Turkish stocks and the lira jumping as erdogans party sweeps back into power. We will be live in istanbul with everything you need to know after this short break. Anna welcome back. You are watching countdown. Guy hsbc has beaten estimates. Costs have declined. Europes largest Bank Reported a gain in thirdquarter profit. It may not announce a decision on its domicile. Anna chinas yuan retreated since his highest level since the valuation as manufacturing is still declining. The official purchasing Managers Index is unchanged at 49. 8 in october. That missed estimates of 50. Guy turkeys Ruling Ak Party has swept back into office. Least 49 ofk at the vote and will regain the parliamentary majority. Stocks have been gaining on the news. Anna some more on that story. Lets get to bloombergs Tom Mackenzie live in istanbul. The markets have been digesting the results. What are the implications of this surprise win for erdogans party . Tom it was a surprise win. The man who has loomed so large over the turkish political scene for the last 13 years did it again. He won the presidency last year. His name wasnt on the ballot yesterday, but no bones about it, he loomed large. His ak party coming up with that 49 win as you said, upping their vote count by around 4. 5 million from june. Those elections saw the ak party lose their majority, forced Coalition Talks that then broke down. Erdogan took yesterdays election. That has paid off. Weve seen the tension in the last few months in turkey. That has got to be addressed. The ceasefire between the government and the kurdish militants has broken down. That was engineered just a few years ago by the ak party. Their critics say theyve been consequential in breaking that truce. Then youve got attacked by what many say are Islamic State bombers that have killed over 130 people. One bombing killing over 100 on its own last month. Then youve got the syrian refugee crisis. Some big challenges for the new government. The economy is slowing to probably around 3 . They have a strong mandate now, the ak party. What is the next that for erdogan . Will he look at changing the constitution to an executive style presidency or wait it out . Those are some of the questions. The market is taking relief. Weve seen the lira rally. Weve seen the stocks go up as well. Is that going to turn into change on the ground . Large reforms are needed. Guy whats next, tom . Tom the constitutional question. In june, president erdogan campaigned on the question of the constitution. They lost that majority. They didnt talk about the constitution in this election. Last night, the Prime Minister came out and said, lets change the constitution for a new turkey. This constitution was written by the military back in the 1980s. Polls suggest that the people here do not want that executive style presidency. Weve got economic questions that need to be tackled. Inflation is rising. Unemployment is rising. Is the Central Bank Going to be under more pressure to keep Interest Rates low . That speaks to a centralization. That is a big concern. Analysts point out that there need to be checks and balances. Already, weve seen pressure on the central bank. Is he going to extend that pressure to other areas . Hes already putting pressure on other sectors in the industry. They would say, his critics, that hes already got his people in power. If we see more of that, what does it mean . Then youve got the political and social questions. Can they get peace talks back on the table with the kurdish militants . Can they resolve some of the issues facing turkey and syria . We know the Islamic State have been going back and forth across the border. Youve got the refugee crisis as well. Theyve fallen out with many allies in the region. Merkel was over here just a few weeks ago promising more aid for turkey in their bid to help with the refugee crisis. International relations going to be key. Everyone watching her to ones next move. Ans next move. Og anna tom, thank you. Tom mackenzie joining us live from istanbul. Guy hermes still with us. What weve got now is this incredible rally. The turkish lira just beginning to run out of steam. Dollar falling, turkish lira going up. We are beginning to bounce. Is that an indication that there might be an overextension . Before, this is probably the shorts being covered. The key here is, if you pick out all the political pontification, what do we do with the economy . That is the real question. Theyve got a strong mandate. They are not ideological about reform. They do want economic reform. It is a tough environment. If they can keep the growth going, they will keep their popularity. They tried to go outside their core competence. Theyve been good stewards of the economy. Lets wait and see if they can keep that going. Anna weve had news on the banking sector. Lets get your thoughts on the greek banking sector. Citi saying they see some selective value in the greek banking sector. What kind of capital requirements, not as much . Exactly right. When we heard about the settlement with the ecb, 5 billion, worst case was 14. 8 billion. The rest can be funded from this money made available. Specific greek banks, im not so sure. Guy if i was a private investor, why would i put money here when i dont understand whether or not the government is going to end up effectively nationalizing these institutions . It is not clear. This is the third capitalization. Guy npls have ballooned out. Absolutely right. This is uncertain stuff. The way i take it is, it is better news for greece as a whole. Anna thank you very much. Our top corporate story this morning, hsbc beating estimates with profit rising 32 . Lets find out how this is playing out in hong kong. Lets go to zeb eckert for the details. as we look at the markets in hong kong, hsbc in focus. Major player across the asian pacific. Shares despite this result not doing well. The hang seng down 1 today. This is how hsbc looks. 0. 7 , trading at 60. 55 hong kong. Earnings are in focus. Asia does generate two thirds of overall revenue for the bank. The thirdofit gain in quarter exceeded estimates. It has seen legal costs following. The organic growth is what analysts are questioning right now. Junet gulliver unveiled in this new treaty to deal with this cost reduction. They have a big target of 290 billion, reducing assets by 290 billion by the end of 2017. The other big issue that investors in this market are watching with respect to hsbc is the domicile. Will they keep the headquarters in london or return to hong kong . Hsbc appointed local pride in hong kong and a major employer in this market. Take a quick look at the stock today. This is on the hang seng. ,eartodate, down about 18 consistent with other financials. Lets look at the other markets in the region. Stocks slipping across the region. We have the latest manufacturing numbers from china. The Government Survey and a private survey weighing on sentiments. Not suggesting strength in the chinese economy, the kind of strength investors would like to see. Manufacturing contracting for a Third Straight month. Shares in shanghai and Southeast Asia moderate decline, with the exception of singapore. Ill leave you with this. Asx 200 in australia falling. That is the play on china given the impact of the slowdown in chinese manufacturing. Anna thank you very much, zeb eckert. While we on the subject of things happening in the Asian Session, nissan raising profit forecasts higher than it previously was. How we will think about they are going to be working that one. I suspect positively. We are 30 minutes until the open in europe. Let me show you the numbers at the getgo. Think, ind 1 , we what the bloomberg terminal is telling us. Looks like we are to get a negative start, pretty similar to asia. Anna manufacturing data later from europe. Weve got the german number, the eurozone number, all those details later in the program. Guy 7 30 in london. A 30 in frankfurt. Here are the stories you need to know. Anna hsbc has beaten estimates. Europes largest Bank Reported a gain and thirdquarter profits. It may not announce its decision on the trial this year. Guy top stories in hong kong. Investors and taxpayers face the cost of repairing the damage of wrangling. Friday tohave until give recapitalization plans. Has turkeys ak party gotten back into power. The group has gotten 49 of the vote. Lira and turkish stocks are gaining on the news. Ryanair that is the view of the thames, the bridge. You cannot see that. You can see some commuters and somebody on the bike, writing across that bridge. Today, i wouldg check before you go to the airport. Half an hour until the start of the European Equity day. Guy lets get you some visibility on the markets. Anna dreadful wordplay, guy. Guy it is negative. We are down around 8 . Percent. Down around a negative start for the week in european equities. A new month and at risk in Global Stock Markets has faded just a little bit. A significant month of equities in october and less until we got the fed news. Caroline . Caroline what a phenomenal amount in terms of market valuation. Uptick in thedden news we might see a rate hike. That was not enough to put down prints across october. You can see how much we added in terms of a global stock valuation, 5 trillion. That is how much we added over course of october. This is a rally of 7. 75 . Phenomenal news when it came to risk. It elevated levels when he came to buying or stock. We will see that it was asia driving some of that demand ther the rap we saw in previous quarter. We see october unwind some of that nervousness. The hang seng was up 11 in october. Clearly, money moving back to chinese stocks. Money moving back into european stocks as well. Up 8 . We saw cars, minors, energy started to pick up. Manufacturersuto doing particular well. Why . The ecb. A hint of stimulus to come, as soon as december. Stimulus coming from china, of course, that Interest Rate cut, really adding to the desire to buy into equities and the money keeps on rolling around the world, even though it seems the United States will start to rain back stimulus as soon as december. Up to 50 that we could see rate hike from the fed and the sever. This Risk Appetite seems to be fading. A downward day on the euro stocks, down. 7 . The dax in particular. Clearly, there is a bit of risk aversion, money moving into the yen. All apart of this emerging market area, turkey. The lira coming off of his highs of its highs. ,he turkish lira bouncing having its biggest rally since 2008. All of that as the ak party sweeping back to powder sweeping back to power. This seems the far less appetite out there today. T is all about Political Risk meanwhile, money moving out of equities and the rest of europe. Back to you. Anna caroline, thank you. Guy lets look about what is been happening with the banks. As we have heard, the ecb says the performing banks have to , that14. 4 billion euros as the quality review adjusted plus out the bank. For investorss asking for more clarity. How much is the government going to end up owning . There are a lot of questions. How many of those are we going to get answers to . Philip in line with market expectations. Greek banks have to raise 4. 4 billion euros. Baselinegoing to be assumptions. News, because the greek banks will not have an 4. 4 theising the remaining 10 billion euros on the 25 understandably, the greeks have much less bailout package and already estimated. The fund said yesterday that it will stop at 10 billion euros under the adverse scenario. The 75 will be through convertible securities. It wont make them feel comfortable to invest into greek banks before the second time in 18 months. Are onemind us where we the debt restructuring story. It is something the imf has been pushing for. There are many voices in your that are not so keen on that conversation. Reminder tois is a greece that debt relief issue. Bank recap was the thing to resolve at the moment. Into er we get [indiscernible] the issue with the imf here is they say we dont want general reassurance that these will be tackled, we need a strict plan on how risk will get on how greece will get that relief. Problemwould not have a on a cut on the nominal debt of greece. Europe zone peers euro zone peers say lowering Interest Rates is what we can see, but st has to take the ball but first greece has to take the ball out of its court. Always a pleasure. Thank you very much. , hsbcstaying with banks reported a jump. Great to have you with us, what did you make of the numbers . They benefited from they do not have to pay so many fines. Give us the true picture, david. David good morning. I think the results are remarkable, because we are a 4. 4 in spite of reduction. An increase of 33 on the Compliance Costs which is now 2. 2 billion. Also, the reduction in operating costs which are now at 19 lower. We see a strategy here which started some time ago. It is an fruition because of this investment and compliance. Also bigger costs. I see these as very positive results because of the realignment to the core areas where the banks want to grow. Dismissing of some of the units like in bermuda and also in reduction in brazil. Acalibration of business has very positive strategic outlook for the business. A Good Development in spite of very difficult times in asia which accounts for a big chunk of earnings. Despite this reduction, we have better than expected results due to lower legal costs. Guy why they delayed the decision on when they are going to give an announcement on whether this on where this bank is going to be domiciled . Do you think they have second thoughts about moving to hong kong . Do you think theys end up staying in london do you think based d think they and up staying in london . Forget thes not situation in hong kong might change in terms of autonomy many years down the road. It is something they have to take into account with such an important business. This selfimposed deadline at the end of the year. I think the u. S. Is something which should be in the cards. I would rather they stay in the u. K. Which would be more beneficial, because and move to the u. S. Will accrue a lot of costs. It is not sure. What is probably going to happen is some units as we have seen in the derivative business will be moving. Derivatives will be moving from , saving to hong kong costs with Compliance Costs and etc. Theyre going to move more of the business in hong kong. That move will create certain uncertainty for investors which they are trying to avoid at the states. Anna when you look at the european banking scene, we heard a number of voices pointing out so many of the investment banks in europe are retrenching, going reducing and getting away from areas of the business they dont think are profitable. Is there an opportunity for someone here in europe . Do we leave it to the americans . How does it shape up . David absolutely. As the banking business goes, it creates opportunity for other banks that want to be in the sum market which may be at the moment, does not look attractive. Down the road, when the profits come back, it they will be much more interesting. At the moment, there are opportunities. I see opportunities for investors to enter a lot of banks which are out of fashion at the states, but as we have seen in cases like with hbc banking isestment not attractive to many bank many players. It leaves space in the market for players who want to reconsolidate their business there. Guy david, nice to see you. David costa, thank you for joining us. Ryanair reported a big jump this morning. Where would you crunch the numbers next on countdown. Anna welcome back. You are watching countdown. Here are the stories need to know. Guy hsbc has been estimates. A 32 gain and corporate profits. It may not announce his decision this year. Maybe next year. Stocks trade a little softer in hong kong. Yuan retreated to its thats still declining and the worlds secondlargest economy. Estimates from a rating at 50 and mark a Third Straight month of contraction. Is set for your earnings will be at the top end at the forecast range. Anna for a closer look of those numbers of ryanair, current i had a comes issue with Michael Oleary. What you make . That ryanairaying will be the fasting growing airline in the world this winter. I think that gives you a sense of what this winter is going to be like. Theres a lot of growth coming from ryanair, lower fuel prices. Battleground,be a but ryanair seems quite confident. Guy theres going to be a lot of capacity coming on. That is there because of the Lower Oil Price and it is going to get competitive. Ryanair says it is looking for to that. What is it going to do to the how much visibility do we actually have. Fuel costs will be down but can they keep the other cost down . Labor cost . Airport cost . One question i was asking michael was, are you going to be able to continue to drive the passenger numbers and away you created markets in the past by going into these airports . People said maybe i can buy maybe i can fly somewhere over the weekend. Are they going to be able to do the same thing at primary airports . Tosaid if youre going primary airport and offering a significantly lower fair, maybe they will reconsider that. That is going to be the key to the ryanair story because they have been so good at it in the past, creating a market out of nowhere. Anna Michael Oleary try to say and suggest it wasnt going to matter that much to the business. And what they think about brexit no question about what they think about brexit. Kari people continue flying. Theyre wanting to be going on holiday. Keen to get their break. Thats why they call it easyjet. ,eople going to Canary Islands and i dont think that is good to change. Weather still stinks. He buys planes from boeing. He buys jet fuel. This is what he had to say about the story surrounding the euro. We are in a very luxurious position. A strong position. Ultimately, the weak euro is probably a negative for European Airlines because of so many of our costs are in dollars. We are well insulated for the next three years. We would like to see the euro recover somewhat. He dollar weakene we are friendly not that worried. Anna from a man who always says we always get it wrong. Kari 90 hedge they have around that. The european headlines hover around 70 . Carriers like norwegian for example. They are taking advantage of that in 2017. Interesting in a year when they were hedging at 90 at significant he hire prices and theyre still making a pretty good profit. Guy you talk about creating new markets. Marketing kenny describes the business coming out of them. Ryanair . Ou think about maybe michael is not the right person talk about this. Where do these guys see this airline going alternately . Kari a lot of carriers are thinking about this. Think about the amount of information you get in terms of travel trends, where people are going, how they want to travel, what they want to buy when they are flying. I think there are places they want to think about taking advantage of that. Even the legs it even the legacy carriers are thinking about that. But about shopping . Could she have somebody shopping in flight and when they arrived at the airport, they have their toilet paper and house items they need after two weeks away . There are opportunities like that. In terms of moving around the airport and easyjet has been , leavingbals trials messages on your apple watch saying you have 10 minutes to board. Things to think about. Anna he says they were late on the data, but it is clearly a focus for them now. Guy a quick look at what is happening it this is what is happening with the turkish lira. We did see a bounce. The turkish lira strengthening. We are seeing that run out of steam a little bit. Maybe Short Covering coming through their. The fair valley calculation of the terminal which is weekend a little. Percent. Wn around a london looks like it is good to fare better maybe. It looks like we are good see a negative start to the new month. We are into november. October is done. That was great. We are starting off in november on a negative note. It is interesting that the Asian Session was as negative as it was. The nikkei down 2 . We had two readings of the manufacturing situation in china. One was exactly the same as the previous month. The other one was better than estimates. When you look at china, theres a stabilization picture. Guy plenty of data. The data are going to be interesting this week. The payroll data friday. Stay, weve got a whole bunch of out around europe. Pay attention to that. I am sure mario draghi will be there on thursday. Anna we get the we get the german data. Thats coming up in 50 minutes time. We did the eurozone number later after that. In terms of stocks to watch, there attempts to get their hands on Ge Appliances in the United States. The case was rejected by the u. S. Courts. Keep an eye on that stock. It has been a busy monday morning. Cap on the move is up next. See tomorrow. Jonathan good morning and welcome to on the move. Ferro here in the city of london. Moments away from the start of european trading. Thats get straight to your morning brief. Contraction continues it china signals that manufacturing has not bottomed out. Single party rules. The ak party sweeps back into party desk swings back in the power. The turkish lira surges. Hsbc reports a bigger than expected 52 jump in profit. A decision on its headquarters may not come until next year. That is what we are watching. European markets moments from opening. Futures markets little bit lower. But the futures test ftse futures down. Caroline almost 10 seconds and and we are going to be saying how the market opens after 5 trillion worth of market violation was added to global stocks in october. It looks like Risk Appetite not quite so hot as we enter into november. Ftse 100 just and the negative as we are opening up. We are expecting a downward day across european equities. What helped to boost equities in october, the fact that the ecb was hinting at stimulus. China perched on the pedal when it came to stimulus. Maybe now raining that back in thee wait for payrolls at end of this week. U. S. Data on unemployment. How much will that add fuel to the fire . We could see a rate hike s s december. 50 probability