Transcripts For BLOOMBERG Countdown 20160413

Manus i am manus cranny. Anna anna edwards. Just past 6 00 here in london. Let us get straight to the correlation between oil. We talked about it many times, reaching new levels we have not seen since 2013. Manus just in the morning, 120day relationship between the stocks and wti. And this all comes on the back of russia, starting to get ready for potentially agreeing, as we take the road to go. This morning overall, you think about the real drivers in the fed, but is it oil price . with plenty of rhetoric from the russian side surrounding what can be achieved, even if we do not have the cooperation of the iranians, just to keep track of the price right now, that is something that drove the price higher yesterday. Cents, reporting an agreement between the russians and saudis, it could be done. And we have this other commentary from the kremlin press secretary, and the saudis building something. What exactly do we do not know yet. Manus depends on what we get. As far as the market, up 30 since the original freeze back in february. Let us translate this, currency and equities all moving through the markets. Top of the pops, the shanghai composite. Oil is taking a breaak. And it was Energy Companies driving the rally. Anna export numbers out of china key, the aussie doll picking up on the export dollar, up by 2 10 of 1 . Intervention is futile, weakening the limits. We have a representative from goldman later in the show. Being spent on intervention thus far, as we go to g20 though, what are the new rules of engagement in fx wars . Anna let us get the bloomberg first word news. Joining us from hong kong. Good morning. The brazilian Vice President says he will form a transitional government, as Dilma Rousseff sharpens acquisitions. With a crucial Impeachment Vote looming on sunday, he plans to spend early political capital. That is according to an aide involved in drafting the strategy. Some of britains biggest continental trading partners voice their support for David Camerons bid to stay in the union. The Prime Minister met with germany, france, spain, and the netherlands. Connected and Driverless Cars could be targets for hackers, including terrorists and hostile nations, according to a top u. S. Justice official. Industryotive must provide protection for burgeoning cars protected to the internet. By 2025. 42 billion if you want to earn more money, and helps to have a man with rich parents schooled in the london of economics. A study of some 60,000 british graduates after leaving university, the gap in annual earnings between the wealthy and backgroundsroere made more money for men and women. Global news powered by 2400 journalists in 150 bureaus around the world. More on top if you are indeed a terminal user. Back to you. Manus thank you very much. Let us check out how the markets are reacting. Juliet sally is standing by. We have the chinese stock Story Building relief. Juliette absolutely relief. Good morning to you. Look at this picture in asia today. We are seeing widespread buying coming through, really led by producers. And raw Commodity Prices but also better than expected export number coming throughout china today. Also missing sentiment. And most of the currencies across the region of the japanese yen reporting the nikkei 225. And in china, coming out of the lunch break from the shanghai composite holding on to the early session gains come up by 2. 2 . This is actually a threemonth high for the shanghai composite. You see they had the daily limit. Grapevine coming through in australia on the back of the rally, in the commodity players. We do have markets in korea and also thailand closed today. But they are seeing solid gains here in hong kong, you see that is only one out of the 50 stocks on the hang seng index in negative territory. Reallyl producers driving the gains. The original benchmark index, every sector higher. It is the highest level in three months. This is a sixth session of gain from the longest winning streak we have seen on this index since october of last year. Basic materials and oil and gas, as i was saying, really above the major winners. Having a look at some of the other movers we are looking at. The metal group of australia up i 8 in late trade. Fourthquarter output being point 8ion of 41 million tons, and the index in japan another one of those solid oil producer movements that weve seen across the region today. Anna thank you very much. Exportget to chinas story come at the top of the show, news that exports rebounded to rise by 11. 5 in march. Compared to the 25 slump in february. Our beijing chief joins us. Nick, the numbers look pretty positive them. Is this a case of the chinese economy recovering better than anticipated or Something Else going on . Couple think there are a of things happening here. One is that in the early months of the year, it is very difficult to read this data because of seasonal issues. Whichinese lunar holiday, varies from year to year, really throws a wrench in the works. You mentioned last months number was down so much, that is really impart because of seasonal affects connected to the nadir. Punitiveok at numbers and we saw that exports are down 4 . The looking at sentiment, we saw the data consistently beating forecasts from economists. That marks a change from last year, when we saw it was constantly surprising the downside. Bad news, worse than people expected. So sentiment does seem to be changing, it does seem like the data coming in these days is better than expected. Better news for the chinese economy heading into the year. Manus let us talk about what comes next in terms of stimulus. You get this basic moderation of the numbers. Is this the opportune time for the bank to go with more reserve cuts, to perhaps consider some fiscal latitude or push for them . Nick i think sure. In terms of seeing sentiment and in our read of what the government is doing, they do seem to be looking anna looks like we have a problem with our line today. Nick wadhams, our beijing bureau chief. That leads to our nextdoor a. Manus it does indeed. For the worlds secondlargest economy. That was yesterday. A warning same time, of prolonged Global Growth slowing. Anna the chief economist spoke saidoombergs david gura, he is supporting negative rates. Negativenow, we see rates supporting aggregate. Demand supporting expectations of deflation at bay. So for us, that is a big positive. Manus he also told bloomberg of the u. S. Federal reserve was decisionmaking this on a data dependency basis. Yesterday, the fed president echoed Janet Yellens call for a slower approach. But it was richmond who argued in favor of a tightening. My own view is that the mediumterm u. S. Outlook is not change materially since december. If anything, inflation seems to be turning to our 2 goal some much more rapidly than we anticipated. As result my sense is that the less leisure leap, was still gradual rates they submitted at yearend, strikes me as more likely to be appropriate. Anna lets bring our first guest of the morning, Patrick Armstrong, managing partner. Joins us on set this morning. Good morning to you. Let us start with the big picture. The imf downgrading the global outlook, many bad news stories ahead of all of these Washington Spring meetings. How much of what they said chimes with your view . Patrick they have lowered the forecast by the u. K. , below 2 . The eurozone at 1. 5 . Aey upgraded china, a bit of surprise to some. That is where we are right now, growth with sub 3 globally. Right around that level, 2 in the developed world. It is not spectacular but it is a halffull depending on your view. Online with historical averages. Manus glass half full. Fairly good form. And because i see news coming from russia, our chart that anna and i chose this morning is the 120day correlation between wti and msci equity. Owned, this under relationship matters. Do you believe in this relationship and where are we in the oil story . Patrick if oil prices are plummeting, i think some people are taking the narrative that oil prices are weaker because Economic Growth is so slow. I do not agree with that. World oil demand is 95 Million Barrels a day. Supply is 97 Million Barrels a day. The outlook on Economic Growth, it is more production than demand. And when it does get rid of the tail risk, any spike even after worry about contagion and effects reading a financial crisis. We are seeing the Stronger Oil Prices getting rid of them, some Economic Impact getting rid of those tail risks. Anna it is interesting correlation, for many when we started to see the oil price fall, a lot of people said this is going to be a boost to the consumer. Some panetta that is positive for western markets. That is not turned out to be such a correlation. Patrick the u. S. Savings rate is high, and for the first time in years, when they get the tax cut or lower price, they have spent that. They eventually say that, so you do not have the immediate impact. Manus economists are relying on we did before. It has never been a shock. There is nobody alive trading, buying that has lived through the great depression. Patrick that is a good point, i suppose. Maybe people are preparing for the next depression. Manus i have been banging this drum for quite some time. The psychology has completely changed in terms of how we react. Patrick consumption will come through. There is been a delayed effect. But if you will get more money in the savings accounts, that will come through. I dont think we are in a structurally higher savings environment. Anna we will eventually move on from the crisis. Has saidse premier recently that there is a lot of improvement in Economic Indicators in the First Quarter. And the imf actually upgraded the forecast for china. A lot of the nervousness in markets, certainly in autumn of last year and spring of this r, seem to come through starting with concerns about the chinese growth story. Does this harold something more positive . Patrick china is not to be getting well what theyre doing. That is greater a lot of problems, when they devalue the currency in august, that symbols a hard landing read that was not the case, it is not communicat ed. We have come around the corner march manufacturing is up showing expansion. The signs of china being a hard landing of think numeral them out now. It is not on a real sustained, robust growth, we have difficulty getting rid of overcapacity. What i think the contagion risks about a knock on the western world, you can roll those out at this point. In terms of 3 trillion worth of reserves. Manus the finance ministers speaking at one of the main italian newspapers talking about the bank, i misspoke there completely. The helping hand or the backstop of the bank, the rescue funds sees ity the ecb favorably. There is no risk of any bank fund by the eu or the ecb, possible. Momentsone of the big in the european story. Best people are concerned about the Systemic Risk from italy. Naturally, mario draghi is going to be favorable of his own country. Is this a significant move for italy . Patrick it is almost immaterial, the size versus the bad loans in the banks. That is the ratio, exactly. Difficult to say it is huge. But it might create a positive view that at least they are doing something, anything is a positive. The ecb has a lot of policies in place now. They are very favorable to banks, not necessarily on earnings but on capitalization, where they can borrow less than zero. That is what people should get the confidence in the banks, not from the new italian measure. Anna we returned to the banking theme through the day. And it features on our radar for what is happening later on today. Manus we will get the annual biggestfor the 12month loss they ever posted. At the same time, sweden is going to release its revised budget for the year. Anna at 10 00 u. K. Time, eurozone industrial production. And the bank story, jpmorgan kicking off earnings season for the big wall street banks. We will have a preview of what to expect for the banking sector. Just how bad will this round of Bank Earnings be . We will look ahead . Anna welcome back. Hongng at a live shot of kong early afternoon in that part of the world. The hang seng up by 2. 5 , boosting many equity markets in china. It is 6 20 in london. Let us talk banks. Manus jpmorgan will be the first wall street bank to reveal the impact of the turmoil, announcing firstquarter earnings. Expecting 25 drop in Investment Banking revenue. U. K. Finance, Michael Moore joins us to discuss earnings season. Very good to see you. Set to be a pretty dismal quarter. I am not sure that is the work, i gadfly piece that is a deathointing, dreadful words you can apply. Lot of there is a things working against the banks right now. You know, not just the market turmoil that we have seen both in the trading and Investment Banking side. But also you have the energy issues. You know, banks have added to the reserves for those energy loans over the last year. And a lot of Analysts Expect that to continue in the First Quarter. You had Interest Rates, the yieldcurve kind of flattening. That may have put pressure as well. And you have markets being down. Wealth andpacts Asset Management businesses as well. So there is a lot of headwind for the banks this quarter. Manus there is also a credibility of strategy in terms of pressure, some shocking news from credit suisse, not aware of the risk that has been heaped on the bank. Just trying to convince the market he has a hand on it. And you have the aboutface at Deutsche Bank, real pressure. What story are they going to want us to focus on . Michael focus on what they can control, typically the cost. Showing that cost down. Even if the healthier banks, like a jpmorgan, there is a lot of pressure to show some progress on cost because there are 70 things they cannot control right now. The banks are under pressure even before the market volatility, because there are these existential questions of, can they boost returns in this environment . Get back to a normal operating environment . And then you have volatility on top of that, really adding another layer. Anna patrick, when you look at the banking sector, the headwinds and the outlook for the First Quarter, fallen by about half year on year. Bond issue are down. Mergers at 80 . This was not a quarter filled with a lot of confidence in those areas. Patrick with negative Interest Rates compounding all those things, a very difficult environment to make profit. You cannot maintain a previous levels. Investment banks, everything there, that has been a particularly tough quarter for them. A lot of the investment heavy banks are really suffering. Manus we have a great piece on the terminal this morning, pimco Wells Capital says to get ready. We have a graphic for you, the return on bank bonds. 2015, let us check it out there in the return was on the bank bonds, probability is what to be a pressure. But this could be, this could be the one trade that sort of comes through, according to Wells Capital. Along with pimco, they are buying notes issued. When it comes to equity and debt, where would you prefer to be positioned . Buying we have been debt from Deutsche Bank to we think the european banks are much better capitalized than they were in 2008, but the imminent financial crisis is not really there. The Economic Outlook is reasonable. We think the earnings environment is difficult, but we see steady deposit growth below levels. They have a higher equity cushion, and they have the next four years, all of that should make a default on a bank a very, very low risk of it. Where you are getting a percent yields on some of european banks right now on the debt. Anna interesting to compare the equity versus the debt. You both mentioned the Interest Rate environment, how tough that has been making things for the banking sector. Michael, anything brighter on the horizon, given at the start of the quarter, maybe not talk about Interest Rates in the quarter as much as we are now. But depending on which week we are in, whether the wind is blowing in a dovish or hawk fashion, where does the curve take us into the future . Any brightness in bank, looking ahead to say things are going to get easier . Michael i think that is what analysts are hoping for, some commentary going forward. Certainly, with negative Interest Rates in europe, ahead when looking like we were on a somewhat better path in the u. S. Perhaps that is going to be delayed. But back to your point on the bonds, everything regulars have done recently has served to limit the downside and limit the upside. And that would seem to benefit a bondholder more than a shareholder. Manus the whole value destruction in the First Quarter was about negative rates. We have headlines coming across the bloomberg, anna, in terms of the japanese side of the equation. Cannot say that there are no side effects of negative rates. Course Board Members of this is the debate. This destruction in terms of return on equity and delay impossibility. That was the message that came through from the ceos that i spoke to. Michael the earnings outlook you cannot expect earnings to be bound with negative Interest Rates. We have a big rebound, do not expect Investment Banking to turn a corner quickly. I think the way to play them, if you have to, allow european banks to trade at tangible book value street and short canadian banks. Much more extensive, have all of the risks of oil and metals and mining. Anna patrick stays with us. Michael moore with the latest on the banking story. Manus up next, a jarring cut for japan. F is the outlook for the thirdlargest economy. We have a chat with Goldman Sachs chief economist for the region. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. Manus 6 30 in london. 1 30 in new york. Let us the first word news. 1 30 in hong kong. Exports jumping the most, adding stabilization in what is the worlds biggest that secondbiggest economy i should say. March,11. 5 from compared to the 25 slump in february. That is the weeklong closing for the lunar holiday. Iszils Vice President forming a transitional government, as Dilma Rousseff sharpens accusations that he is the mastermind of the crucial Impeachment Vote. Looming on sunday, he plans to spend early clinical capital on reforms that will stem the worst recession in modern history. That is according to an aide involved in drafting the strategy. Business groups from some of the biggest constitutional trading partners voiced support for David Camerons head to stay inside the european union. The Prime Minister will need to employ groups from germany, spain, and the netherlands, and heads of businesses, including the likes of siemens and loreal. Driverless cars could be targets for hackers and hostile nations. That is according to a top u. S. Justice department official. Says the Automotive Industry must ensure the vehicles are built inside a protection. Expansion isoning inspected to be valued at about 42 billion by 2025. Global news 24 hours a day powered by 2400 journalists located in some 150 bureaus around the world. Back to you in london. Anna thank you very much. Let us check with the market is doing. Nejra has it. Wti to the highest level in four months after reports that saudi arabia and russia had reached a consensus on output freeze. U. S. Crude settled above the 200day moving average for the First Time Since july 2014, closing at 42 a barrel. 42, back below that retreating ahead of u. S. Government supplied data. Looking like it is Still Holding to that average. Even though we are seeing oil retreated a, it is still driving gains in asia. If you look at the asiapacific index, it is Energy Shares leading the rally. Back on the longest winning streak since october 2015, at a threemonth high. We see japanese stocks rise, chinese stocks also within a threemonth high after data showed of course that the exports jumped the most in a year, beating estimates. Now also that data has been driving the aussie dollar higher, falling back a bit now. But it was climbing towards a ninemonth high, rising along with the new zealand dollar. Both of those countries to count china as their biggest trading partner. Weakening, and the story is the 17month high. He isllar this week, saying that the currency will hit 100 by year end. But intervention is in a minority, because the median is for the yen to infect weaken to 118 for dollar by year end. Here is interesting fact for you. If you look at the function, you can see that according to a bloomberg measure of purchasing power parity based on an super recent rate iss still undervalued, undervalued in fact by about 22 . Anna, manus . Manus with tesco reporting in 30 minutes, we have a chart of the hour. Guy i pinched this from charles allen, to be honest. Manus naughty, naughty. Guy this is a chart that kind of one is half of an hour away from tesco. The other is the inflation thing that im hearing more about. This chart is u. K. Fresh food inflation, the white line. Two, kindue line, the of an inflation gauge. The u. K. Market of inflation, it is a big part of it manus 2 . Guy the yellow line is sterling. And as a result of which, this is an important metric. Basically as you can see, they are fairly correlated over the last year. This is i think five years. And you see the correlation. But as you can see, we have broken the correlation over the last beginning since 2016. The question is, does this start to record late . Does inflation go higher . As we start to import more of our food, grow less of it here. Back to be an inflationary push later this year. Becausegood for tesco, negative inflation is bad for tesco. You want inflation to come back into the system, and that means they have more pricing power. As result of which, that can be a positive impact later on this year. Somebody to look forward and extrapolate to. Manus we have charles coming in. No, not at all. We have another target. That im sort of horrified. I go to all shopping. Guy really . Anna not located near your house. Guy johnson will be back in just under an hour. The imf has cut japan in half, seeing the economy shrinking in 2017 because of the stronger yen and increase in sales tax. Tokyo isining us from kathy matsui, chief strategist at Goldman Sachs. Great to see you again. Last time we got together we talked about womenonimcs. People are really suspicious of this. Messagewhat mr. Abes was. It seems to be faltering. Are you still a buyer . So, i think it depends on the definition for each individual. In my book, it is about sustainable growth, sustainable inflation. And while we have some success and some progress on both fronts in the first three years, and a bit on the abenomics agenda, things suggest we are presently stalling. You saw the imf projections, pretty much in line with what we are seeing. It is clear the pressure is on to come up with additional measures to stimulate and sustain the economy on its growth path. And reach higher inflation. Anna kathy, i read a story on the bloomberg terminal this morning that suggested tokyo is what fiscal study list might look like on the japanese. Any suggestions as to what we might hear . Kathy correct. Clearly, there is a lot of discussion right now. Both on the monetary and fiscal fronts, and as you rightly point out, the government is scribbling to come up with measures that will stimulate Economic Growth, stimulate domestic demand in particular. There are numbers ranging from 5 trillion to 10 trillion, more than double the size of the last fiscal package that japan in limited. There is a lot of discussion planabout the second hike, for next year. Whether to go through with it or whether to postpone it. But not only will he get some more fiscal stimulus coming through the pipeline, the most likely depend will decide to delay that second tax hike. Which is probably going to be welcomed, at least by the stock market. Manus kathy can we have a great story. The big market focus has been on the yen, the appreciation. Almost virtually ignoring negative rates. In terms of the currency position, is supposed to that end, the speculation is about intervention. The you think it would have any impact . On the run up to the g20, it looks like the door is closing. Do you agree . And what should they do . Is intervention futile . Well, personally i think be very difficult to conduct for japan. Lateral intervention in the fx market is obviously so much depending on factors the on their control. I think the monetary side with the bank of japan may augment what they are currently doing. May cut Interest Rates even further. Possible timing of april and june, and it may also augment their asset purchase program, particularly in the purchase but in terms of out right intervention, that is politically very difficult in the current environment, and as you point out the question is will it actually work . Is twoend of the day, fx sides of one point. If you push on one side and the fundamentals on the other side are not in the same direction, those efforts could end up being futile. I think that is a pretty long stretch to imagine they could go as far as doing that. Having said that, the world is an uncertain place. And we need to see what transpires. You know that japan is hosting the g20 in a few weeks of the end of may. That is another reason politically it will be very challenging for japan the kind of go down that path. Instead, like i mentioned the money will probably push on both ae fiscal and monetary levers little bit harder to get the numbers improving. At the same time, it was not just about cyclical demand. It is about structural reform, demographic change, corporate governments. That kathy, you mentioned the rates could go lower from the boj in the short to medium term. It sounds like, just how low can they go . Kathy it is hard to say. But clearly, governor kuroda has been referencing the examples you see in europe. Our call right now as they can go from 0. 1 to 0. 3. I think going much further beyond that is probably rather tricky, given the implications obviously for the Financial System here. But in terms of the messaging that we need to do more, to try to strive for our inflation targets, so the campaign will continue for the foreseeable future. Metas kathy, one of the most wellknown pieces that you write about is womenomics. 66 of theour notes, japanese female population is now working. That tops the united states. My question to you, help us understand the quality of that 66 do, ift more should abe you have a sitdown meeting of a what is he have to do to make higherquality 66 . Kathy a couple of things. Number one, the composition of those jobs that women have been taking up more recently are mainly parttime or temporary jobs. So really, improve the quality of what they are doing. He needs to limit rules that really enforce equal pay for equal work. And there are discussions on that front, but they need to move along faster. Number two, exactly eight or nine days ago to panic and lamented a law whereby you have more than 300 employees you have to disclose gender diversity targets and action plans to meet those goals. And i think the beginning steps for all of these changes are transparency and disclosure. And i think if you are not able to come up with ambitious targets, it will be very difficult to recruit in this very laborshortage and played market were in. Still obviously a lot more work to do. We are getting the numbers up at the mass level. The competition of the jobs need to improve. More importantly, we need more diverse presentation and leadership making positions. But let us start with the hopefullye, moving the needle further along. Manus thank you very much, kathy matsui from tokyo. Anna up next, return the topic of tesco, set to announce annual earnings a year on from the biggest loss. Optimistic this time around . Ind out why. Anna welcome back. 6 46 in london. 1 46 in new york. That is where we find the Bloomberg Business flash. J yes, take a look at 5 of the jobs in the asiapacific Wealth Management unit. Refocusing staff on serving clients with higher investment threshold. That is according to a person familiar with all this. Jobs this week0 expected to be involved. Mostly relationship managers based in hong kong and singapore. The bank did announce firstquarter earnings this morning. That is at 11 45 u. K. Time. Deutsche banks derivative business follows a slump in that unit sales, according to people who know about it. Coce is tryingp ceo is trying to reduce the reliance on trading debt. Pressure from bondholders to file the delayed financials. The partners and notify the company that they plan to issue a notice of default against them. Result int will not the deceleration of any indebtedness. The company reiterated that it is on schedule to file on a per for april 29. Facebook Ceo Mark Zuckerberg outlined a 10 year plan for the company at the end will develop er conference. Intelligence bots will do everything from sports updates to car service. People interacting with virtual places and objects, instead of actually buying them or traveling in real life. One of the things we think about, as physical objects today like a tv for displaying an image, there will actually be one dollar apps in the app store. So, it is going to take a long time to make this work. But this is the vision, and this is what we are trying to get to the next 10 years. And that is your Bloomberg Business flash. Anna and manus . Publishesco is due to their fullyear results in about 10 minutes, and the company has been focusing on Sales Recovery over profits. What can we expect . Anna trolls allen, retail iselligence, tesco a difficult period, charles. Why are analysts so optimistic this time around . Charles sales and u. K. As stabilized. We see volume growth for about 12 months, and we had a sales growth over christmas, we expect that to continue for the whole and into the following financial year. Myselfanna, guy, and pitched one of your nice charts. Talking about food deflation and a rising eurosterling. This is good news contextually for the eurosterling trade in terms of where we buy our food and Food Ingredients from europe. This could set up a nice little boost for mr. Lewis going in the back half. Charles i think the deflation part of it has been their own fault because they had to bring prices down to match aldi. The part of it has been the strength of sterling, reducing prices particularly fresh prices. And with the changing exchange rate, we could see people starting to buy food from spain again. And prices are to go up again. Which makes things a bit easier for supermarkets. Anna let us pause to talk about what is happening in the oil space. We have interesting commentary coming through here. Representative from the Iranian Oil Ministry will not attend the talks today at doha. Set to take place on sunday, but that is follows of the wesley by the representative to attend the talks. Reading the oil prices, why we iran will not be entirely absent. Manus levy me just pull of this. I prepared this earlier. This is about the society in russia, coming together. Restricting at about 42 a barrel, this is the iranian production chart. The most since 2012, the issue, what level do you set the freeze potentially at . January of february levels . Most of opec is producing at maximum capacity. That is deadly a shifting price of oil. On the bottom of the screen, 1. 4 . Before the news broke. Anna that is where we are on wti. Charles allen, retail analyst at bloomberg intelligence. Of severe warning damage to the world economy, if britain leaves the european union. Told reporters in washington that a vote to leave the eu would pose a major challenge. Maurice it is obvious that there is a lot of uncertainty at the moment about what will happen in june, that it is weighing on confidence and investment in the u. K. A brexit vote would lead to a twoyear process of renegotiation, in which it seems unlikely that we cannot presuppose what happenes but s access to the eu would not change. As with a big effect on the u. K. , on the european partners. In fact, on countries more globally, who are more integrated into the current set of arrangements. Meanwhile, David Cameron will meet employer groups from the u. K. , germany, france, spain, and the netherlands. As well as the heads of businesses, including siemens and loreal. Manus glynis bring patrick back into the conversation. The daily dose of brexit. Yesterday, i had a conversation with the gas. Takeed him, how would you the risk without trading the pound. Patrick shorting risk assets, so many beneficial, you may get a muted effect. Imilarly in u. K. Property, think it will attract Foreign Investors into u. K. Property. So the pound is the cleanest way to do it. Anna another question about how the bond market would respond . One persons safe haven look like a risky asset. Patrick you will see shortterm, the misery index, contracting due to imported inflation from a weaker currency. Manus we know it is incredibly spiked in sterling. Im trying to find other ways of looking at the market. We what we are seeing here, woke up on the 24th and decided to stay. You will see a high price in sterling against the dollar, banging higher in terms of the euro. But what we have got here, i just want to get your take on this is the risk reversal for threemonth, six of a month, and one year. They are all saying do not expect some magical read buying. In terms of if we wake up on the 24th of the net cause will be to have your self, rising by nearly five percentage points. Tot is the most expensive hedge yourself since 2003. The market is saying even in three months, there is still be no necessarily huge bounce in this market if we stay we are in. Patrick i think sterling will bounce. There are a lot of trades hedging the risk. Not speculating, but against that, if the vote happens that i think you will see those unwound. Anna this is perhaps a political question patrick, you have to make a judgment on it. When we see the referendum announced, questions are answered. But often, people do not move on. We enter the series of neverending referendums. Is it some and that will weigh on the u. K. And the growth story . Even if we do vote to stay . Getick i think if we stay, back to the status quo environment, all that uncertainty will disappear. The risk is a volatility, the twoyear risk for the economy. I think if the stay vote happens, we move on from this. Manus Patrick Armstrong there. Up next, we will talk the bright spot. Yes the but there was one in the imf report. Anna you have to dig down. The worlds secondlargest economy see the biggest jump in exports in over a year. That is something to talk about. But we will also bring you numbers from tesco. We have chief executive david lewis. But record losses, how much has the business moved on . Manus we have a set of reports that the Iran Oil Minister is not set to attend the doha talks. 41. 57, down 1 and tesco and sweden, at the top of the hour. Manus china come back. ,xports jump the most in a year boosting the worlds secondlargest economy ahead of fridays gdp figures. Stock markets rally on the newsgroup oil off the boil. Crude oil retreats amid reports that irans oil minister will not attend the production meeting in doha. And the imf warns that a brexit could cause Severe Damage to the world economy. David cameron gets the backing of business groups. Manus you are welcome to countdown. To the very warm welcome program. Manus is going to talk about the oil price in just a second. We have been experimenting with this for a while and getting some insight into the budget out of sweden. Some lets give you breaking headlines. The swedish government says that. 9 in 2016. By of course, this is an economy that is running hot. That is the point here. Record low Interest Rates. The inflation story is gathering pace in sweden. The government sees growth at 3. 8 . In december, they said it was going to be 3. 1 . That is a little bit lower than nordea had estimated. Said. 9 er, they growth. They are upping the growth forecast. Sees 2017 gdp of 2. 2 overall. Again, a little bit of a variety of takes here. The deficit, lets talk about the deficit. The swiss government sees a 2017 budget deficit. Plus. 7 of gdp. This year, it is going to be a. 4 . It of negative again, a great deal of deliberation in terms of what happens. How much tolerance is there from the swiss grip bank . You have the economy that is growing and a real resurgence in terms of the currency. Will they allow that to continue . Those are the top lines. Anna lets get to tesco. The uks largest retailer contending like many others in the price war we have seen affecting the grocery sector in the u. K. Fullyear operating profit has come in at 944 Million Pounds. That is just ahead of the estimate from analysts, 936 million. They are talking optimistically about profitability. They say there will be improvement in profitability pace. Improvement will be in the first half of the year, they say. They will also see a reduction in debt levels. This is a company that still has a junk credit rating. Looking out for any comments about how quickly they want to get that debt level down. They have ruled out major divestments to help curb the debt level after september, when disposalthe 4 billion of korean operations. Yesterday, we heard about a disposal of a small stake in an ecommerce business to alibaba. Be quizzed team will on the types of businesses in the u. K. That they could be tempted to sell if they turn their attention to that side of things. The number on operating profit better than estimated for tesco. Manus lets talk about futures. We had a nice, brisk march to the upside. London up. 8 . Over 1. 2 . A variety of things at play. Talking abouted patience. Chinese exports rising the most in 18 months. Is china stabilizing . Oil, where do we go with the yin story . G and yang the relationship between equities and oil. 6na the ftse 100 closed at 142 last evening. It finally made up its declined the its decline. Lets talk about oil. Irans oil minister is a pair the is apparently not. Ttending the meeting in doha he is sending a representative instead. How relevant is this . From joins us this morning seneca investment management. We will get your thoughts in just a moment. How relevant is this news . Whether he shows up in doha is completely irrelevant. The conversations have taken place amongst the opec members. The iranian position is the one that has not changed, which is we will not join acap until we get production back to levels that they were presanctions. Unless he wants some air miles, all he is going to do is sit in the room and listen. Iran is not going to do it. Manus this is a graphical representation of where we are in terms of production. Ryan they are not there yet. That is what the graph shows you. Manus the other story was what levels do you use at this meeting in doha . Everybody has a group hug. The idea was february production levels would allow iran to continue to produce and participate. Of around this level of where they saw february production. The groupiely does to accommodate iran, the group needs to accommodate iraq, which is pumping at record levels. They need to come out with some nice, fancy language that allows iraq to keep pumping like there is no tomorrow. This is the thing. The expectation is that there is going to be some kind of deal. At least when you look at the since the up 30 preliminary agreement between the saudis and the qataris. The real story will be, what is the deal going to be . Do they fail to reach some kind of substantive deal . Then you could see huge downside to the risk of the oil price. Anna what are the key questions . Whether they can arrange a freeze, whether the freeze will hold, what interests you right now . If one of ther risks is that they may come to some agreement. You see a surge in the oil price and that brings back a lot of in Production Capacity europe that has been taken out. Lets remember the whole point was to try to eliminate all of the u. S. Shale production, to take it out of the market. I would have thought there was a bit of a risk that the opec news would allow the shale production to come back. You look at u. S. Production, it has gone from 9. 6 Million Barrels a day at its be to 9 Million Barrels. They do not want 6 Million Barrels to come back to market. They are going to do something. They do not want to go too far with capping or cutting. Manus or a global rate cut. We have got to move on. On a global basis, the u. S. Has a huge swathe of production that is not there. Rya thank youn, manus ryan, thank you. Peter stays with us. Manus lets talk about asian markets. Help me with my dollar yen. We are seeing the yen weakened against the dollar, which is sending the nikkei up by almost 3 on the close be also seeing some good gains coming through on the asx 200. Have a look at this rally on the shanghai composite. Up 2. 2 . Some great gains coming through on export data. The expectations, overseas shipments up 11 from a year earlier. That is compared to a 25 slump in february. Adding to those hopes that the gdp numbers we will get coming out of china on friday are going to be better than expected. Players really led the gains in the region today. China doing petro very well. The basic materials rallying as well. We had some good numbers coming through from fort eskew metals ue metals group. That is a six session of gains and the best levels we have seen since early january. The longest run of wins on the regional index that we have seen since october of last year. We are also talking about not only the yen, but the resurgence we have seen and emergingmarket currencies, led by the malaysian ringgit. It is up about. 5 against the dollar at the moment. Leading the gains that we have seen across emergingmarket currencies. Having a look at the japanese yen, if it is going to update. 108. 74. A little bit of a switch coming through from the japanese yen, which is the reason why we have seen such a big boost coming back into the nikkei. A very solid session all around. Manus anna thank you. There is fresh evidence that chinas economy is stabilizing. In march. Se by 11. 5 that is after a 25 slump in february. Manus lets get more from our bureau chief in shanghai. The numbers make a good reading. You are going to see a whole swathe of notes about hard landing being out of the cards. What do you make of it . It is only a onemonth turnaround, isnt it . That is true, but it is building on earlier positive data that cannot at the beginning of the month, like the manufacturing pmi as well as the cpi data, which seems to be building a case for some improvement in the chinese economy. Us anna sounds like reason to be cheerful, but we cannot count on the government to rest on their laurels. Where do you sense the government goes next in its efforts to spur growth in china . All eyes are now on the gdp figure coming forward. That will be on friday. Really thentals are same here in china. The government is still pursuing its plan to try to make the economy more efficient, to become less reliant on manufacturing. Todays data shows that manufacturing the Manufacturing Sector is picking up. That is positive news. I might point out that there is some possible seasonal distortion from the Chinese New Year holiday that floats around between february and march that might be affecting the data. Toin, it is all eyes on gdp see if the recent slew of positive data continues. Manus thank you so much. Greg in shanghai, breaking down the latest data. Peter joined us at the top of the show. We get so excited when there is good news regarding china. We have the exports data here. Not be so if you said about china this morning, but it is the story. Upgraded maybe i about not be so effusive china this morning, but it is the story. The imf even upgraded them. Peter everyone fears everyones fears about Global Growth. Were thetrade numbers only positive data that was coming out, i would not take much notice of them. As your correspondence had, they were building on other positive data that had come out earlier in the month. You also have the imf report upgrading china. You also have a couple of other things that are, in my view, looking quite positive. There is a leading indicator that i look at and that has been turning out quite positively. It looks like there is improvement going on in the chinese economy, which is very good news. Manus i am on a correlation roll at the moment. I am rocking it out. 120day correlation between global stocks and oil. That is why i think there is so much. Every word that comes out of , the iraq, saudi, russia biggest correlation since 2013. It is almost inch by inch. How do you look at that relationship and what is that relationship to you when you make decisions . Peter the oil price is a reflection on the health of the global economy. There is a lot going on which relates to supply as well and not just demand, but you have to say that the oil price is some sort of barometer of Global Growth. If the oil price is going up, maybe that is because Global Growth is Getting Better and that is great for equities markets. It is all about what the saudis and others have been doing with their supply decisions. Is not just oil. You have other Commodity Prices as well that are recovering. You did it does not necessarily mean that demand is great. It just means that demand is less bad. That is obviously the first thing you would expect in any recovery. Manus we have had a variety of said officials everyone is focused on whether we will get another hike by christmas. I found this fascinating comment. He said that the u. S. Election will have bought janet yellen time before she has to make a hike. And it could open pandoras box. What could happen if this whole powder cake goes off keg goes off . Peter that is a tricky one to i was looking at comments from the fed officials who were speaking yesterday. Two of them were quite dovish. They are voting next year, but they were saying, lets be patient. Lets wait for the numbers to come through. La was quiteer hawkishcker, talking about how the disruption in Financial Markets earlier this year has not had any affect on growth,. Hich is quite amusing the financial turmoil was because there were concerns about growth. So slightly unusual comment there, but the reality is that growth is not nearly as bad as people were worried it was. You have a lot of different views. Anna sticking with the fed members, there were some different views. The new york fed was tracking growth. They were saying 1. 1 . They last said. 1 . Thank you. Peter stays with us. Comeback next, crudes hits a fresh speedbump. Reports that irans oil minister will be absent from the doha meeting sends commodities further into reverse. Welcome back. You are looking at live shots of london. 7 20 this morning. The sun is coming out over london. Lets get to hong kong. 2 20 in the afternoon. Sallysally juliet joins us with a business flash. Analyst estimates suggests operating profit rose to 944 Million Pounds compared with estimates of 936 Million Pounds for tesco. The improving sales helped them mitigate the damage caused by an Industry Price war. Jpmorgan has cut about 5 of jobs in its asiapacific World Management unit as it refocuses on serving clients with higher investment thresholds. That is according to person with knowledge of the matter. The approximately 30 job cuts which happened this week are said to have involved mostly relationship managers based in hong kong and singapore. The bank is due to announce firstquarter earnings this morning at 11 45 u. K. Time. Deutsche bank has hired james boyle from citigroup following a slump in the units sales. That is according to two people familiar with the decision. O is tryingnks coce to boost stock trading operations. Pharmaceuticals is facing pressure from its bondholders to file its financials. Convinced the company to issue a noted a notice of dassault. Of default. The company reiterated it is on schedule to file its 10k on or before april 29. That is your Bloomberg Business flash. Manus thank you very much. On, theelcome peter elst ceo at seneca investment management, back into the conversation. Guy came on and shouted about context,inflation referring to the difference between the event the fed and the new york fed. What is this . This is the view in terms of inflation five years out in the u. S. You say that perhaps causes the greatest concern of all. Were talking to black rock and jeffrey gun lock again in terms of the debate as to whether or not you want to belong treasuries to be long treasuries. Lets take it back five years. Iner a big decline inflation over the next five inrs is sort of inherent bond markets. What you have seen over the last month or so, a strong recovery in inflation expectations, which i think is definitely a good thing. Expectations have risen from quite low levels to levels that are a bit higher. We are not talking about high inflation that we should be worried about here. Manus 1. 48 . Peter absolutely. The big question is what should your position be in sovereign bonds at the moment . In terms of where we sit, we had nothing in sovereign bonds anywhere for the next couple the last couple of years. We have seen yields at low levels. We have seen real yields at low levels. We cannot bring ourselves to invest in bonds that are clearly extremely poor value. That has actually hurt us in some respects. Have been thes bestperforming asset class. Anna you thought they looked bad. Peter they have gone from being expensive to very expensive. There have been other portions of our portfolios that have been performing extremely well. Overall, our income fund is at the top of the fear group peer group because it has done well in u. K. Equities and other parts of the spectrum. We continue to avoid we are not touching these sovereign bonds because they are incredibly expensive. They might get more expensive in the shortterm, but over the longterm, you are guaranteed to lose real capital. Manus there was a renaissance of a couple of different Asset Classes in the First Quarter. It was such a toward a tortured quarter with the first days of trading. We saw a rally in emergingmarket currencies. Some of the biggest emerging byket economies through over 4 . How much exposure do you want to take to ask to emerging markets . I know they are not all created equally, but how does it play for you . Peter the two points i would make about emerging markets, firstly, is that they are a play on the global economy. You see a high correlation between emergingmarket equities and commodities prices. We start to see Global Growth improve and Commodity Prices improve, you will naturally see emergingmarket equity performance improve. The other point i would make is that despite this romantic view that people have of emerging markets, that they are wonderful places to invest, they are actually horrific players places to invest if youre not careful. They are full of corrupt governments, badlymanaged companies that are reckless with their capital expenditure. You have to be incredibly selective. Anna you have to know where to look. Peter absolutely. Anna peter, thank you for joining us this morning. That is it for countdown. Boil. Oil coming off the the debate on whether the iran minister will be there. Equities are set for a better opening. It is dawn in london. It is beautiful. We are back. Guy welcome to on the move. 8 30 in berlin. I am guy johnson alongside hans nichols. Gear asts back in exports jumped the most in a year in march. Does this point to a stronger gdp number on friday . Esco beats his tescos new ceo is tescos