Donald trumps republican nomination is all but certain after his republican competitor exits the race. Has the market priced in the chances of a Trump Presidency . Lets talk about the markets. 29 minutes away from the start of trading in europe on the cash markets. Lets show you where we are going to go this wednesday morning. Looks like a fairly flat story. Yesterday, we were drowned we were down pretty hard. Ftse up by. 1 . Looks like the dax is going to outperform. It will be interesting to see how adidas performs today. Other assets around the world, risk off trade. Let me show you some of the numbers we need to watch out for. Dollaryen is trading up a touch. This williams story that we have got for you, we will talk about this later in the program. Yellen andco joins williams. You need to listen to williams. Nymex crude trading higher. Keep an eye on that crude story as well. We will talk about shell a little bit later on. Lets get the first word with juliette saly. Juliette good afternoon from hong kong. Donald trump is the result of republican president ial nominee after ted cruz quit the race. That means he can secure enough delegates before the Party Convention in july. After denigrating his opponent praised ted, he cruz for ending his campaign and took aim at Hillary Clinton instead. We are going after Hillary Clinton. She will not be a great president. She will not be a good president. She will be a poor president. Juliette Bernie Sanders claimed in indiana, slowing Hillary Clintons progress to the nomination and giving his campaign a muchneeded boost, but does little to narrow her delegate lead. Hedge funds have come under attack from a highprofile name in finance. This time, it is billionaire steve cohen. He said he is astounded by the shortage of skilled people in the business. Profit beatquarter analyst estimates. Profit adjusted for onetime items and industry charges fell, exceeding the estimate of a letter 11 analysts surveyed by bloomberg. Oil prices are at a 12year low. Global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. Guy thank you very much. Lets get to our exclusive conversation. Socgen post estimates that beat analyst expectations. Posted results that beat analyst expectations. We have heard this before somewhere. We spoke exclusively to the lenders ceo on these numbers. The start of the year was very awkward with the economy, the oil price, china, etc. In that environment, which was very special i think our performance was very strong. It seems to me we have a more resilient model. We have seen a drop in equity revenues. We have had hand, better revenues. We might remain in a volatile environment. The Fourth Quarter was better, but lets think about the brexit referendum. There might be nervousness. We can expect something a bit volatile. That will not present us prevent us from developing on, carrying our model. Earnings were on the r. O. E. Targets. That is 7. 1 for this quarter. Are you confident in your target for the shortterm . With the kind of environment we expect, with a russian deliver which will not what we expected three years ago which was at 11 at the beginning of the year, this year, we cannot deliver that kind of return. If we keep our objectives in mind, we can achieve that by further transforming our business. When is that target . We need first to have clarity on the Regulatory Framework. 2016 is a very important year from this perspective. We should have clarity from the European Commission on key elements of the regulation. On that basis, we will put in place our new strategy plan. Lets wait a little bit of have clarity. Guy socgen higher this morning on the back of those numbers. Expectation management a big part of this process. Lets bring in bill to this conversation. My sense from him, downbeat. Now he looks more positive. He has a retail bank that is helping him out. Nevertheless, you look at what is happening with these banks as they are telling us that the First Quarter was horrible. I have not heard any of them say that things are going to get better. Bill rings are unlikely to get better. It is not just a factor of this particular corridor. Smart ceos can blame performance on what is going on. This is more longterm decline in banking, i am afraid. We are seeing the most enormous financial abolition with the emergence of new ways of doing things, new lenders entering the market. For instance, Insurance Companies and pensions funds lending direct. For the last eight years or so, the banks have not been focusing on their business. They have been focusing on trying to cope with a massive volume of new regulation, new capital rules. They spend their time thinking, how do we avoid the next fine . What has happened is that has been going on, the banks have been less attractive as investments and more open to competition. Even though the socgen results are possibly the best of the bunch, they have done quite well, the general story across all of banking is disappointment and a situation that is likely to remain disappointing. You were saying you thought ubs yesterday looked like losers. Guy he looked fat. I am not saying he looked sad. I am not saying he looked like a loser, but he looked sad. Definitely more deflated than i have seen him. The market says the Business Model works. It is not the Business Model that he wants. Bill i would question all of these banks for now saying they have a new Business Model. Lets take the swiss banks. They are going to expand by supporting swiss Private Banking in the asian markets. They are going to put swiss ways of doing business in front of asian entrepreneurs. The reader the market is the read of the market is that is not what asian billionaires want. They want their own Investment Strategies and business strategies. These banks are chasing what they were good at in the past, which may no longer be fit for purpose. You have other banks we were talking this morning about retail. Retailgoing to see new contenders emerge. Personal lending platforms are far cheaper for people to use then going to their banks. I think there are still regulatory problems guy peak regulation has not been reached yet . Will seehink we another wave of regulation that will hit some of these platforms. All we need is one big scandal and we will see regulators pile in. Guy interesting. We will come back and talk about that later. We will talk about shell later in the program. What else . Fed chiefs say and early summer rate rise is still an option. We will discuss that next. Guy welcome back. You are watching on the move. Lets get you your Bloomberg Business flash. Juliette ab inbev reported sales growth that missed estimates. The Worlds Largest brewer says fourthquarter revenue rose 3. 1 , excluding currency shifts and acquisitions. Analysts had estimated an advance of almost double that. The company, attempting to complete its takeover of sab miller, also sought earnings miss estimates. Miss estimates. Adidas plans to sell its golf unit, abandoning the brand that has been dragging on profitability. It will take it will keep its golf shoe and apparel business. The adidas ceo will be speaking to bloomberg surveillance at 11 35 u. K. Time. Siemens has reported secondquarter profit that beat analyst estimates. Profit from industrial operations rose 28 in the three months through march. That is after an increase in demand saw for energygenerating equipment offset a decline in the commodities industry. Brazilian prosecutors have filed a 44 billion civil suit against bhp billiton and their joint venture that killed as many as 19 people and caused severe environmental damage. Shares in the companies have plunged on the news. That is your Bloomberg Business flash. Guy thank you very much indeed. Lets talk about the fed. San francisco fed president John Williams says he Still Believes in the possibility of a june rate hike. I do not want to say likelihood because we are never supposed to talk about what is going to happen. Of course, we will get a lot of data between now and then and a lot of good discussion. In my view, it would be appropriate, given the things we have talked about, to go that next step. A lot could happen between now and the middle of june. Happen. Ot could the data, what is it telling us . Atlanta chief Dennis Lockhart said a june move is a real option. The markets have already priced in a 12 chance of a hike. Lets bring back in bill bla in. Williams is incredibly close to yellen and he is talking about june being life. Bill there does not seem to be any key driver that would say it would have to happen then. We do have an interesting situation. The Global Economy is beginning to look better. You are seeing things better in the oil prices and emerging markets. Weak andhe dollar is nobody expects a hike. This morning, the dollar started tick upwards,s just reminding everyone that the bogeyman is out there somewhere. As soon as we get a stronger dollar, you will see a reversal. This is the peculiar dollar seesaw that we are on right now. A stronger dollar, the Global Economy goes up. A weaker dollar and everything starts to recover. They have got to find a way of keeping the dollar stable. Not too low, because that causes all kinds of problems that we are seeing in japan right now. Guy are you ready for a june hike . Bill that is a good question. I am not sure. I think many would be surprised if a june hike happened at the start of may. Guy i know how you are answering it. Said, it is aan long time until the middle of june. Guy it is and the data is quite interesting. Foreconomic surprise index the United States has definitely kicked up. He talked about a lot happening between now and then. I wonder if the fed is seeing evidence of dropping troughing here. Focused janet yellen is on the American Economy and not so much concerned about what is happening globally. If that is true, there are many reasons why the fed should raise. Maybe it is playing a bit of catch up here. Bill there is that. I suspect there is looking at the Global Economy and saying, hang on. What is the effect of an overlyweak dollar . You have a very strong yen, which creates problems in japan and knocks back some of the support that had been going on there for global trade. All of these factors, i think, are in the minds eye for the fed. Guy lets say we get a june hike. What do i sell today if i think we are going to get a june hike . One it is not an obvious to sell treasuries and buy stocks. If we do get a july hike, because it is a stronger economy, that is enough to continue the rally that we are seeing in oil, the expectation that the Global Economy is getting stronger. That will be one aspect of thinking. At the same time, you have to think that will make commodity purchases for third world economies and emerging markets more difficult, which triggers that weakening cycle. These things are so finallynuanced at the moment. It is not a question of going out and selling treasuries and buying stocks, which is the way we were brought up. It was a gift it is a different economy. As always, the most different difficult thing to predict is currencies. That brings us to where the Central Banks are and the disappointments we are seeing over what has been going on in japan and europe. Guy i suspect that mr. Abe would like to see the possibility of a stronger dollar. Bill any central banker outside the states wants to see their currency weaker. At the end of the day, no matter how much Monetary Policy you throw at it, the only thing that will help the economys is for them to start producing. Guy we will come back. Thank you for staying with us. Up next, we look at some of the potentials for movement. Shell is definitely on the list. The list. Initely on 10 minutes away from the market open. Fairly flat off of yesterdays selloff. We have a lot of earnings to digest. Guy 52 minutes past the hour. Seven minutes until the market open. Juliette saly standing by with details. Not a great session in asia for the middle of the week. Japan closed until friday for golden week celebrations. The slight pickup that we saw the last hour in china has actually reversed. The shanghai market down by. 25 . The Hong Kong Market down by 1 . Still an hour to trade, but that is a threeweek low for the hang seng index. Australia giving back much of the gains that it had yesterday on the surprise Interest Rate cut due to the weakness we have seen in energy and mining players dragging the region lower. That is its longest losing streak since february. We are back to where we were on the beginning at the beginning of the year on that index. The rally we have had in the last few weeks has not even happened because it has been reversed in the last couple of sessions. Having a look at bhp billiton, you are seeing its share price falling the most since 2008 as the brazilian prosecutors puts their case towards the hp and vale. Bhp and vale. It doesnt think will be about 218 Million Dollars for the year, sending its share price lower. Oil producers coming under pressure in the region, dragging on the regional index. Emergingmarket currencies also coming under pressure. Much indeed. U very lets turn our attention to what is happening in europe. Stocks softening up a little bit. Fair value numbers are negative, but only just. Talk about sheltered worst number since 2008 on the profit line, but a beat in terms of where the market was on deliverable numbers. It will be interesting to see how that one opens up. Socgen looks like it will be higher. The Retail Business standing up at the moment. Adidas as well. Ignore the numbers. The fact that they are talking about selling their golf business, which has been a real drag i am going to avoid my golf jokes here on business, seen as a real positive. That is likely to be good news. A new ceo coming into the business as well. Is still with us. Its earnings season, what is telling you . It is telling me that companies are becoming very good at guiding expectations lower. Companies are creating that positive five vibe. I love the story about adidas getting rid of golf. I am not a golfer. I have a problem with golf. The fact that one of the smartest Sports Companies in the world is getting rid of golf tells you everything you need to know about the future of golf. Old mans game and not a good way to spend five hours. Bikes or sailing. Guy fantastic sports. Thank you very much indeed. Coming up, the market open. Futures pointing to a softer story. The market open is next. Guy good morning. You are watching on the move and we are moments away from the start of european trading. The First Quarter of socgen wa s awkward according to the ceo star ofe the new Global Banking . Fed president Jonathan Williams and lockhart will say the central bank could raise rates next month. Our investors wrong to write off a hike . Donald trumps nomination is almost certain after ted cruz exited the race. Expectalk about where we to go this morning. It looks like it will be a flat open, but we thought a big selloff yesterday. Socgen, down by 1. 29 euros yesterday. Here is nejra. Nejra japanese markets closed until friday. The sixth day of losses for asian stocks. It was pretty much flat in the futures market. This is how the markets are opening in terms of the industry groups, looking at the stoxx 600. Downmer discretionary,. 1 . That has now changed to materials, basic resources down. 7 . The commodity producers leaving the losses in europe, the worst in asia on the stoxx 600. The currency markets are focusing on the dollar today, rebounding for the second day. This is even as we have seen treasury yields being driven down. That is really because of hawkish, comments from fed officials. Socgen, frances second biggest bank. This is after it reported is a price increase in firstquarter profits. They climbed 18 . The banks also announced plans to deepen cost cuts. Moellermaersk reported a smaller decline in firstquarter profits. They have been stepping up costs cuts at the oil unit. Idas announced it plans to sell most of its golf unit and will start conversations with potential buyers. Guy . Guy nejra, thank you. I want to take you back to the socgen numbers. I want to show you the terminal because i think it is slightly instructive. Yesterday was a horrible day for the european banks. That was socgen yesterday and you can see the gap higher this morning, but we are still not back to where we started. On a two day basis, we are still lower, despite the fact that the market has marked up socgen. On a two day basis, we are still down by 1 . We are talking about shale reported firstquarter earnings. Profit still fell 50 , back to 008. Lowest levels since 2 is this like bp . Is this down to trading . Yes, this is a lot of trading. Again, it has been the same trend with bnp, total, and exxon. That is what is saving the day for the big, integrated Oil Companies. Guy those are pretty variable areas of the business. You can get them right or horribly wrong. Indeed, and that is why we are seeing shale falling farther, costcutting today. Marketuiding the with 33 billion in spending in 2006. Now, they think it will be around 30 billion. Guy so they are acting even more aggressively . Yes, they are announcing today 30 billion. We will see what the company is a suspending in the First Quarter. It seems like they are dropping to 45 billion. Thatis a huge indication they are being affected by the very low oil prices. This is the first time the companies are reporting together. A few weeks ago, for shell, now gas is what really matters. Guy all the banks are telling us that trading in the First Quarter was absolutely horrible, that they really struggled to make money. They called it awkward and horrible. They dont get picking up. Why are the Oil Companies able to produce great numbers in trading when the banks cant . Javier in a way it is simple, but it is also complicated. It is down to the fact that dividends. Ade in they are able to store barrels and cash in the potential future profits. Guys making a lot of money. They dids today not say exactly what they were doing, but if you can read through the long statements, there is a very interesting indication that capital has increased significantly in part because they pay the money they owe. But in part, because they have increased the amount in inventory. That is trading. That is probably why shell beat the estimates. Guy jump in, yeah. I find the absolutely fascinating, but to see the global Oil Companies start to hiring, and start spending money again, what kind of stability do we need . I think we need to see highe fewices and a order o quarters of higher prices before the boards are convinced. The underlying situation will remain. Because although we have people saying we are going to get a supplydemand balance fairly soon and the Global Economy seems to be picking up, we also have the Political Uncertainty about who was going to start producing more. Javier i think here we are going to see the first month, increasing in spending with Shell Companies in the u. S. They could increase spending today and reduce it again in three months time. The problem with Companies Like exxon, and bnp, you cant really turn around unless you are willing to take a significant amount of financial pain. The first haul is going to be a lot higher for these companies. Guy lets bring in another v oice in th conversation. Ys are going to stay with us. The conversation you had a hat we ago hinted t believe we have stated consistently for some time now that the market is getting close to balanced and we think in 2017 it will balance, which implies prices will begin to recover. Will occur very gradually. But yes, you can say there are brighter times ahead, but it will be slow progress. Guy i want to throw out a quote from robert kaplan, talking about the fact that imposing large cuts by u. S. Producers, supply reductions have been slow to materialize over the last year. he is not convinced. He is not convinced that actually this supply story is coming in the way others suggest it is. Is there any danger that there is still much more oil than we anticipate . U. S. Crude peaked in 2015. But they are showing production just below 9 Million Barrels each day. So, production has fallen off and we are expecting that production will continue to decline in the u. S. For a while. But as javier said, and this is one of the most intriguing questions we will be looking at, is the u. S. Does have the ability to put production back on stream fairly quickly if the price improves for them. So, yes. There is some doubt, as the fed believeng, but we production declines are set in place for the rest of 2016 and into 2017. Javier neil, how will the market be impacted with iran production entering the stream significantly higher than many were anticipating . How do you see this playing out . Real well, yeah, the numbers we are starting to see do suggest the pace of return has been a bit quicker than we anticipated, but it is not that much quicker and i dont think it is affecting the balances materially for 2016. And there is an upper limit because iran can only go back to where it was when sanctions were imposed. Though as you say, it has been a bit quicker, dont forget that it has been offset to some extent by falls in production elsewhere. For example, in venezuela and nigeria we have had a followuaf earlier in the year. Is going off quicker, but it has been offset by falloffs elsewhere. Guy two respected members of the Federal Reserve talking about how june may still have the meeting for the opec. What will this do for the Energy Market if they do hike rates . Neil even if they were to increase Interest Rates in june, there seems to be a lot of debate whether it will happen or not, but it is not likely to be such an enormous Interest Rate increase to make a massive difference to the market. U. S. Oil demand, particularly led by gasoline, is very strong this year. We dont think it would make a huge difference, that we will have to wait and see if there is a decision at all. Guy we will wrap it up there. Thanks Neil Atkinson and javier blas. Blain is going to stay with us. Up next, a big night in the u. S. Election season. Ted cruz, walking away. We discussed this story, next. Guy 14 minutes into the equity market session. It was a down day yesterday. We have seen some stabilization this morning. 6167 is where the index is trading. The dax is positive and the cac is positive, and that is because of what is happening with socgen. Is trading strongly onthe upside, up nearly 4 this morning. As i pointed out earlier, it has dropped over the last couple days. Yesterdays session was a big down day for european stocks. Lets show you what is happening with socgen. This will show us if we are still in positive territory. Unis still absolutely flat der the two day basis. They have recovered from the losses yesterday, but nevertheless, we have slightly elongated periods. We are not seeing good news being reflected in the numbers. Lets get you caught up with the bloomberg first world ms. Bloomberg first world news. Funds have come under attack by billionaire steve. He says he has been blown away by the lack of talent. Donald trump is now the Presumptive Republican president ial mom and he after ted cruz quit dust president ial nominee after ted cruz president ial nominee after ted cruz quit the race. Hisr months of insulting opponents,trump praised cruz as brave for suspending his campaign. P ted cruz, i dont know if he likes me or doesnt like me, but he is one hell of a competitor. [applause] amazingas got an future. For the democrats, Bernie Sanders claimed an upset victory in indiana. It slows Hillary Clintons progress and gives his campaign a muchneeded boost. But it does little to narrow or lead in the delegate count. Narrow her lead in the delegate count. Global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. You can find more stories on the bloomberg at top. Guy . Guy thank you very much inde ed. Bill blain is still with us. So, it looks like it is going to be trump. Bill it does. Guy should we extrapolate beyond that . Should we be talking about him seriously as being a president ial figure . Is that how we should be seeing him from the markets point of view. Bill it will be a very interesting election because themp is very linked into antiestablishment sentiment. They could become a very guy it will be interesting. Bill it will be a very interesting election and there is the potential the market has to face up to that trump could end up in the hot seat. If we does though, do we really need to panic as much as we are prepared to . Probably not. You have to look at what the president can actually do. Fathers sawnding this one coming. Bill he will not be able to build a wall or what he wants to do. People want himself sitting there, surrounded by layers of stopping him. Guy checks and balances. Balances checks and is how it is described in the constitution, but the longterm consequences could be very interesting. It is probably the beginning of the end for the republican party. It will continue to fracture and split and what does that mean for the future of u. S. Politics . Willie en will we end up with the future of longer and longer democratic incumbents reigns . A personal cycle of two years means it is almost impossible not to spend your entire time worrying about the election. Guy but here is the thing. Countries with no governments seem to be doing alright at the moment. Spanish willh, the have another go. The irish are not doing too badly either. And belgium went for years without a government. Guy maybe we dont want to go down that road. But nevertheless, checks and balances will grind washington to a halt. U. S. Gettinger the close to that default of the market freaking out. But actually, this could be the new normal and this is how politics will network. Actually, as a result, we could just get on with it. A very serious point to this argument because if you look at the rhetoric being employed by politicians, it appeals to the antiestablishment praise. It is not the fringe anymore. It is becoming the majority. Abouty hear trump talking stopping ttp trade agreements because it might cost jobs. And then clinton comes in and says, i will stop this. Guy the Party Continues to fracture, yeah . Bill yes, you are in a situation where the Global Economy continues to slow down because of the failure of politics to address growth. Ella takes them become more protectionist. Becomes morehen protectionist. Guy what about the brexit . Bill they could be a protectionist movement to go back to things we actually understand. Guy a nationalist movement . Bill it does worry me that an awful lot of the rhetoric about the brexit is very similar to what we are hearing trump come out with. Guy on that note, thank you very much bill. Always a pleasure. Up next, stocks for the name of the game last year, but this year it is a more fragile asset class. Our chart of the hour is next. Guy 23 minutes into the equity market session. Lets first deal with the numbers on the day. That is the stoxx 600, as you can see on the two day basis. 2 . Re down nearly we initially client this morning and then we started to fade. We initially climbed this mor ning, and then we started to fade. Stand out stf the ories. Higher, closeing to 3 . But again, on the two day basis, still down by. 5 . We are tracking the performance of socgen but it is not exactly delivering over the last couple days. Lets get to nejra. Nejra i have heard so many puns on this this morning, but my chart is looking at the commodity frenzy now, versus the stocks. Stockths ago, it was the market that was in his position, but look at what is happening in commodities. Egg futures in china are up about 25 on the year to date, actually. That is the white line. The shanghai composite is down about 15 , one of the worst performers. His has really been change. Ng some probably dont even know what they are purchasing in china. Guy eggs or steel. The Stock Exchange has already been through this. Nejra and this is the interesting point. He said, this is about the improvement in fundamentals, but also about the availability and the leverage to bet on commodities. These guys are going nuts, but leverage exaggerates the move on the way up and down and this is what margin financing did in 2015. Will we see the same drop we did back in august . Guy nejra, thank you. Coming up, we are going to be. Alking about the bloomberg we will be talking about booze and tobacco. We look around and try to determine what will be there in terms of its cover for those costs. Well, those may be the two sectors we should be looking at. People still smoke and drink, just less so. We are down by. 4 in london. 161. Ftse 100 is trading at 6 [ soft music ] e. T. Phone home. When you find something you love, you can never get enough of it. Change the way you experience tv with xfinity x1. Shoah, ha ha. Ew artist. Show me top male artist. My whole belieber fan group. Its not a competition, but if it was i won. Xfinity x1 lets you access the greatest library of Billboard Music awards moments, simply by using your voice. The Billboard Music awards, live sunday may 22nd, 8 5 pacific, only on abc. Guy welcome back. You are watching on the move. How are things shaping up . Lets find out from nejra. That is the story. What stocks are we watching now . Nejra i him looking first at heinz burke cement, this is the Third Largest cement maker in the world. It also said it expects increased profits and sales for 2016. This is one of the best performers on the stoxx 600. The worst performer is dialog s emiconductor. First quarter underlining operating profits was a miss for the company. They have also seen the revenue drop at a high of a 1 percentage rate. This stock is falling today, as is bhp billiton. It is down in london, down 5. 3 right now. The brazilian prosecutors have filed a civil suit against bhp, vale, and their joint venture over the november dam rupture. Has not yetsays it received a formal notice of the nonetheless, the stock is responding. Guy socgen posted profits that beat analysts estimates. In a bloomberg exclusive, we speak with the ceo regarding the newly announced costsaving plan. The transformation is very diversified, depending on your activity in the french retail. The five year transformation plan. Platforms that are dedicated to service to the clients. We have to rethink about the relationship model. It is a bit different. It is not just about the difference in technology. It is about attempting a new Regulatory Framework. Services, for the refocusing of the Business Model. Day, we mightthe not meet the objective we have in mind. We are paying attention to costs, which are very important. This saving plan will of course, come with some more cost reduction. What are we expecting in london, for example . Again, we have announced already a series of small reductions in london and the u. S. It is diversified. We are adapting the Business Model to a new Regulatory Framework and were focusing on the client to deliver even Better Services at consumer costs, and delivering a decent profitability to our shareholders. That is what we are doing, stepbystep, quarter after quarter. Oudea talking about the french banking sector. Airfrance this morning, down. A series of interesting notes. Productivity measures with the pilots they dont see significant risks from these negotiations that will generate more strieke action. Here is something that caught my eye this morning and i will throw it out here out of. Out of curiosity. The airfrance pilots used to get 50 extra on their pay for night flights, but now they will only get 45 . People are talking about how you can change the airline sector. I guess, just looking about the variants in wages, relating to different conditions, i think it is fascinating. They will now get 45 , not 50 for flying at night. First quarter estimates beat estimates. They plan to sell part of the business. Bloomberg joined from intelligence reporter. Are these numbers that that . That bad. They are certainly not great. People. Y did surprise guy i assume with the rio olympics coming up, that number will bounce back a little bit . I believe so. The zika virus did impact shortterm travel, but it will bounce back. It is a great business. And actually, the premium did well. So, it is not all bad news in brazil. Guy how should i think about this sector . Aret the moment, people paying up. So, the price is moving up. That should generate cash. They should generate cash with dividends. Guy what is the kind of dividend yield in that sector . It is probably around 3. 5 , and compared to other sectors it is very good, yes. Guy one sector that is better is the tobacco sector. It is a brilliant pricing model. The government does the pricing for you. The lid ever get any problems with that so, they never get any problems with that. It generates a huge amount of cash. Guy i was stunned by this yesterday and caroline was smoking a cigarette and i asked her how much it cost. She told me nine pounds. When you look at what happens next, essentially my colleague was discussing this. If you are managing that business, what would you do next . Purchased a huge businessin they just purchased a huge business in u. S. It is the right decision. They have to major they actually generate the cash from that. Transferring to the higher price brands, and they get the cash from it. They must be getting close in the developed world. 20, the Tobacco Companies are challenging some aspects of the regulation. In the u. S. , it is reasonably regulated, compared to you europe. In the developing world, prices are significantly cheaper than they are in the west. Guy the Government Works pretty hard as a liaison. Yes, but the u. K. Government with of. 5 billion euros the tobacco tax. Uy up next, in the rough adidas, and yes, we are talking about golf. Details, next. Guy welcome back. 40 minutes into the equity market session. The european stocks story is reasonably flat this morning. London is actually edging lower. The dax and the cac are absolutely flat as well. I want to show you what is happening with the eurodollar. Arerly, the fed comments interesting in terms of what they delivered, particularly the williams comments. This also may be related to commentary we heard from sweden. It will be interesting to see if these comments related to what might happen in june are backed up by the rally. We will come back to this later in the program, but in the meantime, here is the Bloomberg Business flash. Has reportedmens secondquarter profits that beat estimates. Profits from socalled industrial operations rose 28 in three months. That is after an increase in demand for Energy Generating commitment at europes largest Energy Generating company. Shells First Quarter profits beat estimates. It was adjusted for onetime items and industry charges. This exceeded the 1. 8 billion analysts of 11 surveyed by bloomberg. Il prices are at a 12 year low socgen shares are higher after reporting a surprise increase in firstquarter profits. Frances secondlargest bank. Ays net income rose that is as the companys performance was helped by consumer banking. It also announced plans to deepen its cost cuts. That is your Bloomberg Business flash. Adidas confirmed today it is entering into active talks regarding its golf business. It will shift focus to with more profitable sportswear business. We are now been joined from frankfurt. We have seen is coming for a while, right . Things are going to get better. Have they finally made the decision on golf . Betterngs are going with adidas. Finally, after a few years of stumbles, herbert finally seems to beginning some things right. He is getting rid of golf, which has been a drag on results. North american sales were way up in the quarter that just ended. Hainer seems to be setting the table for the new adidas ceo, who takes over october 1. Guy you are talking about cleaning up. Is that what we are saying here . Why now, it is a very oddly timed story. He is making Big Decisions because he has been forced to. 2014 was the year of the world cup and so, it was supposed to be a big year for them. We saw them scrap an important financial target. Was a little better, but it has been a rough couple of years. He has been in the chair for more than 15 years and he finally succumbed to shoulder pressure and made some big moves. Remember, the current ceo will be speaking to bloomberg surveillance at 11 35 u. K. Time on bloomberg. 44 minutes into the session and lets turn our attention to the saudi arabia Stock Exchange. An announcement will be made within the next few days. The federal Stock Exchange ceo spoke to bloomberg. , inhat i said is we have the next few days we will appoint the Financial Advisor and publicly announce this immediately. Chosen. Ave not yet we have been working with Foreign Investors. Inclusion is an outcome of something bigger we are doing. Which is what we announced today, the changes we are introducing are what make local and Foreign Investors comfortable to join our market. And then hopefully, that will result in a bigger inclusion. Guy lets carry on this story. Lets talk about how big a deal this actually is. Reporter this is a huge deal. Not only in dollar sense, but also as far as the changes going to bring to saudi arabia. We have been hearing discussions about the crown princes plan to make these changes. This is an action plan for that oilmap to become a post economy. Last june, it started to open, as far as welcoming in qualified Foreign Investors and setting the bar relatively high. We have not seen the rush of investors to the saudi market. They are coming through with a bit too hot, a bit too cold. They want to make sure foreign vestors are bettinrear eady a are ready and willing. They are taking things like the settlement procedures. The are looking for things like an increased in ownership. It is a big step. This might be what the market needs to gain confidence in transparency and they move process of bringing them inline with the international markets. Guy which banks will benefit . Reporter if you are on the ground in saudi arabia already, they are whawho will benefit. Goldman sachs already has a fairly significant footprint in the kingdom. We dont know at the moment, but they will probably be at the front to be considered. But it will be a bit of a mixed. A bit of a mix. Local banks will also be at the forof the list consideration, but we will start to hear details in a couple days as the ceo Khalid Abdullah al hussan mentioned. Guy thank you very much indeed. Tht is what is happening in e tadawul market. Rising 53. 1. It is interesting to see how draghi is dealing. The San Francisco fed president , mr. Williams, says he believes a june rate hike is possible. He says we should not ignore the possibility, but the market only has a 12 probability of that happening priced in. Guy 51 minutes into the equity market session. The market is down by. 2 . One of the reasons for that is what i will show you here on the bloomberg, and that is bhp. As you can see, it has fallen l ower. On a threeday basis, it is down by 12 . This is related to the stories surrounding what happened down bursting and the dam and what that will mean for the business. We have seen a similar gap lower her eine in london. We have got the final number on french april services. So, still north of 50, but softer than the preliminary number, which was 50. 8. Data fromt a slew of the knotted states, including a reading on the state of the service sector. An hour and a half after that, we have David Cameron testifying in front of lawmakers regarding the upcoming brexit referendum. 30 tonight, 11 minneapolis fed president kashkari speaks about the june meeting. What will he say about that meeting . Because that is the talk of the town this morning. Lets talk now about what is happening with the fed. Fed president John Williams says he Still Believes in the possibility of a june rate hike. Williams i dont want to say likelihood because we are never supposed to talk about what my colleagues will say. But in my view, yes, it would be appropriate, given all of the things we have talked about, to go to that next step. But you know, a lot could happen between now and the middle of june. Guy meanwhile, Dennis Lockhart said a juene move is a real option. Just remember, the market is only pricing in a 12 possibility of that happening. Lets talk about San Francisco now. Who else is from San Francisco . Janet yellen. I extrapolate the consensus . I would not just it. It is important to remember that both williams and lockhart are nonvoters. The second thing is, everything i have read from the reports of what they said yesterday showed a fed that isnt data dependent. And we have been showing a chart guy it is getting softer. It is and as a result, the fed is more optimistic about data Going Forward compared to the market. Guy nevertheless, they are quite sure. What they are saying is, dont dismiss it. And if i cant dismiss 12 , it seems awfully low to me. The fed would like it to be higher, but that is what the reality is, given everything investors have seen and what the fed has said. Mark investors are not deaf to what the fed is saying, but 12 is not great. But as wetill change, stand right now, given the most recent data we have, the odds are very low. Guy here is the thing. We are focusing globally. They said they are going to focus more domestically. The rest of the world looks horrible. The u. S. Economy does not look horrible. It does not look great, but not horrible. Is there a kind of mental catch you have to go through . Maybe the data is a little bit softer, but we were not looking at it earlier, and now we are. Should we be concluding that there is an argument for raising rates as a result . The data in the u. S. Is that her that the rest of the data from the rest of the world is bad enough that through . Maybe the data is a little bit softer, but we were not looking at it earlier, and now we are. There is not enough good data from the u. S. Economy to raise that of the rest of the world. You cant separate them. Guy they are not completely related. No, but we live in a globalized world. As a result of the dollar weakening, that has given the fed more room to maneuver, but that is because they have been dovish. Guy the dollar has overshot ont he down side. The euro is way too strong on the technical fly. If the dollar strengthens, the will that make the case for the fed to do nothing . You can also look at the eurodollar and make the same case that there has been a very strong euro. Has moved a very long way in a short space of time and yes, we are probably overdue for a slight correction. Guy that does it for on the move. ,ming up on the pulse francine lacqua. Francine the day after indiana. Cruzns, crews quits quits. June is a real option. Rates could rise next month. Have the markets got it wrong . G upstream francine welcome to the pulse, live from bloombergs european headquarters. Quickly lets check on the markets. We got a lot of earnings coming