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,