Markets. Futures a little bit softer. 500 futures 16. In europe it was all about the banks. Syncing over 60 in the First Quarter. Switch up the board very quickly. The aussie dollar thats the headline thinking by 1. 4 . The rba surprises with a rate cut. Renewed dollar weakness. Bit. Me back just a little in a commodity market, very much risk down by 1. 2 1 . Some crude related earnings as well. Matt just going through halliburton, seeing the loss widen. Four cents. S was it reported firstquarter revenue of 4. 2 billion. Unchanged in the premarket. To 2. 4s really widened billion dollars from a loss of 643 million in the same quarter last year. Pfizer reported firstquarter earnings that blew away analyst expectations on stronger sales on products such as a Breast Cancer drug. Earnings of . 67 and we were looking for . 55. Raising its fullyear outlook. Earningssee aig mr. Expectations missed earnings expectations. Mylan up on generic drugs. Starwood also beating estimates in the premarket. David einhorn saying his shortt capital is the commodities play, along the i. T. Play. And apple down yesterday. Its eighth day in a row with a loss on the stock market. Thats the longest streak of losses since 1998. If it finishes in the red today it will be the longest streak since 1991. It was about . 10 away from cutting that losing streak yesterday. It will be a story throughout the morning. The big story in europe is ubs. Banks have been struggling due to market volatility and tighter regulation. Ceo onnson spoke to the what he thinks is affecting the banking system. If i look at the kind of Market Conditions we have been operating at, those results are resilient. Profitability in those kinds of environments is not easy. Most importantly we have been doing that while keeping the and the possibility in a more normalized environment to deliver stronger results. Considering the environment i am pleased to see how we operated. Warned intty much march that things were going to be tough. I think i was pretty clear about the environment back then. I think it is our responsibility to highlight the Market Conditions we have been operating and our results reflect that. Client transaction volumes the lowest recorded ever for q1. Clients are terrified right now. How is that going to change in a hurry . We definitely entered into New Territory in the First Quarter. The last three to four years, you would have served weeks or months of strong Market Conditions. Some kind of positive pickups. The First Quarter was an environment that had only one constant. From the firstn to the end of the corridor. Is it going to be like last year but in reverse . Last year started off brilliant and got horrible. This year started off horrible. I hope so. It looks like we are still in a. Ery challenging environment of macroeconomic issues and geopolitical issues are now coming on. We have to see soon about brexit. Deescalation coming from the u. S. Elections. Potentially a lot of factors that may affect market sentiment. In that sense you see volatility but its not the kind that is translating to client activity. It is paralyzing volatility. Jonathan that was the ubs ceo. Talking with guy johnson. It is getting hammered even more, off by a. 6 . Money good, but the first worst First Quarter for transaction volume on record for them. This is the reason the is. K is down as much as it we knew these numbers were going to be horrible because he was at the Morgan Stanley conference in march and he told us they were going to be horrible. He is not saying things are going to get better from here. Look at his body language. Listen to the way he is saying things. It is still incredibly tough out there. The sense for q2 is that it is not going to look any prettier. The cost income ratio rising to 85. 7 in the First Quarter. That is up from last year and dangerously close to the crisis levels. He needs to bring it down to below 70 . Cost cutting is job number one. You cant control the markets or do anything about the brexit. He has to deal of the cost story. Hes pretty comfortable with where this bank is strategically. They made the switch. In many ways that has worked out. Now he has to figure out what hes going to do tactically. There are rumors swirling around about which job is going to go where. You are absolutely right. Where does the costcutting go and where does it fall . David were also joined by felix zulauf. We have been hearing quite a bit from the european banks. They are going through a tough time. This is part of a series. In the united states, we cant really grow our economy without the banks being healthy. Is this true in europe as well . Absolutely. Even more so. The loans are 80 of the financing of the corporate sector whereas it is only 20 in the u. S. You have much more securitization. The european banks are highly regulated. They cannot go back to earning the returns on equity that they used to in the past. Its a completely new ballgame. Jonathan its a global story. Season was ugly u. S. , ugly europe. The top five banks trading revenue down over 20 . Thats the u. S. Thats not europe. Is that going to change . In stock markets and commodity markets, i think that is going to help on the income side. You will see some improvement in the second quarter. That youieve have to own for the medium and longerterm. Guy johnson, for credit squeeze. Credit suisse. They wanted to look more like ubs. Does it look even harder to you . It does look really hard. If you are heavy into the Investment Banking story life is going to be fairly difficult. He saw that very clearly with Deutsche Bank you saw that very clearly with Deutsche Bank. All thet of idea from other guys about how they see things shaping up. Life is tough. Jonathan stocks down by over 8 . Guy johnson in zurich. , the moves in the market stunning. The aussie dollar taking a tumble after the Central Bank CutInterest Rates to a record low. A move aimed to counter disinflation. Richard jones joins us from london. Everybody started thinking, Glenn Stevens pulled the trigger. Is there more to come . I think there is. Statement,the rba they said inflation will probably remain to low Going Forward too low Going Forward. Cut as early as july or august. Its very much in the cards. Of odds. Ree in terms we should not be surprised if we see the rba act again in the summer. Megan lets talk about the growth of australia. Where are we in terms of where they are Going Forward . Well we see this headwind in commodities and mining . Interesting part of the rba statement for me was that like the imf and the world , the rba is looking at a Global Growth picture that is slower than expected and being revised lower. That presents pretty serious challenges for australia. When the mas said that last month in singapore, theres another economy very much dealing with global headwinds and they are at the mercy of what the Global Trading markets are doing right now. Global growth is maybe not as buoyant and strong as we thought even a few months ago. Matt showing currency moves. This is a fiveday picture of the u. S. Dollar against the g 10 currencies. Is can see the aussie dollar the only one that underperforms the greenback. But theknow about you, story really isnt in australia. Its the amazing moves of the yen and the euro. This divergence still cant stop a dollar drop and yen strengthens still blows me away. Jonathan we were sold a story that there would be divergence. The fed has completely backed away from that. Look at the renewed dollar we is. Weakness. Equally so for draghi . Absolutely. Japan and the eurozone tried to weaken their currencies and they have done everything possible. It backfired. They have a strong currency. Both currencies are structurally running large current account surpluses. So they are by definition strong currencies. And you can only make them have important events politically and economically that are negative for the region or you have a conviction among International Investors that that currency is for whatever reason unattractive and capital flows out. Japan started the whole currency game. Yen started to weaken the and that was a dedicated policy. The economics plan. Its unbelievable that they have backstepped. Disappointing on all fronts. The currency is strengthening back to almost 100. Jonathan you are going to stick with us. Richard jones, thank you for joining us. What a busy session tuesday is turning out to be. Lets cross over to matt miller. Matt a lot of news. May be on the verge of delivering a knockout blow in todays indiana primary. Him with a 15ws point lead over ted cruz. Ted cruz has indicated he will keep campaigning to keep trying from winning the nomination. Bernie clinton and sanders are in a tight race. Clinton has 90 of the delegates she needs to become the nominee. Elipe hasing fole called for elections. The prime ministers first term ended in electoral deadlock. Mosts parliament is the fragmented it has been in history and it has not been able to agree on a coalition government. In turkeys parliament, emotions got a little out of control. Lawmakers fought each other over a controversial plan to strip them from immunity over prosecution that could pave the way for prokurdish legislators to be tried on terror related charges. Water bottles were thrown and so were a few punches. Megan coming up, the latest data coming out of china sending the markets some mixed signals. That is next. David this is bloomberg go. Im david westin. Some data out of china has been sort of mixed about how factories are doing. Onhad the official numbers sunday. Lets get another look. Felix zulauf is joining us. You had a note out just last week. You are bearish on china. Why are you so concerned . Excessa is the biggest in terms of investment and credit. Its a big bubble and it will eventually burst. They are trying all sorts of tweaks to carry on the bubble and make it even worse over time. Timing whenion of the bubble will burst and that will have implications on the currency. The currency will weaken and then its the biggest exporter in the world with a weakening so. Ency of lets say 20 or thats going to hit the World Economy because Pricing Power will disappear and product prices will decline wherever china is involved. That goes to the price margins and profits throughout the corporate world. David some say this is a very large economies that has grown rapidly and they are just making this transition from. Anufacturing to services uni they are trying to make the transition. It is not working. There is a big battle between the reformers that want to make the transition happened and the traditionalists in the promise an provinces. They increased capacity and the investment in real estate. There was more than plenty of that already. I think the interesting news coming out of china is there introducing a value added tax. Some provinces have that. They are doing it nationwide and they are taking fiscal power away from the provinces and moving it to the center. That tells you the reformers are probably going to win that battle. The fiscal impulse we have been seeing in recent months on the investment side construction etc. Is going to thinkear and thats why i this run in china will probably fade in the second half. Seen moves by regulators to force banks to be more honest about some of the loans they are carrying on their books. How concerned should we be about the Banking Sector in general and the growing shadow banking issue . Marketa is not the Free Democratic system. Most of the key banks are owned by the government or controlled by the government. So it looks pretty bad out there. Will the government the money to carry through. Down after this interlude we are seeing for the next few months. It will slow down and the currency walls will be opened and hitd it will weaken the World Economy. Jonathan the mechanism for that slowdown will come through the fx channel and not credit . Absolutely. The very wealthy chinese never had to go outside. They had an economic boom internally. Real estate, stock market. They never had to diversify internationally. Abouted to other markets 25 of the assets are outside, that is minor in china. You saw that in the First Quarter almost 100 billion tookg out because they over other companies. Investing outside of china. That game was stopped by the government when the starwood deal fell through. That was canceled by the chinese and that was government intervention. They were afraid that currency would get out of control. David thank you, felix zulauf. , google,ming up, fiat and Driverless Cars. Lets make a deal. Thats next. David Fiat Chrysler expected to come out with sales within the hour. It is also expected to make a deal with google in order to develop self driving minivans. Pacifica is aler fairly popular minivan. The Company Wants to make it self driving with google. You can see out so that down in the free market. We also have clorox shares moving. A ton of earnings back out today. Jonathan coming up, Warren Buffett has one piece of advice, the most important investment lesson in the world, next. Jonathan this is bloomberg go. By over deep in the red 1 . Do you like that, tom keene . We will break down the markets in just a moment. Lets can check of the headlines with matt miller. Matt the European Commission has cut its inflation forecast and warned of slower than predict growth. In gdp in the eurozone will increase by one point x percent this year, a full 1 below februarys forecast. That Helicopter Crash in norway is raising questions about whether Oil Industry Cost cuts are a threat to hd. Last weeks crash killed three people. Callss biggest oil union the action a wakeup call. It was the first fatal accident in norways oil industry since 1997. European companies are rushing to iran now that sanctions have been lifted but they are doing it without their favorite bank. They are unwilling to go near iran related business because of the remaining u. S. Sanctions on the country that has opened the door for chinese banks to get in. Jonathan some days you get into work and pay attention. Today its one of those days. Lets check on the equity markets globally. Red on down, deep in the the dax. The real story from the is fixed income and fx. Crept to a yeartodate high. Yields come again on treasuries by six basis points. Tom keene joins us from Bloomberg Radio. There are certain days where you pay attention. Almost standard deviation move in euro. Stages. T the brutal this is the Second Derivative day. Its about acceleration in vectors and trends. This is something that janet yellen cannot ignore. It is unthinkable that she could ignore the kind of shifts we are seeing. Jonathan in some ways, she is the catalyst for the weaker dollar. Great for china, some stability on their currency. Terrible for japan. Australia needs a weaker dollar we dont see that now. The Australian Dollar is challenged to say the least. Jonathan i would ask whether dollar yen is the canary in the fx mine. How much of that is dollar weakness . Tom i would take the cliche to the canary in the iron ore mines. You see that with the shock and off of what australia did today and the effects which makes this a very important day in the bond market for the whole year. Jonathan growth is picking up. Itsf it was picking up australia, the aussie dollar. If they are cutting rates you have to pay attention. How many guests have sat in front of us and talked about Monetary Policy . Where is it . Everyone else is pushing against the string. Tom it goes back to what you saw with the eu headlines today on reduced inflation combined with reduced real. That means growth plus inflation. When they both come down together that is clearly a reduced animal spirit and maybe thats the next step for the summer. Tom keene has to go back to Bloomberg Radio. Thank you for your time. An important moment in markets globally. Megan hedge funds under pressure. Last week dan loeb started of of high investors high fees and poor performance. There is no doubt we are in the first innings of a washout hedge funds. Joining us now is bobby fabio salvadelli. Lets talk. Why should anybody be paying two and 20 right now . We need the money. Many cases he in is completely right. There is too much following on. For a hedge fund trade the first things written in the bible were, it has to have some economic line, you have to have ariedy opinion v opinion, and some form of an edge. Is what isopinion falling apart. You are looking at stock positions there was an Oncology Company which had 48 different hedge funds at the same time. Suddenly 48 analysts are experts on oncology issues . Look at things that got people hurt. The pfizer and valeant deals. I think what was lacking was really good ideas, good talent and liquidity. It ishings go bad particularly ugly for Equity Investors stuck in the same names. David one explanation is its a crowded train. Is there another explanation . When you take down the yield it gets really hard to justify that compensation system. 4 a 4 orit a 5 yield, you have to get even. If you are long g. M. And short ford in the have the olden days in the happy olden days, you still made the 10 cash which you charged 20 of the performance on. Now the managers are quite cruel. Not getting 20 on any deposit amount. If you are long and short and had a cash balance, setting aside the short rebate, you actually ended up with a