Profitability. It all comes down to cost cuts. Hsbc heading annual cost of bout 5 billion. Jonathan he had a bit of a message for the bank of england. Alix and it come downs to the Retail Banking sector. Were going to have a big interview in the next three hours, talking commodities with the new man in charge over at oy tinto rio tinto. You look at overall at the arkets, it seems to be a risk. Jonathan s p 500 futures marginally negative. In europe, its the ftse 100 thats soft but no drama. Hsbc stands sure leading the gains. In the f. X. Market, this is the one to watch as the cable rate against the u. S. Dollar ahead of the bank of england decision. We are positive on the day but we trade at 39. 78. And ahead of pay rolls friday, ahead of the bank of england decision on thursday, yields coming in on 30year treasurys and off 30year gilds as well. Alix time warner increased its full year outlook and a 10 investment in hulu. You can glean it beat on earnings coming in at 1. 29 a share but its an investment into hulu to be carried on hulu. David disney and fox are already in their stay. And nbc going with hulu now. Alix setting the counter. O. T. C. Setting the counter now. Its a wednesday. Time warner cable is moving igher by 3 in premarket increasing its 2016 outlook. Lets check in with our Bloomberg Team for all of our top stories. Richard, a slew of European Banks reported earnings this morning. Plus we have lucy on the u. K. Services shrinking the most in seven years ahead of the bank of england Rate Decision. Its all about European Banks the last 48 hours. Jonathan we begin in london with bloomberg banks reporter. Lets start with hsbc. Seems to me its less about the earnings and a whole lot more about the buyback as far as the session is concerned. Absolutely. Thats the big thing the investors really appreciated today from the bank. They have been concerned in recent quarters about the capital generation in return of this institution as it faces revenue he winds that we talked about. Those low Interest Rates really squeezing down on the profitability whether theyre able to cut costs fast enough. The buyback that they announced today really to do with selling their brazil unit. And that enables them to carry out this buyback which investors are cheering this afternoon. As far as Standard Charter is concerned, its an asian story. Are we finally starting to see a little ray of light coming out of the restructuring, the big restructuring that weve seen at that bank . Richard hsbc, yes. One thing that weve seen today is both hsbc and Standard Charter asian banks reporting 45 drop in earnings on the yearonyear basis for the half year. Thats really negative. However we are turning the cycle hopefully for these institutions as they restructure and cutting the costs. Theyre generating capital from disposing of loan books and that is something that investors are looking through today. Its notted a bad. And theres a bit of a mixture of stories going on here. Revenue environment very weak. Operationally, theyre attempting to do the best that they can in this difficult world. Jonathan thank you, richard. The low rate story is something thats planned into all of the Bank Earnings and now in thick as well. Alix that story is going to be front and center when the b. O. E. Comes out with the Rate Decision tomorrow. Lets bring in lucy. The u. K. Services, it was really decides mall, falling the most since 2009. Talk us through the u. K. Economy since brexit. Its really negative because there are huge u. K. Computer, three quarters. Its not that its the largest component, it is by far the largest component. That is going to be a huge problem if it continues. And thats the real question. This is one month. So were going to have to see what else comes up. That would translate to a. 4 contraction of the u. K. Economy for the quarter. Alix and this leads into the b. O. E. Tomorrow. 99. 3 chance of a rate cut tomorrow. What can we expect . Lucy well as you say, people are really expecting a rate cut the markets have got it completely priced in. It will be a real shock if we dont get one. The last time they met three weeks ago, the market was pricing at an 80 possibility. So theres nothing set in stone here and were expecting a packages measure as well. So we could be seeing an expansion of kiwi. They could extend their funding to lending scheme or they could even play around with the time horizon for which theyre trying to get inflation back on target. So they could say instead of trying to get inflation back to its target in two years, well give ourselves three years. Alix you want to stimulate the man and supply all for loans. Lucy, thank you on the bank of england and u. K. Economy. And were going to have you covered tomorrow on the bank of england decision and mark carneys news conference. Do not miss it on bloomberg. And david, we have Economic Data out of china which is a different story. David we want to turn to our bloomberg reporter in hong kong. We expect services in china chafment cha what have we learned from these new data . What weve seen over the past few days, we had some Economic Data missing estimate, some beating estimates. At the end of the day, what the market is taking away from this s chinas twospeed economy is almost on a pretty solid, solid track even on the best of times. Its difficult to predict whats really going to come in. But what investors are seeing the people that i speak to, theyre all saying these things havent declined. Both manufacturing and services are hovering around the 50mark which bodes well for the economy after a sharp turn. David theres news about a possible changes in restriction on the futures trading. What do we know that is coming down the pike and when . Robin so what were hearing is there are some restrictions on stock futures allowing people to open 100 new accounts rather than 10 per day. This is a reflection of the confidence that the chinese authorities have in the recent few months. If you remember last summers stock route earlier this year as well, when the currency or debt appreciation led to turmoil in the stock market. Pretty solid ot practices in place at the moment now. They also have massive state on funds which can interfere with the markets but there is always a danger because sometimes the chinese stock market doesnt always move with fundamentals. Avid thanks very much, robin. Alix talking about breaking news as to do with time warner taking with a 10 stake on hulu, joining other big media moguls like fox and comcast. And theyre raising that full year guidance as well. European banks front and center. Hsbc profit falling 45 . But the markets ok with that billion has a 2. 5 buyback. Because its an economic uncertainty, but all of that taking in stride because we did get that buyback. Also did have charges for bad loans coming in at 1. 2 billion. We will be talking more about the negative rate environment in the next three hours. I. N. G. , a bit of a different story. Theyre making some stories despite the negative rates. Interest income is up 6. 7 and Second Quarter profit rose. It did cut some of the bad loans that it had on their books. A better quarter for i. N. B. Stock general stocks i. N. G. There. It had lower provisions for bad loans. A theme that were seeing from a few of these European Banks. Like hsbc, it is worried it wont reach its 10 r. O. E. Goals because of the market and Economic Conditions are totally different than they were two and a half years ago when they could reach that profitable target. A constant theme. Profitability for European Banks. For what you need to know outside of the world of business, taylor rigs is here with first word news. Taylor an airline went up in flames after going to dubai. There were 300 people on board. Television footage showed a large plume of smoke over the airplane. Its the worst accident for emirates which this Worlds Largest carrier in politics, its payback time for donald trump. The republican president ial candidate is refusing to endorse the highest ranking republican, paul ryan. Ryan has a primary election next week in wisconsin. After trump had clinched the nomination, ryan spent several weeks before deciding to endorse him. Trump withheld his endorsement facing primaries, senators john mccain of arizona and kelly aot of new hampshire. Hewlett market enterprise endorsed Hillary Clinton for president. Whitman once ran for governor of california as a republican. She urged all members of the party to reject trump. Whitman says clintons templement and experience make her the far better choice. Im taylor rigs. This is bloomberg. John . Jonathan thank you. European banks rebound but its been a rough year for Credit Suisse and Deutsche Bank. Up next, we reveal which banks have a track evaluations and which are still value trapped. This is bloomberg. Jonathan to the European Banks we go now in focus since the brexit decision. Here is more. Its difficult to say when the environment would be stabilized. Today the risk are very high and the uncertainty is very high. The brexit decision is creating an additional uncertainty in the environment. The global has been revisited at a lower level in the past. And it could last very long. Jonathan joining us now on the stat of the financials is krishna memani. If i said to an Investment Bank, they go whoa, no, no. But the environment for European Banks, its so different. There are four, five different stories all on the same index. Krishna absolutely. Jonathan talk to me which ones youre looking at. Krishna so so far, European Banks have been the ultimate value trap kind of put it mildly. Having said that, i think and there are certainly significant headwinds and the profitability is under severe stress. But even with that there, are really good franchises that exists out there that are being punished with the rest to the crew. So Companies Like u. B. S. And Credit Suisse where the Investment Bank may not be doing as well as they have in the past , the welt management part of sweeties, test, bba. Alix it is different across the board. Credit default swaps and Deutsche Bank has held up very well versus the underlying stock, david. David it depends on what youre investing in. In debt or equity . The reserves are going up with these banks which makes it a better investment, isnt it right, krishna . Krishna if you look at the stress test results, solvency is not an issue anymore. So banks react to solve vensy are just fine. On the other hand then profitability is under severe stress because of structural headwinds that these ubstitutions face. Jonathan the question is debt versus equity is just growth and profitability versus stability. And if you look at the u. K. , lets take a franchise like hsbc. Big asia story baked into that. Now they face the prospect of very low Interest Rates in the United Kingdom as to many of the lenders in the u. K. This story has gone global. The banks are saying we dont like it. Why isnt the central bank acting on that . Krishna theyre key job is to make sure that the economy is sport supported. They are going down to the Interest Rate to support the economy. Banks are Collateral Damage. After the japanese experience, the policymakers are far more aware of the fact that this may end up being significant Collateral Damage and that will have impact on how policies transmitted and therefore, theyre being far more careful. Can you do that without strong and strengthening banks . Krishna absolutely not. And as i said before, with the negative Interest Rate experience in japan, i think policymakers are coming to that realization and perhaps that helps on the banking equity front. Jonathan i think were going to be talking about this for a while because the u. S. Banks just incremental steps across europe slowly well be doing this for a while, stick with us. Alix and coming up, crude has some company. We have a supply glut weighing on prices. Were going to discuss how low oil can go next on go. This is bloomberg. Alix this is bloomberg go. Im alix steel. Brent oil joining w. T. I. You have a supply glut weighing but something odd is happening. Take a look at my bloomberg here. This shows the dollar index versus the w. T. I. Whats going on . Theyre both going down. They usually have an inverse correlation. Ow does that make sense . Krishna memani still with us. Goldman coming out saying guys, this is not about the macrofactors. So what is moving oil low . Krishna this chart is really the biggest difference between oil in 2015 and oil in 2016, which is the driver of oil prices in 2015 was one, supply glut but at the same time, the dollar move was exacerbating that. Thats not the case. So yes, oil is a problem. Prices going down is a problem but it is a localized problem. It probably will not have the same impact on the overall economy, overall Financial Markets as it did in 2015 and end up being far more selfcorrecting than it was in 2015. David is this a temporary inventories issue if a few rigs have come down but its not close to the peak. Krishna the supplydemand mismatch is reasonably substantial and probably takes up to 2017 for it to match up well. I think the thing that can change that is Growth Prospects in emerging markets. So if Growth Prospects in asia change materially, i think the oil picture can change. For now, the prices are going down but it is not going to be as harmful for Financial Markets as it was in 2015. Alix but we have seen china stabilize somewhat. We have seen money guy into emerging markets which should be supportive for oil. Why is that . Krishna the Financial Markets are anticipating the turn if emerging markets. The economy still are at the verge of strengthening further. I think if that is realized, oil price will react more favorably. David i wonder what effect india is having. Because india is a economy growing faster than china and their Oil Consumption is growing as well. Is that a growing factor . Krishna india has been a large importer of oil forever and has been one of the biggest beneficiary of the down trend in oil prices but indian growth is stabilizing but it is not getting to the next level where it needs to hopefully it does. Theyre implementing certain policies that gets growth going in a better way but its still to come. And thats true of emerging markets. If you look at the other countries, things are stabilizing on the verge of turning up. If theyre due, theyll have a meaningful impact in oil. Alix so when you take a look at oil, where are the areas that you cannot invest when you have oil at 39 a barrel . Krishna so where you can i guess where you cannot invest is producers. Producers are on the verge and some high yield bonds that are dependent on that revenue stream. Having said that, there are pockets in the Energy Market that offer you tremendous opportunity because prices go down and their fundamentals dont. M. L. P. s are the best example of that. Alix they have the juicy dividend and they want return to investors. David which have gone up and gone down. Alix a lot of retail wind up being in that trade. Krishna for people looking for income, i continue to believe midstream m. L. P. s offer tremendous income opportunities. Lix krishna, great stuff. Jonathan the chinese hard line has become a reality but only in one profits alone. Well discuss a fragmented china right here on bloomberg go. From new york city and the markets two hours away from the open, futures a little bit softer. S p 500 futures negative five. 24 hours away from a bank of england decision from london and new york. This is bloomberg. Alix this is bloomberg go. Im alix steel. Heres a check on some stocks moving before the stocks open. B. O. G. Funded by asset sales and Second Quarter operating profits with six cents before. Well be speaking with the c. E. O. At 10 00 a. M. This morning. Also Standard Charter, youve got the good and youve got the bad. The good it shall the stock is up. Its bad loan charges fell to about 1. 1 billion. The rough part was the profits still fell by 46 yearonyear, the lowest revenue since 2008. So definitely sort of the good and the bad when it comes to these European Banks. Also bitcoin, this had a huge move. Its really fascinating. Down by 5 but its low was about expect . The worst daily fall since january. You had a hack of a Hong Kong Exchange about 120,000 bitcoins were stolen. Over to john for a look at whats happening in the markets. European banks, profits may be down but stocks really moving. Jonathan that buyback from hsbc really happening. And the wider market, the dow on a sevenday losing streak. The s p 500 on a twoday losing streak. Futures softer. Europe, threeday losing streak. The ftse down. 2 . Germany, margically negative 24 hours away from a big bank of england decision. He anticipation is too much. Its been a soft weak, weak, weak pound story ever since the u. K. Voted to leave the e. U. The Monetary Policy response, we get some answer on that tomorrow. In a commodity market, w. T. I. Has been a big story. It sapped the 40 barrel for the first type in april. Percentagically positive on 39. 69. And the global bond market rally is starting to unravel. G7 yield, fiveweek highs. At the long end of the curve, 30 years, we start to come in on treasuries