Transcripts For BLOOMBERG Bloomberg Markets European Open 20170504

Shares jumped in hong kong as investors rewarded improved capital. Returning bank that more to shareholders and when will it . We will talk about that question. It will be a busy session. An awful lot to think about. We need to talk about what equity european equities will do today. We will see what the fair value looks like on the wei. The ftse look sick it is opening more firmly. Up and the dax up by. 3 of 1 . In aggregate we are opening up. 3 of 1 . That is the story in terms of where we have think cash is day. Ing the guy the where watching carefully a number of things. You have seen the aussie dollar come down. That is the story with the aussie dollar, down by. 2 of 1 . The bloomberg dollar index is up and the dollar is firmer. Solids backtoback sessions for the greek market. I want to show you the next column. This is where gets interesting and this explains why we are seeing what we are seeing in the aussie. Iron ore is down by 8 . Youre seeing an aggressive selling off of the metals complex overnight. Were soft yesterday in london and soft in australia. Will they be softer in london . The fair value which i showed you on the ftse points to a fairly solid start. Hsbc is trading very strongly this morning. Kong. Up to 2. 5 in hong that should translate into a big positive jump for the london market. We will talk about the minors and what is talking happening with oil as we work our way through this morning. And the crude complex as well. Lets get the bloomberg first word news update. ,uliette thank you, the u. S. The fed has stuck to its outlook for gradual policy tightening as it left Interest Rates unchanged and so a saw no alarm over economic weakness. Officials were unusually explicit in a statement indicating a disappointing firstquarter would not knock them off to raise rates this year. The way the expected decision contained no concrete commitment to the time of the next rate increase. Investors increased bets on a move in june. And still in the u. S. , has rippled against plan to vote today on their long sought obamacare measure. This comes after weeks of agonizing over how the gop would deliver on seven years of promises to repeal obamacare as well as intense pressure from the white house a number of republican moderates remain opposed or under sided undecided adding significant suspense to the about. South africas finance minister has said the countrys economic policies are safe and focus on growth despite questions at home and abroad about jacobson was administration. The government is committed to this go management and comets his advisor about changing policies do not reflect its stance. Our policy is the South African government [inaudible] and by companies. There will be various voices outside that framework. Reflecte voices do not the opinions of government. Juliette we will be speaking to the governor of the South African river reserve bank at 9 30 a. M. U. K. Time. Said firstquarter profit rose 12 as it boosted revenue at three of its biggest businesses. Adjusted pretax profit which excludes onetime [inaudible] rose to four point 9 million. Share buybacks have helped its stock climb 45 in the last year mckay saidn children should not expect purchases every quarter. We have finished day billion dollars by back. When you add to that what we did last april, that is 3. 5 billion. I would not encourage investors to think we would do buybacks of recorder. We are happy with we are from a capital position. Juliette global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is blogger. Bloomberg. Guy lets talk about what is happening with france. S speaking on the radio addressing some of the issues in the last 20 for hours. He does not have an account in the bahamas. What of a followon from one can describe as a Heated Exchange that took place in france last night. The france i want will not be divided for you to make this happen we will need to leave a system that lead a system that produced that. You are a coproduct of the system. Your its parasite. You said it so often, i am the candidate of openness, no, you are the closure of factories, the closure of maternity wards, the closure of police stations, the closer of closure of hospitals revealing the leaving you do not want to close our borders. Guy it was a fairly feisty affair. That is the highlights of some of the blows of the tv debate in the runoff phase of the election. A survey showed 63 of respondents rated macron is the winner. I am joined from paris by my colleague. Is running out of time, isnt she . Last night did not work for her. Is there anything else she can do . Caroline she wanted to show a series of conquests but she did sound angry and aggressive on many occasions during this debate. She did sound more comfortable on subjects like terrorism, accusing macron of having a soft spot for islam it fundamentalism islamic fundamentalism. She was confused about the plans to leave the euro saying there guarantees, the french would still be using the euro franc but the would be used for international transactions. Macron replied that was nonsense. If you dig into the details even among the [inaudible] thoughter electorate macron was most convincing. Best. 4 Emmanuel Macron point for macron, he was the candidate who can understand ordinary people, according to polls. Guy one thing that occurred to me is that it was not a debate that is going to encourage people to come out and vote. I think that is going to be one of the critical elements of all of this. Do you think it has engaged people with the cabinet . Caroline it was very Little Exchange as you saw. Cooln trying to keep his at appear as the detail man, the man with knowledge, we saw the first clash after just a few minutes on industrial qualities with the le pen accusing macron for being responsible for the sale of some companies. Then macron told her, you can look into your file but you are mixing the two subjects, youre telling the french lies and you are a parasite. There were very strong punchlines saying that macron saw part of the french people as invaders and he would be dependent on the german chancellor, angela merkel. She said at some point you have the choice now to elect a woman, it would be either me or angela merkel. And thank you very much date. It will be an amazing run up to this. I am sure the period afterward, we still have elementary elections. They market did not move on the back of it so that the headline level the markets have priced in a macron win. Take a look at the risk reversals, this is the euro dollar risk reversals and what they show is this kind of search forr the first round win macron and this replacing of some of the options, and this is the skew. The market is down from the zero line the more the market is betting that there is a possibility we could see a significant move to the downside. Hedging. S like this is people saying, you know what, we have seen what happened in the u. S. And the u. K. , we have seen surprises take lace, we are going to cover ourselves. What we have not seen his headline moves, you have seen the market taking a little bit of cover. Bloomberg tv and radio bring you special coverage of the French Election, the president ial runoff results sunday. Will repeat the performance after the second round as well. Market reaction as i have indicated fairly muted on the french debate as investors have had other things on their mind. Lets go to singapore now. The fed is comfortable looking through this soft patch of data. Does that mean june is definitely got the green right now . Mark jen would have to be the base case, it is not deficit june would have to be the base case. They emphasize the point that the recent slowdown in data in the u. S. Is transitory, i believe the word was. They think this is temporary and the economy is still find and they left with the message of what they said in march holds and that meant the market is cracking pricing in june as most likely but the fed has not precommitted. They have given themselves in option to talk about that if the economy continues to deteriorate. June is the base case but it is not 100 definite yet. Screen, 74 the gmm on the dollar. Iron ore being battered in singapore and in china. What do you make of this, the reflation trade continues to ebb and ebb away. How should we be reading this, a canary in a coal mine or is there something more to it . Sok the downturn has been sustained it should be worrying people more. One of the most interesting things in terms of the Market Reaction is there was not a mass contagion effect from the commodities fall. You have a slightly hawkish said traded relatively ok. Commodities topped out in february. We have seen Agricultural Commodities happy all year and oil tank heavily. Head toward the lows. We are seeing industrial metal having problems. They commodity indexes trading poorly. There are supply issues that are hitting this but this does reflect a lack of demand based on what was expected a couple of months ago and that is a negative sign for the global reflation trade. Working our way through the morning. Mark cudmore, thank you very much indeed. Spot analysis as ever. There is a piece of it, many more on the mliv go screen. There is another thing you can do this morning as well. A pliv screen as well. This is running on the hsbc core and numbers, smart analysis on a very on very important events. Interviewt you more with the ceo cfo. You can follow this on top live and on the terminal. We will get you some great stocks. Stock is trading higher in hong kong. We will carry on the conversation next. This is bloomberg. Guy good morning, 46 minutes past the hour. Lets get your Bloomberg Business flash. Juliette thank you. Societe generale has settled a legal dispute with an authority income. Ed lower net net income fell to 470 Million Euros missing analyst interest estimates. The bank posted rebound in trading businesses while falling short of trend shown at its larger rival, bnp paribas. And tempering exuberance about sales. The company said it expects Revenue Growth to be down meaningfully after its talks increasing the frequency of marketing spots in the newsfeed to avoid driving way users. Shares fell as that message overshadowed First Quarter sales and top estimates and a 17 jump in monthly users to 1. 9 billion. The impactully track of bad experiences during the last several years. We have said that ad load is up and we are able to do this by improving the quality and relevance of ads. Where we are focused is continuing to improve the ad quality and relevance. Juliette tesla has ensured invest assured investors that they are on track to become begin production. Lostding some margins has 1. 33 a share. Cashman was the secondmost in the companys history behind only the final period of last year. I am confident that these vehicles will occupy every segment. I do not jump the gun on the semi truck announcement, we are unveiling that this year. Will define peoples expectations. Juliette that is your Bloomberg Business flash. Hsbcs adjusted pretax expectations. They will contemplate share when they ared appropriate. And edwards to the banks cfo. Anna edwards spoke to the banks cfo. I have to say not being facetious, i would be a happy man if i could closeout 2017 right now. We guided at the end of the year to see 3 or 4 Revenue Growth over the course of 2017 and notwithstanding a very good start in the First Quarter, that is the gains we are holding for the market as we move into discussions with investors over the course of the next few days. Anna can i ask about Share Buybacks . What would you say to them, last time we talked, you said we have a ratio target, if you are above that you will contemplate returning cash, you are well above that at 14 point 3 . Why not more cash right now . Guest we have finished a billiondollar buyback on the 12th of april. When you add that to what we did last year that is 3. 5 billion. I would not encourage investors to think we would do buybacks every quarter. Were very happy with where we are from a capital position. At 14. 3 , dating to her one and at the half your last year at the end of the year, our principal focus is taking our Investment Capital and putting it to work to build the businesses around the world. Where strongly focused on the maintaining and delivering good dividends to our shareholders. Last year we paid over 10 billion to our shareholders which i think made us the thirdlargest dividend payer in the Banking Sector globally. Fromll consider buybacks time to time as appropriate. We have finished one billion, well take a look at policy and reflect and had and see how the rest of the year develops. Anna last time we spoke and last time you are talking to investors around the last set of results you mentioned 8 billion could be freed up from the u. S. Business. How much is the scale of returning cash to shareholders question mark guest shareholders . In 2016e completed ccar with no objection from the federal reserve. We along with the rest of the industry submitted ccar submissions for 2017. We are making that available for further deployment within the group. Our possible or possible return to shareholders. The guidance we provided at the end of the air around how we intend to deploy our cash hold is firm. Edwardsaking to anna earlier on. Lets get an analysis. Kongt reaction and hong pretty positive. Was it the quality of the earnings that encouraged investors . Certainly, as you mentioned, the stock up in hong kong. The last time it was i checked it was the highest intraday level in more than two months. Casting around and some of the analysts reports, a lot of people enthused by the fact that this report beat estimates, a 12 beat on the adjusted profit line. Another positive thing, some analysts had been anticipating revenue aligned to decline. They reported a 2 increase on the adjusted revenue line. Considering that this is a bank that came off a fiveyear decline in revenue, that is one thing that was noted as quite positive area do couple of other things, some analysts that at the fact that payments fell loan payments fell 48 , adjusted loan and payment charges. That is a good. We are talking about the outlook for bad loans. The other thing we should mention is the fact that the comment equity to one ratio rose to 14. 3 percent. That is also very positive thinking about how the bank will expand their riskweighted assets over the coming year. The sense in the market is that we are moving to a point where we start thinking about capital returns from banks. Banks buybacks announced. There is enough positives in this set of results to look through that. Do you think the focus returns to that issue of capital returns pretty soon . I think so. As the interview with anna showed, he left a lot of wiggle room for that and certainly not ruling anything out for it it makes for prudent fiscal management, if you like. He also talked about the fact that the outlook for more capital is going to be, going to look pretty good, they will get more capital freed up from the u. S. He said Something Like 8 billion expected to come out of the contraction and the u. S. They will have the firepower to do it. The key and the other interesting thing is the other challenges that may come about this year. Is the new chairman have to think about, he is replacing mr. Flint, what are the challenges there . Mark tucker comes in as the new chairman in october. Among the things he will have to do and we have noted it before. He will have to look for a replacement for Stuart Gulliver as ceo. Thisulliver has indicated year might be his last year, last full year at the helm of hsbc. That is one thing that mr. Tucker will have to deal with. More broadly, the bank is facing a number of other challenges. We have the likes of exit sputtering along in the background. The finance dr. Was saying. It is too early to worry about that but no doubt they are thinking about that. They are a big trade finance bank as well. The possibility of more trade bytectionism and so forth the u. S. Foreignpolicy agenda could also impact on that front. Guy plenty to think about he has his work cut out. Numbers. S on the hsbc we have a few minutes before the london listing opens. You have this tliv function you can use in your terminal. The call is ongoing. They are talking about loan growth guidance, we have seen alina what is happening with buybacks. Well take a pause. What is interesting is that is going to help out what is going on with the london markets. Seven utperform, up. 7 of 1 . Upc is going to help, it is in hong kong. Show will be positive shell will be positive. Despite the fact we have seen the oil price coming in a little softer. Be aware of that. The other thing to bear in mind is we have seen this big move lower in the metals complex overnight. For of that was priced in the london market yesterday. Some of it may not be. Keep an eye on the miners. There are five or six stocks going today. Unilever, you that in mind bear that in mind. Jeff 7 59 in london. One minute ago until cash opens in europe. Looks like a positive start for european equities. London looks like it will outperform. Looks like we will be opening up. 6 in london. Cac 40chyearold the and dax up. Keep an eye on what is happening with the mining stocks. You have seen a big move lower in iron or and some of the other metals overnight. Bear that in mind. We did see some big names coming softer yesterday. 2 for some of those names. That. Y see more on we will see exactly what happens. The aussie dollar through. 74 this morning. Get the smarter analysis. Stewart wallace walking towards this duty youre right now. Let us talk about the markets and this open. We think it will be a positive story. Here we go. This is the picture we are watching at the moment. There goes london. Nice, solid start for the london market. 72 point 60 is where we are trading. We are expecting the german markets to open up reasonably strongly. We are expecting a little bit more on the london market. Good news from anglo as well. A bit of news on the Mining Sector as well. We will break it down in more detail. Let us get details. Manus cranny. Jennifer we get to the price of iron or in a moment. That takes a shine off the metal. We have a few exdividend to consider as well. The focus on hsbc will be on numbers. Financials are slightly better bid. A third ofpening up 1 . Hsbc, no buyback. Better. Ers were carlsberg. First quarter revenue. Stocks are at a 20 month high. At 1 8 of 1 . The shanghai rebuffs futures. You are seeing this methylation in terms of the market. The central gravity in the iron ore market has changed. Futures dropping 7 . Are something to be aware of. We are going into the last final days of when you can trade your way into the French Election. And the ramifications there of. 240 feet, which surprised me. The actual volatility, the cost of hedging, hsbc, as you can see, up 2. 4 . Drope seeing it aggressively as we go into these final furloughs of risk over the weekend. Ae gilt market is something number of protagonists are less enthusiastic about as we saw the Inflation Numbers rising. Manus you are seeing one or two people saying 1. 7 on a very outlier. The gilt yields could rise toward the 2 level. Up overget that opening 3 . I am off to Digital Radio with caroline. Guy. Guy thank you very much, indeed, manus. Let us show you what is going on. Just have you updated before we get to it. I apologize for that poor timing. The up. On it is continuing the run we have seen in asia. The market likes the numbers we are seeing. Total lifted. Added us on the back of its numbers. The oil complex looks like it is rising this morning. Hsbc, royal dutch shell, and anheuser are the main gainers. Let us turn your attention to what is happening on the downside. This is the picture. After bnp paribas is numbers, socgen is a little bit of a disappointment. 17 or 18 stocks going ex dividend. A big chunk of those are coming out of london, but the london market look like it is performing reasonably well this morning. There are a number of factors that will lead against that. One of those is what is happening in the commodity complex. Metals extending the biggest daily plunge this year, busted by signs of apple supplies and concern about the outlook for demand in china. The outlook is softening. Let me get you a chart in a moment. I will bring you that. There we go. This is the chart we are looking for. No. That is not the right one. He is the executive editor for energy and commodities alongside james bevan. Good morning, gentlemen. What is going on in the commodity complex . I think that is the key thing. I have had that question the last couple of days. It is really going on in metals. We have exciting stuff going on in agriculture in the u. S. It is not will end it is mostly not the precious metals, so we are looking at copper and iron or. These are the fundamental ones. They are moving for fundamental reasons. The pmi numbers out in china over the weekend were not particularly encouraging. We have data out of australia showing fresh supplies coming into our already record stockpiles. On copper, stockpiles building. In london, that let us not get carried away. The main thing to remember with iron or and the equity players is at 60 per ton, the marginal iron or is well over 100 . This is a very profitable business. Mildly less profitable that was a couple of months ago. Guy to an extent . Stuart yes, i think so. This has got to be one of the best meltdowns i have seen in some time here at even the producers were saying we have got far ahead of ourselves. We are coming down to 50 per ton, 60 a ton. How much further, i dont know. Guy james comer thoughts . James, thoughts . James i completely concur. This will be a noisy market. There was a very strong run a prior to that. Occasionallyng to have a shakeout, trying to determine whether people have the capacity to stick with the prices. To me, the big issue, as you rightly identify, i do not expect it to collapse. Manage theto deflation of those bubbles we worried about so long. These are the metals that are be based. You have the right line that is copper, iron or, the lme. The move here, it is the iron move down that is rebased that stand out. These are separate buckets we had to think about at the moment storyvertheless, the oil in the United States just keeps ramping up. We saw that again in the data. The opec members, looking at this and scratching their heads. That might be a polite way of putting it. I suspect it is more dramatic than that. At these numbers yesterday and i look at this every day, but the americans have managed to add close to 900,000 barrels a day since october. That is absolutely phenomenal. Another one. Y adds it lets out a great deal of what they managed to achieve in the nonopec production. It will continue to be a major headache. No signs it will that up soon. You can say they are an early indicator of what is to come. That suggests we have a lot further to go in terms of added barrels. May 25 is the big meeting in vienna. Positive noises from just about everyone. Even iran on site for an extension. Maybe they attempt to deepen it. Surely, the pressure must be on them, not only to extend it, which is the bear minimum, but maybe a few more barrels would help us stay above 50, thereabouts. Guy keep an eye on that one. James, the numbers at the Oil Companies this morning, and yesterday, bp, they look fairly solid right now. If you have them in your portfolio, do i need to worry that a significant leg lower in europe would make those dividends maybe from bp . James i think it have to be very worried about the sustainability of dividends. He is doing so at the real risk of its longterm position. I worry that we have not only as of the oil prices dynamic, but it will ball decline in demand relative to prior expectations. Energy production is no longer significantly dependent on hydrocarbon. There are real headwinds in the entire sector. The further price improvement building to buy more. Guy thank you very much indeed. Great start. Stuart wallace joining us as ever with fantastic coverage from the entire commodities studio at bloomberg on what is happening in a number of different aspects of that market. James bevan will stick around with us. We will bring you special coverage of the french president ial election. The runoff sunday. We had rate coverage at around one. We will wrap it up around two. An exclusive interview with the finance minister of south africa. He will be joining us at 8 30 u. K. Time. While we will talk about the fed not budging on its Balance Sheet policy. The former chairman says shrinking the holding will take four to five years. We will have more on that interview that he delivered yesterday for bloomberg, and next. Guy 12 minutes past the hour. Welcome back, you are watching the european open. Equities reasonably well bit across the region. A few exdividend out there. Trading higher and hsbc is definitely trading higher this morning. 72. 72 is where we are trading in london. Big cap movers. Nejra cehic, over to you. Nejra quite a bit of focus on minors, particularly after what happened in the asian session. We are looking at gold. First quarter Gold Production up 10 year on year. Shareholders approving a 52 increase in the annual dividend. Brandon bolden rising 2. 7 despite weakness. We often see gold producer react along with the gold price, but ran gold randgold bucking that. And has record high risen the most since midmarch. This after First Quarter revenue from continuing operations was the. 9 yearoveryear for security firm. On the downside, im looking at next. Could be a sign sales continue to flag ahead of an expected slowdown in consumer spending. We are seeing the stock dropped the most informative, causing a bit of concern for a company that has been seen as one of the top performers in the industry up until recently. Guy. Bernanke has said the Trump Administration plans to tax cuts, at the wrong time to boost growth. The former fed chair also suggested it would be wise for President Trump to reappoint his successor. , to another term. Take a listen. Ben we dont know who he is going to a point to appoint. He could conceivably reappoint janet yellen, which i think from his perspective would be to reappoint chair yellen . Ben which would be a reasonable, sensible thing to do. She is highly competent, has done a good job, has the confidence of the markets. Whoever is appointed, i am sure will certainly work carefully with the rest of the fomc. There is a reason why there are so many people on the federal Market Committee making those decisions including Seven Members of the board, and that high quality staff, which provides a lot of guidance and help. I do not think we are quite in the 1928 situation by any means. I am of course very hopeful that they will appoints, if not jenny yellen, they will appoint somebody strong and competent. Debatein that is a sharp within the business media, and i would suggest in economics as well. Im going to pick on gary cohn of the Trump Administration. With Great Respect for mr. Cohen s abilities. Do you need to be a frontline academic to take the job . He was very ben familiar with Monetary Policy and the fed. He obviously knew markets well. I think there is a range of skills you can have, but you have to be at least familiar obviously with Monetary Policy and how it works and what some of the issues are. There are important technical components of it. Leadership is not constrained by , you know, a narrow set of skills. There is different types of backgrounds that could create a share. Ir it is important to know about Monetary Policy and the financial system. What do you envision that our vice chairman of general regulation will do . There is talk of others. For a more regular it is not the romance of the fed that we cover at bloomberg. Within all of business economics. What do you envision that job to be for a new kind of vicechairman . Ben it is a very important job obviously because as they say, personalized policy, so even if the regulatory structure is only moderately changed, not substantially changed, the way it is applied and executed will matter a lot in practice, so you know, the people they have talked about generally are people who are highly qualified, have had a lot of background in isancial regulation, and it important to get someone who will take very seriously what i think we learned from the great crisis. It is not enough to be looking at individual banks and at the individual components of the system. Somebody has to think hard about the stability of the system as a whole. Was was something that brought home to us when the system as a whole went into shock in 2008. That person will have a very important role. Agencies,to other they are trying to make sure, not only are banks individually stable, but the system as a whole is resilient for the next shock that will come. Alsothe former fed chair told bloomberg it would take four to five years to unwind the Central Banks Balance Sheet, which while not the biggest, are certainly substantial. The fomc did not signal any change to its Balance Sheet in the holding that it has from yesterdays fomc meeting. The fomc also left rates unchanged. The week growth was transitory. James bevan is still with us. Is the fed right to look at the recent soft data . James the fed is adopting a wait and see policy, try to anticipate what trump will deliver in terms of policy. There has been a significant gap in a softer data, the surveys that say optimism is up, and the hard data that tells us what is really go on it going on in the economy. Until that happens, i think the fed will say only one or two more hikes this year. 10 year yields oscillating in the first half of the range of two to 2. 5. Rising inflation. With any luck, recovering grow, perhaps 2. 5 to three. Still, it imperative policy in the context of history. Guy that is fair to say. Still, a comparative policy in the context of history. Guy that is fair to say. Ofcan start to clear some these hurdles in quick succession, how does that change thinking . James i think mr. Trump will need to flesh out the detail on the tax plans. And how they are going to be funded. That said, what is critically important is that there is i do not think it matters that the deal is deferred until 2018 because the market is always looking ahead, and therefore absolutely. Guy when you think about the it worry you, does that this is going to take place, or are you kind of less concerned because the ecb is still cracking on a fairly decent clip and the boj is doing exactly the same thing as well . Do the two balance each other out in terms of what is happening in the market . I think it would be incredibly useful if we were to see confirmation that deflation risks are firmly behind us as opposed to something deferred, and that we are getting a normalization of Economic Activity levels such that the central bank could begin to withdraw its extraordinary stimulus. In due course, one should see higher bond yields. How high do yields go in the current cycle . If they rise at all . Up threen the yields Percentage Points would be consistent with a rising equity market. Only in my view do we begin to see a compression of the capacity in the interest of consumers to bahrain to spend and to stress on Balance Sheet because of course, while the average Balance Sheet of a u. S. Company is adequate, there is a bifurcation between companies with lots of cash, and companies with heavy depositions. To given that they have unbind the Balance Sheet, this hiking cycle will be weird. You are going to end up with a very different shaped curve at the end of it. Is that something to worry about, to think about . It not only would flatten, you probably expected to steepen. Expect it to steepen. Do you worry about this . James i see no signs of an imminent u. S. Recession. That is critical in terms of the bond market and equity market. When i contemplate what is likely to lie ahead for u. S. Equities, i think that probably early 2019 is the onset of the next bear market. Accepting that there may be corrections are on the way, but by 2019, we could see the u. S. Economy rolling over that down into recession. Too much stimulus leading to a policy agenda. That is when the long bull market may finally end. Uy james bevan, cio hes going to stick with us. We are going to discuss last nights debate between frances president ial candidate. It was fierce. That is next. This is bloomberg. The hour. Nutes past welcome back. You are watching the open. Marine le pen unleashed a barrage of attacks against Emmanuel Macron must might as she tries to close the 20 point gap in the only headtohead debate the two have had any French Election campaign. A snap survey by pulling confirms that 63 of respondents rated macron as the winner. Still with us, james bevan, cio at investment management. Have you move beyond the French Election . James i worry about the aftermath of the election and the shifting relationship between germany and france. At the end of the day, that is critically important to the outlook of the e. U. And single currency. I think there has been a significant shift in sentiment in the eurozone towards the currency, towards maintaining the union, which is positive for the outlook of the european economy and also for markets. One might have said three month ago, one would not want to touch european banks. Now, one looks at the prospect, credit agricole, you could make a very good bull case. Guy do you think the americans, who have long resisted putting money to work in europe will be reversing course . There is evidence already that they are. Our european equities the strong buy . Are they the conviction buy right now . James there are lots of people identifying that the european economy will move up. Equities have in some sense been left behind. There are good quality opportunities in global businesses, so if you want to have a global business, look no further than an lvmh. If you wanted to have a play on the outlook of the european economy, one could look at ryanair, which has been savaged by many commentators but has positive prospects. Credit agricole to me looks like an interesting opportunity at current levels. Guy thank you very much for spending time with us. James bevan, cio at cci investment management. Bloomberg tv and radio will bring you special coverage of the french president ial runoff election. That takes place sunday. Great coverage of the first round. We will repeat it. App it up even more for the second round. We will bring you an exclusive interview with the former finance minister of south africa. An interesting exit for that conversation, next, here on bloomberg. The fed, unfazed. The Central Bank Says it will keep its gradual rate hike approach despite the soft patch in the data. Is the door wide open for a june hike . Macron comes out on top in the final french president ial debate. Time for the pen to close the polling gap. Pen to close the polling gap. Why is the bank not returning more to shareholders . Good morning and welcome. You are watching bloomberg markets. This is the european open. I am guy johnson in the bridge capital. How are market shaping up . Now, remember there are a few exdividends in the market, so be aware of that. There are other names going ex dividend as well including names like allianz. Hsbc is trading at 666 this morning, up. 3 three shale is trading strongly for the upside as well and anheuserbusch is moving. These are index. 3 santander, ing index points. Santander, ing. That a slip into the downside entry what is going on. I mentioned the fact that some stocks are going ex dividend. One of the big names is allianz. Hsbc figure straight quality and quantity. Toppedd pretax profit expectations. The lender said it will contemplate Share Buybacks as and when they are appropriate. That may be a bit of a disappointment. Anna edwards spoke to the cfo earlier and asked whether 2017 will be the end of fullyear revenue declines. Be ahave to say, i would happy man if i could close out 2017 right now, but the end of the year, we see three to 4 Revenue Growth over the course of 2017 and notwithstanding a very good start in the First Quarter, that was the guidance we are holding for the market as removed into discussions with investors over the course of the next few days. Can i ask about Share Buybacks. There are many who are disappointed not to see a Share Buyback today. Last time we talked, you said there was a ratio target of 12 to 30 . You are well above that at 14. 3 . Why no more cash right now . Finished ave just billiondollar buyback on the 12th of april. We add that to what we did at the end of last year, 3. 5 billion. I would inc. Merge investors to think we are going to do buybacks every quarter. We are very happy with where we are. 14. 2 common equity, tier one. Ourhe end of the year, principal focus is taking our Investment Capital and putting it to work to grow the business is around the world. We are obviously very strongly focused on maintaining and delivering good dividends to our shareholders. Last year, we paid over 10 billion to our shareholders, made us the Third Largest dividend payer in the Banking Sector globally, and we will consider buybacks from time to time as appropriate. We have just finished a billion joined we will take upons year to reflect on how the rest of the year developed. Anna you are taking a pause, which i understand. Last time we spoke, and last time, you were talking to investors around the last set of of results. How are we understanding the scale of returning cash to shareholders through 2017 . Again, we are making Good Progress in working through the restructuring of our u. S. Business. 2016. Pleted it in successful, with no objection from the federal reserve. We a lot with the industry is submitted submissions for 2017. We will be looking to dividend some of our and making them available for further deployment within the group of possible return to shareholders. So right now, the guidance we provided at the end of the year round is absolutely firm. Mackay speaking to an earlier on. The rules for struggling banks in india mean for the Financial Sector in the country . We will speak to the chair of the state bank of india. That conversation, next. We will speak with the former finance minister of south africa. This is bloomberg. Guy welcome back. This is the open. European equities bid this morning around. 5 . Here is nejra cehic. Nejra hsbc rising the most since december on a supplies increase in First Quarter profits. Adjusted pretax rising et al. Present. The ceo, Stuart Gulliver, stemming a revenue to climb that has dogged his 10 year. Hsbc is on track to hit its costsaving target. We spoke to ian mckay iaian mackay this morning. Here is what he had to say. Added that to the end of what we did last year. That a 3. 5 billion. I would encourage investors to think we are going to do buybacks every quarter. We are happy with where we are from a capital position. Banks as ane seeing Industry Group upcoming on the stoxx 600, but also seeing oil and Gas Companies outperforming. Among them, shale. Showing it as adapted to a world of lower oil prices, generating a surge in cash flow that allowed it to pay dividends while reduced that he read on the cash flow, cash flow from operations rising more than tenfold in the First Quarter. We have seen the stock in this session rise the most since december. On the downside, anglo american. Miners underperforming. Anglo american hitting its lowest since 2016. A lot of this is down to the drop we are seeing in industrial matters, which are having their worst day this year since yesterdays session and continuing the slide today. Guy thank you very much indeed. Are a rating down grades reality the country has to accept. A form in durban. Thank you very much indeed for taking the time to join us. I guess so many questions. Let us start off with you, if we might. Is it your idea that you will remain in parliament, or are you going to move on to other things . Pravin good morning, and thank you for having me. I will remain in parliament for a while. I have been in parliament before between 1994 and 1998 when we drafted the new constitution amongst many other things. And this is indeed a new chapter in one life, so we will evaluate the situation as we go on. Guy ok, so what is this space . Talking of spaces we want to watch, we are wondering when we are going to see a vote of noconfidence in and we are wondering if you are to remain in parliament, whether you will vote for or against . As you know, this is a matter between certain litigants and our constitutional court. They are hearing this matter. On thehe 15th of may 15th of may, the issue before the court is whether it would allow for parliament or Ask Parliament to consider the issue of a secret ballot. These things are going to evolve and change every few days depending on how different players view the situation. We would debate the matter intensely and these matters have been discussed in the past, as you would know, late last year as well. Theus wait and see how Court Determines this matter. Parliament has been in recess because of the easter period, so we have not been back to parliament. Some of the processes have started this week. Next week we will have a better for how these issues will unfold both in the courts and politically as well. Guy but you are a leader in this country. How do you see it . How would you vote if you were standing in front of the table and placing your bets right now, which way would ago . If you were to go one way or the be . R, how would things pravin i think it is an unfair question at this point in time. I have said before that conscience is going to be an important factor. The allegiance to the constitution is an important factor. Others believe that the Political Party you belong to need to have an influence over the kind of decisions you make, so these are the kind of havessions we need to internally, clear up our heads. The public is becoming more vociferous on this question as well. You have heard the Deputy President of south africa among others saying to ourselves that we need to listen to these people marching in the streets or engaging in other forms of activity, and i think that is a very important issue for public representatives to keep in mind. What is the public saying . What are the expectations . What is the best thing for the future of the country itself . About would like to talk the mobilization. You talked about that in the past in more detail in the moment, but you said yesterday the country must make tough leadership choices. What did you mean by that . Very simply that in the past year, working with business government, in the treasury and associated departments, we were very successful as Team South Africa in maintaining Investor Confidence in this country, particularly on the portfolio side. Thendly, meeting expectations of ratings agencies and sustaining investmentgrade that we have. And there was a very clear formula, if you like, that we evolved through internal dialogue and reflection, and that formula is one, inspire two,dence in this country, manage our politics in a way in which it does not do economic inm as we might have done other parts, three, undertake Structural Reforms that are required, whether it is to soes, and become in into writing, in different sectors of the economy, particularly in tourism, innovation and relations to manufacturing. Want tohese factors lend properly. Given that impetus and backing those in the private sector and we will take think south africa to be on 2 growth, so the formula is there if you like. What we need is a collective determination both in government and outside to make sure that we now stop the talking and get on with the implementation, because implementation is what will actually inspire confidence. Guy let us talk about confidence and break it down a little bit. Do you expect moodys to downgrade the country . Let us talk about confidence, the rating agencies. Pravin yes. All we are saying now is that we over spilt milk, so to speak. Two of the ratings agencies have done what they have done. A third will give their views in a few weeks time. That having happened, we need to now pull our National Efforts together to implement this plan the we have, and in shortest possible time, get south africa back to investment grade, but more importantly, inspire the right level of cooperation and alignment of all the resources and role players in south africa so we can get higher levels of growth, better levels of job creation, and higher levels of inclusivity, which is a key issue both at the World Economic forum and for south africa as well. So we come back to the same scene, which is confidential, if we act together and seem to be relate delivering results both for south africa for all the elite if you like, the political and economic, and show to them that we are working in their interests. Guy you talk about the public and the high levels of expectation. You talked in the past about the need for the public to mobilize. When they see things going wrong, they need to mobilize and make it clear that they feel things are going wrong. Did we see that around labeled a around labor day . And how would demonstrations be received both sort of domestically by government, and externally, do you think . And it this a positive story . Is an no, i think it extremely positive story, because in all countries around the world where they use the deficit between political and economic elites on the one hand and citizens on the other hand, and this is what has resulted in political results in the indebted states, in the u k, and possibly in france this weekend , andll the u. K. Possibly in france this weekend as well. Having people engaged, being active on issues that matter to them, is a very crucial part of any democratic system. As aeing able to work team, both leaders, political and economic, and citizens of the country, and aligned on the kind of goal we want to achieve what we want in south africa and many other countries around the globe as well. The essence of inclusive growth, which has become a dominant narrative now across the globe, is inclusivity. Inclusivity entails involvement. Involvement informs citizens entails informed citizens who want to find solutions as we go forward so they do not feel alienated on the one hand, but also do not feel excluded from the benefits of Economic Growth and globalization on the other hand as well. Guy final quick question. You are at the World Economic forum in durban. Fantastic place to be. What kind of feedback are you getting . What kind of conversations are you having . And what kind of people are you meeting . And what are they telling you . Know, we are very fortunate to have people from most parts of africa. I have a former colleague from another part of africa here as well. I think the general theme would be how do we get the african continent becoming the positive focus of the globe again . Secondly, how do we undertake the practical elements aside from inclusive growth and make it happen in the continent . And thirdly, how do geopolitical issues around us begin to impact the continent and how can the continent shape its own destiny as well . What role does leadership, and responsibler, leadership, what role can that kind of leadership play and do we have it . If we do not, how do we produce it in different parts of society so that there is a better alignment as i said earlier on between leaders of different sectors of society and citizens so that there is a sense of common purpose . , thank you gordhan for joining us from the World Economic forum in durban, the former finance minister of south africa. Theill be speaking with boss over at the south African Reserve bank later on to get his take on all of this as well. Really looking forward to that conversation. A real focus on what is happening in south africa. Up next, brexit looms. Is london dominant . We may get news on that front a little later today. What are the implications . That conversation, next. This is bloomberg. Guy good morning. Welcome back. You are watching the open. Youre going to hear a little bit of background noise. But we will not worry about that for the time being. It is 8 53 in london. Concerns for londons dominance set to intensify as brexit negotiations loomed. Draftof the station legislation for the infrastructure. The business of ensuring trades on to physically relocate to the continent did i was going to talk to someone about this, but things are happening here at to talkg, and we need about markets. Let us do just that. Let us show you the market boards and hollywood is going on during we are up, as you can see, pretty much across the board. 5 on they docks. A lot of exdividends in the market today. We will be back. We will continue to show you market boards. Although going on in london. This is bloomberg. Le pen and macron tear into each other. No fear at the fed. The u. S. Central bank maintains its outlook for gradual tightening as a brushes off a recent economic slowdown. Hsbc says europes biggest bank posted a surprise increase in firstquarter profit. Has gullivers plan finally come good. We speak to