Transcripts For BLOOMBERG Bloomberg Surveillance 20170221 :

This is bloomberg surveillance. We are getting pmi figures out of the eurozone, and this is what they are showing. This is for the month of february. Services pmi rising more than expected, 55. 6. He spoke to economists who forecast a figure of 53. 7. Everything above 50 means it is expansionary. Manufacturing also rising a little better than expected. That is at 55. 5. The forecast was 55. I want to see the full breakdown, but we did have a earlier figures in manufacturing pmi from germany that were much better than expected. This is big for eurodollar. Lets get on to the rest of the markets. The one thing i want to show you is hsbc. That stock under pressure today. It did miss profit estimates as the revenue was dropping. It has had to say it will cut more costs. Still the biggest loser in europe in terms of the equity markets. Down 6 . Stocks are pretty unchanged overall. On a case basis, depending on the earnings. We once again talk about politics and risk in europe with those French Elections. You can see the vix gaming at 12. Get to the first word news. Nejra hsbcs fourthquarter profit missed estimates. Onetime profit jumped 39 , but came in below the 3. 78 billion estimate. The lender extended a stock backpack five act that drove its london shares to a threeyear high. I would not encourage any investor to read too much into the one billion now. We have clearly got a Strong Equity tier ratio at 13. 6 , well above the top end of the range that we targeted, in terms of ensuring we are well capitalized in our businesses around the world. Focus onue to investing capital in the growth of our business. As the opportunity arises, we will contemplate, as we have done, share buybacks. Nejra hsbc shares have dropped the lowest since august of 2015 and london. Donald trump chosen an Army Lieutenant general as his new National Security advisor. He will serve with retired Lieutenant General Keith Kellogg, who returns as chief of staff. Masters succeeds michael flynn, who resigned following revelations he misled officials about contact with a russian envoy. Australian Prime Minister Malcolm Turnbull described President Trump as a Big Personality with a big job. Saidbill told turnbull he had frank and open conversations with the president and the content was not for public view. To push thentinues case for tpp to go ahead without america, which abandoned the deal as one of trumps first moves. Turnbull it is vital that we maintain the drive toward more open markets and free trade. Trade means jobs. Australia is a trading nation. Our future depends on not simply selling things to funny 4 million australians, but to the whole world. As i said in home joe as i said at g20 last year, protectionism is not a ladder to get you out of the load low growth track. It is a shovel to dig it deeper. Nejra Marine Le Pen is gaining in the polls ahead of the French Election. The latest poll shows first round support for the antieuro candidate has risen to 27 . Cron and micron ma Francois Fillon are at 20 each. That poll was conducted before the news that the offices of the National Front were rated last night as part of an investigation into whether she is European Parliament money to pay for jobs related to domestic politics. ,oal news 24 hours a day powered by analysts in more than 120 countries. This is bloomberg. Francine thank you, nejra cehic. The dollar is on the move after the Philadelphia Fed president s adjusted he would support a rate increase next month. Interview conducted on friday but published overnight, the fomc Voting Member said, i would not take march off the table. Interview conducted onwing friday but published officials hinting they might move next month. But investors see just a 30 chance of the height. The december hike, futures predicted in 100 chance of a shift. Has the fed it fully prepared the market for a march move . Global equities economist at commerce bank, and Richard Jones is bloomberg fx strategist. Thank you for joining us. Peter, nothing is priced in at the moment. Will they go even if there is a 36 chance of it happening . To go in march, we would hear a lot more signals, giving us some. Ndications all the meanings are live, but some meetings are more lives than others, and i am not sure which is the one. Where do things need to be for the markets to start believing . It is a chicken and egg. What comes first . Is it the markets, and the fed follows, or the other way around . Peter the fed wants basically to tell the markets, we are going to hike rates. We are not using the market meeting as a stick to beat expectations. They are tryingto tell the marke going to hike rates. To push up june expectations about the 75 priced in there. We have to see a number 80 plus in order really for both the markets and the fed to be happy that it is the right time to push the button. Richard i think peter is absolutely right. Comments are consistent with other comments he made. March really is not in play, but june definitely is. I think that is the point of mr. Harkers comments. He might also be setting himself up for a dissent in march, which is not unheard of. He might be doing that. Francine but why is march not in play . Richard i think peter is right. They did not do enough to set it up in january. There was a lot of talk for them to do that. They did not. The february statement was very dovish. Is it because we do not yet know Donald Trumps Economic Policy . Peter Central Banks do not like to surprise markets. Given that markets are not expecting it, the fed would say, why take the risk of upsetting the apple cart . And as you rightly point out, there are still so many unknowns with regard to policy. They went in december on the basis of very little, with regard to knowing what the administration would do. We still have not got any indications yet. Francine can they afford to wait . Or fundamentally, do Interest Rates need to be hiked . Richard i think what the fed was really concerned about in february, which is why you had janet yellen tilde little more hawkish than expected, was investors were saying, here we go again. A repeat of 2015 and 2016, where the fed says we are going to hike multiple times, and we end up getting maybe one. What yellen has been able to achieve is, investors expect twi in 2017, and that is probably about right. They have left open the possibility of three, but two is nailed on. That is something yellen wanted to solidify with investors. Francine what happened the last four weeks . We started january 2016 with market saying another thing. 2017, the market was aligned. Now, they no longer are. With the had a year fed saying three rate hikes in the course of 2017. I think the markets did that a little over the top. If they go june, september, and december, if we took that off the table, having waited 12 months for the second rate hike, i suspect the frequency will speed up. Three months seems to be a little bit too soon, given that the economy is doing ok. Inflation is coming back. But it is not solid enough. Richard if you look at this year versus this time last year, multiple rate hikes are more on the table than they were at this time last year. I think that is one thing the fed has achieved. In,are definitely priced and three are not out of the question. Francine richard and peter, thank you so much. Richard is one of our columnists. And peter dixon is an economist at commerce bank. Commerzbank. On tv go, watch the video, follow our charts and functions, and our breaking news from great guests. We talk about currencies, fx. Producerss show directly. You can give input, analysis, or sometimes criticism. Stay with us. Interesting times. Hsbcs chief Financial Officer as europes biggest bank suffers a surprise drop in revenue. We look at the numbers. Plus, as Marine Le Pen makes progress in the polls, bearish bets on french stocks are on the rise. And a very Big Personality, the australian Prime Minister, with a diplomatic take on President Trump. Our exclusive interview with Malcolm Turnbull. Francine this is bloomberg surveillance. Here is nejra cehic. Nejra bhp billiton said first half profit jumped sevenfold, beating estimates. Underlying profit rose as Commodity Prices surged on increased demand from china. We will be speaking to bhp billitons ceo at 2 35 p. M. U. K. Prime. Anglo american profit more than doubled last year, beating estimates. Underlying earnings were 1. 72 a share, compared with 54 cents a year earlier. Commodity prices soared. The producer of diamonds and platinum no longer news to sell assets to reduce debt. Russia overtook saudi arabia as the biggest crude producer in december. The country started restricting output the of agreed curbs. Russia pumped almost 10. 5 Million Barrels a day that month. About 30,000 more than saudi arabia. It was the First Time Since march that russia produce more oil. The u. S. Was the third biggest oil producer, followed by a rock and china. That is the Bloomberg Business flash. Francine hsbc shares in london are down more than 6 this morning after europes biggest Bank Reported fourthquarter profit that missed estimates and a surprise drop in revenue. The bank pledged to buy back 1 billion of stock. Hsbcs cfo said he is focused on the growth of the business. I certainly would not encourage any of our investors to read too much into the one billion. We have clearly got a very strong common equity tier one ratio of 13. 6 , well above the top end of the range we targeted in terms of ensuring we are well capitalized in our businesses around the world. So we continue to focus on investing capital and the growth of our business. As the opportunity arises, we will certainly contemplate, as we have done, share buybacks. Francine Michael Moore leads Bloomberg Finance in london. Still with us, peter, Global Equities economist at commerzbank. In terms of what we are seeing from hsbc the producer down 6 and european trade what were investors concerned about . The turnaround was longer than expected. Peter i think it is about the revenue picture. This bank has been cutting costs for the last several years. Since gulliver took over, revenues are down about 20 billion. The shrinking of the business, but also revenue headwinds. The bank pointed out in 2017 they are facing another 3 billion of revenue headwinds. So i think it is, can this become more than just a costcutting story . Can it become a growth story . Francine when do we find out . They will have to write down a huge chunk of the Private Banking business. Michael in addition to being disappointing on the revenue front, it was a pretty messy quarter. There were 6 billion of what the bank calls oneoff items. Analysts had been expecting about one billion. There was a lot of noise in the quarter. There was the big writedown, which they had previously written down that unit before. Certainly, there was a lot to digest. Francine peter, what is your take on hsbc and the u. K. Banks . They are different to a lot of their rivals. Peter i think all banks are facing huge headwinds, as we just heard. There was a cost problem and a revenue problem. Unfortunately, they both need to be tackled differently. At the same time, it puts a lot of strain on the management of banks, to tackle these problems simultaneously. From a british perspective at least, life is going to get rather difficult. The expected slowdown in the economy and who knows what brexit will mean. That probably means the focus is going to be, at least for the near term, on the cost side of the equation. Francine the miss seems to be chiefly driven by lower revenues. The chief executive is battling five years of declining revenue. How long does he stay in charge . Peter you will have to ask the shareholders. It is really the shareholders. What we learned over the course some banksears is, ceos stay around for a long time, and others do not. It depends how active the Shareholder Base wanted to be. Francine thank you for joining us. Michael moore and peter dixon. Up next, what a difference a year makes. Aglo american reports doubling of profits and says it no longer needs to sell assets to reduce debt. We focus on the commodity come back. And we interviewed the opec secretarygeneral, mohammed barkindo, just after 11 00 a. M. Here in london. Plus, a discussion with totals ceo from 4 00 u. K. Time. Francine i am Francine Lacqua in london. Anglo american reports profit more than double last year, amid recovering commodities, leading the mining giant to say it no longer needs to sell off assets to reduce debt. The results highlight the reversal of fortunes from last year, when investors were questioning whether the company prices. Rvive toughening the Anglo American ceo spoke to bloomberg earlier this morning. Books look pretty good in terms of prices. Probably some downside during the year. The fact we cut costs mean we will be robust through the cycle. We cut our costs from 77 to 29. I think the metals could do much better. We are hoping they do much better. Diamonds, we think the market is starting to study. In they some downside barks and some upside in the metals. Francine british stocks overall are trading their the cheapest level in two years with fears that despite climbing more than 20 from postbrexit low. Peter dixons Global Equities economist at commerzbank. And you look at commodity stocks , a year and a half ago, we were talking about possible nonliability. This year, they are getting their dividends. Are we seeing a complete reversal for the quality cycle . Peter i think this time last year, a couple of prices had been collapsing for some time. Now, things think seem to have stabilized. Emerging markets stabilized. There is more demand there. The chinese economy has been falling off a cliff. I think we are getting used to this world of less than stellar commodity price growth, at acceptable levels. Companies have managed to cut costs accordingly. I think they will be more stable. Francine will there be m a or winners and losers . Peter i think the next few months will be characterized by steady as you go. I think we are at a steady equilibrium. We do not know whether things will get better or worse or stay the same. I do not think Companies Want to take risks at this point in the cycle. Francine when you say we do not know where it goes to, do you mean Global Growth or possible trade wars between china and donald trump . Peter you name it. There is the International Trade situation. We do not know what Central Banks are doing. The future of the dollar. All these things feed into what commodity users have to think about. Ultimately, what they care about is, can they get the stock out of the ground . To the highest possible price . I think the price will probably hold up. Growth seems to have stabilized. I think all the other factors suggested the risks are higher. Worry about you china . The last time we worried about china was two years ago. They still have a huge nonperforming loan problem. Is there a concern at some point they crash, and that could lead to scampering Commodity Prices . Peter i am not concerned about a chinese crash. The air seems to be deflating out of the bag at a modest pace, and that is a good thing. I think they will do all they can to keep the show on the road. As you point out, the flip side is the end of the huge buildup of debt. That will act as a drag on growth over a couple of years. To that extent, i think we can be relatively hopeful that things in china will stabilize. Francine does it make a difference if you are a u. S. Commodity producer . I know they are global, all over the world. If you are based in the u. S. , are you going to be advantaged because of deregulation . Peter you might get some boost from that, but i think the problem is that you have got problems in other parts of the world that you cannot control. If we start to get some form of trade discrimination, for example, that is going to cause all sorts of problems. Currency moves are one thing. If the u. S. Moves in one direction, you can bet other countries are going to move in the opposite direction. That is going to disadvantage u. S. Companies on the roundabouts. Francine where do you see the dollar going from here . Peter i think it should go moderately higher. Given what we francine but moderately. Peter basically, were not going very far. If you set against the euro, 1. 04 on a ninemonth verizon, that is probably what i am looking at. Not significantly different from today. The countervailing forces that have been in play for so long will remain so. By the end of this year, we get the ecb removing its tapering. I think that will start to give the dollar more of the lift. Francine i want to see what happens with the French Elections, which were talking about next. Peter dixon stays with us. , le pen gains ground. Boost pollncerns numbers despite a fake jobs controversy. We analyze the race. Ive spent my life planting a sizesix, nonslip shoe into that door. On this side, i want my customers to relax and enjoy themselves. But these days its phones before forks. They want wifi out here. 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