anna: hssbc takes the ax to investment banking. they will restore profitability. selling off assets in brazil and turkey. mark: apple launches a new streaming service and it seeks to regain its dominance in the music industry. anna: asia follows european and u.s. markets following greece bailout talks. ♪ mark: good morning.

anna: good morning to you, everybody. it is 6:00 in london. hsbc is the top story. guy: hsbc coming out with a significant reshaping of the business. talking about limiting the access to investment tax. we knew that would happen. some fairly big numbers here. anna: they talked about significant reshaping. extreme solutions so this is a result of months of work. the emerging markets business, it is about being in that business that works for you. we are seeing they will be selling, hsbc their turkey and brazilian businesses but expanding their asian businesses. it is the internalization of chinese businesses. guy: we will also be talking

about this which in focus in the emerging market. a shrinking of the investment bank. that will be cutting back. they really want to focus this business because the stock has they need to get the share price back on track. they have an roe of 10% by 2017. they are at 8% right now. they are also reviewing the domicile in the u.k. and that will be completed fairly quickly. anna: we have a date for that. a review of their headquarters will stay in the u.k. we will have that decision by the end of 2015. we have some interesting thoughts. at 250,000 staff this business has, that makes it very big to manage. that is crucial. we will also be talking about that later. guy: we will get his take on the markets. a month ago, -- in the month i

just haven't, huge amounts of market action. we will get his take on that and we will talk about apple. the new music streaming service. the question of the day is would you switch to apple music? we are already getting some e-mails and tweets on the subject. not all particularly positive, i have to say. one coming from -- it is lawfulawful and unlikely to be any better. another one says he is already a subscriber. can apple catch up? anna: i like the family plan. it is interesting that it is not only available on apple products. let's catch up on any of the market movements you might have missed overnight. we set inner headlines -- in our

headlines that reflects on asian and u.s. trading. some of the airline stocks and the results of downgrades with the businesses concerned about their growth. that was quite significant. we have seen six days of weakness coming through in the u.s. technology stocks. guy: that have been hit pretty hard. the banks in germany -- we will talk about the european market a little later. now a technical correction -- up 10% from the recent high. we will continue to see what happens a little later as the european session progresses. we will have plenty of market action. anna: highs in the chinese market -- let's bring you up to speed. sherri has the latest movements for us. sherri: good morning. a look at my map -- it is completely red. asian stocks feeling the downward pressure. it is spilling over from wall

street and also negative data from china. we saw asian stocks falling for the seventh consecutive day in more than two months. shanghai composite was rising but it gave up its gains and now at 1.2% down. it fell from the highest level since 2008. the first drop in three days. we have the latest inflation data out of china fueling concerns that demand is making consumer prices rise at a lower pace. producer prices staying in negative territory showing deflation for over three years. the asx 200 coming back from a holiday but down 3/10 of a percent. it is following its peers today. i have to tell you about the massive selloff in southeast asia. we are seeing jakarta ists worse two-day drop in three years.

down 3.1%. we are seeing funds are pulling money from local sponsors. speculation is rising prices makes the interest rate hike less likely. the worst performer as currencies go. philippines, down more than 2%. it is the worst day for the philippines this year. 6.4% in april. japan has downward pressures. it is down a tenths of a percent. japan has been down for three consecutive days. we had the japanese yen reversing course. we saw three weeks of weakness of the japanese yen, but it has been gaining strength. we are seeing the japanese yen strengthened by the dollar. the most in two months on monday. today it is staying around that level. we are seeing exporters being pressure. the biggest decliners with only

a couple of sectors in positive territory. back to you. anna: thank you, sheri. guy: hsbc is slashing costs. it is cutting 22,000 jobs. it is selling its brazil and turkey units. it is putting pressure on the investment bank, really limiting its access to capital. let's get a take on exactly what they are doing. let's bring in jonathan tice. jonathan, give us a sense about what was expected and how much of this was unexpected. jonathan: it looks very much in line with what people were expecting. i think the $4.5 billion across the year is part of the banks. they are trying to limit assets by 20%. they suggested 12% to 13%.

was the rise level. we think brazil turkey -- the only couple of things people will be very interested in will be the u.s. they say they want to return it to profitability. asia growth, asset management insurance, low capitalanna: we also have been joined by chase. it is all about cost-cutting. as you were warning us, you said it is going to be very much about that. is the cost-cutting happening in the places you thought, as we were hearing from jonathan. perhaps not enough detail about what they want to do in the u.s. or maybe more commitment to the u.s.? chase: this is just a preliminary announcement. they just talked about their ambition. their ambition is strong and the announcements will be quite

purposeful. in a way, that is good news. they are promising to grow their dividends. i think if they continue to grow, that kind of great is a good driver for share prices. guy: jonathan, this is a big complicated bank. it has underperformed. is the task too much almost for an entity this big to get to a target of 10%? is it too much to expect this institution to be able to go through a massive reshaping in the kind of timeframe that investors expect? jonathan: clearly it makes it more difficult to change the judiciary. -- trajectory. the problem is cost growth. the environment changes and now the costs are advanced of the revenues. they are trying to get that to the other way around. the environment is very difficult. for $.5 billion is a good start

but if revenues are not getting anywhere, you will struggle. it is understanding what ability management has to manage that. that is the biggest challenge. same thing with the deutsche bank. revenues are difficult. you cannot keep cutting and cutting. it does not mean it goes anywhere. anna: why aren't the cost more variable? are we talking about a large staff cost element? jonathan: some of the key issues is wage inflation. it is a real issue. it is not so much too much staff. it is a question of wages and the costs keep growing in brazil. will he grow in places like china? if revenue falls you have absolute cost-cutting which means you are not ready for the upswing which is exactly what is happening. guy: why is hsbc in investment

banking? gervais: it has been a good business for many years. it has been negative at the moment. that said, the area will come under margin pressure. you will see margins falling in our view. they are reviewing the investment banking because it is not that distinctive from other areas. anna: it seems a number of banks are going through this. if you cannot be an investor get out. is that what is going on? jonathan: it is a global bank and it facilitates cash management for its clients. it is tbm. a lot of it is balance sheet management, cash management. those are the areas they will focus on. it is not a traditional kind of equities, fixed england commodity business -- fixed income, commodities business.

maybe they cut the fat on things like exits where there is some scale. it is not very profitable. guy: the hong kong share price -- stocks are 2%, little more than 2%. the you think they are expecting more of a bounce on the back of that? anna: those are big numbers. gervais: if you look at deutsche bank, i would imagine they would be pleased at the markets. clearly they don't disagree with us. as you said, the devil is in the detail. we need the presentation. we need to show that we know what they are talking about. guy: thank you very much. jonathan and gervais, you will stay with us. we will talk in a few minutes. anna: coming up, apple makes a play to take back music in its subscription service but has it

already lost the battle to the digital streaming experience? more on that when we come back. ♪

guy: good morning. it is 615 6:15 a.m. in london. with the stories need to know this morning. anna: hsbc will cut between 22,000 and 25,000 full-time employees and will target annual cost savings at $5 billion by 2017. it is promising to return in equity by 10%. they also say they will sell their equities in turkey and brazil. guy: the highlight of the conference was apple music. they are fighting companies such as spotify with its new streaming service. it will have 30 million songs. anna: south korea reported its seventh death of mers.

the country has vowed to end the spread of the virus. so far, there are total of 19 confirmed cases. guy: let's get back to our top story. that is hsbc. the stock in hong kong just coming off its earlier highs. it was of around 2%. but, gergvais williams is still with us. gervais when you look through with the rest of the day will do, we are waiting for 8:00, we need to see what the detail is from hsbc. what are the critical missing parts that we don't know? gervais: we are interested on how much they will be taking from the top of the business. we don't know how much they will be cutting and from where. some of the branches -- we want to get right into the details to find out where the $5 billion in

cost savings will be found. they want to invest further in the asian markets. their other operations. it is a combination of detail and the cost savings. anna: this could get very political because they are reviewing whether to keep their headquarters in the u.k. they have said in march they are planning to move their retail banking . many political to this story. gervais:" they said they would like to make a decision on that by the end of this year. we won't know at that stage how the referendum will be going. to have to make an assumption of that. they are trying to get some final decisions so they can really settle it down and go for the return in equity that needs to be raised. they are moving towards 12% or 13%. guy: how do we compare their strategy with what other banks and doin -- are doing?

we will see a focus by credit suisse. hsbc was talking about this morning. ubs, a real retrenchment. gervais: all banks have had a big culture change in the last five years. they've addressed some of the problems of the past. fined $11 billion, the hsbc. a lot of money going out. they will stop doing that. as they get back to the corporation they will find certain areas are very profitable. some of the retail banking operations have had returns. it is a question of them really recognizing that, allowing that profitability to come out rather than being diverted by so many activities. anna: what is the future of global banking because here we have a bank that sprouted itself on its global presence and now selling its business in turkey

and brazil. two really high growth until recently, getting out of those. they want to focus on the emerging markets of asia and chinese perhaps. does that seem sensible to you? gervais: there will be increasing attention coming up. in a way, you might say perhaps they should not have moved into turkey in the first place. that cost of going in and out probably have been quite expensive. have been changing the same places that other companies. they will step back and see what will be going on in the longer term. that will be good for them. recognizing the changes. guy: ok. thank you very much for your analysis. i think we will get more detailed at 8:00. we will be waiting in and anticipation.

we will wait for the london open. stock bouncing on the back of the announcement that we had this morning. it is beginning to fade a little bit in terms of that rally we have seen. anna: 20 minutes past 6:00 in london. apple watch -- the company spent in nearly 2.5 hours introducing new services and products on monday. bloomberg's josh breaks down the three important things you need to take away. josh: we are at apple's worldwide developers conference in san francisco. three big takeaways today are apple really wants to be in music in a big way no matter what is going on. you have spotify and pandora nipping at its heels. they have a new service called apple music that aims to take on those services and maybe more. they are launching radio stations in satellite radio.

they are also creating a new service called apple music connect which lets artists share photos and new songs with listeners. the company introduced a lot of new features for ios 9. the most significant one might be the ability on the ipad to be able to use two apps side-by-side making it a productivity device as opposed to a lean back machine. one other thing you might have noticed is they are definitely on the attack. they launched a new service called apple news which is taking a shot at flip board. they made several comments about privacy and user data that was aimed at google and facebook. finally, they introduced a new service called apple intelligence which is very much like google now. it is all about predicting how you will use your device and aims to make your apps more integrated with one another. all in all, this is a developers conference. there was a lot of updates to software and services but no

huge moments. i think the closest the company got was the introduction of the new music service which if it actually taps into itunes full library of songs could be a fierce competitor in that space. anna: no wam bam moments. let's see what caroline had to say. caroline hyde is here with the highlights of the conference. is the music offering taking aim at some of the streaming services? it seems they are taking aim at rivals of all fronts. caroline: this is a winham bam moment because it is taking on competitors. less than $10 per month, you can get access to 30 million tracks. it is interesting because streaming is the bay area they feel they perhaps -- big area that they perhaps mixed. ssed.

streaming -- you have downloads and radial in one place -- radio in one place. they have suggestions for you so perhaps you can listen to something and then perhaps they offer another song. they have connect where you can access the musicians which is taking on sound cloud. they have drake on stage announcing all of this. they tried to play it cool./ they are taking on the competitors. this is not a massive money spinner. this is about making the phone a goto product. it is getting into your everyday life. this will not help their current $32 billion. guy: i read that apple makes more money in a day than the whole music industry makes in a month. so, music streaming industry makes in a month. if you put it in that perspective, they want to get it

right, but if they make a loss on it, will it help boost phone sales? caroline: it is about being addicted. this is when you suddenly realize this is just about making apple the goto product. it is about making the iphone irresistible because not only will you have your music there, you also have news. the new news app was announced. you also have espn, new york times -- a friendly way to digest all the news you want. that is the news app. then of course, this is a developers conference. the biggest cheer was about making their operating system, their programming language which was introduced last year. it is making it open-source allowing developers to play with the programming. they cheered hard. [laughter] caroline: ios 9, the operating system updated.

the intelligence is taking on google now telling you perhaps what music you want to listen to, what traffic you need to avoid. the ipad was updated, the watch. anna: what was not there? caroline: the tv streaming. many people thought they were behind of making content streaming available through apple tv. it has a lot of tasks. they are sitting down with abc and fox, but it is getting hard to come to an agreement about having tv streaming. it is taking longer than they thought. that will be the other big area of media push. one key area that i am interested in is more women on stage. this is really interesting. he had jennifer bailey announcing apple pay. women taking the fold. guy: the stock did not bounce that much. there were some wow factors but

the stock did not do that much. the reason for that may be because all of the tech tstocks were down yesterday. ♪

anna: welcome back. let's talk about what is happening in the foreign exchange market. get up to speed what is going on with the dollar. we have a three day chart. we saw a push back upwards on the payroll number. more jobs being created in the most recent month. that pushed the dollar higher on expectations of a sooner than expected rate increase in the united states. that has been tempered in yesterday's session and continues to be in today's session by speculation and commentary about whether we are starting to run into issues with the dollar. yesterday, an official said president obama said the strength of the dollar could be an issue. later yesterday, president obama

said in a press conference denied that he said that. many analysts said it would be unusual for him to mention the dollar specifically. it was the best performer this year after the swiss franc. whether this will start becoming an issue for the fed is something they haven't knowledged -- have acknowledged. keep an eye on what is going on with the dollar this morning. guy: it is 6:31 a.m. in london. hsbc is going to cut between 22 and 25,000 full-time employees as part of its annual cost savings to be as much as $5 billion by 2017. shares up in 2017. hong kong. europe's largest bank is promising a return by the end of 2017.

they will sell operations in turkey and brazil. the big update comes at 8 a.m. london time. the highlights of the apple developers conference was apple music. they are fighting back companies such as spotify with his brand-new streaming service. it debuts on june 30 with more than 30 million songs. the u.k. house of commons will have its first debate on the eu referendum today. the main opposition labor party will back the bill. speaking at the g7 meeting in germany, prime minister david cameron says it is in the uk's interest to make changes in the eu and the country's membership. anna: let's talk about today's top market stories. hsbc, and greece. angela merkel says there is not much time to find a deal if negotiations continue. joining us for more is bob senior independent client advisor of global markets. a pleasure to have you. i was heartened yesterday.

i saw people agreeing about greece but what they were agreeing on was angela merkel -- the need for urgency around greece. that is what they are agree not. bob: this will probably drag on. this is 50-50 now whether greece makes it through the eurozone. we will end up with no compromise or very little. we will end up with elections and greek people will have to make a choice again. guy: how does the market react to what looks like a binary decision in your view? bob: even if the worst happens in greece is forced into a proper default, from a systemic perspective, they have enough in place to stop anything really bad happening across europe in the short-term.

i think longer run there are some difficult choices. if the greeks get a good deal, the perception is spain and portugal and others will have a deal. there has to be some compromise. in the absence of compromise. there will be volatility in the short-term, but i don't think it is another lehman brothers. anna: other assets clauses that you think requires protection from the fallout? bob: i think we will talk about the bond market. i think the price of money, the availability of money will be the key thing for the real economy. the ecb is focused on that. i think the asset class which is perhaps at risk is the equities in the short run. just like risk assets. guy: banks down from the peak 10%. bob: i mentioned that internally

and people look at me like i'm an idiot. well, me looking like an idiot? i think there is more risk there. one of the other things we need to separate is you saw in u.s. and japan on the initial qw announcement, obvious things happened. equities rallied, the currency settled. after two months you tend to get a bit of a reversal. i think europe is going through that. where it starts will be driven by greece. guy: the you think the risk is down so they will get more? bob: i think there is a risk of another 10% in the eurozone. there was a risk of up to 10% for the s&p. i think europe and stocks are more risky than u.s. stocks. anna: because of greece or more fundamental factors? bob: i think greece more. people were talking about e cbcb exit a few weeks ago and i think that is laughable.

to get off of it or not six years and is too early. i think greece will do fine perhaps where we -- thedefine where we settle. anna: thank you. south korea has confirmed it seven debt from -- death from mers. that has led to travel warnings for the country. let's go to the seoul bureau chief who joins us now. it is good to see you. what is the applications of this latest of element -- implications of this latest development? >> there are two aspects. you have the direct concern which is very much related to the public health issues and the fact this is spreading, albeit at a slower pace. i think the other concern is the impact on the economy which

has been a fragile kind of situation. any kind of halt in consumer spending or dampening of activity, people staying indoors etc. is starting to warn the government that we will start to see this play out in economic numbers. guy: are we going to get any economic reaction to this? there is some talk -- i'm surprised by this but it makes sense -- there will be interest rate cuts. stuart: i think that is due on thursday. i think bets are increasing we may see a cut. i think the context of this is important because mers itself is not going to be enough to have that kind of reaction, but placing it in a contacts were exports are down dramatically. it is already at record low interest rates. you get the mers situation

compounding what is already a fairly fragile economy. i think there are parallels. these are very different situations, but there are parallels with what happened when the ferrry sy sankd over a year ago. it is an entirely different situation but the reaction was of people staying in, a lot of events canceled, spending down. the impact on the economy was very long-lasting after that. i think that is the concern now that we may see a similar picture happening. anna: how are south koreans coping? life is not as normal as you say. stuart: i think it is a very mixed picture. i understand it is very much front page news. it has been for quite some time. you can see more people wearing masks. you can see -- we ran a story a few days ago about people who

were not going to hospitals. that is not related to mers or fear of symptoms, but fear of going to the hospital itself were there may be mers patients. we are seeing that name. -- theme. i think it is important not to exaggerate what is happening. there are examples of life happening as normal. it is a varied picture. anna: thank you for bringing this story to us. guy: bob is joiningit is a varied us. we saw sars. we remember the impact of that. does mers seem like it is similar? bob: no. i think what is central is it is a lack of demand. everybody is competing for that demand. the only responses weaken their policy. the traditional way to us. weaken

currency is to cut rates. we will talk about the u.s. but lower across the world. we are starting to see that with the yen. also with the euro. the markets are getting ready for the next move by japan. anna: you will not find inflation in the chinese prices. 38 consecutive months of falling factory prices in china. bob: this is not very popular but talking about inflation. a whole bunch of structural reasons the global economy where we will not see much inflation. the very simple answer is in the absence of wage inflation you cannot have sustainable growth inflation. you can only have wage inflation if the world has pricing power. in the aggregate, they don't.

guy: can i take you back to greece? the prime minister is saying it will be don't. guy: can i take you back to greece? the beginning of the end or the eurozone. bob: it depends what you mean by the eurozone. if it is collective responsibility for other people's problems essential that might be the end of it. the eurozone is something else maybe not. i think this is the fight for what the future of the eurozone will be. anna: it depends on the deal they get because any the beginning of the deal they secure -- other countries might look at greece and say thate eurozone is a club you want to stay in or leave. bob: they are fully fadepaid up by the imf. even if they leave, they can stay in europe. they can get help from the european union going forward. i don't think it is anybody's interest to abandon greece completely. equally, i think there is no blank check. that is the reality.

it is something we have been talking about for five years -- there is no blacknk check. all of that should have been written out five years ago. at the time, people did not fancy it. guy: sooner than later or? bob: it depends of which way the greek people vote. anna: thank you. bob will stay with us. guy: a quick reminder -- we are on twitter. we look forward to having you on twitter as well. you can tweet us. we will take a break. we will be talking about driverless cars. anna: it would increase your productivity. the driverless mercedes. apple's push to own music again and the man behind the alleged flash crash. those are the trending stories we will break down. ♪

anna: it is 6:45 a.m. in london. here are some of the stories you need to know. hsbc plans to cut between 25,000 full-time employees. it will target annual cost savings as as much as $5 million by 2017. shares climbed as much as 2.4% in hong kong. the u.s.'s largest bank is targeting return of equity of more than 10% by the end of 2017. they also say they will sell its organizations in turkey and brazil. guy: apple is fighting back against companies like spotify with its brand-new streaming service that will debut on june 30 with more than 30 million songs. anna: paralympic and oscar pistorius will leave prison in august. the court plans to hear thefrom the

prosecution for the murder of his former girlfirriend. he was cleared of murder charges in october. guy: in a country renowned for policy, italy has been put on a tall pedestal. one maker thinks of things a step further. introducing a kosher-compliant process to get the jewish exports. bloomberg got an exclusive look behind the scenes. ♪ >> helpappy and healthy cows. just a few of the ingredients that go into making kosher certified of parmesan. open for doors on a kosher market worth around $12.5 billion in the u.s. alone. >> it is a brand that sells. adding a new brand that is

kosher compliant can be something that reinforces and appreciated already in italy branding. >> it did not come cheap. the owner of thise cheese factory spent 1.5 million euros changing its production line. he opened up its factory to jurorsewish food processors to make sure it is reaching its requirements. >> i think in the near future many producers in the agricultural business will invest in kosher markets. i think it will be the right choice. >> it is a valuable commodity. the business is worth about 2 billion euros. a single 39 kilo we'll like this can sell for more than 700 euros. they are so valuable that some regional banks even hold them as collateral for loans of producers.

>> a luxembourg fund has already bought the entire 2015 production. that is 6000 wheels available on the market next october. >> making kosher parmesan cost about 30% more than producing the more common variety. experts are betting this new brand will prove appetizing for cheese fans both kosher and otherwise. >> today, about 58% of products on grocery shelves in the u.s. are kosher. just imagine what will happen in europe in a few years from now. guy: i love it. the regional banks will take cheese as collateral. they should do that for the greeks. anna: the industry becomes a great strategic importance to the greek banking sector. let's talk about this -- maybe or maybe not. bob is still with us.

also joining us is tim with all the news from the bloomberg business website that we are tracking. good morning, tim. where do we start? what is the first or you have? tim: the big breaking story is the hsbc story. a lot of people want to read about that. it is a significant story in u.k. and elsewhere. turkey and brazil -- i am sure you will talk about this all morning. we have quite a nice profile of the flash crash trader this morning. a very detailed look of who exactly he was, the millions he made and why he does not drive a bugatti. anna: can you tell us the answer? tim: apparently he could not drive. guy: bugatti stand out a lot around there. anna: does it shed anymore light

on whether really this guy in this room could have wreaked as much havoc as is alleged? tim: that is the big question. if he did, we should all be very afraid, right? guy: you have a story on driverless cars. we are talking about productivity and the whole inflation story, but driverless cars. that is dead time. the idea of a driverless car appeals to me right now. when will i get one? tim: the technology will be there far before the regulatory and legal issues catch up with it. the technology is pretty good. the google car has not been responsible for any accidents. it has been in a few. it is usually hit by behind. our story today is about the new mercedes e-class. anna: i have never caused any accidents either. guy: u.n. google, -- you and

google, eh? anna: i have never caused an accident either. tim: our story said that the biggest hurdle to smart cars is dumb humans. guy: i can say i have no crashes. let's take this a step further. t economic impacthe of driverless cars. you can go to the pub -- it would be great. beyond that, if you think about how disruptive this sector could be. the the impact could be massive. tim: i think you can say the same for technology broadly. in the 1970's when we were kids -- in the future, we would have a life of leisure and robots would do everything for us. anna: still waiting. bob: i think the robots are doing a lot more for us than we can actually see. we don't have guys making cars anymore, we have machines.

the problem with that program is we never figured out what to do with all those people who used to work in the car factories. a lot of them became drivers. now we will take that away eventually. i think technology is a very deflationary factor. it is a good thing. we have too many workers on the current level of demand. anna: where does that end? that's something a very writing brought -- very frightening thought. bob: i'm more hopeful because two of the biggest challenges facing us and the future of the planet is energy and looking after old people. there will be a lot more old people in the future. i think health care and alternative energy are the future. once we crack whether it is nuclear fusion or other credible energy sources, once we crack

biology and the whole "star stre trek" diagnostic thing, more people in labor will be deployed. guy: is there a comparison in history? is it the industrial revolution? bob: we have these big leap forwards whether it is the telephone, the railroads, the car where the internet -- these things do happen but not smoothly and not everyday. guy: we talked about driverless cars in the end of the world is coming. anna: even if it is this big deflationary influence and people are working out what to do. bob: globalization is the same thing. it means workers have no pricing power. if you are a worker on a production line in the west, you are probably not a big fan. if you are one of one or 3 billion people who worry about food or water tomorrow who no longer have to worry about it will be fantastic.

tim: the reality of technological advances is the halfppen far quicker than you ever imagined. think about where we were in renewable energy 10 years ago and today. look at what elon musk is doing with electric cars. bob: i think it is within the next 10 years. guy: the life is getting shorter now. bob: whether it is nuclear fusion or some other form of technology, quantum 3-d printers. that kind of stuff will be with us very soon. anna: many of these technology companies -- developments raise moral questions like around the driverless car. it is if regulators can keep up because, for example, the driverless car you have to make very unpalatable decisions. if you have to hit something, what do you hit? that is something regulators will wrestle with. tim: those are difficult

questions but ultimately they will get resolved. guy: you look at apple. they are playing catch-up in streaming. how many of the big companies now will be the big companies tomorrow when all this stuff starts happening? or are they leading this charge? bob: this stuff happens all the time. if you look at 1930, how many people are still around? how many people are still around in the dow? it is part of our lives. guy: it will be harder for investors. you need to be in and out of these things quickly. bob: there is a difference between investors and traders. i think where we are now and where we have been for the last few years -- i think most people are basically punting central bank liquidity rather than the real story. there are exceptions. anna: thank you very much.

bob will stay with us. tim, thank you. guy: you can follow us on twitter. we will take a break. we will see you in a moment. ♪

anna: hsbc's slashes jobs. guy: apple launches a new streaming service as it seeks to regain its down minutes in the music industry. anna: asia follows u.s. markets lower. guy: welcome. you are watching "countdown." anna: it has just gone 7:00 in

london. 8:00 in frankfurt or paris. guy: we will get more details from hsbc. the bank has outlined some details about what it will be doing. it will be cutting out -- cutting back quite severely. it is going to be curtailing its investment banking division and the access to capital. the stock initially bounced, but it is beginning to fade off in hong kong. the market reaction may be not what they were looking for. anna: expectation was really high. stuart gulliver back in february talked about taking some extreme solutions. perhaps expectations were a little too high this morning. i am fascinated by what they are doing in emerging markets. they are talking about taking big parts of the emerging markets business.

taking out turkey and brazil. five years ago, those were names that were fantastic growth opportunities. they are focusing on the things they do better. guy: we will talk about that. we will be talking about apple it has launched its music streaming service, a bit late in the game somewhat argue. would you switch to apple music? a lot of people are already on pandora and spotify. let us know what you think. anna: a very defensive move. more on that story as we go through the program. let's catch up on the markets. we saw weakness in the u.s.

equity markets, the dow s&p nasdaq all weaker. the semiconductors were down for the sixth day. guy: we are starting to see that being represented in europe as well. let me show you on the terminal. this is how we are expecting the main european markets to open this morning. it looks like we will get a negative open. the dax is already down 10%. the ftse 100 is down. the dax is down .3 .2. we will get some losses first thing in the european markets. guy:anna: hsbc slashes costs. selling its brazil and turkey units. let's bring in jonathan and bob.

jonathan, thank you very much for coming back to talk to us. jonathan: the issue is we do not have a lot of details yet. you have -- the fact is emerging markets banks and global banks, you have to go -- grow revenues faster than costs. when you to understand, where does the revenue grow from here? as for your comment about brazil or turkey, the other thing to remember is currency. what these businesses were worth and regenerating significantly less. they will need to look at the currencies of the businesses they are in. guy: give us a sense of how

complicated it is to try to do something this big with the bank as big as hsbc. jonathan: very hard. balance sheet management, all of the things hsbc offered its global clients. tracking that is difficult when you have multinational clients. they need to be an all service provider to their biggest clients. products to their core customers, we need to understand what those products are. not an easy task at all. in the global banking markets, that cannot be more than 30% of the business going forward. they will take more than 40% of the business away. that is what it works out as. at the moment, it is 43%.

it will be less than 30%. it is a big number. a very big number. anna: this is a business 260,000 staff. what about what was not in their? -- in there? >> the underperforming units and they were going to give us solutions on brazil, turkey mexico, and the u.s. in the u.s., they will try to rebuild profitability. at the time, we all thought it was a great deal. look at the business they have got now. you wonder, where does it go from here? you see rbs pulling out. but the u.s. market is competitive. what is the plan with the u.s.?

it is not a small business. to be honest, i was not surprised. interesting to see, one of the key things they want to do is restore north american profitability. anna: it is a canary in the coal mine. guy: hsbc certainly got into the mess is the financial crisis kicked off. bob, why do i want to own this sector when it is so complex? yes, some of the u.s. banks are making some decent money. nevertheless, hsbc is a massively complex institution. and gulliver's line of sight into the arcane areas of banking must be really hard. bob: i own stocks and banks.

i own stock in a bank. it is not -- our industry, it is trying to figure out what its identity is going forward. i do not think anyone really owns the stock. people traded, it moves around. as a business, as a sector, it is readjusting to a new world. are still too many of us. -- there are still too many of us. there is not enough demand. our industry does not have pricing power, that is the reality. anna: what do you think of this specializing within the emerging markets? the issues around the emerging markets currencies. at some point, the currency might get a bit too much.

emerging markets specialization, something banks are thinking about. >> banks are looking for anywhere they can grow. i think the currency issue -- what of the chinese devalue by 20% in the next two years? does hsbc reinvent itself again? anna: is that why they are doing ok in asia? >> the margins are higher. look at the private banks. everyone is all over asia. they talk about asset management insurance, less capital-intensive businesses. and chasing growth. you can completely understand the motivation.

>> the regulator or regulators they have made it pretty clear that they are uncomfortable with risks in the banking sector. i do not think they want to see banking are a we into -- roe -- as banks become a bigger share of the economy it it takes away from other parts of the economy. i think there is -- >> it has been managed down. hsbc is a systemically important bank. they have the highest buffer charge in the world, next to jpmorgan. for hsbc, they will be talking finding out what will you

require us to do? they will be having the same conversations in the u.k. and that will be part of their decision in the domicile. >> what i have not read anywhere is a desire to make this bank smaller and more manageable. he is still trying to find the global banking model. >> in the future, there will be a hand for the global banks. perhaps what we saw with deutsche bank this week, means there is one less. there is space for a few, but they will be a lot less than it used to be. institutions will have to figure out -- >> it depends what sort of bank you are.

they need to offer all of the services if they are a corporate bank. the incoming deutsche bank ceo talked about increased statistics. they said a universal banking model is us. they tried it at a discount and it was difficult to manage. being all things to all people is not the way forward. anna: thank you very much. guy: it is 12 minutes past the hour, we have 50 minutes to go until the market open. apple announces its next move but is the company already playing catch-up when it comes to music streaming? a look at what the tech giant is up against. ♪

anna: welcome back to "countdown to coat only 45 minutes ago -- welcome back to "countdown." only 45 minutes until the markets open. guy: hsbc will target annual cost savings by about $5 billion. the lender says it will sell its operations in turkey and brazil. anna: the highlight of the apple developers conference was apple music. a brand-new streaming service. it will debut on june 30, 30 million songs. guy: south korea announces deaths from mers. 95 confirmed cases, hong kong is

issued a red travel warning. anna: senior independent advisor of global markets is still with us. bob, we have not really talked about the u.s. a little while ago, you were saying vehemently there was no way to hike interest rates this year. do you still think that? bob: absolutely. a discussion that the fed -- the fed may be on a predetermined path. they will raise whatever. it is not interdependent. the reality is they have a small window in which to try to normalize policy ahead of the election cycle. the fed does not want to do anything six months before a presidential election. certain members of the fed if

they were more honest, they may be sitting there thinking, there is an asset price issue. the real economy is not delivering the kind of growth we want. just in case there is a recession cyclically, we are well over -- well overdue a recession, what is in the armory? it is 50 basis points if they do anything. i think the bond market is already creating an increasing drag on the economy. if they do a rate hike the dollar keeps moving higher, it is deflationary for the u.s. economy. we will get to a point where we will see some pretty aggressive flattening of the curve. i do not think they need to hike, but they may well do it in

q3 or early q4. you will not tell me there is any inflation in that economy. anna: bobble stay with us. guy: the london stock exchange is hosting -- let's get a voice from the industry. we are joined by tony o'reilly. good morning. give us a sense of what is going on in the irish energy sector at the moment. i hear a lot of talk about rollouts and consolidations in the sector. tony: i am hearing a lot of that as well. the overall macro element happening in the worldwide industry means that ireland is

not interrelated. a dearth of investment taking place. lower activity, we have many wells drilled in the last few years. as a general statement, you are starting to see some change in the market with companies starting to say, the oil price has stabilized and there is a plan to go forward and make the investment. it is a great time to invest. costs have come down, it even greater than the oil price has fallen. that creates a unique investment opportunity in the marketplace. in terms of what is going on with the companies in ireland, a lot of companies are talking to each other and a lot of companies who are looking further afield to see where the private equity mayor be -- maybe coming in etc.

anna: is that your assumption for the rest of the year? tell us what you think things look more stable. tony: do you know what? i have no idea. all i can do is read the various reports emanating from the suppose it experts. -- supposed experts. a longer-term prognosis has to be better. the geopolitics of the world, it is a pretty unstable place. i think you will see the oil price coming back in the years ahead. where is the oil going to come from? guy: we talk a lot about technology on this program. what are you hearing about the marginal cost? i am hearing a lot of people talking to me about the idea

that people are really innovating at the moment particularly in the states, and it is driving down the marginal cost of the barrel. tony: that is absolutely true. technology has impacted every industry. why is it any different for the oil and gas industry? costs are coming down, which reinforces that this is the time to be doing things in the oil and gas industry. there is a need for oil and gas in the years ahead. if you can produce it more cost effectively. whether that leads to more swing producers, i cannot really say. geopolitics will have an impact. anna: thank you very much for joining us this morning. guy: let's go from ireland to china. details from the securities

regulatory commission. let's get the details from caroline hyde. caroline: it seems to be related to potential changes when it comes to margin trading. basically, it said that maybe brokerages will be allowed to roll over repayments of margin trading or shortselling contracts. they can do it once or twice within a six-month period. they previously chastised brokerages that did not make their clients pay up if they allowed them to overstep. at the moment, they seem to be saying that they could be easing that up a little bit when it comes to margin trading. margin trading has helped fuel the surge in chinese stocks. shanghai composite up 57% over

the year to date. these are the trends we are seeing happening in china. it has fueled $6.5 trillion created in the chinese stock exchange in just 12 months. $6.5 trillion. some amazing stats. you can circumvent the earth 250 times with $100 bills. it is pretty phenomenal. guy: thank you very much, caroline hyde. bob is still with us. the chinese are pumping up a bubble in their equity markets and this is tinkering around the edges. but that bubble blowing process is definitely underway. bob: fix that investment. the export story -- everyone is

trying to export to the same buyer i.e., the u.s. consumer. it comes down to domestic consumption. you could people to spend. i think it is a dangerous game but with china, the warning is always there. if there is one economy where they may get away with it, it could be china. it is risky. anna: interesting development. deciding whether to include the shares in their emerging markets index. if they were fully included that could lead to $154 billion of inflows. talk about whether things can go higher from here. bob: bubbles have a way of surprising.

ultimately, i will always seek comfort and incomes, earnings growth. none of those things are happening in china. i think that is telling you something. in terms of the equity market the authorities kind of want to make people feel better about life. stocks are relatively illiquid. easy to kind of push higher. guy: european equities beginning to sell off. to repeat the story from earlier, do we have another 10%? bob: i put something out in may when i was talking about increased volatility. in terms of stocks in credit markets, a little more resilient.

i think there is potentially another 10%. we have a six-month window. guy: back in a moment, thank you very much. ♪

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>> welcome back to "countdown." just half an hour to go until equity markets open here in europe. here are some of the stories you need to know this morning. >> hsbc is planning to cut between 22000 and 25000 full-time employees. the lender also says it will cut operations in turkey and brazil. >> the highlight was apple

music. it will debut on june 30. >> the u.k. house of commons will have its first debate on the referendum. speaking at the g7 meeting in germany, prime minister david cameron said it is in the interest to make changes. let me give you a heads up on what is happening. it has been all about the dollar for some time to go. let me show you what is going with the euro dollar this is the last couple days we are looking at. we have been climbing for most of the numbers. we are beginning to fade off a little bit.

the story is whether the president said he was concerned about the strength of the dollar. we heard from the french apparently president obama said that during the meeting. the president decided he needed to clarify things in the press conference afterwards. president obama: i did not say that, and i make a practice of not commenting on daily fluctuations of the dollar or any other currency. >> apparently he didn't say it or that is what we have in lead to believe eerie at it is going to be interesting to see what happens with the euro-dollar going forward. we are watching carefully to see whether we continue to see strength. will mario draghi follow-up, and will we see further action from him as well? the primary action has been to

send this chart in the opposite direction. i want to show you what is happening in the european equity story. we are about a half hour away from the european market open. this is a confusing chart. let me show you what is happening. we are seeing a little selloff to the market open. we have the euro stocks down by around half of 1%. the ftse faring better. we are down by around a third to a half of 1% as we head into the european open. the dax is down by 10% from its peak. he expects may be another 10% still to come off the european equity indices. >> mercedes is upping the luxury game with the driverless car. it could hit markets by next year. elizabeth is in munich. thanks for joining us. what is new about the self

driving system? i think don't they already have some elements of this technology ? tell us what is the new thing here. >> i guess what drivers would notice most is driving on the motorway and on country lanes where the car is able to pilot itself, meaning it can keep a distance from the car in front and keep a lane. the second thing is collision avoidance system mercedes has decided to put into the car. the car is able to see pedestrians suddenly jaywalking in front of them. they can come to emergency stops as well as a traffic jam suddenly appearing on the motorway. it's able to bring you to a complete halt.

>> i'm fascinated about this. i started commuting. what are the limitations of this? am i going to be able to check on the internet and read my notes on the way in? what can the car actually do? >> at this point driverless systems are supposed to assist the driver rather than take over the whole task. you are able to take your hands off the wheel for a few seconds but if you don't hold onto it, the car will be but you reminding you to retake the wheel. if you don't, the system switches itself off, forcing you to retake the wheel. it's really about making the driver more -- the drive more comfortable and relaxing. we might see systems that take over more driving tasks in the future that are more automated. >> thank you for joining us today. absolutely fascinating. when we first started having

this conversation my reaction was imagine what it could do for the productivity of the u.k. economy. your reaction was imagine we can go to the pub and be driven home by our own car. >> this is going to change the pub industry. you could drive and the car is outside. job done. i live in the country. the other big difference. >> that is the dividing line. 12 hours to go until the start of trading. mike joins us. i assume you came here and a car that had a driver. >> i think so. there was someone in the front seat. he said expectations about what companies could deliver had run away from themselves a little

bit. >> has been known to be bearish. the world economy is in a bit of a mess. what we have seen has been a revulsion. they put back to the ucb, which ultimately didn't exist. there was a global overlay, which led everyone into a bond market. one thing i am looking at is where are the earnings. where are european earnings? there is a narrative that u.s. earnings are horrible and european earnings are much better. actually, estimates for the full year are down five or 6%. they are still down 3% in euro stocks as well. one would have thought it

started around a year ago. thus far very little evidence. if you look at emerging markets estimates are still plummeting. >> let's talk about hsbc. we are about 22 minutes away from the big of aids. we had some details coming through. the devil is always going to be in the detail. we have got the hong kong listing. we are only up by around half of 1% in hong kong. what do we need to hear? what do they have to do to get this stock moving? what happens next? >> it has a would -- already been commented the bank needs to significantly downsized de-risk, simplified the organizational structure. it seems to me the bank is too

big to manage profitably. they say a lot of the right thing and everybody likes productions. interesting to see given some of the difficult over the past few years but the question was always about execution. there are broader concerns globally. you have regulators loading extra capital. you have got crushing yield flows. no wonder these banks are struggling to generate double digits. all these banks have to transition to a significantly different business model. >> you have said how the banking system seems to suffer from this scale. is that because regulators expect a lot?

>> a number of academic studies have looked at this. finance is one of the areas that stands out. i think it is the increasing complexity of the business, which ultimately works against developing sustainable borrowing -- sustainable roa. it is very rare you will get them arguing for small organizations because they sit at the top of them. >> thank you for your insight. >> let's go to athens and find out what is going on. angela is putting the pressure on greece once again. frustration mounting. on the ground in athens. european creditors losing a little bit up patience. what is the latest?

>> this is the blame game at its finest. they are urging the greek government to come back on the proposal. they are saying time is of the essence. we have to speed things up. you always hear them saying the grexit will not be the end of the eurozone. greece gives its negotiation tactic. greece says we will wait for you to give us a counter proposal on that basis. that is our redline. you have the finance minister varoufakis saying the traders are sabotaging negotiation talks and we are in the risk of an accident which will not be an accident if it actually happens. a mess overall.

we hope we see some developments until then. there is some convergence in the numbers. that is about it. >> what can we expect from the review? what can we expect this week? >> it is balancing all outcomes. the fact that greece bundled the imf a meant some say this could be the thing that forces the ecb's hand. with negotiations ongoing i don't think the ecb will pull the plug this week.

it is a possibility, but maybe we will give another week to the greek side. >> thank you for the update. >> coming up, you are looking at live pictures of london. we are 17 minutes from the start of european equities trading. it looks like we will see weakness in global equities. it looks like we are going to open a little weaker here in europe as well. how will hsbc open? we are back in two minutes. ♪

like is which route which really should you were in -- welcome back. we have less than 15 minutes to go until the equity markets kickoff. there are plenty of things you

need to know. >> they said they would target annual cost savings of as much as $5 billion. europe's largest bank is targeting a return on equity of more than 10% by 2017. >> the highlight was apple music. the u.s. tech giant is fighting back companies such as spotify. it will debut on june 30. it will have over 30 million songs. >> the u.k. house of commons will have its first debate on the eu referendum today. the main opposition party is set to back the bill. prime minister david cameron said it is in the uk's interest to try and make changes in the eu. >> the big story we just mentioned is what is happening with hsbc. we got some details a little bit

earlier on. we are starting to get even more details. jon ferro is here as well. more on what we can expect as he takes over the market action. we have got the dax. we now know some of the details going through. >> initially we were told the exits were expected. i think it is a return on equity's. they are targeting to inner half percent. they are going to have the most cuts to assets.

nearly half of that is going to advance. it is not so much disposals. i think there will be a lot of questions on how do they get the return on assets. if you look at the 5 billion in cost savings, consensus is expecting 9% in 2017. that cut get to 210, which is what they are targeting. there is still the question of what does the revenue look like from there. we are still pretty unsure of the revenue trajectory for a few of the business is. >> it will be interesting to see how this opens. we can track it all the way through asia. it spiked up a little bit. >> i think we have got to talk

about politics. you slashed some of the workforce. the banks have been surrounded by a regulatory and political storm. 8000 jobs in the u.k. politically. that is something they have to deal with. >> it has been reported george osborne is going to use his speech to say we cannot enter banker bashing. do we change the rhetoric? >> i think definitely. the fact is the report is asking banks to spend an awful lot of money on retail businesses. we are talking billionaires. what does the business normally do? clearly the government would have been aware there was a risk to jobs, etc. in terms of u.k. business, it's one of the areas of growth. they are committed to being

here. they set up in march. >> in birmingham. >> back to the midlands. >> i think the rhetoric has to change. >> can we talk about putting this in context of what happened this week? we had an exit interview going through fairly big changes. put hsbc in the context of what is happening in the industry. is it a focus on asset management etc.? >> risk has increased with big banks. the way you record operational

risk, it requires capital. that has gone up a lot with the big banks. they need to simplify. also it's not going to be all things to all people, but it wants to be universal bank. you can imagine the incoming ceo is saying we need to show people what we are. the way the regulator looks at you and worries about what you can't catch compliance wise. hsbc spends $11 billion on compliance. >> i talked about this exact topic and how much hsbc had been spending on compliance. i think from an investment perspective from what we want these banks to look like and on the other hand it's what the country and the economy wants them to be. the discussion has been pushed act when it should be brought

forward. here we are still talking about a bank cutting costs, stripping assets. brady dougan said enough is enough. maybe we are at the point where he tries to end banker bashing. >> stocks of around half of 1%. >> this is a big weight. it matters in that sense. we have seen the dax go into correction territory. >> another 10% downsize. i hate to put words in your mouth but bear market? is that where we are heading?

we are heading for a sixth straight day of losses. the emerging market heading for losses. >> the correlation actually beginning to tighten up a little bit. >> where do you hide? the correlation between bonds and european stocks at a one and a half year high. it is very hard to find somewhere to hide. >> they are getting paid more. it is becoming more attractive. >> we had the chinese inflation data out, which factors in. we had some interesting regulators as well. factory price inflation is down from march of 2012.

>> the chinese equity market tells we we are in a beautiful place. >> the fact you may and up in a situation where they are telling a different story for quite a while. >> it is becoming a china story more than a u.s. story. >> it happens later today if it happens at all. thank you very much. >> that's it for countdown. jonathan is going to pick that up. it is around 3.4. >> we will see you tomorrow. ♪

>> good morning, and welcome. let's get straight to your morning brief. and aiming to slash costs by as much as $5 billion a year. consumer prices rose a slower price for may. leaving the people's bank of china a little bit more space to ease. an 11 day of losses. europe's stoxx 600 is on the longest losing streak since

2015. ftse futures off by 12 points. it looks like we might open lower. caroline hyde has your market open. >> six days of declines. there we have it. action is needed. you have got obama saying he is losing patience. the finance minister of greece himself saying they could unleash the bailout funds overnight if they want to.