francine: trading higher. your short -- europe's stocks open higher. a warning from wall street to jpmorgan kicks off bank earnings seasons. i deal or no deal. crude slides from us highest after doubts emerge over the attendance of iran's oil minister and this weekend is this weekend upon meeting -- weekend's meeting. ♪ francine: welcome to the pulse, life from europe's headquarters.

the equity boards. this is a picture for your. we are seeing gains across the board. this is a picture for the ftse, 1.2%. italy, the european banks gaining quite significantly on the back of the funds that were created just about 12 hours ago. onto the second board. yen,t to show you dollar one away .95. it was significantly higher -- 108 .95. it was significantly higher. presidentzilians vice is joining a plan to form a transitional government. votea crucial impeachment oning on sunday, he plans spending his capital on reforms that would stem the worst

recession in the country's history. business groups from some of business -- some of british biggest -- the prime minister will meet employees groups from u.k., germany, france, spain and the netherlands today as well as the heads of businesses. internet connected could be target for hackers, potentially including terrorists and hostile nations. that is according to a top u.s. justice department official. vehicles havere built inside the security protection. be valued atd to $42 billion by 2025. global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. you can find more stories on the bloomberg at top . francine. francine: china's exports jumped

the most in a year. shares on the shanghai composite today.ng some 30 tom, the headline figures look impressive. does it tells the whole story on china? tom: in a word, no. the headline figures are impressive but they are flattened by two factors. there is a significant base effect. back in march 2015, we saw a slump insect -- slump in exports. secondly, there was a week holiday for chinese new year back in february. it has been dragged back from february to march. what we do to try and see past

that, is we look at the growth rate for the year to date it if you look at that, while china's exports are down 4% so far this year. not a particularly promising trend. francine: tom, we note that the operator who is spinning off its china's operations as sale -- sales jumps grows. there are specific factors when you're looking at a specific company. yum has some low reported issues in china a few years ago in particular with food safety scandals did it impacted just scandals. -- scandals. it impacted sales. china's rebalancing story has to be tempered by a recognition that consumers are a part of the voter economy. it is going to be hard for household income growth to be

strip growth from economy as a whole. they work in the export sector. face slowing wage growth and that means the consumption will find it difficult to maintain very robust levels going forward. francine: tom, think you so much for joining us. chief asia economy -- economist for bloomberg. geraldine sundstrom who is with us for the first half of the show. geraldine, great to have you here. thank you for coming in. there are a lot of them out there and we talk about china, local election. when you listen to the imf, we should be worried. is there any optimism we should focus on? geraldine: pimco agrees with the imf, there is a recession around the corner. growth is positive but risk is out there. china is one of the big one

which i think we are coming at a very important moment for china. the first quarter was pretty weak in 2015 in china and all of the data we are seeing now is flattered. the truth about what is going on now in thell come second quarter. next, you will have a brexit which we will see the u.s. election looks like something very far down the road. this week we have the oil prices and what may happen here. are looking better certainly compared to what we had in january and february. francine: we don't have the turmoil. central banks are doing wrong. they are doing too much and maybe need to force more structural reforms. geraldine: it seems to me like the next stage, and just rates have serious albums in terms of

transition and having an impact on the banking sector. now we would hope something would come from the fiscal. the first time this change in the policy might come from japan . europe will probably have to wait a little bit longer. they did something quite big, corporate bond buyback. wait to seeed to the impact of all of this. the next innovation if it were to come, quantitative easing, might come from japan. francine: how much do you look at japan to give us an indication of this great financial experiment? whether it is working or not? the yen arose quite significantly on the back of the not being putorms in place? or is it a. pure havenor is it a play? geraldine: boj went for negative interest rates we discovered

that policies are not a new paradigm. negative interest rates are complicated to handle with. now with essential bikes around the world, -- francine: do you have any exposure? -- benchmark against future if you see it, it is currently at 108. they say it will touch 105 and 100 and it may go lower. geraldine: that would be problematic for the nikkei. some of the same reaction on the euro stoxx, the euro getting stronger as of late. we will have to see. around 105, iys would say the move on the nikkei is probably exaggerated and would make an interesting by. i was in the same about the euro. on a trade weighted basis, the currencies have depreciated but not as much as you look at versus the dollar. i am a bit more sanguine on

these two markets. to the s&p 500. it is probably a bit overdone. 100 or 125ing about on the -- 120 on the euro. francine: we'll get back to geraldine and get morbid thoughts on ecb. stay with the pulse. plenty coming up. count me out says paul ryan. he insists he will not run for president. we talked geopolitical risks. it is going to be bad news for jpmorgan and berkeley's -- barclays. what to expect. why a failure to freeze and -- what a bigger deal to expect in delhi. what a that's wife very to freeze

.rancine: welcome back let's get straight to the bloomberg business flash with nejra cehic. nejra: shares and tesco are trading lower this morning despite reports of its animal -- annual earnings that beat analysts estimates. it rose to 1.1%. that compared with estimates of 936 million pounds it the uk's biggest grocer said profit will be held back by the cost of crude.

jpmorgan has cut about 5% of jobs at its asia-pacific wealth management unit and refocused staff on serving clients with high investment rush holt spirit -- investment thresholds. it is involved mostly relationship managers based in hong kong and singapore. the bank is due to announce first-quarter earnings this morning at 11:45 u.k. time. usual. that is your bloomberg business flash. francine. francine: think you so much, nejra cehic. -- populist politics in the u.s. and europe.

japan as growth risks. -- ofalso warns adviceting growth. >> followed, generally the outcome has been good. there is an issue to raise which is policy works. monetary policy cannot be implemented overnight. partly for that reason it has been very an excessive burden. we should not hide behind legislative lags and difficulties in enacting structural reforms here is -- reforms. our job is to point out how beneficial these can be. then the political process has to pick up that ball and run with it. francine: let's get more now

with geraldine sundstrom. take you for sticking around. we're talking about the policy did you aren't seeing the -- the policy here you are saying that the fiscal has to come in. a signal to the markets that they cannot take all the weight on the shoulders, oral do we need to make sure the politicians come and just come in? -- come in? isaldine: more physical humbly warranted at this juncture. it would be welcome in europe. it would be the most difficult to come by. japan will be the pioneer into this. we've discovered that negative interest rates are very complicated animals and it is better not to do too much with them. -- they are going to have to find a means to

monetize a little bit that might come from japan. in europe, the key could be quantitative easing more free. course, people and structural reform really necessary. this is also complicated and moving very slowly and politicians have certain angles that might be different. for now, relying on central banks is what we all do. that is what we have. francine: what is amazing if you look the last four to six tests last four to six weeks, so much has been done. forecast for mobile growth has come down to the settlement policy is there but it is not helping growth. it is hurting banks though. are you concerned that banks are being punished at a time when a lot of them are starting to restructure? geraldine: bankshares have had a

bad quarter. the european and japanese banks are suffering from the negative interest rates. this is hurting probability -- profitability and their ability to rebuild capital. this is unlikely to go away right away. negative interest rates are not going away this year. the only that's the only thing we can hope is there will be no --e negative interest rates the only thing we can hope is there will be no more negative --erest rates here it negative interest rates. overall, europe is still creeping up a little bit. a difference within country. we are in a bit more unfair -- the punishment that the u.s. banks -- exposed commodities and oil prices and mpl's there.

they have domestic resale and mortgage sector. even though we know first-quarter investment bank profits are going to be low, there might be higher up provisioning for mpl's. that said, there is a sector in the u.s. market that can produce genuine positive earnings growth. low single digits but positive and they are trading at a deep discount at the market. isn you look at levels, it hard for the market trading below price books. i would say when you look at what we can hope in terms of earnings growth and the broader index level. what we can hope from banks, and a usual world, it is not the different. probably their hopes are being scaled back. the earnings potential of

converging. that means you look re: used to be week. around 12.is why should there be such a big discount. peoples with debts people with earnings expectations and be contained in this new environment and world. this might be a sector that --ht have a chance -- might this might be a sector that might have a chance. francine: a lot of them are retrenching. regionally.ertainly i would not mix u.s., europe and the japanese banks. they are different animals. generally speaking, i think the sector is not that huge risk like the market would like to perceive it. francine: there is nothing systemic.

geraldine: first quarter would be bad but after this we have hopes. francine: geraldine sundstrom stays with us did we talk about oil next. us.ith we talk about oil next. tell me out. -- count me out. elections 2016.

>> let me speak directly to the delegates. if no candidate has majority on

the first ballot, i believe you should only choose from a person who is actually participating in the primary. count me out. --ncine: dayco. paul ryan there you go. paul ryan pulling out. let's bring in geraldine sundstrom. geraldine, when you look at political risk, it is impossible to look at the polls and figure out and try to imagine what could happen in the u.s. election in november. it is very difficult to read the polls here in the u.k. talking about brexit. how do you manage it from a portfolio point of view? we warned in our publication that sadly we can't rely -- and the same extent as we could in the past. what we have to be careful of an portfolio construction, we use exaggeration as they diversify their.

you can find other means and ways. [indiscernible] taking care of one of those risks. when it comes to brexit, it gets binary, i would say. at the moment it is probably relatively well priced here it -- well priced. francine: you don't think it will follow further -- fall further. geraldine: it could definitely bounce. [indiscernible] is tok what we can do keep more cash than i used to. liquidity -- francine: what currency? geraldine: whatever currency is in the portfolio. liquidity is not what it used to be in the market. volatility where everything gets bundled. yet to be quick to take advantage of it.

as anly thing i have found means of them with this and deal with problem one after another when they come. very, i think china is much in need. in june we have brexit. then we have to worry about u.s. election. francine: in the meantime, we have oil. correlation seems to be we have had an inversion. i did this chart. in orange is actually what we saw from the banks. white line is the price of oil. you can see them correlated from 2011 to 2013. now the correlation has inverted but it is quite strong. do you have hopes for delhomme r doha? --fo beenne: our focus has $50 per barrel which is on

track. if we go much beyond $50, shale oil producers will come in there and do more supply. i think something is going to come out of the -- will it be real? exercise.ore of a pr regardless of a freezer not, when we look at supply and as the euro comes along and goes forward toward 2017, supply and demand will be much more in balance here it -- in balance. we would go up. supply is on the way down, even though iran came online. they probably agree to something. deal or no deal, it would have an impact in the short. it doesn't change our outlook for oil prices. care -- francine: think he so

much for coming on today. geraldine sundstrom from in. we talk more about jpmorgan coming up. ♪

francine: welcome to "the pulse," live from london. let's get straight to the bloomberg first word news. nejra: thanks. forhas extended declines more than four months as speculation swirls over the likely outcome of a meeting by major suppliers to discuss freezing output. iran's oil minister has been invited, but hasn't yet communicated a definitive decision on attending. the brazilian vice president is

drawing up plans to form a transitional government, as dilma rousseff sharpens accusations that he is the mastermind of a coup against her. with a crucial impeachment vote looming on sunday, he plans to spend his early capital on reforms to stem the worst recession in modern history. business groups from some of britain possible biggest continental trading partners have voiced their support for david cameron's bid to stay inside the european union. the prime minister will meet groups from the u.k.,, germany france, spain, and the netherlands, as well of the heads of businesses. gomez, 24 hours a day, powered by 2400 journalists and 150 news bureaus around the world. you can find more stories on bloomberg at top . francine: european markets are slightly higher this morning. let's head to the market check. mark: good morning.

stocks in europe rising for the fourth consecutive day, the longest streak since march. exports are declining by the most in the year; decline in imports narrowing, suggesting the second-biggest economy in the world is stabilizing. every industry group on the stoxx 600 is rising today; the european gauges up by 1.5%, led by basic resource stocks, up over 4.2%. have a look at this chart. this is wonderful chart showing the shanghai composite year today. swingeir 30 day price since january on the 28th. the benchmark shanghai composite has rebounded; this is the white line. back in january, it reached a 14 month low. the 30 dayn, gauge of price swings has also declined to the lowest in the year. that is the yellow line.

music price swings aren't translating into better trading conditions for local brokers -- that's the downside of less volatility in china. big news for tesco, reporting annual profit that beat analyst estimates, improving sales helping it mitigate the price for, which of course is damaging the industry. profit will be held back this year because of the cost of improving its product range as dave lewis continues to revive the economy. it was only a year ago that the company had its biggest loss in 97 years. these are tesco shares this year. and you can see the rebound in the share prices this year, pushing a closer to the 12 month average price target. decline, itoday's

came below the price target, it is a good chart showing how the analysts have come much closer to the share price because of the increase. the big question many are asking ,s if britain leaves the eu sterling is likely to decline, but what happens if britain votes to stay in the eu? another a strategists and investors are suggesting that yes, we will see a rally, but it won't last. on top of that, options prices suggest that traders are pessimistic about sterling. this shows the net cost of three-month contrast hedging against sterling, widening to 4.7%, of the most since bloomberg compiled the risk reversal data, as it is known, since 2003. there are similar premiums to protection. so yes, sterling is likely to fall if britain leaves the eu,

but if it stays, how long will the rally last? francine: certainly the story of the year. thank you so much. detailing the damage. jpmorgan is said to be the first wall street banks to report this quarter, setting the barlow by warning revenue could be down by as much as 35%. u.s. banks have seen profit estimates/ahead of earnings season as low interest rates, slumping trading brings them to our chart of the hour. this is one of our favorite guests. look at that. still fromimates february 1 to what we are now expecting april 12. christopher wheeler will shed some light on all of this. great to have you on the program. earnings were expected to be much worse -- talk to us about stocks. is it already priced in, or can the news be worse?

>> i think most of the bad news is priced in and obviously what people are hoping for is better news, can people were saying what could be positive over the next few days. we are seeing something about more fundamental, but it is difficult to see where the good news is coming from. while we know trading revenues will be week, there is interest in the margin but i think the big factor will be the energy conditions despite the rally in the oil price. what clients are asking me is does that start to mean we have contagion elsewhere? that will be -- francine: does it? >> it is very rare to have a single industry see a spike. we saw some in the first quarter, and then down it goes, and everything else, real estate, manufacturing, is fine.

francine: let's bring that chart up again in terms of the earnings expectations. jpmorgan today is expected to be bad. which is the one without worries you the most -- the one that worries you the most? >>: that worries me the most is the one that is normally the bellwether. wells fargo. they don't have -- there are couple factors in the first one is that they are quietly building quite a major investment banking business, which is having an impact on the cost base. they keep banging on the top of that cost income ratio while everyone else is pushing down. we think it may not be bad, but it changes the risk. francine: this is still a retail bank, right? given where central banks are doing, it is probably the safest. >> if i look at the wholesale banking industry, about $11

billion, in may 2 $.5 billion of fees. that's about 18%. they are taking 500 thousand square feet in manhattan and i don't think that is retail banking. they also have $17 billion funded unbalance exposure. nearly all of that is noninvestment grade. you manage that big negotiation with chesapeake where they are trying to shift the emphasis away from being oil to the other assets and i think the market may be surprised by the level of decisions they take. if we have a really bad quarter, will it be the worst quarter? will he try up with everything in this quarter so people think, ok, we are doing better, because central banks aren't doing anything? investment banks will be under pressure? >> call the banks will be asked how was the quarter going. unlucky 13 --.we got a lot of

detail on what is going o. it doesn't feel like it will be a stunningly good quarter. francine: will it be stunningly bad? >> i don't think so. we had so much volatility in the first part of the year that we saw that fall down in the indices. a lot of volatility around the fixed income markets. better, but equity revenues have been holding up for two years and so is m&a and capital markets. those are falling away and they don't look like they are coming back vigorously. francine: we talked a lot about u.s. banks. are european banks going to be even worse? we are seeing a lot of retrenchment. >> absolutely. are still oneanks step or two steps behind the curve compared to the u.s. they haven't adapted to

the and we have -- -- in trying to get the business into shape, to generate the kind of returns that the shareholders want to see. francine: we will be talking european banks with chris wheeler next. we will look at some of the big names you mentioned. deutsche bank, credit suisse, and ubs. and three new banks have three new ceos. why bad news with financials could mean bad news for europe and those at the helm. ♪

francine: this is "the polls." let's get to the bloomberg business flash. nejra: thanks. shares in tesco are trading lower this morning despite reported annual earnings that beat estimates. operating profit rose by 1.1% to 944 million pounds, compared with with estimates of 936 million pounds. the biggest grocer says profit this year will be held back by the cost of improving its product range as the ceo continues his turnaround efforts. about 5% of cut jobs at its asia-pacific wealth management unit as it refocuses staff on serving clients with higher investment thresholds, according to a person with knowledge of the matter. week, cuts happened this said to have involved mostly relationship managers based in hong kong and singapore. they are due to announce first-quarter earnings this morning at 11:45.

peabody energy has voluntarily filed for chapter 11 bankrupt. trading shares were suspended immediately; all of their mines and offices are continuing to operate, and are expected to continue for the duration of the process. no australian entities are included. operations in that country are continuing as usual. that is your bloomberg business flash. francine: thank you. let's turn to europe's banks now. wall street players will be the and it iseport, expected to be bad for the european lenders. they are in the process of restructuring under new ceos. for more on what's ahead, we are joined by chris wheeler. we talked a little better of the u.s. banks. europe's onk about a daily basis, that is bad news price into those banks? the economy is in helping. they probably have portfolios that they have to unwind, which

will be expensive. >> look, they are going through major changes. they are in search of the holy grail of about 10%. i think it is fair to say that these banks have done an awful lot. of people ask me, are they going bust? of course not. they have got some industry slump, the need to get a higher ratios, they have the support of the german government. it'll just take time. francine: how much time, and what does it do? the share prices are up -- how much time would you give them? >> i think it's laid out. the plan is 2020. i think he is hoping to get a lot of the lifting done in the next few years. so 2018 you start to see some progress. i think investors -- the good news is that he has been given time. credit suisse is a much more --

francine: but the share price has halved in 12 months. >> in many ways, it is the most important thing -- this incredibly strong wealth management business. retail said many times, is just not a big business. the problem is a lack of understanding in exactly where the chief executive is taking the bank. that is clear is focus on asia; it's the rest of the strategy that remains confused. i think the market wants more clarity. morning, a big u.s. investor was calling for them to get out of the investment banking business. there is some pressure building, and i think he has to consider that. and also what he does with his non-swiss and non-asian wealth businesses. francine: you are talking about

david herro. talk to us about italian banks. italian shares of banking stocks are going up. they set up a fund of over 5 billion euros -- it seems like peanuts because the value could be up to 360 billion in italy. is this just a first step? >> i'm not sure that's the number to look at. the number to look at his $5 billion of capital and they will leverage that. it will not just be buying it because you say. i keep saying -- i first reported on them when it was totally different, fragmented, high cost basis, an enormous amount. it's remarkable what was achieved. however, they are still dragged down by these bankruptcy laws, which mean getting money back, which could take 10, 15 years. francine: and that is set to change. >> and that is an enormously

positive aspect, because they can get back on an even keel like the rest of the european markets but it will take time. that is why they are trying to shift as much as they can off the troubled banks. francine: who is best in class? we talk about deutsche bank, u.k. banks, they all have troubles. but because of valuations, is there something that you think looks like a good deal? >> interesting question. so many banks are so troubled. one could argue that the bank, the large banks in europe, the one that looks best place seems to be lloyds bank in the u.k.. it got to where it needs to quicker than everybody else and it has a focus strategy. now i can just tweak that strategy -- it could go into fixed income. they could boost their margins

there. --ing rates in the u.k. francine: at some point, fixed income has to turn around. or does it? >> fixed income will turn around. it will go back to 2009 levels where we had that big spike. it is never going back to the precrisis levels. but yes, investors are more willing to take risk, there will be more going on, all the hedging that has to be done. it will come back. the question is who wants to be in that business, and do you have the cost base to be in it most cost-effectively, given the extra capital you have to have? francine: what kind of impact does brexit have on u.k. banks? i have heard it is the swiss banks, the big banks, with the big, fancy things in canary wharf that would lose the most. >> look, i was talking to a gentleman this morning he was a big fan of brexit. we were arguing about this, and

i said, if we said no, they are saying it will be a disaster, and people have said -- they have never been right in the past. there's a great deal of confusion. what the u.k. banks should say is that we have this quote. it doesn't mean more costs or having to get different licenses rather than a single license for being eu member. francine: thank you so much for that analysis. chris wheeler. will they do a deal in doha? the impact on oil prices if output fails to materialize. stay with us. ♪

francine: we are right on "the pulse." oil in stocks back in sync. the relationship between stocks and crude continues to strengthen. this is our chart. wsee the correlation between the msci and wti; it has climbed to the highest level since 2013. in the yellow is the msci world index. you can see the correlation is very strong for 120 days from 2011 through 2013. this is the price of oil back in 2011, which has calmed down. you can see that the correlation is again back.

this signifies when we need to look out for oil, because it impacts global stocks much more than the last 12 months. in the short-term, oil has extended declines amid speculation over the likely outcome of the meeting by major suppliers. for more, ryan chilcote is here. we have had some conflicting news over the iranian oil ministry. ryan: we heard from the iranian oil industry that they haven't made up their mind. we heard they might be sending a representative. it doesn't matter because the only iranian position that has been consistent ever since these freeze is weil aren't capping, we aren't even going to discuss it, until we get our oil output to pre-sanctions levels. if he shows up, it is just to take notes. francine: what are we expecting oha?

what we gotpecting last time -- it has gone up 30% since february and that is the expectation. is thatest risk here they won't meet the expectation and we could see a big drop in the oil price on the back of it. if it cop of the goods on sunday, we couldn't see it fall to about $33 per barrel, which is where we started. francine: it is still a powerful image, that they are meeting. that they are trying to find the agreement. even if they don't 100% mean business, they are thinking about it. >> it goes from verbal intervention to good feeder. you have all these guys willing to discuss stuff, maybe without the iranians. at the end of the day, they will

always get some sort of pack. and the salaries as they were yesterday are talking about production levels, that would lose the risk that we have extended supply collection. francine: and u.s. stock files. >> the expectation is that they will be thinking about the glut persisting. the record for u.s. inventories as 536, or 530 million barrels. let's see what happens. francine: do you like my chart? >> i really like your chart. everybody wants to know what's going on. francine: that's just one of many oil stocks to come. stay with bloomberg. "surveillance" is up next. we will bring you first-quarter numbers from jpmorgan as they kick off the earnings season before wall street bank. how much of the bad news is priced in? we have one question when it comes to the banking industry. how ugly will this quarter be? chris wheeler says let's try and

focus on what they could surprise us with all the upside. we tried to think how they could support it. are looking at oil in geopolitics. ♪

francine: europe stocks sharply higher as china's exports jump by the most in the year. commodities rising ahead of gdp data out tomorrow. jpmorgan kicks off the earnings season, and we look at how bad it will be for the industry. oil slides from its highest level in more than four months n's oil minister says he may not attend the key meeting. how much does it matter? this is bloomberg "surveillance." tom, we are going to have a greatho