welcome to "on the move." we are counting down to the european open and i'm anna edwar ds. plummeting profit and it is a tough first quarter for ubs, thing is topline fault 55%. the ceo tells us potential volatility from macro events is quite paralyzing. bnp say revenues show resilience, but it has been a challenging first-quarter. >> of course, there was a

particularly unfavorable market environment at the start of the year. divesand the aussi dollar after the central bank unexpectedly cut rates and its inflation outlook. meanwhile, the yen surges with an 18 month high. we are less than 30 minutes away from the start of the european equity trading and let's have a look at where we are with european features. it will be a little bit stronger at the start of the european equity feature come up .2%. the ftse 100 is up by .6%. we are getting some breaking news, really focusing in on what is going on in front in markets around the pound. the pound is raising its year-to-date losses, versus the u.s. dollar. there have been many concerns about where the brexit debate will take the u.k., whether the u.k. will decide to leave the european union or not. expectations around the

feature as seen the pound move up and down. let's check where we are on crucial asset this morning. .4% comparedup by to the previous growth on the back of that reevaluation around the brexit story i was talking about. stronger movesot within the japanese currency. the boj did not provide the stimulus we thought they would. ude, up by more than 1% compared to the previous growth. we are going to have the inventory numbers out of the u.s. later on in the week. tomorrow in fact. aussi dollar down by more than 1%. we saw the rba cutting interest

rates to buy 25 basis points, surprising some and the market, at least before exchange market. apps apprised some, but some factored in that moved by the rba, given what we have seen with the negative cpi. let's get to the bloomberg first wilderness. juliette: the yen's biggest rally. governor, heoj has once again reiterated that policy makers want hesitate to expand monetary stimulus in order to achieve the 2% inflation target. the chief investment officer of one of america's biggest pension funds has joined warren buffett and scolding money managers who charge 2% fees on assets under management and retain 20% of the gains. billionat the $187 california state teachers retirement system called the practice "broken." >> as an investor of b negotiate

hard. capital, weestor of negotiate hard. the model is broken and we are negotiating much lower management fees and incentive fees. the englishey won premier league. they could only manage a draw. leicester city are the champions. they were 5000 to one outsiders to win the title back in august. 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 . anna: let's turn now to the earnings story from the banking sector. ubs' profts plunged, missing

analyst estimates. we spoke to the ceo abou t the numbers. at the market conditions we have been operating with, the results are resilient. profitability within those markets is not easy and most importantly, we have been doing that while giving the opportunity and the possibility in a more normalized environment to deliver a stronger result. anna: guy johnson joins us now from zurich. guy, he was clearly painting a picture for us of what has been a very damaging quarter, for not just this business but many others, but he says that was really little that was positive about this quarter, apart from the wrist aversion. -- apart from the risk aversion. guy: i don't think he had much fun this quarter, unless you are in wealth management, which was a pretty good number. but we were warned it was going

to be tough. the morgan stanley conference back in march, he wants things were going to be tough. when you look at the numbers, every single unit had disappointments. the lowest transaction volume ever recorded this quarter. that speaks to everything you need to know about just how tough it is out there. the big question now, do things start to improve? weit looks like you know, are still in a very challenging i market. none of the issues we have been fighting are disappearing. i think this cocktail of macro issues, macroeconomic issues and geopolitical issues, are now coming on. know, we will see the vote on brexit. we will see a de-escalation coming from the u.s. election. potentially, you see lots of

factors that might affect the market sentiment and in that sen se, you see volatility, but it is not the kind of volatility translating to client activity. it is a paralyzing kind of volatility. guy: it was never going to be easy for ubs. a lot of picking up business as a result of what was anc,ening with the swiss fr but nevertheless, the market will look at these numbers and be disappointed. we will find very shortly when the market open. back to you. anna: we will see whether that negative trading story outweighs the positive around the new money. guy johnson joining us there in zurich. we also are sticking with the banking sector and we had earnings from hsbc earlier. they reported a bigger profit than analysts forecasted. the stock jumped in hong kong and we are out in front of hsbc headquarters. haidi, talk us through these numbers. profit beat estimates, but came in lower than last year.

haidi: that is right. we have a number of $6.1 billion. we were actually looking for a number around $4.2 billion. that is an 18% decline of the same period last year, where we saw $7 billion. it was a period of resilience, despite these global headwinds. what they did do well was a number of syndicated groups did very well. chinese mergers and acquisitions will increase market sharing. sector did banking not do quite as badly, but they did say there was exposure to the selloff her eie in asia. it was a pretty terrible quarter and the bank continues to have exposure to whether the chinese markets, which are the worst performing still into the second quarter this year.

in terms of that dividend, we have been looking very carefully at the progressive dividend that they hold a soap year. there was some speculation that they might have to let them go, but it is holding steady, flat at $.10 per share. ubs came in at $.20 per share. that was also better than what we expected. we did see the weakness coming through in the trade finance numbers. this continues to play out and this is a very growth demand and trade demand. that includes right here in hong kong. anna: haidi, thank you. dollart, the aussi tumbles. we are live in sydney with the latest, next. ♪

anna: welcome back. this is "on the move." let's get the bloomberg business flash. juliette: commerzbank has reported first-quarter profits that beat forecasts, even as a plunged 50%. the frankfurt bank lenders said

it slipped to 153 million euros. it did beat the predicted bloomberg survey. phillips were proceed with of the ipo. the amsterdam-based company will list the shares on the amsterdam exchange. they plan to build 25% of the units after failing to find a buyer for the business. bmw's profits climbed 2.5% in the first quarter. that is as the carmaker invested in developing new technologies, such as the self driving features. says he is concentrating on sustainable and profitable growth, rather than short-term profits. that is your bloomberg business flash. anna: now, the reserve bank of australia has unexpectedly cut rates as it tries to counter the dis-inflationary tends sweeping the world.

it was a surprise to some and the market with the dramatic effects on the aussi dollar. we are in sydney. dan, take us through the rba's decision because it did surprise them, at least that is what the fx market suggested. dan: that is right. it still had that shock factor, the decision did. the expectation was that the rba would not cut. dropped overlar 1%, now around $.75. it started the day at $.77. now up 100e are points. it is an interesting decision. this continues the trend we have seen across the world, where there is just no first level

rise. first level banks have been forced to act. the central bank is really trying to support demand, but it is fascinating to see the way the currency is reacting. it did track down the kiwi with it as well. it will be interesting whether to see if there is more skepticism. rba does have ammunition on that front, but where it will go remains to be seen. anna: we will wait and see because we did not get guidance from the rba about whether this is it, about whether they are done here, or whether they are happy to sit on their hands? or whether they want to act? clues about more fiscal levers later. dan: that is right. by day.e go deeay

of those strange setups where you go in a room for seven hours and work on the finances for the country. i have been several of them and of the government is preparing a budget that will start to stimulate growth away from that non-mining part of the economy and 30 to get demand going that for example, will go along with building of trains and growth -- a series of infrastructure that has been underinvested in for many decades. we might get some guidance around 7:30 tonight, but we are expecting an rba highlight. it is very interesting. they say they have been bouncing out the china concerns. remain to be seen. if we get another poor inflation rate, it does seem to indicate that the central bank is prepared to act. when you keep cutting rates, there is a sense, and you know

this in london, you are feeding into future profit prices. that speculates on real estate assets and that is a huge problem here in sydney. bubbles are also standing to rear their ugly head. anna: that is definitely something we know a little bit about here in london. guest.elcome our great to have you on the program. when you see what happened to the australian currency this morning, a bit of a surprise that the australians are cutting rates even further? we saw a tweak in the inflation number. anna: which was negative? we had a substantial reaction. it remains to be seen. the australian dollar has rebounded nicely over the past

three months. they were driven by commodity prices, but also, the new set of china. that recovery in china is questionable. it is questioned because it is based on a massive boost from the government, massive lending in particular. and the sustainability of that recovery is questionable. dollar the aussi probably is now been corrected. i think there is some room there for the correction. anna: how much does the aussi dollar affect the chinese currency? the want to affect infrastructure spending today, rather than the mining sector. policytly, the domestic will be a factor and they are going to try and support the economy. but i really think the china inference will remain very high.

forcoalition with iron ore example, remains very prominent. thre are some concerns ere. remain the aussi will exposed to potential disappointments. overnightimf warning about debt lvelevels in china. losses ever get these ond ebt crystallize? the we ever see the negatives in the credit cycle, do you think? >> there is room for the government to shift parts of the debt to ease the pain. but i think already we are seeing some stress along the credit chain in china. loan.ar about a rising you hear about some bond issues being possible. you also see some high end mar

kets suffering. i think we all already seeing some stress among the credit chain, but it has not been a major focus for global markets. but it is something to watch. anna: vincent stays with us this morning. up next, we take a look at the trading session in asia and look ahead to when things open up her eie in europe. we are just about 10 minutes away from the european equity data. ♪

anna: welcome back. 8:52 inlondon and berlin. we are getting expectations from the banking sector in london. weaker on the back of the numbers they showed us today. a lot of the other metrics look to be worse than what investors had anticipated. hsbc is trading higher in the hong kong session. we also have numbers from bnp in the dri french banking sector. juliette is standing by for us. juliette: it has been a pretty interesting day here in asia. untilwill remain closed friday. we had the big 3% drop and a number of the markets closed on labor day had their first chance to react.

we have seen quite a bit of selling going off in malaysia and here in hong kong. the hang seng is down by 1%. as you mentioned, hsbc shares are doing well, that we have seen a big switch out with some of those property stocks. the shanghai market is looking pretty good. we did see that coming through a little bit weaker than expected, but showing some signs of stabilization. in korea, stocks are closing higher by .4%. we had the surprise interest-rate cut from the rba. that's australian equities rise and they are now holding at their highest level since october 27 last year. and a very solid session coming through from new zealand as well. this is what the regional index, excluding japan, looks like, down by .1%. the yen is getting very close to that 1.05 handle.

this is the fourth day in a row that we have seen gains up on 6%. 1.05 is that line that the b ulls were calling for information from the boj. 1% dtodaydollar down at $.75. chaigneau is still with us. the pound has losses against the u.s. dollar. is this brexit for a dollar move? -- or a dollar move? >> there is a brexit reaction right there. if you look at the average of the polls, it seems that the "stay" camp has been progressing of late. you can see a relief rally. i don't think it is going to go very far. anna: vincent, thank you.

coming up, it is the market open, the futures pointing to a flat start to the trading day. perhaps it will be a little bit stronger i london. n♪

anna: good morning and welcome to "on the move." we're here in the city of london, moments away from the start of european trading. here is your morning brief. plummeting profit in a tough first quarter for ubs, seeing as topline fall 64%. tells us that potential volatility from macro events is "paralyzing." a beat for bmp. it's showing resilience, but it has been a challenging first quarter. >> revenues held up well in domestic markets, in financial services. but of course there was a particularly unfavorable market environment, particularly at the start of the year, those first two months. anna: and the aussie dollar dies after the countries central bank

unexpectedly cuts rates and it's inflation outlook. meanwhile the yen surges to an 18 month high. so let's see how the european equity markets opening up this morning. teachers were suggesting we would be stronger on the london market, perhaps a little bit sluggish elsewhere. let's get to mark barton, who has the market open. good morning. mark: a small gain in london. we are playing catch up after the bank holiday yesterday. the other 1/5 of 1%; markets are slowly opening. the cac40 is slightly lower, dax a little higher. the big, macro story today came out of australia, the central bank surprising, cutting interest rates to a record low of 1.75%. it's trying to counter this emergence of disinflation in the country that has swept not only

australia but the developing world as well. rba governor glenn stevens cutting the benchmark by 25 basis points. it was predicted by 12 out of 27 economists in the survey. last week we saw inflation data -- or should i say deflation -- in the consumer price index of the weakest and data on record for core inflation. that spurred today's move. all these currencies are rising against the australian dollar today, which has had a good year against its major peers. every major currency is rising. ubsday today for banks; saying first-quarter profits fell by 64%, missing analyst estimates. all divisions reporting a drop in earnings. heightened economic and geopolitical uncertainty, as well as global market volatility, led to more pronounced risk aversion. that is what the bank said in its statement. here are the big banks in europe. as you can see, youear to

date, they are all falling from between 17 to almost 35%. quickly, hsbc, the other big bank reported today, bigger than expected first-quarter profits, weathering turbulence of financial markets. stuart gulliver paring costs. those are all the big u.k. costs in the last 12 months. anna: thanks very much. mark barton taking us through the open of these european equity markets. london is playing catch-up is tuesday morning. a big morning for the bank earnings season; ubs profit plunged, falling 64%, missing analyst estimates. guy johnson spoke to se sergio ermotti, who says it will continue. >> it looks like we are in a very challenging environment, because none of the issues we have been given in the last few quarters are disappearing. issues,ktail of macro

macroeconomic issues, geopolitical issues, are now coming on, and we are going to see soon volatility on brexit, other major -- we see the escalation coming from the u.s. election. potentially, you see a lot of factors that may affect market sentiment, and in that sense, uc volatility -- it's not the kind of volatility translating to client activity; it's a paralyzing volatility. anna: meanwhile, bmp also reported this morning. we spoke to the cfo, who cited challenging condition. >> the unfavorable environment i talked about has been weighing on our cid, particularly on the global markets. why? because we saw lower clients with concerns about global growth. there were concerns about the regulatory treatment of some

subordinated debt. there was also uncertainty about monetary policy. several of these things came of it in less troubled water by the end of march, showing a pickup. anna: here's a picture for the bank this morning. let's quickly check where they are. ubs trading down by 3.7%; it seems the bigger picture story, the numbers missing estimates, detracting from the next new money story, which was a positive in the most recent quarter. guy johonson talked about that. bnp paribas up. 3.7%.zbank down by revenues, and they had some interesting comments about the future, about just how profitable they will be this year compared to last. that seems to be taking the edge off the numbers. hsbc, as it did in asia, trading higher in this morning's london

session, up by 2.7%. -- ubs is going on as we speak. let's bring into the conversation michael moore, who's with a subset. good to see you. sum up the banking sector for us. we've had numbers from hsbc, from ubs, from bmp. brady want to focus? michael: it's really how bad was it? everyone knew it was going to be bad and it means people are reacting to have drastic. hsbc was down but not as much as people ask acted whereas ubs and commerzbank were down 50% or more. it's a matter of degree of how bad it was. the key factors was how can businesses change strategy to take on the troubling headwinds they still see, and how much in the short-term can they take out? michael: right.

it has been a lot about cost-cutting. you have seen that in the u.s. and in europe. when you have a volatile market, people want to see that you can react to that. what we have seen with the market volatility is everyone knew it would affect the trading investment banking businesses, that it seems to have affected across the board. you have heard that from some of the more retail banks, ubs preaches the consistency of wealth management, but we see it's not as volatile as the trading business but can still be pretty volatile, down more than 20% revenue was year-over-year. the market volatility was not just the training story; it was across the board. anna: how many of these banks talked about negative rates? a lot of the japanese banks were really vocal when the boj one negative about what this might do. have the european banks been complaining about the negative rates environment? michael: they have definitely changed incentive structures, how it puts pressure on them. you saw towards the end of the first quarter, so it may show up

more as the year goes on in terms of the actual results, but certainly it is one more headwind. anna: societe generale, they were saying that if they want clues on where the ecb goes next, whether rates get more negative, if that is one of the headwinds -- what is your expectation around the ecb? >> we think they are done. with think the signal was pretty clearly marked. they moved away from the rates tool, more toward credit easing sweetener. that's where they want to go. that being said, you cannot exclude another cut if the economic conditions were to deteriorate again or inflation was to surprised the downside. but that is not our central scenario. are scenarios they won't cut again. anna: thank you so much. michael moore, thank you.

he will join the programming later on. the dollar falls to an 18 month low as fed rate that's slide -- fed rat be bets slide. ♪

anna: welcome back. this is "on the move."

this is the picture of the european markets right now. we're a little bit weaker on the stoxx 600, down by just shy of half a percent. ftse holding up a little bit, but it was out of action yesterday for the bank holiday. dax down 1.2%, some of the banking stocks weighing on things. cac udown by 4/10 of 1%. the banking sector next back this morning. bnp trading higher, up this morning. ubs down by 4.5%. they missed estimates on a range of numbers, the new net money figure looking positive, but it wasn't enough to take the negative story out of the headlines. 2.45%, stronger in the asian session and stronger here as well. commerce bank was weaker this -- commerzbank was weaker this morning, halved as market

turmoil hit the numbers. earnings beat analyst estimates that revenue did decline. it's really what they have to say about 2016 and what they will achieve this year versus last year that takes the edge of the share price. let's get the first word news juliette saly. juliette: thanks. the chief investment officer of one of america's biggest pension funds joined warren buffett in scorning money managers who gains.20% of their broken.d the practice >> as an investor of capital, we negotiate hard. and i have said very clearly, the20 model is broken; large institutional investors are off the table. we're negotiating much lower management fees. the english premier

league was clenched by the first-ever winner, who only managed to drive chelsea. ester came close to relegation from the premier legalla year ago. it was 5000 to one to win. global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. stories on there bloomberg at top . anna: thanks so much. goldman sachs can't catch a break in the currency market; less than two months after it softened its short-term euro forecast, it's doing the same with the yen. now goldman thinks it is likely to arise until the boj as additional stimulus. this comes at the en -- let's get analysis of the japanese currency with our global head of rate and affect strategy at socgen, still with us. i pulled up a chart of the yen

and how it has been moving against the dollar. you can see the yen strengthening here as we have gone through the start of 2016. safe haven that's are the explanation often given. i expect the other line is the median forecast dollar yen for the end the second quarter. analysts,hat fx economists have to catch up with the level of yen strength we are seeing. i think many people, including us, after an surprised by the strength of the yen. what's remarkable is that, as you say, earlier this year we had risk off markets, and it was not that surprising that the yen would rally. since mid-february, it has continued to be strong. i think the negative rates from the boj have not been working, and that policy has been changed. positions have

moved sharply from that short to net long. that's not where i am worried. i am more worried about the hedging side. when you hear gpi f, for example, starting to worry about the losses of its hedge, and they start to talk about the need to hedge the foreign assets, that would bring the yen to an even stronger level. will doerm, the boj what you have to do to support a weaker yen, but near-term -- anna: do you think the boj will have support from the g20 if they decide to take further actions? that has been strengthening more than other currencies against the u.s. dollar this year. >> i think japan has been seen as the big loser of the g20 in shanghai, where effectively the u.s. in particular showed quite

some frustration about the weak currency policy that the likes of japan or even europe, to some extent, have been running. through that, the yen has strengthened. i think japan will have no sympathy from anyone. on the long-term basis, the yen is still not extended. i think they will have to deal with that by themselves, not counting on anyone. anna: it's an interesting -- the fact that we saw the yen continuing to do ok. we also sell gold continuing to rise. i have a chart here on the bloomberg, "in gold we trust." it suggests that the weakening dollar is pushing for jan prices higher. buillion prices higher. are you worried about this e strength of gold? >> i think it's the other side

of the u.s. dollar story. we have had quite a significant pullback for the u.s. dollar, against the gm and em currencies. the loans that were very high last year has been cleaned up, to a large extent. that has been driven by the fed. has beenard repricing a key factor behind the u.s. dollar. we think that from here the downside is probably quite limited. trend,ht now, there is a and it is hard to take the other side. much.thank you very getting some comments from the ecb, talking about how ecb policy is not impairing price discovery process. ecb policy is essential to restoring a robust economy. he is defending the ecb. that was yesterday, in the face of german criticism.

up next, profit plunges at ubs, and sergio ermotti says conditions remain tough. we haven't speaking to the ceo. that's next. ♪

anna: welcome back. move." "on the ubs reported first quarter profits dropped by 64%, stock trading sharply lower this

morning, down by 4.2% this hour. sergio ermotti spoke to guy johnson about the earnings figures. >> if i look at the kind of market conditions we have been operating at as a result of resilience, a profitability in those environments is not easy. most importantly, we have been doing that while keeping the opportunity and the possibility in a more normalized environment to deliver stronger results. areink that overall, there -- i would say that considering the environment, i am pleased to see how we operated. guy: you pretty much warned that things would be tough. you should have been even more clear. >> i think i was pretty clear. think that it is our responsibility to work to the

market conditions, and our results reflect that. guy: clients -- client transaction volumes, the lowest recorded ever for q1. clients are terrified right now. how is that going to change? >> we definitely enter into a new territory in the first quarter. if you go back the last three to four years, in every given quarter, you would have served weeks or months during a quarter of strong market conditions, or in any case some kind of positive pick up. quarter had only one constant -- risk aversion. will it be like last year but in reverse? last year started off brilliant and got horrible; this year started horrible -- >> i hope so. it looks like we are still in a

challenging environment, because none of the issues we have identified in the last few quarters are disappearing. issues,ktail of macro macroeconomic issues, geopolitical issues, are now coming on, and we are going to see soon about brexit, about other major -- the de-escalation coming from the u.s. elections. potentially you see a lot of factors that may affect market sentiment, and in that sense, you see volatility, but it is not the kind of volatility translating to volatility; is paralyzing. guy: has good as it has been since 2008, is it sustainable? thatre you surprised, given the cocktail of horrible things he laid out, that the numbers are as good as they are? >> it is a function of wealth

creation; you can't talk about it nowadays, but this is basically the fruit coming to us, with what our colleagues have an doing in the last couple quarters. when comfort is that we look at the quality of money. results,happy with the not because of the quantity, but because i know the quality is good and strong. of course, we retain our targets 6.5% in 5% growth, with the first quarter for wealth management injury and 5.3% for wealth management. i think we will probably have more moderate growth. anna: sergio ermotti speaking to guy johnson. guy johnson joins us now from zurich. in the context of the banking sector, it's interesting to hear what he is saying. he's speaking in paris this

morning, saying that negative rates haven't had a major impact on bank profit. ubs is notyou ma eurozone, but it's a story that we are t discussing. they say they want to deposit rates to absurdly low levels. the unknowns are just one of the headwinds they have to deal with at the moment. guy: and you can hear sergio ermotti talking about that -- this cocktail of events he talks about that makes life so difficult for his bank. amazinglybout this -- low transaction volumes we are seeing, having a huge effect. net new money may be up, and that's great news, but yes, the investment bank may be covering its cost. tone of the whole conversation is one we don't see

our way out of; we're ready for when things get better, but they are trying to figure out when that is actually going to happen. reading between the lines this morning, looking at the numbers, the fed is definitely -- this is the current environment that will be with us for a while. he would not be drawn on whether or not the new numbers will be better, but you just listen to him, you look at the body language -- it is tough out there, anna. that's what the market is reacting to. the numbers are a beat but it is the forward-looking stuff the market is latching onto. anna: abnormally low transaction volumes are certainly a key line item i picked up on. guy johnson, joining us from zurich. the banking sector really feeling the repercussions of that extensive reporting. hsbcrading down by 4.2%; up by 1.4%, as is bnp. we've got commerzbank down in germany. up next, chinese data.

chinese pmi slumps in april. we track the nation's policy puzzle with standard chartered's chief economist. ♪

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call or go online and switch to x1. only with xfinity. anna: welcome back. this is "on the move." 30 minutes into the trading day; let's see how things are shaping up. here's a picture of the markets. we're on the back of the european equity markets, even the ftse catching up. 3, down by 3/10 of 1%. 1%, thewn by 7/10 of worst falls on the center deck. lufthansa weak, commerzbank weak. 1%,cac down by a tenths of bnp paribas moving up in the banking sector, trading higher along with hsbc. this is a picture of the banking sector, or some of the big

movers. lift and zon lufthansa down, bnp higher, ubs down. that's a picture of what's happening on the market in terms of the banking sector. let's talk about china. chain's pmi -- china's pmi slipped, missing estimates. it underscores contractions and weakness in an economy weighed on by overcapacity and weak external demand. chinese policymakers are balancing the need for ongoing stimulus while seeking to avoid propping up zombie companies with excess capacity. let's bring in the chief economist at standard chartered, who joins us now from frankfurt. good to have you. is that your key concern around china, the level of debt we are seeing in the chinese business community? achievenk china will its targets this year. talking about 6.5%

at -- i think they will exceed that. sector, mainly reflected in the pmi indicators, is soft, and it's going to continue to be soft, but we have to big knowledge that the chinese economy is rebalancing. if we focus entirely on manufacturing, we will get an overly dreamy picture of china. consumption is strong and services are strong, and those different sectors will pick up a lot of the slack caused by the manufacturing sector. but overall, i think the chinese will be able to achieve their growth targets at about 6.5%. anna: do you think the negativity around china is overdone? is that to do with the way china communicates what it is doing with policy? have we learned a lot since last summer, where it seems market didn's didn't really understand what they were trying to do? >> 2015 was a year of extreme negativity in china, in

particular, but also emerging markets in general. i do think it is overdone. when it comes to china, i think that their minimum we should get from china is attributing a growth target. i think it is essential to see growth around 6.5%. as you mentioned, i don't think it will be enough on its own to change sentiment. let's not forget that growth last year was around 6.9%, yet negativity was still there. communication will be very important. hugee already seeing ia improvement in the way chinese authorities are communicating with financial markets this year compared to last year. but also the way they will manage their currency will be very important. there was a lot of pressure on the currencies to be valued. i don't think that is consistent with the state of the economy and the state of fundamentals, but nonetheless, the pressures were there and the chinese authorities will have to keep the currency stable. they are doing that, and the

longer they keep that in place, the better the sentimental get on china. if sentiment in china improves, broader sentiment will also improve. then, thathink, stabilizing things is still the focus, rather can be big moves in the currency? >> yes. i think that loosen in the currency will not help with anything in china. there is the perception that the devaluation boosted exports and the economy, but i don't think that he was valid. net exports have not had anything to china's economy since 2007. that's an environment of weak demand, and i think it will make things worse for china. to keep on target when it comes to growth, they need money supply growth to stay where it is today, and if it lives to

further capital outflows, it is likely to damage supply growth and it will consequently damage growth in the economy. if the chinese authorities want to achieve their gdp growth targets, they will have to stabilize their currency. they have been doing that. i think fundamentally their currency is not overvalued, but the valuation would help the chinese economy. it will hurt the chinese economy, and that is not what policymakers want to do. anna: one of the big speeches of the first quarter was what looked to be a flaw swarming and commodity markets, particularly around the oil market at the end of january and beginning of february. do you think that oil prices have bottomed? is it sustainable, the bounce we saw in oil prices? has that been sustainable? >> one of the main reasons behind the negativity was the

big drop in oil prices. at low levels they were not sustainable. quite simply, supply had to change because many producers were at a loss and that is not a strategy you can keep for a long time. that expect supply to decline later in the year. we expect the market to go from a small surplus to a deficit. once demand and supply dynamics change, because the current level of production is unsustainable, we will expect oil prices to rebound very strongly. picking up the exact timing is more of an art rather than science, but we will expect the demand supply changes to happen later in the year, and we expect most of the increase in oil prices to happen in the fourth quarter of 2016. that will be mostly positive for sentiment. anna: thank you very much for joining us. europeanint out,

stocks extending their drop through the morning session, the stoxx 600 now down by 9/10 of 1%. a short break. up next, spanish political deadlock triggers a repeat election as the deadline is missed. the timing is fascinating. we are going live to madrid, next. ♪

anna: welcome back. more comments coming out of

sergio ermotti over at ubs. the ceo saying that "akoni and cost-cutting" would impair performance. he believes reducing encore and legacy assets is a priority. more comments coming through on taxation as well; topline is where you can find all the latest as it unfolds around the cbs story. -- they ubs story. tliv go. let's get the bloomberg business flash with juliette saly. juliette: thank you, anna. it to beaver europe's largest bank, hsbc, despite bad loan charges surging. profit was $6.1 billion in the first quarter ahead of the $4.3 billion average estimate. charges for bad loans doubled to $1.16 billion, the shares rising in london trading. ubs says first-quarter profits fell 64%, missing analyst

estimates, as divisions reported a drop in earnings. reported a surprising first-quarter profits, and bad loans helped out way. ahead ofme rose 10%, estimates. the cfo tells us that the market environment was unfavorable at the start of the year. >> revenues held up well in domestic markets, in domestic and financial services. but of course there was a particularly unfavorable market environment, particularly at the start of the year. juliette:+++

sliding after reporting first-half profits tumbling by more than 50%. the lender said that income dropped to 163 million euros while revenue fell to 2.3 billion from 2.8 billion. bank earnings have been buffeted by the slump in energy crises and falling growth in emerging markets as investors shied away from trading. and that is your bloomberg business flash. anna: thanks. juliette saly joining us from hong kong. let's turn our attention back to europe; it has run out of time to form a government. the missed deadline will trigger a repeat election for late june. and stills joins us, -- ben sills joins us, live from the drip. tell us about what's going to happen in the coming weeks, and almost two months. it's fascinating timing, the way it comes up against the brexit debate. ben: exactly. the first thing we will see today -- the speaker and parliament are meeting in the palace on the outskirts of madrid. they will agree to dissolve parliament and call the election, we expect, for june 26, which is after the break the referendum. then we begin the process of campaigning.

the main party leaders are trying to avoid the blaze for forcing voters to go to the polls again and position themselves ahead of what proves to be a crucial campaign. anna: and who stands to win or lose in a repeat election? -- is the battle between set tho fare? ben: i think one is feeling pretty comfortable; he is hoping to win back a few of the voters he lost last time around, and if he can push his vote to around 30% he will be confident that he can lead the next government. the others are searching for an alliance with the other left-wing parties, which could really boost their the number of lawmakers and potentially make them the second-biggest party. the groups under threat are probably the socialists, who came pretty close to securing a

governing alliance over the last few weeks. ents facing a lot of diss from within his party ranks and is going to struggle to assert his authority on the socialist vote that has been in decline for the last 10 years now. the broad picture, but the campaign itself -- anything can happen. there is a long way to go before the vote. anna: there is a long way to go until the 26th of june. then sells, joining us from madrid. let's keep you updated on what's going on with top live. ubs ceo says he can see current market conditions as the new normal, comforting to some. andking with europe, savers germany won't experience higher returns until economic reform rekindles the demand for capital, according to the ecb president, who was speaking at

the annual meeting of the asian development bank in frankfurt on monday. he hit back that his critics, blaming the central bank's policy for depressing returns on savings, saying germany's current account has also contributed to the low rate era. >> question marks over the future of the area are contributing to uncertainty for thatiduals and firms, and this can hold back consumption and investment. removing this uncertainty will have boost consumption and unleash investment across the continent. there is therefore no doubt in my mind that institutional reform in the european union and in the euro area has genuine economic benefits. for all those who want to see a return to more normal levels of interest rates, this is an essential part of the solution. anna: so mario draghi,

reiterating comments that we need institutional reform in the euro. let's get out to berlin, where european democracy founder joins us now. great to have you on the program. you are the author of the book "why europe needs to become a republic: a political utopia." good to have you. i want to get your thoughts about the criticism we are having of ecb at the moment. obviously germany is fairly critical of them, criticizing the ecb. the french government, not so much. you make the point in your notes -- the french and germans are not on the same page on the number of issues. >> well, on the ecb policy, there is a growing unhappiness in germany with low interest rates, which is cutting down savings, which does not make savings attractive for germans. because saving is a big german this is the ecb policy

that germans dislike; and you are right that the french do not have the same philosophy on this. weh respect to the eurozone, have been struggling to get a meaning oncal union, budget and fiscal policies and how we manage the euro crisis together, there are a couple of franco german papers on the table, and a lot of french initiatives remember that the french finance minister's proposals, but there is still no big deal ahead. anna: it speaks volumes that you described saving as a german issue in europe. talking about the looming brexit vote, some people in continental europe must be tempted to argue that britain should just go ahead and leave, because it has only been -- it hasn't been fully committed, perhaps, since

the start of the european project. if it wants to leave, leave, and leave behind the europe that looks more united. you'd be tempted to think that, but you don't follow that side of the argument. >> well, i think you are right in describing the situation. i felt that way, that the u.k. was always -- they didn't join the schengen or the euro, and they were always resistant to continental europe. now we see in the brexit debate unfolding -- yes, you are right, there are increasing voices to say let them go, because they haven't been a good contributor to political unity anyway. but i think the argument that would provide for continental europe to really do institutional sides is probably wrong because continental europe is pretty much in a mess and we

have a lot of political problems . the very fact that the u.k. , it tells me there will be more integration on the continent. anna: if we didn't see the u.k. vote for a brexit, where would we see cracks of the european project emerging next? isn't about -- the slow process is so slow that you have all these things being there, not triggering anything. we have the populism problem in hungary and austria and poland, and they are -- there's the brexit vote, which may a lease political forces that might be very difficult to control. the sectoral side, i'm not so much concerned that there would

be much of an impact, because the euro train would go from brussels to paris to london, and they could have their apartment houses -- it will be tricky on the legal side, many people earning a lot of money, and they will have a hard headache to follow to track their relationship. i'm more concerned about this unleashing of political forces and the symbolism in that brexit vote. sends a signal to the world that the european union has become relative, that it is relative to join or leave, and i 'm fearful that any moment of crisis, it could trigger a heating up and disintegration. anna: great to have you on the program. founder and director of the european democracy lab in berlin. up next, we discussed the

implications for the aussie dollar. the rba's unexpected rate cut, next. ♪

anna: welcome back. let's check in on some of the biggest movers and today equity session. the london market playing catch-up, but equity markets sluggish, down 1.4%. this is the biggest mover -- ubs down by 5.9%, missing various estimates. net new money was a bright spot,

but the negative outweigh the positive. 6.7%, gloomyown by on how their performance in terms of profit this year will matchup against last year. aberdeen asset management report of a further 7.6 billion pounds of net outflows of the first three months of 2016 as clients continue to withdraw money. shares following the most in almost six weeks on the back of that, down by 7.7%. emerging market exposure is a key topic of conversation. 7%.ysts called down by lufthansa under pressure as it grapples with restructuring. leads to a drop in revenue. it is trying to revamp its business to deliver cost cuts in the face of the low-cost competition. may have that opposition in doing that from the pilots. let's get back to the macro

story; the reserve bank of australia has cut rates as it tries to counter that is inflationary trend sweeping the developed world with dramatic effect on the aussie dollar. we are joined by richard jones. richard, big moves of the aussie dollar. we are getting strangely used to this. the rba is surprising some -- at lease that is the picture you are left with. richard: the currency markets probably did not have much priced in -- it was a bit of a surprise. but after that week inflation data, we are talking about 60% of the odds to a move this week. not a complete surprise, but not fully priced in. what's interesting going forward is that we are getting now saying that they expect further cuts this summer, perhaps in july or august. anna: and they didn't give us any steer on the. richard: they obviously knowledge the week inflation, weaker than i thought it would be, but looking forward, they

say they are concerned about the global economy and growth being cut. also they have a lower outlook for inflation than previously forecast, reading from a statement. they have to give us over forward guidance, but they have said that they are concerned about these moving parts that force them to cut this time around. anna: briefly on the pound, raising its year-to-date loss against the dollar. is that a dollar move or a brexit story? richard: a bit of both. the most recent push higher we have seen against the dollar is very much a dollar move. as the dollar weakens broadly against the whole reason. anna: thank you very much. richard jones, joining us on set. stay with bloomberg; "the pulse" is up next. they will be talking to aberdeen asset management this morning about the performance of their business. a lot of questions to put to the management there. the company is trading considerably weaker this morning, down by 7.8% is our.

8:56 in london. a weak picture for european equities this morning. ♪

francine: profit pain. -- cutting deep down on her. the aussie dollar drops as they take their interest rates to a record low. traders costs after brexit concerns. ♪ francine: welcome to the pulse. where live from bloomberg's european headquarters here in london. markets.ck in on the