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 extending their lowest levels

after investors weigh a slew of -- a lot ofeuropean banking stocks under pressure, 1.8% lower. australian central banks also cutting its benchmark interest rates to a record low lsd door opens for further easing -- unless the door opens for further easing. let's get straight to the bloomberg first word news with mark barton. mark: chinese manufacturing flip today. underscoring pockets of weakness in an economy. 49.4%. fell to australia's central bank cut its its market just rates to a record low. the unexpected move -- the aussie dollar weakens on the move. its bad loan

charges surging, profits fell from $7.1 billion earlier. -- -- badr bad loans loans --. net income fell to $707 million. that fell short of the 735 million frank. chief executive told bloomberg uncertainty as well as global market volatility led to more pronounced risk aversion. we are seeing a very challenging environment. i think this cocktail of macro

issues, geopolitical issues are coming on and we are going to see soon brexit. we are seeing distillation coming from the u.s. just seeing the escalation coming from the u.s.. volatility, it is a paralyzing volatility. marco b.n.p. paribas posted -- mark: b.n.p. paribas posted its -- a slump in trading revenue. it rose to 8.1 billion euros. the new cfo told us the market environment was unfavorable. >> revenues held up well.

particularlywas a unfavorable market environment at the start of the year. mark: banks reported -- it plunged more than 50%. the net income slipped to 160 million euros. global news, 24 hours a day, powered by our 24 hundred journalists --global news, 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. you can find more stores on the bloomberg at top . francine: mark barton there. shares in aberdeen are the worst performing of the other companies on the stoxx 600 index. withdrawontinue to from equities and fixed income funds. i am happy to welcome martin gilbert.

he joins us for his first interview of the day. tell us how are you expecting to spend these outflows going forward? martin: it depends on whether emerging markets come back in favor. certainly we have seen a welcome turn inflows and emerging-market equities having gone from outflows to a first quarter of inflows. there is light at the end of the tunnel, but only just a bit of light. francine: how long does it take to see that and of the tunnel? we were hearing we are expecting volatility to continue. he is concerned about liquidity. do you share the same concerns? do you have to cut the fact? .artin: i don't think so we are strong financially with over 400 million cash on the balance sheet.

we can survive as a business there easily. i think we have to wait for these emerging markets to come back in favor. that is what we are doing. we're looking at a fish sees in the business. that is not cost-cutting. we're looking at running the business more efficiently. we are dependent on sentiment in emerging markets. and developed markets as well. francine: you are dependent on sovereign wealth assets. when you expect emerging markets to come back up? we are concerned about the price of oil. -- price of oil being stuck in this range. we're concerned about a lot of structural reforms not being pushed through. martin: we have seen some big rises in emerging markets this year. 30% in brazil. we are more positive on the oil price than most. between a surplus

and a shortage can be as low as 3%. with production falling as quickly as it is, i would expect the price of oil to be .easonably strong this year we are not as negative on these aspects. as i say, we are seeing money coming back into emerging markets, albeit in very small amounts. that is better than it is -- that is better than it going out. francine: heavy seen any signs of sovereign wealth wanting to put money back in to your company? so.in: i don't think i don't think the sovereign wealth fund had these big funds for a rainy day. that rainy day came last year. with the price of oil recovering, they are probably .ore confident about the future probably looking to rebuild time here a period of

and we are and we aren't seeing no evidence of large amount of money coming back into the market. francine: are you worried about liquidity? -- martin: we have always worried about liquidity. it is an issue that regulators are aware of. is regulatory risks have moved from bank balance sheets to some of the big credit funds in the world. they are well aware. one less expect -- they will have measures if we reach liquidity crunch in markets. you own a lot of the main stocks in europe but a lot of the banks, hsbc down a little bit today. i know you are a holder of standard chartered. are you going to cut down your

exposure to banks? martin: we are big holders of emerging market banks which have tended to whether the financial crisis very well. we have obviously got holdings in hsbc and standard chartered. we think they are doing the right thing. hsbc results were probably pretty solid today and what is a pretty tough market for banks, as we have just heard. francine: when exactly do you see a lot of the emerging markets ticking up? i guess one of the concerns of a lot of when ars is they say janet yellen starts normalizing, it is going to be messy. we are going to start seeing defaults. martin: that is a possibility clearly. the view i take is they are still growing at a reasonable

rate. china is still at 6%. india which is our biggest exposure growing at 6%. even with difficulties in infrastructure there. it is about the company's and the companies we invest in our very important when we are investing to be selective which companies you invest in. will they look after our interest as a minority shareholder? to they have strong balance sheets? these are factors we take into account in emerging-market investing. down.ne: your stock is what is the main message you shareholders today? martin: i think it is still tough. we are seeing the first six of light at the end of the tunnel. emerging markets have recovered

strongly, year to date. we will have to wait and see if sentiment improves. in the meantime, we will manage what we can manage which is the business. try and run it as efficiently as possible. francine: martin, thank you for joining us. cofounder of aberdeen asset management. coming up, but to coming your way including the rate cutters. the aussie dollar slumps after is a private move -- after a surprise move in interest rates. paralyzing volatility as switzerland's biggest investor falls by two thirds. he doesn't expect martin to call anytime soon. can bmw hold on to his crown? we will look at the race for leadership at the world's luxury vehicle market. ♪

francine: this is the pulse. let's get to the business flash with mark barton. mark:the biggest rap -- biggest rally since -- so says the boj governor, harry he took a road a. they will not hesitate to expand monetary stimulus in order to achieve their 2% inflation target. the chief investment officer of one of america's biggest instant we -- has joined warren

buffett in charging 2% fees under management and retain 20% of the gains. $187 billionthe california state teachers retirement system called the practice broken. >> as an investor of capital, we negotiate -- i have said very clearly that the model is broken. the largest institutional investors are off the table and we are investigating -- we are negotiating much lower a management fee and incentive. place -- could only manage a draw. relegation from the premier league a year ago. they were 5000 to one outsiders to win the title back in august. francine. francine: thank you so much market.

australia's basis points cut in interest rates were predicted by 12 of 27 economists surveyed by bloomberg. take a look at the aussie dollar. many in the market were not ready for the move. another currency on the move is the yen which is our chart of the hour and japan's currency has risen 5% in the last five days. boj's governor kuroda warned that the rally risks harming japan's economy. moretti.k with mauro we had a very vibrant conversation about global policy around the world. when you look at yen, do you feel less confident that central banks are in control of what is going on in worldwide growth? some investment with good exposure.

we see good demand their. probably what the central bank did was to calm down the sustainedate to demand. -- to sustain demand. francine: you are looking at good deals. half of it valuation at but half growth. sustained demand. is there a difference between what markets are telling us that go and -- telling us? and the world you are seeing? mauro: there is a lot of uncertainty. bullish on thes speed of the recovery of interest rate, because when you see some retailer markets and giants struggling, then people say maybe the fed is not going to be so bullish. -- waiting for

opportunities, waiting for the bargains. francine: when will he come? when janet yellen starts normalizing, it will get much tougher. we're not expecting it by the end of the year. there will be plenty of opportunity. i think cash is king today because a lot of culprits are keeping -- a lot of corporate keeping -- if you look at the european market, there are so execute.ies still to of our competitors and no to gain these opportunities when they come. francine: where d.c. currencies going? -- where do you see currencies going? the pound has regained all of the decline. is this because people are not expecting brexit to happen? ?ill it impact your investment

if brexit happens, i'm not sure what happens the day after. mauro: everyone thinks the pound is under pressure because of brexit. from previous capital partners perspectives, when we saw last the pound tomate euro coming back to 1.5%, we because aoo sure couple of bubbles happening in the u k that people are getting worried. francine: central london. mauro: look at the leisure space. we are quite active in the market. at some point in the last two of three years, there was a big inflow of money in the sector. people are starting to see not anymore of this kind of

dislocation. francine: are you expecting a big correction? mauro: not big. a small correction. 140 could be the balance point. francine: thank you so much. he stays with us and we will be talking about investments next. also up next, we will talk about yen and where jim goes from here. -- and where yen goes from here. ♪

francine: welcome back. this is the pulse. let's get more from mauro moretti. we spoke back in november when you are starting with three hills. you have done a little bit of investment. you try to unlock value where you see opportunity, not only in valuation. you are president of retail. mentioned, we are really interested in softening markets which are underpenetrated and quite fragmented. basically focus the company between $5 million and $10 million in profits. --are the market leader

where is the market leader has 10% market share. it gives you room to grow organically. investmentsour last , a company called tomorrow which is one of the largest -- ributors francine: it is high-fashion. mauro: it is affordable luxury, high-end. we see a different kind of demographic. with this company, we invested in november and we are already reviewing five potential targets to buy and build. i agree with you, today a project based on a like for like -- we try europe is and go in stories where we can put capital behind successful --agers and don't country

don't penetrate markets. francine: you believe there is up today in europe. we are getting some headlines. we will bring this up the italian prime minister saying there is a -- there is threats to the sanction treaty -- the singing treaty. something question this is a serious problem because europe is facing serious problems. how can you see value in europe if we are at the forefront of european crisis? if greece comes back on the table, are we not going to see a eurozone that breaks up? therefore makes your investments much more worthless? mauro: i would start with the current reading it as of today, we have seven companies of her management -- under management. the more successful one is your.

europe.s counterintuitive but as a mentioned, we are micro investors. -- wein select companies go and select companies. , in twock to the crisis months we will know if brexit happens. people sitting on cash, yes, of course, because today, everybody is on the wait and see. usually we invest every two or three months. now we are saying they be the next investment is july or september. we are seeing what is happening with scotland. today, i think everybody is trying to put numbers on the table. the numbers do not see a lot of benefit for the brexit happening. we hope that --

francine: mauro moretti joining us. next, the pound erases 16 losses against the dollar. we have -- we will bring you that number. ♪

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simply by using your voice. the billboard music awards, live sunday may 22nd, 8/5 pacific, only on abc. francine: welcome to "the pulse" in london. we are just getting manufacturing pmi for april. it is falling below 50. worse than expected at 49.2. two crucial thing. pmi manufacturing for the months of april, a, worse than expected but we are also seeing a contraction for manufacturing. there has not been that much movement on pound. 1.4738.y at

markets lower this morning. let's head straight to the bloomberg for an asset check. mark: european stocks are falling for a third consecutive day. down by 1.15%. manufacturing gauge out of china which contracted as you just said did the u.k. manufacturing gauge, setting the tone today. this is the stoxx 600 banks index. paribas,gainer is bnp posting a surprise increase in first-quarter profit. a decline in provisions for bad loans. hsbc is lower. one of the better performing banks today. first-quarter profit rose more than estimated. stuart gulliver paring back costs. down.d commerzebank

said first-quarter profits fell a greater than estimated 64%. market turbulence eroding earnings. bottom of the pile is commer zbank, 8.5% lower today. -- halflf market profit halved. you spoke to the ceo of aberdeen asset management. the shares are down by 7.4%. big, big mover today. that is after the company 6 billion pounds in outflows in 2016. emerging markets. what about the aussie dollar? after the central bank surprise. most economists by cutting

interest rate to a record low 1.75%. every single major currency is rising today against the australian dollar. i'm just going to change the one day chart to year to date, just to show you what a good year the aussies had against most of its peers.yes, these currencies are rising. these currencies are falling against the aussie dollar. australians are battling disinflation. the rba electing to cut interest rates by 25 basis points. 12 of 27 economist survey predicted the outcome. reason we had was stated last week that showed quarterly deflation and the consumer price index and the weakest gain on record for core inflation which the rba tries to keep between 2% and 3% on average. the currency has risen by 15% since mid january.

it could further restrain import prices in australia. that is the big move today. australia cutting interest rates to a record low. francine: thank you so much. now, ubs first-quarter profits fell 54%, missing estimates. as all divisions reported a drop in earnings. guy johnson spoke to the ceo. he started by asking him whether the market should be disappointed with the results. >> if i look at the kind of market conditions we have been operating, those results are resilience. most important, we have been doing that while keeping the opportunity and the possibility in a more normalized environment to deliver stronger results. so,i think that, overall, of course, last year, i would say

that considering the environment, i am pleased to see how we operated. pretty much warned at the conference in march that things are going to be tough. that you should have been more clear at that point. >> i think i was pretty clear about the environment by then. i think it is our responsibility to highlight the market conditions. client transaction volumes, the lowest recorded ever for q one. clients are terrified right now. how is that going to change? >> we definitely and it into a kind of new territory in the first quarter, because if you go back and the last 3-4 years, in every given quarter you would have served weeks and months of strong market conditions or in any case some kind of positive -- the first quarter was, what was an environment that only one

constant. risk aversion from january to the end of the quarter. guy: do think it is going to be like last year but in reverse? last year started out brilliant and got horrible. this year started off four-ball. is it going to get better? >> i hope so. but it looks like we are still in a very challenging environment because none of the issues we have been highlighting in the last two quarters are disappearing. macrok this cocktail of issues, geopolitical issues are now coming on. brere going to see votes on xit. escalationor, the coming from the u.s. elections. potentially you see a lot of factors that may affect market sentiment. sense, you see

relatively but it is not the kind of volatility that translates into client activity. it is a paralyzing volatility. guy: as gooad as it's been since 2008. a, sustainable, yes, no? b, are you surprised that that number is as good as it is? >> of course, it is a function of money creation. you talk about wealth creation nowadays. but this is basically the fruits ourng to us on the work colleagues have been doing and the last couple quarters. onwe look at the quality of that money. happy with the results, not because of the quantity because i know the quality is good, strong. we retain our, targets of 3% to 5% growth. we had 6.5% in the first quarter for wealth management. and 5.35% for wealth management

americas. we expect for the rest of the year on more moderate growth. guy: you talk about brexit. the main risk. the fmb talking about it being overvalued. every opportunity they have, they say that but nevertheless we are coming up to some things that could potentially make it even stronger. how do you, have you prepared the bank for this? have you looked at your operating and five it, have you looked at the divisions -- have you looked at your operating environment? it would have an effect here. >> if you look at the conditions we saw in the first quarter, there is nothing you can do short-term to offset such ahead went. wind.h a head we have been working on our most recent cost reduction initiatives $2.1 billion that we want to achieve by the end of 2017. we made progress during the

quarter. we are pretty confident we are going to achieve this $2.1 billion by 2017. you work on structural issues mainly front to back. improving efficiency, improving processes. and position the business to be ready for a more normalized environment. francine: guy johnson joins us now. given what he just said, how concerned should the market be that we are not going to get much more clarity? we do not even know what the dividends will be like. guy: he does not know it awful lot about what is going to happen in the future. who does? nevertheless, he thinks it's going to state of for quite some time. as he said, he is getting the said it's he

horrible. you look at his body language and try and read between the lines. getting't see things better any time soon. he is pointed to the fact to this cocktail of nasty things that are affecting the banks isn't going to change. nothing is really going to move on. transaction volumes from clients in q.1 they have never seen a number this bad. it is going to be a very big hole they will have to date out up here clients are terrified, petrified, paralyzed. given allt of which, that is going on in the world, what is it going to take to turn these guys around? that is what analysts are worried about this morning. does it mean that we have need to take the current market conditions as the new normal? guy: i don't think that is what

he sees it as. i think he sees this as abnormal. he use the word abnormal on the call this morning describing these transaction volumes. they are not normal for him. he does expect some stabilization but this year, next year, is it next quarter? i think that is the thing that nobody knows. the year started in a way that nobody anticipated. all the banks have said that q1 was absolutely horrible. what you are not hearing from many of them is that things get magically better. everybodyat is what is grappling with. the business model, he is happy with that. strategically he knows where he wants to go. tactical story. how do i work my way around what i see as maybe not good short-term but it is affecting the numbers? short-term, i've really got to deal with that. the definition of short-term is what we have to work out because it could be for the rest of the year. if we do get a 2015 in reverse,

we have yet to see any evidence of that coming through. francine: guy johnson with the latest on ubs from zurich. poundwe go to break because we had some pretty dire figures. pound stilltish erasing all this decline since the beginning of the year. a touch lower by not buying that much. up next, can bmw keep its crown as the world's carmaker. ♪

francine: this is "the pulse." let's get straight to bloomberg first word news. mark: chinese manufacturing slips in april. an economy way down by overcapacity. 49.4factory pmi fell to down from 49.7. australia central-bank cut its interest rate to a record low today. the unexpected move was came to counter disinflation. the aussie dollar weekend. despite biggest bank ad loan searches charging --

charges surging, billionahead of a 4.3 average estimates, charges for bad loans double to $1.6 billion. ubs first-quarter profit fell 64%, missing estimates. as all divisions reported a drop in arteries. .et income fell to that fell short of the average estimate. the chief executive told he kindrg that a higt uncertainty and volatility led to more pronounced risk aversion. >> it looks like we are seeing a very challenging environment because none of the issues we have been highlighting of the last few quarters are disappearing. macrok this cocktail of issues, macro economic issues, geopolitical issues are now

coming on. we are going to see soon a vote on brexit. other major,to see we see the escalation coming from the u.s. elections. potentially you see a lot of factors that may affect market sentiment. sent cc volatility but it is not the kind of villa to into client activity. -- in that sense you see volatility. but it is not the kind of volatility that translates into client activity. mark: a drop in provisions for in loans outweighed a bump trading revenue. net income rose ahead of estimates. e market environment was unfavorable at the start of the year. >> revenues held up well in international financial course, there of was an unfavorable market

environment at the start of the year. the first two months. pluned 50%.zbank net income slid to 163 million euros, still exceeding the 160.5 million predicted in a bloomberg survey. global news 24 hours a day powered by our 24 hundred journalists in 150 news bureau or around the world, you can find more stories on the bloomberg at top . francine: think is so much. we are getting breaking news. populari has been halted after it fell. we did have quite a lot of pressure and a lot of the italian banks, major bank, onon all of them. worst italian bank

and it was down 5.3%. atlaf atlantic, the fund created by the healthier banks to shore up losses, they now say be become ancould accelerator for losses, which is why a lot of the italian banks are under pressure overall. ubs down 6%. commerce bank the worst performer, down 7%. the only banks gaining in today's trading session. let's getting update on europe's car market. the m w's profit declined 2.5% in the first quarter as the company invested in new technologies to defend his status as the world's biggest maker of luxury vehicles -- bmw's profit declined 2.5%. what is behind the earnings dip at bmw? bmw starting to see

a strain of their effort to maintain their number one status, on the one hand they're investing in new technologies and on the other hand the sales of high-end products like the 7 series are not going as well as they might have liked. is doing all right. they have maintained a reasonable return on sales of 9.4% which is better than mercedes. but underlying the earnings you're seeing the strain that bmw is under to maintain their status as the world's number one luxury carmaker. francine: talk to us about for our. -- about ferrari. a new coe. eo. chris: they have struggled as an independent company. they were finally and completely the the from fiat at getting of the year. they produce some solid first-quarter numbers but the question over ferrari is where here?y go from

everybody knows they make exciting sports car but the question is how far is that, is that business model is going to take them as an independent company? in the sales process, the ceo said he wanted to turn it into a full-service luxury brand. so far those efforts are hard to see. to the extent to which he can really pull that off is what is going to drive ferrari. nice, but where they go from here remains a question mark. francine: of course, how they grow. thank you so much with all you want to know about banks this morning -- about cars. this is the update. all you need to know about banks is right here. this is the picture for ubs and pnbnp. the stoxx 600 for the banks overall are under pressure to you can see commerzbank. one of the worst performers after disappointed earnings, earnings that ubs did the same. bnp was better than expected

and so was hsbc. we have a lot of concern about the italian banks. banco populare has just been halted. i believe the italian banks under pressure because media ca put out a note saying that the problem with the new is that it will exacerbate some of the losses or will bring losses to the forefront. we will be watching the banks closely. up next, has puerto rico defaulted? we will look at what is happening in the commonwealth and what its latest missed payment could mean for the u.s. ♪

proto-we go has warned bond investors they face a cascade of default -- puerto rico has warned bond investors face a cascade of defaults. let's be to michael mckee. what exactly did puerto rico do? it there seems to be some confusion as to whether a defaulted or not. were government development bonds but not guaranteed by the puerto rican constitution. $42 million,owed they pay the interest but not the principle. they had reached agreement with

a group of hedge funds to foreb ear on that bond, but this was not the entire universe of bondholders. there are people who did not get paid. and that is considered a default and the ratings companies say it is a default and there will be lawsuits over it. francine: so, could this lead to a greek-like crisis for the u.s.? mike: no. muni market in the u.s. is very healthy. even with yesterday's default, of the market is in trouble. congress is working on a way for them to restructure their debt but it has not passed yet. that is something to keep an eye on. francine: thank you so much. michael mckee our economics editor. stay with bloomberg. "surveillance." is up next. we will bring you a bloomberg first interview with the commerzbank ceo.

they are getting crushed in the market today. the biggest loser amongst the banking index. they are down 7%. we will also go through ubs numbers. they disappointed. ♪

misses estimates. hsbc beats. cutting down under. the aussie dollar drops. return of the pound. sterling erases its 2016 losses against the dollar as traders caps off brexit concerns. this is bloomberg "surveillance." londonncine lacqua in with tom keene in new york. we are getting breaking news. the commission lowering their gdp forecast and