♪ ♪ welcome to "on the move." we are counting you down to the european equity market. i am guy johnson. why did the u.s. curve flattened so much? we are joined by one of the biggest names in the bond market from hsbc. this weekend, week chinese data is a worry -- weak chinese data is a worry, but the real concern e. the u.s. dollar-yuan rat and after being rescued by

shareholders, we will speak to longman's ceo later in the program. than half an hour away from the european equity market open, and let me slide across to give you an idea of where we think the day will start here in europe. this looks like it will be a fairly positive picture. stoxx up 0.7%. well.n the front foot as everything opening up around 0.5%. german market is looking strong this morning. other assets, let's see what is happening around the world this morning. higher,gher, 1.25% $48.43. goldman sachs sees changes in the gold market. shanghai on the front foot. the resale name -- retail number

was actually quite good. ar, this is the one need to worry about, versus the chinese renminbi. a trading need to pay attention to. pushing up north of january highs quickly. are we going to see a significant outflow once again developing? we have a surprise for you this morning. not only stephen major from hsbc, but my colleague from matt miller -- my colleague matt miller from the united states, in berlin. matt: i'm in berlin. good morning. pleasure to be joining you hear. i am more excited about stephen major. looking forward to hear back -- hearing about his forecasts. guy: we will get those soon. not a time to change some of the big views of the world. matt, i have to say. u.s. investors have been running away from europe as fast as they can since the start of the year. you just came from new york. what are they saying about us over there? what do they think about us

europeans in new york? matt: i haven't talked so much. i have been here for the weekend. i have not talked about what they think about us, but what they think about themselves. if you look at the german "die welt," zeit," they are talking about the gdp number from last week. they are really impressed with themselves, managing to grow 0.7%. i have a chart appear. it is the biggest growth we have seen since 2013. they are looking at this as proof, even the more right-wing papers, as proof that this immigration problem could be an immigration blessing. ," a center-right paper, has been talking about the fact that the region -- reason for this growth has been the syrian refugees, helping to

build up demand and byproducts --buy products. guy: great stuff. the germans need to spend some money, everybody says. maybe they finally are. matt miller joining us from berlin. looking forward to getting his take on the world. let's get another take, with bloomberg first word news. tom mackenzie, good morning. tom: morning, guy. there has been more disappointing data out of china. bloomberg's monthly gdp product tracker shows growth at 6.88% in april, down from 7.11% in march. coal output dragged on industrial production. retail and investment ratings also short of estimates. dollars 850 billion wealth fund will join a class-action suit against volkswagen after the admission cheating scandal. the fund, which according to

bloomberg data owns 1.5% in vw, says it is acting to safeguard its holdings in the carmaker. the fed may delay interest rate increases until later in the year as they look at risks associated with the brexit vote and the u.s. presidential election, according to pimco's had a portfolio management for emerging -- head of portfolio management for emerging asia. saying the eu referendum has put a dark cloud of uncertainty on the outlook. the pci sees -- cbi sees growth of 1.8% this year. mark carney has defended the bank of england against critics furious about his forecast. the boe governor spoke to the bbc. >> if we are taking a judgment as a committee, and changing policy because of it, we are putting billions of pounds into liquidity facilities and getting

banks to raise capital against these types of risks, it will potentially alter the path of interest rates, or other instruments of monetary policy because of certain things. we have a duty to explain that to the british people, and parliament. tom coburn global news 24 hours a day, powered by our 2400 journalists in 150 news bureaus around the world. more stories on the bloomberg. guy: thanks very much, tom. what happened on friday? what happened friday? retail sales numbers were good. what happened in the bond market was slightly curious. we will spend a lot of time talking of that fixed income, because we are lucky to have with us hsbc's stephen major, the global head of fixed income over there. good morning, stephen. explain this to me. this is the u.s. curve.

buy tens, and, it has been flattening. this has been the chart for the last five years. you can see we have been pushing down, down, down. why after that good retail sales number did the market flatten out? stephen: the u.s. curve is a signal things are not good, looking into the future, talking about recession risk. that data last friday on its own was strong. no doubt about it. it was way above the consensus forecast. but as was said on the earlier footage here, there is a gun great to growth forecasts in the u.k.. china is slowing again, it seems. if you add together the whole global picture, it is not looking very good, and the fed has clearly pointed to the international backdrop. so rates could still go up in the u.s. the fact the market is not pricing in for june is a red flag in itself.

guy: is it a worry to you? stephen: no one will trust the consensus forecast, and no one will trust with the bookmakers say about various events coming up, either. just look at the football. [laughter] leicester city, nobody thought it was possible. skewed the risks are now against this trend, and people are looking to us to change our bond forecast because they think, look, we are getting towards the low numbers we forecast previously. but that is no reason to change the forecast. we could stay down here for a long time. guy: is that your expectation? stephen: it's probably unlikely. something will happen. if you look ahead to june, there's so much. all of these policy moves that may or may not happen in june. japan, the u.s., the eurozone. there's the vote in the u.k.. there is one in spain. there is an election in japan.

there's a fair bit on the horizon, so something might come along to disrupt this trend. ultimately, at year-end i doubt yields will be far from where they are now. guy: so volatility is in the middle. buy volatility around fixed income? stephen: if you are worried about volatility, you look at the yield curve and think, do i really want to chase the flat trend here? isn't it better to be sitting in the two to five year segment, where there is more value? i am worried about how far that curve has gone, because i am much more in this camp at the moment. this is probably too much, too soon. iy: walk me through how tactically want to put between now and june. stephen: you have to accept, there's a narrow range. i know that is quite a boring thing. but in reality, the 10-year treasury has been in a range of 30 basis points the last few

months. the 10-year bund about 20 basis points. you don't chase it through the bottom. as you compare -- prepare for the unexpected. i'm not forecasting any kind of increase in rates in the u.s. or u.k. anytime soon, and i doubt anybody watching this program believes rates will go up in the eurozone or japan. we know the next move is probably down. but it's the unexpected, and what's going to happen around these votes, and what kind of data surprise we could have. without knowing what it is, we just think we are getting a bit ahead of ourselves. guy: plenty more to discuss. we will berket, kicking that around in a few moments. stephen major will stay with us. we will talk u.k. later in the program. we have a raft of disappointing data, showing china's debt will be hard to shake.

we go to hong kong with the latest on that story next. ♪

guy: we are a few minutes away from the market open in europe, counting you down. here's the bloomberg business flash with, and can see -- tom mackenzie. ipo phillips has set the price of its lighting business, giving the unit a value of as

much as 4.9 2 billion euros. trading is expected to go ahead light. under the ticker the finland-based company will pay $800 million in cash and $19 million in shares. terex is in the parts business after they abandon a merger to pursue merger talks with a chinese company. chinese car hailing company didi is targeting an ipo in new york next year, according to people familiar with the matter. they say the timing will depend on how the firm's battle with uber plays out. last year, apple put $1 billion in two -- into didi. telecom italia has almost tripled its target for reducing

expenses to 1.6 billion euros by 2018. cuts will include 800 million euros in operating cost, and 800 million euros in capital spending. that comes as the new ceo aims to improve profitability at the former state-owned carrier. that is your bloomberg business flash. guy: chinese stocks trading in hong kong rebounded from a two-month low, despite a raft of negative economic data over the weekend. retail sales and fixed asset investment it all missed estimates over the weekend. malcom scott joins us from hong kong. the miss on retail sales and industrial output -- walk me through what the take away from this should be. i thought the retail sales number actually looked all right. malcolm: the retail number wasn't too bad, but it was the lowest. as with the credit numbers and industrial numbers. throwing that altogether, there

had been real optimism after the march numbers beat estimates across the board, that maybe the economy turned the corner, that maybe things have stabilized. stabilization seems to be the word, but any hopes of a v-shaped or u-shaped recovery seem shot by the april numbers, which all undershot what economists were looking for. it highlights how dependent this economy still is on credit. on friday credit numbers disappointed. in fact, they were worse than all economists we surveyed looked for. wesaturday, productively, saw all of those measures of economic activity dialback from march as well. once the credit dries up in china, so too does the economy, it seems, and that's a big problem for the economy, because you can't just keep stimulating, you can't just keep throwing or asseto the economy, bubbles and all sorts of problems arise. guy: walk me through what this

tells us. what is the real take away from this, in terms of what the data are telling us about where the chinese really are with this economy? it is so hard to get a real understanding, and you have to sort of pieces together, bit by bit -- peace it together -- piece it together bit by bit. malcolm: production rose 6% in april, from a year earlier. the big drag was heavy industries. coal, steel, both are mired in overcapacity, causing a big drag. but some newer industries are looking ok, so good and bad on that front. on the retail front, the number is about 10%, so pretty strong retail growth, down from what economists had been looking for, down from march. that was a bit of a pullback, especially in automobiles. there has been a government measure to increase purchase of automobiles. they came back a little bit.

restaurant sales looked pretty strong. the retail consumer story still looks good in china. on the investment front, this is maybe where they are divided. government-led in construction programs are still going, but on the private investment side things are looking very weak. there has yet to be a real revival in the animal spirits business level, and that doesn't really spell good news if you are looking for any sort of pickup from today's levels. overall growth is coming around 6.5%, 7%. most economists say that is not too bad, especially by european standards. guy: everybody seems to say that this morning. ird had matt miller talk about what decent growth looks like around the world, and what we experience in europe. malcom scott, joining us out of hong kong. let's bring back steven major, global head of fixed income at hsbc. the chinese are still enjoying decent growth. you watch what's happening

globally at the moment. how worried is the fed going to really be about what is happening with the chinese economy right now? steven: the point that was just made was about credit, and we know are that ends. if the growth is being purchased with extra borrowing, it is not good for the longer-term. that, i think, is one of the current focuses people have had. in the past, there was -- it was about the currency. it seems we had that scare last august and january. guy: you bring that up. are we getting back to that? the dollar started to strengthen again. this is the u.s. dollar versus the chinese currency, in january when the market got really freaked out and we saw the effect of that quite clearly. we are ever so slowly starting to push up to that level. 6.52. we are climbing back towards that. the dollar strengthens. is the fed worried about the effects of a stronger dollar after a rate hike, and what it

will do to the rest of the world? steven: they are. that chart belies what's really the yen andcause the euro have been running a fair bit. they had achieved some of that evaluation. guy: if you look at the basket, it is a different story. steven:, all of the talk in august and january some of that has played out. the market focuses on this. people like to talk about conspiracies. i don't think there is one, but the reality is everyone who is quite well served by the u.s. keeping rates low and china expanding credit, and china can only expand credit if rates are low. so eventually it comes together quite nicely. people know in the background that the debt is building up, and it is a question for the future, not right now. guy: we will talk about how far in the future, maybe a little later. we are minutes away from the open. up next, a look at corporate

movers around europe. telecom italia has tripled its targets for reducing expenses. the market will open in nine minutes. a lot of stocks to talk about. ♪

guy: 7:53 in london, counting you down to the market open, moments away now. let's find out stocks you need to pay attention to. caroline: telecom italia is the first stock to keep an eye on this morning, because it could

jump 5% to 10%. a volatile ride if you have had telecom italia over the last 12 months, on a downward trajectory. but we could see a spike today. why? they are phenomenally increasing the amount of money they are going to be cutting overall. they will be cost-cutting to the tune of 1.6 billion euros by 2018. compare that to the 600 million previously. they are upping it by one billion euros. a new chief executive is taking the bull by the horns, really wanting to improve profitability for telecom italia, so watch the stock rise on the open. meanwhile, watch the stock fall. not by much, but 2%. i want to focus on this, because you know they are seeing concerns about trading. we are seeing a likelihood of 1% to 2% lower on the stock price. remember, they are going through m&a at the moment, but fascinating for icap, for your

revenue down 6%. a challenging market environment. the challenges will stay. they will be fact renaming themselves nex group. nex.will be changing to guy: welcome very much, indeed. we have the market open coming up very shortly. looks like we will see a negative start in europe. euro stocks down 0.7%. ftse down 0.5%. dax a little better, opening absolutely flat. looks like we see a negative start here in europe. keep an eye on the stocks. telecom italia could be one to watch out for. icap another one. we will talk about the bond

market. chinese data, interesting over the weekend. we are four minutes away from the open here in europe on this lovely day in london.

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guy: welcome back, good morning . you are watching -- we're moments away from the start of european trading. here's your morning brief. the treasury trade. what is going on in the bond market? joined by one of the biggest names in the bond market, hsbc's stephen major. this weekend, weak chinese data is a worry. and has lonmin finally got a grip on its conquest? we will speak to the ceo. meantime, let me tell

you how we think the executive markets are going to be opening. looks like the fair value calculation will see a negative start to the day, euro stocks down by around 8/10 of 1%. that looks like a trade we will see at the get-go. here's the market open. we're getting the negative view, cac already trading down+++

we'll wait for the dax to open for the closing price, and the euro stocks looking for that negative turn, down by 2/10 of 1%. market flat to negative this monday morning. let's get some details with caroline hyde. caroline: i want to dig straight into your imap function. this is where you get to see the sector breakdown. the stoxx 600, red across the board. down 3/10 of a percent, the worst performance of the i.t. sector. some downward trajectory for the consumer staples as well. we saw a bit of a growth spurt on friday. we ended in the green for the digestion ofn that woeful chinese data, missing estimates not only in retail but weo investment and, indeed, are seeing concerns about fixed asset investment and industrial production. good news bad news for the united states -- we saw a selloff in the equity market on friday because the retail sales numbers were just too good. does that mean a federal hike sooner than anticipated? we see money going into the dollar, and it could fall down a little bit. overall we are seeing dollar strength continue over the last three days. the bloomberg dollar index function, and it does show the path of strength we have

seen as we start to anticipate fed rate hikes. maybe not june or july, but i think the big gathering sentiment -- remember the odds on the terminal are that by september, 34% chance of a rate hike, all based on the fed funds futures. now let's dig into the stocks only to look at. i want you to have a look at m&a stories coming out, and some cost-cutting stories. keep an eye on the likes of telecom italia, up 2.8%. are we see fit to rally even harder after the largest phone company in italy tripled more its target? they really want to get a profitability. this is a company that is not living up to expectations. , but thee in april

coldspring continues into april, and that is heading some of the larger markets. cranes,p an eye on the still a bit behind the times. we are waiting for it to open itause we are seeing expanded to the united states, 1.3 billion on exports. guy: just to run people through the numbers, here are some of the stocks you need to pay attention to. down, we arec still waiting for the dax. the market makers need to get a clip on. the market is still waiting, in the looks like it will open softer. let's talk about vw. the investment management plans join a class action lawsuit in germany against volkswagen over the emissions scandal. matt miller has joined us in notany, something of a car

of these all. matt: i don't believe the dax will open -- if you are waiting, don't hold your breath. it won't be until tomorrow. there's a holiday here. that means that most trading in germany will be closed. there,m glad you are because i completely missed that. you are definitely already one step ahead of the curve. matt: thank you very much. that will probably be the only time i do that at all today. let me tell you something interesting -- looking at the volkswagen story, a norwegian sovereign wealth fund is going to sue for some of its losses and if you pull up the loss

function you can click on to a graph of any of the investors that had the biggest holdings and you can see their holdings over time. if you click on the norwegian you seebank position, that they had about 6 million shares going into the december of 2014. to cut that down to 4.8 million shares this past december because of the scandal and how it drastically reduces the value of the holdings, they are suing because of his deal and emissions scandal, and it is not the fact that folks like an was -- volkswagen was cheating, it's the fact that they didn't tell its biggest investors until after the u.s. issued its concerns. they are suing and you and i

both look into the holders function and you can see there are number of other shareholders, including blackrock, and the california state pension fund for teachers and police officers that could possibly join them. they are inviting more people to join them. the biggest holder, if you go ahead and close out of this function on your screen, you can see the biggest holder of volkswagen shares outside of porsche is qatar holdings. that they would jump into a class-action lawsuit, because why would they want to hurt a company they hold so much of? guy: great stuff. we will watch that with interest. why would you by the hand that feeds you? matt miller, talking about talk and the fact that the german market isn't going to open today. global head of

fixed income research room hsbc, is still with us in london. let's talk about your area of expertise, which probably isn't talk. we will talk about the bond market. you were ahead of the curve in terms of where you expect the market to go, in terms of the u.s. 10 year. you were talking about 1.5 a long time ago and the market has come to you. this is the consensus forecast -- this is the back end of this year. that's a worry, isn't it? >> that is 100 basis points. the consensus forecast has fallen about 100 business points . it is a capitulation of sorts. people have come around to the idea that if rates go up at all, it won't be by very much, and also that there is a reality -- if the fed and others were to hike this year, there is a material risk that they could reverse it next year. if that is the case, don't do anything.

i think that's where we are. the market is ready for a long time of low rates, and it has been painful, because people have been expecting the fed to do what it said it was going to do. the fed really wants to hike rates, but can't. as you have pointed out, there is the dollar, the international backdrop, the risk of reversal. stuck with very low yields for a very long time. guy: what would happen if the fed surprised? walk me through the implications, the ripple that would cause. >> they have surprised before with rate cuts. and if you want to look at rate hikes, you would have to go back a very long way, a completely different historical backdrop. in modern history, we don't have that many examples of surprise hikes. so of course history is no guide to the future. the fact that the market is not pricing it in means nothing,

nothing at all. if they believe that conditions are right to hike, then they will do so. maybe we aren't listening. i am not forecasting it -- i think it is out of the question for june. but the fact is everybody else has now come around to the same view. that is a red flag; that's all it is. be careful, don't get sucked into this crazy trend. we are almost there. that's it, really. i'm sorry i haven't got a big -- guy: as you say,. june is coming up the message i am -- the message is there is so much about to happen, the market has come such a long way -- >> i think you are expecting me to say they will go to 1%. i have heard that from a few customers recently, and there is no reason to change the forecast from 1.5 right now.

july, maybeune or we will take a different view. what we need to do is talk about what's happening with the deal market. mark carney over the weekend talking on the bbc, talking about the brexit, about what is going to happen with the view of the world. there going to talk outstanding performer, the surprising a performer if you are a great. -- a brit. ♪

guy: welcome back. 12 minutes into the equity market trading session. we have some markets closed. it turns out that germany won't have a meaningful impact; stoxx 600 down, ftse down. cac also down. red, i think the market is on board. let's find out what exactly is happening around the world with the first word with tom mackenzie. tomko there has been more disappointing data out of china, with the gross to mystic product tracker showing growth slow down from 7.1% in march. week core output dragged on industrial production, and meanwhile retail and industrial productions came in under

estimates. norway's $850 billion wealth fund will seek to join a class-action suit against vonnie: following the missions cheating scandal. vw, and says% in they will have holdings in the carmaker. the fed may delay an interest rate increase until later in the year. there are risks associated with the u.s. presidential election, according to pimco's head of portfolio management. it comes as britain's biggest business lobby group cut its growth forecast from the u.k. economy, playing the referendum that has put the dark cloud of uncertainty over the outlook. gdp rises 2% this year. meanwhile, mark carney defends the bank of england against critics, serious about his warnings of the dangers posed by brexit. this comes after he said leaving the eu - could trigger a recession.

we spoke to andrew mark. >> if we are taking a judgment as a committee and changing policy because we are putting billions of pounds of liquidity facilities and are getting banks to raise capital as we did a few years ago against these types of risk it could potentially alter the path of interest rates or other instruments of monetary policy because of certain things, that we have a duty to explain that to the british people into parliament. tom: global news, 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. you can find more stories on the bloomberg at top . guy: thank you very much. tom mackenzie. steven major is still with us -- we need to talk about the gilt market. earlier on we were showing you what we thought the market thinks the u.s. 10 euros going. let me show up where the expectation is.

stephen, these two stories look very, very similar. >> that's the bank of england rate. it says the same thing. is the policy rate in a might as well have been the same thing, because they are both down 80-90 business points. we are talking about the u.s. as the same thing. the market has completely priced out the implementing of a rate hike. after the vote, there could be but the dataoves, hasn't been that good for a while, and regardless of what happens in june, the bank of england has to stay on hold. first of all, they need the data to repair itself, because there have been a few months where there has been uncertainty and data could have been soft. off fora sterling goes whatever reason --

guy: we haven't actually seen the benefits of the gilt story. >> investors would have lost money of the currency, and they would have made -- the u.k. market is the top performer year .o date and the corn market only emerging market hard currency -- and maybe high yields. of the core government markets, guilt is the top performer. if you look at where the yield is compared to japan or germany, you can see what people are buying. storyk this is a great because it is another example of where people have been sucked into this idea of maybe rates will go up. i think it was a mean reverting crowd idea, that there is a

cyclical pattern and the bank of england would follow the path of using rates. just like in the u.s., everyone has been caught up. guy: pimco using the brexit as cover do you think? just strip out the real economy and what's happening with the brexit, and i get that there is some justification. >> i can't speak to what it aght be, but i think there's fair bit of that that around. people need to hang the decision on something so why do people get the bond market wrong? it is quite easy to look outside the immediate area, so the fed is pointing to the international backdrop that is part of the story, but not the whole thing. nobody believed the fed funds are going back to 4% anytime soon, nobody. if we are lucky, we might get toward 1.5%-2% if they ever

start hiking. pointing the finger someon somewhere else is helpful for someone who's got it wrong. look at the u.k. and the story five years down the road, what do you see? when you look at look at happen here, the inflation narrative is an interesting one. there has been very little of this, particularly given the fact that unemployment is where it is. the phillips curve is not working in the way you would anticipate. is it there or is it just bubbling slowly somewhere before it burst its way onto the scene later on? or is this just a new world we live in. >> it gets this world clear of it requires us-- to think about what kind of place the whole world is going to be. it is happening in japan, china,

the eurozone. but if you look at the u.k. only factors, the things that come to mind other current-account deficits, 7% of gdp, and productivity. you start to add it up, five years out, maybe we would have some normalization of rates, maybe not to the extent people are expecting, but that would point toward some the inflationary pressure, and if you're looking at the u.k. only, what we don't know is what will happen to the rest of the world. we don't know whether they will have a recovery elsewhere. the u.k. is the small and open economy, extremely open. so it's and vulnerable to the externals. at five years out, it's reasonable length of time. imagine that we will be seeing rates going up, and there will be some pressure.

but thank you for that five-year. [laughter] guy: stephen will stick with us. we need to talk another market in japan. where to go after subzero rates. why japan may be running out of policy options on the monetary side of the road. we will talk about that, next. ♪

guy: welcome back.

23 minutes into the market day, as matt miller point on, some markets are closed. european markets are generally open, mostly down. euros stocks in aggregate down by 6/10 of 1%, some markets out. let's talk about asia, a market that we need to be paying attention to. japan may be starting to running out of rose on the monetary policy front, according to the head of sovereign rankings. after arranging a record stimulus program introducing negative rates, the boj is still well away from achieving its 2% inflation goal. meanwhile, exports are declining, stocks are little changed from the corona stimulus boost. stephen major from hsbc, still with us. japan being the place we should focus and pay attention to -- why? >> they owe us. the april meeting was a letdown

-- were expecting a policy moves in april. june,led it forward to and all the meetings in june, that is the one whereby we could get a rate cut. we have already got -10 on new deposits, and that is a policy in the early stages. i think it's inappropriate to say that it works; it's way too early. against japan,s but they can cut that rate again. we also think there's a good chance they increase the equity purchases, even though we know our top 10 stockholders -- that could continue. government bond purchases, back and continue, -- that could continue, and there is further for that to go. i hear what they are saying. that you get toward the outer limits, legally and practically,

of what you can do with monetary policy, and already in the gray area is where it overlaps with fiscal. negative rates are form of helicopter money, especially when you get the lending rates near zero, and that is happening in some parts of the world. people are now talking about what will be the next rabbit out of the hat from japan. you mentioned policy surprises before. people know that mr. kuroda is capable of pulling a rabbit out of a hat so he might do it again. real --is why june is a it will be the meeting everyone will look at. guy: pay attention. june will be quite a month. thank you very much for spending your time with us. stephen major, global head of fixed-income research for hsbc. up next, that mcgarr -- ben

mcgara. that story, next. ♪

guy: welcome back. you are watching "on the move." let's see how things are shaping up. here's a picture of the markets around the region. the german market is not opening today. the markets are wearing red this morning; cap down, ftse down, stoxx 600 down by 6/10 of 1%. let's find that wish stocks are moving with caroline hyde. caroline: i'm focusing on h&m, big in europe but also worldwide, second only to zahra. sales are not living up to expectations in the month of april. they grew 5% in the market, but

they wanted to see 7%, almost 8% -- coldspring seems to be stumping people, continuing throughout april on the sales of transitional garments. anglo-american is your withrform her for the day, bank of america merrill lynch .doubling upgrade the start now they go to a buy,. and saying that they could reach as high a eight pounds. they see a significant increase in the share price -- executing on its deleveraging plan. they say they will achieve their sales, their disposal target for 2016, but they say overall it is time to go along. 3.5%, this as of the company really moves to

drill down on their cost base, upping their cost target by one billion euros. it will no longer just be 6 million, it will be 1.6 billion. this is a strategy coming from the biggest phone company in italy. the new chief executive really seems to be focusing on profitability, is the investor base buys it. guy: interesting stuff. thanks. she is talking about one of the minoers. that comes as the world's third-largest plat number user introduced a plan to save the business. joining us is the lonmin ceo. good morning. how much further do you think you can go on the cost front? >> it's amazing what you can do in tough times. we have done what we promised we would do. %,r cost program is 67 pe

ahead of schedule, but we are working costs and we are still removing some of the high cost production in what we promises and oversupplied market. the cost cutting is bearing fruit. , howwhen you look forward critical is that evil edition? the price is up -- how much is that helping? will he give you a bit more time? >> not at all. we are focusing on the things we can control, and therefore we are continuing to cut costs. we want to make sure we position this business in the best possible position, so that the price has increased, and we are only increasing liquidity of cash, returns. it is important that we increase the cost-cutting program as scheduled. what we have already done right now, we have closed two of the

shops already, and we still have two more to go. we will utilize that process to make sure this business is the best place to benefit that we have seen since november. the prices have been growing up. guy: you are talking with the fact that you can control the prices. do you think the low is behind us? feeling the recent loss seems to be behind us. there is an upward trend. dollar prices have been up since january. andre seeing a good trend, we will continue to do what we can control to make sure we benefit even more. guy: so what is your long-term cost target? run us through what you expect the business to be operating at. >> i would promise that market the year, when we delivered unit cost of 10,400 rounds, we

promised we would keep those costs flat, and what we have achieved is 10,600. in this quarter, after we removed all the effects of the restructuring, this quarter is at 10,390. we are in line with our promise and we expect to maintain that cost line for the next three years. we know they will be pressures of increases, pressures of electricity, but we expect our productivity efforts, cost cutting, removing the bank costs, would help us maintain the target. guy: i was going to ask -- what your view on labor relations are. this has been an industry has company that has been severely affected by strike. up talking about what wages we will have going forward. give me a sense of where you think that relationship is. >> one truly hopes that the 2014

strike was the extraordinary. particularly in the platinum industry in london, it's worked very hard with unions to understand each other and to really share and communicate at all levels, to make sure the employees and the unions appreciate the economic realities of our sector and businesses, and i believe that realism will be a factor in the negotiation. i'm cautiously optimistic about the outcome might be, given that we lost 6000 through restructuring. the unions also appreciate that and realize where we are, so i am hopeful that there will be realism in the outcome. guy: and to come back to the overall narrative, you are in a better cash position than you have been. is the message to investors, things are getting better, or is the message to labor and investors, still very much

operating on the edge? we are working hard to walk away but it is still tough. there, still tough out but we have cut costs. we have double leane what we promised. are operating profit is getting better. balance is a lot stronger, but we have to continue to manage what we can control, because the markets will do with the markets want to do. guy: is the political story making your job harder? labor,social, political, and economic situation is indeed challenging. i'm always optimistic about south africa's ability to come to a collaboration and realize that what is best for the country is going to be done. i remain hopeful that basis. guy: when you talk to your investors internationally, and they feedback, are they worried

about what's happening in south africa and have that could infect their investment? >> they are indeed concerned, and we'll lay them on the basis -- like in the recent businesses, we are working very hard with governments and collaborating to work together to minimize the potential for a downgraded in terms of credit rating. we are also working with the department of mineral resources and the chamber of mines in order to review the mining charter and make sure what 's best for south africa is what we do. there are challenges, like in any part of the world, but i believe we are engaging to give them the comfort that companies like london are managing the risks in order to get the gains that i think they should be looking for. guy: great to see you. thank you for taking the time to speak to us. the ceo of lonmin.

up next, oil prices. we will tell you what nigeria is likely to be the source of a little volatility for this market going forward. ♪

guy: welcome back. let's get you your bloomberg business flash with tom mackenzie. tom: phillips is seeking to raise as much as 970 million euros in ipo with its lighting unit. they are planning to sell 37.5

million shares, which values the unit at as much as 3.3 billion euros. this could come as early as may 27, and will be under the ticker light. philip shares are lower. business for $1.5 billion, which will pay $820 million in cash and 19.6 million in shares. that is after the u.s. tree maker abandoned merger to pursue talks with the chinese suitor zoomlion. telecom italia has almost tripled its target for reducing expenses to 1.6 billion euros by 2018. largest phone company says the costs will be split equally between operating and capital spending. this comes as the new ceo aims to improve profitability at the former state-owned carrier.

shares are trading higher. that's your bloomberg business flash. until recently, nigeria was the biggest producer of crude in africa, that now the country is at 20 year lows. to discuss this, julian lee. good morning. let's talk about the river in the delta. obviously there are huge amounts of politics at play give us a story about how much this has changed. >> it changed quickly. we saw a new president elected in nigeria, and analysts linked it to former rebels in the nigerian river delta region. payment of them was under that amnesty; arrest warrant's were issued for several of the high members of the previous insurgencies.

not for the attacks they carried out in the past, but alleged ongoing criminality. what we saw after that was a series of attacks on oil fields in pipelines, the latest one on taken outd this has somewhere between 600,000 barrels per day of production, according to the government, perhaps as much as a million. it could get worse. guy: why could it get worse? what's happening with boko haram, and more broadly? >> boko haram is a separate issue. the problem with boko haram is that it divides the attention of the government. they are fighting one insurgency in the north and a separate issue in the south. the reason they could get worse -- we have seen the new breed of insurgent, the new, young crews who are doing this, with scorn on their predecessors.

they successfully launched an attack on one of the deepwater, offshore oil installations in nigeria, so those have to be a target for the new guys to prove their credibility. but on top of all of this, we also have the two big oil unions and nigeria now threatening to go on strike. this is not related to the insurgency -- this is related to job losses and caugh cost cuts. if they go on strike, we have that to worry about. guy: interesting stuff. julian, thank you very much. let's go from nigeria to china. china's biggest ride hailing app is considering a u.s. ipo. it is in the process of raising $3 billion. obviously this includes apple, a big part of the story that it is

trying to deal with its main rival. lulu, talk us through what we know about the ipo details. >> so what our sources are telling us is that the company is targeting an ipo as soon as next year. there is no timeline, i and bankers have not chosen exchanges, but the destination is most likely in the u.s.. at this point, they are raising $1 billion from apple, which brings the total amount of fundraising they have to $3 billion. over, that would mean a tremendous amount of pressure on the company, as they have already tried to do this as a preemptive measure for other investors, to put money into uber. guy: so what does this mean for them? talk us through the

ramifications. >> in china, they are one of uber's largest competitors. they have operations in more than 400 cities. uber is targeting more than 100 cities by the end of this year. they are profitable and more than 200 cities at this point. the company does have an international -- they want to go global and at this point what they are trying to do is form an and wee with companies will have to see how that competition plays out, both in china and globally. guy: thank you. lulu chen. i want to stay in that part of the world and walk you through what happened a little bit earlier. you can see this on the stream -- we saw this drop, this very

sharp drop. nobody can quite explain what caused it and why it happened and as a result of which people are scratching their heads trying to understand what the implications of this can be. clearly we have seen this in the past but there have been some unexplained moves, the flash crash being the most obvious. we will pay attention; maybe it is an example of how close to the edge investors are in that part of the world. up next, the battle of the charts. ♪

guy: 8:50 in london. let's bring back in matt miller. matt, this is your area of speciality. the battle of the charts. matt: i do love any kind of chart. i have a great one today. i brought in from the u.s.; this is one that will be used by you guys a lot because it is a reason to buy stock even as price-earnings valuations approach internet bubble levels. what you see here -- and this is terminal -- you can use this on your terminal,

trying to convince a client to buy stocks. this shows the s&p 500 etf yield, in blue. that shows the u.s. 10 year yield in white. the spread between them is here, in pink. the higher the pink line goes, the cheaper stocks are on an etf yield to treasury yield basis than if they were lower. you can see that we are higher; this goes back to 1999. we have really been cheaper, stocks are cheaper than they have been relative to a risk-free treasury. since 2007. the entire 2002-2007 bull market, we weren't this cheap. there are a lot of people who don't like this measure as a valuation. because inflation reflects etf

stocks differently than it does bonds, you don't want to necessarily look at this.it is called the fed model , though, so it does have a pretty big following from some pretty big people. guy: so that's great, and that all sounded amazing, and i am sold. we will buy long stocks, but here's the problem. the world over the last few years has seen a massive fire in the market, and it has been the corporations in which we are investing. buybacks, a critical factor to what's going on in terms of the equity market performance. and it is going away. and that ain't good if you are long stocks. this is my chart. this is the announce share buybacks that come through in the first four months of the year. last year, this peaked out. this year, it is significantly lower. we are back to the numbers we saw in 2013, and yeah, the market was going up, but maybe

we are starting to go down as well. it is great that all the valuation metrics look a little bit more favorable. i would argue that if you take a fire out of the market, that will staying. let's get if you on these charts. richard jones joins us from bloomberg first word. give us your two cents. richard: i don't think you can look at the stock story without looking at both of your charts, and i'm not being diplomatic, i'm just saying i think there's an interesting story. what you highlight, guy, is important, but i will give it to matt for two reasons. one is i like the cross asset aspect of his chart, and two, it is his first day in europe, so we would like to give him some encouragement to stay with us. although it was a tough decision. guy: [laughter] matt: richard, i appreciate your vote, and i will stay with you as long as you like.

one of the caveats here is that no matter which chart to pay heed to, it matters that earnings continue to grow. my chart doesn't make sense if you don't have a view that earnings will continue to accelerate into the future. guy's chart, as well. that's an important part of investing. that is the key, the crux for investing.' if you don't see corporat earnings grow, know will make you want to buy stocks guy: i just wonder whether that is true. you look at what's happening in the world, the fact that central banks are pummeling money into the market, the ecb is doing it now, and they are giving money to corporate that low levels. you could effectively have negative money. the bank of japan is doing it as well. i just wonder whether that buyback story will turn around. when money is this cheap and the corporate bond market is doing what it's doing, i wonder whether that number goes up.

there is a great story on top germany today, all across europe, as long as you can get money this cheap, a lot of companies are going to be borrowing money in order to continue to pay dividends or even ratchet dividends up. i guess that would be a reason to own stocks; you are getting yield as opposed to a lot of other instruments. guy: fair point. richard, what's going to be the highlight for the week? richard: this will be a busy week for u.k. data. inflation data, wage and employment, retail. given the backdrop we have seen the data recently, i think it will be interesting as we get closer to the eu referendum voting day. on this day u.k. data will be worth it. guy: fascinating, given the backdrop of last week. we will wrap it up there. richard jones, matt miller for the next few weeks.

pushing forward to german angles, stay with bloomberg television, "the pulse" is up next. jon ferro and i will be on bloomberg radio next. ♪

francine: the slowdown stimulus cycle. chinese data misses estimates. the pboc says it will support the economy. the s&p 500 flirts with his highest readings since the internet bubble, but the fed model suggests it is still far from its 2007. and carney defends his warning about a brings it, saying the british economy faces 1990's era uncertainty. we talked to the cbi. welcome to "the pulse