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tv   Bloomberg Daybreak Europe  Bloomberg  October 27, 2016 1:00am-2:31am EDT

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areeutsche and barclays set to release in one hour. the u.k.'s trade minister says global banks will lose passporting rights. labor abuses theresa may of seeking a banker's brexit. and elected to the board of the electronics unit. this, as it reports a 17% slump in profit, thanks to the note 7 drama.
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welcome to bloomberg: daybreak. we are right here from the city of london and i'm manus cranny. this is a little bit of a shock in terms of the estimate of the market. we have adjusted the loss of $251 million. the market had tabled a profit of $136 million. they are however, telling us they will lower their exploration guide down to $1.5 billion from $1.8 billion. they are also adjusting their view on capital expenditure. from say it will foall $12 billion to $11 billion. this is a lost in the third
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quarter from statoil. the other key headline is of course, on the slight reduction of capital expenditures. atrd quarter total output 1.8 5 million barrels of oil per day. they are lowering their expiration guidance to. $1.8 billion down to $11 billion. a couple of other stocks that are coming in across the bloomberg terminal. basf, now this is the first report from basf after that tragic incident they had on site a uple of weeks ago. they had preannounced their tonings would drop by 5.4% $1.5 billion. third-quarter sales are down 20% at $14 billion. don't forget, they sold the gas
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business. that is why you can see the dramatic drop in the sales numbers. tax is at or below the 2015 level. so, they are saying the overall sales number is down 14%. this will be the first time we will hear from the ceo after that explosion at one of their biggest manufacturing sites. eak laterear him sp today. they are raising the average price of oil to $45 per barrel. a headline coming from nokia. the third quarter net sales come at $5.86 billion. le'ts see how the world is
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setting itself up. the risk radar is up. i looked at sterling on the back of that headline i gave to you. theresa may, is she pushing for a banker's brexit. pound is down and we are getting third quarter gdp today, which is expected to come in at .3%. the u.k. banks might lose passporting rights brexit. mark carney is perhaps looking for a new model. election ak the little bit later on with our guest host larry hathaway. the mexican peso is extending its drop. the bloomberg poll showed trump ahead in florida, a swing state. that is your risk radar and those of the corporate results. let's get you up to speed with the first word news with rosalind chin. reporter: good morning. shareholders of samsung
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electronics have elected a new member to the board. that came as the electronics inision reported a 17% slump the profit. this is after the devise of the note 7. the first profit in eight quarter. net income was 71 cents per share. oflysts had predicted a loss 55 cents per share. elon musk hopes to get through the rest of the year without losing any more cash. he will prepare to acquire money-losing solar city. global banks will lose their rights to provide services in the european union after the brexit. carney told bloomberg that
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they are trying to create a "new model for single market access." meanwhile, u.k. businesses are demanding action from chancellor philip hammond to stimulate confidence to counteract the uncertainty caused by brexit. the confederation of british industry wants the government to boost annual public investment by 6 billion pounds to 2% of their domestic products. and profits of china's industrial corporations are holding up this year thanks to steel and refining. that is even as last year's earnings slowed from a three-year high. they are down from the jump of 19.5% in august. the world's second-biggest economy for producer costs rose last month for the first time since 2012 as global commodity prices recover. global news 24 hours a day, powered by 2600 journalists and analysts in more than 120
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countries around the world. you can find more stories on the bloomberg at top . i'm rosalind chin. this is bloomberg. manus: let's get into these markets. sherry ann is standing by. we have a little bit of weaker asian trade going through. give us an update. >> that is right. asian stocks are falling for the second consecutive day. we have only a few markets in the green right now as investors assess those earnings out of china, south korea, and australia. one of the markets up today is south korea, up .4%. we had tons of new set of samsung today, which is gaining. the index is now reversing two days of losses. new zealand is also gaining .7%, despite the fact that we had data this morning shooting the trade deficit widen to a record.
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the kiwi dollar though, was unfazed because of aircraft purchases. the nikkei is down .7%, reversing gains already. we had earnings out of japan as well from nintendo. the shanghai composite is down .4%, losing ground for the second consecutive session. groundg seng is losing for the third consecutive session, down 1.3%. it is being pulled a down by energy explorers that are weighing on the index. we have a reported slump in sales. that is weighing on the index. also, watch these chinese stocks because we have earnings today. the earnings season is in full swing in china and hong kong. china eastern is also losing
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ground by 1.4%. manus: thank you, shery ahn. now, as i said at the start of daybreak, it is a big day for the european banks. two of the region's most important lenders are set to report the profits. we will hear from deutsche bank, and then we will turn our attention to the u.k. and barcla ys. deutsche bank shares are down 40% this year and investors are keen to hear more from john cryan. and in barclays, the focus is on the turnaround plans from just eff staley. he joins me just after 7:00 this morning. it is his first interview of the day. let's get larry hathaway in the conversation. larry, thank you for coming in. a big day for the banks.
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i am not going to say there is a renaissance , but there has been a lift. deutsche bank is at the bottom. but hsbc is up at .79%. how did the banks look to y ou? banks have staged a recovery. those low levels were something to be concerned about with deutsche bank. some of the recovery has been a lessening of fears regarding extraordinary capital injections. a couple other factors have played a role. u.s. banks reported stellar earnings after the third quarter, a lot of that was driven by the fitc, a fixed income trading, which could have been a result of volatility in those markets. but there are big differences between the u.s. earnings in the earnings potentially in europe.
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we read a really nice line on jpmorgan. he has a really nice diversified message. you mentioned the fixed income quality in currency. ubs,shows the ficc for db, and barclays. this could be a land grab situation. the other thing that came to my mind was, this quarter has been quite a precipitous quarter for fx trading at ubs, for fixed income trading. i just wonder, are these models still built for business, really? >> well, the third quarter itself so i pretty interesting turn with fixed income markets.
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we initially started out with the projection of lower bond yields, which were shoved lower because of brexit. but in august, we saw higher yields. that is a mixed story for banks. their markets and bonds are not necessarily -- bear markets and bonds are not necessarily a good thing, but that interest margin does improve with steepening yield curves. helped, to the extent that folks are counting on the underlying business model being helped by a bigger spread between long waves and short waves. manus: we will carry that conversation forward with staley and ermotti tomorrow. the underlying story on banks, and this is our trade minister in the united kingdom, saying the u.k. weighs a new model for the single market. if we can create a hybrid with what we have at the
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moment, passporting will be off the table. banks likely to lose passporting will get a new model. is that pretty much how you think it will be? frameworkhe overall is clearly one where everything has to be up for negotiation on the table. you have to rewrite basically, all the rules. that is the cold reality britain is waking up to in the various sectors that offer extensively throughout europe. there will have to be some thoughts about what replaces the current passporting system. there could still be accessed, but it will come at some cost, and in political cost as well. manus: everything that is good in life costs, larry. larry will stay with me. an andm., we get restrict decision from sweden. 30 minutes later there is a
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policy decision from norway's central bank. 30 minutes after them, is that u.k.'s third quarter gdp. on the corporate front, we have twitter earnings. apple0 p.m. u.k. time will hold a media event where it will unveil new mac computers. and after the u.s. close, alphabet and amazon deliver their earnings. deutsche bank agrees to sell its mexico unit. capital levels will be closely watched for the third quarter earnings. the u.k. chancellor should listen up. infrastructure investment is needed. key recommendations over the next month. take a closer look. plus, no swansong at samsung's electronic shares. the stock is on positive ground, despite a 17% slump in the
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third-quarter profit. plus, don't miss the conversation. director,naging christine lagarde, that is at 8 :00 a.m. u.k. time. this is bloomberg. ♪
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manus: progress on the restructuring at deutsche bank, that is a line from john cryan, that ceo. is standing by. the top line, a net income of 256 million euros. the market has priced in 354 million euros. costoking straight to the line on this. it looks like the everything costs out of this business more aggressively than the market had anticipated. caroline? caroline: when you look at that statement, it says, why the cost reduction? because the compensation. they are looking into new ways
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of paying bonuses. they are taking out costs by reducing pay basically, to their bankers. you are looking at the capital ratio, better than expected, up to 11.1%. that is higher than what was anticipated. it were expecting 10.9%, but it is above 11% now. so, improvement in their capital standing. what really has to be dug into is the fixed income currency commodity trading. did that improve, like we saw in the united states? they are saying overall, there was a third quarter loan loss provision of 127 million euros, more than what had been anticipated. but there is a beat, in terms of third-quarter revenue. 7.5 billion- and the euros, and the market had been looking for 7.2 billion euros. it was a huge loss this time
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last year of 6 billion euros. they are managing to show some sort of profit here. this is a notable, better than expected set of numbers coming from deutsche bank, but it is about digging into those numbers. they say they have a pretax profit of 33 million euros. they are scaling back in the emerging market, manus. this is a set of numbers that is intriguing. manus: there are a few more lines coming through. litigation costs, we know they are behind the curve in terms of provisioning. but the debt trading revenue euros, at 2.0 7 billion and the market had an estimate 8 million euros. in terms of what you are
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hearing on your end, what is next? we have the overnight news they are selling the mexican business, but that is a minnow compared to what john cryan has to do. caroline: exactly. they did not even tell us how much money they got from the mexican business. there are only 130 people based still, he isut doing what he promised. they are scaling in on what they do best. maybe they have to therefore, be focusing in on how well they do at debt trading. mabye they should not be moving away from investment trading. they have boosted revenue coming from the fixed income commodities. equities are not looking so strong, an area they were hoping to beef up at some point. they will have to show the investor base how they cut costs. they were expecting costs to billioneuros.
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what about the 9000 jobs? will they do that faster than was expected as well? analysts say "buy" and 14 say "sell" this stock. a lot of convincing to dubai john cryan. -- a lot of convincing to do by john cryan. manus: thank you very much, caroline hyde. i will have a conversation with another ceo, jes staley. he joins us at 7:00 a.m. u.k. time. one other company that is reporting this morning, posting an unexpected loss amid lower energy prices, norway's biggest rude producer. let's get straight to the ceo,
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who joins me now. thank you for taking the time to talk to us this morning. an unexpected loss. we have seen slightly lower oil prices. my question to you is, is this the bottom for us in terms of earnings and expectations from you? is it an upward trajectory from here? explain his unexpected loss for us. >> is negative result is impacted by the weak commodity environment. we are coming further down compared to last year by 8%. the european gas market is down 30% from last year. line.at hits our bottom we have had quite significant activity within the norwegian confidential related to turnaround activities.. we also expect some previously
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drilled oil from the gulf of mexico. i think the good news of would like to convey is that our operations have been stable throughout the business. we had very good progress on our improvement program. also, we used the last opportunity to reduce our guiding on expiration costs and cutbacks. and the cash flow is positive in this quarter. we are getting our debt ratio down to about 30%. manus: the headline here is lower 2016 capex. is this as low as you can go? can you move lower on capital expenditure? you also mentioned the cash flow there and that takes me to the dividend question. let's talk about that capex, f i irst. is this a flaw, in terms of the cuts to capex? >> there are very few weeks left
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of this year. basically -- manus: let's talk about 2017, eldar. will of the $11 billion, or lower? >> i cannot guide you on that, but we invest in high-quality projects. we have a strong quality pipeline project ahead of us. we expect at some point there will be an uptick in the commodity environment. manus: eldar, you mentioned some of the business areas where you have done well. . you mentioned brazil. i am ready to know, will there be more on the table for you in shale overseas, or are you going to focus on norway? >> we will continue to consider opportunities to strengthen our portfolio and the longevity of our portfolio and our resource base.
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that is something we will continue to look for, good opportunities. i don't have to do anything, but if we see those opportunities, we will continuously look for those kinds of opportunities, but i don't have to do anything and they have to be a good deal in terms of strategy and a value to our business. manus: eldar, we have got the opec distribution to come. what do you expect in terms of the next opec meeting? do you think they will reach an agreement? brent is moving a little bit lower. give us your outlook. >> i think we are heading for a rebound and we might be pretty close to that, independent of any opec decision. at some point in 2017, i think we will reach a rebalancing and enter into the rebalancing process with a lot of volatility.
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opec cutting or reducing production could bring that point forward in time. i consider it to be more likely that they will, reach some kind of agreement. manus: eldar saetre, thank you for joining us this morning. ♪ [ corvo ] delilah won't go with a fight.
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shot: we are giving away here of the imperial palace in tokyo. the dollar-yen is inching lower. the yen is inching lower, and the dollar is flat. we have a new addition on "daybreak." let's take a look at our top stories this morning. the cover story, it is about the u.k. trade minister saying global banks probably will lose their current legal rights to provide services in the european
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union. this is after the brexit. but the most detailed outline yet of the government's thinking, mark spoke with bloomberg and he says they are trying to create a new model for single access. everything has a cost, but it is a question of what that might be for this new hybrid model. your second story of the day on "daybreak," well, it's about the u.k. gdp data. is this a sentiment number, rall ther than a reality number? on "daybreak"cus on the abank earnings. you can follow the entire .ge on top live
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i will have a conversation with jes staley. let's turn our attention to larry hatheway. andy, i broke those numbers caroline and i were trying to figure out what was going on here. it looks like it is a beat on revenue and costs. >> i think john cryan has bought himself a little bit of time here. the revenue side was boosted. and on the cost side, a big reduction that seems to be mostly about compensation. in the background, we still have issues about litigation, as we do for so many other banks, but on this day it looks to be a pretty good result. manus: john cryan potentially has bought himself some time with this set of numbers. let's talk about the confederation of british industry. .k. they say the government should boost annual public investment by 6 million
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pounds, 2% of gdp. this comes ahead of next month's autumn statement. philip hammond says that will be no splurge. larry is still with me. we are never too far from brexit foor fiscal stimulus. when you look at the world, is piecext big chests fiscal expenditure? is that what we need in the u.k.? >> it might be what we need, but i am not sure we will get it. the fiscal position is not strong enough to have a big fiscal boost. the numbers will be small and targeted economically and politically. in europe, there is not much momentum behind the infrastructure bandwagon. and in the u.s., assuming
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hillary clinton wins, she will face some opposition to such an expansion from the republican house of representatives. this is what the commons have been looking for for a long time, but it is not the month of political stars are aligned for a big fiscal expansion. --us: when we look at thee when we look at the bond market, this is two year u.k. versus two year in the united states of america. we were looking at the bond markets yesterday. but when you look at this kind of divergence, so to speak, after what you have heard from carney, what comes next, in terms of divergent rate? does it continue? >> it is very consistent with the lower level of sterling against the dollar. it is about the version business cycles, which lead to diversion in monetary policy. if the fed is going to raise
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rates in december, what still could come to pass is an upward adjustment for 2017 and the tightening could be more than the market anticipated. be ate what will probably very benign third-quarter gdp number, all the evidence does point to a softening of activity. the inflation numbers will be on the high side for the next six months. this divergence is likely to continue and if anything, get wider. manus: the break evens are just surging. the u.k. break evens, are just ramping ahead, versus sterling. i think the bank of england is 1.5% to 1.8%. it will be worse than that, isn't it? >> it could be a little bit, but the bank is on pretty firm g
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round. a couple years ago, the bank was thewriting letters to chancellor about missing the inflation target. those temporary things i think the bank can manage pretty well. there will be a spike in inflation, but that is more about declining living standards than about a wage crisis spiral. it is more about weakness than strength, actually. manus: i have referred to sterling this morning on the wrist radar and i said, "we are down again." we have had a number of different opinions this week. everybody seems to be saying we are dealing with a flaw here. our guest on monday said 80% to 90% priced in. we are reaching a real flaw in sterling. but are we? >> i am not sure. there is some still downward
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potential. there is not much upside here for sterling. the hard brexit talk is in the market and it has been in the price since the tory party conference. there will be very tough slugging to avoid a hard brexit. the politics are aligned that way, both domestically and with europe. the reminder came in the breakdown of negotiations with canada. you need a consensus of 27 countries, and indeed, some regions to strike deals if you are an outsider, and of the u.k. will be an outsider. manus: where will gilts fall in the reserve currency status? i'm thinking about the tie up between sterling gilts. that is the absolute bedrock of certainty. >> as far as foreign exchange reserves, i suppose they have lost some of their luster. i think the issue around gilt
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yields is more of a concern at the bank. it is one thing to face a weak currency on the basis of brexit, but if the economy will be weakening, you should not see gilts as weak as they have been. they have underperformed many of their peers. the banks have to watch the yield curve and maintain credibility around their ability to control the gilt market. a cap we are looking at in those gilt yield spikes. fixed income there could be value potentially the cousin the economy closes, the bank has to prove to be more expansionary. targeting the yield curve is one of the mechanisms the bank could pursue and that will ultimately support that market. manus: larry will stay with me. a little bit more to get through with larry hatheway.
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stay tuned to bloomberg because we will be speaking to the confederation of british s chief economist. a little bit of breaking news coming across the bloomberg. we have the spanish telecoms operator, a dividend at 40 cents per share. that is the dividend for 2017. a little bit of breaking news. good news for you if you are a shareholder in telefonica. samsung's stock is trading higher this morning, despite the 17% drop in the third-quarter numbers. while the smartphone decision softened from troubles related to one story, the galaxy note 7, business says the chip is something of a bright spot and the company's capex will come in at $27.1 trillion.
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peter, thank you for joining us. how much of an impact did the note 7 debacle have on the third-quarter numbers? >> well, it was not as significant as some people were expecting. clearly, we saw that with the market investors. the shares went up as soon as it was reported. the mobile unit's profits plunged to a record low. that was widely expected. overall, the company did pretty well. -- as you said, thanks televisionsof lcd and chips. manus: look, have we worked out exactly what went wrong with these note 7's? >> no, this was the hot
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topic of conversation during the shareholder meeting this morning. many of them kept asking, have you guys figured out what has gone on here? one of the samsung executives gave an interesting and telling remark about how they are not ruling out anything at the moment. initially they said it was with the battery and now they are saying it could be anything, even a software glitch. they have gathered a vast majority of the phones that have caught on fire. the looked at them and yes, majority of them are related to the battery, but with a bunch of them, they don't know what is causing the phone to heat up and catch on fire. a big conundrum for samsung and not a good sign either. manus: samsung and apple are both losing market shares. i suppose it is a little bit of
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fatigue. let's talk about the succession planning. what does the succession of lee mean for the future of the company? >> obviously, everybody was focused on the earnings, but during the shareholders meeting, jae-yong tod lee the board. the was the ascension as head of samsung. they cannot give him the title of chairman, because his father, who is hospitalized and is not dead yet, in the korean tradition you cannot take the title of somebody who is still alive. chairman byis vice title, but now as a board member
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, he basically is the guy running the company. manus: i am not even sure in british society that you can take the title of somebody who is still alive. snapchat, you use snapchat, right? it has captured the wall street ipo buzz. the company is aiming to raise $4 billion. we have more from new york. reporter: according to people close to the matter, the snapchat ipo could be value between $25 billion and $35 billion, possibly up to as much as $40 billion. the company is not officially addressing the matter, but those close to the situation say no final situation has been made and the size of the ipo have changed. morgan stanley and goldman sachs have been picked to lead the
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offering. andfings show they will be offering during the first quarter of next year. the papers are said to be filed confidentially. snap is not talking publicly, but many in silicon valley are about the value of this company. >> you need to have the combination of growth and engagement the guys leads to long-term retention. that is something snapchat has demonstrated in spades, both with incredible growth and engagement. ipo woulda snapchat be the biggest since twitter and could set the stage for a resurgence of tech listings after what was considered a mild year in 2016. meanwhile, china is returning to the u.s. ipo market.
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the chinese delivery service that gets about 75% of its business from alibaba. ipo is the most raised by a chinese company. werellion parcels delivered by the company last year alone. meantime, in shanghai, there is a list of 800 plus companies waiting to have offerings there. as for the ipo in the u.s., the details are that the company $16.50o price between share..50 a the pricing will be set for the 27th. "daybreak,"g up on
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what is your portfolio trump card ahead of the election? the aggressive turnaround of barclays has included cutting the dividend in half. can the ceo give investors something to cheer about today? we speak to him on his third-quarter earnings after 7:00 a.m. plus, a message to the chancellor. infrastructure investment is keyed as it sets out its recommendations ahead of the autumn statement. this is bloomberg. ♪
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manus: it is 1:49 a.m. if there is somebody having a great martini, it is in new york. overall, there is a little bit of a version to risk overnight. we are seeing a little bit of a dip in asian trade, 0.8% lower.
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rosalind chin is standing by for the business flash. rosalind: deutsche bank has reported an unexpected third-quarter profit on lower than expected litigation. the net income was 256 million euros, compared to the average forecast of 394 million euro loss. john cryan has cut jobs, suspended dividends, and shored up profitability. followrg customers can all of the due to make news on top live. loss among lower than energy prices. the first of the major oil companies to reportajor earnings says the adjusted loss would exclude financial and other items, was $261 million. that missed the estimates of a
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$186 million profit. apple announced the anticipated ipods will longer ship this month. the ipods are introduced last month alongside the iphone 7, which was designed without a standard headphone jack. a spokesperson said the company needs "a little more time." they did not provide a technical reason for the delay, nor a new shipping date. that is your bloomberg business flash. manus: the republican presidential candidate donald trump insists he will win less than two weeks time. can assets have been joint -- mexican assets have enjoyed a boost. but how do you play the election with less than two weeks to go? the global equity fund manager larry hatheway joins us now. thank you 30 much for joining us.
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forhank you very much joining us. this is a great map of the united states of america on your bloomberg terminal. our poll yesterday, gentlemen, put trump ahead in florida. larry, you were surprised, looking at florida, he was ahead. texaswas surprised that was a swing state. do you believe the polls, gents? richard, how do you look at this risk? >> clearly, this has been a big focus for investors. clearly we saw post-brexit that polls are very dangerous. what i would say to investors, historically, equities have proved quite resilient towards election outcomes. i think the focus needs to go back on the fundamentals. we have been looking at the earnings season in the u.s., and
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i think that is where investors need to be focused. manus: when you look up and see that red headline that comes out that in a swing state trump is worry ores that unnerve you? >> i am not sure about it worrying me, but it changes how you think about what comes through. policies would likely be very different between a clinton presidency and trump presidency and therefore, market impacts could be dramatically different. from that respect, we would watch it carefully. manus: i did prepare one chart for you, the performance of the s&p relative to clinton's administration. typically, the s&p rallies four to six quarters after a u.s. presidential election. you say we need to get back to
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fundamentals. so, where are the winners for you? and is it in the u.s.? does the trajectory continue for you in the u.s.? >> we need to put things into context. we have seen a significant re-rating in terms of u.s. equities. you really need to see the earnings coming through. if you take the example so far, if you look at the winners, the u.s. banks have come out of this pretty well. if you look at the fixed income commodities and trading side of things, that has been going quite strongly for them. provisions have been going down as well. banks is one area we would call winners right now. on the losers side, industrials is where we have seen weakness. we have seen a lot of companies reporting profit warnings there. we have seen a rebound in commodity prices, but you have not seen the company's following
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through -- nothing the companies following through, in terms of capex. manus: do you share that view, larry? are there any dips in these markets getting in there, and building more overweight positions on the equity side? >> in the case of a clinton victory, i would assume the house would remain in republican hands, which would mean no major shifts in macro policy. there could be shifts on the regulatory side. there could be increased regulatory activity around drug pricing. but with a trump victory, it begins to change. then they would certainly carry the senate and house in republican hands. in scenario, you can vision a fairly big change.
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the fed within have to raise rates at a much faster pace than is currently priced in. that is when you will see big market swings. manus: that is the interesting one, isn't it? the bond market, right at 10 year yields in white. i have the yield in the blue. we have put on 20 basis points in the last month. the relatively of a spike stands at 20%. what is next for bonds? ?s this all priced in, larry >> i don't think it is all priced in. we have done quite a bit of work cents august, but -- we have done quite a bit of work since august, but i think the two year note will continue to sell off. it would not surprise me by the first quarter if we were back to
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the kind of levels we saw over last year. richard will be with me after the break. larry hatheway, thank you for being with me. i am talking to jes staley on barclay's numbers next. [ emily kaldwin ] when you stole the throne, witch,
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manus: a big day for banks. deutsche bank posts and unexpected profit. our earnings are set to follow. we speak to the lenders ceo. the trade minister says banks will lose rights. labor accuses theresa may of seeking a bankers' brexit. on the samsung era, currencies elected to the board of the firm washed electronics unit -- firm's electronics unit thanks to the note 7 drama.
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welcome to "bloomberg daybreak: flagship morning program. i am manus cranny. profit from barclays, 837 million pounds. capitalffers of standard, a 11.6%. barclays is on track to meet this state capital requirement. for the nine months of this year so far, on a project level, barclays has earned 2.90 billion pounds. that is under the tenure of the current ceo, jes staley. he has pulled this bank, investment bank, out of seven countries in asia. selling the african business,
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jobs as part of a major strategy and turnaround. before i turn my attention to mr. staley, one other hot headline on the bloomberg terminal. this is nomura. met income at ¥61.2 billion. billionmate was for 45 yen. revenue at barclays, let us focus back in on the barclays story. of 414a net profit million, up from the 417 million and the revenues, 5.45, up from 5.48. this is just staley who joins me now. mr. staley, thank you so much for joining us today. at the top lines, it looks like the progress is progressive. you have been in the seat for 10 months. did meet your own scorecard. how is it going?
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the we set a strategy for bank on march 1. it was angered by being it a diversified bank with a consumer and investment banking franchise. it is quarter highlights highlight to the value of that diversification. we have a lot of our revenues in u.s. dollars and revenues in the wholesale side of the business, a good footprint in the united states. a retail bank that tends to do very well in the united kingdom. we are pleased with the results and set a couple financial targets for ourselves when we laid out the strategy on march 1, a double-digit return on equity for the corporate of the bank. we livered that again in the third quarter, managing our costs. we are on target to hit our cost target for 2016, continue the progress in in our capital -- progression in our capital bill, given we have taken provisions this quarter for ppi and had headwinds from our pension, so
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we are pleased with the results. we have a long way to go. close non-court in 2017, which we will do. be yourhat will barclays, mr. staley, won't it? a bank shaped in your own image. pti, -- another charge on ppi is this the last major charge on ppi, mr. staley? jes: given everything we know, we feel we are fully reserved with this charge we have taken this quarter. we think we have the reserve levels right and let us see what happens down the road. manus: you are right. who knows what happens for the rest of the delegation? talking about the investment deutschebroke the bank numbers, and looking at the investment bank, not a bad set of numbers.
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does this justify keeping the size of the investment bank? what does it say to the marketplace in terms of your strategy in regas to ib? our strategy is anchored on being diversified, being both a consumer and wholesale bank. we are pleased with our investment banking results in the third quarter. not only did a number of our principle of trading desks like credit and macro, they are up 40% in revenue numbers versus this time last year. we gain market share in the united states, so we feel good about our investment bank performance, it is a key part of the strategy, and the balance is retail rent rises in the united kingdom. the ib did very well and we are pleased with performance. manus: you mentioned that you got to share from the state. i am curious, was there any win, any big shift from the european side?
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did he win business from deutsche bank? -- did you win business from deutsche bank? jes: what we focus on is our market share and whether we are servicing our clients and customers the way we want to tear it we are getting good feedback from our clients across the world. we liked the position that we maintained in the third quarter. very active in credit and leverage finance. good number in equities for us as well. i think the ib is delivering on its promise and we like the outlook for that business as well. then, can i just ask you could i expect you then, that all of the cuts are done at the investment bank, might you be in hiring mode if you like the equity business and are winning markets? do you have the human capital to meet the uplift? jes: we reduced our headcount by
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some 14,000 people since i joined barclays, and when i joined the non-core assets we are set to close or sell in fourth quarter of this year, that number will be close to 17,000, 18 thousand. that is a reduction in headcount. we feel good about that level. it is mostly through a hiring n effectivech is a way. we all intents and purposes, like the platform we have got now and this is the platform we will manage into the future. manus: one of the other things i want to get your sense of, rn remuneration in that we are hearing some of the banks may assets,pay in non-core are you aiming for a majority, the balance of cash payments and bonuses to your team? what is the thinking in the ceo's office on immigration? -- on remuneration?
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jes: we obviously want to pay for performance. we need to be competitive. the bank has to generate the level of profitability that we are seeking. targett to income ratio is 60% for the group. for the core business, we actually hit 56% in the quarter. we have got the right cost income ratio, and as revenues do well, that will give us the ability to invest in the business. manus: the boost that some people like your business might get from a stronger dollar is also potentially a bit of a headwind for you in terms of the costs cutting target that you set for the bank. are you going to have to shift targets asreduction a result of the value of the currency? you now, one of the good things about this quarter for us is that every line of business
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produced a positive spread in you are to costs, so right. we do have cost in dollars, that we are going to meet our cost target for 2016, which was 13 billion pounds for the core andness, but our revenues dollars are growing faster than our costs in dollars are and that is one of the things that contributed to the quarter. manus: cannot ask you, we have this story overnight, mr. lose theirt banks a passporting writes with brexit. this is the u.k. official saying the u.k. is hoping to establish something new, a new version, which is different to passporting. how would that fit with you in terms of your perspective on brexit any ramifications for barclays on the ib side? jes: having access to europe is
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very important for us. leading underwriter for european sovereign debt in the continent, the leading underwriter of the supernatural -- supranational entities in europe. we have a tremendous client franchise in europe. one of the important things is that the regulator's post financial crisis through the d 20 have been very faithful to the principle of not inhibiting the free flow of capital. there is a lot of capital in the u.k. which is put to work in the european union. we would hope as the brexit negotiations go forth that the politicians and regulators keep up the free flow of capital and continue to allow participants in europe to have access, participants in the u.k. to have access in europe, to help europe grow. those let us hope some of arguments are indeed heard. when we look at the markets, and
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i know you keep a close eye on everything that is moving, when you look at sterling, evaluation around this 120, 1 hundred 22, do you think there is more -- 122, do you think there is more -- do you think sterling will go lower on politics? clearly, there is a loss of a value when the sterling depreciate and that is the price that is being paid, but on the other hand it gives the bank of england some flexibility in terms of their policies. one of the challenges we are facing right now is a divergence growing in monetary policy with the u.s. economy doing what it is doing, interest rates rising in the u.s., the expectation that the fed is going to raise rates. on the other hand, you have the bank of japan buying equities. and you have the european union
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continuing with the very accommodated monetary policy. that is going to impact the financial markets in ways we all need to be cautious about. one of the markets it is going to impact his currency, so we obviously hope for a strong sterling, but right now we are seeing weakness in part to the divergent monetary policy. let us see where it goes from here. brexit anddebate on what happens next for institutions, are you one of those ceo's, there was a report earlier in the week that said ceo's are sitting with their hands over the "let's go button." if i said to you, you have to make a decision to mr. staley that you need to continue to do blockbuster business, where would it be? europeanging with our
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client, executing our strategy across europe is very important for barclays. we'll do what is necessary to stay engaged in europe. we are looking at what those alternatives are. i think we are in the very beginning of a long road to negotiate the impacts between the united kingdom and european union on the back of exit. barclays is going to look at whatever alternatives we need to pursue, our intent and desire is to stay fully invested in london and the u.k.. we are a british bank. we hope the political come,ations as they preserve the access of european capital to invest in europe, but we have to see. manus: mr. staley, well then. thank you for taking the time out of what is going to be a very busy day. well done, mr. staley.
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the day. let me get you a few other it's and pieces of breaking news we have had during the conversation. bp has come out with their adjusted revenue, 6 billion pounds, 6.0 one billion pounds. market estimate, 5.9 4 billion, and it came in at 1.9 billion. the market was looking for one point 9 billion. dividends, just incrementally higher. for 25. -- 4.85. they are keeping their outlook unchanged on bt. at bt. have the ceo over he joins guy johnson and caroline hyde at 7:30 u.k. time. , excusearter for them me, fiscal second-quarter for them over at bt. devon joins us later on.
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inpassport to work -- gav joins us next. up next, passport to work. this is bloomberg. ♪
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manus: 7:18 a.m. here in the city of london. the u.k. government trump ller -- government chancellor commenting on their stake in lloyd's, selling shares is one of the top priorities. the u.k. government will use all of the proceeds from the sale of any stock in lloyd's paydown the national debt. there are calls this morning from the cbi that have -- well, they are calling for 6 billion pounds worth of infrastructure expenditure from the current
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chancellor. there are states in rbf and lloyd's. what more and when? jes staley speaking to me about it. it you never know when the end of that train is set to come. comments on the potential sale of lloyd's as one of the top priorities for this current administration. shery ahn is standing by. manus, thank you. it deutsche bank has reported an unexpected third-quarter profit of lower than estimated litigation and restructuring costs. shary: net income was 256 million euros, compared to analysts average forecast of 394 million euro loss. cuty: john cryan has jobs to set up capital buffers.
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bloomberg customers can follow all the deutsche bank news on top life. roseays has said profit 35% in the third quarter. pretax profit climbed to 800 37 million pounds as revenue from fixed income trading surged to the highest in more than two years. that may help the ceo convinced investors the advantage of keeping an investment bank after he posted lower returns that lenders of other businesses in recent years. amid lowered loss energy prices and reduce its projected investment this year's. the first of major oil companies to report earnings says the loss was $261 million. that missed estimates of a $136 million profit. shareholders of samsung electronics have elected a
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48-year-old error apparent to the board. that came as the electronics -- heir apparent to the board. electronics the giant chairs slumped. tesla jumped after hours following its profit in it eight quarters, and net income for the period was $.71 a share. an average loss of $.54 a share in a bloomberg survey. elon musk also said he expects to get through the rest of the year without raising cash, using one concern for investors as it expands production and prepares to acquire money-losing solarcity. that is your bloomberg business flash. manus. manus: shery ahn, thank you. british industry says the u.k. government should boost public investment by 6 billion pounds to 2% of gdp. this come that part of a set of recommendations. the balancedoning
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budget goal, the chancellor said there would be a splurge, most part excuse me, no splurge from this in terms of announcements. he is with us now. great to have you back with me richard. thank you for sitting and listening to jes. the cbi is asking for 6 billion pounds. how would you look at fiscal, the fiscal splurge? do you begin to invest on the fiscally senator -- fiscal expenditure? richard: central bank have been doing a lot of the heavy lifting in terms of monetary policy to low worthonomies in a environment. right now, some of that responsibility has to shift
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toward government, so what you are seeing is governments will have to evaluate infrastructure spending, where they can stimulate things. if you look at interest rates right now, that is one area they should be looking to invest. we see noises in the u.s. in terms of what hillary clinton have been saying about the central spending. in the u.k., at this stage, we are getting noises potentially. that is one area where the central bank cannot keep doing the heavy lifting. you need to see the fiscal response as well. manus: the inflation response, larry and i were chatting about it, everybody is buzzing about inflation, but apart from the u.k. where you have the 10 year expectations, they are like that. begin to, it do you think, you know what, oil is around $50. you could get a kicker in the united states of america and i should begin to think about inflation.
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richard: you are starting to see some of that feeling. you have seen a bit of a rebound if you like in oil prices and that will start as well. the u.k. as an example, what is interesting for me, after the brexit wrote, there was a big slumps inactivity. what you have seen in the consumer spending numbers, you have not seen that fall off, if you like. that should be taken as a positive. the action you have seen from central banks in particular, the bank of england, to stabilize things in terms of a rate cut and writing stimulus, i think that will help. we would like to see some more fiscal moves if you like. that would be great from our perspective. manus: i dream at night of that. i had a conversation with jes staley. you are gracious and sitting and listening to that. staley, obviously, mimicking
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that lovely resurgence in the third quarter that we saw in the u.s.. to that say to you? nadir inassed the banks? ubs, deutsche bank, etc., will give us their full-year numbers at the end of the year. have we passed the western banking? richard: they have made significant adjustments. this is to do with some pretty big headwinds when you think about in terms of where interest rates are right now and capital requirements from a regulatory perspective. banks have had to adjust. if you look at profitability, come down considerably. i think banks understand in an environment where profitability has been tough, they need to focus on cost cuts. you have seen berkeley take
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significant steps in terms of reducing their areas where they can generate decent profitability, the u.s. retail and investment bank. fixed income certainly helped. you have seen a good rebound. that has partly been a function of the volatility pattern in the assets markets. levers they can pull will help on that front. you saw provisioning coming down as well. ok up there. for banks right now, any news on that front is good news. manus: any good news will be taken by any ceo of any bank. thank you so much for joining me. ha.t is richard saldan that is it for "bloomberg daybreak: europe." you have had oil and barclays and jes staley. you can grab all of those interviews. hop on to bloomberg.com. needan get everything you
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to know. in terms of the equity market, let us have a look at futures markets. we are set for a slightly softer open in london. that is from daybreak. let us can you across to "bloomberg markets: european open," up next with guy johnson and caroline hyde. ♪
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guy: welcome to "bloomberg markets: european open." we have your first trade today. we are alongside caroline hyde. deutsche delivers. the bank posts a positive surprise. does it matter until we get the boj magic number? berkeley profit jumps on fixed income revenue.

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