francine: job cuts at hsbc. the bank said to/18% of its workforce in another attempt to revise its fortunes. cuts will be surgical and ruthless. to cut itsrning, set current goal because of the coronavirus with iphone production taking a hit. rawwarns of a hit to material demand. ♪ good morning, good afternoon, good evening.

i'm francine lacqua in london. these are your markets. 0.4%.an markets down a lot of the market put a position that the economy and a lot of the earnings would go through the coronavirus. not so after the apple news yesterday. there is more concern about the deadly coronavirus trade looking at treasuries, they are rising. americans reopening after a holiday. yesterday was president's day. jumping as much as 24% after unsuccessful bid for the small arrival. this may be the kickoff of banking consolidation in italy and then further into europe. coming up on bloomberg surveillance, our exclusive conversation with the hsbc financial officer on the banks job cuts. first word news.

viviana: hsbc is set to slash 80% of its workforce. the lender taking more than $7 billion of charges and suspending buybacks as part of a restructuring plan. plans to exit some businesses and cut costs. hsbc still hunting for a permanent chief executive. we also spoke to the lender cfo about the coronavirus outbreak. came to actively monitor the effects of the coronavirus. we will have to take some additional provisions. very much a call on how long the virus continues for. viviana: staying with the coronavirus, worldwide cases have risen above 73,000. this as japan plans to remove all passages from the diamond princess. the ship remains docked ideal,. casinos in macau have been cleared to open again on thursday. this follows an unprecedented 15

day closure for the world's biggest gambling hub. the u.k., it is lunch unprecedented attack on the eu conditions for a post-brexit trade deal. the chief negotiator warning that a that britain be backed by its rules risks undermining democracy. it highlights the split between the two sides. we end with amazon founder jeff bezos committing $10 billion to fight climate change. he has announced the bezos earth fund, his biggest ever philanthropic investment. it will begin issuing grants in the next few months. in ames as -- he says post, we can save the earth. global news 24 hours a day and on quicktake by bloomberg powered by 2700 journalists and analysts. this is bloomberg. francine: thank you. now our top story, the coronavirus has hit one of the

world's most valuable companies. apple says it will not be able to meet its revenue target for january to march quarter because of a work slowdown and lower smartphone demand. the iphone maker says it is experiencing a slow return to normal conditions than anticipated. demand ahead is been hit by store closures and reduced foot traffic. joining us, selina wang is in beijing. the first of many companies that roads have because been shut down but people don't travel to buy things. selina: that is exactly right. this news about apple is not entirely surprising given the reporting of all the supply chain disruption but it reinforces the supply and demand side for multinationals across china. even those apple's iphone manufacturing partner is located outside the center of the outbreak and restarted the process of those factories have been very slow.

on the demand side, it has been reduced for the iphones as many stores in china have been closed or operating with reduced hours and few customers. china is apple's third-largest market and has 32 stores which have been closed for much of the month. earlier this month, we heard from foxconn which makes a majority of the iphones, warning investors is a very challenging for.at hand w hand the restrictions have made it difficult for factory workers across china to return to the place of work. according to a survey by the american chamber of commerce in shanghai, 80% of u.s. factories around shanghai say they don't have enough staff to run apple capacity yet. francine: what do we know about what the virus is becoming? do we have a handle in china of the number of infections in the number of deaths? selina: we are seeing the growth

rate of cases in hubei province continue to stabilize with china reporting new cases on tuesday. that is the lowest single day figure in china for the month. there are now more than 72,000 cases total and more than 12,000 patients that have recovered and been discharged in china. state media says this is a sign that containment efforts are working. the world health organization says it is still too early to say if those reported declines are going to continue with every scenario still on the table at this point. we have seen china continue to mobilize workers across the country to help those hospitals that have been overwhelmed by the virus. more than 25,000 medical workers, including topline doctors in hospitals in beijing and hospitals have been sent to jubail province -- hubei province. just reporting moments ago the

director of a hospital in wuhan had died. according to the latest statistics, more than 1007 hundred medical workers have been infected by the coronavirus in at least six of them have died. francine: thank you so much for all of your reporting. our china correspondent in beijing. joining us is the chief global economic strategist at goldman sachs. peter, you have some great notes looking at the earnings, earnings tracker. how difficult is it to actually model what the coronavirus impact on a lot of these big companies will be? peter: it's difficult because at the core of this, we don't know how big and the shock economically will be and how long it will last. we already reduced our chinese first-quarter quarter gdp by about 6% quarter on quarter. reduced it to 4% quarter on quarter annualized. that is quite a big hit. our central assumption is that the rate of infection does peak in the first quarter. so some of the hit in the first

quarter then reverses again in the quarters that follow. so, the overall effect on global gdp is not that big, but i don't think we can underestimate the effects on companies that are affected by the supply chain effects. around a rule of thumb, a 1% change in global gdp would hit earnings, in europe, by about 10%. i think it is important to emphasize that even before the virus it's, we were looking at pretty low profit growth over the course of this year. this revenue that companies can actually get back? if you look at the hong kong protests, but either go elsewhere or wait for it to be quiet to shop again. peter: some of it is demand that will shift to other areas. it will be some rebalancing there but it is the supply chain effect that is going to be quite damaging, at least in the near

term for companies. they're making components and parts of their processes in china and the provinces around where the infection has really been hit. i think in the context of profit growth already being likely quite week this year, you could easily see one or two quarters where earnings are actually negative for some companies and maybe even for the markets as a whole. francine: it is difficult because we look back at sars as the benchmark. the chinese economy was so much smaller and the supply chains were less global. is there anything at the moment that would not be hit by the coronavirus? that the supply chains do not touch that part of the world. peter: the regions which are more isolated, but there are also parts of the market which are much more domestically driven by services and generally speaking, what we have seen since this outbreak is the more

domestic and the more defensive areas of most markets that have got relatively predictable cash flows are the areas that have performed best. i think that does make a lot of sense. we find there is a split between markets which are very exposed to china for sales or for supply chains relative to those areas which are much more domestically exposed. francine: do you think they're a lot more companies like apple that will come out? peter: we are already seeing lots of companies warning will be disruption from this. i think there will be more companies that will come out and say very similar things. i think the issue for market and investment is to really try to assess how much of that is a short-term, temporary hit that will be quickly reversed, and how much of it is likely to have a more ongoing effect for some months to come. francine: i know this is a

difficult question but i am asking you because you are good at this. if we stay at it is for another quarter, is the impact actually , the than if it becomes coronavirus spreads worse but then we go back to some normality by summer? peter: i think when we look at some of the other -- you mentioned sars. differences given the size of the chinese economy but what we have found is the markets tend to react more positively once you start to see the rate of infection peak and the derivative improves. and also as we have seen, during the stress itself, we tend to get interest rates and bond yields falling. that decline tends to last longer. it is the combination of the lower interest rates and the expectation that the rates of infection has feet that generates a recovery. pathnk that is the likely this time so long as the virus

is contained and the number of infections start to slow in the first quarter. that would be our central assumption and our hope. francine: peter oppenheimer stays with us. plenty coming up, including more on apple shares down this morning in premarket trade after the company warns about the effect of the coronavirus. plus, our conversation with the hsbc chief financial officer ewen stevenson. that's coming up next. this is bloomberg. ♪

francine: economics, finance, politics. this is bloomberg surveillance. 35,000 jobsto slash

and taking $7.3 billion of charges and exiting some business units as part of a dramatic overhaul. the lender is targeting cost reductions of $4.5 billion in europe in the u.s. and concentrating on its asia business. as the coronavirus continues to pose risk, we asked the chief financial officer about the bank's mitigations plan. there's acoronavirus, big call on how long it takes for the virus to be contained. at the moment, as you can see in the fourth quarter results, we had a very resilient performance in hong kong. profits were up 3% on the year before. but overall, we are continuing to actively monitor the impact of the coronavirus. i do think we are going to have to take some additional provisions this quarter as a result of that, but very much a call on how long the bears continues for. >> can you give us any indication of the slow down in lending, the reaction in china and hong kong in its first month

of 2020? may coronavirus come alive in terms of the actual reality for the business, for the market. at --yes, when you look across the businesses, we have had to put a lot of contingency planning along the centers. a lot of colleagues have been able to work from home. for our customers, when you look at the actual january numbers, they continue to be robust but i think we are seeing some customers obviously struggling at the moment, particularly those dependent in the retailing sector. some of the real estate sectors. anything that is dependent on tourism. so far, the credit metrics continue to be pretty robust. francine: that was the hsbc's chief financial officer ewen stevenson speaking to manus cranny. let's broaden our conversation to the wider european earnings

picture. still with us as peter oppenheimer. first of all, the earnings seem to be ok but this is before the coronavirus. do they still actually warrant these pretty lofty valuations? we are seeing record on equities. doesn't match up with the quality of earnings we are seeing? peter: the earnings season has been broadly reasonable, slightly better than expectations in europe. rather better relative to expectations in the u.s.. the u.s. has done better than europe. equity markets are at record highs and they seem to be shrugging off all of the effects of things like the coronavirus. while that may be reasonable on the basis of what we see in historic similar examples, these things have been short-lived and investors are looking through it, and also enjoying the benefits of the lower interest rates bond yields are getting, i think in the context of relatively weak earnings growth

there is probably too much complacency and we could see some negative earnings. and, the valuations are vulnerable to a setback. i don't think structurally, equities are at risk. they still offer decent risk premiums, but certainly i think we could not out some corrections, particularly if we get worse earnings numbers from the disruption we have been discussing this morning. francine: when do we go back to the kind of old-fashioned correlation between bonds and equities? peter: old-fashioned is a good way to put it because the relationship has varied over time. generally but we have found is in the period when you've got very low inflation expectations and relatively weak growth, equities tend to do better because that reflects greater confidence in growth and higher inflation expectations. i would say that in the sense if we get slightly higher bond yields, over time, equities are

likely to sustain the rally longer. in the very short-term, that actually benefit from bond yields falling only because it compensates for the short-term growth shock that investors are expecting from the effect of coronavirus itself. to me, bond yields continue to be falling is probably in the end on a great thing for equities because it is really reflected a falling big sliced -- inflation expectations. francine: quickly on the european banking industry, i know you don't want to talk individual stocks but given what we heard from hsbc, the possible consolidation among italian banks, is 20 going to be a big europe transformation for banking? peter: we are seeing a transformation and it is important the european banking sector at the heart does not have a real problem with capital. that was an issue that lasted for a very long time after the financial crisis. banks issued a huge amount of capital. now balance sheets are sustainable. some of the banks of being able

investorssh back to in the form of dividends. that is a positive. but on the other hand, we do have very weak growth in europe in terms of lending and economic activity. these flows in bond yields we have been discussing are continuing to put pressure on interest margins. i think we are out of the crisis phase. i think we are moving in a phase where we are going to see more consolidation and we don't have the structural impediments that we see for many years. i think the differences between relative winners and losers are going to become more important as we move forward and the sector as a whole is not going to be as disadvantaged as it was. francine: peter oppenheimer from goldman sachs stays with us. coming up, brexit gets frosty. her in's chief negotiator makes his case and not looking to make any friends in brussels. we will break down david frost's demands next. this is bloomberg.

♪

francine: this is bloomberg surveillance. the u.k. has launched an unprecedented attack on the eu over its terms for post-brexit trade deal. the u.k. has warned the bloc's demand that britain be bound by his rules after departure risks undermining democracy.

the dramatic intervention by david frost highlighted the gulf between the two sides. still with us, peter oppenheimer from goldman sachs. first, how do you see this panning out? will we have a trade deal by december 31? peter: this is part of the negotiating process. the u.k. are trying to make clear they are not going to accept the deal at any cost. one important principle is they have the right to the verge on some areas of regulation -- diverge on some areas of regulation in order to fulfill the hopes of the point of brexit in the first place. i think there will be the ability to get some trading deals done this year within the time limit. it could go into details of other specific parts of a trade deal to a might end up going in phases.

itre the beginning part of is the basis of the trade deal and art good. and, other more complicated issues follow. francine: what does it mean for u.k. assets? peter: u.k. assets, as we have discussed before, different things for different people. if you look at u.k. equities, they are quite global and they tend to benefit from periods where sterling weekends. we think domestically, u.k. equities in particular are quite attractive valuations and will also benefit from a decent physical -- fiscal boost. francine: thank you. we will be back with peter oppenheimer of goldman sachs. ♪ ♪ hi! we're glad you came in, what's on your mind?

can you help keep these guys protected online? easy, connect to the xfi gateway. what about internet speeds that keep up with my gaming? let's hook you up with the fastest internet from xfinity. what about wireless data options for the family? of course, you can customize and save.

can you save me from this conversation? that we can't do, but come in and see what we can do. we're here to make life simple. easy. awesome. ask. shop. discover. at your local xfinity store today. francine: job cuts at hsbc. the bank is set to slash about 15% of its workforce in another

attempt to revive its fortunes. the cfo tells us cuts will be surgical and ruthless. apple is warning the tech giant expects to miss its quarterly revenue goal because of the coronavirus. china iphone production is taking a hit. plus, bhp warns of a hit to raw material demands and prices if the virus fallout extends into april. good morning, good afternoon, good evening, everyone. depending on where you are on the world. this is "bloomberg surveillance ." we are getting data out of the u.k. a wage growth from october to december has slowed a touch. 1.299 one. also the hard data from october to december, basic wage growth went to 2.2% instead of the estimated 2.3%. -- 3.3%. 16,000 more falling than expected.

a lot of the focus especially what happened last week, the prime minister saying he no longer wanted to be part of the cabinet also means that there is a huge belief in the market we will see a trump-style stimulus package when budget day comes in the u.k. we will talk more with peter oppenheim are, but first let's get to first word news with viviana hurtado. viviana: we begin with the coronavirus outbreak, hitting apple. one of the world's most valuable companies. for this quarter, apple does not speck to meet revenue guidance. -- does not expect to meet revenue guidance. also, demand is lower. stores in china have been closed or are operating on reduced hours. to capitol hill where u.s. house speaker nancy pelosi says huawei must be prevented from: trolling -- from controlling the next generation of wireless networks. she says it is a threat to

western countries. i believe it would be like putting the state police in the pocket of every person who uses that highway. huawei has repeatedly denied allegations it represents a security risk. we end up with australia's central bank, reviewing the case for a further interest rate cut but decided against it, to -- this is according to an it's of the february for meeting. the reserve bank saying rates are likely to stay low for "an od."nded peri global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries, i'm viviana hurtado. francine: earnings 20 on higher

prices to extend bumper returns to investors. r said ad's top mine further corona outbreak would hit commodity prices. is holding up. we are shipping all of our products. prices are holding up in part because of other supply-side disruptions and we have not seen issues with receiving payments. as long as things are contained this corner, -- this quarter, we think they would hold up for this financial year. if not, would have to revise our forecast. but so far we remain confident about the outlook for the remainder of the half calendar year. mike, i want to get to iron ore, given how key it is to your business. record low as far back as 2015 where this data set again. given that almost 50% of your revenue was thanks to iron ore,

is there a concern for deterioration in pricing as well as output? so if we look at iron ore inventories in china, they are reasonable around healthy levels. there is more inventory capacity so they can absorb more inventory. at the same time there is weakness in demand in china, we have had a cyclone come through western australia, there have been disruptors elsewhere in the world. we always have to keep in mind that coronavirus is also impacting domestic supply of iron ore and domestic supply of metallurgy coal -- met allergic coal. that bhpve said actually needs more copper, more nickel as well. do you believe that you will have support for multibillion

m&a's in terms of these assets? alongside just not smaller exploration or early stage deals? my strong first preference is to secure some of these options, and keeping in mind we have some options within the existing portfolio. i first preference is to secure these options through exploration and early-stage entry. we have had some past success in that regard. it has been an area of success for our petroleum business. i would like to see that for nickel and copper as well. francine: that was mike henry, the chief executive officer of bhp. still with us, peter oppenheimer from goldman sachs. if you are a commodity producer, you have pressure from sustainability, exactly what happens in the next 15, 20 years, and you have to contend with slowing in china because of coronavirus, a pressure does the sector see?

peter: a lot. it is seen as a value sector for some time. value has been under pressure as a factor because of years of relative growth and falling interest rates, which tend to benefit growth and accomplish much more. there is a mixture here of longer-term structural issues coming from disruption, esg, and so on. and the longer term cyclical effect, shocks from the coronavirus. it is a difficult environment for cyclical parts of the market right now. francine: and of course a big presence in the u.k. peter: a very big presence. if you look at these classic deep value sectors, oil and of course banks, which we discussed a little bit, it is around 20%, 25% of the ftse index, three times more than the average across the global index, whereas the u.k. has small weight in

vast growing areas, 2% of the index. stock in that classic deep value space, which at the moment is challenged, low valuation, that we think around half of the discount of the u.k. compared to the rest of the world is a function of just francine: the sector exposure. francine:where do you see the most -- of just the sector exposure. francine: where do you see the most exposure? is it in sectors? peter: the operation spreads are wide, not as high as pure growth, which is where we have more extreme valuations, but we think trying to find areas that have some growth but have lost the highest valuations is the right place to be. particularly looking at companies that are cash generative with reasonable yield. a lot of that cuts across

industries, but we still believe defensive type growth is a better place to be then deep value, which is still being challenged by foreign bond yields -- by falling bond yields and challenges to economic growth. francine: to emerging markets -- tothe coronavirus spreads emerging markets, because the health care is more rudimentary, they will be adversely effected -- adverse affected? peter: they will. on any shocks, those will be more exposed, and the u.s. market, which is more domestic in terms of exposure, would be more defensive. but of course it does have more of these high valuations. of the technology companies have a lot of supply chain connectivity to china and that region. at the moment we don't have a very big split geographically in

our recommendations. we think the year's a isformance in the u.s. coming to maturity. but we still don't see the u.s. underperforming other markets because of its sectoral structure which we think is quite attractive. francine: are we going to see a lack of investment because of the fears out there, and how will that hit certain sectors? is there a real concern within five years having built enough of these things because chief executives were fearful? peter: it comes back to the discussion we were having about resources. as you get cutting capex, eventually if you get a stronger -- a structurally stronger growth environment, we could shorten some of these things. that creates pricing pressure, maybe even increasing inflation expectations. the thing to watch for is what would happen to long-term bond yields in that environment, bearing in mind long-term yields

are the lowest level to date in the u.k. for 300 years. at some point, if those rates start to rise, it could have a big effect on leadership rotation, but also on the valuations of all financial assets. so that is something i think we are very focused on. francine: peter, thank you very much. peter oppenheimer is chief equity global strategist at goldman sachs. hsbc is slashing about 15% of its workforce. that is europe's biggest banks. of $4.5cost cuts billion. earlier, the chief financial officer of hsbc spoke with manus cranny and nejra cehic about the bank's plans. areasare shrinking in where we have clear underperformance and a lack of long-term sustainable competitive advantage. equally, what you see is significant investment in those

parts of the business where we think we have competitive advantage and we can grow. i think we are excellently doing both of those things. nejra: it definitely was an interesting comment from one of the shareholders that laid the options for hsbc is fairly binary. what you're saying is that you're kind of balancing those two sides of the coin. are you happy that you are getting the balance right from those binary options? think this is the right thing for the bank to do, the right plan for now. are looking to invest $100 billion of risk-weighted assets, around $14 billion to 15 -- 215 billions of billion,- to $15 coupled with a cost reduction program, organizational simplification to allow us to speed up the pace of execution.

we think it is a great plan. manus: picking up on risk-weighted assets, i could see that you are at a hunger for yield. risk-weighted assets, a little more complexion on this before we go. i'm surprised -- unsurprisingly, it is parts of the business, the market business and global banking and markets, we are tending to exert focused customers in europe and the u.s. on the global banking side come and where going to exit international customers not --ucing acceptable returns not producing acceptable returns. so i think we will be surgical and ruthless in targeting those parts of the business where we are not generating acceptable returns. we will reinvest in parts of the business where we will see much better returns. nejra: on the u.s. business, characterize for us what that is

going to look like. we know the numbers, but what exactly are you trying to achieve? things.o on the retail side, we are getting back to where we think we have core competitive sametages instead of the population in the u.s. and other customers. predominantly focused on the is coast and building presence on the west coast. secondly, on the global market side, reducing operations in the u.s. quite materially, looking to concentrate more on that -- more of that business into london. francine: that was hsbc chief financial officer ewen stephenson, speaking to us exclusively. we are breaking into a conference call after they did the chiefal, or

executive sake the execution risk of the upi deal is very low. he also sees synergy estimates on a possible upi deal. gaining 22%.pi we will have plenty more on the m&a in the italian banking landscape. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get back to the top story. the coronavirus outbreak is having an impact on one of the world's most valuable companies. apple does not expect to meet revenue violence for the march

quarter, demand for iphones being reduced in china because stores are operating at reduced hours. more than 16% of revenue came from greater china last year. let's get straight to the partner at -- what is the biggest concern for china? is that the supply chain or loss of revenue coming from chinese stores and chinese shoppers? >> for apple it sounds like it is more of the latter. the slowdown in expectations that they reported. for most people i talked to on the ground, it is the worry that the supply chains are slowly dwindling in china. factory workers are not going to stores but also not going to factories, which means people not producing materials and goods for the rest of the world economy. i feel in the next 30 days we will start feeling a pinch. francine: are there more tech companies with similar warnings because of the virus or

semiconductors, or is it other components? hussein: it is not really tech companies because that does not require manufacturing. it is products and services that require manufacturing in china. while china is a powerhouse of the global economy, it is not the powerhouse of the semiconductor industry. most of that takes place in taiwan, not in china. taiwan is probably good for now, but i would imagine anyone manufacturing components, whether metals or plastics, particularly plastics, that inventory is going to dwindle in china. in 30 days, we will not have the parts for these products, which means people will start reporting slowdowns of some kind. whatine: if you look at investors are worried about in apple, if they did not provide any new forecast, is that worse than providing much lower forecasts? is this the right thing to do? think the challenge with the virus is none of us really know when it will be contained and when things will

settle down. the only forecast you would make is probably incorrect, and the worst thing to do is have revision after revision downwards. if this keeps going the way it is going and the infection rate is the same, and we do not have proper news out of china, we do not know how long china is going to be shut down. francine: we don't know how long it will be shut down, and we also don't know if they will delay some of the launches apple will -- was meant to do this spring. do you think it will? hussein: what is telling about the apple expectation call is that they only report a slowdown on the demand side, which is that the stores are closing down they do not report much on the supply side. has tentacles all over china, but it is not necessarily as dependent on china as other folks are. it is the smaller companies that i think are much more sensitive toward a slowdown. if you are outsourcing manufacturing to china and the chinese factory you are working

with has no workers turn up, over time you are not going to be able to produce your products and service. the longer this goes, the more sense that -- i would expect there will be some kind of delay in product launches at the back end of this year. francine: what is the company that will be most affected by this? i know we were talking about software companies in general, but if you look at what the apple warning is, it certainly won't be the last. are there any other companies that need to come out with the same? hussein: a large part of the american economy relies on chinese manufacturing, and almost everything from retail oriented stores producing clothing and tailoring in china to folks producing plastic components that go into other pieces. the really big giants have distributed supply chains and can weather storms.

be an interesting exercise to go through the list of companies to see how much exposure they have with china on the manufacturing side. china is such a powerhouse on that side, when it shuts down, which is basically what is happening right now, the world is affected. francine: thank you so much, from hochstein ventures, talking to us about apple. hoxton ventures. this is bloomberg. ♪

francine: economics finance, politics. this is "bloomberg surveillance ." jeff bezos has created an economic climate fun. for more, dani burger. dani: the world's richest person committed $10 billion, under 8% of his total net worth, called the bezos earth fund. it will be issuing grants in a few months. its aim, as he puts it, is to

save the earth. for years the amazon founder has been under pressure to act. he has not had major charitable products. then there is the company's environmental impact. as it rushes to deliver products cheaply and quickly. the company last year responded, committing to an 80% renewable energy target by 2024. but will that, combined with the latest announcement of the bezos earth fund, enough to squelch criticism? a worker from amazon group says it applauds the move but it is francine:ping up the -- francine: remember, last week on thursday, it was quite a busy reshufflee we saw a from boris johnson, that became

bigger when the chancellor at the time decided he would step down because he could no longer be part of the team. street changesng here, intervening too much in the budget. since then there has been a big put in the market. it will bring that on-screen. in a second for you. but basically there has been a big put for the pound, and u.k. assets that we are going to get some kind of trump-style massive stimulus plan, and then there were concerns that actually this would be delayed. the current chancellor confirming that the budget will now be on march 11. we will have plenty more on the pound, at 29.94. we will have plenty more on our exclusive interviews, hsbc, also bhp. this is bloomberg. ♪

francine: job cuts at hsbc.

the bank is set to slash about 15% of its workforce in another attempt to revive its fortunes. the chief financial officer tells us cuts will be surgical and ruthless. apple is warning the tech giant expects to miss its quarterly revenue goal because of the coronavirus. china iphone production is taking a hit. plus, bhp warns of a hit to raw material demands and prices if the virus fallout extends into april. well, good morning, good afternoon, good evening, everyone. this is "bloomberg surveillance ." i'm francine lacqua in london. tom keene is in new york. i think apple is huge just because we could see many more companies coming out with similar concerns, and therefore say we cannot forecast what happens in the future, and this is something that investors did not like. tom: i agree, francine. there are lots of disparate stories today. what is so important about story c, is the, story

market showing substantial bond 2%lds considerably below the level. aancine: we were expecting 21.5 figure, so that is actually huge. i don't know whether it is moving euros. a 21.5 figure,ng and actually it is down to 8.7. is future expectations, this for the month of february. i imagine a lot of this will be the threat of tariffs from the trump administration. but i imagine most of it is the coronavirus. tom: bring up the chart right now. this goes back to 2015. this is how we do it right now. i am making the chart for you on air. usually we do this behind secret closed doors, where viviana hurtado has the lock and key for this.

there is a long-term regression of german expectation slowdown, and on the right side you can see the big rebound, some of the optimism, and out of late-summer, and then we rolled over with this new statistic. francine: we have a lot more to focus on when it comes to strength or weakness of the european and german economy. let's get to first word news in new york city with viviana hurtado. viviana: very cool chart to see how that is made, live on air. we go forward with first word news. hsbc planning a major restructuring. it will be to tens of thousands of job cuts. -- sincecial crisis the financial crisis, it is the latest attempt at the british bank to retrieve fortunes. u.s. assets linking to trade operations where they are going to be roughly cut in half and interim ceo noel quinn telling bloomberg 35,000 jobs may be eliminated or that is 15% of the total. now to china. the country says coronavirus has

infected more than 72,000 people. the death toll is approaching 1900. one of those fatalities, a senior doctor at a hospital in wuhan, the epicenter of the viral out rate. the u.k. and south korea now preparing to evacuate their citizens from the cruise ship at -- staying with the coronavirus, the viral outbreak having an impact on one of the world's most valuable companies. apple does not expect to meet revenue guidance for the march quarter. it says demand for iphones has been reduced in china because stores have been closed and are operating with reduced hours. chinese factories that assemble the device are ramping up production more slowly than expected. global news 24 hours a day, on air and at quicktake by bloomberg, powered by more than 2700 journalists and analysts in i'm than 120 countries, viviana hurtado. this is bloomberg. francine? tom? tom: very good.

let me do a data check right now. equities, bonds, currencies, commodities, lots to talk about here. markets on the move. futures -14, down to -18. nowhere near 1.07, but i'm watching that near -- next screen. the vix, some of that is a holiday yesterday in america. there is the 30-year bond i mentioned. 2%, down to 1.98. that should be read on the screen. be r on theld screen. isi would note renminbi seven as a weaker renminbi. francine: let's bring you some news across the bloomberg terminal. michael bloomberg is appearing to qualify for presidential rolee, according to an npr -- npr poll.

the amount of people that support you, you need that to get into the debate. but we need to bring this to your attention to her michael bloomberg is also majority owner and founder of bloomberg lp, and therefore bloomberg news. tom: for our international audience, the debate is a venue that could be not only entertainment that could have some uncertainty to it. i would suggest that there is a wide part of the political already and's -- of the political audience that wants to see how mayor bloomberg acts within a debate. that is is something that has not happened before, so to have a first debate where he is in the line of fire with senator sanders, senator warren, and the others that will be more than interesting. francine: we will be watching you any breaking news and we will be watching the presidential debate. that is coming up. that was breaking news and the last couple of minutes. let me go to my data check. i have a couple of things that i think you will like. i am not only looking at

treasuries -- i hope you had a nice day off, tom. tom: no. francine: stocks in europe are falling. quarterly sales missed from apple, spooking investors who with the impact from coronavirus. if you look at ubi, there you go. ofning from 22% because buying this. a lot of people are saying this is the kind of kickstart of the italian banking consolidation that can become european banking consolidation. tom: let's go to apple and have a discussion. poll and mr.arist sanders had this morning. ofg -- neil cap ling is out switzerland and london. piece. a more broad the number one question here, and i thought shannon cross was

really smart on this from the sell side, if there is a demand destruction in china, they make it up when the virus is done to . do you buy that line? >> unfortunately, not. you can see consumer conference in terms of the call for consumers, what they have. the risk is that they giro for the supply shock and the demand shock more so than people realize. apple is the biggest acquirer of semi conductors globally. they spend $40 billion a year. that is the risk to their entire supply chain. we have to remember so far in the earnings season, 138 companies in the s&p 500 have discussed the potential impact with coronavirus. saidlso, only 34% have that there is an impact to that guidance the rest of the companies still do not know what

that impact could be. tom: we see the uncertainty on this tuesday morning. is apple over owned? a really interesting history here from switzerland. from where you sit, is apple over or under owned? apple is extremely well owned partly because of the etf from passive funds have a high weighting in apple. many are underweight because they cannot have the same exposure given the high weighting in apple in the index. however, what often happens to buythe active -- they will stock in supply chain companies, so they will get synthetic apple exposure that often can be a high proportion of portfolios. that is why i see, if you see apple weakness, you will probably see exacerbated weakness in the supply chain companies because some has 80%

revenue exposure to apple. a sense ofive me what apple will do with some of the launches. unveil a expected to cheaper iphone in the spring. is that delayed come and how much of an impact will that have? very i think that is a good question. we all expected a march launch. the 5g iphone is expected for september. remember that apple are very careful to make sure that they have real big oversight on their supply chain. business 50 executives class from san francisco to china on every single united for example, sfo, until recently. you do not really here recalls of millions of iphones in the way you hear of millions of recalls in autos. there is a risk that they push out launches both on supply

constraint for components and also not being able to qualify the end devices when they are ready. inncine: let me also bring william, barclays chief investment officer. how much supply chain will we see, and will there be a lot more companies that are saying they cannot. anything? william: a pretty interesting question. we are fumbling around in the dark more than usual with regards to the outlook for the economy. we are reliant on these high-frequency data coming out of china come everything from air quality to hotel, all the sort of stuff. apple confirms that you have seen a sharp fall, recent stabilization in q1 activity. know is the degree to which it bounces back. tom: while we have you on the phone, it is so important to

look at what is going to happen to banking over the next six months or even a year. hsbc out with 15%, rightsizing over three years as well. , the is this something kind of rightsizing we will see across the entire banking business? certainly possible. for one thing, both the rise of automation and technology and ai, there are some talks that you are able to automate. so there are some things that are still very heavy in terms of employee count, so i think much of the growth in employees in recent years has been in compliance functions, many of which can now be automated. so i do think this is a specific event and could be a wider industry issue. william hobbs, what are you doing this morning? apple down 4%, i thought it would be down more, to be honest. what is the mindset here, given

these challenges of global slowdown, given where yields are right now, given gold really beginning to threaten 1600? william: you mentioned at the top of the show the number of stories this morning, things analysts have to keep an eye on, i guess. --king consolidation that will make the european market look more interesting. there were very patient investors waiting for this moment in european banks peered for us, the big story that stands out is high yields. they still look very low relative to an even reasonable assessment, with a one-year, to your outlook for the global economy. safety.ds will -- for in stock land, you have not really seen so much of that. it seems like stocks so far have been willing to look through this kind of economic with most economists turning around and saying it is time to make up some of that. there is a bit of a disagreement

between stock land and bond land, and we are leaning against that high quality corners of the complex and the multi-asset class. francine: thank you both. neil campling and william hobbs. he stays with us. we are getting breaking news out za,and taser -- out of ente saying he has positive initial feedback on ubi. offering -- launching one of the biggest european a 4.9 billionwith euro bid for the smaller ubi. that was this morning and now we are going through the conference call that mr. mussina is giving to analysts at the moment. tom: very good. mr. bloomberg will, of course, be in the next debate. but much more importantly, npr saying there is a marist poll

out with bernie sanders, the senator from vermont, with a 9% newshourhe npr pbs pole. bernie sanders up 31%. the surprise is number two, and there is this host of candidates, and we have seen some of them challenged. mr. bloomberg now, a new number i have seen, 19%. that is not the 15% we have seen in recent days. we will have much more on that. i should point out that mr. bloomberg is a founder of bloomberg lp, television and radio operation as well. coming up, leslie vinjamuri of chatham house. this is bloomberg. good morning. ♪

tom: good morning, everyone. "bloomberg surveillance." francine lacqua in london, and shocks over hsbc cuts. 35,000 bodies, 15% of their workforce. really extraordinary. tom.ine: i'm not in shock, a lot of this was expected. tom: francine is right about the lack of shock. right now we need to look at the politics. on wednesday there will be a debate at the paris theater in vegas. las vegas a little different than the rest of america. mr. bloomberghat will appear to qualify for the debate. also, marist, along with npr, put out a poll showed mr. sanders increasing 9% in the polls. i don't have that statistic in front of me, but it is a very large leak for the senator from vermont. -- a large lead for the senator

from vermont. has headed thei u.s. and america program at chatham house as well. what will you look for in the debate on wednesday? if sanders runs away from the mainstream, what will you listen for? leslie: we are all looking for the same thing, which is who is the other candidate going to be from the moderate wing of the democratic party? in some ways, it is less interesting in terms of game changing what sanders has to say, because he is clearly taking the lead. but despite the poll you just noted, he has seemingly been hitting a feeling of 26%. sustainablyt push above that, it becomes more important to see who can capture the moderate side, and obviously all eyes -- if bloomberg does debate, we will all be watching

to see how that turns out. tom: u.s. was cleaned a couple times in london that there were two presidential birthdays, the 12th and the 22nd, even though we have a manufactured president's holiday, which we know is fiction. i hope you will explain that as well. what does -- what this comes down to is our process, and the process now is in search of a middle ground democratic party candidate. are we being underserved because others are not dropping out of the race, or does that wait for after nevada whereafter south carolina? leslie: i think really a lot is going to come down to super tuesday, and the question there is, will the moderate wing of the democratic party continue to split the vote? it depends on who you are. if you are michael bloomberg, the fact that the moderates are splitting the vote, that there is not a clear alternative to sanders, is a very good thing, which is of course why waiting until super tuesday, when things

really do matter, is significant. i think we are looking at not knowing a lot until potentially of march, march 18. arguably, having so many candidates in the race has been a game changer. we don't know a lot on the back of iowa and new hampshire. francine: we don't know a lot because lots of people are undecided. do debates make or break candidates? leslie: they matter. i don't think they have made or broken candidates yet. again, michael bloomberg's entry into the debate is significant. people have not been watching him debate. they do not know what he is going to say and they have not seen him next to the alternatives. i think this will be a significant moment. francine: the democratic party has to choose whether they go for centrist or someone who is not a centrist, who is more left wing. do we know if it will be tactical voting of people who

beatwant to try to be ban president trump? is it a centrist or left wing? an incrediblys important question. whether or not democrats will ultimately unite about the candidate becomes it becomes more important them to defeat president trump. what we hear out of the african-american punitive -- african-american community of voters is that it is incredibly significant, the candidate that can beat the sitting president. but it is not so much that people are undecided. thee who are progressive in democratic party are pretty committed. the question is what they will do if and when it seems to me likely that a moderate candidate will take center stage. tom: leslie vinjamuri, thank you so much. with chatham house this morning. later today, a conversation with someone on asset management, and the backdrop here is franklin templeton, widely rumored to be

taking out legg mason. that happened over the monday heaven tuesday, franklin templeton may be going after a value manager from baltimore. martin gilbert. stay with us. this is bloomberg. ♪

tom: a little better in the last hour, francine lacqua in london, tom keene in new york. hsbc down 6%. a killer note from bloomberg

intelligence. half of all of this is in the price and earnings gaming right now, but this is a shock to the system for hsbc. quickly, bouncing, negative 4%, -5%. nice chart. with nvidia in there as well. francine: have big news out of the european banking sector, especially this is one of the first ones of consolidation. taserief executive of in -- launching one of the biggest european banking deals, and unsolicited bid. the chief executive saying he has no intention at the moment to raise the price, but he has good ecb feedback. this is bloomberg. ♪

"surveillance," exceptionally busy corporate news and difficult news,

pullback in expectations out of germany. here is viviana hurtado. viviana: a major pullback by hsbc. and plan to cut 35,000 jobs will scale back operations at underperforming units in the u.s. and europe. hsbc plans to speed up investment in asia where it gets the bulk of its profit. they will take a $7.3 billion charge. the board will decide if the moves are enough for the interim ceo to have the job permanently. the u.k. is making it clear that negotiations with the e.u. will not be easy, rejecting their demand britain be bound by its rules. have the the u.k. must ability to set its own laws. america filingof for bankruptcy, trying to protect itself for the rising

claims tied to sexual abuse of children. it is setting up a trust fund. turned a claims they blind eye to allegations of sexual assault. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: here is what you should be looking at for this week. the u.s. democratic candidates will be going head2head in las vegas tomorrow. head toy, iranians will the polls. about bothus to talk stories, leslie vinjamuri of chatham house and william hobbs. what do americans vote on? we have been focusing on the democratic debate which is

tomorrow night, but if i have a strong economy, if the u.s. economy keeps creating jobs, do i vote for the person who has been charged? leslie: it depends on who the alternative is. if the americans have confidence they will build a strong economy and demos -- demonstrate confidence in that way, it will be a different game than if you do not have confidence. in the midterm election, the economy was doing very well and the republican party did not do as well as one would expect given that starting point. it depends on who they feel represents them on any number of dimensions and culture. it is a very complex, divided, polarized political system right now. it is not simply about the economy. it is more complicated.

francine: what kind of economy is the u.s. seeing right now? are they creating quality jobs? william: let's exclude the chunk taken out of gdp by boeing, if you look at it, you have lots going in the administration. you have wages rising across all income categories, record low -- sliver, so if there is a of the electorate that swings with the economy, i think they are the same and that will be helpful to the current administration. tom: diving into the poll numbers, there is this candidate and that candidate and below them is the soup of candidates in nevada that is different from south carolina. it makes up some 20% of the polling population. is that too many candidates or is this normal?

leslie: it is too many candidates, but we have a long way to go and super tuesday is not until march 3 114 states have their primaries, and -- when 14 states have their primaries, and there is more to come. thes affecting things on democratic side. to beogressive side seems consolidating behind bernie sanders, but never read the results off of one pole and what we know from the last election is do not read the results from polls at all. tom: the paris theater, i have been there, i believe it is a union shop. who has the union vote in nevada? leslie: good question, and we have to wait and see. what we want to watch in nevada is who is going to take that

progressive, moderate side of the vote, and who will fall off the charts, who will make it hard for themselves in terms of the momentum going into south carolina, going into super tuesday. francine: how do you modeled this for the markets? william: the main thing for us, the appropriate posture for investors is humility. we have a long way to go until november and there is always a long way from campaign trails rhetoric to actionable policy. the whole point of the u.s. constitution makes it difficult. to a certain extent, i would be wary of the caricature of the u.s. global economy as a marionette to the white house. play,are many forces that and that is the thing to remember. the president is powerful but not all-powerful. francine: is that true?

it is true, america is a democracy. institutions still matter, but in relative terms, the executive power, the president's power has increased before president trump and increased both -- under president trump, given trade and national security. the president has a lot of authority and congress has not pushed back with what is happening with the republican party. tom: that is right where i wanted to go. national -- former duke.al security was at you look at john bolton and the democrats in the house i congress, do they want to stir the waters now, or do you say with nevada and south carolina

and super tuesday, these distractions don't help anyone? leslie: the democrats want to hold the president to account on any number of things, whether it is domestic or foreign policy. john bolton, it is interesting. he has a speaking circuit. he goes to vanderbilt next and he is beginning to hint at what is in the book. it does not matter. the republican party is not going to split with this president because the costs are clearly so high. ,hat we are hearing constituents support the president more than they support their individual senators, so the political consequences are very high. much,eslie, thank you so william hobbs with us of barclays. mr. bloomberg is the founder of bloomberg lp, as he moves to the

nevada debate as well. this is really important. our jonathan tyce has this movable feast and revenue is the great -- immovable feast and revenue is the great -- >> we will be surgical and ruthless and terms of targeting those parts of the business. ♪

francine: this is bloomberg "surveillance," tom and francine from london and new york. 15% of itsd with cost cuts of $4.5 billion and facing

challenges of the coronavirus and protests in hong kong. the model of hsbc is in question. spoke to us about the plans. >> we are shrinking in areas where we have clear underperformance and long-term sustained competitive advantage. equally what you see is investment in parts of the business where we have competitive advantage and can grow. we are doing both of those things. interestings an comment from one of the shareholders that laid the options as fairly binary. you are saying you are balancing those two sides of the coin. are you happy you are getting the balance right from those binary options? >> we think this is the right thing for the bank to do, the

right plan for now. todefinitely are looking invest one hundred billion dollars of risk-weighted assets, around 40 to $50 billion of capital in parts of the business that are performing well, particularly asia. we think this is the right balance but it is coupled with a implication -- simplification. we think it is a great plan. manus: on the risk-weighted assets, you are at the moment of leaning into not bad -- you have a little bit more complexion on them before we go? unsurprisingly, it is parts of the business, the markets business and global banking and markets, we are intending to exit a lot of domestically focused customers

in the u.s. and europe on the global banking side and exit international customers not producing acceptable returns. i think we will be quite surgical and ruthless in terms of targeting those parts of the business where we are not generating acceptable returns. we will take those risk-weighted assets and reinvest them where we can see better terms. the u.s. business, characterize what that will look like. we know the numbers, but what are you trying to achieve. -- what are you trying to achieve? retail side, we are getting back to you where we have core competitive advantages and servicing. what you will see is a 30% reduction in the network predominantly focused on the east coast and building on the west coast. secondly, on the global market

side, reducing operations in the u.s. materially and looking to concentrate more of that business into london. hsbc's chieft was financial officer speaking to us. paulo launched a bid to buy european banca. fernando, in milan is we have a lot to talk about in hsbc but we have been waiting for consolidation in italian banks and spreading. is enteza the start of this? fernando: this is surprising in many ways. it was a surprise that this bead was launched and if was -- bid was launched, and if there was

that would have been with some of the weaker banks that are still around in italy, starting with monte dei paschi and the smaller banks in the past -- south. of two of the strongest banks in italy is a surprise and leads many to wonder what would happen to the on lucky banks which are still .round, who will buy them tom: does this murder -- francine: does this merger make sense and is bigger better? ferdinande: you have to buy somebody from intesa's point of view, you do not have to go through the problems. they bought a bank even though they got a generous gift from the government. ise would wonder why intesa

not looking abroad. this is a large bank in italy and may not want to double down on a country that has significant growth problems. one criticism is that the bank is doubling down on the market, that is not really appealing at the moment. tom: on hsbc, it is essentially an asian bank based in london and has spent 10, 20, 30 years trying to be america and europe. is this finally where hsbc goes to the cash cow hong kong and forgets about europe, italy, and america? ferdinando: that seems to be the strategy, but the timing is incredibly unfortunate. for many as china and hong kong would have looked like exactly the type of places where you would expect growth, but with

the slowdown in the country, with the virus, we don't know if it will be temporary or permanent, and we know the troubles going on in hong kong over the last few months, this is incredibly unfortunate timing for this shift. that is really the strategy, but the timing looks awkward. tom: i want to put up the headline that just came out, the actual bloomberg headline that comes off the terminal. this is a wonderful headline -- hsbc france may be sold for close to zero. this really goes to the heart of the matter. within the announcement that you saw today, is this finally the hong kong and shanghai bank getting religion? ferdinando: i think so, and it tells a lot about how difficult banking has been across the world, especially europe.

, there arebranches often negative prices. this is a business which is going through a difficult phase because of what is happening to interest rates and technology and the habits of consumers. banks have to navigate this difficult environment. toc has decided to retreat where the prophets are right now. weref the profits generated in hong kong in the last quarter, so with a ceo in a difficult position because he is an entering ceo and what we are seeing in asia, it is not going to be easy. tom: for those of you with a terminal, jonathan tyce and his team are first rate today on hsbc. it is going to be -- it is always a big deal, walmart fourth-quarter results.

it is an ever more bigger deal today as we look at walmart and amazon, and walmart and reporting they may have on china as well. please stay with us. this is bloomberg. ♪

♪ are watching bloomberg "surveillance." the next six weeks may be crucial for the impassive corrosive -- coronavirus on commodities according to the world's largest miner. >> we are shipping our products and prices have held up. we have not seen issues with receiving payments. we think they will hold up to the remainder of the financial year. if not, we will have to revise our forecast, but so far we remain reasonably confident about the outcome of the half calendar year. posting earnings that rose 29%. franklin resources to buy legg mason.

the owner of franklin templeton could announce the deal today. 28% over legg mason at friday's closing price. they have been hurt by investors shifting assets into low-cost index funds. that is your bloomberg business flash. franklin glad you put templeton and legg mason there. william hobbs is very much attuned to what we see from the consumer. the consumer wants index funds. any change in sight? william: now is probably one of the best times to be an investor. the cost of assembling a diversified pool of stocks, assembling and maintaining a diversified pool of stocks is

lower than it has ever been. benchmarking so we can pick out active managers for the genuine stock selection offer, not just styles thing and making more money than they should have. you have the choice and ability not just to go active, but you can do both. tom: the active defends his it has been truly a great old market. -- bull market. we could discuss why that is for years. bull market index funds seem to do better or active does worse? leslie: it -- william: it has not been a great period for active. it could be the idea of too many chasing a finite pool of inefficiency. less efficient now and we have an understanding of

the behavioral shortcomings of investors. this gives us plenty to go for in going active. it has been a great period for the basic 60/40 portfolio. if you have not sat and done taa and active, you have done very well. that is not effective. what we would say is the most important thing, you have the ability to use both with discretion. francine: when you look at equities, are they overvalued? we see the virus and other things. william: the valuation debate has dogged this whole cycle. , the realityfind is it is subtly different every single time. the problem with comparing today do yesteryears, the beginning of the s&p 12 railroad companies.

how do i viably compare those or the pre-roi -- prewar oil stocks with today's tech companies? you can-- francine: compare it to what we saw 10 years ago. william: even there the economic context is different and it is always evolving. tech is less risky. they are funding out of free cash flow, how do you compare those to yesteryear? i would argue that looking at the risk premium, you still have a bit to go. francine: william hobbs with barclays. we will be with michael holland as we talk about your market and politics.

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hsbc will downsize. costs, 15% will be fired. no word if the chief executive will be shown the door. the bank will invest in asia. china adapts to the slowdown. gold to new highs, threatening $1600 an ounce. how about those china economics for apple? disrupted supply, they have delayed demand. all of tech deals with the virus. this is bloomberg "surveillance." i am looking at walmart right now just coming out. i am reading it as you are reading it, they come out a little bit light. francine: what we are expecting or hoping to come out more as their supply chain, given a lot of the things they sell comes from asia.

i think there will be extra investor attention to anything they say because it is a virus. this is not like apple where they came out saying they cannot forecast the effect of the coronavirus on their supply chain, but this is walmart, earnings-per-share probably not affected by the virus but we want to know how they see going forward. 2%, notanic sales sub that good. total revenue, one point 9% excluding currency. -- 1.9%. their e-commerce sales grew by 37%. this has been one of the shining moments, but we will see how they flesh that out and competition with amazon. i want to be clear.

smallestoes one of the press releases out there. hollando when michael first looks at walmart it was on a three by five card. walmart out with a limited release, there language is terse, and the price coming down. let's get some color and we can do that -- this is a perfect guest as everybody re-calibrates on the presidents birthday. it is february 12 and february 22, not this complete fiction of monday. we have a little bit to talk about, the collapse of banking, hsbc, apple as well, but let's talk about walmart. do you have shares? michael: for a long time. tom: what is the dynamic? story, at the retail what is the dynamic on walmart that allows you to be a long-term investor?

michael: they have been a survivor in a business atmosphere where many of their competition are dead. they have been able to struggle forward in the e-commerce business fairly brilliantly. worry about the mammoth size of walmart. this is the largest destroyer. they have the largest private employment in the world. tom: 2.2 million employees. michael: what they do matters in a lot of different ways and they have been able to pull it off. the e-commerce thing, they are getting it right. tom: hsbc, they are making a ton of money and profits, hemorrhaging money. do you have a feel for the profit mix of walmart, the traditional store profit through the income statement and this new e-commerce thing? michael: the numbers for the new as fastng are running

as they can. overall for them to survive in the environment, they have done a masterful job at managing a huge balance sheet. it is worth watching what they do in e-commerce, because you look at amazon and walmart together. the consumer is benefited by this. it is a huge deal what they did. francine: i don't know walmart very well. i tried to buy kids clothes and the shipping was like 190 nine pounds for something that cost three pounds. chain bethe supply affected by the coronavirus? michael: the best guess for their exposure is in the teens, mid to high teens for exposure for sales and things. it is meaningful. the numbers will be coming out later today.

francine: i know you are also an investor in apple. how shocked are you by the news from apple? we knew they would be affected but they say they cannot forecast what can happen. michael: because no one can forecast what will happen with the coronavirus, the shutdown, we are getting a surprise this morning from apple, they have shut down the country basically, a totalitarian state. close down your factories, close down your shops. you have totally unpredictable things so if you are managing a business, you and i would say the same thing, apple is saying we cannot predict the near term. tom: this is the gift michael holland lives for. are you going to go back to the office and load the boat on apple? this is the holland method,

isn't it? michael: it is coming off an all-time high. -3%,-4%, now i think it is that is opportunistic. michael: it goes down a lot more. my stock raises, if you have owned it a long time, this is pretty low, so giving back a little bit is ok. if it went down a tremendous amount, you and i talked years ago. it was stupid cheap and now it is not stupid cheap anymore. tom: i want to bring up a chart to go to richard windsor. we are making it up as we go. this is apple. boat in marchhe of 2019 -- this is the gloom at the end of 2018 -- and this year shows you the surge of apple. ensy weensyte

amounts. that is a good way to bring in richard windsor. more going to be technology that ropes in? do you assume a hundred companies out of china will do what apple did overnight? richard: possibly more than just the technology sector, there will be a few exceptions like facebook and google that do not make anything physical or have else in china, but anybody will have a difficult first quarter. the lack of visibility is something you do not want to participate in. tom: what have you observed in dubai? almost to way station the 15th century. the -- you observe from from dubai off the slowdown? richard: i am based in abu

dhabi. the answer is at the moment, absolutely nothing has changed. whatever is coming from china has still been able to ship here from inventory. there is very little manufacturing in this country, so when it comes to parts and inventory, you will not see the impact here. the biggest impact has been in korea where automakers cannot get the parts and have to close down. francine: what is the biggest problem for apple? the supply chain is being impacted. we thought they would launch the cheaper iphone in spring. that launch is now under consideration because i guess they are lacking the parts, but the chinese are not spending. out of these problems, what will hurt them the most? does demand from chinese consumers come back if the virus tails off? richard: i think the biggest

problem is going to be the china demand. when they are able to get the parts again, the chances are the pent-up demand across the rest of the world will come back. people will delay their upgrade for a while because they cannot get their device. how does the overall demand come back into the chinese market? do people feel more nervous, less inclined to spend because of other problems that may occur? for apple, that is the biggest problem at the moment. the numbers are all over the place. francine: if you look at the buy chains, have they not already moved from china to vietnam and neighboring company any -- countries because of the trade war? richard: a little bit yes, but in reality, no. it is easy to say, we will uproot our supply chain and move it to vietnam. it takes a little bit longer to

do that and the trade war has only been going on for about 18 months. whatever transition has been made is only slight at the moment. tom: richard windsor with us from abu dhabi from radio free mobile. we will continue with mr. holland here. right now in new york city with our first word news. viviana: hsbc is planning a major restructuring that will lead to tens of thousands of job cuts. itsbritish bank weighed attempt to revise its fortune. it's retail network will be scaled back by about one third. u.s. operations will be roughly cut in half. 35,000 jobs may be eliminated, 30% of the total. the nation now says the coronavirus has infected more

than 72,000 people with the death toll approaching 1900. one of the fatalities a senior doctor at a hospital in wuhan. u.s. areea and the planning to evacuate from the cruise ship. time, michael bloomberg appears to have qualified to take part in a presidential debate. in the newest npr paul, mr. bloomberg reached 19% support. that meets the dnc national threshold. esther bloomberg is the founder and majority owner of bloomberg lp, parent of bloomberg news. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. hurtado.ana this is bloomberg. tom: thank you so much. we will come back, lots in the

markets and we will look at hsbc, the global story of the day. we will continue our work on their rolla g and microbiology andhe urology -- virology microbiology. this is bloomberg. ♪

"surveillance," francine the claw in london shocked by the -- francine lacqua in london shocked by the hsbc cuts, i am tom keene in new york. ,oining us now is william lee chief economist of the milk on -- milken institute and a lead

expert on hong kong. he joins us with michael holland. give us the bill lee update on what has transpired over the weekend. do you sense a leveling in the virus crisis or is it still highly ambiguous? william: quite the opposite. the apple announcement is a great example of law and operation. this is the example where the markets have been so complacent about the v-shaped recovery and all the epidemiologists have been warning us that things are worse than we think. not bepolicy will offset. if you are locked up at home and pop tax rebates and fiscal spending into the economy, they will spend it. this is acceptable where the downside risk is increasing. tom: you are expert on the

institutions involved. thatu have a confidence there can be institutions to the rescue? william: the institutions that lack credibility are causing the rising doubt. when they tell us the virus is getting better, the growth rate is diminishing and yet people are locked out -- up and not going to work so that the lies that announcement. how the chinese are making their numbers up is calling into projections analysts are using for the smart v-shaped recovery everyone is expecting. francine: how difficult is it to measure? we tried to measure with goldman sachs in the earlier hours that if there is 1% of gdp growth it has 10% impact on earnings growth. is there a model that tells us how many infected people and what kind of impact on global growth that is, or does it

depend -- if we stay at this level for a long time, is it worse if it gets worse but for a shorter time? william: the supply sides are most well lee lacking that there is a huge margin of error. bottlenecks are and how long it takes for people to get back to work, 80% of factories are working at less than 50% capacity which tells us a lot about how long it will take to restore workers to be able to go back to work. without workers going back to work, you will not have the demand. the modeling of this episode will have to focus on the supply side and how labor participation has fallen off the cliff. francine: let's bring michael holland into the conversation. we were talking about apple and the secondary effects. what does this mean for the chinese economy?

do the authorities have the with place to deal everything coming? michael: i think they are making it up as they go along. since nobody knows whether the v-shaped as bill referred to will be affected, whether it will be a big u or a hockey stick, what is going on at the end of the world -- what is going on around the world's people are lining up at institutions on the financial side and fiscal side and saying, if it is as bad as bill lee is implying, you could have massive simulation coming and that will be an interesting way to play things out. at the same time, you can have asset impetus from various financial institutions. tom: michael holland and william lee with us. we have much going on, including hsbc, slashing 30% of their

workforce in essentially a european-u.s. restructuring and they will invest in asia. ♪

♪ bloomberg "surveillance," francine in london, i am in new york. futures down -14. they were worser two hours ago. thet now, kevin cirilli on

changeable landscape known as the presidential race where policy is out the window. i am going to go to what mike allen wrote moments ago, the predicted viciousness of the paris theater debate on wednesday, and the headline is that mr. bloomberg will be in that debate. how vicious is vicious? kevin: the gloves are coming off. usually they save this for south carolina, but if there is any indication, this is the first time mayor bloomberg will take to the stage. you have seen the attacks sharpen from bernie sanders. he has drawn a contest. it is unclear who wants to be on the debate stage more, bloomberg critics or the bloomberg campaign. he is not competing in the nevada congress -- caucus. yang will and andrew not be there.

andrew yang has criticized the dnc on how they have changed their rules, but this will be a major shakeup in the race. 22, we come out of february and it is a one-week dash to south carolina. whatever the results out of nevada, how do these candidates adjust to go to south carolina? kevin: you look at what happened in iowa and new hampshire, and it was positive for buttigieg and sanders, and negative for joe biden. carolinada and south alter that trajectory either way? we just do not know. francine: we don't know, but for an international audience, can you crash and burn in a debate? do debates make up the mind? there are so many people who do not know who to vote for in the democratic party.

how important is this debate? kevin: it is very important for a number of reasons. it is the first time former mayor bloomberg will be on a debate stage with his rivals and the first time he will try to get to characterize himself, and also the first time his opponents will get to characterize him. there has been a bevy of opposition research that has come out over the past week or ,o through social media examining his record, and based upon my reporting, that will continue tomorrow night in vegas. francine: what does the american voter want? 30% the economy, 20% medicare? i know it is a difficult question. how do we figure this out? kevin: i think republicans will run on the economy. president trump wants to talk about the economy all day every

day, as well as the broader vision of america's standing in the world. there could be a populist election should bernie sanders win the nomination. buttigieg biden, and are banking that americans want to defeat donald trump no matter what. sanders is banking that americans want to be donald trump and have a new economic vision. tom: mr. bloomberg the founder and owner of bloomberg lp and this station as well. much more coming up as we move through the political season and march through super tuesday. this is bloomberg. ♪

♪ >> we are going to be quite surgical and ruthless in terms of targeting those parts of the business where we are not generating acceptable returns.

we are continuing to monitor the impact of the coronavirus. i think we will have to take additional provisions this quarter as a result of that. it is a call and how long does the virus continue for. tom: bloomberg surveillance of hsbc.of cfo for this bank, three and four times, just off the mandarin hotel there is that big tower which is the hong kong and shanghai banking corporation. did they just meet once and finally say they are a hong kong bank and stop messing around with europe and what has been a failed thirty-year business plan in america? michael: quick answer, yes. shanghai for hong kong and for them to pretend to be a london bank is silly.

they have a history going back many decades, they have been less than exemplary in their management over the years, choices they have made. they are now feeling the results. for thosehan tyce -- of you with a bloomberg terminal those of you must read jonathan tyce this morning, he and his colleagues tearing this apart. we will still invest in asia. deutsche bank flat on its back, but what do you do with europe? what is your view on europe with the uproar at credit suisse and barclays? michael: they are not cheap enough yet. they have had decades of bad management decisions. i think as a group, it makes it difficult for the competition over time because if you're competitors are doing stupid things and forcing clients to

buy -- go ahead. francine: isn't it a tough sell? we are talking about the coronavirus day in and day out and we had the hong kong protests. is that why investors are not concerned with the pivot? michael: i think yes. there will be people who will be -- made untilny they come to for russian. -- fruition. things are mainly suspect. francine: the board is still looking for a new ceo. who ideally will be in charge of this bank? michael: probably not someone from within and i'm not sure of who the outside candidates are. i would hope they would have challenge come in and

the whole business plan and say, it is 2020, we have made mistakes, how can we get this right? what can we do? i look at hsbc time and time again. have you been surprised there haven't been mergers? credit suisse with the mess they are in, they have not been able to do transactions across borders. michael: it reminds me about the cliche about the merger of these two people would be like two drowning people grabbing onto each other in the water and going down together. tom: michael holland with much more. with our first word news in new york. viviana: the u.k. is making it clear negotiations with the e.u. will not be easy. boris johnson's government rejecting that it be bound by e.u. rules. -- a warning for

former national security john bolton -- from former national ,ecurity advisor john bolton the trump administration may block his book. he would not say exactly what was discussed. the book is undergoing prepublication review. next week may be crucial on commodities. >> demand is holding up. we are shipping our products. prices have are holding -- are holding up because of other supply-side disruptions and we have not seen any problems with payments. we think they will hold up for the rest of the financial year and if not, we will revise our forecast, but we remain reasonably confident with the outlook of the half calendar year. viviana: bhp posting earnings

that rose 29%. global news 24 hours a day, on air and @quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: we are just getting a number of poles. for an in -- polls. audience,ernational this is sometimes confusing because there are various states, swing states. the latest poll out of monmouth university, bernie sanders and michael bloomberg each have the support of around 22% of the likely primary voters on super pollay, march 3, but the was february 15 and 16th with a margin of error of 4.9 percentage points. take each pole with a grain of salt -- poll with a grain of salt. tom: that is a huge margin of

error. the two polls this morning are very different. towardist poll drives the overall view and the one francine quoted is specifically on virginia. i want to show you a chart of something we can do on the bloomberg, logarithms of calls. why do you need to do that? it shows the rate of change. two things are extraordinary, the biden decline on a log basis, a stunning pullback for the middle of january. the others is the massive persistency of mr. sanders from the third week of november, the linear effect of this bernie sanders affects. that is what is called a bandwagon. that is really something, i was not aware of that. there is a poll from predict it. mr. bloomberg is the founder of

bloomberg lp. we want to fold this all into where we are heading. william lee and michael holland with us. there is a poll every 30 seconds. policyes the american look like question -- economy look like? the democrats want us to believe it is rolling over a cliff and headed for disaster and president trump says it is the best of all times. we have a buy for q shin -- bifurcation and the reality is somewhere in between. our economy is turning along at near 2%, but what is weak about the economic growth is it is one leg it, led by the consumer with hardly any business investment. we have had a business investment recession in the last three quarters.

without productivity, you do not have higher wages. tom: i think holland can understand there is no such thing as progressive. it is what we call a liberal from another time. i am stunned when you look at the rate of change, the bandwagon for bernie sanders. it is log linear and steady growth. how do you define him as a liberal that can pull in the rest of the democratic party and disinfected -- disaffected independence? it is as muchnk people defecting from biden and going to sanders so he gets the upward tilt because they have to have someone. i noted, was there a mike bloomberg line? tom: i was remiss in not bringing this up. here is mr. bloomberg on the chart on a log basis. michael: a steeper line than

bernie sanders. tom: he is gaining a lot now. michael: tom riordan -- tom: i put in a harvard grad, is that ok? michael: he is moving up at a very rapid rate, and tom riordan of the new york times of all places says the democratic party wants to survive, get mike bloomberg in, forget these other guys. it is a biden migration to sanders. i don't think there is a groundswell for bernie sanders. francine: if you look at the state of the u.s. economy, it is pretty strong. jobs are being created. would that not suggest that president trump is a two-term president? michael: that is the way you would bet with rational money, but what we have seen with u.s. politics in the last election is that anything can happen. the last time i was sitting here with you and tom i thought mr.

bloomberg, it continued to look like less of a surprise that this could happen, he could become president. francine: what does the american voter look like? does he or she just look at the economy? william: of course they don't, and one thing to remember is the last time the democratic party had an outlier come in was someone like george mcgovern. he did well in polling but in the general election did not hold well. one thing we have to be careful about is do not focus on just what is going on in the democratic primaries to project what is going on in the economy. the american voter is looking at, how is my life improving and what are the prospects under this administration or another at improving those prospects? ,ages and employment are rising but without investment we will not have real wages increase in a consistent way.

i think that is what the voters will hear. there is not enough investment and i hope they will say we need more. tom: william lee with the milken institute. apple bounces up to 314. this is a professional phrase, it is not worser than two hours ago. even thoughg better they adjusted dividend up, coming off of zero on their earnings at the top of the hour. this is bloomberg. good morning. ♪

"rancine: bloomberg -- tom: surveillance." what we have done in recent weeks is try to talk to people about this medicine, realogy --virology. joining us now is celine gounder who is in new york university with the university of washington credibility and has actually spent time in africa on ebola virus. to be clear, thank you so much for joining us -- to be clear, it is not ebola, but did you say -- could you say after a week of ambiguity what kind of virus this is? outne: the chinese cdc came with data looking at the more than 70,000 cases since mid-february, about 8% mild

cases, but the case fatality rate is over 2%. times moreit 20 deadly than the regular seasonal flu. boston this virus was in , would doctors be dying? death appalling to see within the hospital community. does that surprise you or is that normal? celine: that is the pattern we saw was sars and mers. it depends on how strong your health infrastructure is. i practiced at bellevue and we have a special passage were retreat patients like this, where we treated craig spencer, the doctor who got ebola. we rehearse this stuff so we are very prepared, but unfortunately in the beginning of an outbreak, health-care workers may not know they need to protect themselves. francine: how do we understand how this actually spreads? they changed the methodology and

the numbers changed significantly, but do we know how people are affected and how bad or how much better this could get? celine: our working hypothesis is that this is still transmitted like other corona viruses, through respiratory secretions, touching somebody, if you are in close proximity to somebody coughing or sneezing, that still is our thought at how this is being transmitted. francine: what figures do you look at to know that this is getting better? is it the rate of deaths or infections? celine: some of both. dip in the cases in china as a result of draconian measures and quarantines, and people have been on vacation. they are starting to go back to work and school, and i think it is much too early to tell.

we will see what happens over the next few weeks and likely we will see another increase. tom: what would happen if they allowed you in? you had the courage to go to africa during the ebola crisis. what would you do they are not doing now? celine: they need to let in our cdc colleagues from the u.s. they need the help of that expertise. -- cdc, hands-down best epidemiologists in the world. there are some key questions we do not have answers to. can people without symptoms transmit? that leads to different policies from our perspective how to prevent transmission. tom: what is your gdp number for china? it is a parlor game now. chris kaz mendez down to 1% at j.p. morgan and a sharp rebound after the virus. william: i agree with his

downside. the v-shaped upside i have doubts about because of what we said, we don't know the -- itission mechanism and is way too optimistic regarding the lack of facts. tom: bill lee and michael --land and dr. downed her dr. celine gounder, thank you so much. coming up on apple, we will be looking at apple, the dynamics of their supply and demand in china. this is bloomberg. ♪

♪ good morning, everyone. this is bloomberg "surveillance." the coronavirus has hit one of the world's most valuable companies. apple will not make its revenue target from the january to march quarter because of slower demand.

joining us now is francisco geronimo. english,t it in plain it is basically there are less chinese buyers so there is a lack of revenue but they cannot assemble their products because they do not have a component because of the quarantine and isolation -- isolation. fransisco: apple stores in china are all closed. to cannot get access confidence. manufacturers themselves are also shut down. francine: how much an -- of an impact will that have on future product launches and how quickly can they change the supply chain to companies -- countries that are open? is it impossible? fransisco: not impossible, but

hard. to -- they canre willble the products but not have critical confidence and access to those companies. francisco: what are these products? microchips and things like -- francine: what are these products? microchips and things like that? why can't someone else make them? francisco: not all vendors can 30,000 tole with 40,000 microchips per quarter. there are not many factors -- factories that have the capacity like apple. they are working with foxconn. they have no other factory in the world with so many employees to manufacturing those in volume. francine: what does it mean for

neighboring countries? if you are apple, do you try to figure out where that component can be made or do you stay put to see what happens? francisco: i think both. they are trying to find an alternative in other countries with other suppliers but are probably monitoring the situation closely. the impact will depend on how fast the control measures are effective because if the outbreak takes a bit longer and extends to q2, we will have an impact. the impact is already difficult. it is expected to cut the impact on the iphones in the first quarter and 8% in the second quarter so this is impacting apple. it is also in the other industries that are having the impacts. francine: this is what, hundreds of companies, thousands? francisco: thousands are being impacted from supply chains to

the end product. this is impacting the entire economy and at a global scale it will have an impact in global economies. francine: is there space in the harder work -- in the hardware components that is not impacted? is there anything made that does not rely on anything from china? francisco: i do not have a company off the top of my head. this is a major epidemic impacting everyone. instance, factories have stock for four to eight weeks and could continue to manufacture the products, but if the cities are shut down, they cannot transform those -- transport those to others. even if they have the confidence, they cannot move them to other places. francine: is this 20% of revenue loss or 50%? francisco: we estimate between

$5 billion to six by -- $6 billion of apple revenue in the first quarter, around 10% of the revenues. ofncine: francisco jeromino idc. apple is having a big slump on a lot of european stocks. investors are quite fearful because they had hoped for limited economic impact from the deadly coronavirus and are starting to realize a lot of the supply chains are being impacted. treasuries are rising. american markets reopened today after a holiday. we will hear from martin gilbert. ♪

[ fast-paced drumming ] [ fast-paced drumming ] ♪ alix: hsbc's end game.

take $73is going to billion in charges and pivot more to asia. apple ensnared by the virus. the company cutting outlook as coronavirus hurts demand and production. and investors bank on stimulus and a sharp recovery in china, while they expect economy to grow just 4% in the first quarter. welcome to "bloomberg daybreak" on this tuesday, february 18. a heavy trading day as apple weighs on sentiment. also had investor sentiment coming in weak. euro-dollar also down by 0.1%. no surprise, you're seeing a bid into the bond market. crude taking a hit as well, with all of the risk off fears. we also want to point out that walmart is down in premarket trading. that is after the company's fourth-quarter results and