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tv   Bloomberg Markets European Open  Bloomberg  February 21, 2017 2:30am-4:01am EST

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♪ >> welcome to bloomberg markets, the european open where we bring you the first trade of the day. here is what we are watching. buyback blues. hsbc stocks slump. a $1 billion stock repurchase. the cfo tells us more buybacks could be on the horizon. -- and mining firms see profits jump on the back of commodity prices.
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harker boosts the buck. the philadelphia fed president says he will not rule out that rates next month. welcome to the program everyone. a half-hourthan away from the opening to the trade date this tuesday. looking pretty flat on the euro stocks 50. , possibly one of the weights on the ftse 100. one of the equities that will be weighing down that particular benchmark. it is been a week performer in the hong kong session. the dax seeing a little bit weaker and the cac keeping its head above the water. let us pull out some of the interesting moves. over on the side we have commodities with iron or making another move higher. highe touched on another overnight in the asian session
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for iron ore futures. a productionning cut. of some key political gatherings and that is boosting commodity prices. on the left, we have the foreign exchange markets. we have some decent sized moves in the new zealand dollar. the bloomberg dollar index is up 0.3%. the is harker boosting dollar headlines. here is juliette saly. jon: -- haset: donald trump selected hr mcmaster as his new national security adviser. speaking at his florida resort in palm beach, florida he says mcmaster will serve with keith kellogg who returned to his earlier role as chief of staff. succeeds michael flynn who resigned following revelations he misled administration officials about his contacts with a russian envoy.
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hsbc's fourth-quarter profits miss to estimates a mid-lower revenue. adjusted pretax profit which excludes one-time items jumped billion but came in below the $3.70 billion estimate. the lender also extended a stock buyback that is driven it's london shares to a three-year high. i certainly would not encourage any investor to read too much into the one billion. ratio at 13rong point 6%, well above the top end of the range that we targeted in terms of ensuring we are well capitalized in our businesses around the world. we continue to focus on investing capital and the growth of our business. and as the opportunity arises we will contemplate as we have done share buyback. euro area foreign ministers have poured cold water
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on a quick disposal of age payments. they agreed to pick up discussions in the coming days. greek bonds rallied and creditors demanded that the nation institute tax, pension, and labor reports before they will sign off on an agreement. australian prime minister malcolm turnbull has described president trump as a big personality with a big job. he told daybreak australia that he has had several frank and open discussions with the u.s. content ofut the those discussions was not for public view. this comes as australia continues to push the case that tpb should continue forward without america. vital that we maintain the drive towards more open markets and free trade. trade means jobs. australia is a trading nation. our future depends on not simply selling pe best selling things to 24 million australians but to
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the whole world. and as i said at the g-20 last year, protectionism is not a ladder to get you out of the low growth trap. it is a shovel to dig you much deeper. juliette: global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. this is bloomberg. talk about the hotel industry. intercontinental hotels group has missed estimates as it released its full-year results this morning. at least if you look at the revenue line. the pretax profit line though, the full year of adjusted tax line profit, came in ahead of estimates. let us talk to the ceo of the company. from the london stock exchange, i enjoyed by the companies ceo. you say the you are comfortable in your outlook for the year ahead. how much is that based on your american business? >> america is about two thirds
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secondbusiness but our biggest market is greater china. we saw growth across the world. we are in 100 countries. viewe have a pretty good and we also undertake a long-term view in our business. it takes a long time to build up our hotels. there is some uncertainty out there but we are confident and that is what drove our decision to raise our ordinary dividend by a 11% and also return $400 million to shareholders. anna: you have given us a bit of detail -- what do see in your u.s. business? is there such a thing as a trump boost? some measures of the u.s. economy, some markers are doing trump what you see in the demand picture for the u.s.? >> in terms of guest demand in the shorter term we saw a decent
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performance in the fourth quarter. ongoing is even within negative impact in oil markets. in terms of longer-term, we signed more deals then we have signed in new hotel since 2008. it is hard to attribute it to donald trump or anything else but clearly if the economy grows that is beneficial to the travel industry and would be beneficial to us. --a: does the trouble then does it the travel ban have any impact on your business? do you notice that in your bookings? market is the hotel domestically driven, certainly in the u.s. where holiday in is our biggest brand. that is mainly domestic. the travel ban is on the margin.
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in the short-term, we have not seen it but overall people are traveling more. in the u.s., we have seen many months of demand levels and documents a for us is at an all-time high. overall, we are in good shape. him: what are you expecting to do in terms of tax cuts for the hotel industry? is that something on the radar? >> i wish it were. i have not heard of anything specific for the hotel industry. anna: are you lobbying for any? are you talking to the administration at all? >> not on anything specific like that. for our business, it is more growth,ng-term with gdp corporate profitability, disposable income for leisure travel and so on and that has been positive. in the u.s. and china -- we had a strong quarter in the u.k. as well. generally, people travel and that has been growing.
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and that has been a positive market. anna: any plans for m&a at the moment? plans to retake the crown? the big for the sake of being big is of any value in the industry. we have significant scale. 40,000 new rooms. we signed 500 new hotels last year. we have the scale. our focus is on innovating with our existing brands. open lobby, holiday inn. holiday inn express. adding new brands and operational excellence. at a time when there is m&a going on, what is really important is running your business extremely well. revenues,r margins, and profitability. and that is really our focus. ina: you say m&a is going on
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the hotel industry and elsewhere particularly in the companies that have seen the impacts of them look making cheaper to outside investors. i know we have talked before --ut whether your business does it feel different to run a ukplc with the weakness of the pound? for thes, it is neutral year. as a dollar based business reporting in dollars, that is what we focus on. i think it may be a little different press. i think we have always had an open market -- there has always been m&a going on. line in 2015 u.s. and started to grow that outside of america and that has gone well for us. we focused on running our business. we announced an 11% increase in
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our dividend. well.siness is performing it is a strong business model. as a monotonic team, that is what we're focused on doing. a management team, that is what we are focused on doing. on the program, the greenlight for the greenbacks. chances harker boosts for a march hike. discuss the company results and asset plan. and we talk with statoil. that and more is still to come. this is bloomberg. ♪
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back.welcome this is bloomberg market, the european open. let us get a bloomberg business flash. here's juliette saly. bhp billiton has said first-half profit jumped more than sevenfold eating estimates. underlying profit rose $3.24 billion as commodity prices surged on increased demand from china. we will be speaking to bhp billiton ceo andrew mackenzie. said profitan has within doubled last year beating estimates. underlying earnings were one dollar 72. -- $1.72 a share.
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biggest producer of diamonds and platinum no longer needs to sell assets to reduce debt. russia overtook saudi arabia as the world's biggest crude producer in december that is when both country started restricting output ahead of agreed curves. russia produce almost 10.5 million barrels a day, 30,000 more than audi arabia. it was a first time since march that russia produced more oil. the u.s. was the third biggest oil producer. followed by a rack and then china. to she but is looking to raise a point a billion dollars from the sale of its memory chip business. the company hopes to create a trained -- complete the transaction by march of next year. a spokesman declined to comment. to see but is grappling with a
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6.3 billion dollars write-down at its nuclear division. that is your bloomberg business flash. anna: thank you. march madness. philadelphia's harker has become the latest president who says he will not roll out a rate hike next month sending the dollar higher. it the past is anything to go by, a march hike is not necessarily on the table. the weeks before the december hike, traders were 100% certain and increase was coming. three weeks shy of next month after encompassing futures market shows under a 40% chance. mark cudmore joins us now. very good to see you on the program. given the march hike is a serious possibility, you may be less convinced. >> it is definitely a possibility. i will continue to repeat that. lacking the number of catalyst, the number of data events before the march meeting that will make them move towards a definite hike. that is what they need to do.
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they normally have one priced before they had. is it probable? no. i think the real probability is less than what is being shown at the moment. are harker'sevant comments if you are not convinced about march? are think his comments irrelevant. i don't think they would've had any market input had it not been for the u.s. holiday yesterday. there was low liquidity in the market. they overreacted. harker said pretty much the exact same thing last week. that the market could have three hikes this year. and march is still live. he said nothing new. he is not considered one of the more relevant speakers. a u.s. holiday, i think the market would have ignored it entirely. anna: there goes my next chart. is the dollar per merely about the newor what administration wants to do in terms of talking up or down the
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currency and what they want to do in terms of tax change, and the border? is all of that were important? is stillarket theoretically possible and people are still considering that there is a slim chance or a hike, the fed is the most dominant factor. jan march, it will be whether it is may or june for the next hike. the fed is the most dominant thing at the moment. until we see a firm policy measure from the trump administration. whether the border policy comes through or infrastructure plan, when we get some firm policy then we can start analyzing that and it will become more relevant. for now, the fed is the main game in town for the dollar. anna: thank you very much. go to the bloomberg to get all of the thoughts from mark and his team. head of macro strategy at state street global markets is with
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us. what are your thoughts about march? i have this nice chart entitled "wake-up call." not's point was it would have been done had there been at their desks on monday. we're making too much about the harker come in. the charge.iked what it demonstrates is that all of the nays around -- all of the hike around the probability -- what your chart demonstrates is there is still a tight correlation between interest rate differentials and the dollar. and that is true today. it was true over the last week and the last month. whatever correlation period you look at, there is a tight link there. will the fed hike rates in march? probably no. the fed haso 1995,
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never gone unless the market was priced at 80%. the reason the comments are interesting is that we also have the minutes this week and we know the fed is gradually trying to massage up market expectations. maybe not to go in march but possibly may. the fed is talking about gradual rate hikes. the way the market has it priced, they have june and then november and december. that does not feel very gradual to me. anna: it is all about the timing. 36% chance of a hike in march is what we are talking about. to your point, your sense is that number would need to be 70% or 80% for the fed to go ahead. >> at least 80%. if you look at fed futures on the day when they hike, it was still 60% or 70%. there is no way the fed will
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surprise the market that much. before march, they may talk it up a little bit. i think it may be more about trying to get may or june fully priced. anna: when does the fed start to be more concerned about the strength of the dollar? those that say it is not been important say the u.s. is a domestically driven economy and the dollar strength weighing on exports is not too much of the story but politically it is very much of the story with what donald trump is saying about trade and trying to boost exports? when should the fed start to worry about the strength of the dollar? terms the dollar has appreciated over 20% in the last three years. the trumpfocus on administration but the interesting thing in the last 18 months is a fed has mentioned the dollar and that has been unusual. the reason it has is that net trade has taken away from growth
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and that is one of the reasons they have missed their growth forecast. inflation will be higher than they thought but the growth miss has been because of net trade. it is not just the dollar but the weakness of global growth. the dollar does matter to fed policy. clearly. dollar moved more rapidly it would become more of a factor. it is a factor. and it has been a factor before trump and it is now a factor with the trump administration. ata: one of the things -- the start of the area's years recently we have seen expectations running high with what the fed will deliver and then it has had to be rolled back. quite quiet onn that front. seechance we will emerging-market nervousness? >> we could have had the same
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conversation this time last year. the fed will hike three times. starten we had a risk off to the international markets last year and then the fed was talking about brexit and a lot of international events that could stop them from hiking. so far this year, you have had almost the reverse. you have had risk on. -- the reflation trade reflation and potential risk aversion because of the rhetoric that might come out about global trade. reflation is fine. that trend is still clearly in place. the whole risk aversion thing is not bad. systemic risk is low. ok i'm a yes there is always a risk in china but so far commodity prices are telling us that china is doing ok. -- the international
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factors are not there to prevent the fed from hiking. anna: we will keep those things on our radar. michael will stay with us here on the european open. we are minutes away from the start of european equity trade for tuesday. let us have a look at some of the stocks we are watching. hsbc in focus. a stock that was weaker in the asian session. trading down in hong kong. hsbc, fourth quarter profit missing estimates as a surprise drop in revenue. they are boosting cost-cutting measures and it pending a buyback. i spoke with the cfo earlier from hsbc and is -- and he was cautioning investors. he suggested we should not be too disappointed in that. i also asked if there would be much attempt to lift the revenue saidh line at hsbc and he -- and he defended the
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performance of the key areas of the business. and see how hsbc performs in london but there was weakness in the performance in reaction to this release coming through the hong kong market. looking at anglo american. the world's because producer of diamonds and platinum saying profit more than doubled last year as commodity prices soared. the company no longer needs to sell assets to reduce debt. we are seeing a bit of a change in start from the company. disposals are no longer required. we will be speaking to the about which asset they do need to sell and which they do not. bigger profits in the stock trade. anglos turnaround program unveiled. it has worked according to my colleagues in bloomberg news. the equity market open.
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futures pointing to a mixed a picture. the u.s. back in play after being out for presidents' day. futures suggesting we will be weaker in london but better elsewhere perhaps, this is bloomberg. ♪
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anna: welcome back. this is the bloomberg market, european open. less than a minute away from the start of the bloomberg equity trading day. we are expecting futures to be a little weaker. taking some time to find their feet this point. they looked fairly mixed about an hour ago. there seems to be a downward bias especially on the ftse 100. especially from the reaction in the asian session regarding hsbc. some disappointed about revenue growth. some initial negative reaction in hong kong to the hsbc numbers. we are waiting for the reaction to the mining sector numbers. anglo american.
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bhp billiton. all of those companies reporting numbers. bhp had better than estimated results coming through. all of that factoring into the european market open. we will have some comments on the great expectations that have weighed into market expectations. let us have a look at how the european equity markets are opening up. this is the start of the european trading day. waiting to capture those first traits. the ftse 100 could be weighed down about best buy what is happening in the banking sector, hsbc. thea: i am starting with gilt markets. the treasury markets reopening after president day. 10 year yield on the treasury rising about two basis points. it does look like it is edging higher, about one basis point by my calculation. or 1.24% on the 10 year
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yield. tracking the treasury yields higher at the moment. -- looking at various sectors. a lot of focus on miners and banks this morning. it looks as though energy stocks are outperforming, up 0.4% followed by telecoms. material stocks are also higher, 0.2% higher. financials pretty much unchanged but edging into negative territory. we are pretty and hsbc reaction in hong kong. it was down 5%. dropping the most since brexit in hong kong. some contexte you before we take a look at how it is opening in london. surgedrexit, hsbc has 56%, the most of any major european bank hedging its highest since september 2013. some of that has been helped by a weaker pound. that is some context for you
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even as we saw that negative reaction in the stock work it in hong kong on the back of that ms. for the adjusted pretax profit. and a disappointment around the $1 billion stock buyback. looking at the miners. iron ore. particularly relates to bhp billiton. look at how it has rallied. and how it has been on a tear. in hp did chose some caution terms of the iron ore price going forward. highlighting that for you. anglo american. benefiting from the strong gold price. some news coming through on the french economy. manufacturing pme -- pmi falling. still in expansion territory. manufacturing pmi fallen to 52.3 and coming in below forecast for 53.5.
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services number rising to 56.7. way above the forecast of 53 point nine and very much into expansion territory. a mixed. we had a host of mining releases is when. earnings release coming through from bhp billiton. we saw first half profits jumping in beating estimates. anglo-americans profit more than doubled. the company's first profit increase in five years. joining us now first on anglo-american's ceo. market, thank you so much for joining us today. quite a lot of announcements today around assets. the assets you will hang onto. those you will not be selling. could you clear up for us what you're going to be hanging want to now and what it is that is still on the blocks? >> we have made it very clear that we are holding on to the two assets in australia. and also the nickel business. , top-tieruality
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assets we have been building the business around, -- about eight months ago, our debt was quite high. commodities were dropping. the prognosis for china was tough. we had to make some tough calls. we made those calls. we have improved the business and cut our capital. 8.5 billion is a testament to the progress we have made and we are in a different place. facts change, i change my opinion. hindsight is a valuable thing. do you think in hindsight it was not the right decision to put those assets on the block at the time the decision was taken? >> i think it was exactly the right decision. we had a tough area. debt was high and we need to do news something. we moved hard on our cost. our capital work has been the prime contributor to the improvement.
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we sold one asset, the phosphate business which was a good one but it did not lead us anywhere strategically. we think we made the right call. at the same time, we have delivered value and on the right thing for shareholders. anna: tell us more about your south african business. and what you're saying today about south africa. thereoes the business look like now and what could it look like in five years? >> we are very pleased. we have done three years of major work there. revenue to there in a person is going very well. we would be quite happy to stick with iron ore. but at the same time, if people have ideas where they are prepared for us to look at other options, we are open as long as whatever we do have to be good for all of our shareholders. that is the criteria we use to
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decide what position we will take in south africa. how difficult is it to move money out of south africa right now? is that being factored into your plans for asset sales in that country? >> we are able to move cash into the center. there were certain requirements and processes we have to go through but we can do that. from our point of view, we are happy with the configuration that we have and we are happy to break those assets for the long-term. if someone thinks they can add value to us or for our shareholders, we would be open to that conversation. anna: does that mean you're shopping? ? >> nodded all. we are happy to run the -- not at all. we are very happy where we are. anna: i was having a conversation earlier with one of our reporters who suggested that the business has learned a lot from previous highs. when companies in the mining sector had money to spend, they
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may have crowded into projects that were not worth doing. the the sector had -- sector as a whole has learned its lesson and will be returning more money to its shareholders. is this a changed sector? >> i cannot talk about the sector. for us, it has been very clear. we have cut anyone percent out of our costs. our margins, despite a 3% reduction in price for the full 2016 compared to 2015, we have improved our margins from 21% to 26%. the underlying deficiencies are there. for us, by the end of the year we want to be in a position to share with our shareholders. anna: they come first. you have talked about getting to investment grade were nearly back there. what is left to be done on that front? >> our numbers are getting pretty close to what you would
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assess as being investment grade but in the end, the rating agencies have to make that call. i will not preempt their call. from our point of view, we will be in position to pay by the end of the year. we are focused on what we can control. and those that have to make decisions on the progress we have made will make their decisions. anna: what is your outlook for the commodities in terms of pricing/difficult to call where these prices will go. when we look at diamonds, platinum, copper, iron ore --what is your forecast? is the upside sustainable? >> from our point of view, the bulks look pretty good in terms of prices. the fact that we have cut our cost means we will be robust through the cycle. we have cut our costs from $77 to $29. the metals could do much better.
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diamonds, we think the market is starting to study. probably some downside in the box -- and some upside in the metals. anna: any ideas regarding donald trump's infrastructure or the chinese economy to see metals go higher from here? >> underlying demand in the fundamentals are pretty good. -- is pretty good. the lesson we have learned as a company over the last few years is to try not to rely on others to create your 42. left to put your own future in your own hands and that is what we have done in the last three years. i will not try to forecast mr. trump or china for that matter. andant to be competitive want to improve our margins. our future is in our hands and no one else's. anna: i don't want to forecast mr. trump but some of his polys may have an impact on your business. protectionism and the rhetoric
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around that and anti-globalization sentiment. all of that is very topical. the ceo of bhp billiton said protectionism is an ill wind. will that affect anglo-american? >> the protectionist conversation is a concerning conversation. global us be frank -- trade has been a great thing for most people in the world. but we all have to do is try to make sure that everyone comes along with us and that is important. in our case, and when i talk about mr. trump, his position on infrastructure in the u.s. could be a good omen for the mining industry but beyond that i would not try to forecast any of the other positions he would take. i think common sense will prevail. people will see the benefits of global trade. but we certainly have to do a better job of making sure everyone comes along with us. anna: market, great to have you on the program.
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up next, our exclusive interview with hsbc cfo after europe's weakest banks saw fourth-quarter profit miss estimates. shares of all most since the eu referendum. omb joins us. and the finance minister of cyprus joins us to talk about europe, the debt crisis and much more. don't miss any of these interviews. this is bloomberg. ♪
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welcome back. this is bloomberg markets. let us have a quick check of how the markets are performing. here is a picture of european equities. down by a quarter of a percent on the ftse 100. hsbc notthe weight of doing the ftse 100 any favors. let us get the details. a: looking at the industry groups on the stoxx 600. we have had a lot of earnings from miners is when. starting with anglo american. somewhat embattled miners seeing a reversal of fortunes because it reported that profit more than doubled last year. $1.72derlying earnings of a share was a beach on market expectations. it said it no longer needs to sell assets to reduce debt. releasing a turnaround there and the stock deigning as a result,
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up 2.4%. hb billiton up 1.9%. the world's biggest mining company. profit announcing a better than expected dividend and bond buyback. benefitingese miners from the surging commodity prices that we have seen of late. in terms of the outlook for that, bhp billiton says it is confident in the long-term outlook for commodities though it did sound a note of caution on iron ore which has been on a tear this year so far. finally, i wanted to look at hsbc. we sell the shares drop in hong kong, the most since brexit. they have dropped the most since brexit. in london also. fourth-quarter pretax profit missed estimates. the share buyback announcement of a billion dollars perhaps disappointing some investors. --spoke to the cfo of which
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of hsbc in an exclusive interview and he said not to focus too much on that share buyback number. >> i certainly would not encourage any investor to read too much into the one billion. we have a strong equity meet tier one ratio. that is well above the top end of the range that we targeted in terms of ensuring we are well capitalized in our businesses around the world. we continue to focus on investing capital in the growth of our business. as the opportunity arises we will contemplate as we have done share buybacks. nejra: that was an interview euro.ou did for daybreak and it know to give context. hsbc shares may be down today but they are up more than 50% since brexit. at 5:30 a.m. this morning london time speaking to the hsbc cfo. still with us here in the east yu-gi-oh is michael metcalf.
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michael, the banking sector in europe stepping away from the specifics of one corporate, we have banks reporting -- u.k. banks reporting in their numbers this week. thenu.k. based stories and we have more globally relevant stories. hsbc is a more global story. and different factors playing in. macro environment has been far more favorable to financials and we have seen that reflected in the prices. there are big regional diversion some ofthe sense that the financials in the us will be related to the promise of hopes for changes in regulations and high-yield. politics probably won't get better anytime soon. in the u.k., we are beginning to coming -- article 50 is
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and now it is the impact. very regional diverters. regulationrms of the story, there is a promise in the u.s. what does that mean in europe? do we have a sense of the european regulators wanting to follow the u.s. down that path? one might think instinctively not. diversionsregulatory -- i think we should expect that. it has been a constant. after the financial crisis, we wanted to get all regulation on a level playing field everywhere but it has been different. we are still waiting for the trump administration. in europe because of the politics, it seems a lot of people do not want any changes in the near term. anna: hsbc, not so well received by the market.
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but the mining sector has been better received. ,hen we look at the sector there has been a certain change in the extent to which these miners need to sell assets to boost their balance sheets. because of the rising commodity prices. both sectors, financials and commodities have been big beneficiaries of the reflation trade. the commodities news is particularly important for the reflation trend. and the lack of risk aversion we have seen. the immediate reaction to the was at riskstration aversion in the emerging market. haveact that commodities done well has removed some of that risk aversion and we have seen capital flow back into emerging markets. these positive statements we are getting along with the earnings releases from the commodity companies is really important
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for the overall macro environment and the stability. anna: are these commodity moves firmly underpinned? downside in bulk commodities and upside in metals. the cfos view is a mixed trajectory from here that we have seen such a rally from here. iron ore. for example. is that based on too high expectations from the chinese growth story, for example. >> it seems pretty clear that it is not just about promises of trump infrastructure. it is multidimensional. there are a enough pieces of evidence to suggest global growth is doing ok. for all of the rhetoric about protectionism, global trade is rising right now. thean only trade off what hard data is telling us. for thew, the outlook
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global economy seems to be better than it was three months ago. you veryhael, thank much. michael metcalf will stay with us. nine 3 a.m. if you're watching in paris or berlin. we will talk about paris next. murray -- marine le pen's numbers have been boost. this is bloomberg. ♪
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anna: welcome back to the
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european let us talk about french policy. bring the pen has gained rival against her arrival. the national front leader has benefited from concern about security. the survey is showing that she is close to a victory. she is quickly narrowly -- narrowing the gap. the french and german tender spread is at its widest since 2012. michael metcalf is still with us. when we look at that spread between the french and the s, this and preoccupation of the market in terms of risk around the french election and the broader eurozone political story. >> the way to think about the french presidential election is black swan event.
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it is still highly improbable but potentially so impactful, we have to see investors put hedges in place. comparevery quick to great le pen to prompt and brexit. the realities of the poll are still very different. trumplose to the vote, was in the national polls between 8% or 4% behind. brexit, the polls were wrong. marine le pen in the second round has fallen 16% behind. anna: a very different voting system which adds another layer of complexity. the alarming thing about the 16% deficit she currently has against macron in the second round is that the gap was 13% three weeks ago.
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the volatility around the polling is the real problem. we do not know who she will run against get which is adding a layer of uncertainty. anna: it makes it understandable that we would see investors be nervous about french assets. we saw the spread of the yield over german yield. investors are piling into bearish options. that makes sense if you're thinking about political risk. >> the one curious observation about all of this uncertainty is that in general volatility is quite low. also seeing that in the equity market and in the currency. the best bits of evidence of hedging before brexit and the trump election was the excuse in sterling. skews in sterling. we are beginning to see that in the euro. anna: that is interesting.
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michael medco -- michael metcalf. we will hear from the ceo of the omb. that is up next. this is bloomberg. ♪
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fall the mostres since the brexit vote as fourth-quarter profit misses and a $1 billion share repurchase is disappointing. the ceo says the bank could contemplate more by back. --lo american follows bhb's bhp's big league. parker boosts the block. the philadelphia fed president says he will not roll out a rate hike next month sending the dollar racing higher. good morning everyone and welcome back to bloomberg markets european open. we are 30 minutes into the trading day. let us have a big at where we are in the markets.
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this is a picture of the european equity markets. sluggish on the ftse 100. despite the good performance of the commodity related companies. we are weaker in the banking sector. 7274 on the ftse 100. a downward bias. speaking of germany, some breaking news in terms of manufacturing and services pmi. a mixed tag from france earlier on. mixed compared to estimates. rising to 57 against a forecast of 56. a strong number. anything above 50 being expansion territory. germany's february services pmi rising to 54.4. the forecast was 53.6. both of those numbers are above the estimates. let us get another bit of breaking news. rules inset to draft asset management risk. some significant in terms of china's ongoing efforts to
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reduce risk. we have previously been running a story that they would draft rules that reign asset management risks. that is one story we are focusing on. china's financial regulations dropping new rules with a roll of reducing risk by distress -- thatspelling suggestions they are guaranteed. trying to get some two-way business into those markets. talking about the oil sector. has seenoil maker omv the benefits from its estimates -- it's efforts to raise assets. also saw a boost on its gas operations which returned to profit in the last quarter. joining us now for an exclusive interview. in london is the omb ceo. -- omv ceo.
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what brings you to london? i guess you are speaking to investors. what kinds of feedback are you getting from investors? >> investors are regaining trust in omv. hardrealize we are working on our strategy and it is bringing back success. we managed cash flow last year and that is why analysts are getting more in touch with us. anna: talking about the cash levels. you're talking about some ts.elopments -- divestmens what you plan to do with your cash? pay the like to dividend out of that. and we will reinvest because we have to work on the replenishment of our reserves and thirdly, we would like to bring down debt. anna: does that leave any space for purchases or emanate or it is just about balance sheet? >> we would like to do that.
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when you look at estimates that you could get as much as 1.3 billion dollars, is that the kind of number you are looking at? what kind of numbered you have in mind? >> we have received some bids. we are in negotiations so we cannot share the numbers. reports anden some some parties have claimed interest especially saudi arabia. as well as azerbaijan. as we have sold our terminal 2 as a right -- azerbaijan, they are in the lead. anna: let us talk about russia. trying to put more production from local sites such as libya and russia. let me ask you about russia and your plans there. how successful do you expect that to be related to the
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divestment you are doing in turkey? >> i am more interested in investing in russia. one of the lowest cost to countries you can find on our planet. i would like to extend our cooperation with has prom -- gazprom. area for natural gas and that is the reason why we would like to step into gas production in russia. anna: does the sanctions environment around russia have any bearing on your ability to do business in russia? >> not at all. we are looking at the sanctions very carefully and we are in full compliance with the sanctions. we do have some projects which you can do under the umbrella of the sanctions. -- weand the politics mentioned the sanctions donald trump has been more positive in his commentary around russia.
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is this separate from all of that policy? >> i am not really listening to much into what donald trump is saying about russia. theus it is important european-russian relationship. i am a european country. as the u.s. president is always telling us, u.s. first, i have to build on the european position. anna: how confident are you that you will be able to boost production by about 10% by early 2019? crick me if i'm wrong but i think that is your target. wrong thatme if i am i think that is your target. have restarted our production in libya. and in curtis dam. we are well on track to come up with two new projects in 2018, especially in the north sea.
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that is an upside potential. libya is not back fully on production capacity. to 350,000 a day. is yourw resilient business now to a lower oil price? >> we are planning for $55 a barrel and we have to wait and see how opec compliance is doing to end up during 2017. on the mid-to long-term, we are planning $70 or $75 a barrel. the times are over when we will see a three digit number. that is conservative planning. in the long-term, we will see such an oil price. anna: you have been cutting upstream expenses to make your business more resilient in this lower oil price environment. is there much more to do on that
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cost cutting story? when -- we delivered hundred percent on our targets last year. we have set a target of 250 million in 2017. we have reduced our costs to 300 million. all of this is telling you that we are working hard to continuously work on a strong free cash flow. anna: we mentioned about u.s. politics. on you are trying to get with business away from the political story. european politics are interest -- are in for an interesting ride. with the rise of populist politics making itself felt in austria. are you confident that the european economy and the austrian economy -- when you look around europe, what do you see? >> i see the european economy is more or less stagnant. this is what we have in our plan. what is more important for us is
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that we stay as a union and that europe is working together especially the politicians. i am very much a fan of the european union. that is why i regret that we will see the brexit. anna: thank you so much for joining us. great to see you here in london. the ceo of omv. statoil's head of exploration will join us for international petroleum week. that is up next. this is bloomberg. ♪
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back.welcome this is bloomberg markets, the european open. the top stock stories. hsbc: starting with providing the biggest drag on whichoxx 600 banks index is posting the biggest losses so far in this session. hsbc, fourth-quarter pretax profit missing estimates. and the announced a share buyback of $1 billion. some disappointed with that that you spoke to the cfo of hsbc in an exclusive interview and he would contemplate more buybacks and not to focus too much on that number. >> i certainly would not encourage any of our investors to read too much into the one billion. we have clearly got a strong ratio at 13.6%. well above the top end of the range we have targeted in terms
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of ensuring we are well capitalized in our businesses around the world. we continue to focus on investing capital in the growth of our business. as the opportunity arises we will contemplate as we have done share buybacks. nejra: in hong kong, we saw hsbc shares dropped the most since brexit. this decline of 6% is the biggest drop since august 2015 but to give you some context, of forrexit, hsbc shares today have risen 50%, the most of any major european bank. the best-performing miners. bhp billiton. of for today have risen 50%, the most of any major european bank. the best-performing miners. bhp billiton. the world's biggest miner. first-half profit beating expectations. that are than expected dividend of for today have risen 50%, the most hasbond by anglo american also reported better-than-expected. shares have rallied on that. same for anglo goal. 4% increase in 2016, operating profit and it plans to pay a
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special dividend in the second quarter of $400 million. anna: let us get the bloomberg business news. chosenld trump has mcmaster as his new national security adviser. speaking at his florida resort come at u.s. president said he will serve with general keith kellogg who will return as chief of staff. mcmaster succeeds michael flynn who resigned following thelations that he misled american administration. marine le pen is gaining in the polls. first round support for the anti-euro candidate has risen to 27%. unchangedn and fee on at 20% each. as the election approaches, investors are piping into options protecting against equity decline. with the cac at its highest level, the number of outstanding have responded to bullish
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calls. turnbull has described president trump is a big personality with a big job. he told daybreak australia that he has had several frankturnbult and open discussions with the u.s. president but the contents of those discussions were not for public view. australia continues to push the case for tpp to go i had without america which abandon the deal. >> it is vital that we maintain the drive towards more open markets and free trade. trade means jobs. australia is a trading nation. our future and open discussions with depends oy selling things to do before million us trillions at selling them to the whole world. year,aid at the g-20 last protectionism is not a ladder to get you out of the low growth trap. it is a shovel to dig it deeper. >> global news 24 hours a day powered by our 2600 journalists and analysts in more than 120 countries. this is bloomberg. it is international
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petroleum week in london. they are here to do deals and share a few drinks. manus cranny is at the event joined by a gust. -- joined by a guest. morning. manus: we kick off with tim dobson come the executive vice president over at statoil for exploration. great to have you with us. you are bucking the trend. you are committing to exploration. perhaps more than anybody else in the marketplace. why now? >> great to be here. over the last couple of years, we have maintained our interest in integration. ourave replenished portfolio.
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we can increase our drilling activity. high quality portfolio of opportunities this year. manus: does $50we can increase g activity. oil matter? >> we would not invest in opportunities which we did not with would create value oil prices like today's. in theyou have drilling bering sea of norway. give us a status update. still to drill somewhere between five and seven wells. three impact opportunities according to the central. probably kickoff the program somewhere mid second quarter. are ton the expectations the prospect in the northeast of the bering sea, a big structure which was awarded a couple of years ago. a lot of expectations there.
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manus: high expectations. no pressure. this, the key pieces is the oil industry has become so much more efficient and drilling is a key component. how cheap is the average offshore well these days compared to the boom days? >> it is difficult to make comparisons. it depends on if you are in the bering sea which will be some of the cheapest. or in the deep water of the atlantic margin. in general, the combination of costs coming off as the oil prices are three impact reduced but not least the efficiency gains we have seen within drilling. currently, we are actually drilling both our exploration wells somewhere between 30% or 40% more efficient than we were in 2013. it cathartic -- has
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it been cathartic for your or pushed you to the point of real change? >> the point that pushed us to real change was the point of diminishing margins. he came to us in 2013, a year or so before the oil prices started to drop off significantly. wideitiated a corporate efficiency program. we realized this was not sustainable. the oil price was not sustainable. we continued to take as much risk but the reward and the margins were reducing all of the time. we realized this was not sustainable. manus: let us talk about deepwater exploration. what is the vehicle? >> deep water is still one of the last frontiers. it makes it more challenging from a profitability point of view. i'd like to say it is not really about deepwater but the quality of the assets. if you have a good enough
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reservoir and a good water system, and a big accumulation, you can make most discoveries work. manus: i need to ask about one of your wells that you are drilling in the bering sea. some people talk about 10 million barrels. what is a realistic number we can expect from that particular well? >> we do not communicate specific numbers about that but i can give you some perspective. -- it is a huge four-way closure. 800. brim,t was filled to the you could probably get to 10 billion. i would be very happy if we proved up to somewhere between 500 million barrels. very happy. manus: thank you very much for joining us.
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we have a packed agenda. that is tim dobson. a good wind and a fair went. and everything adding together. he could see 10 billion barrels coming from that project. this is an optimistic man in the exploration side of the business. anna: thank you very much. manus cranny joining us there from the petroleum week, the international petroleum week here in london. stay with bloomberg for other important interviews. opec secretary-general will be joining programming a little bit later on. five past 11:00 london time. and we will bring you our exclusive interview from the total cfo tomorrow. that will be right here on bloomberg. turning our attention to european politics. area finance ministers have put cold water on an agreement with greece. caroline conan is in brussels
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tracking the ministers. you have been speaking exclusively to the ministers. just four years ago, in 2013, cyprus was also on the verge of leaving the euro. facing a dramatic cash crisis. the cyprus finance minister can really identify with what is happening with greece at the moment. i spoke exclusively with him and he told me that no one can wait until june or july for political solution on greece. helpingelays are not and primarily they are not helping the recovery of the greek economy. i think there is a strong and common interest to fast-forward the process. to make sure that there is no uncertainty and to get the economy moving again. the political election cycles are a factor but i would be
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primarily concerned of seeing real progress on the ground which would enable the restoration of the confidence towards the greek economy. caroline: is the deadline june? i don't think anyone is considering waiting until june or july. we did have a good decision yesterday at the euro group considering the circumstances, the institutions. i hope the review will be over and done soon. , cannot emphasize once again greece urgently needs restoration of a sense of stability, confidence. we cannot wait until june or july. maturityse of the debt which is coming then because the -- it isomy i think and wantse relieved
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to start moving again. yield on the cyprus 10 year government bonds have been trading downward and yet you do not have investment grades. what explains that? >> we have been making progress and receiving upgrades. the cypress of economy has achieved a remarkable recovery. we are growing at nearly 3% of gdp. we are operating with a balanced budget. the banking sector has been healing. -- are taking time to come down but work in progress is being made. that thingsdent will come. you are right to point out that the markets are ahead of the rating agencies and we have already established sustainable market access. we are able to borrow. so confidence in the cyprus
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economy has already been restored. caroline: you were mentioning the loans. they are still at quite high levels, around 50% for banks in cyprus. what is needed to bring down these levels? >> time and recovery in the economy. this is the overall headline number. necessarily indicating the actual situation because a large chunk of these loans have already been restructured. they are being serviced. they will be on the list for another year or a year and a half. the fact that the recovery -- that the economy is recovering. the cyprus finance minister is telling me also key is working really hard with the rating agencies in order to get the cyprus government bonds back to investment grade.
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asy were downgraded as much 12th come up investment grade during the cyprus crisis. they are two notches low and he is working with rating agencies to get the investment grade back. he is confident cyprus will be able to access international debt markets in the second half of this year. anna: that would be an interesting development. what extra efforts are being demanded of the greek? government -- of the greek government? caroline: the creditors, much more before are on the same page on what is being demanded from greece. extra measures when the tariff bailout program expired, lower the threshold on the income tax and have extra measures on the pensions. even though pensions increase have already been cut 12 times in the last seven years. we will see in the next few months. they can -- we will see if they
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can find political solutions. anna: thank you very much. that will wrap up this hour. up next, is surveillance. this is bloomberg. ♪
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francine: banking blues. hsbc to extend a billion-dollar buyback. it fails to overcome a wider quarterly loss. these are interesting times. the dollar bulls are handed the bats. a fed policymakers as next isth's central bank meeting still live. have they prepared the market for a march move? marine le pen's party headquarters are rated. investors piling to optio


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