Bloomberg. We are targeting parts of the business where we are not generating acceptable returns. Matt apple falls short. The iphone maker expects to miss its quarterly revenue goal because of the coronavirus. And bhp warns of a hit to Raw Materials demand and prices the virus fallout extends. We actually have glencore across the terminal here saying it is going to take a 2. 8 billion impairment charge. It sees the scope of three emissions falling by 30 over 15 years. Bit, 2. 4arketing a billion. Recommended 2020 base distribution of . 20 a share. That will be the dividend news. Carbon emissions falling, coal mines deplete. Glencore says it is watching coronavirus developments. The bottom line in terms of earnings before interest and taxes was 4. 15 billion the estimate was for 4. 07 billion. Doing a little better in terms of adjusted earnings before interest and taxes. We are also getting eu car sales. European car sales dropping 7. 4 in january as new taxes hit demand that is already weakened. Watch out for carmakers to move this morning as well. We are just under an hour from the start of cash equity trading across europe. Let us take a look at futures. Down across the board. A lot more concern about coronavirus today after apple basically canceled its revenue outlook for the quarter. You see cap futures, dax futures, and ftse futures down more than 6 10 of 1 . Look at u. S. Futures. This will be the first trading day of the week for the u. S. Yesterday was closed for president s day. Nasdaq futures down three quarters of a percent. Tech Index Futures getting hit disproportionately more than other Index Futures. Take a look at the gmm here. We can see some real moves in the brazilian real. The black box here means a bigger move than three standard deviations away from the 90 days these core 90 day z score. In terms of equity indexes, for the most part, red arrows. India,howing gain, but hong kong, south africa down as well as thailand as we get ready for the european open. Lets get to the markets now with mark cudmore, bloomberg mliv strategist. Do you feel we have even worse news on the coronavirus after the apple revision to its Revenue Targets . Sure we have worse news on coronavirus, but certainly the secondary impacts are being registered by investors. I think it is very relevant. Apple is not only one of the Worlds Largest companies, but it is a bellwether for that very successful tech sector, showing leadership in u. S. Stocks. They have a Large Consumer base in china and a supply base in china. The fact is apple is saying this coronavirus continues to disrupt the revenue guidance. It is making everyone realize, this is a big issue. I think we know, we can see from how equity prices have traded, there is a large part of the market that assumed the impact would not be longlasting. Policy would counteract it. I think this apple guidance is saying we are going to be dealing with the fallout for some time to come. I dont necessarily mean negative prices. It means we are going to be struggling to work with a real pricing for another few months still. Column on this, he has warned previously he does not think we are going to see a v shaped recovery even if we have seen it so far in recovery indexes. Do you agree . I do not think equities are traded in a correlation with economic in any countries. The centralbank policy is much more important. I agree we are unlikely to see a recovery but i also dont know how important that is to markets. Was going to china have a deep a vshaped or a longer more sustainable you ushape, you would have no idea. We are in an environment where the policy response is always more important than the underlying economy. What i mean by that is we actually trade off the policy announcement, not the real impact of the policy on the real economy. Isont actually think this the core issue for markets right now. Obviously it is a very interesting issue for economists. Matt speaking of policy response, headlines coming across from singapore, saying it from the million budget to counter the virus affects. What do you think of the measures we have seen so far . How far along are we . Are we going to continue to get more major amount announcements from asian and global economies . Anna definitely mark definitely. In terms of the policy response, we are quite early. There are many different views about how far along we are in terms of buyers containment. No point in adding my voice to that. Whatever your perspective is, whether you think it is contained or not, the policy response is in the nascent stages. One of the first countries to announce its budget in the wake of the coronavirus. We have seen this support. Central banks will be following, governments will be following. Economicme way the response will play out, the policy response will play out. For joining so much us. Mark cudmore is the mliv managing editor joining us out of singapore. Im sure when you get back to your desk, you will see these measures, but that is the red headline. Singapore planning it hundred Million Dollars cut from the virus to counter the virus. Dollars from the budget to counter the virus. Impactl apples warning prices . Put in your answer to contribute to that conversation. In terms of breaking news, we have had a lot at the top of the hour. Glencore is one of those companies coming out with earnings that is going to be affected by the coronavirus. Looking at 400 million net loss after an impairment charge. Sales, have european car a big drop there. 7. 4 in january. That was before the coronavirus came into the public eye. There was a tax hit in terms of demand. Evenhas hurt car demand more than it already had. It was fairly weak. Then of course we got that headline out of singapore planning an 800 billion spend to counter the virus affects. Hsbc earnings early this morning. We will take a look at your stocks to watch at the open, see how we expect that one to move. 15 of itsto slash workforce. 35,000 jobs will go. Charges. Ion in remember, Bloomberg Radio live on your mobile device or on dab Digital Radio in the london area. Tune in. This is bloomberg. Matt welcome back to bloomberg markets. This is the european open. We are a little under 15 minutes away 50 minutes away from the start of trading. You can see the impact of concerns about coronavirus after apple cut its revenue guidance for the quarter. We see Franklin Resources in mason. O buy legg we could see more consolidation in that industry. Franklin resources in talks to madehe firm legg mason, famous by bill millers massive success decades ago. Thatlin resources may buy company. Singapore is going to spend 800 million to counter the coronavirus. Now it plans two packages totaling 5. 6 billion to support the economy. Lets get the bloomberg first word news. Outbreak isavirus heading one of the worlds most valuable companies. Apple does not expect to make its revenue guidance for the quarter. Ramping ups is lowerthanexpected after the Lunar New Year holiday. Stores in china have been closed or operating on reduced hours. The u. K. Warns an unprecedented attack on the european itmission following highlights the gulf between the sides ahead of negotiations next month. Bezos isunder jeff committing 10 billion to fight Climate Change. It will begin issuing grants in the next 12 months. Amazon is under pressure over the environmental consequence of online shopping. He said in a post on instagram, we can save us say birth. Save earth. 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. This is bloomberg. Matt thanks very much. Now, let us get your stocks to watch around the newsroom. Dani burger is looking at ship stocks for us. Joe easton is covering hsbc. What do you know on chip stocks . No surprise the sector is going to be under scrutiny after apples warning they are unlikely to meet the quarterly guidance. We have to look at apple suppliers around europe. Look for ams, dialogue some of, infini on, just to name a few. Semi, infineon, to name a few. We may see a read across the entirety of the chip manufacturing sector. Not just those hit by apple. Matt we will keep our eyes on those stocks. Joe, hsbc, clearly a ton of news this morning. What do you expect . Plans toas announced cut costs. Basis, 31 billion as of 2022. The market was expecting 33. 5 billion dollars, so betterthanexpected asians, but not a huge beat expectations, but not a huge beat. They will trim revenues by 2 or 3 . The main and negative is there has been no update in who will the new who will be the new ceo. That is what the market was looking for today. Hong kong is still the main drag. Net interest margins declined in the last quarter, which was quite a big surprise given that rates remain steady despite the disruption there. The big take away at the moment, all these costcutting measures, we dont know who the new boss is going to be and it is an overhang in terms of hong kong disruption and the coronavirus. The ceo was on Bloomberg Television discussing a few moments ago. Negatives as well as costcutting measures being announced. We will continue to keep an eye on it. We are going to get the latest stock stories by typing first go on the bloomberg. You can also get your first word news via the mobile app. Hsbcs chief Financial Officer spoke exclusively to nejra cehic and manus cranny about the banks plan. Let us listen. We have shrinking in areas. Clear we have clear underperformance and a lack of competitive advantage. What we see a significant investment in those parts of the business where we do think we have competitive advantage and we can grow. Doingk we are absolutely those things. Interesting comment from the shareholders. Options fairly binary. You are saying you are balancing two sides of the coin. Are you happy you are getting the balance right from those options. Think this is the right thing for the bank to do, the right plan for now. We definitely we are looking million of130 riskweighted assets in the next three years. In parts of the business that are performing well, particularly asia. We think this is the right balance. It is coupled with a Cost Reduction program coupled with toanizational simplification allow a sped up pace of execution. We think it is a great plan. Manus on riskweighted assets, you are at that moment of leaning into not bad asset price markets and hunger for yield. Riskweighted assets, a little more before we go. Unsurprisingly, it is parts of the business, the markets business in Global Banking and markets we are beginning to exit a lot of domestically focused customers in europe and the u. S. On the Global Banking side. To exitlso Going International customers that are not producing acceptable returns. I think we are going to be quite surgical in terms of targeting those parts of the business that are not generating except of all returns. We are going to take those assets and reinvest in parts of the business seeing much better returns. The u. S. Business, characterize for us what that is going to look like. We know the numbers. What are you trying to achieve . N two things. On the retail side, getting back to where we think we have for aitive advantages population in the u. S. And International Customers. You see a 30 reduction. We are focused on the east coast and Building Branch presence on the west coast. Secondly, on the Global Market side, reducing our presence in the u. S. Quite materially looking to concentrate into london. As hsbcs cfo ewen stephenson. We are going to speak to the Intercontinental Hotel group. Dont miss it. Bloombergome back to markets. This is the european open. 37 minutes until the start of cash Equities Trading this morning. Big drops in futures right now. 0. 8 on the ftse, hsbc is going to cut 35,000 jobs and apple is cutting its revenue forecast for the quarter due to the coronavirus. There is a lot going on. Let us get to our interview right now with the ceo of one of the Worlds Largest hotel operators, intercontinental has reported revenue for the full year that met, slightly beat the average analyst estimates. The question i asked of the ceo, what is the outlook like . Keith barr joins us. You did better than the street was looking for in the reporting quarter. I wonder, because of your very large exposure to the chinese market, what do you expect for the Current Quarter . We had a really solid year last year. Areas of strong performance. We had our best performance in terms of opening new hotels in over a decade. The number of new hotel rooms up about 5 . Profit up 6 . We were able to increase our dividend 10 . A solid performance for last year and good momentum to this year. Clearly the coronavirus is a challenge for the travel industry and for business in general. We are very focused on the health, wellbeing, the care of our colleagues. Customers working with our Business Partners and also with the government to support them in china to deal with individuals being affected by this. Expect do you first, how do you expect the coronavirus to hit your numbers . Do use to manage the companys chinese business, so you have particular experience in this market. What does it look like for intercontinental in q1 . Keith i lived in shanghai for almost five years and helped build our china business. Im proud of the Team Managing through this tough time. Travel is significantly down in the month of february. We are seeing basically a number of cancellations, but also rebookings. It is really difficult to call with the impact of this will be given the fact we dont know how long the virus is going to be a significant impact. We do know, we had sars, i lived there with h1n1, we saw drop in demand for a short period of time and a very strong recovery because of pentup demand and the chinese governments ability to stimulate Economic Growth and activity. It is only a small portion of our business today. A huge part of our growth, but less than 10 of our business today. Matt you have almost 900,000 hotel rooms. Locatedtion of that is in the affected area, in china . Keith about 15 of our existing hotel supply is in china. You have a little under 500 hotels in operation today in china, upwards of 500 being developed in china. To give you a sense, we have signed a few new hotels. We have opened a few in china. It is less than 10 of our companys profits, but it is a portion of our future growth. Thats what this industry is about. Longterm, sustainable growth. With the strength of china, we are confident in longterm prosperity. Unlike product production or Industrial Industries where they have supply chain issues, you can bounce back. You expect a sharp recovery . Keith we saw that with sars, it was a vshaped recovery. Other industries, there is that pentup demand of meetings, conferences, people need to travel for business, we pick up in the latter portion of the year. We need to make sure we are supporting the government. In wuhan, i am proud of our teams. We have four hotels there which are housing medical teams that have been flown in to treat the afflicted individuals. One of our hotels has been doing meals to help the workers build the new hospitals. We are part of the solution, working with the government. Very proud of the people on the ground making a difference. Matt thanks so much for your time. Keith bar, ceo of Intercontinental Hotels group. Next, bhp warns that the next six weeks are crucial for measuring the Coronavirus Impact on commodities. We will talk to the ceo. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Bloombergome back to markets. This is the european open. We do see futures pointing lower on more concern about the effects of the coronavirus. Apple cutting its quarterly Revenue Target. A lot of companies talking about the effects. This morning we spoke with ig hg about what it will do to earnings. Bhp, first half earnings surged on higher iron ore prices, allowing the companys new ceo to extend a run of bumper returns to investors. A protracted coronaVirus Outbreak could hit Commodity Prices even more seriously than it already has. Mike henry spoke to bloomberg earlier. Listen in. We are shipping all of our products, prices have held up because of the disruptions. We have not seen issues with payments. Contained,things are we think they will go back to the remainder of the financial year. If not we will have to adjust our forecast. So far we remain confident about the remainder of the half calendar year. I want to get to iron ore in particular. Im throwing up this chart for the benefit of our viewers looking at the collapse in chinese iron ore imports. Records go as far back as 2015 where the status that began. Given that almost 50 of your revenue in the first half was thanks to iron ore, is there a concern for deterioration in pricing . Mike if we look at iron ore inventories in china, they are not unreasonable currently. Absorb moree inventory. Steele seen weakness in demand in china. We have had supplyside disruptions. There have been disruptions. We have to keep in mind the coronavirus is impacting domestic supply of iron ore and domestic supply of cold. The has helped to give resilience to the market. Bhp needs more copper, more nickel as well. Do you believe you will have support for major multibillion mna in terms of these assets alongside earlystage deals . My strong first preference is to be securing options. Keeping an mind we have options within the existing portfolio. My first preference is to be securing these through earlystage entry. Area ofainly been an success for petroleum business. I would like to see more in copper and nickel as well. Mike henry, ceo of bhp. Joining us now is the manager of 2 billion pounds worth of multiasset funds at Newton Investment management. Of the you think incredible hit we have already seen to Commodity Prices, to commodity demand and how it is playing out with bhp with glencore . It has had an impact on demand, especially steel demand in china. Thate starting to see response. Clearly the share price is reacting. Investors are pricing in the fact that the chinese are likely to have a big fiscal response toward the back end of the year. What sort of rebound does that mean you are expecting . Especially with steel or iron ore, people not only resume the purchases they are making before, but also what they did not buying what they did not during the crisis . Chinese you have to believe the chinese are going to bring not only previous demand, which is why we are seeing inventories build up, but also you have to believe theyre going to bring forward demand for future years. That, thatt get undermines the rhetoric around that. One of the concerns, of course, would be that instead of trying spending in heavy industry, use direct that toward consumer tax cuts or you put forward an agenda that is more supportive of subsidies toward electric vehicles. That is less heavy industry intensive. You then want to be looking for samsung sdi. You need far more copper. Matt one column out today says economists cannot count on a quick virus rebound. What do you expect us to see in terms of economic rebound . Obviously the economy is that much further along. Know is so much we dont about this virus. With, you dealt expect some kind of fiscal response. Now on the table. Matt this morning, singapore said it is going to spend 800 million on top of the almost 5 billion it plan for the economy. Because of the virus we are looking at 5. 6 billion. It is going to give government cover to put out heavy spending plans. When you look across the globe, governments are running much higher deficits than what the market expected. That is in part because of whats happening in china and the concerns around that virus spreading provides support to governments to be more fiscally proliferative. Matt there is a lot of uncertainty and that is the issue. How does it change what you are doing as a multiasset manager . Ask we are very much focused on the longterm drivers. It is very clear we are going to have to d carbon our Power Generation and trip rotation sector. The virus goes longer than the market expect. Things will change. We have seen that with the announcement for apple. Companies torage think about where the supply chains are and make sure they have supply chains in more than one country. That could benefit Applied Materials companies and the benefit from people looking to capex state of things. Government focused on the longterm beneficiaries, structural growth areas. Renewable energy. If you were a government it is much spend, more politically easy to spend in those areas. That is where you have the popular support. Governments to do the stimulus they want, also infrastructure reorganization they would need for the climate diversifympanies to their supply chain. Very cool. More with paul flood from Newton Investment management. Next, hsbc is going to going to slash 15 of its workforce, 35,000 jobs are going to go. We will discuss yours biggest bank next blue matt just 20 minutes to go and we are looking at equity Index Futures pointing lower. Going to be a risk off tuesday. Lets get the Bloomberg Business flash. Apple does not expect to meet its revenue guidance for this quarter. That is because of the coronaVirus Outbreak. Manufacturing in china is ramping up more slowly than expected. Demand is also lower. Stores in china operating on reduced hours. Rio tinto has cut its iron ore production targets after cyclones hampered its operation for the second year in a row. Iron ore prices fell after disruptions to supply. They are expected to decline as the worlds biggest suppliers recover. Targeting a longstanding goal of 300 million tons of iron over year by 2022. For zuckerberg has called new regulations in order to win back user trust in a policy you turn. The social media architect stated that while it may hurt facebook in the near term, in the longterm it will be better for everyone. Tois pushing for lawmakers develop rules around harmful content. He also wants a new type of regulator. That is your Bloomberg Business flash. Now on thes catch up stories you need to know on one of the top stories you need to know, today. Europes biggest bank is going to slash 15 of its workforce. 35,000 jobs from hsbc. It takes a 7. 3 billion charge. The bank targets cost cuts off 4. 5 billion. Cfo spokehe banks exclusively to manus cranny and nejra cehic. Ewen on coronavirus, it is evolving. As you can see in our fourthquarter results, we had resilient performance in hong kong. Profits were up 3 on the year before. Overall, we are continuing to monitor the effect of the coronavirus. I think we are going to have to take additional provisions as a result of that. Very much a call on, how long does the virus continue . Can you give us any indication on the slowdown in lending, the reaction in china and hong kong in the first month of 2020 . May coronavirus come alive in terms of the actual reality for the business or the markets . Ewen we have had to put a lot of Contingency Planning around operational centers. Our centersome of for our customers, when you look at the actual numbers, they continue to be robust. But i think we are seeing some customers obviously struggling at the moment. Sectors,he real estate anything dependent on tourism into hong kong. So far the credit matrix continues to be robust. Manus onsetught with us to talk about the interview. Is it going to be enough . You have been covering this bank for years. It has had serious problems, not only with coronavirus and the hong kong protest, but also its Investment Bank is not measured up. Someone signed onto the new economy forum. A straight talker, to the point. That is reflected in this restructuring plan. When it comes to restructuring, i think this is a moment for stephenson and frequent. They are and for quinn. They are playing defense. Costs ingoing after europe and in the u. S. The are going to rip out in Investment Bank, defend the capital buffers, defend the position for a banking transition. Numbers are staggering in terms of the 7 billion. I am oldfashioned. That is the kitchen sink. Matt i have the lead tables appear. Up here. I switched it out to a 12 month view. Hsbc is coming out at number 16. Bankas this investment over the decade of competition with j. P. Morgan, morgan stanley, Goldman Sachs why have they not been able to do better . European banking is an incredibly difficult business. If you look at what they are trying to do, they have been very defensive, and that is the right thing to do. They need to restructure that business. They are cutting the european Investment Bank. It is a capital heavy part of the business and it is underperforming. They are reinvesting into other areas where they have better Growth Opportunities trying to get profits up. Europe is a very competitive banking market. One of the things we look for in the Banking Industry is a good banking market. That is exactly what europe does not have. We much prefer the opportunities in the u. K. Ratios,strong capital the stress tests last year were well conducted and proved how strong they are. Look at the underlying Economic Data in the u. K. That seems to be much more supportive of an economy that looks like its going to recover. The other part for hsbc they are really struggling with his they are going to have problems in asia with coronavirus. We are already seeing the bank out there providing repayment holidays. That is going to have an impact. Manus they have set a new target on return on equities. To step back from the target they had. You have challenges within credit suisse. We dont know where coronavirus lands. Thats going to be the challenge. A new set of targets for the market. Therein lies the issue. How do you compete with american banks . For me, that is the challenge for banks here. Paul it is certainly the challenge. In the u. S. , you have been deregulating. In europe, regulation has been going the opposite direction. More restrictive for those trying to do business across the globe. U. S. Banks are more competitive going into europe. It is a difficult position for hsbc. Theres a lot of costs and a lot of employees. A big number. Matt you manage to billion pounds of assets in the city. What is it going to be like doing business after brexit . What are Fund Managers and banks going to be able to do . Paul we have a majority in government, something we have not had in a decade. It is going to be easy for the government to push their agenda through parliament. Probably going to step and from their commitments do more spending, especially in the north of england. I would suggest we are going to see more spending in those parts of england where there are seats you want to hold onto coming into the next election. Matt thanks for joining us. Paul flood, fund manager at Newton Investment management, with us today on the open. We are minutes away from the start of cash trading. Hitsg up, the coronavirus one of the worlds most valuable companies. Analysts say apples slowdown will be shortlived. Matt welcome back to bloomberg markets. This is the european open. Eight minutes to go to until the start of cash trading. Let us get the bloomberg first word news. Coronaviruswide cases have risen above 73,000. That is as japan planes to remove all passengers from the quarantined cruise liner diamond princess. The ship remains docked in yokohama. Casinos in macau have been cleared to open again thursday following an unprecedented 15 day closure for the worlds biggest gambling hub. The u. K. Has launched an unprecedented on the eu. The chief negotiator warning the blocks demand that the u. K. Be bound by its rules risks undermining democracy. It highlights the gulf between the sides ahead of negotiations next month. Nancy pelosi has stepped up u. S. Warnings about huawei. She says the Chinese Telecom giant must be prevented from controlling the next generation of Wireless Networks, adding that autocracy in china makes huawei a threat to western countries. I believe if we were to let huawei have the information highway dominance, it would be police in thetate pocket of every person who uses that highway. Allegationss denied it represents a security risk. Jeff bezos is committing 10 billion to fight Climate Change. He has announced the earth fund, his biggest ever philanthropic investment. It will begin issuing grants in the next few months as amazon is under pressure over the environmental consequences of online shopping. He says in a post on instagram we can save earth. 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. This is bloomberg. Thanks very much. Back now to our top story. Apple says it will not meet its revenue guidance for the march quarter. The Virus Outbreak has created work slowdowns and lower smartphone demand as well. Strategists are not abandoning price targets yet. Here with the details and the morning call, dani burger. You will find no bullish capitulation. Strategists are hanging on to their targets despite the very clear warning from apple. Not everything is bright and sunny. Jp morgan saying theres going to be a 70 decrease in shipments and the cheaper iphone models, the se model, is likely to be delayed. Also saying once u. S. Markets open theres going to be a kneejerk reaction because this confirms the worst the street expected. This hurt apple and hurt the supply chain, too. Wedbush and rbc categorize this as a timing issue. It is not going to upset their bullish thesis. Rbc says all this does is the sales that wouldve taken place this quarter are going to be pushed to the third quarter. After a couple months of disruption, rbc and wedbush saying this is going to be a blip on the radar. The dani burger looking at reaction to apple cutting its Revenue Target. Let us take a look at the other stocks you want to watch. Look at commodities after glencore came out with a fullyear loss of 400 million after a 2. 8 billion impairment charge. Admit the and in line with consensus estimates. Its the outlook that matters. 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To slash 15 of its workforce losing some 35,000 jobs. The cfo tells us management will be surgical and ruthless. Apple falls short. It expects to miss its quarterly revenue goal the cousin of the coronavirus. Watch out for the supplying supply chain recovery. Prices take a toll on the Worlds Largest commodities trader. Looking at futures, a risk off tuesday this morning. We get worse and worse as we get closer to the session with woodsy futures down more than 1 . As the market opens up, let us take a look at where the cash trade is showing us. The ftse opening up straight down 0. 5 . Right away, it is risk off for the ftse and we are also seeing a significant demand for safe haven assets. Like treasuries. We see a big drop in yields thee as investors snap up paper. Spain is looking at a 0. 5 drop as well on the ey ibex. And the broader euros stock stoxx downro as well. Let us take a look at the sector break down. The biggest losses. Here that we have down as welltocks as Consumer Discretionary stocks down. Stocksowth and defensive losing some ground today as well as a loss in financials this morning as well as drops in sectors like pharmaceuticals. Pretty much everything is down. Seeonly green slivers we include Construction Materials gaining a little this morning. Media is up a little bit as well as construction and engineering. Really the only sector doing well this morning. Let us take a look at the stoxx 600 in terms of the individual movers right now. Almost alle probably of the stocks on the index open for trading down. Only 45 stocks are up. In terms of the gainers, those adding points or reducing the drop in the stoxx 600, unicredit carrefour. In terms of the losers, hsbc is up at the top down more than 4 bringing the stoxx 600 down more than 0. 25 . End lowerarkets after apple cut its Revenue Target. They expected the supply chain to be back up and running february 10 and it has taken longer than that. Joining us now is Tom Stevenson. Thank you for coming on the program. What do you think about this extended coronavirus hit we are seeing . Dids clear that companies not expect it to last quite this long. Tom i think that is true although i dont think anyone is particularly surprised that the First Quarter is going to take a heads. The actual announcement has been taken badly. It is a shock from apple. No one has been moving people have not been coming back from the lunar holiday. Matt how do you expect the recovery to look . Not surprised we are down in the first ordered. When i spoke to the Intercontinental Hotels group ceo a little earlier come he said clearly they are taking a hit this quarter and in the past when there was sars and they were past the rough part, the recovery was almost instantaneous. Recoveryas a vshaped and that is what we expect this time around and that is why the stock market reduction so far has been relatively sanguine. The expectations for earnings for the rest of the year, looking pretty good but there is a big unknown. Is it different this time or is it a rerun of previous episodes . That is what we do not know. Matt it is different this time. Which industries do you expect to be hedge the hardest . Which industries do you expect to be hit the hardest . A hotel chain does not have the supply Chain Disruption as they will at apple. Tom when it is just people involved spending money, they will come back and spend money. It is the complex supply chains that are at risk here and that is why the auto industry, we have seen a number of manufacturers starting to make comments about the virus situation and of coarse, apple today. Technology and autos. Matt we will take some time in a bit to talk about autos because i think it is a complex industry now and we were speaking with paul earlier antes do and he said that these things do get covered. Maybe we will see incentives for automakers to turn to electric cars even more. Ist we are seeing now commodities have been hit hard. Today that glencore they are taking a huge charge and we have seen the Oil Price Drop significantly. Do you expect that concern for demand to stay out there . Tom absolutely. With the oil price, that has been quite interesting. Several events this year has have pushed them in different directions. We have had iran and the u. S. In the middle east. Coronavirus,h the we have seen a dramatic fall in the oil price. What that is telling me is the forral direction for travel oil is downwards. Matt we have seen investors run to the perceived safety of debt as well as other things including to some extent gold and the yen. The 30 year treasury though dropped below 2 moments ago, the biggest drop we have seen in treasuries since september of last year. Do we have lowered ago for yields . Tom in the short term. What we have seen today is the classic movement to safety. The news this morning is worrying. We have seen the opening trade in the stock market reflecting back. In the longer term, i cannot see yields going much lower. It feels like they are bottoming out. In the shortterm, no reason at all that they could not go lower. Matt the alltime low was 1. 95 last year so we are not that far above the alltime low. Tom stevenson will stick with us as our guest host for the hour. We have more on hsbc which is cutping as it prepares to more than 15 of its work and take a 7. 3 billion charge. This is bloomberg. Matt welcome back to bloomberg markets, this is the european open. A bit of a mixed a bit of but dropse with danes on the ftse 100. Down byin frankfurt more than two thirds of 1 . Dani feeling the repercussions on the apple warning. We are seeing that read across to the suppliers. Including asmrs all diving on that move. Some bighey are doing cost cuts, about foreplay 5 billion worth and cutting its workforce by of about 15 . By about 15 . It is also suspending its dividends. Glencore taking a writedown on some of their commodities including coal and copper. Saying the coronavirus is affecting some demand in china. Have markets priced in a vshaped recovery . So too much action here perhaps that is an argument that investors have priced in the worst or maybe they are just not paying enough attention. Dani burger with a look at some of the individual stocks that are dropping. ,n terms of the gains in milan jumping 23 . That is the reason why you see the italian market moving up while everyone else is moving down. Not hitting all companies equally. Apple has already warned it will not meet its quarterly impact. Spoke tof bhp bloomberg earlier. We are shipping all of our product. Prices have held out. And we have not seen any issues with receiving payments. As long as this is contained , we remainquarter reasonably confident about the remainder of the half calendar year. Matt in a statement, the company said it the virus was not contained by march, it would revise expectations for commodity growth downward. That is the unknown there are. Our executive editor for energy joins us as well as Tom Stevenson who is still with us. There is a lot of uncertainty still out there and some companies are not going to stick out their neck and cut the targets now. Bhp sayingng you you could still be in or a decent recovery. He says he is not going to change his forecasted demand at all this year although if the virus extends beyond next month, they will look at those targets. Uncertainty about the virus made their choices prudent. Talking a good game there that there is some sense in which they are being cautious. He said do not count on a vshaped recovery. He is focused on the economic recovery. What kind of bounce back to you see . Tom you have to look at previous similar events and that is the only guide that you have. With previous events, we did get a sharp recovery. Is a statement of the obvious. We dont know. These are early days yet and we dont know how this will pan out so we have to hold fire on the prognostications about the future. On the basis of what happened in previous events, there is no reason to suppose that the hit might be quite hard in the First Quarter. Is coming down quite sharply but there is no reason why it will not bounce back. Are Companies Going to go back and start buying what they need or will they buy what they missed out on previously . Cio said he the is putting a lot of faith in after theulus efforts virus and in the past, we have seen stimulus efforts which have led to road building and construction. That has been very positive for commodity demand. He is clearly hoping we will see the same pattern a short downturn and a quick recovery backup. Matt that was a very good points. Paul was saying that to us earlier. That governments put more cash to work. Do you expect that to happen . We think the singapore budget today for example. We expect to see more spending. Matt topping an extra 800 million in stimulus. Tom it is an Election Year so that is not surprising. About more talking stimulus and in japan also. Asiank in a lot of these countries, we will see quite a Quick Response and i think that is what markets are counting on. We have the gh, five finance ministers getting together. They have asked for a concert ed action. Our commodity producers looking for a global concert . I think that is what they want but if they will get it remains to be seen. Matt that will be interesting to see how opec response to the crisis and how the supplyside response. Do you see Companies Cutting back in terms of their production . Surely Oil Producers must be doing that to some extent. Tom with opec, we have seen a willingness to cut supply over the last 18 months, two years and i see no reason why they should not take that further. Matt great having you here, tom. Is our executive director for energy and Tom Stevenson joins us from fidelity investments. Coming up, joining the fight a 10 billionates Climate Change fund. More on that story next. This is bloomberg. Welcome back to bloomberg markets. This is the european open. We are 20 minutes into the trading day and looking at a mixed picture. In milan, they are jumping. Other equity indexes are down this morning. Let us get the Bloomberg Business flash. Cut aboutc is set to 15 percent of its workforce and is taking over a 7 billion of charges and suspending buybacks. Businesses exit some and cut costs. It is also still hunting for a permanent chief executive. We continue to actively monitor the impact of the coronavirus. I do think we will have to take some additional provisions this quarter. Laura buyout firms are leading another firm was sidelined from the deal after being the highest bidder. The second group. Has launched a bid for a rival banker. A sign of longawaited consolidation. It expects to finalize the transaction by the end of 2020. The deal would boost earnings per share by 6 from 2019 levels. The banker continues it a hostile bid. Matt thank you, laura wright. Amazon founder jeff bezos has created a climate fund and is toting 10 billion in it help counter affects of Climate Change. Dani burger joins us. Dani the worlds richest person has announced his biggest ever philanthropic effort. 10 bezos committing billion. It will issue grants in just a few months. Is to save the earth. Amazon has been under pressure to act. Jeff bezos had not pursued any projects up to now and then there is the Environmental Impact from the company. There has been a lot public criticism about this. The company committed to an 80 Renewable Energy impact. Will this be on off to squelch criticism . A worker group from amazon says it applauds the move though it is still propping up fossil fuels with its daily operations. Matt dani burger looking at the fund it. On bezos Tom Stevenson is still with us. Theme has been huge for us lately and probably longer for you. What do you think about this investing . Tom the remarkable thing is what happened over the last year. We run a survey of roughly 150 analysts around the world. We cap into the conversations conversationse they have with companies around the world and we ask them about their attitude toward these factors. The difference in the last two years has been extraordinary in terms of the number of companies that are beginning to take social,y environmental, and governance factors in how they run their business. We have noticed a big pickup in parts of the world where it had not been an issue before at all, china is an example. A big increase in the amount of focus on esg factors there. Far have Companies Run too too fast. I look at tesla. Seem strange that tesla should be worth so much thanthen volkswagen volkswagen or all of them really. See where it goes but at the moment, it does feel like it has gone a bit far. It is worth 150 billion while volkswagen is worth less than 100 billion. What do you think about this investment in electric car production . Will it pay off . Off becauseto pay if it does not, they will be out of business and that is what the stock market is saying with its relative valuation of these companies. I would not want to bet against those companies with the technological knowhow and experience and Distribution Reach being able to make a success of it. I think that is the big gamble with tesla it is taking on huge businesses. Matt tesla has the knowhow while volkswagen has the distribution and reach but no one else seems to be able to make a battery as cheaply and that lasts as long as tesla. Bit it seems to be a assumption that no one else will be able to do that in the next few years. Matt Tom Stevenson, we appreciate your time. This is bloomberg. Matt welcome back to the european open. 30 minutes into the trading day. Take a look at the stories in terms of the equity indexes or the main stoxx 600 broader European Equity index. It is down. A brief recovery in the beginning 15 minutes of the session but it dropped back down aain even though we have yo bank improving because of the offer. Utilities up by 0. 7 . A defensive move there. Little change in real estate. Basic resources are taking the biggest hit. Auto parts and automakers the secondbiggest and then technology. We do not have the technology representation in europe as we do in the u. S. The apple announcement throwing out its revenue forecast for the First Quarter sending shockwaves through the industry but not hitting the Bigger Picture indexes here quite as hard. Outbreake coronavirus is hitting one of the worlds most valuable company, apple. Isufacturing in china ramping up more slowly than expected after the Lunar New Year holiday and demand is also lowered. Stores in china have been closed. Have risen above 73,000. All passengers from the quarantined cruise line, the diamond princess will be removed. And casinos in macau have been cleared to open again on thursday following an unprecedented 18 day closure. The u. K. Has launched an unprecedented attack on the eu conditions. The chief negotiator morning that the blocks demand risks undermining democracy. Highlighting the division between the two sides before negotiations next month. Nancy pelosi has stepped up warnings about huawei. She says it must be prevented buildout ofling the networks. Saying it is a threat. Have were to let huawei the information highway dominance, it would be like putting state police in the pocket of every person who uses that highway. Has repeatedly denied allegations that it represents a security risk. Global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Matt. With a lookwright at your first word news. Let us get to our exclusive interview this morning. Hsbc will cut about 15 of its workforce, 35,000 jobs and take 7. 3 billion in charges. Europes biggest bank is trying to reshuffle its strategy once again as it faces challenges like the protest in hong kong and the coronavirus. Hsbc ewenhe cfo of spoke to manus cranny and nejra cehic. Ewen we have clear oferperformance and a lack longterm sustainable competitive advantage is where we are cutting. And we see significant investment in those areas where we do have competitive advantage and where we think we can grow. We are doing is of those things. Nejra it was an interesting comment from one of the shareholders. What you are saying is that you are balancing the two sides of the coin. Are you happy that you are getting the balance right from those two Binary Options . Ewen we think this is the right thing for the bank to do. The right plan for now. Todefinitely are looking invest 100 billion of risk awaited assets in the next three years in parts of the business that are performing well particularly asia. We do think this is the right balance. It is coupled with a substantive Cost Reduction program as well as simplification. We think it is a great plan. Manus picking up on that risk weighted assets. Sellnes you are going to a little more complexion on them before we go. Ewen unsurprisingly, it is in thinkof the business i focus on theto Global Banking side. We are also going to exit International Customers that are 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 reinvest those riskweighted assets. Business, on the u. S. Tell us what that will look like. We know the numbers but what exactly are you trying to achieve . Two things. On the retail side, we are getting back to where we think we have core competitive advantages. What you see is a 30 reduction. We are predominantly focused on the east coast. Globalondly, on the market side, reducing our presence in the u. S. Quite materially and looking to concentrate more of that business into london. Hsbcs chiefs Financial Officer coming Ewen Stevenson speaking exclusively to mandate manus cranny and nejra cehic. Sao paulo has launched an unsolicited bid for a smaller rival. One of the biggest european banking deals since the financial crisis. Let us get more. What do you know about the offer . And what the response has been . This has as we know, totally taken the bank by surprise. We are told by people in the know that they had no idea this was happening. Only yesterday they released their threeyear strategic plan. Seems longe side, it planned and worked out. They worked out other details including other side deals they have to make with their insurance partner. At what already looking the antitrust issues will be. They have examined this and set it up very completely before they sprang the offer. Matt what has the banking story in italy been like recently . This has long been the sick Banking Sector of europe with all of the nonperforming loans. How has the m a situation been . Absolutely stagnant. And only weeks ago we talked about this round of earnings that while most Bank Executives said yes, m a and consolidation are important, none of them are actually interested in doing it themselves. We were almost looking at a story about missing this round of consolidation. So this kind of comes out of nowhere. As far as the conditions of the bank, it has been a quiet recovery. We have heard how bad the Banking Sector was. There have been slow and gradual improvement with bad loans ending. Matt any other of italian banks in play maybe . Is there Media Coverage of banks that may be up for sale . There are quite a few things in the discussions and this may put on it. Even yesterday, when it was talking about their strategy, there was talk about another where the state would have to sell its stake and they might be looking for a partnership deal. There are a lot of mediumsized ones in play in terms of being talked about. They executives have said want to stay away from doing deals themselves. A lot of it is about execution risks. Maybe deals make sense but there are a lot of unknowns. Is a fairlythis small deal relative to their size. Larsen, our european financial editor. , apple falls short expecting to miss its quarterly revenue goal because of the coronavirus. We will bring you the details of next. Arket moving story, this is bloomberg. Matt welcome back to the european open. We are currently 43 minutes into the trading day and looking at what looks like a mixed picture though frankly it is the bank shares that are holding up the ftse in milan. Everything else in terms of indexes is down. Let us get the Bloomberg Business flash. Bhp is warning Raw Materials will take a hit on lowered chinese growth. For now, it is holding up. The World Biggest miner posting positive results with earnings at 29 higher. Prices have held up in part because of other supply disruptions and there have been no issues in terms of receiving payments. Ourould have to revise forecast. So far, we remain reasonably confident about the outlook for the remainder of the half calendar year. Cut its iron or targets after a cyclone hampered its operations for a second year in a row. Prices soared in 2019 after disruptions to supply. Rio tinto is targeting a longstanding goal of producing 360 million tons of iron or by 2022. Nancy pelosi has stepped up u. S. Itnings about huawei saying must be prevented from controlling the next generation of Wireless Network adding that china makes huawei a threat to western countries. I do believe that if we were to let huawei have the information highway dominance, it would be like putting state police and the pocket of every person who uses that highway. Hasa huawei repeatedly denied allegations that it is a security risk. Mark zuckerberg is pushing for lawmakers to devise rules around harmful content and he wants a new kind of regulator. It will be better for everyone in the long term including his business. Matt laura wright with your business flash. Our top story the coronavirus mostit one of the worlds valuable companies. Apple says it will not be able to meet its Revenue Target for the january through march quarter because of a work slowdown and lower smartphone demand. The iphone maker is experiencing a slower return to normal conditions than anticipated. And demand has been hit while store closures and reduced football are stopping people from buying as many phones. Alex webb joins us now. They thought production would be back up to speed on february 10 but it has been longer than did and people have not been buying as much stuff. You mightve expected a lot of people to be out purchasing iphones. And then they cannot manufacture as many as a would have expected. The next month they will reveal a new lowend smartphone. They source workers from all around china when they ramp. P for a certain period they cannot do that because quarantines are preventing the Free Movement of people. Matt dani was talking earlier about analyst reaction and basically everyone still loves apple. There is an expectation that the recovery will be sharp and quick. That there is is no actual effect on demand. As soon as supply is able to soon as chinese consumers are allowed to go shopping again, that will allow recovery. Bearind that china china is about forsixth the revenue apple. That was an expectation there will be a shortterm hit but recovery in the midterm. Matt i have to ask you about huawei. Regardless of how nancy pelosi pronounces the name, she is concerned about the Security Issues involved in using huawei equipment in your network. It is a bipartisan concern in the u. S. Why are europeans not worried about it . They are worried but they recognize that the impacts can be measured and limited. They are keeping it to the periphery of the network. At theextent that moment, it is possible to do that. Evolves as 5g evolves that might become more difficult. And others may catch up with huawei. It will be harder to cut huawei out of the central parts of your network. But there may be viable alternatives. Matt it seems the u. S. Is saying if you have huawei equipment in your network, they can spy on you and if we are sharing intelligence with you sharing military intelligence with you, that is a real problem. It does not seem like the u. K. Or germany are that concerned. Germany matt sensible measures . We will not purchase any gear from this state involved company . But at what cost . Ultimately, a country needs 5g. In britain, we are trying to economy. E postbrexit in germany, it is trickier but they have far greater exposure to huawei equipment. To knock them out because they are already in there. If i am making a phone call to an antenna near me, and it is therey huawei, arguably is an opportunity for it to get into the middle of the conversation. The core network, the ability to look at all communications, is something that will not be easy for huawei to do and there for china to be able to do. Matt very interesting stuff. Thank you for joining us. Alex webb is a Bloomberg Opinion columnist talking to us about apple and huawei. Up next, we bring you some of the stock movers. Theuding more on intesa and takeover bid. This is bloomberg. Matt welcome back to bloomberg markets. Union he european european open. Equity indexes are down for the most part across europe. Slight gains in italy due to one major stock gainer. Here with some of your individual stock stories including the one winner is dani burger. Bid getting a surprise from intesa sao paulo. Some of the other italian banks rising in sympathy with hopes over m a in the country. Renault down 7. 4 , the first decline since august. Part of that has to do with a new emissions tax. Trading at a 2013 low. The saga of the elevator sales continue. Thyssenkrupp. One of the highest bids said the demand of 2. 5 billion euros upfront was too risky so thyssenkrupp has to focus on the other big buyout firms that have expressed interest which as i high have not offered as a price. Altmeier. R all t a proposal faces delays due to work. Halting joining us now is our reporter in berlin. Where do we stand on this . As you were telling us yesterday, it is new forest growth and they want to plant more trees then they are tearing down anyway. The problem is they need to get this all done before the breeding season starts in midmarch. We are basically waiting for the Brandenburg Court to make a decision as to whether tesla can go ahead and finish clearing the remainder of the forest or if that were needs to be stopped. And some of the environmental groups that have put forward this suit is demanding this. Matt what could result from this . Build this,ld not would they have to go somewhere else . That is really teslas decision. Basically, if construction will not start in midmarch, they will have to wait another six months for construction to really start. It really depends on tesla and whether they want to wait that long or if they want to put forward their plant somewhere else. Matt got it. Thank you for covering the story from berlin. This is the european open. Surveillance is up next. I am headed to radio. 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