are headed for a week of gains on the stoxx 600, up to four weeks of losses. crude is the story. wti down two percentage points, about 40 bucks a barrel at $40.66. the iranian oil minister will not be in doha. they are sending a representative. what does that mean for an output freeze prospect for all of them? let's get to vonnie quinn. vonnie: bernie sanders and hillary clinton went on the attack last night, facing off in a debate in brooklyn ahead of new york's crucial primary. they questioned each other's judgment and record, the former secretary of state pushing back hard on criticisms of her decision-making. he questions my judgment, but the people of new york voted for me twice to be there senator. and president obama trusted my begment to ask me to secretary of state of the united states. vonnie: the debate was their first meeting since the campaign moved into the empire state. voters head to the polls tuesday. another casualty of the panama papers, this time the spanish industry minister. he initially denied any involvement before backtracking. intensifieds ouster in spain after a newspaper report yesterday. russian attack planes came dangerously close to a navy destroyer in the ball can see this week. state,. secretary of john kerry, says the u.s. ship could have opened fire under global news of engagement. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. jon: i find them thoroughly entertaining, as many people do. david: it is amazing to watch. funny is that they say it was perfectly safe as we were filing -- as we were flying hundreds of miles an hour that close to the ship. jon: more signs of stability in china. today they reported first-quarter gdp was in line with expectations of 6.7%, just one of several economic indicators to be reported throughout the day. curran, who joins us from hong kong. good evening. thank you for joining the program late in your friday. looking at the data, is the stability move nothing to see do we have to take a deeper look? enda: we do have to take a deeper look, but adding to the narrative is that growth is stabilizing. markets,y, china's was confused policy affecting markets around the world. since then we have seen signs of manufacturing stabilizing, better signs on inflation, exports, and real estate. taken together, we have gdp comfortably within the government's growth target. and there is the sense that china is stabilizing, but at what cost, and how are they doing this? david: retail sales you did not mention, which is up over 10%. between that shift go retail and services? enda: when you consider what is happening in china over the last quarter -- the weakening along the capital outflow, the overall fragile nature of china's economy, if you listen to the big foreign consumer conglomerates working in china, starbucks and apple, they feel there is a pretty optimistic outlook on china. i guess it is not at the pace yet where it is enough to fill the cap -- fill the gap being left by the oil economy. vonnie: the story talks about a credit card trampoline. i want to talk to matt miller. matt: this is a chart that we have of the outstanding loans here, the new monthly loans. you can see the blue showing that they have soared up to levels higher than 2009. sales up 70% home year over year, this new credit could explain some of that. david: the white line is gdp, right? that wanders down, the credit surges up. matt: that's right. they are trying to boost gdp with that. david: how big is this issue? enda: the near-term narrative is one of stability, but economists are worried that they are resorting to old playbooks, increasing spending, relying more on debt and borrowing, moving away from the market-driven reforms that are needed to put the economy on a more stable growth future. the worry is that growth has taken over for now, but down the road they may be storing up bigger problems. david: thanks for much, enda curran, chief economics editor in asia. what iso talk about going on in china. let's go back to this credit thing. credit in itself is neither good nor bad. how much of this is going for productive investment as opposed to state-owned enterprises or local governments? >> that is a very good question, and a lot of that money is going back to these unviable industries -- steel, building materials -- that have been the root cause of the problem. is are companies that are simply not viable. and are being kept alive, as a result they feel that that is exporting deflation to the rest of the world. vonnie: yesterday our guest was saying that the ecb's are not industries anymore, they are employment agencies. is it ok that china is propping them up to keep people employed and social instability down? it is ok, but it is a short-term view. but china has restructure. you cannot keep an economy going with industries being kept alive by cheap credit that are not sustainable in the long run. china has to take a politically hard decision, to close industries down and move the employment to more productive sectors of the economy. but that is a politically difficult decision, particularly when you have a leader in a party where self-preservation is a key motive. cut rates this morning, the markets would cheer . most people would assume the markets would cheer. at the same time, you have china's steel industry churning record supply. the low rates boost the credit, as you say. so how does china manage this transition at a time where if they do ease, the world complains. if they do not ease, then the world complains. difficult thing to manage, and they have to manage it carefully. it is a fine line between domestic instability through unemployment, and managing the global stage. there is a productive element. you have seen a re-acceleration of housing. credit is not only going into the zombie industries, it is also feeding into the housing market. we have seen the acceleration in housing because credit is coming into the consumer area. as the homes are built, there is increasing domestic demand for steel. that is one important thing to take on board as well. david: we had the cio of cow stirs a couple of days ago. negativedecidedly outlook on china. economy is going through an enormous transition from a manufacturing economy to a services economy. that will take time and you will have rough patches. look at the employment numbers and retail sales numbers. i think china is really in a flat patch where they will not see growth. it does not hurt the usa, but it hurts him merging markets in other regions of the world. david: he was more explicit with us. he said it is actually a recession. what is your view about where the economy is overall in china? simon: i have always said that the level is less important than the trend. i think we are in a stabilization, but are we at a point of real acceleration or stabilization followed by a steady decline? anybody looking for the reacceleration -- the real acceleration -- the transition from manufacturing to consumer is important in that regard as well. when you're fighting against capital and fighting against labor, capital and labor have been an asset to china in the past. that is what has underpinned chinese growth at the turn of the decade. now capital inflows are not working for you. demographic,e a and aging labor market not working for you. when you are working against those, the only way you can boost growth is through productivity gains, which are harder to eke out in consumer services than they are in manufacturing. as the economy progresses, inevitably the growth way will slow -- the growth rate will slow. very much for being with us on the program. next up, it is deal or no deal in doha. crude, brand, and wti retracing the rally this morning. ♪ vonnie: "bloomberg you are watching -- you are watching "bloomberg ." lloyd blankfein is embarking on the biggest cost-cutting pushing years. the company recently began dismissing more support staff and is increasingly rejecting banker spending on airfare, hotels, and entertainment, and directly serving clients. vast global market prices are at the top end of the market range. valuing the company at $1.8 million. the company raise 253 million dollars after 13 million shares were sold at $19 each. thestors are looking for deal to live in the ipo market, which has been hampered by stock market volatility. china's economy gathered strength last month, thanks to a spur in new credit that helps the profit sector rebound. new credit, industrial outlook, investment, and retail sales all picked up in march and beat analyst forecasts or that is the latest "bloomberg business flash." jon: some of the world's largest oil producers are meeting. the iea says it can end the global got that's the global glut this year. -- can end the global glut this year. ryanore, we have to get to chilcote in london. it appears the focus now to iran is sending print is that good news this morning? ryan: it is good news, but i am not sure how relevant it is. in the end, we have learned that the iranians are going to send their opec governor. that is effectively the oil minister's number two. at the end of the day, the iranians have been clear that they are not reaching a cap on production until they reach pre-sanction levels. they are nowhere near pretension levels right now. number two has no ability or power to negotiate. it just sends a message that our position is nonnegotiable. i am not sure how important it is that the iranians are there in a capacity to make decisions. overhange possible from iran has been affecting the oil market for some time. do you have any sense of how realistic it is for iran to ramp up investors? a fair amount of investment has to be done, doesn't their? aboutthey are producing 3.3 million barrels right now. that leaves them about half a billion barrels shy of where they want to be by the middle of the year, and upping their production by that much, most analysts would say it is a very big ask. for the saudis and others gathered in the room, iran has not been quite as much of a threat as they might have been worried about. meetings we go into the on sunday, are we looking for a good result or just avoiding a bad result? the iea has already said that oversupply is coming down. if they walk away in anger, that might be a bad result. but are they really going to affect the overall oil price? ryan: they could affect the oil price. it depends on what side of the equation you stand, whether you are a consumer or a producer. the ministers going into the meeting will be well aware that if they are seen as getting together and getting into a big argument and leaving without a deal, that could be ruinous for the oil price. since they first got together in that sort of mini group, with the russians and the saudi's and ,he venezuelans and the qataris production has risen 30%. you can see much of that $13, $14 increase in the price of oil over those two months fannish. vanish.those two months matt: the point of this chart, you can see it dwindling lower and lower. much tolly do not have boost anyway. iran can add one million barrels per day, but the rest of them, other than saudi arabia, cannot add anything to the global supply, can they, ryan? ryan: that is right. remember, if they do agree on a cap, they would be capping production at january levels when many of them were producing more than they are now. the saudi's were producing more. only the russians are matching what they were producing. everybody has been getting ready for this cap by increasing production as much as possible so that if they do agree to a cap, they have no chance of going to where the cap was. vonnie: we are looking at saudi arabia and russia, but no -- but what about the non-opec countries? can they save the day? ryan: at the end of the day, the real question is, who is going whoake room when i were -- is going to make room for iranian oil when it does come to market? to doudis are unlikely it, so from the non-opec countries, you have to watch russia because it is russia that has teamed up geopolitically with iran. i would keep my eyes on them. the other non-opec companies are not even showing up -- mexico will not be there. brazil is not there. bloomberg's ryan chilcote coming to us from london. coming up, his goldman sachs headed for a rough patch? that is coming up next on "bloomberg ." ♪ jon: this is "bloomberg ." futures a little bit soft, -27 point on the dow. three, basic gains in the u.s. looking ahead to the doha meeting, right here right now, onsian crude to write at 20% may 3. dollar-yen softer as well. a little bit of risk off the head of the open for global financial markets. let's go to matt miller for some of the big analyst calls on wall street. matt: a big call from cls a on currencies. china's u.n. will tumble i-19 percent by the end of the year. -- will tumble by 19% to the end of the year. is amar gill.ere a weaker level than any of the other 44 analyst projections that we track here at bloomberg. he is a street low. here you see year today down 3/10 of 1%. goldman sachs is taking t cost-cutting push in years. we expect them to be the lowest of any quarter in a decade. joining us now is michael moore, bloomberg's finance reporter out of london. how are investors reacting to what is going on at goldman? michael: this is certainly in reaction to the environment and what investors want typically when you have a tough environment. they want you to control what you can, and that is more on the cost side than the revenue side right now. this should be well received. jon: that is a big question, isn't it? the kind of expensive cuts we are talking about are expensive, people going down and having extravagant meals, people going from one office to another in europe. they are the types of things that they want to cut back on. is there enough space there? michael: it is not as big of a piece as taking a big chunk out of the competition or the headcount, but it is more immediate. as you mentioned, when you do a big layoff, you have severance costs and it can take almost a year until you start seeing some of those savings. this is more immediate, but it is more tweaking on the edge. it is trying to whether a storm here. vonnie: a couple of things that --have heard is that headcount has gone up since 2009. there was of 2009, 32,500. michael: one thing you see with goldman sachs, while the headcount has gone up, the senior headcount has been going down. they have been hiring a lot more at jr. levels, so the pyramid has got steeper, if you will. i think you are starting to see that across wall street as they try to have enough people to execute the business while keeping compensation costs low. david: i am not sure what that is. matt, will you explain to us? matt: speaking of compensation costs, i have lloyd blankfein's here. this axis shows us the three-year annualized return to shareholders. goldman sachs is this dot here. this group is underperforming all of that index almost. however, lloyd blankfein is getting paid more than almost any of those ceo's. the only one who gets paid more is larry fink at blackrock. matt miller, thank you very much. michael moore from london, thank you for joining us. next up, the brawl in brooklyn last night. that is next on this program. two hours away, futures softer ahead of the open here in new york. ♪ jonathan: this is "bloomberg ." ftse 100 down by .5 of 1%. is selling his penthouse apartment just behind st. paul's cathedral. tom: i am moving across. ofwas like mongolia are one those. i'm moving on the other side of the river. we just need to look at it and not be in it. jonathan: it is time for first word news with vonnie quinn. vonnie: belgium's transport minister has resigned after a report detailing absences in security. that led to this resignation and they said the oversight of security measures at the nation's airport were flawed and had serious insufficiencies. to goent obama is set into the debate after the call remains it europe -- britain will remain in the european union. the 20 trying to keep nations together. the california panel is recommending the trust manson follower, after more than four decades after she" members went to prison, and the decision will undergo review from the board. global news 24 hours a day powered by our journalists and news bureaus around the world. as you heard, tom keene is here for the morning must-read. we are talking about negative rates. had a talk about this important stigma. from columbia, bring it up and he is always roughly everybody up in economics. this is a negative rates. posen says he disagrees. the widely documented search for yield complies that many investors will ship their portfolios toward riskier assets -- we have all seen that -- exposing the economy to grade of financial instability. the big lesson from all of this is captured by the familiar idea, garbage in, garbage out. central banks continue to use the wrong model, they will continue to do the wrong thing. tough language. david: one thing he takes fault with is he says, it does not take into account thanks. so they assume that if they reduce the interest rates that the banks will start loaning money. tom: you could addition effort to big to fail banks to the rest of the banking industry, which is like, will you stop screwing around with things? what was great in the debate was the professor saying that negative rates have a place but they have yet to have the courage to really do them. and then pozen saying they work in denmark, smaller country but not bigger. jonathan: i think this is far more nuanced than people appreciate and i wonder why this has become a huge topic of discussion when the ecb has had negative break since the summer of 2014 and denmark longer. if you look at the fx channel, if performed perfectly well for denmark. likewise switzerland. this helps them put a lid on the currency. i think the conversation has shifted and the gets more attention he kissed the banks are in focus, the credit channel in focus and that is what i think is probably the shift in the last few months. vonnie: anyway, i am going to say, what are the alternatives being proposed? an alternativeot to be proposed, there is a set of debates and this goes back to data dependency and that phrase of actual progress. they have to see the actual progress. matt miller, there is no growth, right? matt: i am wondering about this. we don't have negative rates in the u.s. but we had massive quantitative easing and these qe2, andresent qe1, qe3. this is the fed series on capital spending, and you can see that this comes down below even the 2009 level. would stiglitz argued that we did not get what we paid for as far as qe? tom: that looks like it is on the third floor of the met museum. [laughter] david: exactly. matt: i will tell you that bloomberg users can access if 951.type in g #btv qe3?that is qe1, qe2, matt: that is correct. tom: that looks great. turner is going fast over there. david: now we turn to the debate in brooklyn last eye with hillary clinton and bernie sanders. they were need exchanges about the banking industry. they sparred over dodd-frank with bernie sanders pushing clinton with a relationship on the big banks. >> secretary clinton was busy giving speeches to goldman sachs $225,000. >> it is important to get the facts straight. i stood up again against the haters of the banks when i was a senator. i called them out on their behavior. have consistently said dodd-frank is not enough. clinton called them and out. oh, my goodness. they must have been crushed by this. , in my view, have too much power, they have showed themselves to be fraudulent organizations endangering the well-being of our economy. if elected president, i will break them up with legislation to do that. david: this is good entertainment, but in my experience, you have to take this somewhat seriously because an presidential candidates go out and take issues on the campaign trail, once they get into office, they sometimes follow through. i will be blunt. i thought it was secretary clinton's best moment in ages. she sounded like the hillary clinton i think i know. jonathan: in terms of the playbook for the republicans, is bernie sanders helping them by attacking hillary clinton? david: of course. someoneis helpful for on the outside by jon ferro with that smart question. the nuances of left or progressive or this dreaded word no one uses, liberal, there are as many shades of liberal as there is better known in america, and bernie sanders is one of them. david: also in this election, leftgoes from the very far to the very far right. for a populous right person to come after hillary, it is a surprise action. vonnie: did bernie sanders take the right attack by criticizing wall street so much last night? does the new york primary -- tom: to his constituency and went after new york with a tone. as david mentions, it is a tone that resonates, which is what you get when the gdp, where are we? 0.7? jonathan: i believe so. vonnie: how many bankers do you think are getting their dollars? is thatl, the end bernie sanders and mr. trump are playing and continue to play given the data we see to an economy that just is simply there. david: as you watch this play out, go toward next january and february, if you are running a major bank or working in the major bank or have stock in a major bank, how do regard the debate? tom: i won't do it by selling stocks. we are not allowed, but what should be the response of bankers and what should be the response of individual bankers? that debate, jonathan, has been there five years ago. how should they respond? the atlanta fed gdp being forecasted a .3 percent, said there was a bernie sanders statistic. how do theestion is, many people the watch bloomberg address and respond to that? we have not seen it. david: we have not. tom keene, thank you. you have to go back to "surveillance" on radio. great to have a. next, brazil in the political crisis, so we will take a look at the potential impact on impeachment against resident rousseff "bloomberg ." ♪ david: i am david westin in the hpe greenroom. coming up up, scott mina, guggenheim partners ceo and we will have a great conversation in the next hour. vonnie: you are watching "bloomberg ." playmaker is nearing a deal to develop airlines for 50 more. the sale would be the largest for the struggling aircraft program. it would equal about half the total that bombardier already has on the books. customersr low as slugged volkswagens efforts to resolve the cheating scandal. , it ends in months march. it is down one percentage point from when you're ago. that was their worst showing since 2011. an internet company speaking with banks about getting loans as much as $2 billion. they say that they are seeking a five-year facility of 1.5 billion dollars. in this expanding operations and pushing ahead with acquisitions. that is your latest bloomberg business lash. jonathan: to brazil, or the supreme court has overturned the government motion and outputting therecedent rousseff on impeachment procedures to proceed. there was speculation that president rousseff had to step down. more on brazil with blackbirds had the emerging markets asset strategy, we are joined from mexico. great to have you. is it a flight to brazil? in brazil ising on inflation has unraveled for a number of months. markets are anticipating political change. based on that, there has been a strong riot of different lessons of what is going on in brazil. clearly, their reaction points at behavior. thats led to the situation we are facing right now. brazil is a great country, great opportunities and markets are actually anticipating to what looks to be an improvement in policy. there is another lesson in the case of brazil, in which say an independent prosecutor can actually contribute to an improved environment in terms of growinghing the role of an emerging economy, so the situation is unraveling and it is pretty fluid. it changes day by day. we are watching it closely. it is certainly a time of opportunity in brazil. we have actually been trading brazil on the equity side so far and trying to enjoy the rally, but being careful on what will happen. me that therikes contrast between brazil and argentina in this regard. in argentina, you had an election where someone had a different approach to managing the economy and business. in brazil, it is not a different approach that they want to get rid of rousseff. does that say something about this rally and if it is sustainable? i don't see anyone coming with a better idea. gerardo: one needs to understand in why this is happening and it is after many years of underperformance of brazilian assets, so notwithstanding the massive route we have found a bald assets in brazil, when you look at things in long-term massiveives -- the outstanding we have had from the assets in brazil, when you look at these things are long-term perspectives, there is an interesting message in the case of argentina. it is that political change can bring about much greater economic ties. markets are anticipating that. vonnie: what is priced in? if you look at the 10 year yields, at 5.2% now, what is that telling us about brazilian markets? gerardo: the brazilian economy is one that has significant structural challenges, and this year, inflation will continue relatively high, notwithstanding the economy that will contract close to 4%. next year, it will be hard for the economy to post a positive gdp number, so what that implies in a country in which they look at savings that is relatively low to emerging economies, it is unique to have much higher real rates as part of the equation, so long gunned yields in brazil are certainly at the highest level. we can see that in the emerging world, and in the prospect of market stability, especially on the currency side, it is a very for local market rates in the long end of the curve. matt: bank of america merrill lynch has said they are worried about leverage in brazil. i have a chart that shows public debt as a percentage of gdp is climbing to levels we have not seen since 2011, while corporate debt to assets is climbing to a record five. are you worried about leverage their? gerardo: yes, in the case of and it it is interesting is represented when you look at the structural corporate and it is represented in broader terms and that is sort of the energy in the mining sector that has been used in an intensive manner. a way of credit for global capacity, so most of the increase in debt and corporate debt is explained by the expansion and those sectors. thus sectors happen to be -- those sectors happened to be facing an overcapacity issue at the global state. we do look at it from a macro perspective and in the case of brazil and broadly speaking, the case of em corporate debt, it is not entirely have to be a macro issue but it is an issue and it will test many different em countries. the bankruptcy procedure, so there is a lot of pain to be processed through the systems and it has not been a major challenge in the macro financial perspective, but it will be a situation in where we need to reduce the debt leverage and that will require some time. jonathan: just to wrap this up and put these stories together, if rousseff is replaced by the vice president at this point, are you confident that those in line to replace it are free of the political corruptions of allegations held against her and can tackle the issues you outlined anytime soon? arardo: one needs to take cautious short-term view. the medium-term perspectives are looking good to the extent that , again, asal change i was saying, can bring about improved policy framework and can foster economic growth, so in that context, the situation is clearly the case of opportunity. short-term, in order to get there, it will take a while. it will take a while because even if the situation moves in the direction that you are in short-term, nothing is going to change drastically, so one needs to be cautious in terms of balancing these attractive long-term perspectives with what looks to be a bumpy road to get there. vonnie: you're in mexico now, what is the story now with the currency that seems to be trading around 17 to the u.s. dollar? gerardo: mexico has one of the nicest macro stories of the whole emerging markets spectrum. it has a stable macroeconomic framework, and it has some they moveomentum that toward the implementation of different components as the disruption before it passed to years back,ouple but at the same time, it is an economy that faces significant challenges. public debt has been increasing, the situation of paying that is challenging and current oil prices and the government is taking actions. markets have been reacting to been onethe peso has of the underperforming currencies, especially at the start of the year. the government has announced a spending reductions in . the behavior of the currency and rates in mexico has improved. in the context of emerging a lot of theearly, opportunity is set in mexico and it continues to be attractive. vonnie: t so much. rodriguez.ardo it is dark there in mexico. coming up, experiencing a bull market in brazil, but are they seeing an increase in investor demands? we will show you in off the charts. ♪ over an hour and a half away from the market in new york. futures a little bit down. negative around five point, equity in europe trimming some of the games so far this week but we are heading to the first straightins after four weeks of losses. checking on the other asset classes, crude pulling back a little bit after seven days of gaining. and the oil crude markets greater in the program, havell talk inflows that increased 2.9 percent this year. investors pulling their money out of europe. matt miller is here with us in off the charts. matt: this is a theme we have been watching for a few weeks, but we have in new terminal function that helps you because it shows etf flows and divides them by country and by region. loo is what to type in to see the function. it shows you a three-month look at lowe's in and out of the different countries and arranges it from highest to lowest. you can see them pulling the most out of eurozone and european regions. jonathan: some people would say, this makes sense because the eurozone is struggling but it actually goes up one big fx trade. isn't anything but a big fx trade? matt: it is a trade that has gone on for a long time. if you look at the s&p 500 and compared to the stock 600, the u.s. index has outperformed the stoxx 600 index since the 1980's, and it is the underperformance of european stocks to u.s. stocks that has reached a ratio that we have not seen since back in the 1960's or 1970's. jonathan: i will go out on a limb and say that it looks like a contest if you look at some of the banks, not just the u.s. and europe, but not great here but not so much in europe. matt: i feel like we are beautiful here. jonathan: matt miller, you come with a bias. what can you say, honestly? david: i never have a corporate response for matt miller. i am afraid. coming up, we are away from citi's earnings. we will be joined by scott minor , next on "bloomberg ." ♪ jonathan: cuts for goldman sachs. they are set to undertake the cost-cuttingt -- share in years. the debt search surges property rebound in china, driving growth to 6.7%. deal or no deal, can the world's major oil producers agree on an output? welcome to "bloomberg ." i am jonathan ferro with david westin and vonnie quinn. vonnie: just turn earning per share per dollar [indiscernible] we are getting tear one ratio of 12.3%. we have revenue coming in as well. it came in at $17.6 billion, which was just a little bit of again from what analysts were rooting for. not as bad as you are looking 3.0 $9ming in at billion, which is better than the $2.97 billion euro were looking for in investment banking revenue. io has said to expect the drop of 25% there. investment banking revenue came in, so we will keep track of this and having a look at what the pre-markets are doing. 23%. jonathan: the quote from the group ceo, our markets roddick's clearly suffered from week investment sentiment from the corridor. it is not us, it is the environment we are in right now. david: my first reaction is that jpmorgan is beating expectations but if you compare with q1 last year, it is a clear mess, so we are joined by scott minerd, guggenheim partners chairman of investments and global chief investment officer and we have .ou son -- hugh here you just heard the numbers, what is your first reaction? ish: sort of the game that laid, which is, let's bring down expectations drastically before earnings come out. the first quarter was the worst quarter in trading since the financial crisis. lo and behold, march was better than everybody thought it would be an you have jpmorgan, think of america, and city bank -- citigroup sitting on trading that was not as bad as people feared. vonnie: also, $12.7 billion, not as much as we were looking for but quite a big hit. can we assume that citi is getting rid of a lot of this in the first quarter and other banks are taking it easier? assume so, energy is the focus of a lot of banks, but i would like to look at the costs at citi and how far they have gone. the gains that jpmorgan and boa had done successfully is cutting down cost faster than revenue. david: what i am reading off of bloomberg news right now, citigroup's operating cost dropped 3% to 10.5 billion, begin the 10.8 billion average analyst estimate. matt? see the reaction in shares. up 2.5% right now. just a big positive reaction from investors. i am reading the same thing from the statement which i think is interesting. michael sain, our market products suffered, trading has been bad, but several key areas they grew in, the ones you want to go in, loans, deposits and he talks a lot about cost heading, which i think will be one of the major themes. we have the goldman sachs story today, a major thing for most of wall street, especially on wall street or in new york banks. vonnie: and some of the other banks, 2.92%. i think they are handling it difficult environment as best they can and regulation has been helping them. all the banks are boxed in, so not a bad result dealing with what he faces. jonathan: exactly. at this point, we have banks and the story in wall street so far this week has been increased cost cutting and they have no control over a cyclical over thent and ceos last corridor are engaged in expectation management. is that what continues through 2016? expectation management and say, it is not us that the environment? we can handle it and cut costs? hugh: the only lever they have is to cut costs. scott: i think we will be in a world where the industry continues rationalization and someday we will find a bottom, but it might not be this year. david: i would like to compare four different banks that reported earnings. we could have a comparison about their price to book as well as the return on tangible equity, which is interesting to look at. that is how they are trading in the market. if you put up the chart on return on equity, there we go. that is price to book and not returning equity, but that gives you a sense. atls fargo is the white line the top, green is jpmorgan and the blue and purple -- matt: bank of america, isn't it? blue andeck, i believe purple are bank of america and citi. matt: you are right. hugh: wells fargo at the top, a commercial bank, no trading relatively much less than other firms, jpmorgan with high-quality bank and high in the trading areas, and the other banks are struggling. vonnie: it has been a great week for citi. what we see today, plus, it was one of the only banks that got an almost passing grade. they are onto something, obviously. scott: investors have to assume the worst. hugh: after all the talk of bank chiefs talking about how horrible the first quarter was, energy is under, cost is spread than what people thought and treating is not as bad as people feared. scott's point about the regulators, it strikes me that citi is moving toward simpler and away from complex and wells fargo is moving toward more complex scott:. regulators like simple. the advantage wells has is that they have not had a lot of legacy issues. people there, like tim sloan, now president, they see opportunity. i think they can selectively seed they can move into areas like asset management, places the historically have not been as big as some of the other competitors and take advantage from the fact that other people are shrinking. hugh: jamie dimon said that the only way wells fargo could get scaled investment banking despite a big investment bank, so there is always that speculation that wells fargo will get big and thanking by doing that. slash more? mike hugh: in terms of job cuts? for sure. if you look at the store yesterday, huge expense cuts at is funnyachs and it that people, even goldman, at the pinnacle, saying that they are not -- they're going to stick around and they're cutting, too. scott, look at what is happening. it is what drives things in the short term. the cost cuts you are talking about, this cut expense randy, tell me i cannot go see my friends in the office in paris, out to extravagant meals with clients, that all seems pretty desperate in some way. do you think a lot of people would think that this morning? scott: i think it is true across the industry, whether it is investment banking or commercial banking. under this load of regulation that we call credential policy, it is becoming -- macro credential policy, it is becoming more and more difficult to find places to make any, so traditional businesses for you can take on positions or repurchase agreements, which is being mistreated, it is hard. vonnie: there is no trading being done. scott: i think the idea there is that why not just rationalize back to the point that you get yourself into position that you have a small, highly productive group of bankers or whatever and that some of the smaller clients go. jonathan: when do you look at this situation and strike out the missed beat stop and say, revenue down, cost cutting down, and look at the sector and say, we are at the bottom. scott: i would point to see a signal from the regulars -- from the regulators. in terms of lighting up on capital charges and certain asset categories, but until the regulation in this country starts to at least stabilize -- i was with someone this week with a major firm, a senior person told me that if we could just get regulation. wenging and increasing, if gave it 18 months, we could rationalize the business to make money again. david: making money is important. there are absolute numbers that matter. matt, you have return on tangible equity. this is something they have to deal with long-term. matt: that is right. what is interesting, you are correct, bank of america is luke and jpmorgan is green and they have the high return on tangible equity, as well as wells fargo, but bank of america has caught up to citi in 2012 and they have entired intertwined the time, so tied for last as far as return on tangible equity. david: but there is an absolute number and they get to a certain return on equity to raise equity and the cost of capital as well. typically, people talk about earning your cost of capital, summer in the double digits with 10% and these guys have not done it for the longest time ever. wells fargo and jpmorgan being higher-quality, so that is why you hear people saying, breakup citi because they are not earning that. scott: do you think people can get to a low double-digit cost in major institutions? hugh: not in this interest rate environment. jonathan: we are talking about stocks, stock performance, and the last we talked is when we had a lot of people say, look at what these companies are becoming. forget about returns and stock stories, but play the debt story and look at the cost-cutting. if you play the credit, is that the trade for wall street banks? and financial institutions is probably one of the best places to go for safety in returns because it in the high level of regulation, these banks are not going to get themselves into situations where they are being exposed. when you look at how high the capital requirement is today versus where we were back in 2007, they are much safer than one decade ago. vonnie: one of our oil reports has a statement that says citi had 20 point $5 billion at the end of the fourth quarter, so about 50 $8 billion and the bank said that 87% of their own exposure was for investment-grade companies, so how much does the performance of banks in the next 12 months or the next two quarters, depend on their exposure to energy companies? scott: i think it matters a lot. the comment you made earlier was interesting, the position for loan offs, right? i think we will see an increase and that will be at headwind to earnings until they get reserves up. plus, whether energy bottoms here or not, and the pricing is bottoming, which means by the second and third quarter, the worst should be behind us in the energy sector, we are in the late stages of the economic expansion and default start to rise. we are going to face headwinds and other sectors, so they will be a transition. jonathan: scott minerd, you are sticking with us. hugh, busy man, to our for your time. up next, oil producers from 18 nations are more to discuss the production freeze, but iran and the oil minister will not attend. we will talk the politics of deal or no deal next on "bloomberg ." look at the markets, upbeat for citi. not on that screen, but sitting in the free market up around 2.3% with games across the board for the rest of the banks with the exception of wells fargo. ♪ i am vonnie quinn with your latest this is flash. bp shareholders are looking at 20% pay raise. more than [indiscernible] rejected the company's decision. this after they reported a loss and announced thousands of job cuts. the company plans to respond the changes. of theat the top end marketing range, valuing the company at $1.8 billion. anddeal raises $253 million 13.3 million shares were sold and they were sold at $19 each. company bankers and investors are looking to light the ipo markets which has been affected by stock market volatility. speaking at the annual shareholder meeting in london, they say prices might fall in the second half as new supply offsets, including demand from china. the second the guest provider of iron ore posted results on tuesday. those are some fighting words. jonathan: very much. he is leaving the company soon and his whole force of nature to say, we will boost volume, i don't care about the price, you cannot afford to be in business, get out of business. the problem is we have not seen many come out of this this. david: not enough for his purposes. jonathan: precisely. coming up, nations representing almost 60% of the oil reduction will discuss production output. leading up to the talks, some of the optimism kind of diminishing with shares down about 2%. we learned that the iranian oil minister will not attend the talks. joining us more is andrew, energy analyst and scott minerd still with us. i will be flippant about this, does the prospect of a deal matter at this point? don't think it really matters at this point, but if the rhetoric solidifies beyond what it was injured february, perhaps the market takes that as a bullish sign to set expectations quickly. traders were split pretty evenly on whether they would earn would not be a deal, but if you look at the options market, three times as many calls have been trading right now, so that kind of tells you how trip traders are positioning themselves ahead of the meeting. david: you take those 18 countries, who needs it the most and who does not need it that much? lowest orthink the the producers that are struggling, like venezuela, ecuador, they need it the most, but their production is going to naturally fall off because of the lack of investments. you see them pulling out of the country because they cannot be paid, so there will be some natural production for opec and they could invest in products below 30, so we are already $500,000 below the january levels, so there is an upside to opec production even if the agreement is solidified. vonnie: scott, what are you factoring in when it comes to oil prices? whether it is an economic output or trading? scott: just dealing with trading issues. the big story about oil has passed. we had a massive decline in prices. the last time we had this supply shock in the mid-1980's, oil sloshed around for a couple of years. i hope you like the choice in that word. if wed not be surprised drifted lower, especially -- vonnie: drift lower? scott: yes, because i think that opec announcement does not mean all that much. we are still producing over one million barrels of excess oil aan we need, but that is supply and demand balance that would be gone by the end of the year. there are bigger problems like brexit, the issues around negative interest rates, and basically the massive slowdown in japan and europe. jonathan: negative interest rates, we had a discussion almost one hour ago, i wonder why the have become such a hot topic of discussion when it has been around for quite a while? scott: i think it was japan that will the world that because when japan went to negative interest rates in the markets are not do it they were scripted to do, i think people sort of stepped back and said, what happened? i think what the world is waking up to is that negative interest thes put a lot pressure on veracity of monday, and that is that people tend to take money out of the banking system and start shoving it under the mattress, either literally in the form of cash, which is happening in japan, or by buying gold or other nonproductive assets which are stores of value, so if that money is not in the banking system, then it cannot be land, so at some point, it needs to go to inflationary pressure and it causes currencies to rise. i think japan got there first, but it is not really helping. david: scott minerd will be with the rest of the hour. andrew cosgrove, thank you, bloomberg's senior intelligence he analyst. there is a big impeachment vote in brazil on sunday. we will talk about that next on "bloomberg ." ♪ a political crisis in a two-year corruption scandal has brought brazil's largest economy to its knees. on sunday, they would decide whether they will impeach president rousseff. joining us now is julia, the chief down in sao paulo, where will be be watching this receiving on sunday? office onm the sunday. we will watch it closely. david: i understand people will be gathered in soccer stadiums and football stadiums across the country? julia: there are large screens being put up everywhere, major capitals outside of congress, and they canceled some soccer matches to keep police focused and keep people from getting in trouble and divergent things, so a lot of people are going to set up parties and will watch it together. david: give us a sense of the process? they all get together, what time of day is it and how long is it expected to go? how will it play out? will: on sunday, all they do is vote. they started today's session and they do a session tomorrow what they do that discussions and the government will defend itself. the 25 parties have about one hour to speak in the lower house and on sunday, each of the 513 deputies will vote yes or no quickly. it starts at 2:00 p.m. and expected to go until 9:00 p.m. or 10:00 p.m. on sunday. farthan: quickly, up 29% so this year. , wakesay the all vote yes up monday morning in the week goes on, is it south from there at that point? scott: no, i think it is probably buy. brazil in dollar terms, though it was off by 80%, and you look at that kind of a routes, what we are seeing is literally baron von rothschild's comment about when to buy when there is blood in the streets, so the problem with it is taking a bottom. could we get another setback in brazil? ase, but i think if you look an investor over the next five years, you will wake up and find that this thing has tripled and quadrupled in value, so this is a great entry point. even though you might have to their short-term noise. jonathan: itching to ask you, of long-term by, can they be fundamental issues and kelly wake up and see this tripled? if i ask a question, is that an attempt to answer in 15 seconds? julia, t wright very much. scott minerd sticking with us. , what will come out of the imf world bank meeting over in d.c. ♪ you shouldn't have to go far to get the help you're looking for. that's why at xfinity we're opening up more stores closer to you. where you can use all of our latest products and technology. and find out how to get the most out of your service. so when you get home, all you have to do is enjoy it. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. shoshow me more like this.e. show me "previously watched." what's recommended for me. x1 makes it easy to find what you love. call or go online and switch to x1. only with xfinity. ♪ david: we are just over an hour away from the opening bell here in new york city. we know got minor, he will be with us for the rest of the hour. imf, wells fargo, those things. jonathan: future ahead of the open, a little bit soft, gas , s&p down4 points 0.2%. let the story is the banks, beat, beat. we have had from bank of america, and that was marginal yesterday. this morning is all about is theup, and it province from the previous year, that is what we got a dig at of these earnings. the cost cut, how long can that continue for. meantime, citigroup dropping 9.2%, having a tremendous week, but it has been pretty tough. banks are leaving the game once again. -- leading the game. vonnie: secret eu report detailing airport security oversights in the wake of the bombings at brussels airport. the confidential documents leading to resignation said the oversight was slow. they also talked about serious deficiencies in the way the tanks are managed. --sident obama will exit the and of the brexit debate. it isesident says important for the british people, but it is also in the interest of the u.s., the u.k., and the rest of the european union to keep the block together. a missile launch and north korea has apparently failed. south korean officials say it was reportedly the first test of the new midrange missile. reportlled an unsourced that was capable of reaching u.s. military bases in asia and the pacific exploded in the air . few seconds after liftoff global news convert -- global news powered by 2400 journalists in 150 euros around the world. the imf is kicking off spring meetings in washington focused on the global economy and financial markets. our next guest runs the asset management branch. he joins us from washington. he manages $8.7 billion across 11 funds including to fund to fund. we should be looking at, giving at the end of it? >> the sun is shining here in washington, the mood is overcast. is down.rowth we got used to some very high growth rates and emerging economies, leading up to the financial crisis, roughly 7% or year. 4% is not bad, it is double the growth in developed markets. we are cautiously optimistic about the long-term specular trends we have seen in emerging markets. david: we decide the g-20 over in asia. i learned from that it was not what came out in the communicators, what they were talking about in the hallways. is that true? what will the discussions be? traditionally we focused on long-term development, but we have a number of global challenges that are affecting us beingnow, including prepared for the next pandemic, change of course, and displacement. the last has been viewed as a humanitarian issue. we are all humanitarians now. we have tools in our toolkit we think can be helpful on this issue as well as the other two global challenges. so i would say that has been one of the themes of the spring meetings beyond the more traditional focus on economic growth rates and long-term development investment. jonathan: it seems that activity, you cannot growth forecasts. they just look at the word cut. you wonder, are they on alarm or alert? >> there is plenty to worry about, as i have said, and has been repeated several times, we are on alert, not alarm. because we believe the global economy can actually repair legacies can regain its vigor and become more inclusive. but the current policy responses that we are seeing need to be faster and need to go deeper. jonathan: i trust her to put it better than i ever could. alert, not alarm. i wonder if you are on alert or on alarm because deception seems to be driving things rather than reality. we talked about negative interest rates, japan has got negative interest rates, but we are just as scared about what is going to happen next. are you worried about what is going to happen next owner >> in my business, i am paid to wonder about what is going to happen next. the reality is there is a strong central bank put in the world, and we saw in the first quarter. the minute we have risk assets have europere -- we jump in, japan jump in and the federal reserve in march and jumps in. you have to look at these markets from the perspective of the fact that the liquidity underneath them is continuing to support prices, and anytime we ave a setback, like dislocation in the summer, it is a buying opportunity. you should not be in a hurry to spend money. jonathan: you used the word support. we used to use the word stimulate asset prices. now we are talking about support. they cannot stimulate asset prices like that used to, can they? >> you are right. the efficacy of quantitative easing has greatly diminished, and maybe we have reached the end of the road, meaning there is no upside. the best we can do is tried water if we keep pushing liquidity systems. david: some people might be surprised that the world bank has an asset management company. you are managing a $.7 billion. why do you exist? is it to make money or good? >> is to do both. the ifc has for the last 60 years invested in developing world companies. forhink we do is designed development in countries we invest but also profitable. we have less to invest in the future, we cannot expect insiders. only set this up six or seven years ago, it was raise money from third-party investors, will fund, etc. we manage these in classic bonds, focused on regions or sectors, and invest in ifc transactions around the world. the record has a very good. it is actually better than the private sector. -- private investors in emerging markets, and part of that is because of long-term focus on the ability to ride the cycle. investment times are good, bail out when times are bad. reinvested consistently through the cycle and also in a very divers aside way across all emerging -- diversified away across all emerging markets. that has helped us. vonnie: how do you calculate risk? are you more conservative or risky? that dread may have replaced agreed as a motivating force in investing these days. compared toay week, most investors, relatively brave in terms of the countries in which we are prepared to invest, and that is partly because we have offices in these countries, we have people, we know the local business community. we are conservative and how we structure transactions. these are not leveraged transactions. we provide growth capital for growing companies. we are funding growth plans. what of the ninth benefits is spirit ispreneurial more globalized these days. there are many interpreters, businesspeople -- entrepreneurs, businesspeople taking advantage of transactions in emerging markets. david: that is gavin wilson, thank you very much. a notice time to go over to matt. i want to look at credit card issuers and their stock in the morning meetings. john has joins me from san francisco with his eye on the winners and losers in the industry. talk to me first about the broader picture about what is going on with these companies. however they doing when everybody else is try to cut costs to boost the bottom line? >> good morning. from an industry perspective there is a big secular change we observe going on in credit cards. for the general-purpose issue at the macro level, we have that observed the pickup in household leverage. we have not seen the consumer spending much. the growth rates are rather tepid. it has been intense competition developing for new customer seensitions, and you have that in marketing expense growth, you are also seeing intensified rewards programs. the consumer is benefiting from the perspective that there is a allocatedources being to them, and that is hurting credit card companies because you see increased marketing expenses and reward program expenses, and that is hurting the bottom line and operating margins. matt: in that sense, american express has really dropped the ball over the last year. can they do anything to recover the power they had as far as consumer additions? >> yeah, we are cautious on american express. of discretelot company issues, they are negatively exposed to rising interest rates, the strong dollar, and to the competitive environment. for they lost cosco, their biggest partner, and they to fill that loss at a time where it is extremely expensive and cumbersome to do so. i think it will be a rebuild program for american express, and we are cautious on american express for the time being. matt: you believe the biggest winner is synchrony. tell me why this is a buy. >> it is a private label issuer, secular benefits being attributed to private issuers as retail emphasized programs. you are going to have a secular oi l white -- k . they can enhance with acquisitions, and access capital, and midpoint, we see them pay dividends, returning capital in the form of urges is, so we see three elements very positive for synchrony. matt: thank you for getting up in san francisco for us. telling us why he thinks synchrony is a by and you should be cautious on amex. we are going to give you market movement calls in today's equity markets. ♪ ♪ vonnie: i am in the hpe greenroom. we have scarlet fu coming up. she will be taking on matt miller. thethan: let's look at market share, about 46 minutes away, futures a little softer. stocks, it gains again, citigroup is a revenue drop, sure, but you get a beat at the price of the upside. citigroup stock up right 2.71%. i want to go to the fx market and look at the dollar-yen. you see it reflected in the fx trade as well. well, 1.09, and 98.e we are, on .0 9, micron looks good after plunging 5% a low yesterday. raised the stock to a strong by, put it $17 price on it, a writing change of tactical falling. micron shares have been down 27% in 2015, but there are different uy. ysts saying b cowan downgraded shares to market reform, no longer saying company, $66, they are fairly valued. analysts said for lobsters executioner remains outstanding executionerlocker's remains outstanding but they have room for expansion. the kids love foot locker, but maybe the street love is a little too much right now. wells fargo today, we are seeing a second day of all-out from the earnings yesterday. fiber is downgrading the bank to underweight to neutral. to $44.ed 6% is too high. bank of america as well, speaking of financials, at least one going the other way. oppenheimer analyst chris called undervalued, he is happy about the first quarter results yesterday. opthe 16% drop in shares is over beranted, and that will recouped as critical of the and stays very strong. he likes the bank of america, agency shares moving up 0.66% . six miles northwest of the new york stock exchange, it is a critical part of financial systems. we have a bloomberg news reporter who took a trip to the compound for a story. i read/voice, but this story -- read it flash voice, but this story is interesting. reporter: i got to go to ny for, with my colleagues, and it is where wall street is transacting. through trillions of dollars passing through this stadium, and it goes be on high-frequency trading. it is every high-stakes, they have their most important equipment stashed in these data centers. sense that 9.6 a million messages went per second in the month of february. every second, 9.6 million messages were passing through their pipes. reporter: it is really crazy to see inside the cages for all the equipment, unmarked. fairly nondescript to the way you described it, not much to see. but then you go inside, like the matrix. look at the inside. foot high ceilings with cold water stored above in case the air-conditioning ever goes so they can put it through the pipes. why can't the banks do it themselves? this is outsourcing, basically. reporter: so the people that own the data center do not do any of the cloud, data storage or anything like that. it you have companies within the data center that did connectivity like lou sarah we mentioned in the article. david: who is involved in this? reporter: you have nicene, nasdaq, they are big players. and then you have technology companies like lincoln, facebook as well. david: something happened to these data centers, it would so where the markets, is the redundancy? where is the security? reporter: they have tons of backup, as you can imagine. they have 18 generators and diesel fuel in today's any power outage. they have over 5000 batteries on hand. david: but apart from that, you talk about cyberattacks from various private and government sources. this can be a prime target to try to hack this. reporter: it is important to remember there is more than just one data center keeping everything running. there are multiple data centers all over various areas in new jersey. exchanges ine chicago. exciting for us, and you are also covering the basque ideal of the year. they are behind $19 a year. reporter: it is priced at the high end, people are really positive about ipo. it is the first nonhealth ipo they are seeing this year, the people are watching it closely. they've tried ipos in the past and actually, due to a software in 2012 when i first tried it, it did not go through. this is their chance to do it again. with us $3 million make it easier for them to grab market share? seeingr: well, you are the owner is raising money for the ipo, including case e.g. holdings. holdings. it is very active time in the exchange of space. catapulting. of with: thank you for being us. you can see the full story online at eagle attempt's and the data center. coming up next, the battle of the charts. ♪ vonnie: scarlet fu is here with us. she is going to help. scarlet: we are looking at sector rotation within the markets, the s&p 500 in particular. you want to look at our rg, relative rotation grasp. these are the sectors that are leading, this is what is weakening, and then lagging and improving. what do we see leading and improving? telecom, utilities, they were the worst performers -- the best performers in the s&p 500 in the first quarter. they gained about 15%. losinge weakening, steam. then you move over here, health care, financials still lagging behind. they were the only ones in terms of industry groups that remains the case. we are still pretty weak. and the that cyclical growth like industrials. this is a really good rate, looking at positioning in the cyclical earnings season. vonnie: doesn't simon says look exactly like that order david: it looks like sagittarius. i will say as someone who covers the markets every day, i can confirm this chart is correct. but as we are seeing in the markets. scarlet: i think there were undercurrents. matt: so what i have here is a chart, we talk about personal consumption expenditures, consumption being the key word. we talk about consumers buying. if you look at friday, the weekend, alcohol consumption, you can see that beer consumption has really declined. this is among people over 20, i assume over 21 because you have awful if someone under 21 drink a beer. you can see wine increasing as well as spirits. this is a problem ab inbev is running into. they are losing market share to wine and alcohol. minard, let me ask a question, as an investor, which of those charts would be more important to you? >> as a consumer of spirits -- [laughter] i think this chart of the specular rotation is actually extreme interesting. and very compelling. it is a thing i wouldn't shall use. you can get there on the bloomberg terminal rrg. scarlet: we can arrange that, as well it is it that between four and five. will be out of town next week, so i do not care who i upset, scarlet seems to have crushed matt miller. scarlet gets my vote. i would vote, but scarlet, you get my vote. [laughter] david: no apologies. scarlet: perfect way to cap off the week. matt: i would vote for scarlet too. jonathan: it is not the gracious. thank you for being with us for the hour. coming up next, the guest of the hour, the ceo of economic funds. ♪ ♪ vonnie: citigroup beating street estimates. a slump in trading revenue. goldman sachs embarking on the biggest cost cutting splurge in years. will it affect earnings next tuesday who are , talks in pouha, qatar. they are not sending ministers to the meeting. ♪ vonnie: your exactly 30 minutes from the opening bell in new york, this is "bloomberg ." david: need to hear about the markets. jonathan: let's get a check in on the markets beginning with the banks and the free market. another beat this morning . cost cutting mitigating revenue drops, stock up 2.5% in the free market, inc. of america up, jp morgan up. wells fargo a little softer on the session. futures are little softer as well. we will get to the cross and said board very quickly. futures down 20 points on the dow. you can risk aversion running to the fx market, dollar-yen anding through 1.09, wherever crude is going, equities are going. the bci down 6.3%. -- wti down to 6.3%. hillary clinton and bernie sanders went on the attack last night. judgment andheme, clinton's ties to wall street. bernie sanders: does secretary clinton have the sick -- intelligence quarter yes, she does. collecting fund from wall street, i do not believe that that is the kind of judgment we need to be the kind of president we need. was the first face-to-face meeting since the campaign moved to the empire state where the voters head to the polls on tuesday. lawmakers in washington have not passed of budget deadline. there is other work left undone as well. there was contention between tea party leaders and gop leaders to address puerto rico's economic crisis for example, if the white house putting pressure on republicans to fight to the zika virus. another casualty of the panama papers, it is a spanish industry manager. he resigned after giving conflicting expressions about his connections to u.k. lines, set up by the panamanian law firm. involvement before backtracking as new relations came out. -- revelations came out. you, i want toto point out transactions, it was huge, 9.6. analysts were looking for two. jonathan: it is three stories coming out of the markets right now. we count you down to the market opened today, we are talking about citigroup's earnings, china economy, and producers heading for talks in delhomme -- doha. joining other u.s. banks and slashing costs. morgan stanley next week and goldman sachs earnings, and speaking of that, the top story on bloomberg, the ceo said to be embarking on the biggest top earning push in years. will thaton is with satisfied reports on tuesday. expectations are down here, so them, profits are falling, and they do to cut costs because revenue environment is not there for them. whatever the story for the next one year, two-year, three years? it has been the store for the last five or six. >> not six, but the two or three or sure. as an investor, you would have to have a revenue story has a lasagna missions are attractive, that is a good thing as well. citigroup is a good example, revenue growth be challenged on a global basis. valuations are relatively deep, and they can cut costs to show profitability growth. that is what we are going to be dealing with for the next two or three years. to gamehere was a wing profitability, through cost cutting not topline growth. is that all they have to work with? time being, they are getting sustain themselves through the cycle term, and that is what they are doing. at some point they recovered to previous averages or highs or whatever. how long does this take? do we have to real value it the idea of the present value of money? >> you get to banks and a couple of ways, one is pmi, but there is also book value basis. banks ready on historical values, that has been historical valuation metric. some of the are earnings at valuation. looking at where analysts think they are going to go. help me out here. i am looking at citigroup and analysts suggesting a return to 23% over the next 12 months. is there that much of an upside in these banks? do these analysts need to get real about what is happening? >> i think there is. if you look at january and february that has come out of still down.re i think the potential is definitely there, just a whole lot of things have to come together. that is all we need to realize that potential. vonnie: number two matter into markets, china's economy. it has been stabilized in the last quarter. gdp rising 6.7% in the first quarter from a year earlier. new credit and investment beating analysts forecasts. the shanghai composite advancing on the data. so against that, let's talk about the economic data. we have heard two different reports say they are definitely in a recession, but maybe not quite as good as the numbers say. still around 4%. what is your position? >>: the current growth rate recession is a big threat in my mind. it is slowing down for sure, but what they are proving is when they want to, they can turn things up. that is what they are doing. is that sustainable long-term? it is still a very open question. this is credit fueled the growth, it can last a few quarters. it whether it will last a few years is an open question. having said that, the consumer side of chinese economy needs to grow at a very rapid pace. it is a much smaller part of the chinese economy than the u.s.. david: so you are illustrating what chris was saying. from be it this chart intelligence. bg can get it on bloomberg, #957 in that library. you can see it has skyrocketed, going from 130%, already pretty june or 16%. this is how they are financing a soft landing. these are the feathers under the plane that connected its landing gear out. -- that cannot get its landing gear out >>. we will see what happens. that is the strategy for the short-term, whether it was long-term or not. matt: in the u.s., we are at 70%. david: we have been borrowing a lot of money. at this,ay to look their rate of credit growth is higher than the gdp growth, which is not healthy long-term for a country. when you say it has to turn around, what will make a turnaround, and how do you do that? how would you invest that issue? >> if i were running the chinese economy, i would look at myself, what have i worked myself into? after that, effectively you have got to do these things on a gradual basis and make sure that you implement structural reforms for the soe, and at the same time, the support for the consumer economy. i'm looking at that bloomberg gdp tracker, a monthly rolling thing that tracks a bunch of things like electricity and more. what we have seen china again and again his rhetoric they will make a switch from old engines to new engines. and what do they do? they recapitulate. kim we say they cannot do this without feeling the pain, because as soon as they feel the pain, they recapitulate. it is not going to happen. short-term,e because it is a centralized economy. those transitions are extra narrowly painful, and no politician wants to go down that path until it is inevitable and forced upon them. jonathan: until there is a crisis. we go ahead to a crisis in china? >> with the current growth, two or three down the road, yes. having said that, you can do lots of things. in the u.s., if you win to down the path of debt monetization, the fed it doing something at the central bank level to make that go down, that would be a short nearly difficult and almost politically impossible. in china, you can do those things. two or three years down the road, we will probably face of challenges given the structure. it may be better suited to deal with the challenges that we pretty are. another story, oil is falling for a third day ahead of on sunday,lks coming among the world major producers. they are talking about an output freeze, wti down 2%. iran said it is opening the open governor. as you look forward to how important are these meetings on sunday in doha? >> i don't think of that controls anything at the moment. these are things they have to go through to show some level of effort. i am not expecting anything. oil prices have come back ,ecause dollar has gone down and because cyclically, emerging market growth because of china and stimulus has become better. that is the real story, having a bunch of people who have been at loggerheads for a long time come to some sort of agreement and say to themselves, i do not put in that. david: what about u.s. production? >> it has gone down, but i think oil prices to go back up. shale is not going away, it will be something with us for quite some time. as this stabilizes, we see more and more of it coming back on. david: as oil prices go back up, and this is correlated with growth, do you see that coming back in the second >> half of this year? it is a question of china. there is a chance we will get to a much more stable level then 20 or $30 a barrel. david: as the three stories metairie to markets. he is sticking with us. we will have more on citigroup's earnings. they would beat. ares look at how banks trading in premarket. they were all of last time i checked except for wells fargo, down a little bit, 0.2%. ♪ ♪ jonathan: just getting some news around the u.s., industry will coming in at negative, zero .6%. the previous rating of 0.5% also revived the negative 0.6%. expectedch uglier than . month on month, march was -0.1 percent. we are getting not as good as expected despite to the empire manufacturing. vonnie: we are seeing a two manufacturing week since 2014. utility production down 1.2%, mining dropped 1.9%. let's look at the markets, 40 minutes away from the open. futures have been soft most of the session. futures are negative around 21 points on the dow, nothing, not even 0.1%. s&p 500 negative three points right now. the brexit of not being seen, bank of america up 7/10 of 1%, citibank up 2.65%. they are targeting a quickly on 11%.loomberg, a week of we close up at these levels, it could be even bigger. it could be the biggest week for citigroup since 2011. will go across asset and look at dollar-yen. at 1.08 atelow 1.09 the vti over to protests points -- wti over two percentage points. matt: i headline that broke minutes before you came to air, ferrari is thinking about boosting production. the owner speaking at the agm, saying he may boost production and a gradual way. race is a ticker, stock has been not performing. still basically trading at ipo price. this is news investors wanted to hear. this is why hedge fund players -- bossinto this docket into this stock because they were expecting him to raise production instead of the cap to level where it was. let's take a look at the airline stock, barclays upgrading southwest debt equal rating and jetblue to overweight. proceed miles more than durable and raises revenue by seven to 48. jetblue is the best idea after united, but barclays is not positive on all airlines, cutting ratings on virgin america down to $56. printers having lower in the downgrading citi those. 3-d down to sell. strategists say is fairly valued after doubling the price in february, three of these shares giving back part of the 10% gain in a yesterday after bank of america upgraded that stock. mightays the speculation hewlett-packard is highly unlikely. i want to take a look at seaworld, in the red after putting shares. reason,yst site three including airport traffic into orlando, as well as market petition from universal after a big investment and the continuing fallout of course from what is it, now two or three years old? ckfish," that documentary about the poor killer whale. vonnie: that was so a sincere. it is time for the bloomberg is its flash. volkswagen has reached a five-year low. customers spoke the tire maker after the emissions scandal. it counted for 23.4% of new registration in the three months after march. he was volkswagen's worst showing since 2011. funds, ast trading in $500 million in the first quarter as the funds attract investors. they say sales of $1.5 billion offset redemption. they sell marginally. and iron ore is rallying from a record low, but not sustainable. speaking in london, he said prices may fall in the second half. improving demand from china is it cause. that is the latest bloomberg flash. us theimer funds brings call on china. will the recovery last? ♪ ♪ ."this is "bloomberg we are hearing almost every day from the central bank somewhere, here in the united states, we had kuroda, mario draghi next week. put it all together, are they going in the right direction? >> in my judgment, absolutely. german islaces pressure on deleveraging and inflation, that has been with us since the financial crisis, u.s. growth was doing better, and we have got worked up into thinking we could tighten policy with the rest of the world was still dealing with those issues. and now, janet yellen has made that situation pretty clear-cut, and looking at the data, it is becoming clear she was very questioning. u.s. they that was not as high as we expected it to be. not as high as we expected it to be. pressures in japan and europe have not subsided at all. those economies are still struggling. central banks are doing all they can. there were fiscal moves, i think that would be better, get there to a better point. zeroglobal basis, there is political appetite for fiscal moves. central banks are the only gain we are left with, and they are doing the best they can. vonnie: so which is bank will be the next to move? deck isnk the next on bank of japan, again. the reason is, as the yen has tighten it basically financial conditions domestically and effectively, they can't ease because they have some sort of an agreement at least an informal agreement of some sort. they have to make up for that type of strengthening of the dollar -- i'm sorry, strengthening of the yen their monetary moves in the economy. jonathan: so aps, is that is where we are going? beenis is that we have doing for quite some time, and what we will be doing for quite some time because the real , no one really was to go down that path. david: i'm going to go back to my undergraduate days when i learned that ought implies can. it makes no sense what you ought to do if you can't do it. maybe they ought to get growth going, but if they can't do it, it makes no sense. >> it is one of those counterfactual. i would say if they were to doing all of the things they are -- weren't doing all of the things they are doing, there would be growth at an even lower level than the low level we have today. we would not like it at all. and then we will be in it back on them, that they did not do enough. vonnie: so where does the 10 year yield to go? >> it is in the range bond trade. have overseas conditions and easing everywhere else that keeps a lid on ten-year yields. some are between 170 and 2%, that is where we will be trading. jonathan: he will stick with us ahead of the open. minutesing bell is four and seven seconds away on "bloomberg ." futures have been soft. futures negative throughout much of the session, banks moving in the free market as well. citigroup is higher after a brief on earnings. ♪ jonathan: this is "bloomberg ." i jonathan ferro alongside david westin and vonnie quinn. emani here with krishna m ahead of the open 10 seconds away. stocks and futures going into the session are firming up just sessions as you hear the opening bell. over in europe, a week of gains. earnings are solid if you're looking for upside surprises. manufacturing output and the u.s. has fallen by the most since february 2015. treasury yields just pulling up to 1.70%. it seems that where stocks go, cre crude goes. can we break that correlation at the open? matt miller is here with your stock open. no movement on the dow jones industrial average. 17,926 is still hovering around the 2016 highs. off by three 100th of a percent . citibank coming out and beating estimates. , andhey are cutting costs that is coming out as really the theme of what wall street is doing this quarter. they are cutting costs and investors like to hear that. the stock is up 3.2%. if you look at jpmorgan, it was a big gainer on the first day of it reported. goldman sachs coming out and saying it will cut costs as low. lloyd blankfein saying he's want to look at everything from headcount to wear his employers are eating and what kind of travel they're doing. morgan stanley and the bank of america desk all the banks are up today. although they are heavily weighted, it is not enough to move the index just yet. watch those banks start to push after we get a little bit further into the session. vonnie: matt, thank you so very much. let's get back to our discussion with krishna memani and very excited to have charles peabody with us in the studio. charles, citigroup reporting a good quarter. you outperform the target. do you think he will change it after this quarter? charles: we do not have a stock target, but we did outperform . revenues were week throughout the system. they are trading more on the expectations that the second quarter is going to see a significant rebound. we think there is a dollar $.25 going into the second quarter and you see that going an in the bank of america and jpmorgan as well. jonathan: you mentioned stability. of theed bloomberg news very early stages of an inflection point and corporate credit quality could it is going to get worse from here. how much worse? charles: we think the banking industry is facing an earnings recession. the capital is going to be sound. they're going to be able to grow their book values throughout whatever economic downturn we have. citigroup is reporting 3% sequentially. that is pretty impressive. david: if their stock price is not going up and that takes their price-to-book value in the wrong direction? charles: stock price has been going up since february, one we upgraded citigroup. we downgraded last july because we thought they were seeing secular peaks and they are still seeing secular peaks. they are trading vehicles. bank stocks have typically underperformed the market in the last month of able market and that is where we think we are. we are trading them with the idea that there is a recession sometime out in 2017 and they have to make it through that. beyond that, i think the banks will have proven themselves as really good managers of their balance sheets. their capital and liquidity has doubled. i think they're going to come out of this next downturn in very good shape. vonnie: wearable growth come from then -- where will growth come from them? after that, what happens? charles: the big difference coming out of this next downturn is that banks on day one will be able to invest and grow their businesses as opposed to having to go back and i leave their shareholders and rebuild capital structures. citigroup in a recession has a downside of 30, but coming out of the recession, it could be a $90 stock by 2020. ,rishna: for arguments sake would you say that the outlook for banks is much better than what you would argue for? charles: if you give me a better yield curve and rate environment . krishna: i wish that, too. is lending attitude money out on the spread that it will be a tough environment because of the kurds and the inability for the fed to raise rates. , you have side to volatility followed by bad volatility. david: there is one other player in all this and that is the regulator. we just had a number of banks fail reportedly. that is an ongoing process where we are not sure what the regulations are. isn't that a real headwind on profitability? if you are a ceo, you're spending a lot of time thinking about regulators right now. charles: as do we as analysts. it is a risk. we have been expecting that through 2017 that regulators will keep ratcheting up the requirements, the capital requirements, the liquidity requirements. thi that17, we start think that starts to fade. krishna: how the contrast european banks to american banks? charles: it is really night and day. the european banks have not dealt with their balance sheet impairments. deutsche bank has even talked about may be losing money. i think the u.s. banks are going to make money. jonathan: with the exception of one bank -- jpmorgan. shining bright red as the underperformer of yours. it is the one cell of 29 buys and six holds. that belongs to you. why? charles: our mantra has been by credit, sell rates. these banks sold off heavily in january and february and we do not think we're going to have a recession. when we got the deep discounts the book, we thought those with would disappear. we do not think the rate structure would be impressive. argan on the other side was premium to vote and still has a rate bias built into their earnings estimates. we think that could disappoint. vonnie: what about energy sector? is a going to be much of a headwinds? charles: i think will continue to be a headwinds. atare at an inflection point the corporate credit cycle where corporate credit is going to get worse. the banks are different stages of building the reserves. jpmorgan is on was at 10% reserves. they are ahead of the pack. bank of america is at 5% reserve. eventually we think based on our studies of what happened in texas in the early 1980's, they will have to build reserves to 10% to 15%. texas andas bad as the late 1980's? charles: not in terms of what the final impact will be. i cut my teeth in the follow-up of texas in the 1980's. the losses started mounting in 1984. it was a four-year process of reserve building and absorbing losses. this time around, you will out that u.s. banks are much lower than their exposure to energy. and is why i talk about earnings recession and not a capital impairment. book value will grow. david: explain this to me. exposure to energy is different than long commitments. there long lines of commitments of not been drawn down. how can they cut back on the exposure because they're not committed the money yet? charles: they are chimed to get back -- trying to cut back where they can and that will allow them to cut back their lines as wel. the lines are committed. as long as you are meeting your hurdle rates as an energy company, you can draw on those lines. lending to the risky energy sector to some extent was done by the capital markets. not as much by banks. is that a fact? as a result, even if you have a default episode and energy sector, the net impact on losses for banks may be more manageable this time around. charles: i think it will. if you look at your function on bloomberg, you can see the ratings upgrades and downgrades . energy let the whole downgrade process starting in 2014 and 2015. that downgrade process is starting to spread to other sectors. i think you will see it in health care and information technology. vonnie: i know you do not cover morgan stanley, but it's not as bad as other banks. is morgan stanley too hasty in cutting? and theythey were week had to make strategic decisions about what was the proper size. i think they had to do it. because they're not as big and fixed income, and that is what came back in march more so than equity, and morgan stanley strengths are a equity and m&a. i think morgan stanley will have a disappointing quarter. krishna: they have a wealth management business where they can allocate capital that is a good growth driver that other banks have done. reallocating capital from fixed income growth management makes perfect sense. charles: which is what they have been doing. david: charles, i want to thank you. jonathan: he changes the course and set sail. charles: we've not been shy about selling socks. david: up next, the world's largest oil producers are meeting sunday in doha. the question is whether oil investors will be disappointed by those meetings. more on that next on "bloomberg ." ♪ matt: i am in the hp greenroom. tonight at 5:00 p.m. eastern on "with all due respect," republican presidential candidate, senator ted cruz. vonnie: time for your business flash. to party is making a deal send jetliners to delta airlines. that is according to a person familiar with the talks. the sale would be the largest for bombard ea and would equal the half of the totals that it has on its books. valeant pharmaceuticals is working with investment banks to review options after receiving interest in some of its business. this is according to reuters. writer sites people familiar with the matter. they might dispose noncore assets to pay some down of its $32 billion in debt. had a disastrous eight-month run that has seen the stock declined 80% of its value. expanding in april at the fastest pace in new york. design manufacturing may be picking up after a tough 2014. it jumped to 9.6 in april. it was the only second positive reading since last july. any reading above zero indicates growth. that is the latest bloomberg business flash. david: that you have it. we are just under 15 minutes in the trading. we need to know what is going on, matt. matt:, to tell you some of the analyst calls. starting off with gopro. we have been getting a lot out of the survey. they love foot locker. we are going to talk about that because it is not doing well today for other reasons. are 20% of those teams getting a gopro as opposed to others, compared to 31% previously. i want to take a look at ensco. it got absolutely crushed, down 10% ahead of the premarket. it is going to offer new shares. investors do not like it when you widen out the pool. want toon new shares at be offered at the price of nine dollars for aiv $9.25. talking about foot locker now. you can see it go down now as it has given up the gains it made this week. nike and under armour coming down as well. those are two big footwear brands. david: now it is time to hear about the nasdaq could we're . to going to go live to abigail doolittle. abigail: micron shares are trading higher after raymond james upgraded the stocks. analysts are making a tactical call here. mike burton at green capital sees the potential rebound and demand in the second half. high,ocks may be popping but on the year, one of the worst performers, down 25%, underperforming the nasdaq. let us look at small cap communication stocks. both are trading down on the news that might tell is buying polycom for $1.96 billion in an effort to grow their videoconferencing business. polycom is down. it had been higher in the premarket, but now down. on the conference call that management is holding, something negative could be coming u out. jonathan: a busy week and not just potentially for votes of impeachment for president dilma rousseff. meeting with the manufacturers of oil production. bracing for a little bit of disappointment on the back of hearing that the energy minister out of iran will not be attending. joining us for more is andrew cosgrove. , first to you, the cheapest guide to an opec meeting is to not listen to anyone, but listen to the saudi's. what is the cheapest guide to this meeting? andrew: is bloomberg news reported, saudi arabia is not going to agree to a cut unless iran did. iran will not cut until they get to formally barrels a day. the market rallied since the original freeze came about. i do not think anything is going to change. the market is likely to be disappointed unless there is decidedly very forceful news on a very stable output freeze or even a cut, which is likely completely off the table. david: of the people there, how many are basically running flat out right now, take for example russia? andrew: russian production grew to a record just last month. almost 400,000 barrels-500,000 barrels upon the freeze that was originally agreed upon. the other question is whether saudi arabia will increase production in lieu of the summer cooling demand coming up which normally calls for 300,000-400,000 barrels per day. that would reduce exports into china and hurt market share. there are too many questions that are really unanswered and that probably will be unanswered after the meeting. the markets built up a lot of expectations upon this and there could be some letdown. david: of the 400,000-500,000, how much of that is yes u.s. production? andrew: saudi arabia could be up by hundred thousand barrels by the early part of 2017. that is just looking at supply. if you look at demand, chinese stockpiling demand could end the fear. that is inflating the organic piece. diesel consumption was flat to down last year. that tells you something about how much they're leaning on the consumer an right now. vonnie: there must be opportunity here. where is it? krishna: it is analyzing whether china can stabilize growth or not. quarters,n for a few that has positive implications for oil and commodity prices. vonnie: trading lies and investing lies, where would you put money if you want to see some upside to energy? krishna: i think credit is still very attractive. they have rallied a lot. i think there is still substantial yield and carry that you can get there. i think some of the distressed equities in the u.s. energy fields. jonathan: here's a question for you. if i want to play a gross story and it has been the minus in energy producers, i want investment in the extraction industry. is it energy or is it mining? krishna: i think it is energy because it will give you more upside. the demand picture in energy is much more stable than it is in mining. that makes a bit of difference. if you get the right side of things, prices can appreciate meaningfully. for mining and materials, it is . much longer term story david: we want to thank andrew cost growth. cosgrove. coming up next is "bloomberg markets" with betty liu and mark barton. betty: we have josh rosner with us kicking off, talking about bank earnings. he is going to wrap up what we heard from jpmorgan and look ahead to goldman sachs. also, delhomme meeting this delhomme meeting this weekend -- or i should say opec meeting. will they agree to a freeze? for a little bit of fun, you have been to the hotels here. there is a new condo building in new york city if you can afford million.5 david: a little rich for me. on "bloomberg ," a look ahead for next week. ♪ jonathan: this is "bloomberg ." we are about 25 minutes into the session. let's get you up to speed on what is happening in the markets in the u.s. futures negative three and we opened a little bit softer. the s&p 500 down a 10th of 1%. banks with the story of the week and this morning could switc. intraday, bank of america down. the clear outperformance the citigroup with another beat and a series of beat so far. cutsue is down, but cost quick enough and you catch up with yourself with an upside surprise on citigroup. much more on bank earnings next week. morgan stanley reporting on monday, goldman sachs on tuesday. you are some other ones we are watching -- netflix, yum! brands, and mcdonald's. can we call that a busy week? vonnie: a busy week for economic events and we get housing stats on tuesday. new york will hold its primary that they. wednesday will be existing home sales and then a news conference on thursday. david: talking about presence of primaries, later on bloomberg television, republican senator ted cruz on "with all due respect" at 5:00 p.m. eastern. and jonathan will be in london next week. jonathan: london, i'm calling. i'm looking to the show. that does it for "bloomberg ." for myself, david westin, and vonnie quinn, think you very much for joining us. "bloomberg markets" is next. ♪ betty: it is 10:00 a.m. in new york and 10:00 p.m. in hong kong. i am betty liu. mark: i am mark art and in london and this is "bloomberg markets." ♪ betty: we are going to take you from new york to london in the next hour. here's what we are watching. bank earnings continue to roll in this week. citigroup reporting a beat in profits, but have forecasters said a low for the banks? mark: the world oil suppliers meeting in delhomme this weekend. have we seen the tipping point for record high oil production? betty: shares of valeant have been dragged through the mud this year. one renowned investor thinks the stock is going to make a comeback. we are going to hear from bill miller on his big bet on valeant lettuce head straight to the markets desk.

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