tv Bloomberg Markets European Close Bloomberg January 5, 2016 11:00am-12:01pm EST
london. i know you cannot wait. >> a very good day to you. european stocks are recovering from the worst start of the year on record. the european close starts right now. betty: we will take you from new york to london and berlin in the next hour. we are less squeamish today recovering in the markets? worst first day of beer stocks with aean decline of 2.5% and we have clawed back some of those losses today. what a day it was yesterday and today with china announcing various measures to soothe the nerves of investors. 25%fear index rose by
yesterday, the most since august and is has come back by about 3%. that typifies the change in mood. the miners are the big gainers today. volkswagen is down. the justice department and the u.s. is suing them. the penalties could amount to $80 billion. hans nichols will chat to us about that from berlin. tom: plenty of legal betty: action against them. i'm eurozone inflation, it remains stubbornly low. what does that mean? economists are saying the
are zone cpi was .2% and we far from reaching that goal. brent is much cheaper than the ecb anticipated when it predicted inflation. a lot of central banks are looking at core inflation. .9% strips out volatile targets. the ecb has announced two sets of measures so that will be a story for later this year. let's check in on first word news. republicans are
already warning they will challenge president obama's latest move on gun control. the administration will require expanded background checks for guns purchased from dealers unit they are bought online or at gun shows. the plan is aimed at smaller dealers were not required to is checks.jor background president obama will talk about gun control less than one hour now we will have those remarks on bloomberg tv, bloomberg radio and bloomberg.com starting at 11 for the a.m. eastern time. the fbi says it's working to bring about a peaceful resolution to the standoff in oregon. federal 30's are keeping their distance from an armed antigovernment group that took over that national wildlife refuge. the group's ultimate goal is to turn over the property to local governments of people can use the land without federal oversight. u.s. forces suffered casualties today will fighting the taliban in southern afghanistan. one american soldier was killed ad 2 were wounded and
separate reports as a u.s. helicopter went in while trying to rescue the wounded. the u.s. deployed troops there to bolster afghan troops after they suffered setbacks against militants. news 24 hours a day powered by 2400 journalists. betty: thank you. , the day weening had to start the europe with that huge a selloff in markets around the world are trying to climb back. chinese stocks rose today after a plunge that wiped out $590 billion worth of market value. u.s. stocks are fluctuating after falling 5.1% on the first day of trading. it was the sixth worst start for the s&p 500. it was the worst for europe. >> it was the worst start to the year. stocks are rebounding after tumbling 2.5% yesterday.
from both sides of the pond, let's bring in patrick spencer hear from london. johnny us from new york is the chief market strategist at jones trading institution. a very happy new year to you. you surprised at the excessiveness of the market reaction yesterday? >> it was the first day back from holidays. the volumes were quite low. what scared people especially in china was the fact that they close the market and that caused some panic and that spills over into other markets. i read in the press about hard landings and have been reading it about them in china since 2010. it tripped a selloff in the u.s.. since my team to t8, you have had 15 declines of more than 1% on the first day of the year.
-- i think a low volumes and history proves that this is not necessarily going to dictate how the rest of the year will play out. >> what is the allocation right now? what's the message from those measures? investors intelligence was as and 215 -- in 50% print5 there is a lot of nervousness out there and the bad news is being discounted. there is good opportunities in the market. would you deem herself a bull? >> yes, i think so. we should use his back as a buying opportunity.
there is a lot of structural headwinds there is a lot of attractive tailwinds as well. the american consumers still very strong. of american consumer is 2/3 the economy so housing in the consumer stocks we believe are attractive. companies like home depot and lowe's and ones that we would recommend -- >> we were talking about how strategists are forecasting a 13% rise in the stocks 600 this year it are you in that camp? highthink you will see single digits rising this year. i think people are being on the margin to make -- to negative betty: someone who will not mind mike,called a bear cub up you think differently? absolutely, the way i see
this market shaping up in the united states is the bull market has been driven by the catalysts. very supportive monetary policy, recovering earnings, and improving economy. was all of last year those three tailwinds turn into headwinds. we saw the fed start tightening at the end of the year and earnings decline for the first time since 2008. then the economic data has been accelerating. ism manufacturing report has her been reported accurately the last few months. 2014 was the best year gain since 2009. talking about high valuations with the s&p 500 trading 19 times earnings. while you have as high valuations, you see data
decelerate and the fed tighten so that's not a good mask to take a risk in. betty: we had jeremy siegel on who said he sees the doubt 2000 still and the s&p 500 maybe 10% higher because of the fact that while we saw the huge declines last year with oil prices and volatility, all of that is likely to stabilize this year. we might not yet as many rate rises as people expect. he thinks that's an all clear or --ng opportunity and a rise or a buying opportunity in a rise in the stock market. >> this has been fostered by policy. we talk about the ecb possibly doing more easing. if those are your reasons for buying stocks, you have a problem. and said he did not like stocks. it's hard to argue.
that's not a debate because his view will not change. >> i want to bring in patrick again. michael lists the economy, the fed and earnings, the three things that are going the way of u.s. stocks and they will be taken away. if you are an asset allocator, you are looking at 2% yield for the s&p 500. over 50% of the s&p 500 yield up to percent even if you take the oil companies out. globally has been picking up nicely. the u.s. pmi has been going down but that's because of the multinationals and the strong dollar. concerns about fed tightening is a good thing. the reason they are tightening is because the economy stronger and people are spending more money and consumers are spending more money and there is more
capex and earnings will be better so i thought a rising interest rate environment is good for the market. if you look at 2004-2000 six when they raised rates, the market was going up so it's not necessarily a bad thing. >> what have you got to say about that? >> that's a great example. we have had zero interest rate policy since 2008. it's 2016 so you are talking about missing their opportunity to tighten in 2014. the economic data has peaked in the earnings have rolled over. dollar is in part of this equation can betty: how would they have miss their tightening cycle if inflation is still low? had consumert pricey flirtation -- consumer price inflation. we have had as set
inflation. the fed kept trying to put more liquidity in the system. they kept doing the same thing over and over again expecting different results. they did not get that. betty: that's the definition of insanity. expected a different result and did not get up but we will have inflation this year. the losses over the past year will annual lies there will be more inflation. thank you so much. >> patrick has a final word. about theto talk three things going for u.s. equities, roe's 15% versus europe, 10% and a market is not going down when unemployment was declining and margins, if you take out oil stocks, they are still at.
it's still a very attractive that drop in the u.s. market. thank you gentlemen. betty: the europeans are saying by america. up on thecoming european close, stay with us. are 17 minutes away from the end of the european equity session. volkswagen is getting sued and current criminal charges soon follow? we will have a live update from germany, stay with us. ♪
york and london, this is the european close. betty: it's time for the bloomberg business flash. drugmaker eli lilly is indicating sales and profit for this year may be below wall street estimates. it has promised to return to growth after a decade of falling began itsat they comeback last your beating earnings estimate in the first three quarters. carmakers have wrapped up what may be a record-setting year in the u.s. december sales a general motors, but and fiat chrysler rose not as much as expected. nissan was up 19% beating estimates. automakers are expected to be the annual american sales record set 15 years ago. ky capital says is a shutting down its hedge fund and returning money to investors. it returned over a 10 recently as 2013. than 1% in the first 11 months of last year.
computer-driven trading strategies and index funds of may to top of her some hedge funds to make their money. that is your bloomberg business flash this hour. the u.s. justice department is suing a volkswagen, accusing them of installing illegal devices to cheat on omissions tests. hansson met goals joins us now from berlin. -- hans nichols joins us now from berlin. >> this codifies the u.s. government's position on volkswagen and put pressure on them. we have the department of justice filing a lawsuit in the state of michigan. it's on behalf of the epa. they are raising the bar in terms of how much they are seeking in damages. if you total of the claims come you get to $80 billion. before, the government said this could be $18 billion. they've got that number high-end
volkswagen -- and volkswagen has the way $6 billion in provisions. the government means business and want to send a message to all auto manufacturers. this is the statement that says -- you look at the way they break this down and penalties are up to $37,000 for each violation did there is a difference in the numbers for the coming of justice is 580,000 cars are affected in the number from both wagon that they have admitted to is 482,000. as difference is the audis well as the porsches. i know you would never drive a diesel or a porsche but if you did, you would in trouble in betty: what?
there's nothing wrong with that. affect other lawsuits beating back be filed? >> there are hundreds of lawsuits out there. they have tried to certify these and move them to san francisco. will take thethey civil lawsuit and here that in .an francisco as well they did not forgo criminal proceedings of the department of justice is clear that they will keep that open as an option. in all this that came out, the epa said they have not reached a resolution with volkswagen on how to do some sort of fix for those cars that had the devices in it. in europe, they're close to getting regulatory approval. the stock was battered today, down more than 4%. betty: thank you so much. ahead, as the u.k.
>> you are watching the european market close. david cameron is asking lawmakers in london to decide whether to campaign for great britain to stay in or leave the eu this is what he said last hour in the house of commons. my intention is at the conclusion of the renegotiation, the government should reach a clear recommendation and then the referendum will be held. it's in the nature of the referendum that it is the people, not the politicians, who decide.
as i indicated before christmas, there will be a clear government position but it will be open to individual ministers to take a different personal position while remaining part of the government. neal jones is the head of institutional sales. brexit driving sterling rate this year? >> at the moment it is especially after today's headline. so they can vote how they wish in the referendum which goes against the idea of collective responsibility? >> absolutely, it's really a case of sterling pushing that into the fray. the interest rate is alive and kicking. is the referendum that far away? >> we will probably not see a
rate hike this year in the u.k. looking at things now, probably not until early 2017. >> when is the referendum going to take place? >> scotland had a different set because in the months leading up to it, the pills were suggesting not to leave. we are in a can mac already and have been for a while. we of uncertainty creeping in. political uncertainty creeping in. it should go down to the wire and that's a key reason why they are at a loss. is there a trend one way or the other? not really. pink ends ashe talk currency? as wet are the trends
talk currency for this year? >> there are other currencies around the world that have bigger problems. the dollar will appreciate as a haven, an area where there is less choices to go. there are many issues with the euro to it highlights the potential thematics for this year. probably euro-dollar lower. furtherthat prompt easing from the ecb? that was her cbiz you cannot blame that on oil dip it tells disappointeddraghi the market but the box still has tools.
there is no broken senses like we have had in the past few years. calls on different dollar-yen so it will be an interesting payout for this year. the yen could be initially stronger but it will not last. >> thank you for being with us. betty, we're heading to san francisco next. to equity markets are set close in four minutes and we should close higher. ♪
in europe are finishing their trading day. mark barton is standing by in london with that chart showing not as much read as yesterday. mark what a day, yesterday. of the lossesome from yesterday. up.currency was propped a lot of money into money markets. susan some of the nerves d some of-- it soothe the nerves globally. yesterday had the biggest increase when scheiner devalued its currency. by 3%.e in london is up they were the big decline or yesterday. vw was the big decline or in -- decliner in germany.
we know the story, the doj suing full flag and. -- suing vw. how much could the penalty be? potentially 80 billion. betty: incredible. what is also incredible is inflation. there is none. what is going on? rounds ofave had two qe and we are already talking about a third round of qe because inflation is nowhere near the ecb median term target. the headline rate was 0.2%. the core rate was 0.9%. it is leading to the question -- will we need a further round of qe? the price of brent is cheaper than what the ecb anticipated in december. it anticipated inflation of 1%
2017.ear and 1.7% in we could see those numbers come even lower. not a great day for the ecb. betty: indeed. you were mentioning full flagon. sales --n america another decline for the company. with courtney. back to: we bring it the united states. president obama will unveil a package of executive actions on gun control. the administration is expanding background checks on guns purchased from dealers. the plan will have a limited impact, but it is already generating backlash from republicans. we will have the comments starting at 11:40 a.m. eastern.
u.s. forces suffered casualties today while fighting the taliban in afghanistan. the battle took place in the southern province. one american soldier was killed and two were wounded. a separate report says a u.s. helicopter went down while rescue troops. top officials from denmark, sweden, and germany will hold talks about the refugee crisis. checks onroduced id all people traveling to denmark. denmark tightened border controls on its border with germany. caused morects airline deaths than accidental crashes last year. eight accidental crashes killed 161 people. that is the lowest total in 70 years.
crashesle died in two deemedrd deemed -- were "preventable." ceremonies were held to remember the 17 people killed a year ago in islamic extremist attacks on satirical newspaper "charlie hebdo." french president françois hollande unveiled blacks around the city to commemorate -- plaques around the city to commemorate the victims. around the world. betty: thank you. economic wonks are coming together in san francisco. atndan greeley feels right home at the american economic association's annual conference.
brendan, take it away. brendan: i'm here with richard thaler. he is one of the fathers of behavioral economics. you gave your presidential address yesterday. -- of the things you said you laid out the arguments for behavioral economics and then you said, i'm done making these arguments. did your discipline just drop the mic, did it just win? i always warn about declaring mission accomplished. i think the state of play right under 40, economists especially those trained at the top universities, behavioral economics is not controversial. nevertheless, if you open a principles of economics book,
there will be one chapter at the , by the way, there is this behavioral economics stuff. i think the battle is not over. say iswas trying to let's stop arguing about the stupid arguments. about why we can ignore this. we can't ignore it. especially after what we have just been through. surely, we have to allow ourselves the possibility that there has been some misbehaving going on. brendan: you talk about converting it. be done isft to taking behavioral economics and working it into modeling. in what disciplines? in what aspects of modeling does behavioral economics still need to be worked into basic assumptions? richard: i think macro is the
next big frontier. it is the part of our profession you people talk about the most. profession knows the least come in a sense, because it is hard. we need to start injecting some realism about what people are doing and there are all kinds of details, from what things janet yellen says about when the next rate increase will happen to how a tax cut should be packaged -- should it come all at once? these are all kinds of questions than normal economics have nothing to say out and yet they are vitally important. brendan: there is solid research that suggests that different groups of people respond differently to expansionary economic policy -- monetary
policy. richard: that's right. a good question is -- is monetary policy for bond traders or hedge funds or banks or the man on the street? thoseswer is all of people matter and they will all react in different ways. the problem is very complicated. it is more complicated than the traditional models let on. brendan: as you say, our monetary policy is set for bond traders and hedge funds -- our entire audience is quickly getting to desk getting up to type angry e-mails. you have an asset management firm. how do you create behavioral data? anticipate try to that others will
make. attitude.fferent we don't try to forecast the firm.gs of some form -- we try to forecast the errors in other people's forecasts. if we try to forecast earnings, we will make the same mistakes as everybody else. if you are watching a baseball game and there is a picture that throws a lot of sinkers, you can predict the batters are going to hit a lot of ground balls. i can predict that come even though if i swung, i would just miss. we can predict the kinds of mistakes that other investors will make and then find good opportunities. betty, we've got to get that to you. the president is about to speak. we are here in san francisco. betty: brendan greeley, thank
you so much. conference the aea in san francisco. moments from now, we will get the president speaking in the east room of the white house. there is the white house right now -- or the east room. i want to get to mark crumpton, who has more on this. .: this has been one of the setter marks of president obama's tenure in the white house, some people say. the continued mass shootings in america. the list is long and heartbreaking. ,andy hook, san bernardino charleston, south carolina -- president obama, at several times during his time in office, has had to come out and be commander in chief, but also the who says that this is something that america does not stand for.
the president has also lobbied congress, asking lawmakers to pass sensible gun control legislation. today, as betty alluded to, we will be hearing about expanded measures, executive actions, for background checks and the like. the president held an oval office meeting yesterday with the u.s. attorney general and the fbi director, seeing if he had that margin, that legal margin, as president of the united states, to circumvent and impose some of those measures. what we did have yesterday is the president letting people know that at this point in his administration, the last year of his administration, that he would be going full board toward congress to try to institute sensible gun control legislation. bloomberg is following the story. fromorrespondent joins us
washington. >> this is one of the most .ontentious issues the president has been trying to push gun control since sandy hook two years ago. he has been trying to do it on his own with executive actions. these executive actions are the issident saying that this the last straw. that he wants to take action on gun control. what we are hearing from the republican presidential candidates is that this is a president who is taking matters into his own hands and trying to usurp the second amendment of the constitution. the white house has been clear in saying that they want to at people whowith those the administration believes should not possess firearms. officials have
alluded to those who have been convicted of some sort of felony or crime. also, going after those who are selling guns at gun shows and aose are unregistered on federal level. let's go live to the east room of the white house on bloomberg television and the president of the united states. [applause] thank you.bama: thank you, everybody. thank you. thank you everybody. please. have a seat. thank you. thank you, everybody. thank you. thank you, everybody. please, have a seat. thank you so much. mark, i want to thank you for .our introduction
i still remember the first time we met and we spoke together. the conversation we had about daniel. that changed me. my hope had been that it would change the country. , as aears ago this week sitting member of congress -- a sitting member of congress and 18 others were shot at a supermarket in arizona. it was the first time i had to talk to the nation in response to a mass shooting and it was not the last. , binghamton, aurora, oak creek, newtown, the navy charleston,barbara,
san bernardino. too many. many. many, too many, too president obama: thanks to a great medical team and the love of her husband mark, my dear friend and colleague, gabby giffords, survived. she is here with us today with her wonderful mom. [applause] president obama: thanks to a great medical team, her wonderful husband mark -- the last time i visited with mark, you may know his twin brother is in outer space.
[laughter] president obama: he came to the office and i said, how often are you talking to him? every day, buty the call was coming in right meeting, so i think i may not have answered his call. which made me feel kind of bad. [laughter] president obama: that is a long-distance call. [laughter] president obama: i told him, if his brother scott would call him today, that he should take it. turn the ringer off. [laughter] president obama: i was there with gabby when she was still in the hospital. , necessarily at that point, that she was going to survive. visit, right before a
later,l, about an hour gabby first open her eyes -- opened her eyes. i remember talking to her mom about that. that she ande pain her family have endured for these past five years. and the rehabilitation and the recover the effort to from shattering injuries. then i think of all the americans who are not as fortunate. every single year, more than have theiricans lives cut short by guns. 30,000.
suicides, domestic violence, ,ang shootout, accidents hundreds of thousands of americans have lost brothers and , or buried their own children. livehave had to learn to with a disability. or learned to live without the love of their life. a number of those people are here today. in this room right here, there are a lot of stories. they can tell you those stories. there is a lot of heart ache. there is a lot of resilience, a lot of strength, but there is also a lot of pain. this is just a small sampling.
the united states of america is not the only country on earth with violent or dangerous people. we are not inherently more prone to violence. but we are the only advanced country on earth that sees this kind of mass violence iraq with this kind of -- you wrapped -- erupt with this kind of frequency. it does not happen in other advanced countries. it is not even close. as i have said before, somehow we have become numb to it and we start thinking that this is normal. of thinking about how to
this has problem, become one of our most polarized partisan debates. despite the fact that there is a general consensus in america about what needs to be done. that is part of the reason why on thursday, i'm going to hold a town hall meeting on gun violence in virginia. is to bring good people on both sides of this issue together for an open discussion. i'm not on the ballot again. i'm not looking to score some points. i think that we can disagree about impugning other people's beings are without disagreeable. we don't need to be talking past one another, but we do have to feel a sense of the about it -- urgency about it. king's words, we need to
feel the fierce urgency of now. because people are dying. the constant excuses for inaction no longer do. they no longer suffice. that is why we are here today. not to debate the last mass shooting, but to do something to try to prevent the next one. [applause] [applause] president obama: to prove that the vast majority of americans, even if our voices are not the loudest or the most extreme, about a little boy
like daniel to come together and take common sense steps to take lives -- save lives and protect more of our children. i want to be absolutely clear at the start. i've said this over and over again. this also becomes routine. there is a ritual about this whole thing that i have to do. i believe in the second amendment. it is written on the paper. it guarantees a right to bear arms. you tryr how many times to twist my words around. i taught constitutional law. i know a little bit about this. i get it. but i also believe that we can
find ways to reduce gun violence consistent with the second amendment. think about it. we all believe in the first amendment. the guarantee of free speech. accept that you can't yell "fire" in a theater. that there are some constraints on our freedom in order to protect innocent people. we cherish our right to privacy. but we accept that you have to go through metal detectors before being allowed to board a plane. it is not because people like doing that. that that istand part of the price of living in a civilized society. what is often ignored in this debate is that a majority of gun
owners actually agree. a majority of gun owners agree that we can respect the second amendment, while keeping and you're responsible, lawbreaking few from inflicting harm on a massive scale. today, background checks are required at gun stores. if a father wants to teach his daughter how to hunt, he can walk into a gun store, get a background check, purchase his weapon safely, and responsibly. this is not seen as an infringement on the second amendment. of what to the claims proponents have suggested, this has not been the first step in some slippery slope to mass confiscation. contrary to claims of some presidential candidates,
apparently before this meeting, take awayt a plot everybody's guns. you pass a background check, you purchase your firearm. sellerslem is some gun have been operating under a different set of rules. a violent felon can buy the exact same weapon over the internet with no background check, no questions asked. a recent study found that about one in 30 people looking to buy guns on one website had criminal records. one out of 30 had criminal records. we are talking about individuals convicted of serious crimes. aggravated assault, domestic violence, illegal gun possession. people with lengthy criminal history's buying deadly weapons all too easy. this was just one website within the span of a few months. we have created a system in
which dangerous people are allowed to play by a different set of rules than a responsible gun owner who buys his or her gun the right way and subjects themselves to a background check. that does not make sense. everybody should have to abide by the same rules. most americans and gun owners agree. that is what we tried to change three years ago. after 26 americans, including 20 children, were murdered at sandy hook elementary. two united states senators, a democrat from west virginia and a republican from pennsylvania, both gunowners, both strong defenders of our second amendment rights, both with a grades from the nra -- that is hard to get -- worked together
withod faith, consulting folks like our vice president, who has been a champion on this for a long time, to write a would set of bills that have required everyone to get a background check if they buy a gun -- that's it. 90% of americans supported americans. 90% of democrats voted for that idea. but it failed. because 90% of republicans in the senate voted against it. how did this become such a partisan issue? republican president george w. bush once said, "i believe in background checks at gun shows or anywhere to make sure guns don't get into the hands of people who should not have them." senator john mccain introduced a bipartisan measure to deal with
the gun show loophole, saying that criminals and terrorists have exploited and are exploiting this obvious loophole in our gun safety laws. even the nra used to support expanded background checks. by the way, most of its members still do, most republican voters still do. how did we get here? how did we get to the place where people think requiring a comprehensive background check means taking away people's guns? each time this comes up, we are fed the excuse that commonsense reforms like background checks might not have stopped the last massacre. or the one before that. or the one before that. so why bother trying?
i reject that thinking. [applause] : we know weama can't stop every act of violence, every act of evil in the world. but maybe we could try to stop one act of evil, one act of violence. recall at they same time that sandy hook disturbed person in china took a knife and try to kill with a knife a bunch of children in china. most of them survived. he did not have access to a powerful weapon.
we may be can't save everybody, but we could save some. don't prevent all traffic accidents, but we take steps to try to reduce traffic accident. said, if reagan once mandatory background checks could save more lives, it would be well worth making it the law of the land. the bill before congress three years ago met that test. unfortunately, too many senators failed there's t --h -- theirs. [applause] president obama: we know that background checks make a difference. connecticut passed a law requiring background checks and gun safety courses and gun deaths decreased by 40%. [applause]