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tv   Bloomberg Markets European Close  Bloomberg  February 23, 2016 11:00am-12:01pm EST

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this is the european close. ♪ vonnie: here is what we are watching. the ftse 100 ceo has publicly lacked -- backed david cameron's campaign to stay in the eu. the bank of england is staying on the sidelines. --k: the world's biggest company/his dividends after earnings plunge. stock europe's biggest exchanges are possibly creating one of the biggest exchange companies in the world. paradise on four wheels. rolls-royce gets ready to replace one of its iconic limousines with one with an aluminum frame.
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we are half an hour away from the close of trade in europe to what's going on in the markets? mark: a rebound in the stock market. the stoxx 600 rallied and went down. china setting the tone, cutting .he yuan reference rate that added to the economic indicators signaling a deepening slowdown. continuing to shun the microphone -- microscope on various earnings report. s. php is seeking to protect its -- from thet and price of commodities. this is a good potential m&a deal of the day. nfc chairs jumping as much as 20%. the biggest leap in two decades. one decade, excuse me.
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it is in merger talks with , which would ag create one of the biggest companies in the world. there has been talk of this before. a surprise for your loss today. in year 7% as the decline now. that was the biggest drop in three years. it's reported as a surprise for your loss. -- four-year loss. vonnie: the british pound is still holding over $1.41. what did mark carney have to say? mark: he was testifying before various lawmakers. acknowledged the uncertainty.
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he basically spoke about the uncertainty over the upcoming referendum. he acknowledged it is waiting on the pound. this is the five-year chart. we have seen sterling plunge against the dollar yesterday. the biggest one-day drop since 2010. that decline is extending today. lowest level since 2009. what he said was the weaker u.k. andld offset the help boost inflation. is notd that the boj making a judgment on the consequences of the british referendum. he did say that the bank of england does take into account the movements in asset prices. he did acknowledge the decline in sterling, which was very interesting. vonnie: we are 19 minutes to the trading day. let's head to the markets desk with julie hyman.
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julie: i'm going to start with oil. has been oil minister speaking at an oil conference. the key take away at his commentary is that there will not be in oil production cut. there has been the freeze that is written talked about. -- that has been talked about. he said they will not make a cut. it's the rollover into the april contract. that's why it looks like it is higher than it was yesterday. some of the other commentary, he said we welcome shale production. he also welcomed exports from the united states. he said saudi arabia will keep investing in oil production. makes it flows of the day, so do u.s. stocks. no supplies. this is a correlation we see still at a relatively high level even though it has decoupled to
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some degree in the past couple of weeks. all three major averages now at the lows of the session. we are seeing energy stocks take the bottom slot on the bloomberg. they are down 2%. place,ls in second turning around those gains from yesterday. weight on the s&p 500, it is technology and tanks one 610 -- banks once again. you have apple, jpmorgan and microsoft all declining. jpmorgan doing its investor day today as well. vonnie: we had some nice news from retailers for a change. julie: that is what is interesting from what we have been seen recently. one of the comments that jamie donaldson made today is that the
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bigs beneficiary of the drop in oil prices is the consumer. home depot numbers he estimates. sales rose 9.5%. people continuing to spend on their homes. macy's sales falling, but not by as much as estimated. and dillards getting a lift as fell comparable sales also 2%. that was better than what analysts had been anticipating. vonnie: thank you, julie. matt miller has more from our news desk. plan president obama has a to close a guantanamo bay in cuba. the proposal would send anywhere from 30 to 60 inmates back to the u.s. some of the public has been scared into thinking that closing the president would make the country less safe, he said. has beenny years, it
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clear that the detention facility at guantanamo bay does not advance our national security. it undermines it. matt: the white house does not expect congress to go along with the plan. republican presidential front-runner donald trump goes after his third win in a row today. polls show he is favored in the nevada caucuses. the low turnout could diminish the size of his victory. for second place may be close again. marco rubio is counting on support from mainstream republicans to give him the edge over ted cruz. bill gates says he was disappointed by reports that he backs the fbi in the fight over apple and privacy. he spoke earlier on bloomberg he reallyed whether believed apple should be ordered to break into a dead terrorist iphone. >> i was disappointed because that does not state my view on this. rightelieve that with the
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safeguards, there are cases where the government on our behalf like stopping terrorism which could get worse in the future, that is valuable. matt: gates says there have been many cases where the government took information and used it in unexpected ways. italy's foreign ministry has summoned the u.s. ambassador to a meeting. italy wants to know if the u.s. cap the phone of former prime minister silvio berlusconi in his last term. the italian media said wikileaks files showed the nsa was spying on him from 2008 to 2011. global news 24 hours a day, powered by 2400 journalists in more than 150 bureaus around the world. i'm matt miller. , esther georgeup joins my radio colleagues at 3:00. that's at 3:00 p.m. eastern on
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bloomberg radio. ♪
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mark: this is the european close. i'm mark barton with vonnie quinn. major dealack to our story today. the lse confirming it is in merger talks with deutsche boerse. it would create one of the biggest exchange companies in the world. vonnie: shares of both companies soaring today. oliver renick joyce us now with the story. -- joins us now with the story. what do we know? >> it would be a merger. 56%.wners would get about
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it is in talks, it is subject to changes. that, asthe likelihood we have seen with a lot of deals, you get competing bids. that could drive the price up for one of these companies. or if there is the issue of regulation. it kind of makes sense from many perspectives. vonnie: a merger of equals in which both parties feel like the dominant party. why are there so many deals? >> i think that is the big motif from the story. there is a news era that has been ushered in over the past decade or so and that is electronic trading. it's not really the pits anymore. it happens with high-frequency trading. you have had shrinking profit margins over a long period of
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time. if you are one of these exchange operators you have to think about how you make up for that. we have seen them make up for it in mergers and acquisitions. you scale up. you get bigger volume. you get more trades. the other hand, you can expand into different spaces. we have seen a lot of that as well. mark: what's to say this bid is actually going to be successful? our function. in the last decade or so, lse has been left at the altar by nasdaq, macquarie, omx, and deutsche boerse itself. >> not exactly the best track record. where it makes sense to expand profits, both of these companies have expanded into the index space. they have been trading in non-equity products like
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derivatives. where there is more money to be made. boerse lse and deutsche have done this before, it makes sense for them to combine that platform where they can trade commodities and make more money on the clearing side of the equation as well. it goes beyond the trading exchanges. they also have indexes. from a fundamental standpoint of what the company -- companies stand to gain, it makes a lot of sense. does that mean we could encounter deal, some counter interest from a chinese player? >> it does. because trading happens in london, there is going to be impetus from asian markets to combine forces there as well. , theu look at the price
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move in the stock today, huge moves for both. often indicates from an investor's perspective that they see potential bids coming here. you get big moves in stock prices because investors expect there to be more action. vonnie: who would be the likeliest? >> there has not been anybody making an official bid. as mark points out, it makes the most sense. we have seen the chinese exchanges come and purchase other exchanges in the u.s. and i think because of that, it makes sense that you might see interest from that part of the world. vonnie: thank you. still ahead, keeping an eye on the oil market. the world's largest mining company bhp's cutting dividends for the first time in 15 years. but the company's cfo --
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the company's cfo sees a brighter future ahead for commodities. naturally. that is next. ♪
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vonnie: you're watching the european close. i'm vonnie quinn with mark barton. time for the bloomberg business flash. a surprising residential real estate last month. sales of previously owned homes rose. mortgage rates are still near record lows. steady gains in the labor market are encouraging buyers. american confidence in the economy took a hit in february. believed to the job market will not get much better
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in the next six months and they were pessimistic about the outlook for sale prices in more than three years. of can add time to the list those interested in buying yahoos core business. they have heard a presentation from yahoos bankers. time would be competing with companies from verizon and at&t for yahoo! mark: bhp cutting its dividends for the first time in 15 years. the company trying to protect its balance sheet after a price collapse that saw profits fall a whopping 92%. the company's cfo peter beaven joins tom keene and francine lacqua earlier today on "bloomberg surveillance." we've been in oil since the 1960's. we have made a huge amount of
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value for ourselves. we have a very good operating capability with some of the best resources both onshore and offshore oil. and guess. -- gas. that has worked very well for us in the past. all prices will recover before -- with that capability, this is going to be a fantastic business press. tom: this is critical. if you get oil to do your strategy, cannot support the dividend and actually true dividend growth? >> absolutely. it's all part of it. all of our businesses in .ombination are critical what's important is that we would see that oil will recover first, then copper. then you will get into a sort of
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the bulk materials. we have altimately very strong position. diversifiedl portfolio. business that generates capital into the next. that's the essence of why diversified portfolios work very well. cuts,ne: given dividend do you still have opportunities to buy? there are assets on the market that are valued at a very attractive case -- pace. >> we are always alive to opportunities to acquire assets. for us, it's very difficult. we have a very focused portfolio. -- assets are rare in the world of mining and when people get them they hold onto them. we are on the lookout.
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to come toe going market and then they have to come to market at the right price. it is not just enough to have the opportunity. i think that the probabilities of us actually pulling something off are on the low side. beaven oncfo peter "bloomberg surveillance." restore --to jesse jesse riseborough. >> investors have been calling them to cut the dividend rather perversely. you would expect them to want to keep paying more out. it has been seen for a long time to not make much more sense in a cyclical industry like mining. today was a really significant day for this industry. it marks the death of this progressive dividend policy. rio tinto scripted earlier this
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-- scrapped it earlier this month. they are switching to a ratio of 50% of attributable profit. that has germanic we reduced the pool of funds available to payout to shareholders. mark: does this remove the risk of a further downgrade? >> it dramatically reduces it. said they already had a few chats with s&p about that. i think scrapping the dividend will help them in that regard. vonnie: this is a strategy that people have been calling for. what if prices don't recover in mining? how long could it take for this to become a benefit to bhp? the cfo made comments about that earlier today. the company is in his lower for longer camp they see prices
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where they are for a number of years. the outlook is somewhat grim for the foreseeable future. vonnie: where will they be looking and how much can they afford to buy? clearly marking out copper as a commodity they're interested in expanding it. perhaps also petroleum. they talked about an acquisition of up to $5 billion. i think the company is going to be rather pragmatic on m&a. they will only look at single assets, quality assets. mark: there has been a top management shakeup. jimmy wilson, that was probably the most interesting departure. >> i think he's quite a high-profile figure within the country. mike henry takes a more prominent role. for many years people have talked about him as perhaps the next ceo.
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we could start to see some sort of transition taking place. mark: you talked about copper. iron ore has seen a massive rebound this year. up by almost 20%. they are not feeling too bullish. >> they are not. they see that market being suppressed for some time. have been much more efficient in their operations. they brought costs write-down. that means prices will stay lower for longer. mark: thanks for chatting with us. a look at the final numbers before the close. we have five days of gains in seven. we have a decline today. principally because of china cutting the yuan reference rate by the most in six weeks.
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concern about the chinese economy driving sentiment today. how about a look at sterling? sterling was in the news yesterday, calling among all its peers. it is down again today against the dollar. biggest drop yesterday since 2010. the yield on the u.k. 10 year is up by four basis points. bhp shares are down by 7%. , big decline.ered drop in the bhp dividend today. the market close is minutes away. stay with us. ♪
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mark: i'm mark barton with vonnie quinn. you are watching the european close.
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stocks finishing up today. let's take you through all of the market action. declines all around today after china cut the yuan reference rate by the most in six weeks. economic indicators signaled a deepening slowdown. the stoxx 600 down after rising for five days in seven. bhp shares are down by 6.9% today. the world's biggest mining company made a larger than expected cut to its dividends. it wants to protect its balance sheet and credit ratings from a commodity price book -- collapse. lse shares jumping after it revealed talks between itself
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and deutsche boerse. it will be one of the biggest exchanges in the world if it does materialize. -- 14.5%.by 14 for 5% there have been talks like these before. intercontinental hotels group is returning cash to shareholders. how do they react? intercontinental is the owner of crowne plaza, holiday inn. shares of by 3.5% today. billion toing $1.5 its shareholders in the form of a special dividend. also offering profit beat estimates. this is a company that is under pressure to join a flurry of m&a.
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3.5% today. vonnie: we are four months away from britain's referendum on the eu. uk's it isf the companies signed that letter to david cameron to keep britain in the eu. -- acknowledge that the uncertainty is waiting on the pound. it does appear that recent moves have been influenced by the upcoming vote. policytters for monetary is not just a move in the exchange rate but the persistence of that move and the reason behind it. we will begin with global economics executive editor for bloomberg here in new york, dan moss. and with us from london is just an night to -- justin knight.
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-- are thephrase markets really reacting to what he is saying, or is it just the idea that there is a slight possibility that breakexit might actually win? a 30% chanceout the u.k. exits. i don't know the fed has moved significantly up or down since boris johnson tipped his hand. announcement by candidate -- cameron, it has focused people's minds in a very concentrated way. mark carney's testimony was a great example. it was supposed to be about the elation report. they spend a lot of time afflicting questions about brexit. vonnie: he is very management to be independent from this is like this. and yet he does have some kind of ownership of the british pound.
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how did he sidestepped that one? >> carney and the other officials seemed to limit themselves to observable phenomena rather than taking sides. your intro was interesting. as is sometimes said at the u.s. supreme court, they are independent, but they follow the electoral returns closely. i said your colleague, but your john. great to see. -- i said the name of your colleague, justin. but you are john. great to see you. -- >> it continues a trend that has been going on for some time. if you go back to when the referendum started to become a real focus, sterling starts to slide. it has fallen against all its major trading partners.
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the data in the u.k. has been as good if not better than all the major economies. this has been weighing on sterling for some time. the news about boris johnson was almost bound to give it another like lower. it was a big leg lower. sterlinghas been sterling sterling in the last 24 hours. what to the risk of a brexit mean? it has priced out the first type right over the horizon even as the data has not deteriorated at all this far. therefore there isn't much to hike about. the first hike isn't going to come materially sooner until we know how the referendum plays out. of the market is primarily watching sterling for signs of
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how the referendum is impacting momentum. vonnie: what happens to guilt from here? 39% of bonds are yielding negative and we have mario draghi to consider as well. will brexit ea major -- be a weighing factor on them? >> we are slightly bearish. we think yields have fallen a bit too far everywhere. we not going to see a resolution and more confident part until we get through this referendum and , whethers in brexit that ends up being a good or bad thing, it is clearly going to assure in a lot of uncertainty which is likely to keep rates on hold for a very long time. so the front end is likely to stay pinned around here.
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mark: to what extent should euro investors be quaking at the thought of written exiting the eu? many are saying, where britain goes, parts of the eu could follow in demanding changes to eu law or whatever. there could be threat of catalonia seceding. we are focusing on the sterling risk to the u.k.. what about the euro area economy? >> it's one more thing for people to worry about. it's not long ago that the eurozone was wrestling with its existential crisis regarding grace, regarding spain. otherk. is in a whole league. its economy is so much bigger. it is so much integrated with the rest of the world. it is one more thing for people
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to worry about in a year which is only two months old. people are worrying about a lot of things in a lot of different places. do they really need this? mark: good question. timedis unfortunately when we have all these other global uncertainties. the u.k. data has been holding up fine, but clearly there is a risk going into the referendum if the polls stay closed. if it's a period of high -- it is very unfortunate in that the referendum is coming when it is. maybe we need to get the uncertainty out of the way. >> don't forget unemployment is
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about 5%. wages are showing signs of picking up. core inflation is higher. ande can get through this stop talking about it all day, their language will change anyway. great to see, john wraith. and daniel moss. year markets are done for the day, but u.s. markets are still open. the s&p 500 is down almost 1%. the dow down almost 1% as well. the nasdaq is down 1% as well. abigail doolittle is at the nasdaq in midtown. lots of focus on the
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consolidation in the chip space as western digital is buying and disk in a stock and cash deal. -- sandisk in a stock and cash deal. comingompanies are together to fight shrinking customers and rising costs. one company's focus could be on the move is nxp semiconductors. perhaps it would be some sort of m&a deal that could help the stock recover from its more than 40% drop from its record peak last year. vonnie: to mark in london. we have been speaking with the chief executive of an xp -- nxp in barcelona. what is driving the growth story today? talking about the internet of
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things, chips it can connect. cars, appliances. everyone is so worried about the fact that they are very exposed to apple. stock has been so beaten up. i was speaking to the chief executive of nxp. have a listen. i think we will continue to see consolidations in the semiconductor industry because it is not going to grow as fast as it did a decade ago. i think it's natural that we will see you can validation of the industry. >> maybe we will see more m&a. this time last year, i spoke with him after that $11 billion deal to buy up the rival free scale.
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i know you have been speaking to executives about the mobile video explosion. what have they been telling you? >> this is what facebook was raving about yesterday. we heard mark zuckerberg talk about the shift to a community of videos. everyone wanting to get a piece of the action. i was speaking to another company that has been significantly beaten up in recent days. we just heard bernstein talking about viacom. they have been saying, they need to split themselves up because viacom's networks like mtv and nickelodeon are losing their value every single day. no, says the head of the international head of viacom. he has been focusing on the growth could cash in on. have a listen. andeast significant growth
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we were talking about the mobile world. provides tremendous opportunity. is the media business involving? yes. is pay-tv going to grow? absolutely. is it going to be different than it was five years ago? absolutely. i guarantee there will be more subscribers in the coming years. the head of viacom outside of the united states, prevalent here in europe. he was really trying to big up the growth story in his company as the share price continues to dwindle. doesn't know if the u.s. will have to sell some of their assets. he is hoping they maintain them. and they managed to see the growth in the explosion in video content we heard mark zuckerberg speak so passionately about. mark: thank you, caroline hyde.
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its take isllen to declined since february 9. big fall for crude today. up next, the battle of the charts. it's all about divergences. equity futures versus bonds. dollar versus oil. a pair of charge that show where they meet and where they part. that is next. ♪
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mark: time for the battle of the charts. we take a look at the most telling charts of the day. we are to do things a bit differently today. i'm going to be judging.
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botce quinn makes her debut. joe weisenthal is here. >> we have had quite a rally in global markets over the last two weeks. let's look at the comeback we have seen. i have plotted on this chart s&p futures versus the 10 year yield. , twowas really the bottom thursdays ago. when people are nervous, they buy safe haven assets like u.s. treasuries so the yield plunges. comebackis really nice in s&p futures that caught lots of people offguard. if you look at the 10 year yield, not quite as much. there has been a little bit of a
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bounceback, but it has essentially flatlined over the last few days. not seeing the flight away from quality that you might expect. now we have this divergence between equities and treasuries and we will see if they resolve and which way they resolved. today, equities falling more. closing the gap a little by equities selling. that's my chart today. mark: what have you got? vonnie: i like it. if he wins, i will be a humble loser. my chart is slightly different. i had to do it very fast. it is what i was speaking about earlier today. it is where crude oil and the trade dollar index diverge. you can see this is where it starts to really plunge. that is where the trade dollar
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index moves higher. a reversal in the oil trade, we are seeing weakening in the dollar index as well because we have commodity currencies strengthening ever so slightly with a reversal in oil. you're looking at the canadian dollar and the mexican peso. the winner is, by a whisker, the lady making her debut, vonnie quinn. i loved both your charts. divergence. the theme of the day. next on the european close, paradise on four wheels. rolls-royce gets ready to replace one of its iconic limousines, one built on an aluminum frame. ♪
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big changes at
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rolls-royce. the automaker will replace its phantom ultra luxury car with a lighter version made of aluminum. the next generation rolls out in 2018. matt miller joins me now. it feels like it should be more of a phantom if it's aluminum. matt: exactly. it will be lighter and easier to drive. that doesn't matter as much for this car as opposed to a rolls-royce ghost. because people who own phantoms don't typically drive themselves in the car. they ride in the back seat. vonnie: is there an actual rolls-royce called the ghost? matt: yes, of course. it is my favorite rolls-royce, if i could editorialize. the phantom is such a large car that you would have your chauffeur drive you in it. it has been the flagship for the rolls-royce ever since bmw
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bought them. vonnie: i want to ask you about aluminum. ford did this three or four years ago. matt: and other carmakers have been doing it for a while. audi has been using a lot of aluminum. range rover famously switched over a couple of years back. all automakers, even one that only sells 3785 units a year, need to have better gas mileage to help meet standards for their bigger owners. bmw still wants to do that for regulations and to appease customer demands. vonnie: standards being? matt: miles per gallon that they have to meet by a certain time. vonnie: they have standards like that in europe, right? mark: [laughter] so they tell me. i get driven about these things.
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tell me about the phantom zenith. matt: carmakers typically will do this. at the end of the life of a model, they will produce an extra special version of the car. rolls-royce is making what we call a zenith. there will be only 50 of them. they will be quite a bit more expensive than the $400,000 price tag that the current phantom starts now. hope they buy them will become more of a collectors item because they are limited edition. be interesting to see what rolls-royce comes up with after. this phantom has been around for 13 years. it's a mainstay of the ultra wealthy. we see them occasionally chauffeuring people around down in our courtyard here. it will be interesting to see the new car they come up with. rolls-royce is at the forefront
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of technology and luxury in the world. suv. it's looking at an possibly electric cars. can it be a success in those segments? matt: it wants to be. spoken to -- i have rolls-royce executives about this for years. so many of the wealthy people who own these cars would also like to have a rolls-royce suv. right now they are driving typically a chevy suburban or ford expedition and if rolls-royce would give them a large suv, they would definitely buy one. they will go for an incredibly high price tag. this is not exactly brand-new ground for rolls-royce. made a1930's, they shooting break made to take hunting parties with guns and dogs. vonnie: matt miller, you never
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editorialize. you can read more about luxury at bloomberg pursuits. we will take a look at stocks now. down about 1%. the s&p 500 down 18 points. decline of 1.2%. china set the scene after it cut in the yuan reference rate. php made a larger than expected cut to its dividend. that's it for bloomberg european markets. see you tomorrow. ♪
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>> welcome to bloomberg markets. ♪
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>> good afternoon. i'm alix steel. here's what we're watching at this hour. the world's biggest names in private equity and venture capital are gathering in berlin for the 2016 super return international conference. we will go there live for an exclusive interview with ken mehlman. are they good times over for google and amazon stocks? some say yes. macy's is trying a new strategy. the company is turning several stores into discount outlets. will investors warm up to the retailer again? for more on today's activity, let's go over to julie hyman at the markets desk. it has been about oil and stocks again today. lows oftocks near the the session still as oil

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