tv Bloomberg Markets European Close Bloomberg March 9, 2016 11:00am-12:01pm EST
mark:mark: live from london, i mark barton. this is the european close. we are going to take you from new york to london to madrid in the next hour. here is what we are watching -- what will draghi do with less than 24 hours to go before the ecb faces a choice? draghi will try to pump new life into the economy. what are the odds of a rate cut and more bond buying? for thethe new strategy world largest clothing retailer. how they are moving toward more online sales and cutting back on store expansions. mark: how are little -- how are low oil prices affecting companies that do drilling? drilling is here and an interview is coming up
soon. head to the markets desk were julie hyman has the latest. julie: things are not progressing apace here in the u.s. gainsp 500 hanging onto thanks to energy stocks. the dow and nasdaq not doing much. some decliners in biotech weighing down the nasdaq. after the check inventory report that size larger than estimated build in inventories. a couple of things going on. we saw a large drop because the build last week was so big. that means we did see a declining build in inventories. there still remains this optimism in the oil market that the drop we have seen in production will lead to a -- declinesurprise
in supplies. then there is the technical bounce. in terms of what is contributing most to gains in the s&p 500, we've got a combination of some of the oil movers like chevron and exxon that have been rising as well as big cap tech stocks contributing to some of the gains. all of this money going into stocks. we are seeing some of the safety trade money flowing out. we see someds, selling in treasuries and gold as well as in the japanese yen. mark: stocks in europe rising for the first day in three. we are playing the draghi wait and see game. the german power utility not rising, falling by 3.7%. biggest annuals
loss today and wrote down the value of its coal and gas fired power plants by billions of euros. this is my favorite chart of the day made by yours truly. the world's biggest clothing retailer reported it fastest annual profit growth in three chain.ueled by the zara since its ipo in 2001, shares have risen by over 900%. shares of h&m have risen by 200%. stocks retail indexes up a mere 5%. the investment you wanted to have been in in the last 15 years. vonnie: and would you believe i am wearing a zara skirt. ramy; u.s. special forces have
captured the head of the islamic state unit trying to build chemical weapons. he was captured last month in northern rock. this is the first major success out of the pentagon policy of growing -- of going after islamic state leaders on the ground. vice president joe biden says it iran breaks the agreement over nuclear weapons, there will be consequences. the iranians launched to missiles that had the phrase "israel must be wiped out" on them. the u.s. will investigate theher those violated treaty. carly fiorina has endorsed ted cruz, calling the texas center a leader and reformer willing to take on the status quo in washington. palace has complained about a newspaper report concerning queen elizabeth and the european union. tabloid, to "the sun"
the queen voiced reservations about staying in the eu. the comments were allegedly majoring a private lunch. the palace says the queen is neutral on the issue. back to the fact that everyone but me seems to be wearing zara clothing today. focusing onretailer shopping online rather than traditional brick-and-mortar stores. it seems investors like the plan and shares are up on the news. rodrigo covers tech from our madrid euro. the fastest annual profit in three years. what is the secret of their
success? -- guest: they have been doing it wonderfully for 15 years, ever since they went public. they've been expanding aggressively, cutting their to anyone market and went to 70% of total revenues. the other is strong growth on the online sales side of the business. that is their main thing. they found that it is cheaper, better and people spend more online. back expansion and online is going to compensate for less store space, but they are going to continue to build new stores, aren't they? guest: yes. they were focusing more on online because that can compensate for having more stores. the ceo said as much today.
it's not that they are not going to build more stores. they are still aiming for between six percent and 8% growth. there are huge flagships and all of the big cities and they are stores and of these putting a lot of focus on architecture and design so people feel it when you walk into the stores. they make most of their close in spain. how are other retailers not managing to copy this model? guest: about 65% of their products are made in the eurozone. the other interesting thing is the stuff they don't make in spain, they make in china or turkey or whatever and a lot of it gets flown into spain and redistributed globally. that means there's a lot of
logistics behind it which means there are certain costs which would be difficult for other retailers to do because they would have to change their production and manufacturing truck sure. just famousre not --weae my coanchor where r zara clothing. is he going to hold on to his stake as the founder of the chain? guest: we know very little about him and that's the way he wants it to be. demandedity regulators a photo. department ande has lunch in the company canteen every day and has a doctor working at the office every day.
go anywhere.nt to if it were up to him, he would not be public. he's well into his 70's, so at some stage, he will have to step down. he's worth $69 billion, behind bill gate'$81 billion. the europeant on close, our interview with the chief executive of ge oil and gas which makes drilling and exploration equipment. we'll hear how he's responding to low oil prices. ♪
vonnie: this is bloomberg markets. recordairlines posted a first half, crediting its turnaround, but a stock is still struggling to gain this year. let's go down to the nasdaq for more. you have some challenges that lie ahead, particularly a weaker australian dollar. how do you anticipate dealing with those challenges? guest: the weaker australian dollar is an advantage because it is encouraging a lot of overseas business to come to us this year. light 10%ican traffic and we are benefiting dramatically for that because a lot of them travel around with a domestic network.
continue at these levels, we'll get a bigger benefit into next year, so we are well positioned. so we are pretty optimistic at the moment. the cash flow was about 1.4 billion australian dollars. what do you plan to do with this? that we just back started yesterday and we will continue to do as rapidly as possible. this is on top of 500 billion dollars from october last year. the business is producing a lot of net free cash flows. we have the best balance sheet we've had in a long while and we credit.estment grade heavily inested
products, so we are in a good position to return money to shareholders. how do you expect to use that money rather than by? what about a dividend? you haven't -- you haven't paid a regular dividend since 2009. guest: one thing australian shareholders value is franken credits. because quantum -- qantas had a number of accumulated tax losses, we have not had enough but we will be looking at buybacks and frank dividends as ways of returning surplus cash to our shareholders in the future. at the present time, we are talking about doing a buyback, which we will be doing over the next few months. i have to ask about the upcoming u.k. referendum.
i gather you are for the u.k. staying in the eu. brexit would propel the cost of air travel and returning to a time when flying was for the elite. is she scaremongering? guest: we are supporters and i think ryanair and others have come up and said the british the is not good for aviation industry. we are flying into london and have an operating in london for a long time. we want to see a thriving u.k. economy and tourism business there. entirewhy you have the aviation industry coming out with support for staying in the european union. usually these people are competitive and it's hard to get
them all to agree, so that should be an indication that we are worried about a british exit. why can't this stock get a bit of a tailwind? over the last 22 months, the stock has quadrupled. stock a top performing and top airline stock, so when you go to that kind of movement, sometimes it takes a while for the stock to get to new levels. the job of management is to focus on continuous improvement and we are implementing a major transformation and we've seen better customer service ratings than we ever have. we think the market is structurally sound and record profitability there. we've seen the national business dramatically turnaround and we are participating in growth in asia. we are communicating that story
and as we keep on delivering there will be a response to that. vonnie: where do you see weak spots? guest: at the moment, the resort is showingustralia some weakness. the rest of the economy is going to investors. that's going great for us and we have record profitability. we've seen really strong growth from the u.s. and southeast asia. there's a lot of strong positives with demand and cause, which is great for the performance of our business. to the ceo ofanks qantas airlines. we will have much more after this. ♪
affecting many parts of the global economy. the price of crude remained significantly lower than it has been in recent years. what does it mean for companies producing drilling equipment? my guess is the ceo of ge oil and gas. have you been prepared for a slowdown like this in the price of oil? : it has been hard to be repaired for the slowdown and one of the things we see is we don't control the price of oil. we execute and control on the aspects of outcomes for our customers and make sure we return for our shareholders as well. necessary costhe out actions and focus on reinvestment back into our audit. ising sure we can help difficult in the industry which is clearly going through a big down cycle. innie: have you seen a slump
stagnation or orders? lorenzo: we have seen drilling come down appreciatively. we are working with our customers on new opportunities and seeing how we can make sure some products go forward. the goal is to drive productivity by standardization and offering new novel solution. dimont announced offshore. those are some of the novel approaches where we are entering into a contractual service agreement so we can make sure we remain competitive in the industry. has oil bottomed? what is your outlook for prices this year and next? wish i had a crystal ball. we will let the pendants focus on where the price of oil is going.
where we tend to focus on is what our customers are telling us in staying responsive to them. the price is a little and we have state focused on the productivity and cost action. we believe in the macro trend and the macro trend says energy is going to be required by the increasing population. we have to be ready for the upturn as it comes back and production is starting to come down. you mentioned your customers. is iran a customer? you're the first oil executive to do so after sanctions ended. is that business to be had in iran for ge oil and gas? i went on an exploratory business and the .uclear sanctions came off we wanted to understand what is the situation and we are going through an analysis to see how
we abide by the rules. from an oilarket and gas perspective, so we want to understand and be ready for that opportunity as it arises. the weakening oil price, there must be some good opportunities out there with beaten-down asset prices. lorenzo: at ge, we've got a diversified for folio that we can allocate into a number of areas. we are going to be opportunistic and look at the returns are available. if there is something that fits into our portfolio, we will take a look. we have amassed a great folio in the upstream, midstream and downstream. do you allow for financing? when aallow extra time
slowdown hurts the industry you are dealing with? ournzo: we are therefore customers, so we can help them with financing. we provided financing on the blowout preventer's offshore. financing, thanks to the breadth of ge and the fact we have a financing arm and strong balance sheet, we are able to provide that. vonnie: will suppliers like you and along with banks the able to support this industry through the worst of the downturn or will we see bankruptcies? lorenzo: we are committed to our customers and will support them through the down cycle. there's an aspect of making sure we maintain financial credit and monitor the risk profile of what we do with our customers. but we are committed to this industry for the long-term. bysupport our customers providing financial assistance
and going in and supporting the industry as a whole. as ge, we are able to do that with oil and gas as well. a quick question on your origins. you were born in florence and educated in cardiff in wales. i have to ask you the referendum question. do you think the u.k. should stay in the european union? global country a and work in multiple countries and we are supporting from a european union perspective, we think it's beneficial to continue to have open trade and free movement. vonnie: a very diplomatic answer. final question -- are there other competitors in this space that are hurting more than you because you have the have to of ge behind you? exposureif your full is just an oil and gas, you will be more exposed. we are fed by being part of a large company. aviation there to help
and power and health care. into being a differentiated player in the oil and gas a scum a we bring in financing and new technology. the industry,at we can provide a lot more creativity. vonnie: thank you. we are a matter of minutes away from the end of today's european equity section. stocks are rising for the first day in three. tomorrow's all-important european central bank meeting. the close is minutes away. ♪
million according to those familiar with the matter. the stock is up 5% on the announcement of that news. they are interviewing advisors and did so recently to oversee a central sale. mark: live from london and new york, you are watching the european close. let's take you through the action. stocks rising for the first day. it's all about the ecb. it has been a year since the ecb started. biggestown by 3%, the ever annual loss, 7 billion euros, more than estimated. it wrote down the value of its: gas-fired power plants by billions of euros. --ant to show you this chart this is one of the big stock stories of the day. the world's biggest clothing retailer reporting its fastest annual profits in three years --
a gain of 15% -- i know you are wearing the item of clothing by zara. this shows you the performance since the ipo in may of 2001 and look at the performance. shares up by 9%. it a rival is h&m. butes are up a mere 22% they both whipped the stoxx 600 index. vonnie quinn keeps buying items from zara. vonnie: it is an old habit that i can't break. it is seven years since the stoxx 600 fell the flow. how has it fared since? mark: there's another anniversary. seven years ago today, the
stocks 600 hit its lowest level since 1996. i made you a special chart today showing how it fared in the last seven years. the white line is the stoxx 600 and it is up by 130%. ,'ve looked at the mr function the best-performing stocks in europe, the swedish biotechnology company, the fingerprint company. 18,439% in the last nine years. if you have held onto shares, you would be sitting on a loss of almost 400%. that's the stock you want to have been in. 18,439%. that puts the again in the shame. vonnie: i love how you find
these things. i know you are uttering me up for chart of the day. the ecb is expected to announce more stimulus measures tomorrow. can banks survive in a negative rate world? we talked about the burden on banks yesterday. it is a reduction between creditor and debtor, so margins -- they have to find ways to go around negative rates and maybe charge or diversify the products. it will incentivize the new relationships. mark: let's go to our chief markets strategy -- strategist. how can mario draghi and his policymakers avoid a repeat of december 3 when by all
assessments he under delivered. with great difficulty. the market is fearing he's only going to be able to do 10 basis points. scratching their head as to whether he will be able to increase the amounts of qe. most people expect another 10 billion or the extension of the backend. is that division within the ecb stopping him and increasing qe, which some suggest he should do? the german contingent has been complaining quite a lot. we've had a number of different people complaining about the merits of qe and negative rates. that might argue that if they are complaining so much, maybe
he's got something up his sleeve. we have to see something from him which is a little more spectacular. he could wait the floor for buying a bond, they could scrap it completely. that would mean central banks would be able to buy shorter and did bonds and that would steep in the curve and that is good for banks. what will he say? he's been great about instilling confidence for the central banker. can he do that statement after statement? guest: he is the single most important asset that they have. this is his chance to rectify that and pull a rabbit out of a hat. let's hope he's got something special for us. there could be corporate bonds included. what would be great is senior
financial bonds and that would correct the mistakes they made bonds andthe reinstall confidence back in the bank capital. maybe he's got something else creative. $2.5 trillion of sovereign bonds in negative -- what is the market anticipating? is the market anticipating coming back? that's one of the things we will see tomorrow is the cti forecast. that's expected to be quite a long way. they're going to downgrade a lot of that forecast. that's the forecast we need to see and that will determine whether it can justify himself. can hit you think he
that inflation target by the end of his 10 year? guest: i don't think anyone else has either -- has either. it.s not going to do inflation forecast have actually dropped. you could argue it's not the answer and more qe is not doing that much. too little too late is the story. the germans are constantly hammering everything he's trying to do. for the ecb, there is quite a credibility problem. mark: it means deflation expectation set in. it is the deflationary spiral, isn't it? guest: i think people have combed down on those initial fears. but he needs to do something quite substantial. i don't think anyone really has it.
vonnie: what is your position on the euro? the euro is the target the ecb cannot claim that they have. they were honest enough the other day to say negative rates raise asset prices and weaken the currency. if that is what they say in japan, why isn't it the same in europe? draghi wants a consistently weaker euro. he does not want it plunging to parity with the dollar, he just needs the direction of travel to be going lower and that's why he needs to keep the pressure up and maintain our expectations. great to chat with you. we will see you soon. stocks are finished for the day here. how is it looking there? vonnie: the s&p 500 is leading the pack with a gain of .5%. still below 2000.
the dow jones with a gain of 65 points about two hours into the session. the nasdaq is up .3%. the 10 year rising there in germany. let's go to the nasdaq where abigail doolittle has more. abigail: we do have the nasdaq higher this morning. we have the nasdaq biotech index down about 5%. dropped below its 20 day moving average after a time of relatively flat trading. a 30%ime it was ahead of decline, so this could signal we may see some near-term selling pressure accelerate in biotech and perhaps the biotech market overall could get worse. vonnie: looking at the biggest
biotech losers, any idea why they are down so much? abigail: this is after news yesterday that a new medicare pilot program will be launched and change the way medicare part d is reimbursed. i did speak with our bloomberg biotech analyst to said it will hit these two companies the worst. but could it create a selling environment that we saw last summer where politicians were concerned over high drug prices? it will be interesting to see how it all plays out. vonnie: thank you very much. let's check in with our bloomberg first word news. up, more than 13,000 refugees are piled up at the border of greece and macedonia. the governments have taken next are steps to stop the flood of refugees flooding into their countries but greece says it can only shelter up to 70,000
migrants, double the number of currently stranded on its border. a warning from the north korean leader, kim jong-un. theays the country has ability to make nuclear warheads small enough to put on nuclear warheads. pyongyang has conducted for nuclear tests since 2006. in france, union railroad wrote workers went on protest against francois hollande's labor proposals. it would end the 35 hour work week. the strike a slowdown down rail service throughout the entire country. the u.s. army plans to counter russian military moves by bolstering its presence in europe next year, including deploying tanks, helicopters and infantry vehicles capable of destroying russian troop carriers. global news 24 hours day powered by our 24 hundred journalists
vonnie: it is time now for our global will of the charts where we look at some of the most telling chart of the day and with a mean for investors. you can access these charts on the bloomberg by running the unction. kicking things off is joe weisenthal. a little lazy today because i'm updating my chart from yesterday but i am so
transfixed by this story. vonnie: disqualified immediately. joe: we have been talking about japanese bond prices and how they have plunged. of the largest jumps in yields in history. you can see this white line and the japanese government on yield down to .55, jumping 2.76. it shows how extreme things have gotten where there are $5 trillion about negative yielding bonds out there. then we got a dramatic snap back last night. vonnie: some people took profit and some people were screened -- were squeezed out. joe: we will see if this is just a blip but a fascinating story to keep your eye on. vonnie: you are still disqualified. mark, you can't lose. mark: it is the one-year
anniversary since the start of qe, since draghi and his colleagues started buying government bonds. it is fascinating to see how asset classes have fared because look at what happens to the german and portuguese bond markets. normalized so any movement above the red docket line shows an increase. but forally saw gains most of the last year, those three gauges were below the 100 line. it's only been in the last months that we have seen gase get -- seen gains. portugal is a market strategist that would benefit the most from qe because it deals the highest but has fallen 5%. 50, thethe euro stocks gauge of euro area stocks. it initially saw a gain but look at what has happened to the euro
stocks 50 since then -- it is it certainlyving does not boost the stock market. we have had china and the fed rate increases. we have had the volkswagen omission scandal than those are not going away. xit fears. the mix bre and dayyear anniversary is tomorrow. before i go, if you want a new chart, unlike joe's, which is a rehash. vonnie: you leave me speechless, mark. i did say joe was disqualified, so you win. chartay he had an earlier but you both competed admirably. of europe hasne
vonnie: you are watching bloomberg television. i'm vonnie quinn in new york. mark: i'm mark arden in london. time for a look at some of the biggest business stories in the news. fedex, amazon will be joining you in the sky. the online retailer has agreed boeing planes, wanting to build out its only justice services and reduce its reliance on carriers like fedex and united parcel service. bmw says profit rose more than 5% last year. the world's biggest maker of luxury cars facing strong competition from her sadie's bends. bmw forecast another record sales years, that would be it
seven throw. barclays says there's no short of buyers for its stake in the africa unit. the banks credit ratings were downgraded once it became known once it became known barclays was looking to sell. we had a higher rating than all the other bankers but we do not rate money overseas. in the local market, that was discounted. mark: tomorrow, we will hear from the barclays chief executive. that the latest business flash. vonnie: prosecutors in the u.s. are looking into a art scandal involving europe involving billions of dollars in dealers
-- billions of dollars between a dealer and art collector. let's bring in our financial crimes reporter for bloomberg news. this is a major scandal in u.s. prosecutors are looking into it. tell us who this is. a well-known art dealer and has become significantly more well-known over the last year. they have been allegations levied against him in monaco as well as france by some of his clients, particularly one of his clients who is a russian billionaire, that he was possibly misrepresenting the price of paintings bought and sold as an intermediary between buyers. bidding the prices up almost. it was -- the allegations made by the russian client was whether he was giving full disclosure on the cost of those in and marking them up and pocketing the difference. vonnie: what do we know about the department of justice inquiry? guest: it's in its very early
stages. executors have traditionally honed in on the art market because it is incredibly opaque. there is very little transparency and no regulation. they look into these types of issues and there's a long string they have done over the last what kind ofg up illicit activities could be going on in different types of art deals or within the art market. mark: this all began in monaco, what is the stay of the investigation there? guest: it is ongoing. he was arrested in february and his appeal to have charges dropped in monaco was denied in november. that is currently ongoing. no charges have been levied in the u.s. and they are just now looking into it. how is this going to play out for this man? guest: law enforcement could
find something and come down hardware he could be completely vindicated or it could be a bad dream. vonnie: tell us about the paintings involved. guest: one of the most amazing part of this is it involves an extremely rare painting by leonardo da vinci. it was sold to the russian 127 point $5or billion. it's one of just a handful we know that are in existence and it's in his private collection. it has been on display at the national gallery in london and just determining the authenticity of this painting took several years and some of the best art experts in the world to figure out. some of the most valuable and emotional pieces of art out there in the world have an entangled in the scandal. this is a seems to me perennial complaint in the art world -- i'm not saying it's wrong. are fixinglemen
prices were changing prices were not being completely truthful, is there a way of fixing it that marketplace efforts have not come to fruition? guest: a lot of the deals are done privately. you have people who act as dealers and brokers between buyers and sellers and it's up to the buyers and sellers to ofate their own level transparency in those deals whether it is through contracts or legal disclosures. often it's just not done that way and sometimes you end up in situations. vonnie: you are not going to sell a da vinci on some of these marketplaces. fascinates me is this secret world of the european dealers market, the middlemen market and collectors market. is this scandal shaking up that secretive world? calls into question if there should be more transparency into the art market. it is completely unregulated, so there's a big question on how
you would do it. it would take major art houses and art dealers and collectors to lead by example on something like this. vonnie: thank you so much. check out the story "the da vinci markup." the big one tomorrow, it is the ecb with great things expected from the president, mario draghi. they started day buying eurozone bonds. today, stocks rose for the first day in three and that's what happened in the currency and bond markets. that's it for us. bloomberg markets continues. ♪
from bloomberg world hecklers in your, good afternoon. i'm scarlet fu. the volatility across markets has diminished but don't get too comfortable. my guest will tell us where the risks are. european central bank prepares to fire and other stimulus belvaux. mario draghi has led investors to expect something big. and a big day for jack dorsey and square. the company making its earnings debut. he also happens to run twitter. get a snapshotto of today's activity. let's head over to the markets desk with julie hyman. we are looking at the seventh anniversary of the bull market. debatethere is so much about how much further the bull market has to go. stocks today