tv Bloomberg Markets European Close Bloomberg March 16, 2016 12:00pm-1:01pm EDT
art and. -- mark barton. ♪ we will take you from new york to london in the hour. here is what we are watching. the latest budget for the u.k.. the country -- lowering the this yearorecast for and warning that economic union will the wood even more. -- lower it even more. alix: two hours away from the fed announcement on interest rates. it would be a major surprise if rates go up, but will the fed lay the groundwork or action in the months ahead? mepresident obama nominated rrick garland to serve on the supreme court. we will tell you who he is. well into the trading day in the
u.s. going to the markets desk were julie hyman has the latest. julie: we are not seeing much market action. people are waiting to see what that officials are going to say, what janet yellen will say. even if no interest rate change is expected, the commentary could be key in terms of market direction. if you take a look at groups on the move or not moving, the biggest moves we see today is the decline of nearly half a percent in the utilities. even within the groups on the move, you are not seeing much direction. seeing a pretty even split between gains and declines. matt miller looking at the fix. as well as stock exchange volume. both of these are at the lows pretty much we have seen thus far this year. we have seen volume run in the s&p 500 25% below the 20 day and 100 day averages for that index.
x falling off as there is the collective breath holding on the part of the market. alix: something similar happened yesterday. what about the fixed income market? this is what looks at interest rate futures and extrapolate what may happen in terms of that interest rate increases. we see the odds continually moving up. ining earlier into the year terms of probability. now looking at 55% for the june meeting. that was as low as below 10% not that long ago. that has changed. the other big factor, with cpi coming in hotter than expected. thantion rising more
estimated. the 10 year yield moving up a little bit. i want to move ahead actually if i can do that and take a look at resilience stocks. another key story today. president lula will serve as chief of staff for the current president. there was talk about him being under than investigation for corruption. ,f he is in the cabinet protected from prosecution from anyone except the highest court in brazil. interesting development. we have seen volatility as a result of that. mark: european investors are partaking in the past time otherwise known as collective risk-taking. this is the stoxx 600. these are the 19 industry groups. the advance, the european car market expanded for in 30th straight month february. look at the stoxx 600, barely changed on the day. changed on the day. 5% lower today.
john cryan said he does not expect the german lender to report a profit this year. the man from bloomberg news delving into that story a little bit later. at this.ok this is a sugary drink company or drink company. all of the drinks have sugar in it. george osborne unveiled a sugar tax. look at the shares down. 1.5% lower right now. eventually he will tax these companies. this will depend on how much sugar is in a drink. have a look. the big news, he has cut the u.k. growth forecast for the next five years. this year cut to 2% versus the
earlier estimate of 2.4%. he blames global turbulence and on forecast is predicated britain remaining in the eu. george osborne once britain -- wants britain to remain in the eu. a lot of news today. sterling little changed on the back of the osborne budget. for now looking at bloomberg news. mark: president obama has nominated merrick garland, a judicial moderate to currently serves as chief judge of the d.c. court of appeals. the selection sets up a fight with senate republicans who have vowed not to hold hearings on any nominee until after november elections. isning us more -- with more the bloomberg reporter. thank you for your time. tell us, who is he?
>> he is the chief judge on the d.c. circuit court. for almost a judge 20 years and has received rave reviews from republicans and democrats. he was appointed by president clinton. great things to say about him when he was considered for supreme court opening back then. the president is using this as an all of branch to republicans to press their hands a little hearings,e them have have meetings, and eventually a vote on the nomination. mark: doesn't seem the white house strategy is you have said judge garland is one of the brightest judicial minds before, the president saying this to republicans, and has received bipartisan support, so what is it? >>blem now? is that that is basically the argument. they want to make it seem they are blocking the nomination just based on politics.
to blocke is no reason this if you look at only the merits. the white house has put putting up quotes on republicans from the past where they said great things about the nominee. they will continue to ship around the quotes even as he begins to go to capitol hill putting to start pressure on republicans to have the votes and approve the nomination. mark: as the worldwide audience all on television, the president liveg the announcement from the white house rose garden. let's listen to what the president had to say. obama: this is not a responsibility that i take lightly. a decision that requires me to set aside short-term expediency politics to maintain
faith with our founders, and perhaps more importantly with future generations. mark: realistically, given this is a presidential year and the president has received pushback, not only mitch mcconnell of texas who by the way in the past the nomination to the circuit court, but we also have pushback from the chairman of the senate judiciary committee chuck grassley of iowa, what are the realistic chances chuck grassley -- that judge garland it's a hearing at this point? >> very slim. the entire nomination process is being shaped by the republican presidential race where you have seen voters have an uprising against the establishment. this is another case where they are being put to the test whether they will cave in to the president or stand up against him. it seems like based on the republican presidential nomination that republicans have the incentive to stand their ground. that is what mitch mcconnell said he would do a few minutes ago.
thank you so much. by our journalists. thank you so much. back to you in london. mark: thank you my much. coming up over this. exploring what this would mean ahead of the bank of england policy decision. all eyes are on the bed today. will janet yellen change the outlook for interest rate or will she stay the course? we will take you live to westminster. more budget reaction from chose, chairman of the office of budget responsibility. ♪
mark: live from london and new york. i am mark barton. you are watching the european close. earlier today chancellor of the revisedr just exchequer on the growth forecasts and warned the economic risks of leaving the european union. and edwards is at westminster with the former chancellor. good afternoon. take it away. the other thing we heard today is he is cutting corporation tax. that is a big headline announcement and imposing a sugar tax on sweet drinks. you were mentioned today in the
tax cuts. sinceldest the essenes you were chancellor. what did you make of him? >> that was every kind of him. a politically astute budget. it is a pre-referendum budget. a lot of popular things in it. popular things on spending and tax cuts. that he says he will stick to its plan of eliminating the budget deficit. that is very important indeed. announce all of the goodies by unspecified savings and government departments and another tax on tax evasion. this anupid international context, there is a debate about how we needed to
see more fiscal spending to stop the economy from slowing. the idea of being austere, sticking to the austerity drive. he is -- his the on the right track? >> he is right and they are wrong. >> in the u.k. context? >> sue myrick and the u.k.. i think there is a problem. this has not been fully solved yet and needs to be attacked. a slight problem on the productivity drive. this andis to increase will only make them worse. >> corporation tax. coming down to 17%. i spoke to someone earlier who said it is a big welcome tax. a rate that could get in trouble with some of our colleagues? are we in danger of being labeled a
we areen gekko >> getting a huge amount of investments. people are not frightened of places like that. it is still coming into the country. there is tax equation -- avoidance, tax evasion. severalhad multinational to do this. we have lower the rate of corporation tax. you are the chairman of the lien campaign. very much in favor of the u.k. leaving. we spoke earlier today at bloomberg. the former finance minister down in greece saying britain does not really have a choice to leave. if you want to stay and have the trade benefit belonging to europe brings, you have to belong to europe. >> i do not think we're anything
learned from the greek economy. economy is the strongest, the greek is the worst. the fact is in my judgment, and i've been around the block for many years, there would be an economic benefit. >> he knows thing about economic -- economy is the strongest, the greek is the worst. negotiating with germany. >> if we leave the european union, we will not spend time negotiating with germany. >> we went's negotiate a trade deal, wouldn't we? >> i think it would be the interest of germany . particularly desperately wants the market to have the biggest market we have. joining us here on the college grain and westminster. the day before the english bank rate decision. mark: well done, anna. we will see you in about 15 minutes. and up with the former
mark: you are watching the european close. i am mark barton in london. alix: the federal reserve is getting ready to wrap the two-day meeting. highly rate hike is unlikely. we could can idea of future increases. >> senior fellow at the milken institute joining us from los angeles. i would imagine this is a time when they are sitting down to his and witches and drinks. nearing the end, a statement coming out soon. when you look at the economic backdrop, what do you think they were most concerned about? i think they have to take
into account the fact that the core consumer price index number is out.e out today they had a number yesterday that was down. overall inflation on cpi has been dropping and industrial production shows to be increasingly seeming to be in a recession. while the unemployment rate has gone below 5%, the participation rate is still very close to historic lows from the late 1970's. it is a tough situation to violence. on top of that, the ,nternational circumstances which janet yellen cited in december for delaying a rate hike are still very much present, a be even worse. alix: i know you say the fed could stay on hold indefinitely. me ismber that's about to
medical services were much higher. we have yet to see that which is in the pc, what the fed look set. therefore, indicating inflation could very much pick up down the road. >> you are absolutely correct. services and medical services have increased significantly. on the core portion, the commodity price inflation has dropped significantly. you have a divergence overall not only with medical services, but overall services with commodities. the second part is, what do you think will happen to the ?eadline inflation rate i expect oil prices to take a dip again one more time. much to comect from the opec and non-opec meeting next month. if they are just going to meet, and i touch production, do not think they can, you will see oil prices dropping again, and overall in asian comes down, hiking fed should not be
before that. i am not being dovish. i said two years ago they should hiked interest rates. hike now,aying if you be prepared for a market calamity. mark: when they hiked in december, the risk for balance. they dropped that in january. do they reinstate the balanced risk parts of this statement, or do they keep what it was in january? >> i think they can stick with what they want in january. i say talk is cheap. you can always hold open the possibility inflation will head toward the 2% target. hike now, be prepared for a market calamity. mark: when they hiked in december,you can keep repeatinge employment situation has improved. global say, the situation has improved.
they do not say something reasonable unto they have to. you spoke about the situation, there is the case of the sharp reduction and the u.k. growth rates this calendar year from 2.42 4%. to 2%. that is the part i worry about. alix: we heard from the many annapolis x -- minneapolis x fed president. talking bout a negative rate. he said if the fed can convince people they are willing and able to take rates to negative territory, it may be able to raise rates faster and higher, the idea being the shop and all surprise is not something that is good for the markets. what do you think of something like that? think of a cold open the possibility of negative rates, the market will immediately jump to it and look for it. i do not think it will make it any easier for the fed to hike possibility ofe
negative rates. remember, janet yellen made precisely that statement in front of congress late in 2015, at the markets did not catch the fact that she old -- left open negative interest rates. , japan and the problems left thursday and friday with the ecb has probably put off negative interest rate to some extent. i think in the u.s. that is still very much a possibility if you see the dollar starting to strengthen too much and they have to counter, japan it with e rates on the other side. let me to down that's a little bit more. how much has all of the goings banks changeentral the calculus for the fomc as they meet this week? >> i think what they take into account is the fact that the bank of japan and bank of england does this on an easing
vote, and that makes it all the more difficult for the fed to hike. and china talking about the tokenility of a so-called tax on foreign exchange transactions. if that occurs, it will be effectively and devaluation. that also argues for the fed being relatively easy the next couple of hours. mark: you mention the budget in the u.k. and saying they cut the growth forecast for the next five years, warning of a dangerous cocktail of risks. do you think the next move in u.k. interest rates is a cut for a hike? >> that is a great, timely question. carney and the bank of england move toward lower rates to come. otherwise still remaining there, and we do not know what will, and on june 23.
even without it, the slowing of economic growth calls for this. alix: good to see you as always. turning to our special coverage of the fed decision beginning at 1:00 eastern. have reaction from rich clarida and bill gross right here on bloomberg television and on bloomberg radio. mark: a quick look at what is happening on european equity markets. for minutes away from the close, sitting on our hands with the fed in 19 minutes time. little changed stoxx 600. we have an up, we have been down. we rose for the third time. all about the fed today. that is the story. set around, wait for the european close just minutes away. ♪
stocks, tongue-tied ahead of the fed checking out. that's what it's all about today. tongue-tied, sitting on my hands. we are waiting. look at that. plus .01%. the stock 600 rising for the third day in a row. shares closing in the region of the decline of 4.5% lower. the co-chief executive said that he doesn't expect them to report a profit this year. traffic --nk dragging down other lenders. this is the emerging story of the day, confirming their merger. we know that they are in talks. they have been in talks since the end of february. lowered roughly by 46.5 percent of the group. this is the third time that overche has tried to win and woo the lsc. will it be third time lucky pick?
maybe we will get a talented bid from the intercontinentalexchange. they are considering what they are up to. on the day the george osborne announced his budget, sterling initially fell against the dollar, still down today. the big macro announcement was george osborne announcing a cut to the u.k. growth forecast this year versus the earlier estimates. will grow less quickly in each of the next five years, alix. his forecasts are predicated on britain actually remaining in the eu. to quote him, he says the country faces a dangerous cocktail of risks. the european markets are done for the day, but u.s. markets are still open. but barely. it's the same kind of story, really waiting for the buying that's particularly like. --ight --light.
on the commodity front, highlighting oil, getting a nice balance today. inventory build was not as terrible as many thought. less inventory overall with less pushing. you saw gasoline and distal it's draw. beenally enough crude has stopped up, increased -- improving the crude outlook. shale in particular fell by 20,000 barrels today. all of that helping the commodity front, not a lot of impact on the stock market. >> abigail has more from midtown, manhattan. indexes of just slightly after reversing a small loss. one stock sending out right now is apple. it had been down 12% on the year on their bullish action. now slightly higher on the year. all of this after a spate of bullish comments from analysts today, saying that apple appears
to be undervalued as a platform. they successfully monetize consumers through hardware, subsidized through software. all of this bullish action has taken them above their 50 day moving average. apple may just climb back towards the long-term moving average. $112, something to keep an eye on. what should we keep an eye on? abigail: expedia, shares are lower as they hold an investor day. one of the biggest shares coming out appears to be positive strong revenue growth with investors somewhat discouraged possibly by the fact that it is expected to be flat for the lit next two years. the stock, however, is of huge from its 2008 lows. more than 1000%. we will just start to see this stock consolidate as big gains. david: thank you so much -- alix: they do so much, at
abigail doolittle -- thank you so much, have a go doolittle. center forht european trading, provided regulators give their blessing. valued at $30.5 million, the deutsche board chief go-getter " this "bloomberg morning. here's what he had to say about the merger. >> we both recognize and appreciate each other's strengths. the management team, the boards have come together to develop those strengths. this is what we have done and delivered an intermediate result by announcing today. >> earlier this morning they look at how profitable it was. how do you explain to shareholders that this is in their interest? that this is not a dilution of interest? what do you say to them?
>> i think that the business sets between the can't -- between the companies are complementary. and the growth that they have driven over the last few years is deeply impressive and it has resulted in multiple expansions that are impressive with an overall trajectory of growth in the globally diversified businesses, which is very attractive. the combination between the two houses is extremely productive into the future. we both know that we must gain scale in order to become globally competitive. because we are roughly half the size as compared to other houses in the rest of the world. >> if you have managed to convince shareholders this is a good deal for them, how do you convince the regulator? third time a charm? what is the conversation you are having as we speak?
>> well, approaches have been made to a number of regulators already. others will be approached in due course. of a tory different authorities in the world who all the ability to contribute to this transaction, becoming successful. i believe that overall it adds to price formation and transparency with systemic stability. of the really important issues in the post crisis financial world and financial architecture, overall we are very well set up to have those conversations in a constructive manner. mark: that was the deutsche board chief executive. let's bring in johnson street, who has been writing all about this deal. john: obviously they are
describing it as a merger. i have said to people that this is as close as it gets. they said something like only 3% of tieups are actual mergers of equals. this precedent pretty much gets you there. mark: third time lucky, will it get past all the relevant parties? john: they are confident and going forward. one could argue that there is a bigger risk construction coming from a rival bid than from regulators this time, but we will have to see. it could be disrupted or derailed by either side of that. is the continental exchange may be the favorite? john: whenever we contemplated -- reported that they were contemplating a deal, they did confirm what they were required to buy takeover rules. we don't have the same level of confirmation on the cme group, although there is reporting
watching the steel -- watching this deal. a view amonge investors that another deal might be better? one amongst cme? if you look at the share price, they are certainly anticipating a bid. whether that's better? you can see it on both sides. they could make that argument. they own the new york stock exchange, they are not typically a stock exchange company. there are some nice energies that they tout. the way that they describe it, there's not a lot of overlap. a lot would have to be trimmed off. it makes sense, even if the eu votes to leave -- even if they vote to leave the eu? john: that's what they are saying, that it makes sense either way. they formed a board to advise
them. they have been very clear that they think this makes sense either way. mark: can they get even bigger? has it even gone through? are we now looking at the next big deal? we mentioned the cme, hong kong exchanges and clearing. will there be only a few big players at the end? john: it seems inexorable. they been saying that for some have making sure that they one of those big chunks of financial infrastructure. it does look like we are headed that way. how much smaller can we get? people have speculated that there may be is not room for anymore. we will have to wait and see. for: john, thank you filling us in on that. let's check in with the bloomberg first word markets. mark crumpton has the latest from the news desk.
mark: thank you so much. the president today nominated merrick garland for the vacancy on the supreme court. he is the chief judge of the federal appeals court and washington, d.c. mark: it is tempting -- president obama: it is tempting to make this process an extension of our divided politics. the squabbling going on in the news every day. but to go down that path would be wrong. betrayal of our best traditions. mark: republicans led by mitch mcconnell said that they will block anyone the senate not -- the president nominates. mcconnell: we are going to make sure the american people have a voice in this momentous decision. the american people may well who decides tont nominate judge garland for
senate consideration. the next president may nominate somebody very different. this --ay, our view is give the people a voice in filling this vacancy. mark: iowa republican chuck grassley says that he won't hold hearings on a nominee or schedule a vote before the presidential election. . warning from donald trump if republican powerbrokers deny him the nomination in cleveland, even if he is leading the delegate count. he won three states last night and holds a narrow lead in missouri. withst ohio and is faced the prospect of a floor fight at the republican convention. he told cnn "i think we will win before getting to the convention but i can tell you that if we don't and if we are 20 votes at 1100 100 short and and somebody else is at 500 or 400 because we are way ahead of everybody, i don't think that
you can say we don't get it automatically. i think you would have riots." has 396, john kasich as 138. tightened hern hold on the nomination. she won four of her five states yesterday. the race was too close to call in missouri, where she has a narrow lead over bernie sanders. she now has 1561 of the 2382 become theeeded to democratic nominee. senator sanders has 800 delegates. news, 24 hours per day, powered by our 2400 journalists in 150 news bureaus around the world. back to you in london. mark: coming up, it's the battle of the charts. i'm taking on david: -- taking on alix, who has the 2-0 victory
puts out his tax and spending plan. let's speak to him right now. he joins us here. thank you for joining us on bloomberg television. back in november, for those who don't remember -- remember, you gifted the chance for more money to spend and then you have taken it away again with more whysions to the forecast. have you turned gloomier? the biggest change is revising down the estimates in the change next year. the amount of output that you get every hour that people are working in the economy. if you look across a number of countries, one of the recent your puzzles is productivity growth being a lot weaker than some people expected, weaker than it was prior to the financial crisis. in the u.k., go back to the summer of last year. it looked as though things were picking up. earnings growth was getting stronger. wage growth was getting stronger. assumed that this was consistent with the view that
said productivity was going to get back to its historic average with the problems in the financial sector. what we saw at the end of last year was a big fall in productivity growth wiping out that apparent growth and earnings growth has weakened as well. we are putting more weight on that recent view. are we any closer to solving that problem? it's true that many developed countries are trying to figure out why productivity has failed to rebound in this cycle. robert: absolutely. coming out of the crisis, the financial system was in a weak state and it was not productive at transferring relatively unsuccessful firms to potentially expanding ones. the view was that as the financial sector gets better, the performance would improve.
it's not clearly back to full health, but you have seen that showing up in the productivity numbers. revisions that we have made here line 2010 are roughly in with those, for example, that the congressional budget office has made to the united states. it is by no means unique to the u.k. is a story. anna: in your estimate do you see them hitting that target on that planning horizon? should they be doing more to tackle that environment? our forecast for consumer price inflation has not changed a great deal. whole economy inflation is measured by something by the gdp inflator, which has been particularly week recently, which has come as something of a surprise. in terms of monetary policy, it hasn't changed enormously.
people were not assuming that we would see a rise in u.k. interest rates until 2019, obviously consistent with the view of a relatively weak growth outlook. things have picked up a bit since we finished the forecast. anna: thank you ray much, robert, thank you for joining us house ofld outside the parliament. robert choate, setting out the numbers the chancellor has to play with in his budget. mark, back to you. job there withat robert choate. i gather, analyze starting battle of the charts? i gather i am. i'm going straight in. focus on emerging markets. not just that, but european firms with exposure. these are wonderful morgan stanley indices. the green line has the highest domestic exposure. the white line is those with emerging market exposure. last year through july they were pretty much running neck and neck, these companies.
as you saw, in the summer they started to diverge when china devalued its currency and the talk of the fed raising interest rates settled in. the wide divergence reached its butk -- height in february has recovered since, leading to the question -- will be get that narrowing of the trend continuing? a lot of it will depend on the fed to. they also say the weaker dollar is going to favor emerging-market equities. , pimco the one i love, c says that it may be the trade of the decade they are so cheap. this is a really important chart for european investors. you can find my chart at g#btv596go. david: we have a very good entry from alix. alix: i'm looking at the spread between the two yield and the 10 year yield.
this is the difference between those yields. currently it is 100 basis points. we are sitting right there. it went below it briefly for a few days. that's the lowest level we have seen since 2008. why do we care? why does this matter for the fed? typically as the yield suppresses it could point to a weakening global economy. that may be a recessionary risk. the reason that we care about this today -- why is this happening? there are two particular options. one, it's foreign. the fed can go ahead and raise rates because of other reasons. if it is domestic, if it is because of global slowing in the u.s., the fed is going to have a very difficult time raising rates when this spread is at 99 basis points. potentiality in those charts. mark, i'm giving it to you today. alix: nooo. david: keeping the game
alix: -- julie: this is "bloomberg markets." taking one last check out bloomberg stocks heading into the fed meeting. taking a look at the overall for what we are's in today, a mixed picture of the movers. -- for what we are seeing today, a mixed picture of the movers. people want to know what the fed has to say. movers, thethe big
biggest contributors to any gains in the s&p 500 are largely tech stocks. oracle rising after they beat cloud revenue in particular. i just wanted to mention that in the case of apple, apple is now higher on the year. something to consider. it is up now one quarter of 1% for the year to date. bouncing back, many of these heavily shorted energy stocks that have been so voluble. we have seen big swings with oil higher today. many of them are getting a lift, mark. mark: let's have a peek get how european equity markets finished the session today. it was little movement, as you said. everyone is waiting for the fed. but still, the stock 600 did rise for the third day in four.
car market expanded for 30th straight month in february. missed, fair for the italian stock market, the german stock market, and french stock market. osborne cuteorge the growth forecast for this year to 2%. ftse rose, the pound fell against the dollar, the euro fell against the pound. quickly, i wanted to finish with one of the big equity movers of the day. a day document -- dominated by a merger and by deutsche bank, which said they wouldn't profit this year. stick around. ♪
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headquarters in new york, this is the fed decides we are one hour away from the march rate decision and we are 90 minutes away from janet yellen's news, it's. what will the head of the fed say about the health of the economy as market volatility eases. consumer prices climbed in february, pushing prices closer to the fed's target. the yield is advertised since january. and we have a big lineup to parse through all things that today. tom caselli,da.com and randall kroszner, will be with us in the next couple of hours. i'm scarlet fu. with me this afternoon is tom keene and michael mckee. give us your first thoughts. tom: the press conference will be fascinating. we have a great set of guests starting with carl riccadonna, and the basic idea is to be fo