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tv   Bloomberg Markets European Close  Bloomberg  March 24, 2016 12:00pm-1:01pm EDT

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barton. this is the european close. we are going to take you from new york to london in the next hour. here is what we are watching for you today. european shares have fallen every day this weekend are poised to do it again as slumping commodities are weighing on the market. we will follow the action leading up to the close. and how do you say merger in italian? to banks come together to form the world's largest lender. scarlet: should it stay or should it go? for the european union -- it may depend on the undecided. we are midway through the u.s. trading day.
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equities. across let's check in with julie hyman. it is a down week for u.s. stocks. as we can see, down today but not deep declines. stocks.lower for u.s. financials and banks are the biggest drag. down more than 1%, accounting for 40% of the s&p's decline because of their weight in that group following information technology. there were a couple of analysts calls dragging them down. one analyst there has the lowest price target on the street, $45 a share. willue and credit risks
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weigh on it as well as high valuation. seasonre among the first to report their numbers today with macquarie saying for u.s. banks, it is a perfect storm for first quarter earnings. earnings will be week because of the things we are talking about. you see the banks down today. the analysts at ubs are not the only folks getting more pessimistic on earnings. , looking ats fargo its earnings estimates. how much we have seen those earnings estimates come down. definitely some pessimism and the is the stock price over past three months which has come down and the decline in financials, which has lagged the s&p 500 is one of the reasons it has been difficult to gain traction.
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the dow has managed to hold on but the banks have not. the other big correlation is commodities and the dollar. julie: now the dollar has been the spoiler more recently. down 2.5% as the dollar index has gained in its best weekend since october. you will see a similar movement with oil fall and gold fall. itsre seeing gold have worst week since a trade that has been in effect has sharply reversed. commodities isin hurting basic resource stocks. this is the four-day chart, falling every single day this week.
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the longest losing run since february 9 and the dow down, for the week down by 4.7%. -- noding tomorrow trading on monday because of the easter holiday. this is the sterling against the dollar. this is actually a mini fit because sterling has turned up against the dollar. over the five-day, it has fallen and at least 11 billion pounds have been waged on options that -- it hasn'tif fallen far, we are at one dollar 41 for the referendum on june 23. have a look at the victim and a story in europe today -- the aalian lender agreeing to buy
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bank in an all stock dealer -- deal to create the third largest bank. a great chart him and normalized at 100 so it shows both shares since the height of the financial crisis have lost a big portion of their value. the othere 80% in lender down 95% since the height of the financial crisis. the next biggest decline are today across europe -- shares since 1998.owest it has lowered its sales target, saying it may face the toughest year since the financial crisis of 2008. how the mighty have fallen because shares were at a record high. since then, they have fallen by 29%. did you just say i was 20?
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we appreciate that. some news ihave want to add in here. a chief global strategist at deutsche bank says the u.s. stock market, the s&p 500 specifically could rise to 2300 by year and. chinese selloff in august and the u.s. dollar appreciation -- this will not likely happen until the stock high-back blackout time ends in april. out: a note that came yesterday talked about what would break u.s. stocks out of range.ining -- trading you will have sentiment get and it is a huge support of the market as outflows have s&p quite high and the stays range bound. the combination will help to
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boost those stocks. let's get to bloomberg's first word news with mark crumpton at the news desk. the united states has accused iranian-backed hackers of carrying out an 18 month ciber were against wall street. prosecutors say the group targeted the new york stock exchange, nasdaq, bank of america, and capital one among others. unsealed an have indictment against seven alleged experience hackers employed by computer security companies iranianon behalf of the government, including the islamic revolutionary guard corps. jury inl grand manhattan found the seven individuals conspired together and with others to conduct a series of cyberattacks against targets in the united states financial services industry that cost victims tens of millions of dollars. mark: attorney general lynch says there were occasions cyber
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attacks prevented hundreds of thousands of customers from accessing their accounts. a former bosnian serb leader has been convicted of genocide and sentenced to 40 years in prison. the war crimes tribunal found him guilty of orchestrating serb atrocities throughout the 1992-19 95 war that left at least 100,000 people dead. in argentina, president obama and the argentine president visited the monument to the victims of state terrorism. the monument similar to the vietnam war memorial in the u.s. contained the names and ages of 20,000 victims of argentina's so-called dirty war under the former military leadership. today's the 40th anniversary of the start of that war. vice president biden will speak at georgetown law school today, trying to move past her marks he made in 1992 when some say he endorsed the idea of blocking a
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u.s. supreme court nominee at the height of an election season. republicans say they are following the titan rule in blocking the nomination of judge merrick garland. biden says gop leaders are distorting his remarks. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. i'm mark crumpton. coming up and that staff hour of the european close, banko poppel ari -- and all stock deal creating italy's third-biggest bank's. could it is more a renaissance. and have recent event suede undecided voters in either direction? stocks falling around the world -- our markets signaling a global slowdown in store? ♪
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mark: live from london and new york, it is easter weekend. i'm here with alex -- with alix steel and scarlet fu. scarlet: time for a look at some of the biggest stories in the news right now. star board value has nominated nine directors to the struggling board. yahoo! has been mismanaged under marissa mayer. the board is looking to sell its core business. volkswagen has failed to said where it stands on bringing 6 million cars into compliance. was ae progress, there disagreement over the deadline.
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volkswagen allegedly rigged omissions tests and put ready vehicles on the road. a deal would merge tivo and rosie, which holds patents for tv programming guides. and that is your business flash for this hour. in europe, it's the first major --l in years with banko creating italy's third-biggest lender. regulators have been pressing for more m&a because they believe there are too many banks in italy with skyhigh expenses and rock bottom revenues. will they get their wish?
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why are shares of both lenders down today? guest: this is what investors are looking at. they're looking beyond the news which creates the third-biggest lender. they are looking at the long-term synergy at how it can be achieved, particularly given that they are pointing to not -- and they are looking at long-term profit ability of the group in an environment that remains difficult. alix: i was going to add on to the other difficulties those nonperforming loans that have legs italian banks. this unites a good bank and a dad tank.
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bank and a bad bank. what are they going to do about that? guest: they will be bringing those down and selling some of those that --but banco popolare will be raising a billion euros. this has come right from the top , from the european central bank, which took over the oversight of european banks just a year-and-a-half ago. they are sending a strong message, saying don't -- that it doesn't make a strong bank and that's why the capital increase has to happen before the deal takes place and sends a message to the wider industry to banks considering a tie up in the country and banks more generally that the bar for capital keeps raising. scarlet: senior executives of the two banks will be at the top of these companies, so there won't be any fresh lead here.
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what is really going to change when they combine these two wings? this is precisely what the market seems to be asking itself today. it's looking at the longer term trend that has plagued the industry. it is quite interesting that the bank chairs -- bankshares are not trading above the level where they were when a year and half ago, they pushed through reforms precisely to generate these kind of accommodations which spurred strong rallies across the industry. the shares are below those levels which indicate investors have taken stock and the return to profitability is taking a long time. mark: i want to come back to a story from yesterday. there is day to spillover with credit suisse. the initial bump up in shares did not last too long. shares are down today.
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the new chief executive is being where does thed ?uck stop with this guest: it seemed in remarks made later on today that there was trading in place and there were no breaches, so it's hard to tell. he said there had been some consequences in terms of personnel. i guess people are looking at the fact that the cuts he is making, some investors had been expecting those at the outset in october, so investors are looking at it as a catch up. the: taking a look at broader sector, it is still struggling with this vague merger here.
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what does the ecb need to do to give support to these banks to lend more than they have already done? i think the message from the authorities is the push is now toward the banks getting capital and building up the capital bases which will .nevitably make them stronger they will be a bull to sustain economic growth by boosting lending, so it is up to the banks to clean up the legacy assets they are sitting on. to bring them down and make them leaner wherever possible. mark: thank you for joining us. still ahead on the european brexitas the so-called
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referendum nears, we will look at the divisions among the elite in the government. ♪
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mark: you are watching the european close. i'm here with alix steel and scarlet fu. scarlet: george osborne is facing the toughest test of his political career, yet still defended his unpopular plan before the financial policy committee today. >> i am prepared to take to improveecisions the state of public finances. i have set a date for when we see that coming into effect. the united kingdom went out of its way to praise the transparency of our rule. our european government
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reporter is here. [inaudible] osborne has had a tough week or so defending his budget. in trying to defend what many would say is indefensible, has whenmaged his credibility he tried to defend britain's position within the eu? guest: ben is a good question. has beenhis leadership damaged and his reputation for being a canny political operator -- he now has a budget with a 4.4 ill you and pound hole in it and he will not address it until he and of the year. this is bound to come up and bound to be used for the other camp being blamed for the resignation of colleagues in the cabinet who started.
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lot here in the u.s. about the meltdown of the republican party as trump has emerged as the front-runner. what has happened in the tory party in the u.k.? this is slightly different. this is a problem that has plagued the tory party for a long time. these divisions are very very old. it's a bit like a blood feud. you have those me tory party who will not be happy unless britain leaves the european union. cameron was hoping to get rid of the problem. this has coincided with a huge refugee crisis which has brought questions of immigration and that whole debate into the fold, which means tensions at the moment as we are closer to the vote on june 23 are getting
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particularly strong. mark: it is unfortunate and david cameron called it not u.k. party that the made a link between event in brussels two days ago and the upcoming referendum. also madecy investors that link because we have seen sterling hammered this week against the dollar. there has been made a link, hasn't there? uncertainty to the surrounding the referendum. if you look at the other side of the coin, the government has used this to boost their case and say security and dialogue would be better. line would be that the general public don't care about the eu per se. what hinges on this is how successfully both camps will
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.ake the link with immigration so they are really pushing this point because it is a point that resonates with voters, whether you like it or not. over the longer-term, based on your conversations with people, how do people think it will play out? what kindh depends on of verge we see. at the moment, polls are saying it would be quite close. you might see something like you saw in the scottish referendum which was very close, indeed. have ae s&p went on to resounding win in the general election. unless it is a real positive , it will be an issue that stays in the conservative party. it just won't go away. mark: thank you very much. have a look at what is happening
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to european equity markets. the fourth day of declines, the largest stretch since february. europe 600 is on track for its decline as well and this is what is happening in the currency and bond markets. we saw yield on the u.k. 10 year and german tenure decline earlier. there's the euro against the dollar, about .1% lower. the big story today is the big banking merger taking place in italy, banco popolare agreeing to buy banco popolare di milano . we will speak to the chief executive of one of those banks, next. don't miss it. ♪
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mark: live from london and new york, you are watching "the european close." this is what happened at the end of the trading day, these were the industry groups on the ,tocks 600, all 19 lower today
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led by retail commissioners -- retail, insurers. the longest losing stretches since february, the second weekly losing run as well. one reason stocks fell today was the rising dollar, hurting shares of energy companies and basic resource companies. sterling volatility has been rising this week, the highest level of implied volatility telling us investors expect volatility on the sterling-dollar exchange rate to rise in the coming six months. the highest level since 2010. volatility has risen in the wake of the brussels bombing two days ago. banco popolare agreeing to buy banco popolare di milano. it is an all stock deal, it will create italy's third-biggest
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lender. shares sinceboth 2007. this is being normalized at 100. you can see clearly what the heard -- what the trend has been. banco popolare shares down by 95%. banca popolare di milano shares down by 80%. news, not just in the italian banking industry, but across europe as well. banco popolare agreeing to buy banca popolare di milano. this is an all stock deal, it will create italy's blurred -- third-biggest lender. a lot of hurdles. let's chat about this. with thefuture is,
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chief executive of banca popolare di milano. he joins us on the phone from elan. -- milan. think you for joining us on "the european close." you've had months of talks with the regulators. what has been the main hurdles with the regulator? are you satisfied with the outcome? satisfied.e are very we could not have a better situation to have this first european deal and ecb supervision. combination, being the first corporate bank merger in italy after the reform made by the government last year. at the same time was also the first authorization by ecb.
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the ecb was very focused on ,trength of the new banks strengthening the capital of the bank is one worry is that the ecb has had in the last year. this ended up with the willingness of banco popolare, reassess andto make strong and solid capital positions. mark: will this prompt whole wave of consolidation among the country's banks? could we see overseas interest in some of those lenders? giuseppe: maybe. lower.cks are trading one of the lowest prices in the
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markets. , wear as bpm is concerned have gained a lot beside be our partner. -- vis-a-vis our partner. it is a 50-50 merger. we are proud of it. saying theree should have been, there could have been changes at the top. we needed fresh blood at the top. is that reflected in the shareprice decline today? what you say to those who say maybe the combined lender needed a dose of new blood at the top? giuseppe: frankly speaking, i don't know. the banking industry yesterday time lookingspent
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at the market. yesterday, our banks were suspended from the market. get the lows that happened yesterday. i would not put these in correlation with what you were saying. we will show how we will manage the bank. the governance was one of the main points the ecb was pointing out and we have shown that we the implements. we have to follow the governance part very clear and transparent. mark: how far are we from a
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total cleanup of the balance sheet of the banking industry in italy? it's been estimated 360 billion euros of consolidated loans. how far away is that process? you were the fear mentioning, there are provisions that cover 60% of the global allowance. than 80 billion, which is still a considerable figure. in our business plan with the merger, we are considering to decrease 10 billion in three years time. credit inovision our order to find the proper price in the market and be able in three years to reduce dramatically our mps portion.
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the bank has capital strength and should do it this way to reassure the markets. mark: thank you very much for joining us today on "the european close." the chief executive of banca popolare di milano. scarlet: european markets are done for the day, but u.s. market still open right now. they have been in the red for most of the day. volume has dried up. the nasdaq is doing the better of the three, down by only .4%. abigail doolittle is live at the nasdaq. haveil: shares of tesla pulled a u-turn today, reversing higher. the stock had been down more than 3% earlier on a downgrade to sell by s&p. they cited valuation in a secretion risk. the stock is now higher by 1%. thistors are siding with year's big turnaround after the committee gave a better-than-expected model s --
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shares have been down 40% year-to-date, now down just -- paypal, the stock is down has gene munster reiterates his underweight rating, citing a recode report that apple pay may go mobile by the end of the year. one analyst saying this will likely have no impact on paypal, but he does concede that there could be headline risk. alix: let's get to the first word news. mark crumpton is at our news desk. the samere are signs islamic state network that carried out the terrorist attack in both brussels and paris. many of those blamed in the violence linked in brussels. they're are trying to coordinate a response to the glowing that's growing wave of terrorism.
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-- response to the growing wave of terrorism. russia's foreign minister touting cooperation with the u.s. on the civil war in syria. they are trying to find ways to have peace talks to end the five-year-old war. an alleged sexual abuse victim of dennis hastert could testify next month. he pleaded guilty in october to violating bank laws when he allegedly tried to pay $3.5 million to a person to stay quiet about past misconduct which is alleged to have occurred when he was a high school wrestling coach. that sentencing hearing is scheduled for april 27. opposition to free trade is a unifying concept, even in a deeply divided electorate. americans thirds of favor more restrictions on
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imported goods. large majorities favored policies protecting domestic jobs over lower prices. many described in nafta as being bad for the united states. global news 20 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. back to you in london. mark: still ahead, stocks falling around the world. our markets signaling a global markets -- are signaling a global slowdown? ♪
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alix: live from london and new york, i'm alix steel. scarlet fu and mark barton across the pond. european shares have fallen every day this week.
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i guessed guest says the markets could be pricing in a recession. joins us withe more. are we in a recession? brett: that would be the case before we had ecb and the fed. since then, i'm particular to the credit markets. credit spreads were at non-recession wides. the ecb asset purchases brought credit spreads back down. they've gone from being very cheap and very attractive to merely attractive. mark: could the risk premium had backed where it was on february 11? brett: it depends on your outlook for global growth. we are not seeing a recession for the u.s. 2% growth for europe, 1.5% growth is not spectacular. means our portfolio
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is important and we want to have securities that are more robust, that means owning developed market credits, investment-grade credits. scarlet: one of your views as the central bank has not done much to ease the macro pressures that are out there. the dollar has not recovered this week to higher than it was before the c meeting -- before the fomc meeting. what is your preference there as he position for this? leadings, the u.s. is the global economic recovery. got interest rate hikes priced in. there is a limit to which the dollar can actually follow against other currencies. it is difficult to see the euro going up sharply without these be reacting. -- the ecb reacting. likewise with the yen. we have reduced the size of our
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underweight and commodity currencies because they have moved a long way. our main underweight u.s. dollars against the end -- the yen. of the biggest movers also today in particular had been banks. are so low, margins europe in particular had a lot of problems. under what conditions would you be buying banks? myles: it's about valuation. capital ratios are much higher. are much more focused about the risks banks are taking. they are deleveraging. that has created problems for equity holders. as a bond investor come in
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meantime investing in a more utility like vehicle, which makes me more comfortable that i will get my money back. for us, it is about valuations, comparing what we get paid for financials compared to other credit markets such as , investment-grade or emerging markets. mark: is anyone long pound? : for us, the brexit boat is a key point of uncertainty. the polls show 50-50. -- the brexit vote. many will vote with their pocketbook and remain instead of facing uncertainty. a vote to leave will be increased uncertainty for all markets. hedging that position through sterling to us, make sense. -- makes sense. there are other ways in which you can hedge.
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i want to get back to the u.s. for a moment here. boosts. recovery will between now and 2017. we've already seen peak profitability. talk about the drag that will -- on the recoveries in the in europe and china. their estimate is that trend growth is coming down and u.s. economic growth will come down with that. it is not so much a negative story. it, to when we look at keep or the unemployment rate and the inflation rate, the actual mandate. what does it mean for china and asia? to keep you in china is what is going on in china rather than the u.s. -- the key view in china.
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if u.s. growth slows significantly, it will be back for the global economy, period. we see signs that china is beginning to restimulated its economy. our expectation is that chinese growth will begin to slow in the 6.5% range. mark: have you got your gloves on? it's battle of the charts. the recent divergence between global currency volatility and the yen. it is up next. stick around. ♪
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scarlet: live from new york and london, i'm scarlet fu. mark: i'm mark barton. this is "the european close." time for the bloomberg business flash.
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james bullard says the central bank could begin getting closer to raising rates again. the relatively minor downgrades contained in march suggests the next rate increase may not be far off divided the economy revolves as expected. fed officials are discussing how quickly they should raise rates for the second time following their move in december. the federal reserve bank of new dealers toing establish backup locations that could be used in the event of a disaster. the damage done by hurricane sandy in 2012 highlighted the vulnerability of a financial system heavily concentrated in a single geographic area. the primary dealers will be allowed to transition to put new systems in place.
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jeff is retiring after three decades on wall street. he helped rebuild the markets after the financial crisis. he announced his plan to step down. that's according to a memo from citigroup's chief executive. time now for our global battle of the charts where we take a look at some of the most telling charts of the day. what they mean for investors. you can access the charts on the bloomberg by running the function featured at the bottom of your screen. here we go. scarlet, kick it off. scarlet: i will focus on foreign exchange. we are looking at the global volatility index and dollar-yen. a lot of volatility is usually risk off. that means the yen strengthens.
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that's pretty much what we've been seeing. the correlate nicely together come except since february 11. that is when we went risk on. yet, the yen continues to strengthen. there is a bit of a divergence here. specialist.our be i he says the volatility is reverting to the mean. the yen could be strengthening for a number of reasons. one of which may be that we are seeing some repatriation of fors by japanese companies the end of the fiscal year. once againpicks up and the yen starts to lose some of its steam. mark: where can you find your chart? #btb 666
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here is what contango means, when oil prices right now are cheaper than they are in the -- typically what we've seen over the last couple of years has been contango, so much supply in the world. this is the dubai to month to one month spread. when you wind up seeing it move higher, that is contango. that two-month prices higher. what we've been seeing right now is a bit of a decline. that means the one-month oil prices actually strengthening. once you reach this zero level right here, that is backwardation. you typically see backwardation in a world where you have tighter supply and stronger
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demand come a which does not seem to reflect the fundamentals we've seen. demand, which does not seem to reflect the fundamentals we've seen. we have seen tightening in the but we are not tight yet and the oil prices move ahead of themselves. why do you talk about the jargon? charts like these will show investors if the oil market is finally rebalancing and stabilizing prices. boom. g #btv 673. mark: we love it. scarlet last time set the bar very high when she added a multimedia element. because she set the bar so high last time, she did not match it.
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the facebook ceo running in the middle of china -- by not matching her prior levels which i've come to expect, i have to hand it to alix steel. alix: in my winning because she that --have scarlet: because i failed to include something. quick peek atve a how the european markets ended the day today. a fourth day of declines, the longest losing stretch since february. the stocks 600 down by 1.5%. the kleins and all the major equity indices. that's it for "the european close." "bloomberg markets" continues. stick around. ♪
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and 1:00is 1:00 p.m. a.m. in hong kong. scarlet: welcome to "bloomberg markets."
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good afternoon. i'm scarlet fu. alix: i'm alix steel. here's what we are watching at this hour. stocks drop around the world as the dollar extends its gains into a fifth day. the easter vacation looms. scarlet: copper prices have climbed 5% this month. one analyst says that relationship with oil is about to decouple. alix: the second smartphone revolution is underway. delivering essential services to people who did not have them before. how will small businesses cash in? torlet: let's first had over the markets desk where julie hyman has been tracking the trade. the trade has been slow, but there is a direction to this. julie: a downward direction, for sure. catching up with


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