tv Bloomberg Markets European Close Bloomberg April 22, 2016 11:00am-12:01pm EDT
you are watching the european close. manus: we are going to take you from new york back to london, on to berlin, and it will all be wrapped up in the next hour. here is what we are watching. president obama has arrived for a bilateral meeting with u.k. prime minister david cameron. with the debate over brexit intensifying, the leaders are set to hold a joint news conference this hour. betty: volkswagen is doubling the number of money set aside for the emissions cheating scandal. -- $18.2 billion. manus: shares of caterpillar are
falling today after a lowered sales forecast, caterpillar saying the commodities rally could run out of steam because of excess supplies. it is 90 minutes into the u.s. trading day. it is time to see how the markets are faring. julie hyman is standing by. we do not often get to say hello. how are you? very well, manus. good to talk to you. it has been getting worse in the market ever since the open, in particular because of the technology earnings. the dow is perhaps having the most rheumatic turnaround in this early session. at one time he was up as much as 44 points. you can see 44 points at the high of the session. now it is down 54. it was down more than 70 at one point, so it has a race all of the gains and then some. this also has to do with
earnings. atther you are looking microsoft, which came in below estimates, and sales in the current quarter will fall below projection. importantly, the acquisition of vc europe may be delayed. that is something a lot of investors have been banking on. caterpillar is coming out below estimates as well. is thethat by no means commodity rebound a sure thing. general electric is feeling the pain from the oil and gas industry. all of these dow components are really dragging on that average. even mcdonald's, which had been an early source of strength for the dow, has pared back its gains. it even gets negative, right now only of the quarter percent even after the company's turnaround efforts seem to be bearing a lot of fruit in the recent earnings report this morning. what is interesting about the downturn today is coming in the
-- is it is coming in the face of higher oil prices. oil is getting a lift today, up 2.4%, getting very little traction to stocks. really the focus is on earnings today versus what is going on in crudeergy market, even as is above $44 a barrel. oil is getting a lift also in the face of what is happening in the currency market. the yen is really what the focus is for investors today. you can see the dollar strengthening versus the yen. dollar oil also up at the same time, after the bank of japan was said to be considering negative rates for banks for lending, which would be an expansion of its current stimulus and current negative rates regime. manus: it is fascinating. bank's guidance is added lower expectation, but then you look at the broader can deal -- the broader situation. are the average is faring
equally, or have they all just driven to lower levels of expectation and a little bit of a glimmer of hope? julie: it depends on which kind of size index you are looking at. in other words, what are the components of it. the caveat is that it is still in the early earnings season. the dow, the largest cap companies, have seen the largest drop in earnings thus far, 9.7%. the s&p, 8.1%. thenyou get to the s&p -- -- a 3.3% drop for the nasdaq. mid-cap stocks are up 1.8%. so size is important when you are talking about earnings in this case. manus: great roundup there on the market. the dollar yen is certainly one of the biggest there. meanwhile, europe comes off its
recent high, three-month high. a couple of big interesting moves. pros saying? what is driving leadership today -- what is driving readership today? the average trade size volume going through 140% of a normal day's trade. tokswagen pares its losses 1.25%. volkswagen sets aside more money. we will talk with our german colleague about that. more than $18 billion. tyler is caught up in terms of the emissions scandal. you have a nice takeover story at number six, luxury goods the worst performer. that is a flavor of what is driving. the question you have to ask her some in the volkswagen story is this. down 30% in terms of value on that one day. it got worse.
it dropped by 45%. but we have progressively improved. we have rallied approximately 30-odd percent from that sort of worst moment. the question as we get a shape of the cost in the united states, that could bring us potentially a step closer to closure. brent -- julie mentioned it -- this is our brand, as it were, post the doha debacle. saying, iran, get on board -- but iran -- but brent has managed to rally through. you also have iron ore. this is the bloomberg commodity index. iron ore above $70, copper on the rise. betty, back to you. betty: a lot to watch on the markets there, but let's check in with the bloomberg first word
news this morning. taylor riggs has more. inlor: president obama is london meeting with david cameron. they are expected to meet on the war against islamic state and whether the u.k. should leave the european union. mr. obama wrote in "the daily telegraph," president obama and prime minister cameron will hold a news conference at 11:50 eastern time. we will have live coverage on bloomberg. there is a report that president obama will become the first sitting president to visit the site of the first atomic bombing. nikkei business daily says he will go to hiroshima, japan, next month. last week, secretary of state john kerry visited hiroshima. the bombing of that city and are viewed the u.s.
as having hastened the end of world war ii. this is happening right now in new york. the landmark agreement is aimed at reducing pollution and slowing rising temperatures linked to floods, heat waves, and droughts. countries have reduced -- have agreed to reduce fossil fuels by general that by the way they generate electricity, power factories, and fuel cars. $12 army is spending million on and no mobile -- on a mobile internet network in afghanistan and iraq. the network is used for voice data and transmissions in the vehicle in the field. the army and the contractor, general dynamics, are working to improve the system. donald trump's advisers are telling top republican insiders not to worry, it is all just an act. their front runner for the party presidential nomination has sent emissaries to ease tensions with republican elders. they tried to convince party bosses thatrty
it is just stagecraft. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus i am taylororld, riggs. manus? manus: thanks for the roundup. let's return to one of our top european stories. volkswagen has more than doubled has setnt of funds it aside for the u.s. emissions cheating scandal. it has also cut its annual dividend. tothew miller spoke investors today on the call. >> the further development developing and preparing the details requires some time, and strict confidentiality with the fundamental agreement reached in the united states. we see more clearly what financial charges we face from
the diesel issue. chris is on man covering this story. great to have you with me. what do you make of the comments that he made? i look at the stock -- we dropped by 6%, and then it smacked the dividend. what stands out for you today 's conversation as that briefing? chris: the main message is that they said the financial risks now are quantifiable, meaning they are getting their arms around the scope of the crisis. they know what they don't know. they know how much it can impact them. $16.2 billion is a huge hit, but they have $24.5 billion in net liquidity, so it ismanagement -- so it manageable. that is why you are seeing a bounce back in stock prices, why
volkswagen has recovered in the last couple of days. betty: it is manageable for them, the large sum of money. but how does it impact the company? what does it take away from, if anything, chris? chris: it is still a big chunk of money, even though it is manageable for volkswagen. they have to tighten their belts. one of the big issues for volkswagen even before the unprofitable the vw brand is. the group controls brands from audi to porsche to heavy trucks. but once why it is the biggest unit. so now comes along the crisis, which crosses the brand in the u.s.. a huge market for them, someplace they have put a lot of effort into. that makes it a struggle, putting more pressure on volkswagen to get the vw brand up and running. it means they have to focus on the money they are going to
spend and the spending is only going to increase with the vw crisis because it has put a lot of regulatory focus on emissions. regulators are going to be even tighter. we saw that in germany today, where german carmakers agreed -- this is including most like in 630,000-- to recall cars. this is going to go on throughout the world. it is not a great time to have to tighten your belt because there is a lot of spending that goes on in terms of electric vehicles, in terms of tighter emissions, in terms of tighter digitalization and self-driving features. they are getting their hands around it, but it is a tough situation for volkswagen to be in. chris reiter joining us from berlin on that announcement by volkswagen this morning. much more ahead on the european close. bank of japan officials said a
betty: live from london and new york, i am betty liu. manus: i am manus cranny. hq in live from bloomberg london and new york. the central bank may help financial institutions by offering a negative just rate on some loans, this according to some people familiar with the talks that may happen along with the decision to make a deeper cut to the current negative reserves rate that they have. the yen is sliding against the dollar on this report. this is the intraday move where you have the yen declining and the dollar rising.
that will keep the bank of japan happy. joining us to discuss all these issues is a global research analyst from wells fargo. great to have you today, peter. to, again, moving another new paradigm with the bank of japan, which is actually giving institutions money and letting them landed out at a negative rate. that is similar to what the ecb are doing. these are all new steps into the unknown, aren't that? steps they certainly are into the unknown. we have seen over the past two use that brought monetary policies having less an effect on the economy and the markets what we saw from the ecb and what we are expecting from the boj next week is more fine-tuning of policy to try to boost economic activity, inflation, and market
confidence. betty: so how does the fed play into this? peter: the fed plays into this by the actions that they took last month. and recently. that is by holding off or really fine-tuning their policy, not going with the tightening policy anytime soon and letting other central banks fine-tune their policies heading into the end of 2016. betty: so basically doing no harm, ok. manus: one thing i read about today, the corporate bond has had a rocking rally, 1.6%. the european note delivered 1.6% return this month, the most since 2012. so much weight of expectation is placed on the ecb on their bond buying program. does that make you nervous? are you concerned that this bubble is already created in terms of european notes?
they are going to buy up to 70% of issuance of non-financials. that is a hefty benchmark, isn't it? peter: it is. one of the concerns we have is that the liquidity in the corporate bond market is rather low. again, the ecb is not going to start its purchase of corporate bonds until june, and we are seeing markets rally. there are some risks between now and when the ecb starts buying these bonds in june. they: just looking through notes, you do prefer in terms of where you are going to put your money, europe. you see it more attractive than asia at this point, right back out peter: that's right. those clients who are looking for exposure to european markets do so first in the context of diversified allocation international stocks and bonds. on the international stocks. we prefer on a regional basis allocations to european stocks
versus asian stocks. for international bonds, we prefer -- we are a little cautious on international bonds with low rate currency volatility. much, peter, thank you so of wells fargo, for joining us. much more ahead, guys. let's zero in on one stock in particular. turnaround finally seems to be taken hold. how investors are digesting the latest report. of theand the president united states, barack obama, is behind that famous shop. he is speaking with david cameron. he joins the queen of england later today for lunch. there will be a news conference as a obama and cameron are
is 6:20 two at bloomberg hq in london. you are watching "bloomberg markets." i am manus cranny in london. betty: i am betty liu in new york. let's go to some of the stocks in u.s. -- in the u.s. that are moving. mcdonald's initially opened higher, but it is now trading pretty much unchanged. the earnings conference call is happening right now. the big news around mcdonald's is that it seems the turnaround is finally taking home -- finally taking hold, sales coming up at 6%, the highest
level in four years. part of that has to do with them rolling out slowly but surely the all-day breakfast, value deals, also lower commodity prices helping the bottom line. so it seems like finally the pressure is off. there, finally go in manus, and get your big mac. i go in there and have that breakfast every morning you have to try the breakfast here. it is pretty phenomenal. sure ourwant to make viewers know that the conference call is happening now. one of the big ones that are coming out, one of the details coming out from this conference call is talking about adding 1500 restaurants in asia over the next five years. isy say that their business turning around in china and in of the region. also, they are saying they are
going to take advantage of the federal -- of the favorable interest rates right now. obviously not just in the united states, but really all around the world, that we were just talking about. manus: that kind of line coming from a corporate is what leaders around the world want to hear. the low rate, using the low rate environment to get ahead. let's talk about stocks i am watching here. it is so react and saffron. zodiac aerospace is the best performer on the stoxx 600. insides of the planes, the interiors, the seats. it is considered that these guys are involved in the engine. they are thinking about making a bid. zodiac has rocked at home today, up 12.5%. zodiac has warned eight times in the last six months that they will not hit their numbers because they overpromised and
over deliver. 14%, one juncture on the day. about a 6 billion euro stock. has safran got the cash? they have $1.8 billion in cash. i getve mcdonald's, airplane seats and engines. this is not the way i thought this show is going to go. betty: you know what, business covers everything. i think we can say that we have covered all the bases here on that. we will be looking at that bid and also at mcdonald's and where they are headed. much more ahead, guys, on markets."g surveillanc manus: we are 4.5 minutes away from the trading day. .ll trade lower it is the autos that have been the destructive force on the day. not so on the week. details to come.
the only two industries that are rallying today, thanks in oil and gas. autos down 2.3%. we will break it for your right down here on the close. a shot of -- what is being discussed between barack obama and his counterpart, david cameron? obama came today and wrote an op-ed in "the telegraph." the president of the united in "theith an op-ed telegraph," telling the people to stay in the e.u.? and the color of the reception of your president right here in the united kingdom. we will have more on the news briefing at 11:50 a.m., right here aren't the markets close show with betty. ♪ you shouldn't have to go far
we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. shoshow me more like this.e. show me "previously watched." what's recommended for me. x1 makes it easy to find what you love. call or go online and switch to x1. only with xfinity. nowy: breaking news right on the u.s. case against individuals accusing them of foreign currency many relation.
ubs cartel, an ex- the u.s. inding their case. prosecutors. against individuals, certain individuals, for manipulating foreign exchange markets. this is part of the entire case from the department of justice against banks who have been host to that manipulation. the u.s. expects these cases against individuals could come as soon as this summer. this is all according to people familiar with the case now. manus: of course, we will keep those headlines up-to-date. let's get into the european market closed. we have given a little value back. some of the big themes that have dominated the debacle where the oil stories.
on the road to impeachment. mario draghi's message to the markets all about patients. these are the stocks that are moving. the auto story has progressed. an $18gen going for billion provision thus far in terms of exposure in the united states. 4.7% on thedown day. they are caught in the headwinds. when it comes to luxury goods, in aave caring coming little lower. first-quarter revenue trailed. growth was underwhelming. sales of gucci slowed. brands justly of missing slightly. one billion euros wiped off of the value. when it comes the volkswagen,
the question issue straightforward -- $18 billion set aside. they cut dividend by 19%. the stock dropped by 45% at its worst point. we have traveled higher. the question is deal or no deal opportunity? exchangehe effective rate of the yen. on the bottom of the screen, the dollar-yen. to its lowest level in seven weeks. 11149. discussing thean potential of lending at negative rates. this is the anticipation of abenomics, the bazooka from kuroda, qe.
we will have to see what they do next eat. probability -- 20%. we have done the calculations. probability is 20%. nowhere near where the companies are at 35%. brexit -- message from america. we should not even consider it. betty: judging from that, but things can change. manus: at the ballot box. betty: let's look a how stocks are moving in the u.s. we have come off of our highs and are being dragged down. technology companies are the worst performers right now on the s&p. abigail doolittle has more. abigail: the nasdaq down sharply. the tech is weighing it down.
-- missed earnings estimates. it was largely driven by rising traffic acquisition costs. it looks like rising costs are going to continue as the company spends to move towards mobile usage. the street seems to be giving alphabet a pass. includes someone from monster. mark mahaney. investors not so much. upsee the february rally trend has been broken, suggesting shares of alphabet could go back to those lows. betty: and alphabet is not only the drag, right? abigail: the biggest draw, more so then both class shares of off of it -- microsoft.
it missed sales estimates and --ered a week fourth quarter a weak fourth quarter. some analysts are defending my persistent -- are defending microsoft. one sees margins and free cash flow moving in the right direction. but investors clearly have a different opinion. when we look at a long-term chart, we see the stock is bearish. movingars that two day average is the line in the sand. if microsoft can stay above that level of support, shares will levels orurrent higher. but below that, microsoft could trade back at multi-year lows. betty: thank you abigail doolittle at the nasdaq. manus: thank you. is the key message from mario draghi. this was at yesterday's news
conference. he softened his tone about taking rates into deeper territory. he says he wants to see if stimulus will jumpstart the european economy. joining us now is marchel alexandrovich. great to have you with us. when i reflect back on the news conference from draghi, it was clear to ban issues were at play. he wants to guide expectations that we need to be patient to see the five-year take higher from 1.4%. marchel: there are a lot of messages coming from him. is really about markets not expecting much from the ecb too soon. if you look at the sequence of , in the ecb, the last was the ideawanted
that the ecb will do anything at the meeting in june. he will take it one meeting at a time. the april meeting -- the signals coming from the meeting yesterday was that for the time being, things are good enough. he is basically guiding markets towards looking past the june meeting, perhaps the july meeting, and more likely to the september meeting. at that point, markets need to be compared to do more. but the idea is to temper expectations. look at other central banks, see what they do, see what happens to the brexit vote. for the time being, they are on cause. -- on pause. manus: and the next piece would be buying enough corporate bonds. what i want from you is an indication of the scale, they euro scale, in terms of having a real impact. inhave seen a massive runoff
corporate bonds. a huge rally in the corporate bond market. what do you think of the scale needs to be to have a real impact in the real economy? marchel: you are right. effect of announcing the measure is sometimes as big as when qe takes place. the effect of what was happen -- what was announced in march was a surprise to corporate bonds. though we have had a substantial rally in that market. when they start buying middle of june onwards, we think are around 4 billion to 5 billion euros per month is a realistic starting point. but ecb has flexibility. ssa's,uld buy fewer perhaps fewer cover bonds. perhaps fewer sovereign bonds. that would have an increase of corporate bonds. it depends how the ecb looks at transmission of monetary policy.
to pool,ters it needs which markets it wants to affect. the key is the announcement. the fact they are going into this market at a size of 4 billion to 5 billion is not as important to the markets. not as important as the ecb putting the market's down as one of the asset classes they are targeting. betty: in you mentioned before there is going to be a pause for a while and everyone has to wait to see how it works through. what if that becomes the permanent state for the european economies? is there a huge downside risk for that? marchel: there is obviously a risk that central banks get behind the curve, do not do enough. in europe, we live without a lot of the time since 2011 102015. i do not think we are at this stage. i think draghi has laid that
clearly. year meeting since last has been to -- has been consistent. we will increase qe, go to other asset classes. there is notuch -- much of a question over ecb's ability to deliver. we are not looking at what ecb does next. our senses ecb is on hold for two months, maybe up to six months. now it is to the other central banks. a law to focus on bank of japan next week. and also what happens to the fed. not so much next week. we will not get a change in policy from the fed. but markets are looking to june. manus: it is all about that forward look in terms of bank and -- bank of japan. we will have to leave it there. marchel alexandrovich, thanks for joining us. betty: let's check in on our bloomberg first word news.
taylor riggs has more. taylor: president obama and british prime minister david cameron are wrapping up their meeting at number 10 downing street. they began by exchanging small talk about sports and keeping their children out of trouble. they plan to discuss a wide range of topics, including the war against the islamic state and whether the u.k. should stay in the european union. they will hold a news conference a few minutes from now. you can watch it live here on bloomberg tv starting at 11:50 easter time. -- eastern time. imf and finance ministers in europe are meeting in amsterdam today. substantial progress has been made on greece. greek officials have been negotiating over the austerity measures needed to unlock the next round of loans. station in brussels where a suicide bomber killed 16 will real been monday.
it has been closed since the attack and march. a wall of memory has been installed so writers can -- so riders can leave messages. adam smith is out on the 20 pound note in the u.k. all we know about the new face of the 20 is that it will be someone from the world of visual arts. news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. betty: thank you. much more ahead. battle of the charts. we are really mixing things up. we have matt miller against oliver renick, making his first appearance. ♪
our global now for battle of the charts, where we look at some the charts of the day and what they mean for investors. you can run the function featured at the bottom of your screen on the bloomberg to see it. today is oliver versus matt. matt: i feel confident i will win. will bething -- mine the only chart you can actually all get on your bloomberg. #btv10021. clark,edit to hillary my producer -- not my producer, but a producer. google in the last 12 days, the share price in white, and this
dramatic drop. unbelievable drop because of the when marginsntment were said to be squeezed because googles will have to pay more to get to clients because the new advertising platforms are hurting the search business because -- even though other businesses are doing well. -- the bloomberg can go to twitter and pull out all of the tweets. in blue is the number of tweets. green is positive tweets. red is negative tweets. what the bloomberg can do is go through social media and not only pull out and count all of the comments made, but also value them as positive or negative. you can see the negative sentiment around three days ago started to build up for google in earnings. the stock has been up 40% until
today. over the last three days, there was so much negative sentiment twitter up in -- on that it could have warned you that something bad was to come. that something bad would come on earnings day, and indeed it did. by the way, each one of these are social media velocity alerts. each of lou -- each of these blue h's. bloomberg toour alert you when there is a firestorm of negative liberty for any stock or index you choose. or any asset class. in gold or oil. you can also value of the social media activity positive or negative. betty: apparently oliver's computer has frozen -- matt: he got it. have a backup.
the first one was too complex. too much brain power. we just pulled this out. this is interesting. you have standard and poor versus the nasdaq. tech versus the general stock benchmark. look at what is happening over the past couple of weeks. performance on the nasdaq. stocks have generally been flat the next -- the last couple of weeks. this has a lot to do with earnings. board, everything is beating expectations, but stocks are going nowhere. overall, earnings are bad. down 8% on average. but one area in particular is looking rough. it is in the tech stocks. in the day ones. we are talking alphabet today -- down 5% at one point. the worst earnings reaction for google since 2011, the first quarter. rings do not look good, where
people want to see appetite for risk, for names like the nasdaq stocks, which generally get more growth. matt: appetite for destruction. [laughter] betty: so there is a lot of meat in the excavation of your chart. but oliver, i have to say -- these are just stock charts. oliver: the first one was too complex. thing is hisl point is interesting. you could run this same chart, which is g #btv 1021 with the nasdaq. i guess you would see a lot of negative tweets about the nasdaq and tech stocks in general. ,ech earnings are down 20% about three times what the entire s&p is down. oliver: things are jumping on
and the prime minister. they had a closed-door meeting. before we wait for that, let's well, our guest. joining us is our editor in chief, john micklethwait. an open editorial in "the telegraph" to tell the british people to stay in the eu. some say it is patronizing. you may recognize this man -- boris johnson. and mine,avorite rag "the sun." to obama'saggressive position. john: it is always good when the alternative to looking to me is looking at a brown door. the basic thing is this is a
boris johnsonf actually being strategic. he took the risk, which i think has worked well for his side, to go for obama. itmally in british politics, very seldom pays for you to attack the american president. here iscase, he said barack obama, coming across to lecture you about some thing which america would never dream of doing itself. america hangs onto its sovereignty more tightly than any other country in the world and would never dream of something as complicated as the european union, so why are they lecturing us? even though i am on the other side of the argument, i think that is a good move. betty: should the president should have stayed out of it? john: no. it is entirely reasonable to say this is our view. downsidesa, there are
is britain leaves. leaves,in voluntarily it is bad news for america. bad news for a series of american businesses that have set up shop in london. bad news for america because virtually every economist will tell you brexit is not good for the world economy. and it is bad news for america, because having britain within europe is having your closest stuff about aat special relationship -- having your closest ally and -- embedded in the world's largest economic unit. and you would have to worry about what would happen to the eu if britain came out. it is clear from the american point of view that they see this as a risk. manus: i caught up with michael o'leary, and he thought that
cameron had come back with a good story, but it is a question of getting blindsided. we have a poll done by an independent blogger who called it at 20%, way below the boo kies. over you are all a little in terms of vaporizer debate? john: -- in terms of the brexit debate? john: it is not a poll. it has to do with the bedding, which in some ways is a more reliable guide. u.s.u look at the elections, the bookmakers have generally got it right. betty: thank you. john micklethwait, our bloomberg editor in chief. ♪
minister david cameron and president obama, who is in the country, part of one of his trips there. the president earlier having lunch with queen elizabeth. the president then going from windsor castle to london. iscollie, svenja o'donnell there with more. -- my colleague, svenja o'donnell, is there with more. can we expect more about brexit? svenja: absolutely. central theme here. it is a coup for cameron to get president obama over to defend his government's case, which is he wants to stay in the eu. there has been quite a lot of criticism from those on the other camp, who say obama is interfering in a british matter. but it has caused a bit of a stir.