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tv   Bloomberg Markets European Close  Bloomberg  April 25, 2016 11:00am-12:01pm EDT

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i mark barton. you are watching the european close live on bloomberg markets. we are going to take you from new york to london to frankfurt in the next half hour. here is what we are watching -- we are 90 minutes into the trading day. red on the screen today. european stocks retreating for a third day as energy and commodity producers slide. ininess confidence data came worse than expected. hopes toesident obama finalize a trade agreement with the european union by the end of his presidency, however the bill faces tough opposition in europe and in congress with many lawmakers and the president own party opposing the deal. and a bloomberg exclusive -- we will hear from the cfo of
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tesco, u.k.'s largest retailer undergoing a huge transformation after getting hit last year with the biggest annual loss in its 97 year history. we are 90 minutes into the trading day. let's head to the markets desk where julie hyman has the latest. stocks in the u.s. moving toward the lows of the session, having trouble hanging on after a rally that happened last week. the dow leading the declines, off .7%, but the s&p and nasdaq each off a little more than .5 percent. illustrated here -- this is the s&p 500 in white. every time the s&p 500 gets closer to that range, we see it
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pullback. that happened last summer after it made the record and pulled down 10%. it fell once again and then, once again, we've seen a rally almost to that range. appears to be happening once again and today's session, in terms of what is holding back the averages, some of the biggest drags include apple whose earnings come out this week. a lot of question about iphone demand sustainability. also seeing a pullback in casinos today with a note saying macau casino april run rate trends are tracking -15%. we've been seeing declines for a long time and it looks like they may be continuing. mark: and oil not able to hold
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its rebound so far. we saw a rebound earlier. oil still off by .5%. prices, to look at other commodities to see how they are performing, it looks like we might have a flaw with our chart here. on what thecheck u.s. dollar has been doing. the dollar index strengthening here, up .9%. that was gold that was higher. i was a little confused by that. not helping those oil prices. stocks in europe down for the third consecutive day. oil down and metals down. forget we have come off
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the back of two weeks of gains and it is a big week for central banks with investors sitting on their hands. equipmentternational rental company based here in the u.k.. generates 85% of its revenue from its subsidiary and has been upgraded from underperform to a buy. it says the outlook for its markets is improving and indicators are turning. historical discount and another stock recommendations on imperial brands. formally known as imperial tobacco. to a buyen raised versus a neutral after a recent underperformance.
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issays the business model very cash generative and has attracted growth and valuation. this charto show you -- the german business confidence chart fell in april, a sign the biggest economy is using -- is losing a little steam. it does see slowing momentum after a strong expansion in the first three months of the year. thank you, betty for my present. betty: you're welcome. mark: you don't even know what it is. my super duper new plasma. look at it. it is an enormous. it is a good better and something to thrash joe weisenthal with later.
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i go away and i come back to this. betty: let's check in on the bloomberg first word news. taylor: donald trump is firing back in a -- in an attempt to unify the anti-trump vote, saying ted cruz and john kasich are colluding in a way that would be illegal in many industries. they have agreed to compete in some primaries with the goal to avoid splitting the anti-trump vote. the primaries tomorrow could be telling for hillary clinton's presidential bid. linton cannot win enough delegates to win the nomination but a big performance can race doubt about whether she will eventually beat bernie sanders to win the nomination. the obama administration will decide in the next few weeks of the to release part the 9/11 attacks
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that could shed light on possible saudi connections to the attackers. in ohio, a new turn in the investigation of the shooting death of eight family members. authorities found marijuana growing operations on the grounds of at least one of the homes were people were killed. police called the killings a preplanned execution. attorney general loretta lynch is urging governors to make it easier for convicted felons to obtain state issues identification to help 600,000 state and federal visitors who are freed each year. global news 24 hours a day powered by our trade 400 journalists in more than 150 news bureaus around the world. president obama wrapping up his trip to europe, hoping to complete negotiations on a trade
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pact with the eu by the end of his presidency. he spoke today in hanover, germany, which books itself as the largest tradeshow for industrial technology. president obama: we are proud to showcase our commitment to innovation and change the way we live, work and the way we learn. this is another chance for me to tell everyone to come here and by made in america. the german government editor for bloomberg news joins us from berlin. how close are we to a year of u.s. trade deals. the idea of obama and merkel getting together making this push was somehow going to get some momentum before obama in about 18 months
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time. still a lot of resistance. there have been demonstrations in hanover where the two met and there's amount -- there's a fair amount of resistance in the merkel government as far as american practices that do not toord with how europe likes do business and might endanger protections. so there is a way to go. mark: how has the visit to germany gone down? how is he being received by the german public? i think there was a lot of obama euphoria when he was elected and for the reasons we know. and he madegermany the point of this, as a
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president who will soon leave office and he's attending his presidency by making this trip to europe. so there were not hundreds of thousands of people in the street clamoring for obama but he did give merkel the room and saying madame chancellor, you are on the right side of history. a dealthe progress on with europe, how does that affect the trade deal with asia? that wasn't so much of a topic here. noticeable was there was a briefing by u.s. business concerned about the
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passage through congress. you have to get 28 countries to ratify this deal. i'm talking that the u.s.-european deal. that was the focus of all of the discussions here. thank you so much. much more ahead on the european close. interview. we are going to speak about what is next for european banks. do not miss this interview. ♪
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mark: live from london and new york, i mark barton. time for the bloomberg business flash, a look at the biggest business stories in the news right now. a surprise in new home sales. they fell in march for the third month in a row. sales dropped 1.5% and plummeted on the west coast. sales make up .1% of the overall residential housing market. germany, the co-ceo of deutsche bank and for former employees have been acquitted in a fraud trial. before closing arguments began, the judge said prosecutors failed to prove their case. office,he weekend box "the jungle book" is staying atop the list. the spectacle took in $61 million this time around, more than enough to trash the new
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huntsman." that is your bloomberg business flash for this hour. mark: the ecb release their latest report on financial integration. but they are struggling to navigate the tough environment. what is next for the health of these institutions? brantford isom from frankfurtt -- is andreas dombret how well our banks across europe coping with this negative interest rate environment? andreas: that is very difficult to say because they are very different business models.
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in principle, they are coping reasonably well but we clearly have challenges. in the eurozone on it. still working nevertheless, it depends on what your business model is. if you have a large overhang of deposit, these interest rate environment don't help. better ifdn't it be some of the post crisis rules have theened? we single supervisory recognition -- mechanism closing loopholes oris this a contradiction why can't some of the post crisis rules be loosened?
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andreas: it is difficult to make money in this environment, no doubt about it. but these policies are contradictory because they are targeting different policy fields. the at the ecb and at deutsche bundesbank, we have a mandate for tank supervision and we keep this organizationally very separate and have different instruments. both monetary policy is profiting and thanks are profiting from price stability. theme say that i believe present monetary policy stance of the european system is justified even with where we are
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in regard to inflation. at the same time, i would argue aat we need to maintain strong supervisory approach for the banks. there are so many empirical -- the morethere loans they given a higher quality of loans they give -- to make them.two goals having said that, it is truly difficult for european banks to make money in this environment. mark: you are talking about the better the bank is capitalized, the better its ability to lend. but there's a difference between the board and the commission on the level of capital and lenders that they need to protect -- the singlee
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resolution board just the other day said 8% or more is necessary. loss absorbing capacity -- where does the bundesbank stand on this? at the end of the day, banks in europe need to follow both, so we need to find a way that these can work together in a non-contradictory measure. that weeminder selves resolution to the after 8% of total liabilities. sufficient loss absorbing capacity and therefore i stand with the argument of the resolution board that at least
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we need 8% of total liability. i would like to hear your view on contingent convertible that. some say the rules are not clear enough to buy them. we have the ecb asking for legislation that is less ambitious. would you advise banks right now? would you advise these banks not to sell the securities before there is clarification? this debate is as difficult as the structures themselves and i hear a lot of confusing things in these discussions. one thing is very clear -- they are professional investors and need to be explained. that coco's have
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very special rules that need to be understood and explained properly. this is not for the normal investor, but purely for professional investors. nevertheless, we do like the idea because it does enhance the capacity of banks and is a helpful instrument to have. depending on how you sell it and distribute it and explain it when you do it. mark: i would love to hear your view on the upcoming referendum on eu membership and the view of the financial center here in london. how effective do you think a -- how muche the eu of an effect would that have on london's role as a financial center? it would have multiple effects if it were to happen. i personally wish the united kingdom stays in the european
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union, that's obviously a decision for the voters in the united kingdom. but it would go beyond what you ask. first of all, there would be a consequence on the foreign exchange rate and a consequence on economic development and investment in the united kingdom. the economic challenge for the united kingdom, i am expecting to be considerable, both in the short, in the medium and in the long run. it depends on whether you are talking about banks, the headquarters are located in the united kingdom and i think the -- and i don't want to outguess the market participants. i think it is important to think
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through a lot of euro denominated activities are in london. also with regard to the derivative market -- this has already been a challenge for the of thee outside eurozone. should that happen, the united exit theould choose to european union, this would be much more of a challenge. to think through what this would mean and how it could be tolerated from a eurozone perspective. we will see what happens but i am not going to outguess what happened but these are on my mind. thank you for guess your time. andreas dombret from the in frankfurt.
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the european close continues. please stay with us. ♪
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mark: you are watching bloomberg markets. i'm mark harden in london. let's have a check on today's session. the kleins all around today -- a , a third day of declines led by energy and commodity companies. also coming up next on the european close, an exclusive interview with the cfo of tesco, the big retailer here. do not miss that. ♪
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mark: you are watching the european close. i am mark barton in london with betty liu in new york.
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let's take you to the action with my super led. the stocks are down for a third consecutive day one half of 1%. investors sitting on their hands ahead of the big central-bank meeting by the fed, by the boj. that is something to look forward to in the middle of the week. by 3%.hilips shares down phillips essentially is more likely to sell it to a private investor. analysts say an ipo would re-bless benefits. this is the first time the company has admitted that an ipo is more likely than a private deal. on the flipside the point today, first-quarter earnings estimates and it confirmed its outlook for the full year is not enough to stop the shares falling by 4%. shares today 11% lower.
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the french utility dropped the most in seven weeks and announced plans to sell at least 4 billion euros of new shares. it is going to deepen cost cuts. it is seeking to bolster finances. it is seeking to study whether to move forward with a controversial nuclear power project in the u.k.. on top of the stock sale, it will sell 10 million euros of assets, including estate in the french power grid operator 2020. shares of 11% lower today. the big piece of economic data came out of germany. business confidence unexpectedly declined, another sign that europe's biggest economy is running out of steam. the bundesbank confirm that last week 50. it sees the slow in momentum in the economy in this court of. quarter. china is germany's third biggest trading partner, showing signs of steadiness on last week.
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they saw investor confidence rise to its highest level this year in april. we now move to the best part of the show. betty doing beyonce. oh, oh.h, mark: give me a beyonce dance. [laughter] betty: the reason why i'm talking beyonce is did you see over the weekend? i know you have this on your iphone. onmonade" exclusively streaming service tidal. you probably missed the hbo special in conjunction. it is a big win for tidal, which has been trailing other music subscription services. spotify has 30 million subscribers. apple music has something like al, whichn and tid
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only has 3 million and is owned by her husband, jay-z. i am sure all of her albums are on your gym workout playlist . tidal.rince was also on he was against the internet, but his music was on tidal. i've got to ask you the obvious question -- favorite the office beyonce song? betty: i just saying it -- "single ladies." mark: mine is "crazy in love." [laughter] betty: the producers are cringing in the control room. they are saying let's get back to the markets. [laughter] stocks are trading lower right now. we are near the bottom of the session. abigail doolittle has more live from the nasdaq. abigail: we have the nasdaq trading moderately lower. and is downwn today
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row --ys and i in a american airlines shares are down. this comes in the context of the company's first-quarter report last week. george ferguson is saying what is really weighing down american airlines is fair pressure. the sentiment is starting to shift around the fair pressure. airlines ismerican unable to compete with low-cost offerings from low-cost carriers, and low fares in leisure travel are weighing on revenues overall. all this shows in the chart with s of american airlines trading back down in a trading range. they are pushing american airlines down to recent lows of $35 per share. betty: is that affecting other leisure stocks? abigail: you'd think this would be some of the other tailwinds
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like other ledger stocks. perhaps over the medium or long term this would be true, but wynn resorts is trading down. this is after saying that macau casino revenues for the month of april is tracking below expectations. gross gaming revenue in macau is likely to be down 15.5% in the month of april. this is below his expectations. he has adjusted his estimates. investors appear to be getting more bullish here. the stock recently put in a this is asossfit both near-term and long-term investors are pretty bullish. the last results came around a more than 100% and double for the stock. there is perhaps upside ahead for wynn resorts despite today's weakness. betty: abigail, thank you so much. mark: let's talk tesco, the
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british grocery chain. it had a positive first quarter. the company is signaling the cost-cutting efforts will theinue this year after company recovers from a crisis when profits were overstated. they sat down with guy johnson an exclusive interview. >> when we came into the business 18 months ago, we took stock of where we were. we were restoring trust and transparency in tesco as a brand in the business. we made good progress in all those. we were equally clear that the issue of whether how we were agencies,he rating and at first, we were over time wanting to be in investment grade issuer. it is not something we had control over and we felt it could take some time. we made significant progress.
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we recently had a minor upgrade from one of the agencies coul at is the first step. we are committed overtime to becoming an investment grade issuer. >> how far along the journey do you think you are? >> i think you have to ask the investors that could when we . when we talked to investors, what they say to us is that they understand what we are doing . they understand that the focus on the customer and the business transformation and focus on cash generation within our business is the right thing to do. they recognize that it may take some time, but we are year into it in terms of the recently reported results. we delivered what we set out to deliver. >> given those two things, is there any reason why you cannot go back to the bond market now? >> we never called specifically what our activities will be. we have a lot of liquidity.
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we have more than 4 billion pounds of cash on a balance sheet today. we just have over a billion of materials in the mix over 12 months in the bond market. we may or we may not. there is no reason why we cannot issue as a sub investment grade issuer, but we will wait to see how the year unfolds. it depends on our position and what investors say to us and the business overall. we have the range of options open to us. >> i know you were not there at the time, but do you look at dhs today and think that could of been us? >> not at all. is seen as a strong business. one of the reasons i joined tesco was because of its strength. clearly coming into the business, it needed change and transformation. that is what we set out to do, but we are a strong business and we have shown that over the past 18 months. >> how radical is the change
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that is happening on the british high street at the moment and how hard is it to keep in front of it? >> i think focusing on customers is what we have to do. we very clearly set up our businesses to serve britain stripper shoppers a little bett. if we focus on giving the customers what they want, which is great product, great quality, great service, great availability at a great price, they customers will come back. we have seen volumes growing strongly. we saw every part of a business has grown in the fourth quarter of last year. that is what we measure -- the volume and our customers. >> is that the biggest aspect to your business? >> we will always look to giving customers what they want. we have a very successful online business. they will continue to come with us. we are looking at what our customers want and trying to get more everything with her.
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single more everything wit day. >> are you worried about amazon? >> we do know that we have a significant online grocery business and the u.k. it is far away the largest in the u.k.. we have a distribution capability second to none and we are giving customers what they want. >> customers want lower prices. they want a number of things, but you guys have focused very much on giving them the elements. that has been you wrote of redemption to giving back. is that now synonymous with tesco? nowhe deflationary story built into the tesco narrative going forward from here? that have been day clear we see deflation as something in which is endemic in the markets.
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what we are buying is costing less and that has to deal with worldwide demand and production. there are also areas where we will continue to offer more investment, more deflation, and become more competitive and to give our customers more of what they want. we measure our success and that through the volumes and that is what we will be looking for. through that volume of blitz, we will be giving customers more. we are then able to build a stronger business through it. deflation is something that we will see at the very least and we will see how it is involved. mark: tesco cfo alan stewart blair talking to our very own guy johnson. betty: let's check in on bluebird first word news this hour. we have breaking news on tom brady. court hasd appeals ruled that patriots quarterback tom brady must serve a four-game suspension over deflategate, overturning a lower court's ruling.
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that ruling handed down moments ago by a panel judges who decided to-one that brady must serve the suspension. they say the nfl acted without authority to suspend the star player. president obama says 250 more americans will be sent to syria. they will not be sent to fight the train local forces. he is also calling on more nations to join the air campaign to fight the islamic state group. it is setting up a holding company for defense industries. deputy crown prince mohammed bin solman also says saudi arabia will restructure subcontracts to try to cut back on wasteful note to spending. the brussels subway station hit by suicide bomber has reopened. trains began rolling in to station this morning. 16 people were killed on march 22 when a bomb exploded.
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meanwhile, other attackers and targets at the brussels airport still is not up for capacity. for hours a day, powered by our 2400 journalists and 150 news bureaus around the world, i'm taylor riggs. mark: coming up in battle of the charts, i will face off with lisa abramowicz. we're looking at earnings on the dueling -- can the earnings of the stoxx 600 outdueled the boj? that's up next. ♪
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>> time now for the global battle of the charts. betty: you can access all these charts on the bloomberg by
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running the function feature at the bottom of your screen. kicking things off is lisa abramowicz. this to me is the chart of the week. it's an incredibly important chart because it shows what's at stake with the bank of japan when it comes out this week and how much toher or no expand its asset purchases. you can see the chart showing etf holdings. of japane is the bank etf holdings and the blue is the rest of the market. when the bank of japan started to expand their purchases in 2013, it started to accelerate the amount that they held. you can see that now on one half of the entire japanese etf market. this decision this week will determine how much different markets will be distorted, how much people will also flood into these markets, and how much these markets can expand . this is a boj market absolutely. betty: mark, did you see all the
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nicknames for you on twitter? mark: i did indeed. mark the shark. where is the silver lining in europe's gloomy earnings outlook? this is a lovely chart showing how expectations for earnings are being cut. the green line is the stoxx 600 etf forecast. since then, it has come down by 6.5%. for the year as a whole, analysts surveyed by bloomberg forecast earnings of stoxx 600 companies to contract by 2.2%. i said where is the silver lining? there is a silver lining because not all industry groups have seen their earnings estimates cut by analysts. hade january 21, you have retail companies see their earnings rising by 3.6%.
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travel and leisure has risen by 1.75%. for the year, both of those industry groups have forecast to see earnings increased by 9.3%. the reason why -- the impact of low oil, the ecb stimulus as well. investors are pulling money out , butropean share funds allocations for these two industry groups rose in april preferredremain most in history according to merrill lynch. #btv 1048 -- mark wishart has returned. betty: it is a really hard decision, but i think you can get more out of that new plasma. that is a gift to you. i'm going to give it to lisa today with a stunning bart chart. much more ahead, mark. mark: still ahead on the european close, apple has never
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ever posted a year on year decline since iphone sales. tomorrow's earnings report could change that. we have a preview next. ♪
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betty: live from new york and london, i'm betty liu. mark: i'm mark burton. this is the european close. if you get some of the big business stories in the news right now. it could be an ipo for the record books when saudi arabia sells a piece of aramco. the oil company will be valued just about $2 trillion. that is according to deputy crown prince mohammed bin solman. a valuation more than three times about, the of apple, the world's most valuable company. lester's seized
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by bloomberg news, aurora is to return $5.4 billion to clients under which the firm was to be sold to capital advisors. -- there may be a new ilife ally to sell sales of its airplanes. airbus will deliver the first planes built in its factory in alabama. overseas andld the buyers could tap into banks to help. that is the latest bluebird business flash. betty: apple shares are in a bear market. where they are trading so far in the session -- down almost 1% ahead of the earnings report, which apple hopefully is going to pull out a surprise upside, but the stock has been in the doldrums. why? the iphone expectations will see the first decline in revenue this quarter. joining us now is the senior
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telecom analyst for bloomberg intelligence. so goes the iphone, so goes apple? >> it really does. it is over 65% of revenue. it is a higher percent of their profit. right now, it is everything to apple and it really drives the growth. when you have weak sales of iphone, you get weak overall sales of apple. betty: what is going on here with the iphone? john: my sense is that it's a couple of things. if you want to clock back a year and a half, september 2014, we had the introduction of the iphone 6. it was the first large screen iphone. it was a huge runaway hit for them. pulleda feeling it forward a lot of demand, people who otherwise would be buying an iphone now at the time said i will spend the action money and step up and get the larger screen phone now. we are feeling a little bit of a hit little affect to that in a negative way. i think the other thing that
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tople fear that we have yet find out is that we could be getting to till the top of the iphone product cycle. the pressure regardless of where we are in that cycle, the pressure is really building on apple to come up with an encore to the iphone, whether it's in the hardware world or i think it's going to be more in the services and content world. they got to come up with bacact two here. mark: is the iphone seven going to jumpstart demand for the iphone? big, big pressure. john: it is tough to say, mark. the rumors are calling for a much better camera. a dual camera system with a potential telephoto lens, a better screen, which i think would help sales a lot, because that little screen means everything to smartphone users. day, i think the again we go back to the fact that apple at some point is
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going to hit the top of the cycle for iphone, whether it is now or two quarters from now. they still need that encore in the works. frankly, i'm not seeing it yet. mark: is this just apple having to contend with all the issues that the other smartphone sellers have had to contend with? it is just apple finally joining the party to you such a term. john: i think a better way to put it is that the party has joined them. ,hen the iphone first came out they really did not have meaningful competitors. over time, you have seen companies like samsung, lg, , all these companies have come out now with terrific devices. apple on the confederate of front really has its -- competitive front really has its hands full. they have got to really keep ahead of the pack if they can by leveraging their brand-name and
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keeping up with hardware features that competitors are coming out with every day. mark: john, thanks for joining us. that is john butler a bloomberg intelligence ahead of apple earnings tomorrow. a look at how european equities finished a monday session. it was a third day of declines led by energy and basic resource stocks. those with a big declining industries. the stoxx 600 down by one half of 1%. we had the federal reserve and the bank of japan as well. we have come off of the back of two weeks of gains as well. that is it for the european close. "bloomberg markets" continues. we will see you tomorrow. ♪
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scarlet: it is noon in new york and midnight and hong kong. alix: welcome to "bloomberg markets."
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scarlet: from bloomberg world headquarters in new york, good afternoon. i am scarlet fu. i'm tracy alloway. here's what we are watching at this hour. saudi arabia is try to revive its economy without oil efforts. scarlet: another chapter in the valiant saga. will this version of ceo musical chairs work? tracy: a lot of huge tech earnings will come out this week, but one tech giant is holding most of the attention. we will discuss what to expect from apple. scarlet: we are halfway through the u.s. trading that could let day. lettuce head over to julie hyman. tracy mentioned apple. it is spring break, so it's wait-and-see for the market. julie:


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