tv Bloomberg Markets European Close Bloomberg May 11, 2016 11:00am-12:01pm EDT
you are watching the european close on bloomberg markets. we are going to take you from new york to london to las vegas in the next hour. here is what we are watching. stocks lower in europe and the u.s.. the s&p 500 retreating for the first time in five days. european equity sliding. today's bank rescue fund might be expanding the amount of funds available. we hear from the italian finance minister pier carlo padoan. soften -- as global
factors affect the price of the commodity? vonnie: it is 90 minutes into the trading day in the u.s.. ramy: after yesterday's huge pop we decided we are going to make a little bit of a u-turn and the markets are now currently in the red. the dow is down the most by about half percent. the s&p and the nasdaq down by one third of a percent. popid see a little bit of a when we saw oil production numbers come in a little bit better than expected. let's also take a look at what is happening with the spx. while we are down by about a third of a percent, over the past two days it has not been that bad. we are up by about 9/10 of a percent an year to date we are up still by about 2%.
i want to show you the general health of the s&p plus 10 sectors.- the s&p's 10 energy is the biggest gainer, up high at 10th of a percent. this -- consumer discretionary is the biggest lag or, down one and a half percent. now are thes right 10 worst -- 10th worst performer on the s&p, seeing some fallout from earnings after the closing bell on tuesday. it is down by 4%. it missed estimates on the revenue side as well as on the earning side. revenue came in $13 million, $200 million less than forecast. it was worse than expected revenue from the media arm as well as the parks arm as well as the consumer products arm.
moving on to a retail stock, macy's, macy's is the third worst performer on the s&p. let's pull up macy's right now, and basically, the first quarter ,arnings did beat estimates $.40 versus an estimate of $.37. their reaction is down almost 12%, but despite the beat, that is where the good news starts. revenue fell -- good news stops. i want to talk to you about a merger that basically did not happen. this is the merger of $6.3 billion between staples and office depot. both stocks falling, staples down 17% and office depot down nearly 40%. office depot saying it will not appeal the court's decision to block the deal. it says basically it would be a
monopoly. mark: when i can tell you is an hour ago the only industry group that was rising is basic resources. now,s two friends industrial goods and services, and oil and gas. the stoxx 600 is down. glencore earlier forecasting demand for zinc and other industrial metals. that is why you are seeing metals rise as mining companies gain today. big news in the european as much as 10.2 billion pounds, saying it risked raising prices and shrinking choice for customers. it is the latest setback to consolidation in the industry. telecom operators saying they need can follow -- consolidation to final new money into new
areas. the telecom news does not and there. billionairevestment reported its flight -- it's french business declined among competition from rivals. numericch business is kabul s f r. numericable-sfr marginally lower. embryo -- abn amro says first quarter profits fell by 30%. -- 13%. fee and commission income, regulatory cost also rose. it is considering additional
cost cuts. this company was nationalized after the prices in 2008. it returned to the market in november just before the slowdown in china and declining oil prices provoked the global selloff. the government sold its 23% stake, shares are lower today. one of the victims of the global financial crisis, one of those lenders. there are a few, such as rbs and lloyds. vonnie: it is never ending for european lenders. let's check in with taylor riggs. : in brazil, the senate may decide if it is the last day in office for dilma rousseff. if lawmakers give their approval, recep would be required to step down temporarily. she is accused of illegally
-- three bombings in baghdad have killed at least 80 people. crowdedmb exploded in a outdoor market in a mostly shiite neighborhood. 63 were killed and another 80 were wanted. islamic state has claimed responsibility. two other bombings killed 25 people. donald trump has narrowed down his list of vice presidential candidates. he says he has a list of five or six people that he likes, and he is not ruling out new jersey governor chris christie, a former rival who now heads trump's transition team. anthony foxx ones he could shut down the whole washington, d c subway for safety reasons. he almost ordered a shutdown last week and d.c. officials have not been able to figure out what caused incidents of electrical sparking and fire.
yearsrst climbers in two conquer the world's highest mountain, among a number of disasters. they reached the summit today. nearly 300 foreign climbers and their guides are hoping to reach the summit. global news 24 hours a day powered by our 2400 journalists in more than 150 news journals around the world, i am taylor riggs. vonnie: revenue in retreat despite near all-time prices, but that is not deterring investors. large cap shares are the highest in a decade and it is causing a divergence between companies whose sales are expanding and whose aren't. i want to bring in oliver renick. how richly priced are they.
oliver: if you look at that compared to what is happening in -- small-cap base space, it is kind of created a rift in the market where you have two options. you can buy companies whose sales growth has held up pretty well versus companies whose sales growth has been negative and falling, which are the large caps. investors are looking at those two options and sticking with large caps. the past years have largely been back to if you take it 2014, large caps are up 14% and small caps are down. there was this transition where -- when that transition happened in 2014, small-cap valuations, prices failed to come down quite a bit. it kind of raises some questions if you are in a big company.
vonnie: it seems counterintuitive. what we have seen over the past year is analysts on the saying, thisuously recession is going to shift, these kinds of issues are going to be transitory, and that has not happened yet. i am not sure if it is the best case to say, this is now going to change, let's by amidst declining earnings and higher valuations. mark: do we care about price for sales as a valuation metric? oliver: good question. it depends. a lot of people do not really use it, especially for the older companies. it does apply to the companies coming to market who want to demonstrate the have him product they will -- they have a product they will be able to sell. talking to rbs and they
say, this is not something we take into consideration, and if you are selling, it is good. you want to have a strong bottom line and that is what a lot of investors look to. things are getting pretty expensive and i think it is useful to look at some of the valuations.nuanced mark: history tells us when we have a valuation gap like this it might be time to get into small caps, is that what you are saying? .liver: it is possible we have a pretty limited data set because the discrepancy that is happening now is so rare. this has only happened a couple of times, but in the instance it did in 2003, it was a pretty strong rally in that small-cap iqued some that has p investors' interest.
they can capitalize on the stronger u.s. economy in contrast to the rest of the world. these things are little bit underpriced right now. it may not be the best measurement for the entire stock market but i think it is something important to take into account. mark: i look forward to our next battle of the charts. look forward to tomorrow, oliver renick of bloomberg stocks. much more ahead on bloomberg markets, the european close. we will help -- head to the conference in las vegas where erik schatzker is with chris hentemann. that is next. as we head to the break, this is a live shot in brazil showing the current debate in the senate over whether to impeach president dilma rousseff. at 6:00 is expected p.m. eastern, 7:00 p.m. brazilian time. ♪
vonnie: live from london and from new york, i'm vonnie quinn. this isam mark barton, the european close on bloomberg market. to las vegas head for the sky bridge alternatives conference. erik schatzker is there. erik: i am here with chris hentemann of 400 capital advisors. he specializes in securitized structured products. i tell everybody that securitized and structured products but i really want to talk to you about lending club and marketplace lending. you have been paying attention to this company and this industry for a little while, not
just because of the fairly negative headlines they have been making for themselves over the past couple of days. chris: we have been watching the sector grow over the past two to three years. has been a fantastic growth story for a lot of these companies, and it is a very rational image, but a growth story that is becoming very dependent on the institutionalized credit markets. erik: what does that mean? chris: look what happened with lending club. --ir extreme growth is out? petering chris: showing how dependent they are on smaller markets. now they need much larger markets and it is going to require more transparency and more discipline. erik: is that model broken? to haveo, it is going
to adapt, and like a lot of consumer related industries like residential mortgage or autos, have all of their models to the capital markets, so i think they will learn to adapt. is blowing upclub because of a couple of specific problems associated with disclosure and transparency and the outgoing ceo. s will runnk other into similar problems? chris: they are all dealing with it. erik: at the current time? chris: at the current time. that we areally working with him to try to solve these problems but they will need to work with institutional investors to adapt. they will need to realize the capital market can be very volatile and they will have to diversify their funding sources.
they are going to have to find alternatives, institutionalize their capital markets and funding process. erik: what does that mean? chris: take lending club for example. , theyan sale they had changed several dates on that and that is an extreme no-no in our space. you cannot do that and you have to have certain levels of transparency, disclosure, consistency. erik: is the issue just funding or is it the quality of the credits they are underwriting? i thinkt is both and they will end up dealing with both real-time. they had the benefit of a good credit cycle, and this has to be taken care of. the market is saying if you do not adapt, capital markets, distribution and the conventions of it, when the credit cycle turns it is going to be game over. think those
marketplace lending stocks are fairly priced? pain coming that has not been factor in? chris: they have been substantially discounted over the past week. i think they are much more attractive than they were awake ago. erik: what about the credit cycle in general? some of these loans are going to run into trouble when the credit cycle turns. how bad is it going to be? chris: that is a big question mark. the people who figure that out will be paid really well or avoid some huge problems. you are talking about underwriting that has not been tested on the market. seeing how as a credit cycle changes and see how these loans adapt, how the borrowers basically react to the change in the credit cycle is going to be
the key to whether these companies can survive or not. and it comes with other things. we talked about servicing. erik: loan servicing? credityes, and as the cycle gets more intense, good servicing has to follow in so the industry has to adapt. erik: what do you think is most attractive right now, and what is going to be most resilient when the credit cycle does turn? chris: i think the consumer is in very good shape. i think if there is one form of credit that we would say actually we are most comfortable with, it is consumer credit. we are biased towards prime credit and more traditional forms of credit like residential mortgage, residential prime mortgage. we talk a lot about what is happening with the u.s. residential market and how fannie and freddie changed
credit risks in that market. i just looked at it this morning. there is more than $30 billion of issuance and they have covered over one trillion dollars of mortgage loans that originated in the united states over the past three years those programs have been in place. it is a brand-new credit market. it has all of the discipline that lending club has been unable to figure out. that is a market we really like and it continues to perform. erik: chris, thank you for joining me. vonnie, back to you. vonnie: erik schatzker bringing us an interview with chris hentemann. bloomberg television continues its coverage from salt in las vegas. david westin will be sitting down with the chairman of economic advisers. ♪
mark: let's talk the eu referendum. the houseorne telling of commons and london that a brexit would heavily impact the purses of the british people. >> if you look at the sheer weight of opinion, it is overwhelming. the people who look at the case for leaving the eu come to the conclusion it would make the country poor and the country poor as well. vonnie: not all businesses are concerned by the threat of brexit. the ceo of the $24 billion catering giant compass says he is not worried. >> we think our business model is very flexible and we can case it from most situations. we are not overly concerned.
my personal preference is i think it will be better if we stayed in, but from a business point of view we are trying to think it through. mark: the economic concerns leading up to the referendum highlighted in today's industrial productions. you u.k. show industrial production going back to 2010. .3%aw an increase today of but it was below estimate. it highlights the very lopsided nature of the u.k. economy. it is an economy that is overreliance on the services sector, some say, which leads me to this chart here. this is the latest pmi data which highlights that not only is manufacturing contracting, it is below 50, that is the white line. we are also seeing a slowdown in construction and services, and services, very much the linchpin of the economy, representing the
majority of the economy. it is now at its slowest level in three years. big referendum concerns reflected their. vonnie: this makes bank of england decisions which were difficult. you can follow all of the latest headlines on the brexit debate, have a look at the latest polls. bias than a less lot of the polls you read about in the british newspapers. about 40% think brexit will occur and 40% does not. let's take a look at where markets are ending the day. we will be having that in a moment. ♪
vonnie quinn. a daily dominated by earnings. carlsberg, the world's biggest brewer reported fourth-quarter sales that disappointed investors. it offered a gloomy outlook for eastern europe and asia. sales in western europe which account for two thirds of the company's revenue declined more than expected. for haveow the big fared on a share base prices for the last 12 months. abs, 2% lower. top of the tree, sab miller up by 18%. the earnings test did not and there. rising a stronger than estimated 30% after an
agreement. it was a two-year arbitration process that finished in march and enabled e.on to cancel some provisions recorded in earlier years and that boosted its profits by about 400 million euros. this is an industry going change as itndous shifts from nuclear to green energy. it has lost half its market cap in the last 12 months. quarter's rising at the fastest paced and 13 quarters, propelled by a moving industry as well as the -- this is the company that owns dhl express and logistics brand.
shares in deutsche post up 2.6%. you are looking at disney. vonnie: down almost 5%, which is a big move for disney. we're back up a little bit. retreating by 3% still. this cycle between investors and wall street and the cable companies continues, and we can see this playing out in the disney results because that is what has investors a little jittery. the outlook for advertising dollars and distribution over espn. the other parts of disney did really well, the studio portion and the parks and the recreational activities. although it did say the stronger dollar hurt earnings on sales of merchandise abroad. dow, have a look at the down 6/10 of 1%, the s&p down
for tenths of 1%, the nasdaq down one third of 1%. on to some other markets. , it isecking the euro stronger by about 6/10 of a percent. let's get to abigail doolittle at the nasdaq. abigail: we are looking at a merger meltdown as shares of staples and office depot are plunging. a merger between these two companies would result in pricing power and an anti-competitive environment. as a result, they have called off the $6 billion merger. it is going to put these two companies competing directly against each other in a secular decline. staplesice depot and will refocus on driving sales in non-office categories and costs, closingng
stores, and buying back stock. vonnie: looking at other laggards? abigail: a well-known company is plunging at least as much as office depot, and this is after the watch company missed estimates by as much as 37%. print, a very bad limited visibility, lots of volatility, but there is a 19% bear shortage so some investors are probably pleased. vonnie: it is time to check in with our first word news. taylor: a threat from one of the top aides to turkey pass president erdogan says there if turkey doess not allow them to travel without a visa.
the european parliament is debating the issue today. is taking erdogan another step toward establishing an executive presidency. turkey's constitution bars the president from having a ruling party. erdogan has been seeking to shift turkey's center of power from the parliament to the presidency. david cameron may have an awkward time when the leaders of nigeria and afghanistan visit this week. in remarks captured this week he told queen elizabeth the two countries are among the most corrupt in the world. coming toaders are london for an anticorruption summit. in paris, dozens of people protested for labor reform. wished toollande press the measures through the house without approval.
norway will increase the amount of oil money it spends this year. the government dipping into its sovereign wealth fund. it will withdraw $10 million from the fund, 18 times as much as it had planned last october. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world, i am taylor riggs. vonnie: italy cannot reach -- --e it into the euro area gdp is still 8% below its precrisis peak reached in 2007. mark: what is it going to take for italy to return to growth? italian finance minister pier carlo padoan visited with us earlier and spoke with francine
lacqua about a government-backed fund designed to edge the banks away from a fully fledged crisis. worldlet's consider a without it, we would be in not such a nice situation. let's give atlanta time and let's also remember that atlanta is the private sector and they might decide to speed it up, and to enlarge the size of the resources available. missionint, part of its is to deal with npl's and this will take time. francine: there has been a lot of investors thinking this big news affect has gone. would you tell them to give you more time or were you disappointed? pier: there is no new information about atlante with .hat is available why are the markets disappointed
today rather than a week ago? let's imagine a world without it, we would be in a worse situation. francine: there are other banks to tap funds. the sufficient -- be sufficient? criticalo not see many situations in the banking landscape. francine: where do you see vincenzo? as a possibility of being a strong business model. atlante looking for private equity funding? pier: it is privately run and privately owned, and developing longer-term strategies. is a medium to long-term instrument which needs
a medium to long-term strategy. francine: d you have an opinion on the role of private equity, what that should look like? think there are big opportunities in the italian banking sector because the government has introduced several reforms to strengthen over the medium-term, the two,ng sector, and number the real side of the coin, the italian economy is growing again thanks to other structural reforms. the combination of stronger growth and a stronger banking structure will definitely improve the picture six to 12 months from now. francine: what is the main message you have for investors who not only worry about the italian banking set your but -- sector but increasing debt? pier: debt is beginning to
decline mainly because of stronger growth. the other reforms we have introduced and the label market -- in the labor market in civil justice are severely cut. is easier,ess taxation is being lowered for the first time in many years, so we are decidedly getting out of the postrecession environment. francine: they saw the first growth in 2015, it has never seen that for a very long time. pier: we have been going through three years of deep recession and never lost at least 10% of gdp. we are beginning to go back to precrisis levels and we will go beyond that. 8% below gdp remains its precrisis level. pier: the recession was very deep and prior to the recession, it was also deep. we are facing the challenge of
adjusting the system to the hits of the recession and removing obstacles to growth and investment, which we are doing and will continue to do over the lifespan of the government. francine: is there still an italian discount? pier: i do not think so. i think we are quickly but decisively going towards a more normal situation in italy. this will not come with a big bang but it is beginning to show some sides of the economy like houses confidence, consumption of durables, youth unemployment dropping. these are signs that signal a structural improvement of the economy. francine: how concerned are you that we are still going to see a summer like last year where greece is at the forefront, now we worry about a brexit referendum. it seems no matter how many
reforms are put in place europe cannot get its act together. pier: the situation with greece is slowly improving. the greek government has passed important laws and parliament. -- in parliament. i am confident in light of the meeting this week that progress will be made and we can conclude the first review with greece. as far as brexit, i am very worried not only for the immediate damage that can come to the u.k. but also from the fact that this could be taken as an example of leaving europe by other countries. let's not forget, we are experiencing a widespread discontent so brexit could lead the way to more painful disentanglement. francine: could brexit be a lehman brothers like moment? ?ould it impact
pier: it would impact the european construction. it benefits from european integration like all other european countries. if brexit happens, if the referendum delivers the decision to leave europe, we will enter a medium-term several years period of continued negotiation, which on how to disentangle the u.k. from europe and europe from the u.k. we know when we start that we do not know how we end. padoan, thearlo italian finance minister with francine lacqua. soybeans,arkets and with a little bit of boj. do not miss it. ♪
vonnie: it is time now for our global battle of the charts where we take a look at some of the most telling chart of the day and what they mean for investors. you can access all of these charts on bloomberg by running the function at the bottom of your's green. kicking things off, matt miller. matt: this morning i was showing mark barton in the world house bearish everybody has gotten. we have a number of things happening in june like the brexit, like the fed meeting, like the spanish vote that are all worrisome. in general, bears have doubled
up on their extra bearish options. the whole world seems to be on that side of the trade. i was reading this great blog, this guy writes it and he was saying, i will take the other side of that trade because we are all doubting too much to grow thes' will monetary base and create some kind of inflation. the market right now does not buy it, they are going to keep printing. if you look at the monetary base i have here, just the u.s. and japan, you can see the incredible growth. japan is a quarter the size of the u.s. and the same size as ours, and this is in dollar terms. iss shows how certain kuroda , he is going to do this no matter what, and a macro tourist
is saying he will take the other side of the bet he can is all they do is inflate away the debt selling stock and buying bonds. vonnie: we saw the yen weakening on verbal intervention. you could be onto something. do better than that, mark. last three weeks, global stocks have been on a bit of a downward trajectory and i found the start of that trajectory was april 20. rally for the16% msci old country world index. if global stocks have been declining from april the 20th, where has been the best place to put your money? , whiched with the msci has fallen by 2.4%. space, we track 156 currencies on bloomberg and
the best currency in that time period is there curtis down somebody which is up -- the kurdistan somebody. the best-performing commodity that moved into a ball market last month, you know the one i mean, it is soybeans, risen by 5.5%. fascinatingly, the best-performing equity benchmark since april 20 is the greek stock market. the asc index has risen. 11 when allry equity market started to rise, this index has risen by 42%, but hold onto your horses go since the highs of 2007 the asc has fallen 88%. simply brilliant.
my question is what does that say about investors in these markets? i am out a little bit of a disadvantage with two amazing charts, but a little birdie tells me i may not be able to award matt the winner in the future so i will rewarded today. matt: i am going to germany on friday and i'm going to join mark barton in europe. he is in europe now and maybe he won't be after june 23. vonnie: zhang. -- zing. still ahead on the european close, we will find out why global oil discussions are not doing anything to prop up the price of oil. ♪
this is the european close on bloomberg television. we are talking norway. vonnie: losing $25 billion of its oil wealth to help stave off a recession. it is driving up unemployment in norway and threatening to sell growth mark. mark: a quandary might be why the oil price is not higher. from canada's wildfires to kuwaiti oil strikes, bloomberg asked jeff kerry. here's what he has to say. >> that view is really being driven by the probability of hitting containment issues. when i mean by that is the surpluses are so large, they strainstorage capacity and it leads to a collapse in the market. we saw that in january and
february. could that happen between the months of april and october? very unlikely, and the reason is because in january, february, and october, a go down for maintenance so the demand goes down, backs up the crude, and creates a likelihood of that happening. that is why we upgraded oil to a neutral outlook. the probability of that happening is much lower. i do not want to dismiss the up and because we do have a lot of supportive factors. >> you mentioned the role that fed policy and the weaker dollar played in providing a bed to oil and other commodities -- a bid to oil and other commodity. easy money keeps marginal producers live. to you also think that element is a factor here in terms of
what is going on and prices? think of commodities more broadly, i like to separate the macro drivers from the micro drivers. what you are talking about would be a micro driver. it would create more supply at the macro driver would lead to a higher cost. canada, up toin 80% of the cost is denominated in canadian dollars so when you have a weaker dollar, you end up with a stronger canadian dollar and higher cost to produce the oil. what i am talking about is fundamental or micro drivers move these macro drivers the oil -- commodity price. these macro variables drive the overall price level, and there is a reason why oil is considered a fixed income
instrument. like rates, it is more of a carry instrument and we think of its equilibrium value, it is a function of rates. currie,that was jeff goldman sachs head of global research. let's take a look at some assets moving today. we are seeing a stronger euro today. 108.53. percent.p 7/10 of a another hedge fund manager recommending gold, and nymex crude oil up almost 3%. ♪
scarlet: from bloomberg world headquarters in new york, i am scarlet fu. alix: i am alix steel. it is judgment day in brazil. the senate will determine if president dilma rousseff will face an impeachment trial. today's vote could end with her immediate suspension. scarlet: when you take a look at what is happening with apple, investors contemplating futures of the smartphone market. it may get worse before it gets better. much more from las vegas at the salt conference. scarlet: we have some breaking news. nissan is in talks to take control of mitsubishi motors.