tv Bloomberg Markets European Close Bloomberg June 2, 2016 11:00am-12:01pm EDT
europe today. you're watching the european close of "bloomberg markets." ♪ betty: we kick off this hour with some breaking news on the oil market. let's head to the market desperate julie hyman has the oil inventories in the u.s. julie: coming in with the decline of about 1.3 7 million barrels. the estimated decline was about 2.7 million barrels, smaller than estimated decline at leasing crude oil inventories and gasoline inventories seen a bigger than expected drawdown of about 1.5 million barrels. this is down 1.3 million barrels. back to larger than estimated. just to recap, a smaller than estimated drawdown in crude inventories. larger than estimated drawdown in refined products. also i see that production of
gasoline and distillates with higher -- was higher last week. those of the numbers we have in terms of the reaction we're seeing within the oil markets. there is a little bit of a leg up happening in oil prices. they are still lower on opec's failure to come to the production agreement. but these numbers do you seem to be mitigating that to some extent. coming further towards the unchanged line. we will see what happens as we get further away from these numbers and people go through them more. to get back to opec, look at the bloomberg. this is a chart we have been looking at this morning. 15:27. we've been looking at the failure of opec to come to this agreement. in the past they have come to an agreement and nonstop to them. -- and not stuck to them. you are looking at production in this aqua color.
excluding iraq going back to the end of 2011. and in the group production target that was sent late last year. as you can see, opec is pretty consistently asked needed the targets. opec is notorious for not sticking to its production targets when it does even in fact agree upon them. let's get back to stocks. all major averages down but not as much as they were even an hour ago. only about two tens of 1%. energy continuing to way here -- that could be mitigated following the weekly inventory numbers. the s&p energy index is down over the past couple of days sharply. a drop of about three quarters of 1%. it is also coming back up a little bit in the wake of these numbers. in terms of the energy point movers, the exxon mobil's of the world trading lower.
the weakness we have been seeing within stocks is not limited to energy. tech also seeing some declines. cabell's product -- apple's price target cut over the iphone and legal troubles after a former employee said she was asked to cook the books. microsoft also trading lower today. with people getting out of risks, where are they going? in some measure to the treasury market. we have seen some buying within treasury. you have the 10-year note and now the yield down to 1.8% as the price goes higher. i want to take one more look at oil prices. people are digesting these numbers. we are still seeing that leg up in oil prices, although crude is still down about 8/10 of 1%. mark? stock 600 is up literally by about one third of one point. halting two days of declines.
disappointment that opec cannot implement this production quota. reinstate this production ceiling. the ecb, no change is expected. draghi said the balance of risks had improved. we are yet to see the full impact of stimulus. we are awaiting the stop of the program, the targeted long-term loan program on june 22. those dates were formally announced. function thatn tells you everything you need to know about equities, sovereign debt, cvs and moderate -- commodity perspective. thatis a hedge company operates liquid storage facilities for petroleum products, chemicals and did stuffs. it was updated to buy versus neutral at goldman sachs. the price target is 82 euros. we are at 72 today. that implies a 16% upside.
it has strong competitive positioning. leading to earnings growth. the stocks year today underperformed versus peers offers. rose as much as 6%. sincemuch as 6%, the most may. 2015. according to the chief executive asian and south asia, the lenders are run back -- track to meet its $1 billion cost-cutting program. most of the restructuring is still in place. the chief executive has restructured senior management. he is seeking to exit $100 million of risky assets to turn on the lender that has first lost since 1989 last year. this is the chart of the big u.k. lenders in the past 12 months. you will see clearly the standard charts, it's the worst
performer. roughly 30%bc, rbs worse. lloyd still the best but down by 10%. i want to reiterate something julie was telling us earlier. airline stocks are in focus today. global airline earnings are said to be 3.1 billion dollars higher this year than previously estimated as the impact of lower fuel costs makes up for a slowdown in passenger growth. that's according to the industry body. air france shares are up as our shares of lufthansa and iag, which owns british airways and iberia. with tons up by 1.3%. air france up by three quarters of 1%. airlines taking off today. betty: they are indeed. let's check with the bloomberg first word news this morning. voniie has more.
hillary clinton set to unleash a major foreign-policy attack on donald trump today. tolys a speech in san diego cap him is unqualified and dangerous. the former secretary of state has repeatedly called him a loose cannon. she tries to contest or foreign-policy experience with his. an adviser says she will make clear how high the stakes are the election. fresh problem for the affordable care act. the largest health insurer in texas wants to raise its rates on individual policies by an average of nearly 60%. it's a new sign president obama's health care overhaul is not solved the problem of price spikes. many insurers around the u.s. are requesting bigger premium increases for 2017. they are citing losses. germany's parliament voted to recognize the ottoman empire's killington deportations of armenians in 1915 as genocide.
that sets up the potential for a risk of conflict between on july merkel and the turkish president. turkey denies those killings were genocide and has now recalled its ambassador to germany. soccer superstar appeared in a barcelona court today. he is accused in a tax evasion one that cast a spotlight dealings of elite sports cars -- stars. they were accused of failing to pay taxes on image rights. prosecutors are demanding sentences of 20 humans for each and the payment after taxes. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world.. mark? mark: there are roughly 22 minutes left in today's european equities session. today much more ahead on bloomberg market. ecb decision day. mario draghi reveals little
mark: breaking news on deutsche bank. traders have been charged by the u.s. and a libel probe. they even accused in the rigging scheme. the latest prosecutions bring the total number of bankers charged to 15. and deutsche bank, which has faced the highest legal bills among continental lenders, will probably set aside even more. the banks capital has been hit,
adding to his legal woes. joining us is michael morgan covers the banks. two x deutsche bank traders charged by the u.s. in this libel probe. a couple of names being mentioned, bringing the total number to 15. what can you add? michael: we have seen a lot of the banks settling on the cases. now they have moved to the individual. they are going bank to bank on the individuals being charged. deutsche has a number of outstanding legal items. john said he wants to get there more of those this year, even if it's going to cost the bank its annual profit. they want to get more of those out-of-the-way because having 70 hanging over their heads has definitely wait on the stock. mark: what else is hanging is how basil will calculate operational risks. it could mean deutsche bank need more capital? michael: yes, this is something the banks are not huge fans of.
you heard jpmorgan talk about this aspect of the capital rules, which is operational risks. it means as her legal bills go up, the models say you are more likely in the future to pay legal costs. they are based on history. costs go up, so does the amount of capital you have to set aside for future legal costs. that the argue financial crisis was once in a generation event, and a lot of the litigation coming from that one-off thing in this one happen in the future. the regulators say how do we know? this has been seven years of continuing legal costs. bakeeed to make that ba -- this in for your capital. betty: this is falling on deaf ears? michael: you are hearing a lot of them talking about the tweaks to the capital models. .hey are copping it basil
the committee is not a fan of this name. they say this is the banks trying to make it more comparable to each other so their calculations can be compared. but the bankers are calling this another adding to the pile they have to hold. there is certainly a disagreement there. bankers are trying to get them to pull back a little on some of these changes. betty: outside of just having to add on more capital, or hold more capital, are there other complaints they have against these rules? michael: a lot of them are saying these rules and how we calculated is based on internal models. the models are reviewed by regulators, approved by regulators, should not be enough? -- i think thers
regulators want to get an asset in a bank shall like an asset in another bank in terms of how they are measured on a capital basis, and trying to get a closer together because you see a big difference in terms of the risk weighting of certain assets from one make to another. mark: well they have to raise more capital to cover operations? is essentially a case of reducing the business? michael: the way they talked about it, he indicated the latter. this would limit some of the things they could do, some of the types of businesses they could write. he has been vocal in saying they don't raise more capital in the markets. investors are not looking for that type of the illusion -- dilution. all the banks of it taking the approach of shrinking rather than going out and tapping investors. especially when you're trading around half book. utive.an be very dil
mark: thank you for claim it up. betty: a lot ahead. some of the biggest stories in the business right now. u.s. businesses added 173,000 jobs in may, lifted by strong gains in the service industry. construction firms hired more workers while manufacturers shed jobs. the april total was revised to 166,000. the official jobs report is coming up tomorrow. saysork's highest court efforts to bar to former aig executives from trading industry and forfeit any improperly gained profits, that case can continue. ceo and act cfo engaged in accounting fraud. charges are part of a $1.6 billion agreement regulators in 2006. the insurance giant was bailed
out by the federal government in the 2008 financial crisis. 150 million people using the service everyday, up from 110 million in december. that makes the four-year-old messaging app more popular than twitter by daily active users. twitter has lessened than 140 million users interacting with the service daily. that is your bloomberg business flash for this hour. mark: we are roughly 30 minutes away from the end of the third session. ecb androgyny revealing little change in the central banks policy. the question remains, will stimulus measures be enough to keep the economy growing at a healthy pace and hit the inflation target? ♪
live from london and the work-- betty: this is the european close on "bloomberg markets." the european central bank kept its inflation outlook pretty much unchanged, saying governments must do more to revive their own economies. there is mario draghi speaking to reporters in vienna after the decision. >> the governing council will closely monitor the evolution of the outlook for price stability, and a forwarded to achieve its objective, will act by using all the instruments available within its mandate. economics managing director is joining us today. the big disappointment today? that drug he did not this is inflation forecast for 2018? he get that unchanged at 1.6%. there might have been some hope
that the key year my scene a bit of an uptick. it remains a fair bit below the ecb's targeted just below 2%. >> absolutely. "follow for today was draghi's guidance." they are going to start bond purchases and the new long-term liquidity support measures. here is whattant he had to say about the future for interest rates. that was guided by the mandate in the medium projections. i thought there are three important takeaways today. remarkably, in spite of stronger recovery and higher oil prices with a weaker euro trade and exchange rate and lower market volatility at the moment, they don't inspect any that the translate into stronger medium inflation. that shows a very dovish view of
things on the capacity in the eurozone. the second thing i thought was important was that the balance of risks comments. they announced it back in march. is it going to be enough? -- thatthat is a search is such an important point. the third thing was the ecb is considering their next move is going to be a cut rather than a rate hike. that means stimulus is still possible. mark: when? >> when. the big question i get is when are they going to hike? mark: perfect timing. look at our chart. the morgan stanley month the first rate hike is 45 months. it was 48 in february. you are bang on the nose.
four years away. is it eventh scussing about the three-year horizon? >> they have gone past mario draghi's term. struggling toe say when we could exit the negative rate interest environment. they are saying that under certain circumstances they could implement more. the first one was a current program of asset purchases and corporate bonds for next week. if it were to run into technical limitations in the market. seeingond one was start negative effects and expecting release another three years of below month inflation. and that was the fourth problem. the political hot potato. it was a risk of global
structure stability because of geopolitical developments. any number of things that happen in the eu in the next month that could change in terms of trade. we will see. -- we will see. betty: there are certainly shocks that could happen outside the eurozone that the european countries themselves need to protect themselves from. stimulus are monetary policy can only do so much. what is it about the architecture of the eurozone? what can be done? what you think mario draghi would like to see governments do to firm up the architecture in europe to prevent or to at least help insulate it from some of these shocks? -- this isexactly the multimillion dollar question. draghi'sot be in current term. you will be answered over many years ahead. what is remarkable this year, and remember just five months
ago the consensus in the street was this would be the year of normalization. the fed leading the way. we have seen anything but that this year. what is remarkable is mario draghi's guidance is working. the curve, the benchmark discount rate for every european asset classroom equities to credit to the euro to derivatives, that is following druggie's guidance -- draghi's guidance. what has not happened is a rise in inflation expectations. this is the real carrot. the ecb can do -- can print money all they like, but it will not necessarily get lenders to lend more. it will not give businesses to invest and spend more. confidence,er of
but it's also the fact that you can't take structural problems with debt we have a huge overhang of debt which is not been resolved in the eurozone since the debt crisis. if anything, it is growing. too much liquidity, too much demand or too much debt and too little growth. it's not just specific to the eurozone. and trying to work with credit inflation to support demand while witnessing the global truth -- growth recharging is difficult with china and other areas slowing down. mark: g plus chief economist. we are four minutes away from the close on the european close on bloomberg markets. stocks are going to finish little changed. stick around. ♪
session, most of the attention was on the ecb meeting and the opec meeting. the opec meeting ended with no reinstatement of the production quota. there was some expectation that would happen. consequently, oil and gas companies among the worst performing companies today. stocks did rise after two days of decline. the sox europe 600 up by about 1/5 of 1%. draghi did nothing on the tv program. tweaked the program and set balance to risk has improved. the full impact of qe has yet to be felt. that was from druggie in vienna. busy, -- that was from draghi in vienna. since january 20, that is from the stoxx 600 oil and gas index hit its lowest levels since 2003, i charted the big five oil majors to see how they fared.
bp's up 7%. total of 16%. chevron of by 26%. shell up by 30%. we have seen a big rebound in the oil majors as oil has rebounded. almost double from its lows earlier this year. one of the big moving companies today in europe was johnson matthey. shares were rising and the continued rising, finishing up by 6%. the most since november. the world's biggest supplier of catalyst for producing track pollution. it reported annual profits to be estimates, driven by cost savings and demand among carmakers in europe for materials to cut exhaust emissions. the ceo is looking to develop it into a portfolio to lessen dependence on the auto industry. shares rising after those forecasts be earnings. i made this wonderful chart for you just to show you how european assets have fared since
mario draghi announced qe on january 22 of last year. let's look at the stoxx 600. the white line. we saw an initial rally their april of last year. since then we have, as gains. 3.7%. qe has not boosted stocks. qe has weakened the euro which is down by 3.7% as well. the best-performing asset class announced qe in january 2015. no surprise it's eurozone sovereign debt. the index is up by 4%. bonds have been the place to invest in the last 16 or so months. betty: you and your charts, mark. i know you have them all. let's take a look at the chart -- mark: i have done so many, i had better win today. betty: i know. you are oh-two.
-- 0-2. meantime, think about running for the money. investors are running from oracle. it is down almost 5%. this is after some news came out about a former employee in a whistleblower lawsuit. it is -- the lawsuit is a queuing oracle -- accusing oracle of fraudulent accounting practices. they came out with her own statement saying they are confident that all their cloud accounting is proper. this employee did not even work in the accounting group and is going to sue this person for malicious prosecution. they also noted that the former employee worked at oracle for less than one year. oracle coming back and fighting back against this whistleblower lawsuit. in the meantime on the broad market's, really pushed around
by ecb and after that the anna -- the anna. the opec agreement that had no production target. oil prices up and down. that is pretty which mirrored in the stock price as well. abigail doolittle has more from the nasdaq on how it has done. abigail: this by the news, we have little change. down just slightly. if the nasdaq can do what he did yesterday, a red to green reversal, it might extend its six-day winning streak to a seventh day in the longest since the middle of february. dragging down the nasdaq and attention on the shares of cosco. this is after same-store sales minus fuel came in unchanged, missing estimates of growth of .9%. tos has caused stern agee's reduce into $176 per share. helping the nasdaq are lending tree, up 1.6%.
a new buy rating. reasonable valuations. this is despite the fact it was a huge shortage in the stock of 51%. one reason to listen to michael hek of lending tree, initiated a lending club back in 2014 the celebrating well ahead of the stock's p drop of 90%. perhaps he will be right on lending tree. some of those charts, do they support the price target of $100? abigail: they do. we are looking at a bullish chart. shares have recently consolidated but it appears the stock may be moving back towards the top of that range right around the price target of $100 per share. they could be some upside to the shares at lending tree ahead. betty: thank you so much, abigail. let's check on the first word news. vonnie has more from the newsroom. vonnie: some are trying to get away from the fighting in
fallujah. most of the displaced families are women and children. the iraqi military advance was stalled by fierce resistance from islamic state fighters more than 50,000 people are believed to be still inside fallujah. . high water levels in paris on the river sent forth thousands of people to evacuate. waters aren't levels unseen since 1910. i river levels are expected to pete tomorrow. residents of the canadian oilsands town devastated by wildfires are returning home to assess damage. some 80,000 people were evacuated from fort mcmurray after wildfire that began may 1. the blaze destroyed about 10% of the town structures and curtailed more than one million barrels of daily crude output. u.s. workers are more confident they will be a look to retire someday, but not until the 70's.
23% of americans with jobs said they plan on being employees in their 70's. that's a from 16% in 2009. the survey found employees are expected to work longer are less healthy, more stressed and feel stuck in their jobs. global news 24 hours a day powered by our 2400 journalists in more than 150 news bureaus around the world. mark? opec failing to reach an agreement for a new output ceiling at their meeting in the anna -- vienna. the new secretary-general starts august 1. he spoke to bloomberg in the last hour. >> i think you have to give credit for being the only organization that i know of that and wars between its members and yet survived as
an organization. has is currently happening been overrated. ryan come and get the first interview come the exclusive for the incoming secretary-general. can you unify opec? questiont is the big the one thing they wanted to do today was show unity. one of the tasks they had before them was to reintroduce and reinstate the production target. they failed to do that. the price of oil fell on the back of that. that is a signal of weakness to many. opecsay, how can opec be and the dozen of the tools it's been using for the last 35 years to influence oil prices? the other hand, the way the opec ministers have been spinning it is that it's because we were unified our view that the market will take care of itself. at least that is with the view that the incoming secretary general gave me. they are very positive. they are looking at the last
several months. they have seen the oil price rise 85% since february and they like the way it travels. let's listen to the incoming secretary-general. >> i am confident that the future is bright, that this organization will not only continue to survive but adapt to changes that are sweeping the global industry and the world at large. ryan: i'm not saying there will be people writing opec's obituary. they will be out there. even on the appointed of the secretary-general, that's an achievement in itself. they of the dickering about who will get the job for the last four years. the factions within opec of been unable to agree on a candidate and they finally did that today. they kicked the can down the road when it comes to standards on the market. mark: today was the first day or the first opec meeting of the
saudi radiant new energy minister. you managed to speak to him this morning when they were gathering ahead of the start of their official meeting. how do you think his first meeting proceeded? how successful when you deem his first meeting? opec meetings can bit ugly. we have had ministers storm out of them in discussed. , no ministers complaining that much today coming out of the meeting. what was interesting for me was the hero little bit of a different talent for the new oil minister. when i was speaking with him he talked about things like opec taking back stewardship of the oil market. that means taking back control of the oil market. talking about how it would be
appropriate to reinstate the production target sometime in the near future. he wants people to see this abandonment of the quota as an aberration, not a long-term policy. i think he did all right. there were no big problems. even the iranians came out. if anybody was going to complain, it would be them of the venezuelans. i spoke to both of them and had a criticism. mark: what happens when some of the production that has been lost in countries like nigeria comes back online? is opec going to have introduce some sort of freeze or cut later this year? ryan: that's the big question. that is what they are worried about. if you listen to the gulf countries, the reason the price of oil has been rising is because they left the market to itself. the venezuelans point out no, we had supply disruptions. i think the answer is they are concerned about that.
they don't have introduce the cap between now and december. the saudi's can turn down the cap a little bit in that could take care of the problem. that was one of the things that the oil ministers were telling me. it'st it is a cab or not, irrelevant as long as we are responsible about production and they are promising to be responsible with production. we will have to see. mark: congratulations. what a wonderful day you had. we have some breaking news? betty: on the media front. this battle between good at interview -- ganette and tribune, it looks like ganett is leaning towards dropping its bid to acquire tribune. that's according to one person familiar with the matter. the board of gannett is discussing options. no decision has been made right now. tribune shares were halted as you can see based on possibly
leading towards dropping the bid that they want to see other shareholders meeting turns out today by tribune. alex sherman is here. you have been on top of this and broke this. they want to see whether or not the directors are approved again? lex: either they will approve again or certain shareholders will withhold. in essence, either they support michael pharaoh and his efforts on at engage with gannett transaction, or they don't. some major shareholders of already said they plan on withholding their votes. what we have learned is that gannett expects it not to be enough to be a majority. they expect between 25% and 35% to withhold. that will be too low. at that point the company will have to figure out what it wants to do. what we have learned is that this juncture, unless something
major were to happen the next 24-48 hours, the board is leaning towards dropping it for several reasons. they can always buy to be later. at this point, the stock went way down. there was a degree of premium. noter two, gannett does lead tribune can get to $15 a share on its own. they figure let's see the price drop. once shareholders get frustrated with it may be able want us to come back. betty: there is that option which is we can always come back. why did it seem like there was urgency on their part? alex: great question. from the tribune camp they thought really they had investigated this to buy you. the thought being gannett was going to figure. gannett figures there are other new super assets we can by.
tribune has made it so difficult on gannett, they put out an offer of $12.25. $15, rejected. they were selling shares to another for $15, the same price gannett offered. it was clear tribune did not want to engage with gannett. gannett figured it would be a real fighter this point. in-swerve and supports its board like others have recommended they do, it will be a real uphill battle in order for the deal to get done. mark: and capital structure realty advisors, a tribune investor is suing gannett. alex that's a great point. i think the reason there will not be at the media decision, even after the vote is that gannett wants to look at the lawsuit and see exactly what they are saying and seeing if there is any sort of repercussions.
heavy others will also soon. i still think they don't feel like it's likely that something immediately will, the lawsuit. if they just are tracked and which -- retractable drawl the they can solicit progress from that point it seemed the result is. in many ways, tactically, it might be the right decision for gannett to withdraw at this point assuming it will go the way they think it will. that's just a few hours away at this stage. betty: some things could change for the end of the day. thank you, alex sherman. he covers media and m&a. mark: time for the bloomberg business flash and some of the biggest business stories in the news right now. long-term u.s. mortgage rates rose for the third straight week. the numbers are still near three-year lows. the average 30 year fixed-rate mortgage increased to 3.66%. it was 3.64% before the week
before. the average rate on the 15 year fixed-rate mortgages rose to 2.92% from 2.89%. bhs will be liquidated. as many as 11,000 jobs could be -- bhs they collapsed last month and sparked outrage at a parliamentary quarry. their liabilities rely this folder $894 million. johnson a giant is buying vogue international. the price is about $3.3 billion in cash. they say the acquisition of the ogx brand of shampoos, conditioners and styling products and the fx line of styling products. the deal is expected to close in the third quarter of 2016.
♪ mark: exactly three weeks ago on the u.k. vote to leave the eu. prime minister david cameron campaigning. to remain in the eu he was joined by london's new mayor. labor party leader jeremy corbyn is also out on the campaign trail, urging voters to vote to continue eu membership. this comes as new polls shows the campaign pulling ahead in the race into a dead heat. it leaves supporters of try to focus on immigration from the economy. rob, thank you for joining us. how important is it that jeremy
corbyn, the labor party leader, has reentered this debate. rob: it is absolutely crucial to remain. me a fewas saying to weeks ago that the road to a brexit is the labor constituencies. it is working class, largely white vote that is uncomfortable with immigration. that sees the effects of immigration in terms of pushing down wages, pressure of public services. these of the voters who are very, very soft in terms of where they will remain or be pushed over to brexit. from the remain side, what they need is to go out and say we the labor party are for your interests. he will be better off and say the european union. this will protect jobs and rights. from the point of view of stopping a brexit, jeremy corbyn's intervention is clear. mark: the momentum has shifted to the brexit camp. polls might confirm that view,
which is why david cameron in this sky news q&a might be desperate to pull the agenda back to the economy. it seems as the agenda has shifted in favor of the league campaign. rob: there has been a wall in the last week, definitely. there always wobbles in campaigns. in two months i will tell you if this was a wall or the moment it turned and went horribly wrong for remain, or whether this is just the wall of the narrative thing was fine. there has been a lot of talk about immigration. that immigration statistics from the remain can. the discussion has moved up the economy. what the government wants to do, what the remain cap wants to do is focus on the economy and keep this message that says your job is at risk if we vote to leave. the problem is there was pulling yesterday-- polling
that shows two thirds of people don't believe that. they slightly believe contradictory things. they think it will be bad for trade if we left, and that for investment if we left, but they don't think they would personally be worse off if we left. maybe those things that entirely at up, but that is what they say . cameron will be trying to push people back, to think about the economy, think about the risks. is it worth the risks? he dashed over from westminster. let's look at where european equities are. what a day for vienna. the opec meeting. that is it for us at the european close. "bloomberg markets" continues. ♪
from bloomberg world headquarters in new york among the. here is what we are watching this hour. oil prices attempt a rally. consensus in reach appointing a new secretary-general. the european central bank holds rates at record lows. mario draghi says policymakers are willing to take further action if inflation doesn't take up. pick up. we are halfway through the u.s. trading day. let's go to the bloomberg desk where julie hyman is tracking the