tv Bloomberg Markets European Close Bloomberg June 10, 2016 11:00am-12:01pm EDT
you are watching "the european close" on bloomberg markets. ♪ mark: we will take you from new paris.o london, to this is what we are watching. pushing to record low yields on global growth concerns because the fed and the boj are gearing up to meet next week. diving into the brexit debate, warning it would be a catastrophe of britain leaves the european union. we are turning to the world of sports as euro 2016 kicks off in paris. mark: a check where european equities are trading, 30 minutes away from the end of the friday session.
we are seeing a sea of red across european equity markets. the stoxx 600 down by 2.5%. we have not seen a decline of that magnitude since february 11, the day that the stoxx 600 -- excuse me, fell to the lowest level since 2.5 years. the camera goes haywire. there you go. look at the left-hand column of function. global macro movers. all the major european stock markets are following. money moving, the haven into the european bond market here looking at the individual movers, tesco on profitable turkish groceries and the restaurant chain. 2 separate transactions. the u.k.'s biggest supermarket chain is seeking to cut debts and focus on cooperation. these are the shares of sainz very -- sainsbury and tesco.
stepping down pending completion of the acquisition, which should be finished in the third quarter. look at the shares of 2016, down by 8%. tesco down by 29% this year. the corporate news doesn't in there. yes. at page group and ha they have been cut from cell to hold. they don't believe that stopping stocks will continue to fall on earnings downgrades. see a much worse outcome in 2017. too early to look through the downgrades and pass the structural issues. today, they are now and that i use he was the worst decliner. this is an intraday chart falling over 6%. money moving into the fixed
income market with the yields on the u.k. 10-year and the german 10-year at record lows. sterling is on track word second weekly decline against the dollar. that is pound/dollar going to 2011. sterling that matters, volatility, implied volatility, measuring expected swings has sixthfor the consecutive week, the longest run since february. we are up to the highest level 2009. sterling volatility, climbing. ahead of the referendum and under two weeks. vonnie: around the time of the lehman, the high volatility was up to 30%. we are at 25% now. the market desk in the u.s., julie hyman has the latest on u.s. equities. risk is onerexit
reason stocks are falling in the u.s. and around the globe. people do not want to be long going into the weekend, two weeks ahead of the referendum and one week ahead of not only the federal reserve's next noting, though people are expecting a change in rates, but the bank of japan is meeting next week. the nasdaq climbed more than we are seeing for either the dow or the s&p. heading into today, we were seeing stocks get to overbought -- on a momentum basis. chart thatis a bloomberg news made. this is a shaded line, the overbought to oversold shares in the s&p 500. 55 overbought compared with over ld, a momentum indicator. the average is going back to 17. we got to 55. the pullbacks came on the heels
of a rally that had taken the momentum to those particular levels. if you look at the one week return for the major averages in the u.s., despite these couple of days of pullbacks, the dow and the s&p are still in the green on the week. if the s&p 500 rises, it will be the fourth consecutive gain. the nasdaq not quite making it their. we heard breaking news on intel. according to bloomberg news' reporting and those familiar with the situation, apple will award intel with mobile chips going into its phone on the at&t network. not of that much in presented terms, but this is the first major mobile chip contract that intel has won. diversifying its suppliers. it will stick with qualcomm for its verizon phones. we have a chart of qualcomm shares as well. they took a leg lower after this
headline was crossing your it we do not have those, but i can call it up on the bloomberg easy enough. qualcomm pulling back a little. it is still retaining the contract. it will be powering phones in china, and that is something important to note. fascinating. it is something that intel has been meeting and looking for for a while. checking in on first word news, taylor has more from our newsroom. taylor: muhammad ali's hometown is say goodbye. there will be a lengthy procession through louisville before the boxing champion's later rest. among the speakers, bill clinton, brian gumbel, and billy crystal. the obama administration and agreed to widen the taliban in afghanistan. they will provide close air support to afghan forces.
u.s. troops will accompany afghan soldiers on the battlefield. there are 10,000 american troops in afghanistan. germany trying to keep a chinese company from buying a german robotics firm. time is running out. chancellor angela merkel wants the matter cleared up before she goes to china. they have offered to buy it for five point $2 billion. -- $5.2 billion. angela merkel has discussed the deal with the head of another german company. global news, 24-hours a day, powered by our 2400 journalists, in 150 news bureaus around the world. i am taylor raikes. mark: rush's central banks signaling the start of a new easing cycle, cutting its key rate to 10.5%. most invasive decisions since three years ago. the central bank is moving past the crash in oil and to a new
round of inflation pressure. we are joined before he jumps on a plane. it is good to see you. inflationary pressures are diminishing? >> absolutely. isyou look at russia, it inflation. the fall to last year it is halved. it is at 7.3%. if you look at the key rate, rush's benchmark rate, it has been flat at 11% today. what you have had happened in russia, is going from a situation where real rates were positive to just around 4%. when you have an economy in recession, sanctions, all kinds of problems, people say that is not helpful. we understand your focused on inflation, but inflation is coming down. give us help. the does not seem to be hoped on the horizon otherwise. vonnie: the ruble has been
stabilizing. below 65. we did get import and export data. import is down 29%. is that a red flag? >> i don't know about that. what that tells you is that the ruble is obviously weakening pretty significantly over the past year on the back of the drop in oil prices. saying it will take a lot more rubles to buy the same samsung television, maybe i won't. when it comes to the ruble, one of the central bank's big concerns is it could strengthen too much. a lot of people would tell you that would be a second reason why the central bank cut rates. if the ruvell get stronger than they want, russia may have trouble balancing its budget, which would be another concern for the economy. a lot.hanks i'm sorry we didn't give you
more time. he will have loads more when he gets to rush's economic forum -- russia's economic forum. vonnie: let's turn to the u.s. central bank. expecting the fed to keep to rate hikes on the table. the first will occur in july. i want to bring in the senior take.ist -- for his what is your estimation as to how the u.s. economy is doing. the job report was a one-off? >> it was not cooperated by any of the other evidence. when we think about the timing, it is something that we keep a close eye on. we think it is a one-off. the chair yellen described that on monday as concerning. concerning is not something that a fed chairperson will turn around nine days later from and site policy in june.
it is about if the job report rebounds in july, which has been our forecast. it would be a july move, not a june move. that is the key. vonnie: can the economy withstand a july move? >> i think so. you're looking at an acceleration of the economy coming through. it doesn't sound like a lot, but the supply potential for the u.s. economy is lower. you have heard fed members talk about the labor market improvement over the six-month time when growth has been lower. we think it will withstand that. you will not see a return of the weakness of the financial conditions prevalent at the start of the year. less thanit, we are two weeks away. what do you make of some of the eminentons made by forecasters, such as the treasury, if the u.k. votes to leave the eu?
as the treasury is suggesting, there will be a recession within a year. , we will lose percentage points of growth. are these models "correct?" them. we use what we described was a plausible range. our assessment was a 2% to 7% impact on gdp, which is pretty wide. when you are looking out over 15 years, there are a lot of unknowns and effects. if you look at the different institutions, not only our own, but the treasury and the imf, they are all using different methodologies but coming to a broadly similar conclusion -- there are significant adverse effects over the long-term. short-term, the treasury is pointing to a recession. that might happen. we see a slowdown in economic
activity in the u.k. whether that gets you to the two quarters of negative growth to trigger a recession, there is an element of judgment in that call . it is the best sensible forecast. mark: to what extent was the economy slowing anyway prior to this referendum vote -- separate to the vote? is there a fear that even if we do vote to remain, the economy might not rebound as much as some expect? david: there were headwinds to the global economy. we saw that in the weakness in china and asia. that impacted the u.s. economy. it is unlikely that the u.k. has escaped that. it is a very expose trading nation as well as. there is some softening coming through. those trends have tended to evaporate this year. the u.k. looks like it is still suffering from the uncertainty
impact from the referendum. we are seeing temporary headwinds that are exaggerating some of the slowdown that should reverse out into the second half and we should see an acceleration. we're not looking at strong growth anywhere. globally, the u.s., relatively subdued growth factor out. if there is a pickup short-term and the u.k. come it will be a temporary lift. purchases, a german 10-year yield, that has bounced , that is phenomenal. where are you looking for yields to go in europe? david: there will be a general stabilization. moving beyond the approximate risk to europe from brexit, if we remain in -- which is our main call -- we will see some small risk on. that will help yields. , at july theral
end of the year and across 2017, that will provide a backdrop where global you might see some small pickup come through in europe. we would not to see that -- we will not see that falls significantly lower. bond yields should be dragged higher. vonnie: thank you. ahead.oomberg "markets" look at this oil chart. , under $50. it isn't more than 2%. $49.66 right now. ♪
vonnie: breaking news on goldman sachs. down 1.6%. we have the department of financial services in new york clearing goldman sachs about its .elationship with imbd $6 million with the bond sales, they want goldman to report on its internal review of those $6 billion worth of bond sales. joining us, the federal reserve .nd the sec in examining t immense problem is one way that the u.k. votes to approve the referendum on june 23. the opinion from the former ecb president. he appeared on "surveillance" from paris and described how a brexit would affect the u.k. and europe. of all, let me say that i hope very much, profoundly,
that we will have a brexit. it would be a contact -- that we won't have a brexit. it would be a catastrophe for the u.k.. decides to stay, it is an immense problem for the u.k., in my opinion. the prime minister is absolutely right to stress the importance to say "yes" to remaining in the european union. continent of europe, as you know, france and the others, are asking the u.k. to stay. they are unanimous in welcoming unionk. into the european -- which is different from what we have known in the past when they were not welcoming the u.k. we are welcoming the u.k. for many reasons, including the fact
that the values of the united kingdom, in terms of dedication to democracy, in terms of dedication to market economy, values, global influence, all of these are a positive part of the assets from the european union from the continent. >> how should central banks view the referendum and the possible shocks are volatility that ensue. six days before the referendum boeave the fed, boj, and meeting. >> that is the case when there is an event which is preannounced and extremely uncertain. i understand it is a very close call. you expect all central banks, as they have done very well in the past, and it was a very unfortunate crisis that we had. that they are in constant contact, and that they
have the appropriate means to take into account the situation in terms of a decision for the theish people, and possibility to cope with the situation which might be volatile. i have confidence in the capacity of the global central banks. not only the central banks of the advanced economy, but all of the central banks -- china, india, and so forth. thepe very much that response is "yes, we will stay." betty: talking about central banks, who has the most difficult job? i'm sorry, yes? you are asking about the governors?
francine: i was asking who had the most difficult job. >> i'm sorry. they all have a very difficult job, obviously. it toor kuroda has to get be launched, and it is not yet launched. they also have physical problems. has thesay mark carney brexit ahead of him. he is in one of the worst possible situations. ifwould be directly touched the people of the u.k. respond that "we want to leave." the ecb has a lot of problems, obviously. we spoke of these problems. janet has to cope with the situation that is difficult. ofin, the normal functioning the economies of the u.s. and others -- if there was not
accommodating policies, $4 trillion would not still be in the balance sheet of the fed. it would probably be very bad. you see all of the central bankers in the world, but not one has the most difficult job in the week to come. formercb president, -- ecb president on bloomberg "surveillance" this morning. mark carney has the most difficult job. we are seven minutes away from the close. look at the chart. to the right, this is drilling volatility, this is the expectation in the next month. it has risen for six consecutive weeks. this is a chart going back to 2011. we are at the highest level since 2009 ahead of the referendum. we are seven-minutes away from the close. ♪
mark: take a look at the european equities. finishing the friday session, biggest declines since rb ray 11 when the stock fell to a 2.5 year low. every industry group is falling and investors are falling ahead of next week, a big week for monetary policy. this said, the boj, and of the week after, the referendum. the yield on the u.k. 10 year has reached the lowest level ever. it is a record low. i wish you could see the german 10-year. i can tell you that it is also at a record low. the close is next. ♪
it's not a beautiful day of your in the equity market and every single index is falling today. just 12 stocks on the european benchmark are rising. the others are all declining. all industry groups are falling. back on february 11, the stoxx 600 fell to the lowest in two and a half years. we're falling for the second consecutive week. we are following the third consecutive day. that's the longest losing stretch in a month. we had the biggest ipo in europe this year. it's asr, a dutch insurance company. they raised a billion euros. it sold 52.2 million shares. they were 19.5 euros each.
this is the biggest ipo of a dutch insurer sense 2014. the offer price was 19.5 euros. that's a small upside for the biggest ipo in europe this year. zurich insurance, they are going to create a simpler business structure. reportional heads will to marry odrick oh. they abandon a high profile turk over -- takeover bid it. shares are lower now by 4/10 of a percent. it's only a handful of companies that are rising in europe today. we spoke to the member of the executive board. the shares are in the news today
unexpectedlyfo is stepping down. on augustng to leave 31. it's a surprise departure. is have to say the strategy in a bit of a flux. she will go to another company to help. that is the move from her. the shares are down by 5.3% today. the big move is the safe haven securities. we will talk about that in just a few minutes. vonnie: you can see that in the fix.- the 10 year yield is down to 1.64% in people who would have thought earlier in the week are sitting on profits.
it's incredible. let's have a look at the spread. again, last year, that spread was at 175 basis points at this time. let's take a look at how the broader markets are faring. abigail doolittle is live from the nasdaq. abigail: there are three well-known names moving among news. we are talking a intel, apple. intel is getting a check order from apple for the next generation iphone that will use modems from intel over qualcomm. they are looking to diversify their pace. -- pace. this could happen some point. he says this is a positive development for intel and a nether negative development for qualcomm.
shares of qualcomm are down 20% over the last year. there is one. shares are trading higher. they are having their best day since i over last year. there are signs that the federal trade commission will approve walgreens acquisition of writing. that will combine the number one and number three drug stores. it will give them too much power for negotiating with pbm. that is a benefit manager. expressed. shares of express scripts are down today. vonnie: let's check in on the first word news. taylor: new york regulators have questioned goldman sachs about its fundraising from malaysia's
fund. that is according to a person briefed on the matter. investigations into corruption in the rendering by public officials, the bond yield raised $6 billion. the euro football championships are getting underway today. they may be tripping over trash that is piling up a cousin strike by garbage workers. they may have some problems getting around the country because of a rail worker strike. the president says the government will take all steps, ensuring that fans can get transport. we will have a report from paris coming up. germany, uncle will keep her countrymen guessing for now. she is not saying if she will run for a fourth term. she is waiting for the right time to decide she has been chancellor since 2005 and her approval was the lowest in
april. british construction workers fell. private housing was especially hit hard, down 17%. there is speculation that uncertainty about the referendum are having an impact. it in spain, they are saying here we go again. spanish politicians are out of the campaign trail. the prime minister is trying to consolidate the party power in parliament. will try to forge an alliance with the socialists. the big issue is the 21% unemployment rate. the election is june 26. global news 24 hours a day powered by our 2400 journalists in more than 150 news euros around the world are in mark: thank you very much indeed.
is hitting itst lowest in seven years. record low year in europe and the u.k.. monetary policy will continue to be expansionary. bloomberg first word. richard, right to see you. the best quote came from none other than bill gross. global yields are the lowest in five years. raterillion in negative bonds. this is a supernova that will explode one day. for now though, yields keep going at lower. richard: it's a bit of a perfect storm this week. we had week payroll numbers. we had a dovish fed chair on monday. we have weaker than expected
loads. we have had the ecb broadening the program. we have the brexit risk. european equities had a bad couple of days. investors are seeking haven. mark: it's only a matter of hours. we've only got 20 minutes after the german session. we're so close to zero. that means all 10 years are negative. who would have guessed that? richard: i think at various stages, we had choppy price action. we had the yields come down. now, we are heading down to zero. we are about of asus put away. -- a basis point away. the bank of japan's meeting next week as well. they have the most imperative
situation to do something. richard: the bank of japan is not averse to market participants. you don't want to rule anything out. the base case is they are on hold for the moment. expectations are perhaps in the coming months adding more stimulus. they could be a bit of an outlier. vonnie: what about the yen? we were below 1074 a lot of the week. the bank of japan must be concerned. are they shoring up their reserves to be able to be in sensory? richard: they spent a lot of time below 107. it is problematic. going forward, they have done some aggressive policy the past quarter. they want to work through the system.
if the yen it continues to strengthen, they have a bigger problem. mark: let's talk about the federal reserve and market index. why is it significant? richard: it looks at 19 different labor market indicators. it's a view of the u.s. labor market. having looked at that index over the past eight months, it's going from slightly positive to firmly negative. it runs against the narrative that we've been hearing about the labor market being strong and robust. at it, it looks like conditions are quite challenging at the moment. mark: that makes the next week news conference important. is less than two weeks away. one district and -- interesting week for sterling.
we now know. was that what was? today a we might see it sharp fall. i think it's when we get closer date, theexit liquidity is not as deep as we normally expect. mark: it's less than two weeks away. the time in london is 4:41 p.m. still ahead, we are live in paris. euro 2016 kicks off today. we're all very excited here. ♪
mark: this is the european close on bloomberg markets. vonnie: there is continuing coverage of the commonality funeral. you can see a live shot there of session. the yum kfc is center. president clinton will deliver a eulogy and there will be remarks hatch,lly crystal, orrin bryant double. ofdied last week at the age 74. the: the opening match of euro 2016 is tonight in paris. the french face-off against romania. it's the 10th time in the french
capital that have stepped up security after the attacks and november. fans are dealing with a rail strike and a garbage collector strike. --t has left heaps of traps trash on the street is -- street. it's not the perfect backdrop. it is intended to show off the best of france. it is not the perfect back drop for this tournament. fan, i'm sure you are very excited about the opening match tonight. that is about three hours from now. it is between france and romania. the challenge is the security. 100,000ll be as many as security officers protecting the stadium and the fans. there will be 2.5 million supporters expected all around
the country intensities. -- 10 cities. there is a strike situation. the french airline has warned they will strike from tomorrow until tuesday. that will be a big day against labor performed in france. the train will be difficult. advisedn director has to arrive before the game starts. in the streets you've seen these images of piles of garbage. nice.ot very the waters are just receding after the flooding we have seen. mark: what economic impact is a
tournament like this have on the french economy? they are going to rake in the euros. what about the french economy itself? $1.4's going to be around billion. spend $400pected to a day on hotels, restaurants, supermarkets. it's very good for the french economy. the impact may be short-lived. this is not owing to last year team, if they make pace,the finals, and that the mood on the french consumer will be longer. in 1998 when france one the
world cup, it boosted popularity of the president. i know you are particularly excited because francis kicking things off. who do you think will be the winning team? taking thers are home country as the favorite. france has artie won the euro cup twice in the past. 1984 i'm sure you remember and 2000. the probability of france living -- winning is about 20% followed by germany. they won the last world cup. spain is the holder of the title. england is only 11%.
you know, they last won an international title was 50 years ago. that was before and i was born. quickly, what is the france/romania score going to be? because the have the attached to plaintiff home will be 3-0. apparently romania has a good defense. this could be similar to the third game of the world cup in 1998. game betweenfirst france and south africa. remer how that turned up. mark: i do. france hosted the world cup and one the world cup. half of my house will be
supporting the french. time for the business flash. we will get some of the biggest is the stories in the news right now. burberry, john smith is resigning. it's the latest setback to burberry, which is having to contend with falling demand and lower profit. shares are down 35%. a similar situation. the german airline is quitting. he is leaving for the same role as the pharmaceutical maker. that leaves top management at a time when there are labor problems with the wrapup of its low cost airline. they are so anxious to pull out of turkey it's dumping its majority stake in the chain.
we have probably shown this chart one way or another for the past several months dozens of times. it has been rising again. as the brexit vote comes up and people are nervous about the results, hedging on the pound. let's look at a corollary move. you expect the frank to be one of these currencies, the swiss franc that people buy when they are nervous as a safe haven. it is an rising against the euro. this is a two different y-axis so was not quite as high. the euro against the frank has also been rising, as has brexit volatility been rising. anxiety overall, people selling
the euro, buying franks, hedging against the pound. it is not just the pound where we see the anxiety. easy the chart. vonnie: certainly topical. what you have for us, mark? mark: risk management modeling firm has a warning for those along european equity market. beware. stocks interpret seen 25% in the eventuality of a brexit. stocks will be the hardest hit. it is simulating the effects of a brexit on a hypothetical portfolio consisting of stocks, bonds and alternative investments. interestingly, it found the pound denominated investments hoseping 10% more than t in euros. i have done my own chart. if we see such a decline, that will take us to where we were in july 2012.
we have to fall 50% to see the lows of 2009, which is when the european equity market crashed to its lowest levels since 1996. have some faith because the 12 month price target from analysts suggests we will see a 12% upside. will that change if we see a brexit? take a warning of the risk modeling firm. on my way to work and was reading. they were saying he would not predict the number. it's friday. it's a tie. keep watching "bloomberg markets ." ♪
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♪ scarlet: political uncertainty is taking its toll. scarlet: we will get an update on soft commodities are in it how drier weather is pushing up the price of soy brain -- beings. with carol hamm. we have the new thoughts on golden oil. he is throwing his support behind donald trump. scarlet: we did get the