tv Bloomberg Markets European Close Bloomberg June 28, 2016 11:00am-12:01pm EDT
you are watching the close on mark: weg markets." will take you from new york to london. the aftershock of the brags it continuing to wreak havoc across the u.k. political landscape. live from westminster with the latest. global markets and sterling recovering somewhat. will the relief be enough? mark: mario draghi made no mention of the u.k. vote in his speech today. our other monetary leaders concerned? 90 minutes -- vonnie: it's
90 minutes into the trading day. julie? julie: the s&p 500 wiped out 5.3% over the past two sessions and is now coming back, but not recouping those losses that it's seen. nasdaq was the biggest loser over the past two sessions. but if you look at the past five for for context, perspective, you see we are still down over the past week of trading. right? we had that big rally that happened last thursday. today's is only the largest since last thursday. and then the come down when the vote did not go as anticipated. take a look at some of the biggest movers in terms of the waiting in the s&p 500. of the large technology stocks that have lost over the past few days have relatively high european exposure.
and then jpmorgan representing the banks. in terms of percentage moves, it's a pretty diverse list. seagate has been rallying. percentage shares are up quite a bit. reuters reporting that the company is exploring asset sales in order to reduce its debt and rallying with oil prices. in terms of the other big moves we are seeing, biotech is gaining but again if you look at the five-day chart it really gives you perspective on the story that even if today is a sizable rally we are still down over the past week or so in the opposite direction. utility stocks, one of the groups that was the lone bright spot as we were seeing this sharp today selloff. gaining. not by a huge amount, but gaining over the prior two days. now it's my of the weakest groups. a lot of flip-flopping going on today, mark. mark: second-biggest gain for
the stocks 600 this year. there is a fantastic view after a two day 10.8 .5% plunge. biggest selloff since october of 2000 eight. one trillion euros, wide thought the value over the last couple of days. yesterday the benchmark index fell to its lowest level since february the 11th. what a turnaround, up by 2.7%. every industry group is trading higher. pound dollar implied volatility? expectations for movements in this raid over the next week, two weeks in one month? all three have fallen today. one week volatility lower since june 5. we had a record last week. two week volatility lower since june the 10th. a record of one month volatility lowers since may the 30th. .he highest in over seven years implied volatility is coming
down. diminishing as well. the cost of protecting european corporate bonds rose to the highest it's february yesterday and is coming down. the cost of protecting european banks and insurers rose to the highest yesterday. coming down as well. dw spendinge story, $15 billion to get half of a million admissions cheating roads, they of u.s. kidding investors. settlement.s. civil with an automaker and it brings bw closer to the 16 billion euros it set aside to cover the cost of the scandal. shares are up, but in the last two days shares have fallen by 17%. further news of the scandal. a kitchenlk about
sink quarter. let's get first word news now. the german chancellor, has a tellingfor the u.k., lawmakers that the u.k. will not get favored treatment when it leaves the european union. she said that she makes sure that she will make sure that the cherry picking principal will not apply. and other eu leaders are meeting in brussels. harsh words today in the european parliament. the european commission president accused the u.k. independence party leader of lying during the campaign. >> you lied. you didn't tell the truth. you fabricated reality. debating and sparring with you. i think we have a similar sense of humor. you used a have a sense of humor. i still do, i think. but this will be the last occasion we will be able to
debate week as will not be coming back. european lawmakers that they've done very well on imposing poverty on greece and the rest of the mediterranean. a republican-led committee released its report on hillary clinton and the attack on american compounds in libya. the panel concluded that she should have known that extremist officialssk to u.s. in benghazi. for americans were killed, including the u.s. ambassador. democrats on the committee said the report is politically motivated. tomorrow in autolock, the so-called three amigos summit. meeting with the mexican prime minister and canadian prime minister. the shadow of the brags it is looming large. they promise to strengthen economic ties and cut methane emissions. global news, 24 hours per day, powered by 2600 journalists and
in 2400 countries. thanks very much, courtney. the panel has deferred its decision on the petition for a second vote on the brags it referendum. meanwhile, labor leader jeremy corbyn facing a confidence vote after two thirds of his shadow cabinet resigned. for the latest gift -- for the latest let's get to francine lacqua. very good day to you. most of the shadow cabinet resigned and yesterday the vote was back on the government. we heard from the chancellor. we heard from the prime minister. today the focus is back on him. what do we know about this no-confidence motion? mess.ne: it's been such a jeremy corbyn had a defiant mood here in front of the house of parliament to speak to his base
of electorate. today we know that labor's mp's are vote on whether they still confident for if they have the confidence of jeremy corbyn. remember, this result is to be announced shortly but the vote is only advisory and is to immediately unseat corbyn. over the last couple of days he saw 40 resignations. more than one half of his shadow cabinet. you would wonder whether this is a political move because maybe as some people inside the labour party are hoping, they want to go to fresh general elections and they don't think that jeremy corbyn will ever be prime minister. a rebellion ofke opportunity. i know that there has been a lot of disquiet because of his personal lack of i guess campaigning, almost, in the run up to that referendum. what we do know is that a later lee -- labor leadership election resignsriggered if he
which he says he will not do because he says he still has the people behind him. it can also trigger 20% of the party lawmakers of they put their name to a letter here. is there a whip? any idea of who is against into his for him and his party? are there any efforts to maybe boost somebody else? for the moment, we understand, vonnie, though a lot of people don't want corbyn. we've heard a couple of names. they are sticking by him. i guess overall right now there is that vote just to try to overthrow him. and if things go to plan, according to them, we will have to see. this is not a quick process. if he does decide to resign, maybe the pressures too much. we haven't heard that from him but if we do maybe it will be a party in disarray like the conservative party, putting the
system in motion inside, internally. as soon as we get that vote, we will bring it to you and bring francine on board. we are waiting for the results of that no-confidence motion. mark: jonathan stubbs has more on market reaction. jonathan joins us from london. citigroup owns more than $1 million in debt securities. same as france. we haven't seen reports that hedge funds are long. european equities are going into this. what will the follow have been given that we have seen 1.4 dollar chilean taken off in terms of market cap? >> these have been difficult conditions for everyone. what we wrote in the weeks and months ahead of the referendum
was that we saw this as a volcano season in the markets. there were three contributing parts. one was high levels of uncertainty. the second was low investor confidence. the third is that it has been a tough year in front of the ,quity investors in particular nursing negative returns and the referendum. there are arguments that whichever way the referendum big, it would have important capital plays in the market to follow price, which would have been following the events as they played out. what has resulted is very high levels of volatility over the last three days. we are seeing that up today. francine: what are you -- vonnie: what are you looking at in terms of a barometer where things might go next? there's a lot of
confusion. we have described it as a bull market of uncertainty. it's hard to have high levels of conviction, but you are right, we need a framework. we've written quite a bit about that. consider the downside risks, first of all you go back to basics. if you compare european equities right now to the last major crisis, the sovereign debt crisis of 2011 and 2012, taking a back to the valuation lows that we saw their, you got another 40% downside. 20% lower. different valuation metrics giving you a difference of the downside risk answer and the answer will probably have something to do with how much risk is amplified through some of the key or additional factors, such as oil and banks, as you mentioned. credit and the periphery. the report from yesterday suggested that in all four of those cases the risk applet -- application is going to be lower
than it was in the last two years. a key role in the cycle. u.s. banks today have significantly lower leverage than they did. even in europe, although there are specific examples where there are leverage concerns, generally there is a much stronger capital position and better leverage position. banks as an industry present less of a risk in terms of amplifying what we've seen previously. it's harder to see the big exaggerated down put risk. jonathan, the ftse 100 is trading at its most expensive ever relative to the euro stocks 50. is it overvalued? is the stock 50 undervalued or both? 100, the remains of the you -- u.k. index has always
been a peculiar be. it has some exposure, of course. whether it's the domestic tanks or consumer cyclicals, but it's a large part of the revenue base coming from overseas. a lot of it from north america and the emerging markets. one of the you determiners in terms of how it performs how the currency performs. last year you had huge headwinds from stronger commodity prices. this year we are obviously seeing a rebound with prices stabilizing. sterling is one of the big losers in terms of going through this process. in u.k. earnings you get profits that are very well protected by the downside risk and therefore in the u.k. equity market they like to be better protected than in europe. we see the u.k. as being a much more defensive play here. we have highlighted seven very big liquid international stocks
that have high non-european exposure. a lot of u.s. exposure. companies are likely to face up rate pressure in the event of sterling we this, which it has significantly already. there are a lot of companies with big dollar exposure. i've got a chart that you can't see, but i can tell you what it is. the dividend yield versus the yield on the 10 year. it is of course diverging right ftseecause the u.k. dividend yield is up to 4.5%. the 10 year yield is just below 1%. you could have brought up any country in europe to show a similar thing. , orhe dividend yield itself some of these bosses across toope, reason within itself buy an index question mark to buy a company or not? gsethan: look at the post
and there's one theme across all market equities, the search for secure yields. going to these risk episodes, capital crowds with some of the most secure parts of the market, you are seeing that in germany, switzerland, and the u.k.. how secure is that yield on equity? the yield gap that your chart shows is the widest that it's ever been. you can chart back over 100 years. how secure is that coupon? we know it's not secure in a global recessionary scenario. have a mild u.k. recession and the sterling is weak, a large part of that coupon is secure. it's hard for us to be sort of straight harish on u.k. at this point unless we are going straight to the conclusion, which is that it's not just the u.k. economy facing challenges ahead, but contagion for europe and the rest of the world.
in this search for yield that investors face globally, the local coupon is underpinned, but for dollar investors you carry a big currency risk. we think that u.k. equities are reasonably defensive with currency playing a big part. just a couple of those bargains, jcc, the yasiel. thanks for joining us. 13 minutes left until european close and much more ahead on bloomberg television. how will the identity of london change after the brexit vote? we will hear from the recently elected mayor. ♪
york, i'm vonnie quinn. i'm mark barton. this is the european close. and edwards spoke to the mayor of london, sadiq khan, let the future of the city in the wake of the brexit folk. mayor khan: i don't want to be an independent print -- city state. look, the british public have chosen for us to use the european union. london has more power over how a .ity is run powers over business and skills. powers over the house and abilities to invest. important wheny our government comes to negotiate with the european union that london has a seat around the negotiating table. i worry is that if the government negotiates without us
around the table, it could be a deal that's bad for london and bad for the country. >> what about the ability of financial services to sell products across the eu? how important is that to you? mayor khan: it's crucial. financial services are so important to the country and the economy in london. i've been speaking to chief executives, to the financial sector. they are telling me it's important that number one we have access to the market for financial services. if we don't, let's be frank, the banks and insurance sector in london will go to berlin or frankfurt or paris, which means jobs leaving the city. what i'm saying to all of those running to be the next leader of the tory party, sooner rather than later can you reassure us that you will argue for us to have access to the single market? >> is that realistic? so.r khan: i think
it's for the next government to negotiate a deal with the european union. recognize that the jobs created are not simply financial services. means jobs traded with investment. companies need to recognize that london is the beating heart of the country. of london does well, the country does well. it's important to have a seat around the negotiating table. but also for us to take back control. mark: that was earlier today on bloomberg television, speaking to anna edwards. 4:22, we are literally eight minutes away from the european close. much more ahead. ♪
been voting on this motion. it's not binding, but it could lead to an election. all they need is 20% of the labor party to submit a letter that over 14 members of the team in recent days. jeremy corbyn is said to have lost the motion of no-confidence. really quickly, stephen crabb, the minister of work and pensions said to tory leadership that he could be in the running in the leadership contest. remember, that kicks off close onand will thursday. he's an up-and-coming politician in his early 40's. stephen crabb is said to launch tory leadership. on wednesday he is set to bid on a joint ticket with the business secretary. it's all happening today. we will know on thursday who is of course throwing their hat into the ring when it comes to the leadership contest.
the conservative party we know for sure the conservative party will have a leader in place. we heard yesterday, by september 2. when it comes to the labor party, sky reporting that jeremy corbyn has said to lost a motion of no-confidence. european equity markets, it's quite a turnaround from the ,assive today declined teen when one trillion euros was wiped off the value of the stock 600. biggest decline since 2008. stay with us. ♪ you guy's be good. i'll see you later
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you are watching the european close. stocks, currencies, bonds and credit default swaps and commodities, we've got a risk on rally today. the two day drop before today was 5.6%, the most since august, 2015. 2/3 of 1%s up by after an astonishing two-day decline. index measuresnd sterling against seven currencies. eight percent lower, yesterday, down by 2.9% and today rebounding. the three-day decline is 10% for the bloomberg british pound index. let's use this for u.k. interest rate of ability.
england meeting is fourth of july. the possibility of a cut off to the brexit has moved. but probability in the hike up to 68% probability of a cut. let's look at the bond market area the x back tatian that the bank of england cut rates next month hold the yield on the u.k. tenure to below 1% to a record low. yield on the 30 year to a record low end yields are rising today. money is moving into riskier assets, away from the haven assets. vonnie: that's a beautiful color.
take a look at the indices in the green here as well, up 8/10 of 1% on the s&p 500. up 1.24%. is : a nice rally for the nasdaq, up 1.2%. strength is being driven by technology and biotech. biotech, 2.8% higher on the day after a big two-day slide. it is boosting the nasdaq on the index, gilead news earlier this morning that was approved by the fda. the index breached the february lows.
looking at a five-year chart, we see how precarious this is. last fall, the uptrend started to reverse. biotech test support over and over again. will it hold or will the biotech their market get worse? vonnie: thank you. mark: let's get to breaking news surrounding the vote on the leader of the opposition labor party. cqua is ina westminster. jeremy corbin has lost the vote of confidence. francine: there are press that jeremy corbin has lost the vote of confidence. mps were29 labor voting in the house of parliament behind me. it does not mean much because it is not binding so this would he
and advisory. unseat jeremy corbin. confirmation if the news is true that he has lost the vote of confidence. electionou trigger only beip, it can triggered if jeremy corbin resigns. he has made clear that he has no intention to do so. if 20% of the party possible lawmakers put their names to a letter backing a rival. we heard from jeremy corbin the last couple of days and he seems that if there was a leadership contest, he would put his name forward. he was so popular last year. he won over safety percent of
the boat so there is a likelihood he would be voted in despite losing a possible majority of mps in westminster. mark: we are also hearing, according to the conservative party leadership, a new leader will be announced on september 9. that seems to be the definitive day. on the leadership contest, it begins tomorrow when various members will throw their hat into the ring. willar that stephen crabbe throw his hat into the ring with a joint ticket with the business secretary. the plot thickens. yes, we also seem to understand that he would be the favorite. that david cameron wants someone in place around the beginning of september so they
are ready for the party convention which is in not sober. arere hearing that they under more pressure to find a prime minister sooner rather than later. we heard it from brussels and we heard it from germany and we heard it from france. i would not be surprised if they tried to find out who could actually replace david cameron more quickly just to be sure this country was more stable. it has been confirmed, the labor party has announced it has no confidence in jeremy corbett as the mp. he lost the vote by 170 votes-40 which is a landslide. we are hearing from jarvis who is the business secretary and he is backing stephen crabbe in the contest. do not move because we will come back to you. companies have had
prices slashed from last week but some are benefiting from the fall of the town including pearson. they are a publication company based in london. from thetzker is live festival in colorado. much, fancyyou very i should find john fallon in aspen, colorado days after the brexit. feel better about taking risk today but until yesterday, they were pricing in something dire. is britain's future outside the eu that dismal? >> it's not the result that i personally or the company would have wanted. andpeople have decided we've got to get on and make the most of it. i think it's good that people on all sides are giving the british government some time to work out
its negotiating position. i think we can minimize the risks if we ensure we take an open view and that we continue to be very market driven and we take a connected view on how britain can engage with the rest of the world. most importantly, pearson is a company where we send a message that we are open for business to students from around the world. that's really important. erik: what are your working assumptions about the economic impact on britain and the global impact and the political situation? >> i think it's too early for anyone to have a clear working assumption. as a company, it's about us getting onto business as usual making sure we serve our customers as well as we possibly can. the fundamental assumption is that written has some of the best universities in the world.
we must continue to welcome students from all over the world to study there and ensure the british universities are still part of the wider european resource community. erik: given that pearson generates the vast majority of its revenue in the united states, how bad could the brexit be for you? >> that's a good point and we saw that reflected in the shareholders the last couple of days. erik: yours was one of the few stocks to rally. >> we make 65% of our sales in america. we have a very strong balance sheet and we are in good financial position. from our point of view, it's business as usual and meet the needs of our customers. erik: have you contemplated and light of the vote, the possibility of moving the company to another jurisdiction? pearson has been a british company ever since it was
founded 273 years ago. think now is the time for everybody to be calm and not overreact and get onto business as usual and hope common sense will prevail and we will see a solution work through that reflects the legitimate concerns of the reddish electorate but also does not lose britain's influence over the wider world or the focus of the markets in which we operate. erik: is there an argument to be made for other british companies? every company has to make their own decisions so i will not speculate on what they might.do i think the current environment is unpredictable and we all have the opportunity to be calm and measured and not engaged in speculation. famousearson is somewhat
for a chart correlating u.s. unemployment with higher education enrollment. would you expect to see the same in the u.k. if the brexit triggers a deep economic slowdown or a recession? >> that's one factor you refer but how we chart our success over the next decade is the demand from customers around the world for good quality, accessible, affordable education and that is a strategy we share with her shareholders in a seminar the other friday we have a good strategy that are shareholders understand. we will get on with that as well as we can. your even before brexit company faced a challenging market. is open source information for education and the political fight over standardized testing. you are competing with amazon. amazon is in the used textbook business.
it has a history of driving margins to razor thin levels. it's a race to the bottom so how'd you compete with amazon? >> you cannot sell secondhand versions of our digital products. you cannot rent our digital products except from us. erik: digital is not 100% of your business. >> but we are moving their quickly. i will spend the rest of the week down in denver which is an important digital hub where we will build more of our software and meet important customers. we see a mild drag from the move to open education. lift frome great accelerating our move to digital and meeting our customers where they are and helping our institutional customers meet their needs more effectively. i feel confident we are good shape and will see the benefits
of the expectations we have seen come through. the target is 800 million pounds by 2018 and i am confident we'll get there. erik: you have a big job and the brexit makes it that much tougher but we thank you for spending time with us. it's the aspen ideas festival, in aspen, colorado. vonnie: thank you. much more just ahead. we are live at the ecb form and portugal and we will hear from governor of the reserve bank next. ♪
bloomberg markets. is dominating the discussion at the annual ecb conversation in portugal. mario draghi is calling for central-bank alignment following the historic vote last week. kine is there and joins us now. >> the only surprise is that mario draghi did not talk about brexit. brexit, the u.k. vote, how did the market get it so wrong? because in thelt weeks before the referendum, it would note the market leave but the few days before, everything changed. africa, weouth
prepared ourselves. the big thing was to make sure the shock it would come from a brexit would happen. we did a stress test scenario and the banks were found to be able to withstand the scenario. is this change the interest rate outlook for the south african reserve bank? >> not much, there are so many moving parts at the moment. and looking at the effect of the global economy on south africa, we look beyond the u.k. it accounts for 4% of our exports or 20% of our exports to the european union. it's an important trading nothing that would upset the general flow of commerce. the fallout has been global
from the u.k. vote which is sending shockwaves to markets. that must worry you and perhaps make you moderate your grout outlook for the year -- your growth outlook for the year. >> that is the sentiment and investors were looking for safe assets but that was not seen as one of the safe assets. willet throw the south african economy into recession? >> i would not venture into that. it should slow the south african economy a little. let me ask you about your own political risks. there are thoughts that the president might leave office early. would that be a positive to the rand which is been hit with a term i'll from the michael brex.
howard you -- how are you managing these risks? >> it's a very vibrant democracy. if you are far away across the toantic, it's difficult process all of this information. we have got strong fundamentals and the institutions are solid. they have been tested in the most difficult times of have been found to be sound. >> thank you so much for joining us here in portugal. some positive words from the governor of the south african reserve bank. is still on the minds of central bank governors outside europe and inside as well. vonnie: thank you so much. the big news in the u.k.,
labor leader jeremy corbin has lost a no-confidence vote. labor lawmakers are back to their confidence motion. this is only advisory and corbin has said he won't be stepping down and his office has just confirmed that he is not planning to quit as leader of the labour party. still ahead on the european pharmait's a focus on week and we will dive into the latest troubles. ♪
business of pharma and biotechnology. we will talk about valeant, trading at the lowest level since 2010 on concerns the brexit vote could impact their sales. joining us now is drew armstrong. orit purely brexit drop is is there something going on? >> huge parts of the biopharmaceutical industry have been down following brexit like a lot of stocks. is particularly sensitive to outside turmoil. the company has $31 billion of debt and has been struggling to get its cash flow up. it said it needed to do m&a to sell off some of these assets. any outside turmoil like a bad 3 ratesad for an exchange
or the inability to execute these deals in the market is a potential significant negative for them. investors are probably seeing over the last couple of days that the stock was down pretty much so is there further risk caused by brexit? vonnie: we were talking to a european strategist earlier who said pharma in europe is probably a good place to be. gets done in europe or pharmaceutical so they can benefit from brexit or not see the down side. that's not the case with valeant d isuse there r& questionable. >> it's just a company risk instead of industrywide. the risk of the pharmaceutical industry are the same as any other industry. there is uncertainty about investing in expanding in the
u.k. marketer what will happen with that trade relationship. for most of the industry, it's not a differentiator. because of the exterior turmoil,valeant has a little more risk. vonnie: there are buy ratings on it. what about the news of the anthem --cigna deal? is wondering what the justice department will do and if they will step in and sue these companies to block the merger. we heard from anthem and cigna that we are not talking about any kind of calling off of this deal. there has been speculation. they said they are working as hard as they can to get this thing completed and despite the headlines out there, they are working well together. it remains to be seen exactly where the u.s. government will
come down. we should know more about that over the next two weeks. vonnie: thank you so much. we want to let you know that we are having focus on pharma this week. his stories and analysis across our platforms this week. /ind more on bloomberg.com pharma. the s&p 500 is up 1.1%. of 1%. is up 9/10 the dollar index is off by 2/10 of 1% as is gold. ♪
jon: we will take you from london to portugal and new york in the next hour. the u.k. labour party leader loses a no-confidence vote. we will speak to the ecb governor council member next. markets rise after the brexit. sherry: we go live to aspen and erik schatzker will sit down with cyrus of vans within the hour. we are halfway into the trading day so let's go to the