tv Bloomberg Markets Bloomberg July 1, 2016 10:00am-11:01am EDT
vonnie: we are taking you around the world to cover stories from berlin to hong kong and moscow. here is what we're watching. global stocks extending the post brexit recovery into it for today with the s&p 500 on track for its best week of the year. investors speculating central help out anyt to effects. mark: governor mark carney looking to give lenders more flexibility if the u.k. economy slows down. rico defaulting on $2 billion worth of securities today. the island creating a moratorium on debt payments after president obama signed a law sheltering the commonwealth from lawsuits.
30 minutes into the trading day in the u.s. let's go to the markets where julie hyman has the latest. julie: manufacturing in the u.s. expanding at the past history's in more than a year, coming in month, and that is above even the most optimistic projections. to 51.rage was closer 51.3 to be exact. 53.2 was the manufacturing number. construction spending, however, falling month over month in may. still, the manufacturing number coming on the heels of a stronger than estimated number out of the eurozone as well. stocks, even though not big gains, rising to the highs of the session. the nasdaq leading the gains, up asut half of 1% this morning investors assess the ball up from the u.k. vote.
take a look at the groups on the move this morning, consumer discretionary doing the best today. telecom and financials pulling back a bit. industrials, material, health care, and energy participating in the gains. we're also getting june u.s. auto sales. it is a bit of a mixed bag. on trading higher. sales fiat chrysler missing estimates, ford meeting, but all three trading higher. netflix is also rising the most in a single day in four months. thatort by a research firm indicated the company's international subscriber growth is better than his own projections. those shares are rising 5% on that. also looking at the safe assets -- assets that are regarded as safe, gold and the vix. gold is higher, the vix is
lower, and the vix is set for its biggest weekly slumped ever. the 10 year overnight touching a record low. it has come back a little bit, but still, the yield catching up to where we have seen it in other nations. check out the stoxx 600 rising for a fourth consecutive day. sinceggest increase february. the six-day drop was 4%. down on monday. by friday, up 10 .8%. it is some recovery. sincet rally on the ftse 2008. it is on track for the best week since december, 2011. also at the highest since august. also the best-performing global
developed market since june. quite a read on for the ftse 100. since friday, up 3.5%. on domestic ftse 250 down 5% monday. this is the bloomberg british pound index over the last six days. what a week it has been. monday down by 3%. .uesday, up b the bank of england governor suggesting things are loosening in the summer. since monday, julie was talking about the u.s. fear index. we are done for a fifth day, longest stretch since may. since august 24.
risk gauges have come down. the alley-oops chief economic advisor mohamed el-erian penning a fresh column today on brexit and the impact it will have on central banks. this is what he writes. significantand ecb, structural uncertainties have been added to the complications presented by fluid economies and peculiar financial conditions. this unusual con -- combination undermines the effectiveness of central banks and as the experience of the boj proves, could get them closer to the line that separates effective measures from ineffective or even counterproductive ones. he joins us on the phone from london. thank you for joining us, mohammed. >> my pleasure. mark: how close are we when we talk about the boe, ecb, boj, how close are we from effective
to ineffective policy? >> the boj is there. the ecb will get closer as it does more qe. the bank of england and the fed are a distance behind. the bank of england and ecb are supposed to do more, even though their policy measures are only good at manipulating financial less good at promoting genuine economic growth. you have been calling for other measures. your book backs it up, calling for measures from government to take the weight off of central banks. is the brexit crisis going to prompt such a move or not? >> it is a hope, but not a high probability. recognizing it is not just an economic problem but a political problem. there is a massive loss of trust
in the business and political establishment, as well as in expert opinion. this should serve as a wake-up call. the problem is the politics are so messy, we may need an even louder wicca call before the politicians to the challenges ahead. looking at my terminal, the united kingdom, the boe, chance for a rate hike in july are 6%. in august, 81%. change are medically after the brexit vote in terms of central banking worldwide? >> it is more of the same with less. what do i mean by that? central banks are now looking at even more difficult outlooks for growth. most agree the brexit least anties were at half percentage of growth rates in the u.k. and europe, and increases the risk of recession.
facing the prospect and the deflation that comes with that, central banks, the bank of england in particular, feel they need to do more. so yes, the probability is most likely the bank of england will cut the summer, and ecb will do more qe. the spread between the two and 10 year here in the u.s. is 8.6. will the u.s. continue to be a safe haven for investors, and what will the federal reserve have to do? >> the federal reserve right now is seeing its yield curve captured by what is happening in europe. the result is a relentless decline in yields and lightning of the yield curve. the u.s. curve now reflects much more europe and policy there, then it does the u.s.. the reason is simple, if you are facing negative interest rates on over 30% of government debt,
you will look for ways to get positive rates. if you think the currency will be in your favor, u.s. treasuries to come even more compelling. what you see is the globalization of this market and the massive influence that a slowdown in europe and incremental policy activism is having around the world. mark: how long does the u.s. 10 year ago? >> it could go to 1.25% quite easily, if we continue to see this combination of more central-bank activism. ironically, the u.s. numbers are not that bad. you may get quite a bit of volatility. the u.s. economy is doing ok, not great, but ok. there are pressures coming from across the atlantic. yesterday, an interesting
comment from george soros. he said britain's decision to leave the eu is at least a crisis in financial markets, similar to 2007, 2008. it has been unfolding in slow-motion but brexit will accelerate. do you agree? >> what made 2008 particularly dangerous was the payments and settlements in play, that banks no longer trusted each other and there was a sudden stop in global economic activity. i don't think that is where we are now. the banking system is protected. the payment system is isolated. we will not see a sudden stop. but what we will see is this notion that structural uncertainty is being superimposed on economic fragility and artificial finance. , andis quite the cocktail it is one that brings us into uncharted waters. -- if the politicians do not respond quickly, low
growth becomes recession and artificial instability worsens. i do not think it is anywhere near 2008. vonnie: we did get some yen strength, the same thing with sterling. what does mark carney do? the drop will add to inflationary pressures. at the same time, there is a need to potentially cuts soon. governor carney will worry too much about the currency for two reasons. he will see it as boosting exports and tourism at a time when business investment is likely to decline and consumer sentiment is likely to be hit. he will see it as a partial offset to economic activity. second, he will not mind a bit of inflationary pressure to minimize the risk of deflation.
at the bank of england, you like that your currency has weekend, and has done so in an orderly fashion. for the rest of the world, a different proposition, especially in japan. the last thing they needed was an appreciation of the yen. that is what it is coping with now. depending on where you are sitting, and this new configuration can mean good news or bad news to an already difficult situation. thank you. much more bloomberg markets ahead.
bloomberg markets. investors are still assessing whether last week's brexit vote marks a domino effect. st. louis president jim bullard shares his view. >> international events is something that we track, the u.s. does not have a big trade sector, so it is a -- other countries were relatively close. the direct effects on the u.s. are not so big and there are financial market volatility affects which can be much faster and can come back to bite the u.s. but i think the brexit shock is not that big in the scheme of things. vonnie: investors are looking at data this morning for indications of how the u.s. .conomy joining me now is the chief equity strategist from wells fargo. i have to ask you about your reaction to what mohamed
el-erian was telling us, that we are on the cusp of something dangerous at this point and yields could go lower. thehat is why there is market. i think we're on the cusp of something good. we know there was danger in brexit. when we know something is bad, the market becomes a squeaky wheel. we tend to get what we want. i do not see people making big mistakes because we in the stock market have made it clear there is a lot at stake. central bankers are running out of options and there are structural challenges to central banking activity now. >> there is always an arrow in the quiver if they have to do something. who would've thought chairman bernanke he would've done quantitative easing? they never go home, they never run out of money, and they never want a depression to happen. explain the sharp bounce back in equities.
since monday, four days of gains for equity investors. how do you explain it? >> the first few days we did not know what was going to happen, so he went down. we still don't know what form this will take, but it is very premature to get very negative or very positive. what happens is, the governments, politicians feel their way along the edge, the market provides ample guidance as to what we like and do not like. at some point, they reach an accommodation. at the end of the day, nations have interests, not friends, and they will move in their own self interest, which means they continue to trade. mark: i want to show you a chart that focuses on you today. the last six days, we have been focused on every session post brexit. this is basically an asset check.
the commodity index is up 13%. the purple line is the citi global currency managers index tracking how foreign exchange global traders are doing. the global equity benchmark is flat as well. here six months time, how is the equity, bond, currency, and commodity performance going to change in the neck six months? >> it is always a guess, but i would say the equities are higher. i know we are starting to see better earnings in the u.s. i think american tumors are getting healthier because of better jobs and housing, higher savings rate, and deleveraging. i think we have to worry through the u.k., about what they do with the eu. i think over some period of time, they have to region economic agreement that probably
supersedes what was a political economic agreement. i think the bond market trades off a bit when you look at treasuries. commodities are a tougher call. i do not see inflation yet, so i think it is an improvement in commodities to the degree that industrial america or america in general, and then the rest of the world, gets better. the isn index, prices paid lower by 3%. still be on the 50 mark. as were higher, inventories and employment were higher. that all goes pretty well for the u.s. economy. >> but that does not mean inflation is right away. inc. of the economy as a voter. it is a pretty rock road. we go fromink deflation to fears of inflation that quickly. if we do, the fears are an inch
deep. i do not see the lack of capacity. i think we grow into this and it takes a while for us to get there. vonnie: construction spending down 8% month over month. thank you for joining us. still ahead, our weekly dive into the three chilean dollar etf market. ofwill peak into a portfolio jeffrey gundlach. this is bloomberg. ♪
amazing feat, we have eric balchunas. he covers etf's for us. first of all, jeff gundlach, double-blind capital, very well known. mostly fixed income investor, but also in etf's. 150 actively managed etf's. they have failed to really gather assets. seachangeis this huge of money going from active to passive. ch is swimming upstream here going from 600 million to 2.5 billion. that is the fastest-growing etf of a midsize level and it is active, and he is slightly underperforming. julie: is it about his performance or his name and reputation? >>'s reputation. if you are a rock star, it trumps everything. we saw this with bill gross when he launched the pimco total
return bond. then he left and the petered out. end, jeffrey gundlach is hot right now, and everybody knows in. but here is the thing. he is sort of the last of a dying breed. beyond him, can you name any famous fund managers? julie: certainly not with etf's. if buffett launched an etf, it would be an instant home run. just sit back and watch gundlach defined the ontario. julie: and there is a bit of caution if this has been underperforming. points.sis that is more expensive than his institutional class but cheaper than his retail class. if you are in retail, mutual fund, the etf would be cheaper. have betterd also
tax deficiency with not issuing capital gains. performance wise, it is underperforming a little bit. he is overcoming two major obstacles, underperformance and a seachange to passive. julie: let's take a look at that active to passive tension we have seen. aside, are we going to see any kind of reversal? is it done for active etf's? eric: i thought so but there is a white light on the horizon, and it is ironic. vanguard to be the one to save active etf's. they just launched in canada and london and are pacing in the 22 and 35 basis points respectively. fees are high, the average etf is 76 basis points. fees are a double whammy. they are out of step with people like you cheap these days, and they are part of the reason you cannot outperform, because a manager has to overcome these
just to get to zero. vanguard is launching this product line of active etf's. i think it would cause some of to drop and could spark a renaissance in active if people start underperforming. it could be the catalyst that active etf's need. even if it would hurt. when vanguard comes to town, it is like when walmart comes because everyone has to lower their fees, but it brings attention to an asset category. still ahead, puerto rico prepares for a record default after president obama shelter the island from bondholder losses. this is bloomberg. ♪ you guy's be good. i'll see you later
let's check in with first word news. taylor: reasons why he should be the next u.k. prime minister. he vowed to reduce immigration and take the country a fair place to live. he had this to say about when the u.k. would trigger article 50. >> only after extensive pulmonary talks. i have no expectation it will be triggered in this year. leadershipdoed the of boris johnson. he has his sights on theresa may. in austria, a do over in the presidential election. partyr right freedom disputed the results.
they lost by just over 30,000 votes. the austrian court found violations in counting mail ballots. malcolm turnbull made a last minute appeal for continuity. the liberal national coalition is tied with the labour party. the campaign is focused handle the australian economy. on the lynch has moved controversy over hillary clinton's e-mails. -he will accept the decision - she's marked a firestorm when she met privately with bill clinton. she addressed concerns she could exert influence over the case. global news 24 hours a day, powered by our 2400 journalists in more than a 150 news bureaus around the world.
vonnie: puerto rico is being rescued by its staggering debt burden. it is trying to avert a financial collapse. with a safety net, puerto rico's government will default, one of the largest ever. michelle is here, michelle congress passed a bill and it got signed yet puerto rico is defaulting. why? michelle: the governor said that you have the money to pay for essential services, things like health and safety and schools and also pay investors. puerto rico --
$2 billion. vonnie: does it impact to the oversight board? michelle: it does not affect the oversight board. obama signed the bill yesterday and the make sure that investors are unable to sue for remedies, for payment remedies. it gives puerto rico some time to not deal with the lawsuits. the federal control board will come together. they will start working on any restructurings they feel need to happen. mark: thank you, michelle casca. let's get more perspective on the story with tim blake. today,ou for joining us issuing a debt
moratorium. what is going to be affected? the moratorium essentially is an announcement by the government it will be defaulting on at least some of its debt payments. there are $2 billion due under various classes of bonds. most important is over $1 billion of general obligation bond payments are due today and the moratorium says there will be a default on that debt. we don't know the exact amount, but it will be a large portion. mark: what is next in the whole process of restructuring the $70 billion debt pile? tim: is michelle mentioned, there is a stay on creditor litigation, it puts applause on use on externalai
litigation. one of the first tasks is to oversee three structuring of a debt plan. withll be negotiated creditors. as a failsafe, the board can file the plan in federal court to get it approved. vonnie: how does a body like moody's assess puerto rico and its view forward? investors might not be as interested. tim: sure. we view this legislation is positive. it will avoid protracted and chaotic litigation and move government beginning work to restore the economy.
key toc growth is the quality of life in puerto rico. vonnie: does not assume that they wer there is not political? bills not the most popular , even in puerto rico. view the bill as positive. payments. debt it lays the groundwork for improved confidence and economic growth. vonnie: do you see a change in rating anytime soon? on "bloomberg markets." mark: a new president takes over
mark: you are watching bloomberg television. vonnie: here is what we are watching. one and done for the fed on rate hikes. goldman sachs reportedly cutting jobs. which employees are being let go. and the philippines, the hopes and fears the new president brings to office. james bullard says that for now he is sticking with his call on rate increases. he still thinks there will be one rate increase this year.
james: there is the issue about whether there will be further contagion to europe. we will keep an eye on it. we are definitely wait-and-see. i do not see a big impact on the u.n.. vonnie: he says the fallout over will unfoldvote over the years. u.k. bank stocks have plunged with nearly three of the largest down nearly 3%. mark: data was collected before .he u.k. voted to leave the eu the only country where manufacturing shrank was france.
brazil's bonds have been world beaters this year. still, there is concern about the topsy-turvy policies of the country. 46% inonds have returned dollars this year. potential roadblock that the administration gets caught up in the long-running corruption probe. goldman sachs has dismissed and salespeople in new york and london according to a person briefed on the matter. fixed income and an equity staff are affected. they have limited more than $350 because of trading and deal making. -- they have eliminated more than 300 and 50 because of trading and a making. philippines, the
past six years has been marked by relative peace. here's the situation. rodrigo duterte secured a landslide win, finishing more than 15 percentage points ahead of the candidate favored by the incumbent resident. crime, public services and corruption. his plans including reinstating the death penalty, and shifting to a federal government system. after centuries of spanish and u.s. role, the philippines finally got to determine its own fate after world war ii ended. splinteredd is a democracy marked by political dynasties. the outgoing president is the son of the former president, a brutalolution ended
and corrupt 21 year rule. president,ule of the growth went up 62%. the philippines is securing its first ever investment-grade rating. his opponent see him as the biggest threat to democracy. rodrigo duterte said he will not let lawmakers block his plans. philippines watchers say that winning the election will be in comparison to bringing substance to his promises. for more stories, visit bloomberg.com. ahead, christie's
vonnie: this is "bloomberg markets." mark: this is bloomberg television. this time last week, markets were reeling from the uk's vote to leave the european union. here is a look back at the week that was. jonathan: we are waking up to a new reality. it is brexit. mark: financials are front and center. cameron: the british people have made a clear decision to take a different path and as such i think the country requires fresh leadership to take it in this direction. mark: what we're seeing is the yield.- ten year
>> we're meeting after a very painful and regrettable decision of the citizens of great britain to leave the eu. decision.ect this it will have to be sorted through in their consequences. >> if we don't come to a grown-up trade deal with the united kingdom and eurozone, it will hurt the eurozone. it has a race the post erased theit has post brexit losses. >> there will be no initiations. >> we will make this our moment to stand tall in the world. that is the agenda for the next
prime minister of this country. i have concluded that person cannot be me. week what to next ordinary -- what a next ordinary week -- week.n extraordinary hasn't really been a week since the results of the brexit vote? we are up today, we have been up for the last four days. have a look at what is happening in the currency markets as well. we saw the biggest ever fall for sterling against the dollar. second today and monday and tuesday, declined yesterday, declined today. it is unchanged against this was it is unchanged
against the swiss franc. lowest deal since march last year, small increase. is lower. when yiel vonnie: that sound and pictures sending shivers up my spine. it has been a wonderful week in some ways and absolutely extraordinary in other ways. november.n since again of nine points. the dow up a third. nasdaq is up 7/10 of 1%. in currencies, a little bit of movement, a little bit of dampening on the dollar index. low 96 now. at that.
all the way below 15. a little bit of research and see -- resurgence. dollar-peso, we saw it hike teams.rstens and its market,ndon's art uncertainty leading up to the vote made some sellers hesitant to part with the art. christie's 250th anniversary sale fetched $33 million, setting an auction record. it shrugged off volatility, selling all but four.
>> clearly, the great artist, whether it is picasso or others is the most sought after. those are the artists that are household names and at the moment we are finding the most demand for the artists best known. that is neared by the types of exhibitions. these very major prime exhibitions are drawing huge crowds. the tate just opened a new wing to great acclaim. contemporary art is on the rise. younger buyers come in the 30's and 40's are bidding very high for the art of today. that is probably the most expenses, where we see the most new buyers coming into the
market. a very exciting market right now. >> you talk a lot about the geographical travel you have to do, whether the buyers are coming from russia or hong kong or the middle east. where is the most demand coming in terms of junk if he? >-- geography. mainland chinese, hong kong. we had a strong asian contingent buying last night. and the enormous number. traditionally they buy classic asian art, classical porcelain. now they are bidding majorly for western art. >> me talk about the artists is high priceit points.
what is the most popular price point you do business in? >> the reality is, the range is considerable. when you come to christie's, you can buy a work of art by any of these great names, thousands of pounds rather than millions. it is not well known. the press covers the major sales, the reality is we sell across every price range. there are collectibles, there is always something to buy at christie's. this week alone, we had 2000 objects, which gives you some idea of the range. you can even bid live. talk to me about how
people are buying. disruption?to say how are you reacting to that? >> we have been described as destructors innovators. we are a 250-year-old company, it is an accolade. we are very involved in digital. many of our sales are in the middle east. we have a relationship through christie's live, not the sale room. he bricks and mortar is necessary, but buyers create a relationship christie's on christie's live and make their judgments without handling the objects.
that is a massive shift in the way in which collectors work. --nie: dallas caroline hyde that was caroline hyde. you can read more about luxury in bloomberg pursuits. i think i would like to handle them. i think i would have to. mark: right. coming up on the british banks getting a boost today. climbing.ndex is easing capital demands on banks. that is the big story. expressing his confidence in the bank of england. erik schatzker: there are a lot of tools and they have the objective to preserve the power and growth of the u.k. economy and they will do that in part with how they regulate the banks going forward.
mark: the bank had no sense of concern. there is concern about earnings. much more on that. european stocks, 35 minutes away from the friday close. what a week this has been. it has gained by 7.5%, six-day drop since the briggs it is -- .rexit is still lower four-day rally for the ftse, the biggest since 2008. this is bloomberg.
close on "bloomberg markets." ♪ york to're live in new london in the next hour, plus covering stories around the globe in austria, silicon valley, puerto rico, here's what we're covering today. yields on 10 and 30 year u.s. treasury's falling to record lows. they join a rally of bonds around the world as some of the world's biggest investors including vanguard say the brexit vote means subdued growth and lower yields for years to come. vonnie: it has been a wild week for u.k. politics. compare leaders launching their campaigns to game of thrones. we will tell you what to expect. mark: