tv Bloomberg Markets European Close BLOOMBERG July 4, 2016 11:00am-12:01pm EDT
mark: it is 4:00 p.m. in london. in new york. it is independence day in america. you're watching the "european" on "bloomberg markets." ♪ mark: r.i.m in london for the hour. plus conference stories from paris, australia, and china. here's what we are watching today. nigel farage stepped down from the u.k. independence party
after leading the campaign for brexit. who will step up and lead during the negotiations? the recent market rally has come to a halt. watch the ftse. it is close to entering a bull market, recovering from its brexit losses pay we are live in paris. wants toonomy minister claim the euro clearing business for paris. 30 minutes left in the trading session in europe. have a look at where the session is headed. down by 7/10 of 1% on the stoxx europe 600, falling for the first day. , the most since february. the gauge is 4% below where it closed june 23 before we knew the results of the referendum. it has fallen almost 11% in two
trading days. i want to tell you what is happening in the banking industry. the worst performers. six of them are italian. though -- the worst is monte dei the banks tong fresh concerns. it is under pressure to bolster its finances. ecb asking monte passkey, italy -- ecb asking monte posse -- lower towardso the end of 2015. italian banks leading the decline. an astonishing pmi number on u.k. construction. it unexpectedly shrunk at the
fastest pace since 2009. it in 2013. the index flipping to 46 from 51.2. any figure below 50 shows a construction -- contraction, showing evidence that the economy was hindered by uncertainty before the brexit vote. worst performing sub index. commercial building also shrank. civil engineering was stable. want to talk about gold and silver. so rising about $21 for the first time in two years. investors sinking -- investors seeking precious metals as a haven amid the feeling that central banks will continue to pump stimulus into the economy. howde a nice chart showing well gold and silver have done. silver -- best performing
commodity year-to-date. it is up 46% in 2016. gold up by 27%. it is up for a fourth consecutive day. and i have drilled deeper. gold and silver producer on the ftse -- 168% higher this year. quite astonishing. let's check in on bloomberg first word news. -- my holden has the latest anne marie holden has the latest. -- onstruction that is as the impending brexit vote held back purchasing. economists in the bloomberg news survey predicted a reading as 40.7. u.k. chancellor george osborne
set a goal to lower it the tax rate of 15% in an attempt to keep businesses in investing in the country. reporters that he now wants to minimize the economic impact of brexit. australia's election resulted in neither major party having enough seats to form a government. the nation's credit score is at risk. saturday's election results have been yet to be completely finalized. alec county continues tuesday. an increasing number of predict chinese banks will receive a bailout in two years. commonwealth bank of australia are among one of the respondents to the say to expect a move. the majority of those who expect the cost to be $5.3 billion.
and jonathan mathew, jay merchant, and alex pat on were pabon were found guilty of many blading libor. this comes after the day. the bank markng rate. global news 24 hours a day, powered by our 2400 journalists in more than 150 news bureaus around the world. i am annmarie horden. thanks. nigel farage is stepping down as the leader of the u.k. independence party. he says the brexit victory is a career-high to go out on. >> it has been a huge chunk of my life, doing this. it is not the when you feel a degree of ownership of something , to let go. , to me and a cost
perhaps to those around me. during the referendum campaign, i said i want my country back. what i am saying today is i want my life back. it begins right now. [applause] mark:'s resignation is the latest twist in the u.k.'s political drama. u.k. politics.rs it was the fear of ukip for people to call for the referendum. so job done. >> the referendum was going to prove that europe did not want to leave the european union and shut up the conservative party. mark: talk about the unexpected. arage rides off into the sunset. meanwhile, we are looking for a
new conservative leader. where are we when it comes to the five candidates and their timetable? rob: what this leadership contest has become about is is -- what does brexit look like? theresa may launching last week argued that everybody just slow down, calm down. that is her page. that i am here, it is going to be ok. fastll not make any decisions, you elect me prime minister, i will go to europe, have some talks, test the ground. we will trigger article 50, the thing that begins britain's slight under the eu. michael gove in the cabinet has a similar view. one of his key advisers said triggering article 50 immediately would be like putting a gun in your mouth
and pulling the trigger. so they are in the slowdown wing. fox representam the wing of the party is nervous that brexit may not actually happen. they are pushing the let's do this now. we pimm fox said -- liam fox said that he thought it would be triggered by the end of the year. he will probably get knocked out in the first round of voting. but andrea leadsom has a possibility of getting through. may runoff beld a like? rob: really interesting. [laughter] -- she isay argument the woman in the cabinet. she could be the next prime minister. she has held that rolled -- held that role for 6 years. things have gone wrong in the home office, but she has held on. is the new kid on the
block. she was only elected six years ago. in thisseeing a little campaign that this is the first time she is doing these big interviews and set pieces, where everyone is asking questions. so far, she is all right. she, essentially, is stepping up to the big game. bigesa may is occupying the game. when you talk to tories about women prime minister's, a little distant, wistful look gets into think ofs and they margaret thatcher appeared so both of these women are, in different ways, trying to inherit the go getting person who shakes things up. and theresa may with the eye and the reassuring figure. mark: and the fear among citizens living in the u.k.,
where do we stand on that? rob: this is interesting and important. as we stand, the government has position on what happens to eu citizens after brexit. theresa may says that these people are effectively a bargaining chip in negotiations with the eu. we have british people abroad, and we want to keep -- preserve their rights. and in return, we offer to preserve the rights of the eu citizens. not suggesting so much that they will be taken away. more we will do the right thing when you do the right thing. andrea leadsom says that is an immoral position and we should just say these people will stay here. they have the rights of people who live here. they should have the right to remain. mark: it will run and run. rob hutton. 4:11 in london. how are investors navigating political crisis.
joining us now is alan higgins, chief investment officer at coots. thank you for joining us. -- at coutts and company. thank you for joining us. how has it been in the investment world since friday, the 24th of june? alan: it has been challenging. from a sterling base, we have the beneficial wins in terms of sterling depreciation -- the beneficial winds in terms of sterling depreciation. market oforder in the the ftse. did not quite get hit pay we like to think we were supporting the market. we ordered under that. the rationale is that one thing is clear to the large companies.
80% of revenue outside of the u.k. -- it is clear there are a fishery -- a beneficiary. a technicalt on rebound, i would not push on that, but it would depend on global equities. mark: because when it has been so unloved -- the u.k. market as a whole -- is it time to start loving u.k. equities? when we not go that far looking at the ftse 250? it is much more u.k. oriented, and now is finally underperforming. larger.ve a buy for the we are down pound, 10% since friday, the 24th. are you thinking we will go to 1 .30? you probably go with momentum. we are thinking there is value
here. if you look at real effective exchange rates, if you look back 2009 -- it-- 2008, was right to buy into sterling weakness eventually. being long-term investors, we want to come back into sterling. mark: some say we have had the 10% fall, we will never -- it is a new setting post eu? alan: well the 30 year range on and we haves 1.42, definitively broken that. the pound bove something different. so we are below that. but there is value. mark: alan higgins, chief investment officer at coutts and co. 16 minutes left of today's
people say that a compromise may mean moving it outside of the u.k. -- chancellor george osborne had planned to raise about 25 billion pounds, disposing of the u.k.'s stake in rbs by 2020. icc says it is holding with chinese securities but at -- but that they are at a preliminary stage. strategics looking at cooperation and business opportunities. that is your bloomberg business flash for this hour. stick with alan higgins. chief investment officer at coutts and company. what is the ripple affect of brexit? alan: europe, clearly, is one
effect. you were talking about italian bank prices, for example. of those have very low market cap's now. you have a good indicator that, even before -- mark: this is the panic market timing. alan: from our friends at bnp. it shows generally, there is despair in the markets. there is a lot of pessimism about equities and risk assets in general. any bit of good news means the markets are likely to rally. mark: and banks? 20% lower since brexit. alan: banks do not like lower rates, but we had better results out of the u.s. -- the stress test. 50% higher dividend
buybacks. it can work in the u.s., lower interest rates. in europe, we need to get to where the u.s. banks are. mark: we are seven or eight sort beyond, but they have of bathroom. alan: but -- up, ingit dividend is has dividend increases, there are certain things doing relatively well. 10%.n on equity circa there are another group of banks -- mark: .40. alan: where there is no dividend likely. mark: so on the matter of bondholders, head to mexico, by a 100 year bond -- is that the answer? alan: you have a good memory.
we talked about that one early morning. we invest on income streams. we do not get swayed by it's aral "oh my god, 100-year bond." but we do have interesting investments like a 100 year in mexico. mark: what is the rationale of dying u.k. g -- of buying u.k. gilts? alan: i will give you to ban one is japan. so earned 90 basis points for 10 years, which is better than zero. the second scenario is more speculative. it is 19 today. -- it is 90 today. it will go to 60. make that short-term capital gain. it is kind of a bubble without the retail investor. mark: show -- so shares, you get the dividend.
alan: right now. if you owned the standard gilts make a 4%u would capital gain if they want from 90 to 60. we prefer it if this income stream -- does it have value and would therefore other investors stream?e half of that mark: stay there. nine minutes away from the end of the monday session. have a look at crude oil. trading around $50. this is bloomberg. ♪
company.t coutts and i have known him for many years and i did never -- and i never knew he was welsh. and you are going to watch france in the final. alan: flying to lyons. mark: well, my producer just bought someone his credit card. so i was thinking what can i ask that would link whales to investments. what did we learn from the welsh mentality? alan: stoical. try not to make too many errors. these drawn on defense and income strings -- income streams. the english football team -- do not be individual. coutts. a big team at 30 people working to make a good portfolio for clients. mark: wimbledon final, who will
it be? tennis coach. will i think murray struggle. i hope he comes through. mark: and who do you think will win euro 2016? alan: of course germany will win. higgins, chief investment officer at coutts and company. looks like stocks will fall for the first day in five. stoxx europe 600 down by about 7/10 of 1%. close is minutes away. stay with us. this is bloomberg. ♪
function. global macro movers. this is the column i want you to focus on -- the equity boards in europe. major ones are down. u.k. ftse 100 one of those lower. stocks down for the first time in five days. the 24th, theom day the referendum result in the -- becameane apparent. at the close monday, the stoxx 600 fell 11% over two trading days. it gives you a feeling how the asset classes are faring. i want to look at the ftse 100. it is approaching a bull market yet since february 11 the cia, when the index fell to its lowest level in three years, it has rebounded 18%. seven percent last week.
it has gained almost 4% since june 24 after sinking 3% that day. the top five performers on the , thisre anglo-american over producer chris mello, glencore -- the silver producer prismiller, glencore. of sterling boosting those sort of companies. we want to finish with the british pound index, which is a bloomberg gauge that measures sterling against its seven peers. day is the seven performance record last friday. 8%. sold 3% monday. up tuesday and wednesday, down thursday and friday, little lower today. days, down for third day. record low today. since the 24th.
short sterling is the highest conviction trade. bank of america merrill lynch favors selling any sterling. itsmorgan stanley says trade idea is to buy sterling versus the swedish krona. it says the corona may -- the krona may underperform. let's check in with the bloomberg first word news. annmarie horden has more. annmarie: thanks. australia's election has resulted in neither of the nature parties having enough seats to form a government. rating agencies warned the nation's credit score may be at risk unless the budget deficit is reined in. resumes tuesday. u.k. chancellor george osborne set a goal of lowering britain's
corporate tax rate to 15% in an attempt to keep businesses investing in the country. he told the "financial times" he accepts the results of the referendum and now wants to mitigate the economic impact of brexit. london stock exchange shareholders voted in favor of the merger with deutsche boerse. but the deal is getting pushed back from german regulators, do not want the combined exchange in london. people familiar with the matter say a compromise may mean moving the company's location out of the united kingdom. attackhdad's deadliest in a year has killed 149. the toll is likely to increase. the truck bombing took place at a bustling commercial street that is usually filled with people. the attack has been claimed by islamic state.
global news 24 hours a day, powered by more than 2400 journalists and analysts. mark: brexit
t is theopic du jour in paris. caroline connan caught up with the french finance minister to ask him about his reaction. for a lot of financial players and institutions, brexit will be a big question mark. on the access to your pm exports. it would depend on the organization of brexit. our role is not to play on these arertainties, because we collectively responsible. what we have to do is respect the vote of the brits and organize brexit. it could be an
opportunity for financial plays, because we have a lot of financial players and financial institutions.
we can welcome a lot of institutions who would like to join the eu. there is violence on the side of protests in france, with torched scarves. do you think the french have a reputational issue? l: what you say is true. we have an issue regarding this reputation. what i can tell you from the we will have a slow reform labor market. that is a necessity. this reaction out of a tiny minority is condemned either government.
my deep conviction is that our people are deeply convinced that we have to modernize the country and a depth of the country to the course. so i do not want to be so skeptical and negative. where could they go -- do they stay in paris or go to frankfurt, denmark? -- is a series of issues to frankfurt would be a question in terms of organization. but i think much more players now in paris than in frankfurt. and much more deep marketplace interest. it is something to be negotiated and discussed with a different
institutions in charge. caroline: are you going to run for president? emmanuel: it is too soon to say that. andt, we have to reshape invest in this offer. caroline: you are not excluding it, though. emmanuel: i am not exclude anything. two years ago, i had no idea that the, a minister of france. i am just amending regarding key issues and questions for the country. going to an election -- being part of such a campaign, it is first a question regarding your country, the situation of your dontry, and what situation you want to propose to the country. my first priority is to guilt -- to build this new identity. caroline: and to prevent a
"frexit"? for instance? on the current situation, i do not think anyone --d recommend a referenda in recommend a referendum. i am any institution now and in the coming month to provide a relationship of france with europe. in theve our future is european union. our future is precisely to this relationship and the ability to propose a new sovereignty. ministernch economy emmanuel macron payments bring in caroline connan now. what else did he have to say -- french economy minister emmanuel macron. let's bring in caroline connan now.
what did he have to say? caroline: he is very pro-market. recently last year, he the flow impact for french people leaving the u.k. to come back to france to reduce their taxes for the first five years. of the euro denominated in london. is done only 11% in paris. 7% in frankfurt. that emmanuel macron was confident he could bring some of this clearing business back to paris. over the weekend as well. had, from the finance minister, who had a slightly different perspective. he should -- he said should not divide the spoils and did not appreciate when david cameron
rolled out the red carpet to france in 2012. how do chiefle, executives there view brexit? little bithere was a of anxiety in the air. i felt like a few years back, situation whens we are at the highest of the greek finance situation, there was -- the euro next year ahead of this exchange in paris, they are saying paris and amsterdam are a better place in other places to attract business. --k: and how do >> we are located in paris, with the number of large banks, large companies. the depth of the talent pool, of locally can be a
legitimate player in the new game. the ceo of euronext have a slightly different approach as well. he thought the french quality of life could actually make traders move from london to paris. mark: what about the political situation in france? how to chief executives feel about the upcoming election? caroline: i actually spoke to one ceo. it was pretty excited about talking about the future of europe. he was very astonished about what happened, what is happening, in u.k. politics. cap is int the brexit total disarray, he thought that
holiday. forcest brexit scramble the japanese bond market to fresh lows. here is bloomberg's fx strategist richard jones. the bond yields keep ticking lower. richard: i think we have a lot of easing priced into a lot of these markets. if we look at our market in the u.k., i think we have white a 35 basis points expected in a rate cut. and given where 10 year gilt yields are, we are probably in for more qe. there is a lot priced in. mark: a rate cut comes when and unique comes when -- and qe comes when? richard: i suspect july and august. and qe, sometime in the next six
months. mark: do rates go below zero or not? bank rate suspect will initially not go below zero. governor carney is not a big fan of gut -- of negative rates. mark: we have had a lower bound of .50. and that was meant to be it. but as we have heard central the line -- pmi data. today was notable for one specific piece of data. u.k. construction. that was a number that came out of the blue. services pmirrow's will be more interesting. the construction pmi today well low 15 now, in the run up to the brexit vote, there was quite a lot of nervousness. it will be interesting to see how that seeped into the services pmi.
what we want to see is the post brexit data, which will be released in about four weeks time. today'sun-up to brexit, numbers shows a lot of nervousness out there. mark: just getting some headlines from george osborne. richard jones -- he wants to travel to china, he says he wants to go for a 15% corporation tax. on the funding for lending scheme, it is needed. but scrapping the surplus target was interesting. a long time, central bankers have been saying monetary policy cannot be the only game in town. we cannot be the only policy makers actually doing something about the weakness in the global economy. the u.k., it has been austerity since 2000 10.
perhaps now, we are seeing where the fiscal policy and monetary policy will be more joined up, given the challenges the u.k. faces economically. mark: friday is the jobs report. it last month, those numbers affectionately -- effectively fed, a rate hike from the according to a lot of people. could we back -- did we get back on track of the fed raising rates? think it could be noisy and we could get market moves. you look at the revisions in the previous numbers. but the fed has said, given what has happened with brexit, they will analyze that for the months to come. i do not expect a massive shift in market thinking. mark: is that too bearish? 30% of a hike by september of next year -- richard: it is difficult to go
beyond the next two or three meetings as a horizon. beyond that, it is difficult to say. but the market is leaning towards no hikes this year throughout the year. and the market has been right. thing thathe last market participants think that the fed will be on hold. mark: richard jones. thanks for joining us. 4:48 in london. just to reiterate a headline from george osborne. majorl need the has a banks tuesday. coming up, we are going to tell you why europe cannot afford to ,et a good crisis go to waste especially when it comes to the banking sector. ♪
mark barton. u.s. markets closed for the independence day holiday. let's look at the bloomberg business flash. sell ofish government's its stake in the -- of the royal bank of scotland is delayed at least two years. chancellor george osborne had plans to raise about 25 billion pounds, disposing of the u.k.'s stake in rbs. holding confirmed it is talks with the investment firm china investment securities. is at a preliminary stage. they are looking at strategic opportunities. former barclays traders have been convicted of libor manipulation.
the decision comes almost four years to the day since the bank paid out hundreds of millions of dollars in fines to fixing the key benchmark rate behind more than $350 trillion in securities. that is the latest bloomberg business flash. let's stay with the banking sector. momentrexit be a lehman for the u.k.? mark gilbert is here to explain why good crises should never go to waste. one of the most read stories on the bloomberg. significant? mark g.: in a different kind of way. we saw after lehman was the u.s. instantly fixing its banking sector. they recapitalized the banks. they set a regulatory laying field everyone knew and understood. if you look at where u.s. banks are versus their european peers,
any european banker will tell you the u.s. bankers are eating their lunch. fix its banks, particularly italy. the roles are restrictive on how to do that. mark: how do you get around the roles? mark g.: you have to be loose. you have to let italy face up to the fact that you cannot have billions of loan settling your finance sector at the same time the european is trying to resuscitate the economy. mark: germany is saying what about bondholders -- do you just say forget that? mark g.: you need to find a middle ground. you do not want taxpayers on the hook for all of the casino banking we saw in 2007 and 2008 at the same time, if the economy is suffering because of of those rules being too restrictive, it makes sense to be sensible and
admit the environment is not as good as you may have hoped it would be. as an excusebrexit to do what you're doing. what does this chart tell us? what europeanis banks have done. they were already down 20% by the time we got to the brexit vote. you lose a fit of your equity capital. since then, they are down another 20%. we have gone from too big to operate.oo small to you cannot have a banking system shrinking in that way and ,xpected to perform efficiently especially at a time when lawmakers are saying we have to -- mark: and we have the barclays trial. what does this tell us? mark g.: two things. one is you had traders many bleeding the rates for their own personal benefit to make profit.
backdrop in the culture where the banks seem to have been lowballing their rates to maintain confidence in the system. the question is are they equally bad behavior? what it summarizes is confidence in the system has not returned, which is another reason europe needs to address the issues of the banking system. the problem is demand. if there is no trust among companies, that will never combat. mark: mark gilbert. umns,ore bloomberg view col the bloomberg. this is bloomberg. ♪
♪ ashlee: there is part of me that thinks icelanders might not be the brightest of people. i mean, look at this place. it is mostly made up of barren, volcanic rock that belches, pushing the foul smell of sulfur throughout the countryside. animals and plants have avoided this cold, hard land, and so too should have humans, but, as we